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Audit - 2007/2008 . SALINE COUNTY-CITY BUILDING AUmORITY Salina, Kansas . FINANCIAL STATEMENTS with Independent Auditor's Report December 31, 2008 and 2007 . BARTLETT, SETTLE & EDGERLE A PROFESSIONAL ASSOCIATION Certified Public Accountants . . SALINE COUNTY-CITY BUILDING AUTHORITY Salina, Kansas FINANCIAL STATEMENTS with Independent Auditor's Report December 31, 2008 and 2007 Table of Contents . Independent Auditor's Report Management's Discussion and Analysis Basis Financial Statements: Statements of Net Assets Statements of Revenues, Expenses, and Changes in Net Assets Statements of Cash Flows Notes to Financial Statements Pal!e I 2-4 5 6 7 8 - 11 Supplementary Information: Schedule of Cash Receipts, Expenditures, and Changes in Budgeted Net Income - Budget and Actual - Budgetary Basis 12 . . . B~LETT SETTLE &1 EffiE~E A PROF"ESSIONAL ASSOCIATION OERTIF"IEO PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT . To the Governing Board Saline County-City Building Authority Salina, Kansas We have audited the accompanying financial statements of the Saline County-City Building Authority (Authority) as of and for the years ended December 31, 2008 and 2007, as listed in the table of contents. These financial statements are the responsibility of the Authority's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the Kansas Municipal Audit Guide. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the fmancial positions of the Saline County-City Building Authority as of December 31, 2008 and 2007 and the changes in its fmancial positions and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The management's discussion and analysis 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 required supplementary information. However, we did not audit the infonnation and express no opinion on it. . Our audit was conducted for the purpose of forming an opinion on the basic financial statements. The budgetary schedule listed as supplementary information in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. This supplementary information has been subjected to the auditing procedures applied in the audit of the basic fmancial statements and, in our opinion, is fairly stated in all material respects, in relation to the basic financial statements taken as a whole. ~~/ ~ ~ U,uk A Professional Association. r March 24, 2009 . 129 WEST SECOND, SUITE A . P.O. BoX 2889 . HUTCHINSON, KS 67504-2889 PHONE: 620.662.3358 . TOLL-FREE: 888.414.0123 . FAX: 620.662.3350 . EMAIL: bse@cpabse.com . -2- MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the Saline County-City Building Authority (Authority), we offer readers of our fmancial statements this narrative overview and analysis of the fmancial activities of the Authority for the fiscal year ended December 31, 2008. This discussion should be read in conjunction with the Authority's basic financial statements and the notes to those financial statements. The Authority is responsible for the completeness and accuracy of this information. . Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Authority's basic fmancial statements. Since the Authority is engaged only in business-type activities, its basic financial statements are comprised of only two components: 1) enterprise fund financial statements and 2) notes to financial statements. Enterprise.fund fmancial statements - The enterprise fund financial statements are designed to provide readers with a broad overview of the Authority's fmances, in a manner similar to a private-sector business. The statement of net assets presents information on the Authority's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Authority is improving or deteriorating. The statement of revenues, expenses and changes in net assets presents information showing how the Authority's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the cash flows. The statement of cash flows provides information about the cash receipts and disbursements during the period. Notes to financial statements - The notes provide additional information 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 government's financial position. In the case of the Authority, assets exceeded liabilities by $3,083,977 at the close of the most recent fiscal year. The largest portion of the Authority's net assets (62%) reflects its investment in capital assets, less any related outstanding debt (if any) used to acquire those assets. The Authority uses these capital assets to provide facilities, equipment, and services to its tenants; consequently, these assets are not available for future spending. Net Assets 2008 2007 2006 