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Audit - 2018SALINE COUNTY-CITY BUILDING AUTHORITY Salina, Kansas FINANCIAL STATEMENT AND INDEPENDENT AUDITORS' REPORT December 31, 2018 WOODS & DURHAM, CHTD. Certified Public Accountants Salina, Kansas SALINE COUNTY-CITY BUILDING AUTHORITY Salina, Kansas FINANCIAL STATEMENT For the Year Ended December 31, 2018 TABLE OF CONTENTS Page Number INDEPENDENT AUDITORS' REPORT ..................................................................................1 - 2 FINANCIAL STATEMENT SUMMARY OF RECEIPTS, EXPENDITURES AND UNENCUMBERED CASH REGULATORY BASIS ..............................................................3 NOTES TO FINANCIAL STATEMENT ...................................................................................4 - 7 SUPPLEMENTAL INFORMATION GENERAL FUND SCHEDULE OF RECEIPTS AND EXPENDITURES - ACTUAL AND BUDGET REGULATORY BASIS Schedule 1 ............................................8 CAPITAL OUTLAY FUND SCHEDULE OF RECEIPTS AND EXPENDITURES Schedule 2 ...........................................................................................................................9 INDEPENDENT AUDITORS' REPORT To the Board of Directors Saline County-City Building Authority Salina, Kansas 67401 Wehaveauditedtheaccompanyingfundsummarystatementofregulatorybasisreceipts,expenditures,and unencumberedcashbalancesofSalineCounty-CityBuildingAuthority,Salina,Kansas,asofandfortheyear ended December 31, 2018, and the related notes to the financial statement. Management's Responsibility for the Financial Statement Managementisresponsibleforthepreparationandfairpresentationofthisfinancialstatementinaccordance withtheKansasMunicipalAuditandAccountingGuideasdescribedinNote1;thisincludesdeterminingthatthe regulatorybasisofaccountingisanacceptablebasisforthepreparationofthefinancialstatementinthe circumstances.Managementisalsoresponsibleforthedesign,implementationandmaintenanceofinternal controlrelevanttothepreparationandfairpresentationofthefinancialstatementthatisfreefrommaterial misstatement, whether due to fraud or error. Auditor's Responsibility Ourresponsibilityistoexpressanopiniononthefinancialstatementbasedonouraudit.Weconductedour auditinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica,andtheKansas MunicipalAuditandAccountingGuide.Thosestandardsrequireweplanandperformtheaudittoobtain reasonable assurance about whether the financial statement is free of material misstatement. Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthe financialstatement.Theproceduresselecteddependon auditor’s judgment,includingtheassessmentofthe risksofmaterialmisstatementofthefinancialstatement,whetherduetofraudorerror.Inmakingthoserisk assessments,theauditorconsidersinternalcontrolrelevanttothe entity’s preparationandfairpresentationof thefinancialstatementinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotfor thepurposeofexpressinganopinionontheeffectivenessofthe entity’s internalcontrol.Accordingly,we expressnosuchopinion.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedand thereasonablenessofsignificantaccountingestimatesmadebymanagement,aswellasevaluatingtheoverall presentation of the financial statement. Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforouraudit opinion. Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles AsdescribedinNote1ofthefinancialstatement,thefinancialstatementispreparedbytheSalineCounty-City BuildingAuthorityonthebasisofthefinancialreportingprovisionsoftheKansasMunicipalAuditandAccounting Guide,whichisabasisofaccountingotherthanaccountingprinciplesgenerallyacceptedintheUnitedStatesof America. Theeffectsonthefinancialstatementofthevariancesbetweentheregulatorybasisofaccountingdescribedin Note1andaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica,althoughnotreasonably determinable, are presumed to be material. 