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Audit - 2005/2006 . SALINE COUNTY-CITY BUILDING AUTHORI Y Salina, Kansas . FINANCIAL STATEMENTS December 31, 2006 and 2005 . BARTLETT, SETTLE & EDGERLE A PROFESSIONAL ASSOCIATION Certified Public Accountants . I . SALINE COUNTY-CITY BUILDING AUTHORI~ Y Salina, Kansas FINANCIAL STATEMENTS For the Years Ended December 31,2006 and 200 Table of Contents . Independent Auditor's Report Management's Discussion and Analysis Statements of Net Assets Statements of Revenues, Expenses, and Changes in Net Assets Statements of Cash Flows Notes to Financial Statements Pa2e 1 2-4 5 6 7 8 -11 . . . BARJLEII SEIILE & EffiER.! E A PROFESSIONAL ASSOCIATION GERTIFIED PUBLIC ACCOUNTANTS To the Governing Board Saline County-City Building Authority Salina, Kansas We have audited the accompanying fmancial statements of the business- e activities of the Saline County-City Building Authority, Salina, Kansas, as of December 31,2006 nd 2005, and for the years then ended which comprises the Building Authority's basic fmancial stateme ts as shown in the table of contents. These financial statements are the responsibility ofthe Saline Coun -City Building Authority's management. Our responsibility is to express an opinion on these financial sta ements based on our audit. . We conducted our audit in accordance with auditing standards generally acce ted in the United States of America and the Kansas Municipal Audit Guide. Those standards require th t we plan and perform the audit to obtain reasonable assurance about whether the financial state ents are free of material misstatement. An audit includes examining, on a test basis, evidence s pporting 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 op' ion. fu our opinion, based on our audit, the financial statements referred to above resent fairly, in all material respects, the net assets of the Saline County-City Building Authority as of D cember 31, 2006 and 2005 and the revenues, expenses, changes in net assets and cash flows thereof r the years then ended in conformity with accounting principles generally accepted in the United States f America. The management's discussion and analysis is not a required part of the basi financial statements but is supplementary information required by accounting principles generally acce ted in the United States of America. We have applied certain limited procedures which consisted rincipally of inquiries of management regarding the methods of measurement and presentation of t e required supplementary information. However, we did not audit the information and express no opini n on it. . :B~J~~~ A Professional Association Hutchinson, Kansas May 17,2007 . 129 WEST SECOND, SUITE A . P.O. Box 2889 . HUTCHINSON, KS 675 4-2889 PHONE: 620.662.3358 . TOLL-FREE: 888.414.0123 . FAX: 620.662.3350 . EM IL: bse@cpabse.com . -2- MANAGEMENT'S DISCUSSION AND ANAL YS S As management of the Saline County-City Building Authority (the "Authority'), we offer readers of our [mancial statements this narrative overview and analysis of the financial activi ies of the Authority for the fiscal year ended December 31, 2006. Financial Highlights . The assets of the Authority exceeded its liabilities at the close of the ost recent fiscal year by $2,971,212 (net assets). Of this amount, $1,057,047 (unrestricted net ssets) may be used to meet the Authority's ongoing obligations to customers and creditors. . The Authority's total net assets increased by $59,197. . Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Auth rity's basic financial statements. Since the Authority is engaged only in business-type activities, its asic financial statements are comprised of only two components: 1) enterprise fund financial statements and 2) notes to financial statements. Enterprise fund financial statements - The enterprise fund [mancial tatements are designed to provide readers with a broad overview of the Authority's finances, in a manner similar to a private-sector business. The statement of net assets presents information on the Authority's ass ts and liabilities, with the difference between the two reported as net assets. Over time, increase or decreases in net assets may serve as a useful indicator of whether the [mancial position of the Authority is improving or deteriorating. The statement of revenues, expenses and changes in net assets present information showing how the Authority's net assets changed during the most recent fiscal year. 11 changes in net assets are reported as soon as the underlying event giving rise to the change occ s, regardless of the timing of the cash flows. Thus, revenues and expenses are reported in this st ement for some items that will only result in cash flows in future fiscal periods (e.g., earned but used vacation leave). Notes to rmancial statements - The notes provide additional informa . on that is essential to a full understanding of the data provided in the financial statements. . Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a gove ent's financial position. In the case of the Authority, assets exceeded liabilities by $2,971,212 at the cl se of the most recent fiscal year. The largest portion of the Authority's net assets (64%) reflects its investment i capital assets, less any related debt used to acquire those assets that is still outstanding. The Authori uses these capital assets to provide facilities, equipment, and services to its tenants; consequently, these a sets are not available for future spending. Although the Authority's investment in its capital assets is re orted net of related debt, it should be noted that the resources needed to repay this debt must be provided om other sources, since the capital assets themselves cannot be used to liquidate these liabilities. . . -3- Financial Analysis (Continued) Net ssets 2006 2! ill. 2004 Current and other assets $1,115,182 $ 9 )5,718 $ 934,335 Capital assets 1.914.165 20 8583 1.987.741 Total assets $3.029.347 $30 4301 $2.922.076 Long-term liabilities outstanding $ - $ - $ 43,869 Other liabilities 58.135 1 )2 286 115A7:i Tota11iabi1ities $ 58.135 $ 1 )2 286 $ 159.342 Net assets: Invested in capital assets, net of related debt $1,914,165 $2,0 )4,714 $1,902,029 . Unrestricted 1.057 .047 9)7 301 860.70~ Total net assets $2.971.212 $29 2015 $2.762.734 At the end of the current fiscal year, the Authority is able to report positive bah nces in both categories of net assets. The same situation held true for the prior fiscal year. Chamres it Net Assets 2006 2! ill. 2004 Operating revenues: Charges for facilities, equipment and services $ 772.983 $ 8 )3 423 $ 817.793 Nonoperating revenues: Investment income 42,099 )2,920 5,070 Other nonoperating revenue 1 1.007 5706 8.271 Total nonoperating revenues 53.106 ')8626 13.341 Total revenues 826.089 8,2 049 831.134 Operating expense: Personnel expense 335,494 318,855 306,104 Depreciation 137,667 l:s 1,530 127,761 Operation and maintenance 249,090 2 )6,089 184,520 Other operating 44.641 ~4 170 38.208 Total operating expense 766,892 7 [)0,644 656,593 Nonoperating expense: . Interest and fiscal charges - 2124 3.950 Total expense 766.892 7 )2 768 660543 Income (loss) 59,197 U9,281 170,591 Net assets - January 1 2.912.015 27 ,>2 734 2592.141 Net assets - December 31 $2.971.212 $291 2015 $2.762.734 The Authority's net assets increased by $59,197 during the current fiscal year. Operating revenues decreased by $50,440, or 6.13%, and operating expenses increased by $66,248 or 9.45%. Key elements of these changes are as follows: . Salary expenses and related costs increased by approximately $16,639 . Operation and maintenance expenses increased by approximately $43, 01. . Other operating expenses increased by $471. . Depreciation of fixed assets increased by $6,137. I. I . -4- Capital Assets and Debt Administration Capital Assets - The Authority's investment in capital assets as of December 3 ,2006, amounts to $1,914,165 (net of accumulated depreciation). This investment in capital asset includes, land and land improvements, building, motor vehicles, furniture and ftxtures, and maintenanc equipment. The net decrease in the Authority's investment in capital assets for the current fiscal yea was $134,418. This decrease is a net ftgure resulting from capital asset additions of$3,460, less reti ement of assets of$211, and depreciation of $137,667. Additional information related to capital assets i located in Note 6 of the Notes to Financial Statements. ('anital Assets (ne of denreciation) . Land and land improvements Building Office furniture, ftxtures and telephone system Maintenance equipment Total 2006 $ 306,7; 7 1,491,4)2 95,0 )0 20 976 $1 914 1 '15 2005 $ 313,732 1,579,023 129,894 25.934 $2.048.583 Major capital asset events during the current ftscal year included: Write-off obsolete or unserviceable equipment having a cost of $27,280, less accumulated depreciation of $27,069 Long-Term Debt - At the end ofthe current fiscal year, the Authority had no cutstanding long-term debt. Requests for Information This financial report is designed to provide a general overview of the Authority's finances for all those with an interest in the Authority's finances. Questions concerning any of the in ormation provided in this report or requests for additional ftnancial information should be addressed to tbe Saline County-City Building Authority, 300 West Ash Street, Salina, KS 67401. . . . -5- SALINE COUNTY -CITY BUILDING AUTHORI'l Y Salina, Kansas STATEMENTS OF NET ASSETS December 31,2006 and 2005 ~Q!!Q 2005 ASSETS Current Assets Cash and cash equivalents $ 1 115,182 $ 965,718 Noncurrent Assets . Capital assets (net of depreciation) 1 914,165 2,048,583 TOTAL ASSETS $ 3029,347 $ 3,014,301 LIABILITIES Current Liabilities Accounts payable $ 26,638 $ 22,573 Accrued interest payable - 2,124 Accrued vacation and sick leave payable 31,497 33,720 Capital lease payable - 43,869 Total current liabilities 58,135 102,286 Lonl!