VIEWS: 9 PAGES: 65 POSTED ON: 9/20/2011
City of Marianna Marianna, Florida Basic Financial Statements For the year ended September 30, 2009 City of Marianna Table of Contents September 30, 2009 Independent Auditors’ Report on Financial Statements 1-2 Management’s Discussion and Analysis 3.1-3.11 Basic Financial Statements Government Wide Financial Statements: Statement of Net Assets 4 Statement of Activities 5 Fund Financial Statements: Balance Sheet – Governmental Funds 6 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets 7 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds 8 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 9 Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – General Fund 10 Statement of Net Assets – Proprietary Funds 11 Statement of Revenues, Expenses, and Changes in Net Assets – Proprietary Funds 12 Statement of Cash Flows – Proprietary Funds 13 Statement of Fiduciary Net Assets – Fiduciary Funds 14 Statement of Changes In Fiduciary Net Assets – Fiduciary Funds 15 Notes to Financial Statements 16-36 City of Marianna Table of Contents September 30, 2009 Supplementary Information Independent Auditors’ Management Letter Comments 37-39 Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 40-41 Independent Auditors’ Report on Compliance Applicable to Each Major Program and State Project and on Internal Control Over Compliance In Accordance with OMB Circular A-133 and Chapter 10.550, Rules of the Auditor General 42-43 Schedule of Expenditures of Federal Awards and State Financial Assistance 44 Notes to Schedule of Expenditures of Federal Awards and State Financial Assistance 45 Schedule of Findings and Questioned Costs 46-47 Summary Schedule of Prior Audit Findings 48-49 City of Marianna, Florida’s Response to Management Letter Comments 50 Honorable Mayor-Commissioner and City Commissioners City of Marianna Page Two The management’s discussion and analysis on pages 3.1-3.11, is not a required part of the basic financial statements, but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying schedule of expenditures of federal awards and state financial assistance 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 and Chapter 10.550, Rules of the Auditor General, and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. February 16, 2010 Basic Financial Statements City of Marianna Statement of Net Assets September 30, 2009 BUSINESS- GOVERNMENTAL TYPE ACTIVITIES ACTIVITIES TOTAL Assets Cash and cash equivalents $ 1,589,857 $ 7,865,921 $ 9,455,778 Restricted assets Cash and cash equivalents 553,683 1,254,929 1,808,612 Receivables, net 302,600 1,883,906 2,186,506 Due from other funds 1,227,362 (1,227,362) - Due from other governments 586,563 230,321 816,884 Accrued interest receivable - 51,938 51,938 Inventories 8,000 195,101 203,101 Prepaid expenses - 128,045 128,045 Deposits - 147,000 147,000 Deferred charges - debt - 88,977 88,977 Capital assets, net (see Note 7) Nondepreciable capital assets 1,542,616 1,431,690 2,974,306 Depreciable capital assets, net 7,026,999 46,460,861 53,487,860 Total assets 12,837,680 58,511,327 71,349,007 Liabilities Accounts payable 321,935 2,055,894 2,377,829 Due to other governments 28,488 - 28,488 Liabilities payable from restricted assets - 259,325 259,325 Accrued interest payable - 183,073 183,073 Deferred revenue - 60,000 60,000 Long-term liabilities (see Note 8) Portion due or payable within one year Bonds payable - 437,000 437,000 Notes payable 214,730 742,311 957,041 Portion due or payable after one year Bonds payable - 4,234,805 4,234,805 Notes payable 400,000 15,232,113 15,632,113 Compensated absences payable 345,197 633,860 979,057 Total liabilities 1,310,350 23,838,381 25,148,731 Net Assets Invested in capital assets, net of related debt 7,954,885 27,251,821 35,206,706 Restricted for: Capital projects 37,646 266,710 304,356 Debt service - 668,559 668,559 Community development projects 455,113 - 455,113 Other purposes 516,037 1,763 517,800 Unrestricted 2,563,649 6,484,093 9,047,742 Total net assets $ 11,527,330 $ 34,672,946 $ 46,200,276 See accompanying notes to financial statements. -4- City of Marianna Statement of Activities For the year ended September 30, 2009 NET (EXPENSE) REVENUE AND CHANGES IN NET ASSETS PROGRAM REVENUES PRIMARY GOVERNMENT CHARGES OPERATING CAPITAL FOR GRANTS & GRANTS & GOVERNMENTAL BUSINESS-TYPE FUNCTIONS/PROGRAMS EXPENSES SERVICES CONTRIBUTIONS CONTRIBUTIONS ACTIVITIES ACTIVITIES TOTALS Primary Government Governmental Activities: General government $ 1,928,744 $ 555,252 $ - $ 287,131 $ (1,086,361) $ - $ (1,086,361) Public safety 1,998,138 136,827 - 298,730 (1,562,581) - (1,562,581) Highways and streets 731,594 - - - (731,594) - (731,594) Culture and recreation 331,689 84,413 - - (247,276) - (247,276) Interest on long-term debt 39,544 - - - (39,544) - (39,544) Total governmental activities 5,029,709 776,492 - 585,861 (3,667,356) - (3,667,356) Business Type Activities: Water 1,047,202 1,206,543 - 1,318,498 - 1,477,839 1,477,839 Gas 1,425,146 1,708,472 - - - 283,326 283,326 Sewer 2,503,898 2,546,320 - - - 42,422 42,422 Airport 659,278 386,218 - 551,872 - 278,812 278,812 MHR 10,311,534 11,350,363 - - - 1,038,829 1,038,829 Total business-type activities 15,947,058 17,197,916 - 1,870,370 - 3,121,228 3,121,228 Total primary government $ 20,976,767 $ 17,974,408 $ - $ 2,456,231 (3,667,356) 3,121,228 (546,128) General revenues Taxes: Property taxes, levied for general purposes 651,546 - 651,546 Franchise and public service taxes 3,070,580 - 3,070,580 Interest and investment earnings 933 145,067 146,000 Gain on disposition of capital assets - 8,200 8,200 Miscellaneous 425,184 481,801 906,985 Transfers 1,327,511 (1,327,511) - Total general revenues and transfers 5,475,754 (692,443) 4,783,311 Change in net assets before the net effect of a change in an accounting estimate 1,808,398 2,428,785 4,237,183 Effect of change in an accounting estimate - 100,000 100,000 Change in net assets 1,808,398 2,528,785 4,337,183 Net assets - beginning 9,718,932 32,144,161 41,863,093 Net assets - ending $ 11,527,330 $ 34,672,946 $ 46,200,276 See accompanying notes to financial statements. -5- City of Marianna Balance Sheet Governmental Funds September 30, 2009 Community Debt Redevelopment Service General Agency Fund Total Assets Cash and cash equivalents $ 1,159,081 $ 430,776 $ - $ 1,589,857 Accounts receivable, net 302,600 - - 302,600 Due from other governments 586,563 - - 586,563 Due from other funds 1,831,728 44,406 - 1,876,134 Inventory 8,000 - - 8,000 Restricted assets Cash and cash equivalents 553,683 - - 553,683 Total assets $ 4,441,655 $ 475,182 $ - $ 4,916,837 Liabilities Accounts payable $ 301,866 $ 20,069 $ - $ 321,935 Due to other governments 28,488 - - 28,488 Payable to other funds 648,772 - - 648,772 Total liabilities 979,126 20,069 - 999,195 Fund balances Reserved for Capital projects 37,646 - - 37,646 Community development projects - 455,113 - 455,113 Other purposes 516,037 - - 516,037 Unreserved, reported in General fund 2,908,846 - - 2,908,846 Total fund balances 3,462,529 455,113 - 3,917,642 Total liabilities and fund balances $ 4,441,655 $ 475,182 $ - $ 4,916,837 See accompanying notes to financial statements. -6- City of Marianna Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets September 30, 2009 Amounts reported for governmental activities in the statement of net assets are different because: Total fund balances – governmental funds $ 3,917,642 Capital assets used in governmental activities are not financial resources, and, therefore, are not reported in the governmental funds. 