1 Adverse Opinion on U.S. Generally Accepted Accounting Principles Inouropinion,becauseofthesignificanceofthematterdiscussedinthe“Basis forAdverseOpiniononU.S. GenerallyAcceptedAccounting Principles”paragraph,thefinancialstatementreferredtoabovedoesnot presentfairly,inconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica,the financialpositionoftheSalineCounty-CityBuildingAuthorityasofDecember31,2018,orchangesinfinancial position and cash flows thereof for the year then ended. Unmodified Opinion on Regulatory Basis of Accounting Inouropinion,thefinancialstatementreferredtoabovepresentsfairly,inallmaterialrespects,theaggregate cashandunencumberedcashbalanceoftheSalineCounty-CityBuildingAuthorityasofDecember31,2018, andtheaggregatereceiptsandexpendituresfortheyearthenendedinaccordancewiththefinancialreporting provisions of the Kansas Municipal Audit and Accounting Guide described in Note 1. Other Matters - Supplementary Information Ourauditwasconductedforthepurposeofforminganopiniononthefundsummarystatementofregulatory basisreceipts,expenditures,andunencumberedcashbalances(basicfinancialstatement)asawhole.The individualfundscheduleofregulatorybasisreceiptsandexpenditures-actualandbudget(Schedule1aslistedin thetableofcontents)andthenonbudgetedfundscheduleofregulatorybasisreceiptsandexpenditures (Schedule2aslistedinthetableofcontents)ispresentedforanalysisandisnotarequiredpartofthebasic financialstatement,however,isrequiredtobepresentedundertheprovisionsoftheKansasMunicipalAuditand AccountingGuide.Suchinformationistheresponsibilityofmanagementandwasderivedfromandrelates directlytotheunderlyingaccountingandotherrecordsusedtopreparethebasicfinancialstatement.The informationhasbeensubjectedtotheauditingproceduresappliedintheauditofthebasicfinancialstatement andcertainadditionalprocedures,includingcomparingandreconcilingsuchinformationdirectlytothe underlyingaccountingandotherrecordsusedtopreparethebasicfinancialstatementortothebasicfinancial statementitself,andotheradditionalproceduresinaccordancewithauditingstandardsgenerallyacceptedinthe UnitedStatesofAmerica.Inouropinion,theinformationisfairlystatedinallmaterialrespectsinrelationtothe basic financial statement as a whole, on the basis of accounting described in Note 1. Woods & Durham, Chtd. WOODS & DURHAM, CHTD. Certified Public Accountants May 30, 2019Salina, Kansas 2 SALINE COUNTY-CITY BUILDING AUTHORITY Salina, Kansas Summary of Receipts, Expenditures and Unencumbered Cash Regulatory Basis For the Year Ended December 31, 2018 Add Outstanding BeginningEndingEncumbrances UnencumberedCashUnencumberedand AccountsEnding Cash FundsCash BalanceReceiptsExpendituresCash BalancePayableBalance General Fund$ 1,173,041$1,227,371$ 2,172,965$ 227,447$ 41,994$ 269,441 Capital Outlay Fund-1,190,000122,8621,067,13812,3231,079,461 Total$ 1,173,041$2,417,371$ 2,295,827$ 1,294,585$ 54,317$ 1,348,902 Composition of Ending Cash Balances: Checking account$ 1,348,902 The accompanying notes are an integral part of this financial statement. 3 SALINE COUNTY-CITY BUILDING AUTHORITY Salina, Kansas NOTES TO FINANCIAL STATEMENTS December 31, 2018 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES TheSalineCounty-CityBuildingAuthority(Authority)wasformedMarch22,1965,undertheInterlocal CooperationActofKansas(KSA12-2907)bySalineCounty(County),theCityofSalina(City),andtheBoardof EducationU.S.D.