Current and other assets $1,283,506 $1,209,039 $1,115,182 Capital assets 1.912.124 1.906.899 1.914.165 Total assets $3.195.630 $3.115.938 $3.029.347 Current liabilities $ 77,943 $ 40,031 $ 34,512 Noncurrent liabilities 33.710 27,758 23.623 Total liabilities $ 111.653 $ 67.789 $ 58.135 Net assets: Invested in capital assets, net of related debt $1,912,124 $1,906,899 $1,914,165 Unrestricted 1.171.853 1.141.250 1.057.047 . Total net assets $3.083.977 $3.048.149 $2.971.212 . -3- At the end ofthectirrent fiscal year, the Authority is able to report positive balances in both categories of net assets. The same situation holds true for the prior years. Changes in Net Assets 2008 2007 2006 Operating revenues $ 809,570 $ 799,797 $ 783,990 Nonoperating revenueS 16.803 40.947 41.888 Total revenues 826.373 840.744 825.878 Operating expense: Personnel expense 353,425 341,232 335,494 Depreciation 144,458 141,810 137,667 Operation and maintenance 292.662 280.765 293.520 Total operating expense 790,545 763,807 766,681 . Nonoperating expenses Total expense 790.545 763.807 766.681 Change in pet assets 35,828 76,937 59,197 Net assets - January 1 3.048.149 2.971.212 2.912.015 Net assets - December 31 $3.083.977 $3.048.149 $2.971.212 The Authority's net assets increased by $35,828 during the current fiscal. year. Operating revenues remained relatively the same and operating expenses increased slightly. The excess of revenues over expense as shown.above is necessary in order to accumulate the funds to purchase capital improvements as needed. Statement of Cash Flows 2008 2007 2006 Net cash provided (used) by: Operating activities Capital and related financing activities Investing activities Net change in cash Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year $ 234,201 (149,874) 16.994 101,321 1.182.185 $1.283.506 $ 160,600 (141,497) 47.900 67,003 1.115.182 $1.182.185 $ 156,818 (49,453) 42.099 149,464 965.718 $1.115.182 . The net change in cash and cash equivalents is highly dependent upon the level of capital improvements purchased by the Authority. The net change in cash and cash equivalents has been positive so the Authority is able to position itself to fund future capital commitments. Capital Assets and Debt Administration Capital Assets - The Authority's investment in capital assets as of December 31, 2008, amounts to $1,912,124 (net of accumulated depreciation). This investment in capital assets includes: land, land improvements, building, building improvements, vehicles, furniture, office equipment, and maintenance equipment. Additional information related to capital assets is located in Note 4 of the Notes to Financial Statements. . I- Land Land and land improvements Building and improvements Equipment Total capital assets Accumulated depreciation Total capital assets, net of depreciation 2008 $ 220,228 220,441 3,454,556 406.754 4,301,979 (2.389.855) $ 1.912.124 Long-Term Debt - The Authority currently has no outstanding debt. -4- Capital Assets 2007 $ 220,228 164,281 3,366,482 406.292 4,157,283 (2.250.384) $ 1.906.89~ 2006 $ 4,067,425 (2.153.260) $ 1.914 165 Economic Factors and Next Year's Budget The Authority continues to house the administrative offices of Saline County, Saline City, and the related Courts. Management continually evaluates the maintenance and improvement needs of the building complex. The budget for the following year of 2009 reflects operations to be consistent with the past activity of the Authority. - Requests for Information This financial report is designed to provide a general overview of the Authority's fmances for all those with an interest in the Authority's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Saline County-City Building Authority, 300 West Ash Street, Salina, KS 67401. Jim Schroeder, Superintendent Saline County-City Building Authority . . . . BASIC FINANCIAL STATEMENTS . . . -5- Saline County-City Building Authority Statements of Net Assets December 31,2008 and 2007 2008 2007 ASSETS Current Assets Cash and cash equivalents $ 1,283,194 $ 1,182,185 Cash and cash equivalents - flex spending arrangement 312 Prepaid expenses 26,854 Total current assets 1,283,506 1,209,039 . Noncurrent Assets Capital assets (net of accumulated depreciation) 1,912,124 1,906,899 TOTAL ASSETS $ 3,195,630 $ 3,115,938 LIABILITIES Current Liabilities Accounts payable $ 66,395 $ 30,779 Payable - flex spending arrangement 312 Compensated absences payable 11,236 9,252 Total current liabilities 77,943 40,031 Noncurrent Liabilities Compensated absences payable 33,710 27,758 Total noncurrent liabilities 33,710 27,758 TOTAL LIABILITIES 111,653 67,789 NET ASSETS Invested in capital assets 1,912,124 