8,569,615 Long-term liabilities, including notes payable, are not due and payable in the current period, and, therefore, are not reported in the governmental funds. Balances at September 30, 2009 were: General obligation warrants, leases and notes payable $ 614,730 Compensated absences 345,197 Total long-term liabilities (959,927) Net assets of governmental activities $ 11,527,330 See accompanying notes to financial statements. -7- City of Marianna Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the year ended September 30, 2009 COMMUNITY DEBT REDEVELOPMENT SERVICE GENERAL AGENCY FUND TOTAL Revenues Property taxes, levied for general purposes $ 651,546 $ - $ - $ 651,546 Other taxes 2,960,923 109,657 - 3,070,580 Intergovernmental 328,151 - - 328,151 Licenses and permits 84,370 - - 84,370 Charges for services 627,706 - - 627,706 Fines and forfeitures 32,948 - - 32,948 Grants 585,861 - - 585,861 Interest 80 853 - 933 Other fees and miscellaneous 128,501 - - 128,501 Total revenues 5,400,086 110,510 - 5,510,596 Expenditures Current General government 1,800,729 14,376 - 1,815,105 Public safety 1,905,378 - - 1,905,378 Highways and streets 649,854 - - 649,854 Culture and recreation 347,627 - - 347,627 Capital outlay General government 88,425 47,000 - 135,425 Public safety 82,890 - - 82,890 Highways and streets 1,006,309 - - 1,006,309 Culture and recreation 37,941 - - 37,941 Debt Service Principal - - 220,917 220,917 Interest and other charges - - 21,248 21,248 Total expenditures 5,919,153 61,376 242,165 6,222,694 Excess of revenues over (under) expenditures (519,067) 49,134 (242,165) (712,098) Other financing sources (uses) Transfers in 1,209,021 44,406 242,165 1,495,592 Transfers out (157,081) (11,000) - (168,081) Net other financing sources (uses) 1,051,940 33,406 242,165 1,327,511 Net change in fund balances 532,873 82,540 - 615,413 Fund balances - beginning 2,929,656 372,573 - 3,302,229 Fund balances - ending $ 3,462,529 $ 455,113 $ - $ 3,917,642 See accompanying notes to financial statements. -8- City of Marianna Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the year ended September 30, 2009 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds $ 615,413 Capital outlay, reported as expenditures in governmental funds, is shown as capital assets in the Statement of Net Assets 1,262,565 Depreciation expense on governmental capital assets is included in the governmental activities in the Statement of Activities. (294,218) Repayment of long-term debt is reported as an expenditure in governmental funds, but as a reduction in long-term liabilities in the Statement of Net Assets 220,917 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. These expenses include: Compensated absences 3,721 Change in net assets of governmental activities $ 1,808,398 See accompanying notes to financial statements. -9- City of Marianna Statement of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual – General Fund For the year ended September 30, 2009 VARIANCE WITH ACTUAL FINAL AMOUNTS BUDGET- ORIGINAL FINAL (BUDGETARY POSITIVE BUDGET BUDGET BASIS) (NEGATIVE) Revenues Taxes $ 3,322,971 $ 3,615,471 $ 3,612,469 $ (3,002) Licenses and permits 86,250 86,250 84,370 (1,880) Intergovernmental 230,952 336,952 328,151 (8,801) Charges for services 553,958 618,958 627,706 8,748 Fine and forfeitures 17,700 31,700 32,948 1,248 Grants 553,463 584,463 585,861 1,398 Miscellaneous revenue 122,000 124,607 128,581 3,974 Total revenues 4,887,294 5,398,401 5,400,086 1,685 Expenditures General government 2,016,961 1,986,961 1,889,154 97,807 Public safety 1,970,256 1,971,256 1,988,268 (17,012) Highways and streets 1,513,024 1,700,024 1,656,163 43,861 Culture and recreation 585,069 394,774 385,568 9,206 Total expenditures 6,085,310 6,053,015 5,919,153 133,862 Excess of revenues over (under) expenditures (1,198,016) (654,614) (519,067) 135,547 Other financing sources (uses) Transfers in 1,198,016 1,198,016 1,209,021 11,005 Transfers out - (148,000) (157,081) (9,081) Total other financing sources 1,198,016 1,050,016 1,051,940 1,924 Net change in fund balances - 395,402 532,873 137,471 Fund balance - beginning 2,929,656 2,929,656 2,929,656 - Fund balances - ending $ 2,929,656 $ 3,325,058 $ 3,462,529 $ 137,471 See accompanying notes to financial statements. -10- City of Marianna Statement of Net Assets Proprietary Funds September 30, 2009 BUSINESS-TYPE ACTIVITIES/ENTERPRISE FUNDS UTILITY MHR AIRPORT Total Assets Current assets Cash and cash equivalents $ 4,135,141 $ 3,387,741 $ 343,039 $ 7,865,921 Accounts receivable, net 640,104 1,202,373 41,429 1,883,906 Accrued interest receivable 49,440 - 2,498 51,938 Due from other funds 9,153 595,413 - 604,566 Due from other governments - - 230,321 230,321 Inventories 126,653 68,448 - 195,101 Prepaid expenses - 128,045 - 128,045 Total current assets 4,960,491 5,382,020 617,287 10,959,798 Noncurrent assets Restricted assets Cash and cash equivalents 1,165,983 55,920 33,026 1,254,929 Deposits 147,000 - - 147,000 Deferred charges - debt 88,977 - - 88,977 Capital assets Nondepreciable 1,075,861 50,000 305,829 1,431,690 Depreciable, net 40,562,483 2,226,201 3,672,177 46,460,861 Total noncurrent assets 43,040,304 2,332,121 4,011,032 49,383,457 Total assets 48,000,795 7,714,141 4,628,319 60,343,255 Liabilities Current liabilities Accounts payable 1,351,234 542,917 161,743 2,055,894 Due to other funds 1,827,771 - 4,157 1,831,928 Notes payable 736,812 5,499 - 742,311 Accrued interest payable 183,073 - - 183,073 Liabilities payable from restricted assets 203,405 55,920 - 259,325 Bonds payable - current 437,000 - - 437,000 Deferred revenue 60,000 - - 60,000 Total current liabilities 4,799,295 604,336 165,900 5,569,531 Noncurrent liabilities Accrued compensated absences 93,830 507,357 32,673 633,860 Notes payable 15,224,017 8,096 - 15,232,113 Revenue bonds payable, net 4,234,805 - - 4,234,805 Total noncurrent liabilities 19,552,652 515,453 32,673 20,100,778 Total liabilities 24,351,947 1,119,789 198,573 25,670,309 Net assets Invested in capital assets, net of related debt 21,005,710 2,268,105 3,978,006 27,251,821 Restricted for: Capital projects 233,684 - 33,026 266,710 Debt service 668,559 - - 668,559 Other purposes 1,763 - - 1,763 Unrestricted 1,739,132 4,326,247 418,714 6,484,093 Total net assets $ 23,648,848 $ 6,594,352 $ 4,429,746 $ 34,672,946 See accompanying notes to financial statements. -11- City of Marianna Statement of Revenues, Expenses, and Changes in Net Assets Proprietary Funds For the year ended September 30, 2009 BUSINESS -TYPE ACTIVITIES/ENTERPRISE FUNDS UTILITY MHR AIRPORT TOTAL Operating revenues Water, sewer, and gas revenue pledged as security for revenue bonds $ 5,461,335 $ - $ - $ 5,461,335 Charges for services - 11,350,363 386,218 11,736,581 Total operating revenues 5,461,335 11,350,363 386,218 17,197,916 Operating expenses Personal services 889,564 7,164,172 118,331 8,172,067 Utilities 611,652 314,618 67,015 993,285 Services and supplies 1,519,274 1,780,041 231,459 3,530,774 Repairs and maintenance 71,426 194,783 9,409 275,618 Insurance premiums 141,295 291,607 4,834 437,736 Other operating expenses 14 296,247 30,373 326,634 Depreciation 1,125,806 270,066 197,857 1,593,729 Total operating expenses 4,359,031 10,311,534 659,278 15,329,843 Net operating income (loss) 1,102,304 1,038,829 (273,060) 1,868,073 Nonoperating revenues (expenses) Interest income 72,810 63,107 9,150 145,067 Miscellaneous revenue 487,878 882 1,453 490,213 Gain (loss) on sale of assets 8,200 - - 8,200 Interest expense (617,215) - - (617,215) Total nonoperating revenues (expenses) (48,327) 63,989 10,603 26,265 Income (loss) before contributions and transfers 1,053,977 1,102,818 (262,457) 1,894,338 Capital contributions 1,310,086 - 551,872 1,861,958 Transfers, net (860,675) (423,756) (43,080) (1,327,511) Change in net assets before the net effect of a change in accounting estimate 1,503,388 679,062 246,335 2,428,785 Effect of change in accounting estimate - 100,000 - 100,000 Change in net assets 1,503,388 779,062 246,335 2,528,785 Total net assets - beginning 22,145,460 5,815,290 4,183,411 32,144,161 Total net assets - ending $ 23,648,848 $ 6,594,352 $ 4,429,746 $ 34,672,946 See accompanying notes to financial statements. -12- City of Marianna Statement of Cash Flows Proprietary Funds For the year ended September 30, 2009 BUSINESS-TYPE ACTIVITIES/ENTERPRISE FUNDS UTILITY MHR AIRPORT TOTAL Operating activities Receipts from customers and users $ 5,532,725 $ 11,795,617 $ 397,304 $ 17,725,646 Payments to suppliers (3,205,589) (2,553,844) (257,789) (6,017,222) Payments to employees (892,577) (7,175,198) (117,036) (8,184,811) Other receipts (payments) (147,014) (296,247) (30,373) (473,634) Net cash provided (used) by operating activities 1,287,545 1,770,328 (7,894) 3,049,979 Noncapital financing activities Operating subsidies and transfers to other funds 100,256 (456,773) (35,897) (392,414) Capital and related financing activities Proceeds from capital debt 536,686 16,497 - 553,183 Capital contributions 2,226,988 - 552,101 2,779,089 Sale of capital assets 8,200 - - 8,200 Purchase of capital assets (1,747,717) (126,335) (567,155) (2,441,207) Principal payments on capital debt (1,446,277) (2,902) - (1,449,179) Interest payments on capital debt (560,773) - - (560,773) Other receipts (payments) 549,893 4,756 1,453 556,102 Net cash (used) provided by capital and related financing activities (433,000) (107,984) (13,601) (554,585) Investing activities Interest and dividends 59,542 63,106 9,157 131,805 Net cash provided by investing activities 59,542 63,106 9,157 131,805 Net increase (decrease) in cash and cash equivalents 1,014,343 1,268,677 (48,235) 