- Term Liabilities Capita11ease payable - .. TOTAL LIABILITIES 58,135 102,286 NET ASSETS Invested in capital assets net of related debt 1914,165 2,004,714 Unrestricted 1 057,047 907,301 Total Net Assets 2 971,212 2,912,015 . TOTAL LIABILITIES AND NET ASSETS $ 3 029,347 $ 3,014,301 . The accompanying notes are an integral part of these financia statements. I . SALINE COUNTY-CITY BUILDING AUTHORIl -6- Salina, Kansas STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Years Ended December 31, 2006 and 200 5 2006 200Sl OPERATING REVENUES Charges for facilities, services and equipment Saline County 474,594 $ 503,158 City of Salina 290,329 312,565 . Salina Public Library 8,060 7,700 Total operating revenues 772,983 823,423 OPERATING EXPENSES Personnel costs 335,494 318,855 Maintenance and repairs 92,200 82,410 Supplies and small tools 21,448 17,767 Depreciation 137,667 131,530 Insurance 35,246 32,072 Utilities 135,442 105,912 Contracted services 6,048 7,520 Miscellaneous expenses 3,347 4,578 Total operating expenses 766,892 700,644 Net Operating Income 6,091 122,779 NONOPERATING REVENUE AND EXPENSE Interest income 42,099 22,920 Interest expense - (2,124) Vending income (net) 3,270 3,382 Miscellaneous revenue 7,737 2,324 . Total nonoperating revenue and expense 53,106 26,502 Change in Net Assets 59,197 149,281 Net Assets at Beginning of Year 2,912,015 2,762,734 Net Assets at End of Year 2,971,212 $ 2,912,015 . The accompanying notes are an integral part of these financial statements. I . -7- SALINE COUNTY-CITY BUILDING AUTHORI'l Y Salina, Kansas STATEMENTS OF CASH FLOWS For the Years Ended December 31,2006 and 200 . 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received for facility and equipment use $ 772,983 $ 831,123 Cash paid to suppliers (289,466) (266,449) Cash paid to employees (337,706) (316,285) Net cash provided by operating activities 145,811 248,389 . CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Purchase of capital assets (3,460) (192,110) Principal paid on capital debt (43,869) (41,843) mterest paid on capital debt (2,124) (4,150) Proceeds from sale of assets - 200 Other receipts 11,007 5,677 Net cash used for capital and related financing activities (38,446) (232,226) CASH FLOWS FROM INVESTING ACTIVITIES: mterest received 42,099 22,920 Net cash provided by investing activities 42,099 22,920 Net increase (decrease) in cash and cash equivalents 149,464 39,083 Cash and cash equivalents at beginning of year 965,718 926,635 Cash and cash equivalents at end of year $ 1,115,182 $ 965,718 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: . Operating income $ 6,091 $ 122,779 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 137,667 131,530 Loss on disposal of assets 211 - Changes in assets and liabilities: Receivables - 7,700 Accounts payable 4,055 (16,190) Accrued expenses (2,213) 2,570 Net cash provided by operating activities $ 145,811 $ 248,389 . The accompanying notes are an integral part of these financial s tatements. I . -8- SALINE COUNTY-CITY BUILDING AUTHORITY Salina, Kansas NOTES TO FINANCIAL STATEMENTS December 31, 2006 and 2005 . Note 1 - Or{!anization and Snmmary of Si{!nificant Accountin{! Policies A. Reporting Entity - The Saline County-City Building Authority (the" uthority") was formed March 22, 1965, under the Interlocal Cooperation Act of Kansas (KSA 12-2901 to 12-2907). The organizing agreement was restated January 16, 1996. The Authority is a joint venture 0 ganized by three participating municipalities for the purpose of acquiring facilities to house and accommoda e the offices of Saline County, the City of Salina, and the county and city courts, and such other offices as y be expedient, and to equip, operate, and maintain the facility so acquired. The governing board of the Authority is composed of seven members, six 0 whom are appointed from the governing boards of the participating municipalities, and one of who is select d at large by the six appointed members. The makeup of the appointed members is three from Saline Coun , two from the City of Salina, and one from the District Court. B. Measurement Focus and Basis of Accounting - The Authority consis solely of an enterprise fund. Enterprise funds are classified as proprietary funds by the Governmental Accounting Standards Board (GASB) and are accounted for using a total economic resource measureme t focus. The enterprise fund is used to account for operations that are financed and operated in a ma er similar to private business enterprises. The intent of the Board is that the cost of providing servi es on a continuing basis be recovered through user fees and rents. The Authority's financial statements are prepared using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurr d, regardless of the timing of related cash flows. As permitted by generally accepted accounting principles, the Autho ty has elected not to