1,906,899 Unrestricted 1,171,853 1,141,250 Total net assets 3,083,977 3,048,149 . TOTAL LIABILITIES AND NET ASSETS $ 3,195,630 $ 3,115,938 . The accompanying notes are an integral part of these financial statements. I. -6- Saline County-City Building Authority Statements of Revenues, Expenses, and Changes in Net Assets For the Years Ended December 31, 2008 and 2007 2008 2007 OPERATING REVENUES Charges for facilities, services and equipment Saline County $ 473,694 $ 473,694 City of Salina 290,329 290,329 City of Salina - maintenance 900 900 Salina Public Library 9,000 8,060 . Vending income (net) 3,678 3,080 Refunds, claims, and other 31,969 23,734 Total operating revenues 809,570 799,797 OPERATING EXPENSES Personnel costs 353,425 341,232 Maintenance and repairs 76,867 89,097 Supplies and small tools 23,765 21,591 Depreciation 144,458 141,810 Insurance 45,558 30,369 Utilities 136,041 128,579 Contracted services 6,507 5,785 Miscellaneous expenses 3,924 5,344 Total operating expenses 790,545 763,807 Net operating income 19,025 35,990 NONOPERATING REVENUE AND EXPENSE Loss on disposal of assets (191) (6,953) Interest income 16,994 47,900 Total nonoperating revenue and expense 16,803 40,947 Change in net assets 35,828 76,937 NET ASSETS . Net assets - beginning of year 3,048,149 2,971,212 Net assets - end of year $ 3,083,977 $ 3,048,149 . The accompanying notes are an integral part of these fInancial statements. . -7- Saline County-City Building Authority Statements of Cash Flows For the Years Ended December 31, 2008 and 2007 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES Cash received for facility and equipment use $ 773,923 $ 772,983 Cash received from refunds, claims, vending, other 35,647 26,814 Payments to suppliers (230,092) (303,495) Payments to employees for salaries and benefits (345,277) (335,702) Net cash provided by operating activities 234,201 160,600 . CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTNITIES Purchase of capital assets (149,874) (141,497) Net cash used for capital and related financing activities (149,874) (141,497) CASH FLOWS FROM INVESTING ACTMTIES Interest received 16,994 47,900 Net cash provided by investing activities 16,994 47,900 Net increase (decrease) in cash and cash equivalents 101,321 67,003 Cash and cash equivalents - beginning of year 1,182,185 1,115,182 Cash and cash equivalents - end of year $ 1,283,506 $ 1,182,185 RECONCILIATION OF OPERATING REVENUE TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 19,025 $ 35,990 Depreciation 144,458 141,810 Changes in assets and liabilities: Receivables 26,854 (26,854) Accounts payable 35,928 4,141 Accrued expenses 7,936 5,513 Net cash provided by operating activities $ 234,201 $ 160,600 . . The accompanying notes are an integral part of these financial statements. . -8- Saline County-City Building Authority Salina, Kansas Notes to Financial Statements December 31, 2008 and 2007 . Note 1 Summary of Sil!nificant Accountinl! Policies The Saline County-City Building Authority (Authority) was formed March 22, 1965, under the Interlocal Cooperation Act of Kansas (KSA 12-2901 to 12-2907) by Saline County (County), the City of Salina (City), and the Board of Education U.S.D. #305 (School District). The Authority was created to provide for the acquisition of land and the construction, equipping, operating, and maintenance of a building and parking area to house the county offices and courts, the city offices and courts, and the school district offices. On January 16, 1996, the Interlocal Agreement was restated to relieve the School District from any ongoing responsibility or expense relating to the Authority. The School District retained its beneficial ownership interest in the Building Authority. The accounting and reporting policies of the Authority relating to the accompanying financial statements conform to accounting principles generally accepted in the United States of America (GAAP) applicable to public institutions engaged only in business-type activities adopted by the Governmental Accounting Standards Board (GASB). The GASB is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. A. Reporting Entity The governing board of the Authority is composed of seven members, six of whom are appointed from the governing boards of the participating municipalities, and one of who is selected at large by the six appointed members. The makeup of the appointed members is three from Saline County, two from the City of Salina, and one. from the District Court. The accompanying financial statements include all funds which are controlled by or are dependent on the Authority. The Authority is considered to be a joint venture