2,234,785 Cash - beginning of the year 4,286,781 2,174,984 424,300 6,886,065 Cash - ending of the year $ 5,301,124 $ 3,443,661 $ 376,065 $ 9,120,850 Reconciliation of net operating income to net cash provided (used) by operating activities Net operating income (loss) $ 1,102,304 $ 1,038,829 $ (273,060) $ 1,868,073 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 1,125,806 270,066 197,857 1,593,729 (Increase) decrease in accounts receivable 71,390 445,254 11,086 527,730 (Increase) decrease in inventory (8,671) (6,766) - (15,437) (Increase) decrease in deposits (147,000) - - (147,000) (Increase) decrease in prepaid insurance - 5,830 - 5,830 Increase (decrease) in accounts payable (847,788) 49,809 55,662 (742,317) Increase (decrease) in other liabilities (8,496) (32,694) 561 (40,629) Net cash provided (used) by operating activities $ 1,287,545 $ 1,770,328 $ (7,894) $ 3,049,979 See accompanying notes to financial statements. -13- City of Marianna Statement of Fiduciary Net Assets Fiduciary Funds September 30, 2009 PENSION TRUST AGENCY MUNICIPAL MUNICIPAL POLICE FIREMAN'S OFFICERS' PENSION RETIREMENT DEFERRED TRUST FUND TRUST FUND COMPENSATION Assets Cash and cash equivalents $ 526 $ 10 $ - - Investments, at fair value: Money market funds 12,275 14,848 - Corporate stocks 978,965 1,233,092 - Other investments 721,641 1,136,749 316,954 Total investments 1,712,881 2,384,689 316,954 Total assets $ 1,713,407 $ 2,384,699 $ 316,954 Liabilities Accounts payable $ 450 $ - $ - Deferred compensation benefits payable - - 316,954 Total liabilities 450 - 316,954 Net assets Held in trust for pension and other purposes $ 1,712,957 $ 2,384,699 $ - See accompanying notes to financial statements. -14- City of Marianna Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the year ended September 30, 2009 PENSION TRUST MUNICIPAL MUNICIPAL POLICE FIREMAN'S OFFICERS' PENSION RETIREMENT TRUST TRUST FUND FUND Additions Contributions State and City contributions $ 106,214 $ 53,074 Plan members 28,440 26,651 Total contributions 134,654 79,725 Investment earnings Net increase in fair value of investments (42,922) (91,338) Interest and dividends 50,022 76,365 Total investment earnings 7,100 (14,973) Total additions 141,754 64,752 Deductions Benefits 68,055 138,176 Administrative expenses 22,407 23,588 Total deductions 90,462 161,764 Change in net assets 51,292 (97,012) Net assets - beginning 1,661,665 2,481,711 Net assets - ending $ 1,712,957 $ 2,384,699 See accompanying notes to financial statements. -15- City of Marianna Notes to Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Marianna was incorporated in 1911 under Section 1911-6371 of the Laws of Florida. The City operates under a Council-Manager form of government and provides the following services as authorized by its charter: public safety (police and fire), highways and streets, sanitation, health and social services, culture-recreation, education, public improvements, planning and zoning, and general administrative services. The accounting policies of the City of Marianna conform to generally accepted accounting principles applicable to governments. The following is a summary of the more specific policies: A. Reporting Entity The definition of the reporting entity is based primarily on the notion of financial accountability. The financial statements of the City include the funds required to account for those financial activities which are related to the City and are controlled by or dependent upon the City's legislative body. Control or dependence upon the City was determined on the basis of budget adoption, taxing authority and outstanding debt secured by revenues or general obligation of the City, and the City's legal responsibility to fund any deficits that may occur. On this basis, the following entity is not a part of the City of Marianna and thus, is excluded from the accompanying financial statements: Marianna Housing Authority - This authority was created by the City pursuant to State Statutes with commissioners of the Authority appointed by the City Commission. Operations are administered by the Authority and financed with Federal funds and rentals. Outstanding debt of the Authority is not an obligation of the City. B. Government-Wide and Fund Financial Statements The basic financial statements consist of the government-wide financial statements and fund financial statements. Both sets of statements distinguish between governmental and business-type activities. Government-wide financial statements comprised of the statement of net assets and the statement of changes in net assets report information on all of the non-fiduciary activities of the primary government. For the most part, the effect of inter-fund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues are classified into three categories: charges for services, operating grants and contributions, and capital grants and contributions. Charges for services refer to direct recovery from customers for services rendered. Grants and contributions refer to revenues restricted for specific programs whose use may be restricted further to operational or capital items. The general revenues section displays revenue collected that helps support all functions of government and contributes to the change in the net assets for the fiscal year. -16- City of Marianna Notes to Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The fund financial statements follow and report additional and detailed information about operations for major funds individually and nonmajor funds in the aggregate for governmental funds. A reconciliation is provided that converts the results of governmental fund accounting to the government-wide presentations. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period, considered to be sixty days. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. The following are reported as major governmental funds: General Fund – This is the City’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The City reports the following major proprietary funds: Utility – Accounts for the operations of the utilities (water, gas and wastewater). Marianna Health and Rehabilitation Center (MHR) – Accounts for the activities at the City’s nursing home facility. Airport – Accounts for activities at the municipal airport. It includes the Marianna Airport Authority. The accompanying financial statements present the City and its component units, entities for which the City is considered to be financially accountable. Blended component units, although legally separate entities, are in substance part of the City’s operation. -17- City of Marianna Notes to Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The City reports the following blended component unit: Community Redevelopment Agency (CRA) - On June 9, 1993 the City adopted a Community Redevelopment Plan and created a Community Redevelopment Agency (CRA) by Ordinance #822 and Resolution 93-8. The board consists of the Mayor and four City Commissioners. The total area of the CRA was 0.08581 square miles. The plan was amended by the City Commission on June 6, 1995 by Resolution 95-5, which expanded the area of the CRA to 0.3993 square miles. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Proprietary Funds are charges to customers for sales and services. Operating expenses for the Proprietary Funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. D. Cash and Cash Equivalents Cash and Cash Equivalents include amounts in demand deposits as well as short-term investments with a maturity date within three months of the date acquired by the government. E. Investments Investments are stated at cost or amortized cost, except in the Pension Trust Funds and Agency Fund where Investments are stated at fair value. F. Inventory Inventory is valued at the lower of cost (first-in, first-out) or market. Inventory consists of expendable supplies held for consumption. The cost is recorded as an expenditure at the time individual inventory items are purchased. -18- City of Marianna Notes to Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) G. Compensated Absences Employees earn one day annual leave and one day sick leave per month. Any unused annual and sick leave at the end of each calendar year may carryforward up to a maximum of eighteen days and sixty days for annual and sick days respectively. Any annual leave in excess of eighteen days accruing to the benefit of any employee which is neither taken nor compensated shall lapse. After the accumulation of sixty days sick leave, an employee shall be paid at his or her existing wage rate for any unused sick leave which has accumulated during the calendar year. The liability for compensated absences reported in the government-wide and proprietary fund statements consists of unpaid, accumulated annual and sick leave balances. H. Bond Discounts and Issue Costs In the proprietary funds, bond discounts, premiums, and issue costs are amortized over the term of the bonds using the straight-line method which, for the bond discounts and premiums, is not materially different than the effective interest method. Unamortized bond discounts and premiums are presented in the financial statements as reductions/additions in bonds payable and unamortized bond issue costs as deferred charges. I. Restricted Assets Restricted Assets consist of cash which is required by resolution to be set aside for specific purposes and is therefore unavailable for general operating purposes. When both restricted and unrestricted net assets are available, restricted assets are applied first. J. Proprietary Fund Policies Pursuant to Governmental Accounting Standards Board (GASB) Statement No. 20, the City of Marianna has elected not to apply the provisions of pronouncements of the Financial Accounting Standards Board (FASB) issued after November 30, 1989 to the City’s proprietary funds. K. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $3,000 and capital assets with an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. -19- City of Marianna Notes to Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property, plant, and equipment of the primary government is depreciated using the straight line method over the following estimated useful lives: Buildings 30 – 50 years Electrical, sewer, water and wastewater system 30 – 50 years Equipment 5 – 10 years Infrastructure 50 years L. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. M. Subsequent Events The City evaluates subsequent events through the date the financial statements were available to be issued. NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary Information The City follows these procedures in establishing the budget reflected in the financial statements: 1. City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following October 1. The operating budget includes proposed expenditures and the means of financing them. 2. The budget is legally enacted through passage of an ordinance. 3. The budget of the General Fund is prepared on the modified accrual basis of accounting with the following exception: The City includes a portion of the prior year’s fund balance represented by unappropriated liquid assets remaining in the fund as a budgeted revenue in the succeeding year. The results of operation in accordance with generally accepted accounting principles do no recognize the fund balance allocation as revenue, as it is the result of the prior period’s excess of revenues over expenditures. 4. Budgetary control is at the department level. -20- City of Marianna Notes to Financial Statements NOTE 3 - PROPERTY TAXES Under Florida Law, the assessment of all properties and the collection of all county, municipal, and school board property taxes are consolidated in the offices of the County Property Appraiser and County Tax Collector. The laws of the State regulating tax assessment are also designed to assure a consistent property valuation method statewide. State statutes permit municipalities to levy property taxes at a rate of up to 10 mills. The millage rate assessed by the City for the fiscal year ended September 30, 2009 was 2.9520. All property is assessed according to its fair market value on January 1 of each year. Each assessment roll is submitted to the Executive Director of the Department of Revenue for review to determine if the rolls meet all of the appropriate requirements. The current year taxes for the fiscal year, beginning October 1, are billed in the month of November and are due no later than March 31. On April 1, all unpaid amounts become delinquent and are subject to interest and penalties. Discounts are allowed for early payment at the rate of 4% in the month of November, 3% in the month of December, 2% in the month of January, and 1% in the month of February. The taxes paid in March are without discount. Delinquent taxes on real property bear interest at 18% per year. On or prior to June 1 following the tax year, certificates are sold for all delinquent taxes on real property. After sale, tax certificates bear interest at 18% per year or at any lower rate bid by the buyer. Application for a tax deed on any unredeemed tax certificates may be made by the certificate holder after a period of two years. Delinquent taxes on personal property bear interest at 18% per year until the tax is satisfied either by seizure and sale of property or by the five year statute of limitations. Since the Jackson County Tax Collector's Office acts quickly in selling tax certificates and in remitting such collections to the City, no delinquent or uncollected property taxes exist at year end. The City Tax Calendar is as follows: Valuation Date: January 1 Levy Date: November 1 Due Date: March 31, Succeeding Year Lien Date: April 1, Succeeding Year -21- City of Marianna Notes to Financial Statements NOTE 4 - DEPOSITS AND INVESTMENTS At year end, the carrying amount of the City's deposits was $11,264,926 and the bank balance was $11,631,962. The bank balance was covered by federal depository insurance and, for the amount in excess of such federal depository insurance, by the State of Florida's Public Deposit Act. Provisions of the Act require that public deposits may only be made at qualified public depositories. The Act requires each qualified public depository to deposit with the State Treasurer eligible collateral equal to or in excess of the required collateral as determined by the provisions of the Act. In the event of a failure by a qualified public depository, losses in excess of federal depository insurance and proceeds from the sale of securities pledged by the defaulting depository are assessed against the other qualified public depositories of the same type as the depository in default. When other qualified public depositures are assessed additional amounts, they are assessed on a pro-rata basis. Florida Statutes authorize the City to invest in certificates of deposit, repurchase agreements and the State Treasurer’s Investment Pool. In addition, the statutes allow the City to invest in bonds, notes or other obligations of the United States Government, certain bonds of any state or local government unit, and bonds issued by certain government agencies. Credit Risk The credit risk of certain investments, such as investment pools managed by other governments, cannot be categorized as to credit risk because the City investments are not evidenced by specific, identifiable investment securities. Interest Rate Risk At September 30, 2009, the City did not hold any investments that were considered to have interest rate risk. Custodial Credit Risk At September 30, 2009, the City did not hold any deposits or investments that were considered to have custodial credit risk. Concentration of Credit Risk At September 30, 2009, the City did not hold any investments that were considered to have concentration of credit risk. -22- City of Marianna Notes to Financial Statements NOTE 4 - DEPOSITS AND INVESTMENTS (CONTINUED) The City invested funds in the Florida State Board of Administration Local Governments Surplus Funds Investment Pool. At September 30, 2009, the market value and the carrying value of these funds was $238,855. The funds are carried as a cash equivalent on the balance sheet at September 30, 2009 (See Note 1, Section D for definition of cash equivalents) and are included in carrying value and bank balance in the first paragraph of this note. The City’s investments in the Local Government Surplus Funds Trust Fund (Florida PRIME), which the State Board of Administration indicates is a Securities and Exchange Commission Rule 2a7-like external investment pool, as of September 30, 2009, are similar to money market funds in which shares are owned in the fund rather than the underlying investments. These investments are reported at fair value, which is amortized cost. The State Board of Administration’s interpretation in regards to the City’s investments in Fund B is that it does not meet the requirement of a SEC 2a-7-like fund; therefore, State Board of Administration is providing a Fair Value factor (i.e. total net asset value of Fund B divided by total participant balances of Fund B) for September 30, 2009. The Fair Value factor for Fund B for September 30, 2009, is .54915069. As