apply Financial Accounting Standards Board pronouncements issued after Nove er 30, 1989. The Authority distinguishes operating revenues and expenses from no operating items. Operating revenues and expenses generally result from the providing of services and the related upkeep and maintenance of building, grounds and equipment owned by the Autho ty. The principal operating revenues of the Authority are rents and assessments charged to the enti es occupying the Authority's facilities and for the use of equipment owned by the Authority. Operatin expenses include those costs necessary for upkeep and maintenance and related administrative expens s and depreciation on capital assets. All revenues and expenses not meeting this defmition are reported as nonoperating revenues and expenses. C. Cash and Cash Equivalents - The Authority's cash and cash equivalent are consider to consist of cash on hand, demand deposits, and all highly liquid investments (including res cted assets) with maturities of three months or less when purchased. D. Capital Assets - Additions to property and equipment are recorded at ost. Maintenance and repairs are expensed as incurred. When properties are disposed of, the related cost and accumulated depreciation are removed from the respective accounts and any gain or loss on dispos' tion is credited or charged to operations. Assets are depreciated using the straight-line method over the estimated useful lives of the assets as follows: . Years Buildings and Improvements Equipment 5-50 5-25 E. Inventory - The Building Authority maintains no significant inventory of office and maintenance supplies. These items are expensed as purchased and no inventory is recor ed in these fmancial statements. F. Taxes - The Building Authority is exempt from payment of federal and sta e income, property and certain other taxes. . . -9- SALINE COUNTY-CITY BUILDING AUTHORITY NOTES TO F1NANCIAL STATEMENTS - continued December 31, 2006 and 2005 Note 1 - On!anization and Summary of Sil!nificant Accountinl! Policies - continu d G. Budget Law Compliance - The Saline County-City Builcling Autho 'ty does not have tax levying powers and is not required to publish a budget. A budget is adopted annua y by the Governing Board for the purpose of determining appropriations required from participating muni ipalities to cover net operating and maintenance costs of the building. These appropriations are bome by the participating municipalities. H. Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make es' tes and assumptions that affect certain reported amounts of assets, liabilities, revenues, and expenses. A cordingly, actual results could differ from those estimates. I. Compensated Absences - The Authority compensates employees for th following types of absences at . their current rate of pay. A. VACATION - Full-time employees earn from 12 to 21 days of vaca on pay per year based on the number of years of continuous service. Vacation pay may accumul te to a maximum of 24 days depending upon the employees' number of years of continuous service. pon tennination, an employee is entitled to a lump sum payment for all accumulated vacation earned. B. SICK LEA VE - Full-time employees earn one day of sick leave for each onth of full-time service to be used for illness or death in the family. Accumulation is unlimited. Upo termination due to retirement, an employee is entitled to a lump sum payment for one-half of all acc ulated sick leave not to exceed 90 days. Upon termination for any other reason except dismissal for c use, an employee with at least five continuous years of service is entitled to a lump sum payment for ne-half of all accumulated sick leave, not to exceed 30 days. C. PERSONAL LEA VE - One day of persona11eave is granted to each full-' e employee annually. There is no accumulation of personal leave beyond the year it is allowed. J. Net Assets - Net assets are the difference between assets and liabilitie. Net assets invested in capital assets represents capital assets, less accumulated depreciation less any utstancling debt related to the acquisition, construction or improvement of those assets. Note 2 - Stewardship. Compliance. and Accountability Cash-Basis Law (KSA 10-1113) - The Authority was in compliance with this law at all times during the year. Depository Security (KSA 9-1402) - The Authority's funds were adequatel secured at all times during the year. . Note 3 - Deposits and Investments As of December 31,2006 and 2005, the Authority had cash and cash equi alents as listed below: Deposits in fmancia1 banking institutions $1 115 290 $966.426 The Authority did not have any activity in investment-type assets. The Authority's policies relating to deposits and investments are govern d by various Kansas Statutes (KSA). Those statutes specify the type of deposits and investments as well as the securing of those deposits and investments. Interest rate risk - In accordance with