#305(SchoolDistrict).TheAuthoritywascreatedtoprovidefortheacquisitionoflandandthe construction,equipping,operating,andmaintenanceofabuildingandparkingareatohousethecountyoffices andcourts,thecityofficesandcourts,andtheschooldistrictoffices.OnJanuary16,1996,theInterlocal AgreementwasrestatedtorelievetheSchoolDistrictfromanyongoingresponsibilityorexpenserelatingtothe Authority. The School District retained its beneficial ownership interest in the Building Authority. TheaccountingpoliciesoftheAuthorityconformtothestatutorybasisofaccounting,asregulatedbytheStateof Kansas,whichdemonstratescompliancewiththecashbasisandbudgetlawsofKansas.Thefollowingisa summary of the more significant policies. A.Municipal Financial Reporting Entity ThegoverningboardoftheAuthorityiscomposedofsevenmembers,sixofwhomareappointedfromthe governingboardsoftheparticipatingmunicipalities,andoneofwhoisselectedatlargebythesixappointed members.ThemakeupoftheappointedmembersisthreefromSalineCounty,twofromtheCityofSalina,and onefromtheDistrictCourt.Theaccompanyingfinancialstatementincludesallfunds,whicharecontrolledbyor are dependent on the Authority. TheAuthorityisconsideredtobeajointventurebecauseitisaseparatelegalentitythatisjointlycontrolledbythe CountyandCity.TheCountyandtheCitybothhaveanongoingfinancialresponsibilityfortheAuthority.The Authority’s InterlocalCooperationAgreementgrantsabeneficialinteresttotheCounty,City,andtheSchool District in proportion to the respective share of the original acquisition costs of the building. B.Regulatory Basis Fund Type Afundisdefinedasanindependentfiscalandaccountingentitywithaself-balancingsetofaccountsrecording cash,receipts,expendituresandunencumberedcashbalance.Thefundssegregatespecificactivitiesorcertain objectives in accordance with special regulations, restrictions, or limitations. The following types of funds were utilized in recording the financial activities of the Authority: GeneralFund–thechiefoperatingfund.Usedtoaccountforallresourcesexceptthoserequiredtobe accounted for in another fund. Special Purpose Fund - used to account for the expenditures intended for specified purposes. C.Basis of Accounting RegulatoryBasisofAccountingandDeparturefromAccountingPrinciplesGenerallyAcceptedintheUnited StatesofAmerica.TheKMAAGregulatorybasisofaccountinginvolvestherecognitionofcash,cash equivalents,marketableinvestments,andcertainaccountspayableandencumbranceobligationstoarriveatan unencumberedcashandinvestmentsbalanceonaregulatorybasisforeachfund,andthereportingofchanges inunencumberedcashandinvestmentsofafundresultingfromthedifferenceinregulatorybasisreceiptsand regulatorybasisexpendituresforthefiscalyear.Allrecognizedassetsandliabilitiesaremeasuredandreported atcost,unlesstheyhavebeenpermanentlyimpairedandhavenofuturecashvalueorrepresentnofuture obligationagainstcash.TheKMAAGregulatorybasisdoesnotrecognizecapitalassets,long-termdebt,accrued receivablesandpayables,oranyotherassets,liabilitiesordeferredinfloworoutflows,otherthanthose mentioned above. 4 SALINE COUNTY-CITY BUILDING AUTHORITY Salina, Kansas NOTES TO FINANCIAL STATEMENTS December 31, 2018 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) C.Basis of Accounting (Cont'd.) TheAuthorityhasapprovedaresolutionthatisincompliancewithKSA75-1120a(c),waivingtherequirementfor applicationofgenerallyacceptedaccountingprinciplesandallowingtheCommissiontousetheregulatorybasis of accounting. D.Budgetary Information TheAuthoritydoesnothavetaxlevyingpowersandisnotrequiredtopublishabudget.Abudgetisadopted annually by the Board of Directors to determine the amount of appropriations to request from Saline County. E.Risk Management