because it is a separate legal entity that is jointly controlled by the County and City. The County and the City both have an ongoing financial responsibility for the Authority. The Authority's Interlocal Cooperation Agreement grants a beneficial interest to the County, City, and the School District in proportion to the respective share of the original acquisition costs of the building. . B. Measurement Focus, Basis of Accounting, and Financial Statement Presentation For financial reporting purposes, the Authority is considered a special-purpose government engaged only in business-type activities. The Authority's financial statements have been presented using the economic resource measurement focus and the accrual basis of accounting. The intent of the Board is that the cost of providing services on a continuing basis be recovered through rents and user fees. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. As permitted by generally accepted accounting principles, the Authority has elected not to apply Financial Accounting Standards Board pronouncements issued after November 30, 1989. When both restricted and unrestricted resources are available for use, it is the Authority's policy to use restricted resources first, then unrestricted resources, as they are needed. C. Budgetary Information The Saline County-City Building Authority does not have tax levying powers and is not required to publish a legal budget. An operating budget is adopted annually by the Governing Board for the purpose of determining the amount of appropriations to request from participating municipalities to cover the operating and maintenance costs of the building. . . -9- Saline County-City Building Authority Notes to Financial Statements (continued) December 31, 2008 and 2007 Note 1 Summary of Sie:nificant Accountine: Policies (continued) D. Cash and Cash Equivalents For the purposes of the statement of cash flows, the Authority considers all demand deposits and all investments (if any) with maturities of three months or less to be cash equivalents. E. Capital Assets Additions to property and equipment are recorded at cost. Maintenance and repairs are expensed as incurred. Assets are depreciated using the straight-line method over the estimated useful lives of the assets as follows: . Buildings and improvements Equipment 5-50 years 5-25 years . F. Compensated Absences Payable The Authority is liable for payments to employees for sick pay and vacation pay earned according to the Authority's personnel policies. This liability is accrued at year-end for financial statement purposes. The liability is recorded in the statement of net assets and a related expense is recorded in the statement of revenues, expenses, and changes in net assets. A percentage of this payable is recorded as a noncurrent liability as it is not anticipated to be paid within the next fiscal year. G. Net Assets Net assets represent the difference between assets and liabilities and are classified in the following categories: Invested in capital assets - This amount consists of the cost of capital assets, net of accumulated depreciation and reduced by any outstanding debt related to the acquisition, construction or improvement of those assets. Unrestricted net assets - This amount is all net assets that do not meet the definition of "invested in capital assets, net of related debt". H. Classification of Revenues The Authority distinguishes operating revenues and nonoperating revenues as follows: Operating revenues - Operating revenues include rents and assessments charged to the entities occupying the facilities and for the use of equipment owned. It also includes related refunds, claims, or miscellaneous items. Nonoperating revenue - Nonoperating revenues include all activities that have the characteristics of nonexchange transactions, such as gifts, contributions, and investment income. Estimates I. The preparation of financial statements in conformity with generally accepted. accounting principles requires management to make estimates and assmnptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results may differ from those estimates. J. Risk Management The Authority carries commercial insurance to limit its exposure to the various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. There has been no significant change in the Authority's insurance coverage from the previous year. In addition, there have not been settlements in excess of the Authority's coverage in any of the prior three years. K. Reclassifications Certain accounts in the prior year financial statements have been reclassified for comparative purposes to conform to the presentation