of September 30, 2009, the City had $204,308 and $36,709 invested in Florida PRIME and Fund B, respectively. Additional information and investment policies regarding the Local Government Surplus Funds Trust Fund may be obtained from the State Board of Administration at www.sbafla.com/prime. Credit Risk The credit risk of certain investments, such as investment pools managed by other governments, cannot be categorized as to credit risk because the City investments are not evidenced by specific, identifiable investment securities. As of September 30, 2009, the City’s investment in the Florida PRIME is rated by Standard and Poors and the current rating is AAAm. The Fund B Surplus Funds Trust Fund is not rated by any nationally recognized statistical rating agency. Interest Rate Risk The weighted average days to maturity (WAM) of the Florida PRIME at September 30, 2009, is 33 days. Next interest rate reset for floating rate securities are used in the calculation of the WAM. The weighted average life (based on expected future cash flows) of Fund B at September 30, 2009, is estimated at 6.69 years. However, because Fund B consists of restructured or defaulted securities, there is considerable uncertainty regarding the weighted average life. -23- City of Marianna Notes to Financial Statements NOTE 4 - DEPOSITS AND INVESTMENTS (CONTINUED) The City also offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. This plan allows the employees to designate where the plan funds are invested. At September 30, 2009, plan funds totaling $316,954 were invested in mutual funds. These funds are carried as an investment in the agency fund. NOTE 5 - ACCOUNTS RECEIVABLE GENERAL UTILITY AIRPORT MHR Accounts receivable $ 68,938 $ 659,561 $ - $ 1,275,451 Other receivables 231,471 10,300 41,429 - Interest receivable 35,851 - - 24,877 Less allowance for doubtful accounts (33,660) (29,757) - (97,955) Receivables, net $ 302,600 $ 640,104 $ 41,429 $ 1,202,373 Receivables arise primarily from utility services (sewer, gas and water) provided by the City of Marianna, Florida and nursing home services provided by the Marianna Health and Rehabilitation Center. The City grants credit to customers, substantially all of whom are local residents. NOTE 6 - INTERFUND BALANCES Interfund balances are generally used to meet cash demands necessary to pay operating expenses. Amounts are generally repaid during the next fiscal year. Balances due to/from other funds at September 30, 2009 are as follows: Receivable fund Payable fund General Proprietary funds $ 1,227,362 For Governmental Funds, the interfund balance is comprised of $1,876,134 in due from other funds and $648,772 in payable to other funds. For Proprietary Funds, the interfund balance is comprised of $604,566 in due from other funds and $1,831,928 in payable to other funds. TRANSFERS IN TRANSFERS DEBT OUT GENERAL CRA SERVICE UTILITY AIRPORT MHR TOTAL General $ - $ 44,406 $ 112,675 $ - $ - $ - $ 157,081 CRA 11,000 - - - - - 11,000 Utility 731,185 - 129,490 - - - 860,675 Airport 43,080 - - - - - 43,080 MHR 423,756 - - - - - 423,756 $ 1,209,021 $ 44,406 $ 242,165 $ - $ - $ - $1,495,592 -24- City of Marianna Notes to Financial Statements NOTE 7 - CAPITAL ASSETS Capital asset activity for the year ended September 30, 2009 was as follows: BEGINNING ENDING BALANCE INCREASES DECREASES BALANCE Governmental activities: Capital assets, not being depreciated: Land $ 1,202,036 $ - $ - $ 1,202,036 Construction in progress 3,068,205 1,093,050 (3,820,675) 340,580 Total capital assets, not being depreciated 4,270,241 1,093,050 (3,820,675) 1,542,616 Capital assets, being depreciated: Infrastructure 1,581,321 3,820,674 - 5,401,995 Buildings 1,011,079 11,853 - 1,022,932 Improvements other than buildings 1,388,634 2,400 - 1,391,034 Equipment 2,514,271 155,262 (27,115) 2,642,418 Total capital assets, being depreciated 6,495,305 3,990,189 (27,115) 10,458,379 Less: accumulated depreciation for: Infrastructure 337,472 35,979 - 373,451 Buildings 641,014 24,624 - 665,638 Improvements other than buildings 399,284 60,112 - 459,396 Equipment 1,786,507 173,503 (27,115) 1,932,895 Total accumulated depreciation 3,164,277 294,218 (27,115) 3,431,380 Total capital assets, being depreciated, net 3,331,028 3,695,971 - 7,026,999 Governmental activities capital assets, net $ 7,601,269 $ 4,789,021 $ (3,820,675) $ 8,569,615 -25- City of Marianna Notes to Financial Statements NOTE 7 - CAPITAL ASSETS (CONTINUED) BEGINNING ENDING BALANCE INCREASES DECREASES BALANCE Business-type activities: Utility Capital assets, not being depreciated: Land $ 1,073,892 $ - $ - $ 1,073,892 Construction in progress 27,391,627 617,382 (28,007,040) 1,969 Total capital assets, not being depreciated 28,465,519 617,382 (28,007,040) 1,075,861 Capital assets, being depreciated: Buildings 1,423,911 - - 1,423,911 Improvements other than buildings 23,705,440 29,154,706 - 52,860,146 Equipment 1,750,485 42,667 (53,545) 1,739,607 Total capital assets, being depreciated 26,879,836 29,197,373 (53,545) 56,023,664 Less: accumulated depreciation for: Buildings 814,047 10,391 - 824,438 Improvements other than buildings 12,176,023 1,017,945 - 13,193,968 Equipment 1,398,850 97,470 (53,545) 1,442,775 Total accumulated depreciation 14,388,920 1,125,806 (53,545) 15,461,181 Total capital assets, being depreciated, net 12,490,916 28,071,567 - 40,562,483 Utility capital assets, net $ 40,956,435 $ 28,688,949 $ (28,007,040) $ 41,638,344 -26- City of Marianna Notes to Financial Statements NOTE 7 - CAPITAL ASSETS (CONTINUED) BEGINNING ENDING BALANCE INCREASES DECREASES BALANCE Airport Capital Assets, not being depreciated: Land $ 75,509 $ - $ - $ 75,509 Construction in progress 246,731 555,160 (571,571) 230,320 Total capital assets, not being depreciated 322,240 555,160 (571,571) 305,829 Capital assets, being depreciated: Buildings 2,396,843 10,683 - 2,407,526 Improvements other than buildings 2,096,217 571,571 - 2,667,788 Equipment 824,729 1,312 - 826,041 Total capital assets, being depreciated 5,317,789 583,566 - 5,901,355 Less: accumulated depreciation for: Buildings 804,038 57,691 - 861,729 Improvements other than buildings 828,044 60,104 - 888,148 Equipment 399,239 80,062 - 479,301 Total accumulated depreciation 2,031,321 197,857 - 2,229,178 Total capital assets, being depreciated, net 3,286,468 385,709 - 3,672,177 Airport capital assets, net $ 3,608,708 $ 940,869 $ (571,571) $ 3,978,006 -27- City of Marianna Notes to Financial Statements NOTE 7 - CAPITAL ASSETS (CONTINUED) BEGINNING ENDING BALANCE INCREASES DECREASES BALANCE MHR Capital assets, not being depreciated: Land $ 50,000 $ - $ - $ 50,000 Construction in progress - - - - Total capital assets, not being depreciated 50,000 - - 50,000 Capital assets, being depreciated: Buildings 4,775,023 22,384 - 4,797,407 Equipment 1,855,177 103,951 - 1,959,128 Total capital assets, being depreciated 6,630,200 126,335 - 6,756,535 Less: accumulated depreciation for: Buildings 2,933,161 164,194 - 3,097,355 Equipment 1,327,108 105,871 - 1,432,979 Total accumulated depreciation 4,260,269 270,065 - 4,530,334 Total capital assets, being depreciated, net 2,369,931 (143,730) - 2,226,201 MHR capital assets, net $ 2,419,931 $ (143,730) $ - $ 2,276,201 Depreciation expense was charged to functions as follows: Governmental activities General government $ 97,350 Public safety 96,391 Highways and streets 81,663 Culture and recreation 18,814 Total depreciation expense-governmental activities $ 294,218 Business-type activities Gas $ 66,610 Water 235,652 Sewer 823,544 MHR 270,066 Airport 197,857 Total depreciation expense-business-type activities $ 1,593,729 -28- City of Marianna Notes to Financial Statements NOTE 8 - LONG-TERM DEBT Long-term debt activity for the year ended September 30, 2009, was as follows: DUE BEGINNING ENDING WITHIN BALANCE ADDITIONS REDUCTIONS BALANCE ONE YEAR Governmental activities: Compensated absences $ 348,918 $ - $ 3,721 $ 345,197 $ - Notes payable 835,648 - 220,918 614,730 214,730 1,184,566 - 224,639 959,927 214,730 Business-type activities: General revenue bonds 5,416,000 - 426,000 4,990,000 437,000 Less deferred charges and bond premium - net (357,969) - (39,774) (318,195) - Compensated absences 674,489 - 40,629 633,860 - Notes payable 16,444,420 553,183 1,023,179 15,974,424 742,311 22,176,940 553,183 1,450,034 21,280,089 1,179,311 Total $ 23,361,506 $ 553,183 $ 1,674,673 $ 22,240,016 $ 1,394,041 -29- City of Marianna Notes to Financial Statements NOTE 8 - LONG-TERM DEBT (CONTINUED) Debt service requirements on long-term debt at September 30, 2009 are as follows: GOVERNMENTAL ACTIVITIES FISCAL YEAR ENDING NOTES PAYABLE SEPTEMBER 30, PRINCIPAL INTEREST 2010 $ 214,730 $ 10,725 2011 200,000 4,713 2012 200,000 673 2013 - - 2014 - - 2015-2019 - - Total $ 614,730 $ 16,111 BUSINESS-TYPE ACTIVITIES FISCAL YEAR ENDING REVENUE BONDS NOTES PAYABLE SEPTEMBER 30, PRINCIPAL INTEREST PRINCIPAL INTEREST 2010 $ 437,000 $ 197,415 $ 742,311 $ 130,949 2011 454,000 179,877 748,440 124,821 2012 471,000 163,470 751,717 118,642 2013 488,000 147,297 755,350 112,411 2014 245,000 134,301 761,633 106,129 2015-2019 1,129,000 525,726 3,904,245 434,563 2020-2024 326,000 389,976 4,069,331 269,477 2025-2029 411,000 304,762 4,241,397 97,411 2030-2034 520,000 197,222 - - 2035-2039 509,000 61,656 - - 2040-2044 - - - - 2045-2047 - - - - Total $ 4,990,000 $ 2,301,702 $ 15,974,424 $ 1,394,403 Governmental activities Notes payable Ford Motor Credit Company - payable in annual installments of $15,702, including interest at 6.6%, collateralized by vehicles, due February 2010 $ 14,730 SunTrust Bank - payable in annual installments of $200,000 plus interest at 2.02% at September 30, 2009, on the unpaid balance, secured by non-advalorem revenues, due December 2014. 