Kansas Statute 12-1675, the Au ority manages its exposure to interest rate fluctuations by limiting all time investments to maturities ofle s than two years. Credit risk - State law limits the amount of credit risk by restricting gov ents to specific investment types as listed in KSA 12-1675. The Authority's policy is to place idle ds in certificates of deposit, United States obligations, and the Kansas Municipal Investment Pool ( IP). The KMIP was rated AAAflS1+ by Standard & Poor's as of March 15, 2004. The KMIP 's permitted to invest in fully collateralized certificates of deposit, certain obligations of the United S tes, certain repurchase/reverse repurchase agreements, and other types of investments. . . -10- SALINE COUNTY-CITY BIDLDlNG AUTHORITY NOTES TO FINANCIAL STATEMENTS - continued December 31, 2006 and 2005 . Note 3 - Deposits and Investments - continued Custodial credit risk - The custodial credit risk for deposits is the risk that, in the event of the failure of a depository fmancial institution, a government will not be able to recover eposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty t a transaction, a government will not be able to recover the value of investment or collateral securities at are in the possession of an outside party. Kansas Statutes 9-1402 and 9-1405 require that gove ents obtain security for all deposits. The Authority manages its custodial credit risk by requiring the ancial institutions to grant a security interest in securities held by third-party custodial banks. Mo' es in the Kansas Municipal Investment Pool are not required to have pledged securities. Concentration of credit risk - This is the risk of loss attributed to the gnitude of a government's investment in a single issuer. The Authority manages this risk by placing ds with financial institutions only after contacting all eligible institutions in the taxing area and mo . es in the Kansas Municipal Investment Pool are diverse according to the policies of the investment pool Note 4 - Defined Benefit Pension Plan The non-school municipality participates in the Kansas Public Employees etirement System (KPERS), a cost-sharing multiple-employer defined benefit pension plan as provided by SA 74-4901, et seq. KPERS provides retirement benefits, life insurance, disability income benefits, an death benefits. Kansas law establishes and amends benefit provisions. KPERS issues publicly avail ble financial statements and required supplementary information. That report may be obtained by ring to KPERS (400 SW 8th Avenue, Suite 200, Topeka, KS 66603-3925) or by calling 1-800-228-0366. KSA 74-4919 establishes the KPERS member-employee contribution rate t 4% of covered salary. The employer collects and remits member-employee contributions according to e provisions of section 414(h) of the Internal Revenue Code. State law provides that the employer contributi n rate be determined annually based on the results of an annual actuarial valuation. KPERS is funded on actuarial reserve basis. State law sets a limitation on annual increases in the contribution rates for KP RS employers. The average employer rate established by statute for calendar year 2006 is 4.71 %. The no -school municipality employer contributions to KPERS for the years ending December 31,2006,2005, and 2 04 were $10,516, $8,876, and $7,743, respectively, equal to the statutory required contributions for each yea. . Note 5 - Lon!!:-TermDebt The following summarizes the lease obligations included in the long-term debt Debt Issue Date Issued Maturity Date Original Amount Interest Rate Telephone Lease Purchase Agreement 2/7/01 2/7/06 $200.000 4.84% The lease purchase agreements were entered into for the purpose of financ' g a contract for the telephone system Annual debt service requirements to maturity for the equipment lease purchase agreement follow: Year Principal Due Interest Due $2.124 Total Due $45.993 2006 $43.869 . . -11- SALINE COUNTY -CITY BUU,DING AUTHORITY NOTES TO FINANCIAL STATEMENTS - continued December 31, 2006 and 2005 Note 6 - Capital Assets The following summarizes the changes in capital assets for the year ended De ember 31, 2006: Beginning Ending Balance Additions Dispositions Balance Land $ 223,873 $ $ $ 223,873 Parking Lot 128,580 128,580 Building and Improvements 3,263,308 3,263,308 Equipment 475.484 3.460 (27,280) 451.664 Total 4,091,245 3,460 (27,280) 4,067,425 . Accumulated Depreciation (2,042,662) (137,667) 27,069 (2.153.260) Net Investment in Capital Assets $2,048.583 $(134.207) $ (211) $ 1.914,165 Note 7 - Risk Manal!ement The Authority is exposed to various levels of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Th Authority carries commercial insurance to limit its exposure. There has been no significant reduction in the Authority's insurance covera e from the previous year. In addition, there have not been settlements in excess of the Authority's coverag in any of the prior three years. . .