in the current year financial statements. . !. I -10- Saline County-City Building Authority Notes to Financial Statements (continued) December 31, 2008 and 2007 Note 2 Stewardship. Compliance. and Accountability Cash-Basis Law (KSA 10-1113) - The Authority was in compliance with this law. Depository Security (KSA 9-1402) - The Authority's funds were adequately secured at December 31,2008. Note 3 Deposits - Cash and Cash Equivalents As of December 31, 2008, the Authority had cash and cash equivalents in financial banking institutions of $1,283,506. The Authority did not have any activity in investment-type assets. Interest rate risk - KSA 9-1401 establishes the depositories which may be used by Kansas governments. The statute requires banks eligible to hold the government's funds bave a main or branch bank in the county . in which the government is located, or in an adjoining county if such institution has been designated as an official depository, and the banks provide an acceptable rate of return on funds. In addition, K.S.A. 9-1402 requires the banks to pledge securities for deposits in excess of FDIC coverage. The Authority has no other policies that would further limit interest rate risk. Credit risk- KSA 12-1675 limits the government's investment of idle funds to time deposits, open accounts, certificates of deposit with allowable financial institutions, U.S. government securities, temporary notes, no- fund warrants, repurchase agreements, and the Kansas Municipal Investment Pool. The Authority has no investment policy that would further limit its investment choices. Custodial credit risk - The custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. Kansas Statutes 9-1402 and 9- 1405 require that governments obtain security for all deposits. The Authority manages its custodial credit risk by requiring the financial institutions to grant a security interest in securities held by third-party custodial banks. Concentration of credit risk - Kansas statutes place no limit on the amount the government may invest in any one issuer as long as the investments are adequately secured under KSA 9-1402 and 9-1405. The Authority has placed all of its resources with one financial institution. . Note 4 Capital Assets The following sunnnarizes the changes in capital assets for the year ended December 31, 2008: Beginnine: (Decrease) Ending Balances Increases (Adjustments) Balances . Non-depreciable capital assets: Land $ 220.228 $ Depreciable capital assets: Land improvements 164,281 56,160 Building and improvements 3,366,482 88,074 Equipment 406.292 5.640 Total depreciable capital assets 3.937.055 149.874 Total capital assets 4.157.283 149.874 Accumulated depreciation (2.250.384) (144.458) Total capital assets, net $ 1.906.899 $ 5.416 $~ $ 220.228 220,441 3,454,556 (5.178) 406.754 (5.178) 4.081.751 (5.178) 4.301.979 4.987 (2.389.855) $~ $ 1.912.124 . I- I Ie . . . -11- Saline County-City Building Authority Notes to Financial Statements (continued) December 31, 2008 and 2007 Note 5 Noncurrent Liabilities The change in noncurrent liabilities is as follows: Beginning balance Addition to accrual Reduction of accrual Ending balance $37,010 7,936 $~ $~ Current portion 25% Note 6 Defined Benefit Pension Plan Plan Description - The Authority participates in the Kansas Public Employees Retirement System (KPERS), a cost-sharing multiple-employer defined benefit pension plan as provided by KSA 744901, et seq. KPERS provides retirement benefits, life insurance, disability income benefits, and death benefits. Kansas law establishes and amends benefit provisions. KPERS issues a publicly available financial report that includes financial statements and required supplementary infonnation. That report may be obtained by writing to KPERS (611 S Kansas, Suite 100, Topeka, KS 66603) or by calling 1-888-275-5737. Funding Policy - KSA 74-4919 establishes the KPERS member-employee contribution rate at 4% of covered salary. The employer collects and remits member-employee contributions according to the provisions of section 414(h) of the Internal Revenue Code. State law provides that the employer contnbution rate be determined annually based on the results of an annual actuarial valuation. KPERS is funded on an actuarial reserve basis. State law sets a limitation on annual increases in the contnbution rates for KPERS employers. The employer rate established by statute for calendar year 2008 is 5.93%. The Authority's employer contributions to KPERS for the years ending December 31,2008,2007, and 2006 were $11,048, $11,832, and $10,516, respectively, equal to the required contnbutions for each year. . . SUPPLEMENTARY INFORMATION . . .