600,000 Total notes payable 614,730 Total governmental activities $ 614,730 -30- City of Marianna Notes to Financial Statements NOTE 8 - LONG-TERM DEBT (CONTINUED) Business - type activities Revenue Bonds $4,255,000 Utility System Refunding Revenue Bonds – Series 2004, due in annual installments of $365,000 to $445,000 from October 1, 2005 through October 1, 2017, interest at 1.65% to 4.00%, net of $16,666 bond premium and $334,861 deferred amount on refunding. $ 2,441,805 $2,500,000 Wastewater System Revenue Bond – Series 1998 due in annual installments of $25,000 to $134,000 from September 1, 2001 to September 1, 2038, interest at 4.75%. 2,230,000 Total - net of discounts, premiums and deferred amount on refunding 4,671,805 Notes payable Marlin Business Bank – payable in monthly installments of $458, collateralized by equipment, due March 2012 13,595 State of Florida - State Revolving Fund, payable in semiannual installments of $447,027, including interest at .835%, due January 2029. 15,960,829 Total notes payable 15,974,424 Total business - type activities $ 20,646,229 NOTE 9 - MAJOR SUPPLIER All natural gas sold by the City is purchased from a single supplier, Florida Gas Utility Company. Purchases totaled $1,005,059 for the year ended September 30, 2009. The City has placed a deposit totaling $147,000 with Florida Gas Utility Company to secure the credit needed with the company. -31- City of Marianna Notes to Financial Statements NOTE 10 - DEFERRED COMPENSATION PLAN The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the government subject only to the claims of the government’s general creditors. Participants’ rights under the plan are equal to those of general creditors of the government in an amount equal to the fair market value of the deferred account for each participant. Investments are managed by the plan’s trustee under one of four investment options, or a combination thereof. The choice of the investment option(s) is made by the participants. NOTE 11 - EMPLOYEE BENEFITS During November 2008, the City elected to participate in the Florida Retirement System (FRS) a cost-sharing, multiple employer defined benefit public retirement system administered by the State of Florida Department of Administration, Division of Retirement, to provide retirement and survivor benefits to participating public employees. Chapter 121, Florida Statutes, establishes the authority for participant eligibility, contribution requirements, vesting eligibility and benefit provisions. FRS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to the State of Florida Division of Retirement, Tallahassee, FL 32399-1560, or by accessing their internet site at www.dos.state.fl.us/fgils/retirement. The System provides vesting of benefits after six years of creditable service. Members are eligible for normal retirement after six years of service and attaining age 62, or 30 years of service regardless of age. Early retirement may be taken any time after completing six years of service; however, there is a 5% benefit reduction for each year prior to normal retirement. FRS also provides death and disability benefits and cost-of-living adjustments. Generally, membership is compulsory for all full-time and part-time employees. Retirement coverage is employee noncontributory. The employer pays all contributions. The funding methods and the determination of benefits payable are provided in various acts of the Florida Legislature. These acts provide that employers pay all contributions at rates determined each year by the legislature. The rates, as a percentage of gross earnings, are as follows: 10/01/08-09/30/09 Regular class 9.85% Senior management 13.12% Special risk class 20.92% DROP program participants 10.91% -32- City of Marianna Notes to Financial Statements NOTE 11 - EMPLOYEE BENEFITS (CONTINUED) Contribution rates equal actuarial determined rates. During the years ended September 30, 2009, total payroll for all employees was $6,158,473. The retirement contributions for all employees covered by FRS for the years ended September 30, 2009 were $618,802. The contributions for the years ending September 30, 2009 represented 10.01% of total payroll. NOTE 12 - PENSION PLAN Employees that elected not to enter the Florida Retirement System when the City elected to in November 2009, participate in the Florida League of Cities' Municipal Pension Trust Fund. The employees contribute 3.5% of their gross pay, and the City contributes 6.5% of their gross pay. Total contributions made by the City were $19,462 for the year ended September 30, 2009. The Met Life Municipal Trust Fund was unable to provide the market value of the City’s portion of the pension fund at year end. The following are accounted for in the Pension Trust Fund: The Municipal Firemen's Pension Trust Fund was created by the State of Florida for all municipalities having an organized fire department and approved equipment in excess of $10,000 where the municipality did not already have a similar fund. The plan is funded through employee contributions, contributions from the State of Florida and contributions by the City. The employee contribution is equal to 5% of gross salaries (3% of the employees are participating under the Old Age Survivors Insurance and Social Security Law as elected by these employees). The state contribution is derived from an assessment against insurance companies which sell property insurance on property located within the city limits. The City is to provide a sum equal to the normal cost and the amount required to fund over a period of 40 years or on a 40 year basis, any actuarial deficiency shown by an actuarial valuation performed every three years. The actuarial determined liability is $2,659,566 as of October 1, 2006. The excess of this liability over current assets is $946,685 at September 30, 2009. The plan covers all firemen of the City unless rejected by the individual. The Municipal Police Officers' Retirement Trust Fund was created by the State of Florida for all municipalities having an organized police department and approved equipment in excess of $500 where the municipality did not already have a similar fund. The plan is funded in a like manner to the Municipal Firemen's Pension Trust Fund. The actuarial determined liability is $2,752,814 as of October 1, 2006. The excess of the current assets over this liability is $368,115 at September 30, 2009. The plan covers all policemen of the City unless rejected by the individual. Information regarding the Municipal Firemen’s Pension Trust Fund and the Municipal Police Officers’ Retirement Trust Fund can be obtained from the Florida Division of Retirement, Post Office Box 3010, Tallahassee, Florida 32315. -33- City of Marianna Notes to Financial Statements NOTE 13 - CONTINGENCIES AND COMMITMENTS Various claims and lawsuits are pending against the City. In the opinion of legal counsel, the potential unrecorded liability on all claims and lawsuits will not be significant to the City's financial position. The City has various leases for airport buildings and hangers, for office equipment, etc. Most of these leases are for one year and coincide with the City’s fiscal year. The City is operating under a consent order from DEP related to its WWTP operations. It is currently in compliance with all provisions but will remain under this consent order until the new WWTP facility is completed and in operation. The City was awarded funding by Florida Department of Environmental Protection to rehabilitate the City’s water distribution system. This project is $3 million in funding with 85% being grant funded and 15% in the form of a loan. The City entered into a contract with I-C Contractors, Inc. in the amount of $3,854,950 and also committed City reserve funds for additional paving in relation to this project. NOTE 14 - SUBSEQUENT EVENTS The City approved an increase in the Fire Department plan review fee rates from $.03 per square foot to $.10 per square foot. The City approved the purchase of two police vehicles at a total cost of $48,650 with financing from a local bank at a rate of 5%. The Commission agreed to accept a $100,000 grant and a $216,000 loan from USDA – Rural Development for the purchase of two emergency fire vehicles. The City revised the natural gas incentive program to provide increased incentives for customers to convert to natural gas. The City approved various capital expenditures including a vehicle lift in the amount of $11,299, backhoe loader in the amount of $75,451, a wood chipper in the amount of $27,275, a mower in the amount of $8,875, and resident furniture in the amount of $29,366. The City entered into an agreement for engineering services with David H. Melvin, Inc. for the CDBG – Downtown Revitalization Project for a contract price of $38,000. The City approved a change order in the amount of $15,285 for the airport runway lighting project 18/36. -34- City of Marianna Notes to Financial Statements NOTE 15 - RECLASSIFICATION Certain 2008 amounts have been reclassified to conform with 2009 classifications. Such reclassifications had no effect on reported net income. NOTE 16 - CHANGE IN ACCOUNTING ESTIMATES Effective September 30, 2009, the City changed its estimate of the liability related to an ongoing lawsuit involving the Marianna Health and Rehabilitation Center. The effect of this change in estimate was to decrease other accrued losses and increase other income by $100,000 for 2009. NOTE 17 - RISK MANAGEMENT The City is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets, errors or omissions; injuries to employees and/or the public; or damage to property of others; and natural disasters for which the City carries commercial insurance. Insurance against losses is provided for the following types of risk: • Workers’ compensation and employer’s liability • General and automobile liability • Real and personal property damage • Public officials’ liability • Accidental death and dismemberment NOTE 18 - GRANTS The City participates in several state and federal grant programs. These programs are subject to program compliance audits by grantors or their representatives. The audits of these programs for, or including, the year ended September 30, 2009, have not yet been accepted/approved by the grantors. Accordingly, the final determination of the City’s compliance with applicable grant requirements will be established at a future date. The amount, if any, of expenditures which may be disallowed by granting agencies cannot be determined, although the City expects such amounts, if any, to be immaterial. -35- City of Marianna Notes to Financial Statements NOTE 19 - FUND EQUITY Reserved Fund Equity Reservations of equity show amounts that are not appropriated for expenditure or are legally restricted for specific uses. The purpose for each is indicated as follows: Funds Purpose Amount General fund Capital projects $ 37,646 General fund Other purposes 516,037 CRA Community redevelopment projects 455,113 Utility fund Capital projects 233,684 Utility fund Debt service 668,559 Utility fund Other purposes 1,763 Airport fund Capital projects 33,026 Total restricted fund equity $ 1,945,828 -36- Supplementary Information Honorable Mayor and Members of the City Council City of Marianna, Florida Page Two The Rules of the Auditor General [Section 10.554(1) (i) 4.] also require that we address violations of provisions of contracts and grant agreements or abuse that have an effect on the financial statements that is less than material but more than inconsequential. In connection with our audit, we did not note any matters that were required to be disclosed by Rules of the Auditor General [Section 10.554(1) (i) 4.]. The Rules of the Auditor General (Section 10.554(1)(i)5.) requires, based on professional judgment, the reporting of the following matters that are inconsequential to the financial statements, considering both quantitative and qualitative factors: (1) violations of laws, rules, regulations, and contractual provisions that have occurred, or are likely to have occurred and would have an immaterial effect on the financial statements; (2) improper expenditures or illegal acts that would have an immaterial effect on the financial statements; and (3) control deficiencies that are not significant deficiencies, including, but not limited to: (a) improper or inadequate accounting procedures (e.g., the omission of required disclosures from the financial statements); (b) failures to properly record financial transactions; and (c) other inaccuracies, shortages, defalcations, and instances of fraud discovered by, or that come to the attention of, the auditor. In connection with our audit, we did not note any matters that were required to be disclosed by Rules of the Auditor General (Section 10.554(1)(i)5.). The Rules of the Auditor General (Section 10.554(1) (i) 6.) also requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed. The City was established by Chapter 59-1983, Laws of Florida. The Rules of the Auditor General (Section 10.544(1)(i)7a), requires a statement be included as to whether or not the local governmental entity has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that the City did not meet any of the conditions described in Section 218.503(1), Florida Statutes. As required by the Rules of the Auditor General (Section 10.554(1) (i)7 .b.), we determined that the annual financial report for the City of Marianna for the year ended September 30, 2009, filed with the Florida Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, 2009. In connection with our audit, we determined that these two reports were in agreement. -38- Honorable Mayor and Members of the City Council City of Marianna, Florida Page Three As required by the Rules of the Auditor General (Sections 10.554(i) 7.c. and 10.556(7)), we applied financial condition assessment procedures. It is management’s responsibility to monitor the entity’s financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. This management letter is intended solely for the information of the City of Marianna and management, and the State of Florida Office of the Auditor General, and is not intended to be and should not be used by anyone other than these specified parties. February 16, 2010 -39- Honorable Mayor and Members of the City Council City of Marianna, Florida Page Two A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by City of Marianna’s internal control. 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 significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that none of the significant deficiencies described above are also a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Marianna, Florida’s financial statements are free of material misstatement, we performed tests of its 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. We noted certain other matters that we reported to the management of the City of Marianna in a separate letter dated February 16, 2010. City of Marianna’s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. We did not audit the City of Marianna’s response and, accordingly, we express no opinion on it. This report is intended for the information and use of management, others within the entity, City Council, and federal and state awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. February 16, 2010 -41- Honorable Mayor and Members of the City Council City of Marianna, Florida Page Two Internal Control Over Compliance The management of the City of Marianna is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs and state projects. In planning and performing our audit, we considered the City’s internal control over compliance with requirements that could have a direct and material effect on a major federal program or state project in order to determine our auditing procedures for the purpose of expressing our opinion on compliance 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 of Marianna’s internal control over compliance. A control deficiency in an entity’s internal control over compliance 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 noncompliance with a type of compliance requirement of a federal program or state project on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity’s ability to administer a federal program or state project such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a federal program or state project that is more inconsequential will not be prevented or detected by the entity’s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a federal program or state project will not be prevented or detected by the entity’s internal control. 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 the internal control that might be 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 solely for the information and use of management, others within the entity, City Council, federal and state awarding agencies and pass-through entities, and specific legislative or regulatory bodies and is not intended to be and should not be used by anyone other than these specified parties. February 16, 2010 -43- City of Marianna Schedule of Expenditures of Federal Awards and State Financial Assistance For year ended September 30, 2009 Federal Agency CFDA/ Contract / Pass through entity CFSA Grant Federal Program No. No. Expenditures U.S. Department of Justice Bullet Proof Vest Grant Program 16.607 2008 Fund $ 1,764 U.S. Department of Justice Passed through the Florida Department of Law Enforcement Edward Byrne Memorial Justice Assistance Grant Program 16.738 2009-JAGD-JACK-3-T8-045 1,151 Department of Homeland Security Assistance to Firefighters Grant Program 97.044 EMW-2005-FF-00376 57,799 Department of Homeland Security Passed through the Florida Department of Community Affairs Disaster Grants - Public Assistance 97.036 FEMA01831-DR-FL 3,472 Department of Transportation, Federal Highway Administration Highway Planning and Construction Program Safe Routes to School 20.205 FPN 422935-1-38-01 238,016 Federal Aviation Agency Passed through Florida Department of Transportation Airport Improvement Program Apron Reseal 20.106 3-12-0045-011-2009 46,602 Airport Improvement Program Lighting Design 20.106 3-12-0045-009-2009 34,486 Airport Improvement Program Lighting Construction 20.106 3-12-0045-010-2009 149,232 U.S. Department of Environmental Protection Agency Passed through Florida Department of Environmental Protection State Revolving Loan Fund Program 66.458 CS12045114P 18,395,733 Total Federal Awards 18,928,255 State Agency State Program Florida Department of Transportation Airport Improvement Grant 55.004 42382019401 129,435 Airport Improvement Grant 55.004 41449619401 10,608 Airport Improvement Grant 55.004 42382049401 5,142 Airport Improvement Grant 55.004 42072219401 179,636 Office of Tourism, Trade, and Economic Development Project Springs 31.002 OT-09-021 246,789 Rural Infrastructure Grant Program 31.030 OT-08-081 74,915 Florida Department of Environmental Protection Florida Recreation Development Assistance Program-Performing Arts Park 37.017 A9066 36,291 Capitalization Grants for Clean Water 37.039 N/A 1,235,171 Florida Department of Community Affairs Emergency Management Programs - Disaster Grant 52.xxx N/A 579 Total State Financial Assistance 1,918,566 Total Federal Awards and State Financial Assistance $ 20,846,821 See accompanying notes to Schedule of Expenditures of Federal Awards and State Financial Assistance. -44- City of Marianna, Florida Notes to Schedule of Expenditures of Federal Awards and State Financial Assistance For the year ended September 30, 2009 NOTE 1 - BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards and State Financial Assistance include the federal and state activities of the City of Marianna and are presented on the accrual basis of accounting. The information in these schedules is presented in accordance with the requirement of OMB Circular A-133, “Audits of States, Local Governments, and Non-Profit Organizations” and Chapter 10.550, Rules of the Auditor General. Therefore, some amounts presented in the Schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. -45- City of Marianna Schedule of Findings and Questioned Costs For the year ended September 30, 2009 A. SUMMARY OF AUDIT RESULTS 1. The Independent Auditors’ Report expresses an unqualified opinion on the financial statements of the City of Marianna. 2. Significant deficiencies disclosed during the audit of the financial statements are reported in the Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards. 3. No instances of noncompliance material to the financial statements of the City of Marianna were disclosed during the audit. 4. No significant deficiencies relating to the audit of the major federal award program and state projects are reported in the Independent Auditors’ Report on Compliance and Internal Control Over Compliance Applicable to Each Major Program and State Project. 5. The Independent Auditors’ Report on Compliance and Internal Control over Compliance Applicable to Each Major Federal Program and State Project of the City of Marianna expresses an unqualified opinion. 6. No audit findings relative to the major federal award programs and state projects for the City of Marianna are reported in this schedule. 7. The programs/projects tested as major programs and projects includes: Federal Program Federal CFDA No. State Revolving Loan Fund 66.458 State Project State CFSA No. Capitalization Grants for Clean Water 37.039 8. The threshold for distinguishing Type A and B programs was $300,000 for major federal programs and major state projects. 9. The City of Marianna was not determined to be a low-risk auditee. -46- City of Marianna, Florida Schedule of Findings and Questioned Costs Year ended September 30, 2009 B. FINDINGS - FINANCIAL STATEMENTS AUDIT BOOKKEEPING 09-01 COMMENT: During the current year, a material adjustment to the allowance for doubtful accounts was needed for Marianna Health and Rehabilitation Center. RECOMMENDATION: We recommend that the allowance for doubtful accounts be monitored and adjusted on a regular basis. C. FINDINGS - MAJOR FEDERAL PROGRAMS There were no current year audit findings. See summary schedule of prior year audit findings for findings not resolved in the current year. D. FINDINGS - MAJOR STATE PROJECTS There were no current year audit findings. See summary schedule of prior year audit findings for findings not resolved in the current year. -47- City of Marianna, Florida Summary Schedule of Prior Audit Findings Year ended September 30, 2009 PRIOR-YEAR AUDIT FINDINGS AND QUESTIONED COSTS MAJOR FEDERAL PROGRAMS AND STATE PROJECTS SEGREGATION OF DUTIES 03-01 – NOT RESOLVED This applies to all major federal programs and state projects listed in Part A, Number 7 of Schedule of Findings and Questioned Costs. COMMENT: We noted that there is a lack of segregation of duties between employees who have recordkeeping responsibilities and employees in custody of City assets. RECOMMENDATION: We realize that due to the size of the City’s administrative staff it is difficult to achieve ideal separation of duties. However, the City should be aware of this internal control weakness and attempt to separate recordkeeping duties from custody of assets as much as possible. STATUS: There is still a lack of segregation of duties between employees who have recordkeeping responsibilities and employees with custody of City assets. FINANCIAL STATEMENTS SEGREGATION OF DUTIES 03-01 – NOT RESOLVED COMMENT: We noted that there is a lack of segregation of duties between employees who have recordkeeping responsibilities and employees in custody of City assets. RECOMMENDATION: We realize that due to the size of the City’s administrative staff it is difficult to achieve ideal separation of duties. However, the City should be aware of this internal control weakness and attempt to separate recordkeeping duties from custody of assets as much as possible. STATUS: There is still a lack of segregation of duties between employees who have recordkeeping responsibilities and employees with custody of City assets. -48- City of Marianna, Florida Summary Schedule of Prior Audit Findings Year ended September 30, 2009 PRIOR-YEAR AUDIT FINDINGS AND QUESTIONED COSTS (CONTINUED) PRIOR PERIOD ADJUSTMENT 08-03 - RESOLVED COMMENT: During the current year, a material prior period adjustment had to be made for an insurance deposit that had not been properly recorded in previous years for Marianna Health and Rehabilitation Center. RECOMMENDED: We recommend that all assets owned and maintained by the City be properly recorded on the City’s general ledger. STATUS: Insurance deposit was properly recorded. -49-
"City of Marianna Marianna_ Florida"