CommercialInsurance–TheAuthoritycarriescommercialinsurancetolimititsexposuretothevariousrisksof lossrelatedtotorts;theftof,damagetoanddestructionofassets;errorsandomissions;injuriestoemployees; andnaturaldisasters.Settledclaimshavenotexceededcommercialinsurancecoverageinanyofthepastthree years. F.Compensated Absences TheAuthorityisliableforpaymentstoemployeesforsickpayandvacationpayearnedaccordingtoAuthority personnelpolicies.Thisliabilityisrecordedasanencumbranceandisincludedasanexpenditureinthe accompanying financial statement. G.Estimates Thepreparationoffinancialstatementrequiresmanagementtomakeestimatesandassumptionsthataffectthe amountsreportedinthefinancialstatementandtheaccompanyingnotes.Actualresultsmaydifferfromthose estimates. NOTE 2 - DEPOSITS - CASH BALANCES The Authority does not have any activity in investment-type assets. KSA9-1401establishesthedepositories,whichmaybeusedbyKansasgovernments.Thestatuerequires bankseligibletoholdthe government’s fundshaveamainorbranchbankinthecountyinwhichthegovernment islocated,orinanadjoiningcountyifsuchinstitutionhasbeendesignatedasanofficialdepository,andthebanks provideanacceptablerateofreturnonfunds.Inaddition,KSA9-1402requiresthebankstopledgesecuritiesfor deposits in excess of FDIC coverage. The Authority has no other policies that would further limit interest rate risk. KSA12-1675limitsthe government’s investmentofidlefundstotimedeposits,openaccounts,andcertificatesof depositwithallowablefinancialinstitutions;U.S.governmentsecurities;temporarynotes;no-fundwarrants; repurchaseagreements;andtheKansasMunicipalInvestmentPool.TheAuthorityhasnoinvestmentpolicythat would further limit its investment choices. The Authority’s practice is to place idle funds in certificates of deposit. Concentrationofcreditrisk–Statestatutesplacenolimitontheamountthegovernmentmayinvestinanyone issueraslongastheinvestmentsareadequatelysecuredunderKSA9-1402and9-1405.TheAuthorityhas placed all of its resources with one financial institution. 5 SALINE COUNTY-CITY BUILDING AUTHORITY Salina, Kansas NOTES TO FINANCIAL STATEMENTS December 31, 2018 NOTE 2 - DEPOSITS - CASH BALANCES (Cont'd.) Custodialcreditrisk–Thecustodialcreditriskfordepositsistheriskthat,intheeventofabankfailure,the Authority'sdepositsmaynotbereturnedtoit.StatestatutesrequiretheAuthority'sdepositsinfinancial institutionstobeentirelycoveredbythefederaldepositoryinsuranceorbycollateralheldunderajointcustody receiptissuedbyabankwithintheStateofKansas,theFederalReserveBankofKansasCity,ortheFederal HomeLoanBankofTopeka,exceptduringdesignated"peakperiods"whenrequiredcoverageis50%.All deposits were legally secured at December 31, 2018. AsofDecember31,2018,theAuthority'scarryingamountofdepositswas$1,348,902andthebankbalancewas $1,349,217.Thebankbalancewasheldbyonebankresultinginaconcentrationofcreditrisk.Ofthebank balance,$250,000wascoveredbyfederaldepositoryinsurance,$1,300,000wascollateralizedwithsecurities held by the pledging financial institutions agent in the Authority's name. NOTE 3 - INTERFUND TRANSFERS TheBoardapprovedanoperatingtransferfromtheGeneralFundtothenewlycreatedCapitalOutlayFund(a nonbudgeted fund) in the amount of $1,190,000 pursuant to K.S.A. 79-2934. NOTE 4 - OTHER LONG-TERM OBLIGATIONS FROM OPERATIONS AsprovidedbyK.S.A.12-5040,thelocalgovernmentallowsretireestoparticipateinthegrouphealthinsurance plan.Whileeachretireepaysthefullamountoftheapplicablepremium,conceptually,thelocalgovernmentis subsidizingtheretireesbecauseeachparticipantischargedalevelofpremiumregardlessofage.However,the cost of this subsidy has not been quantified in this financial statement. UndertheConsolidatedOmnibusBudgetReconciliationAct(COBRA),thegovernmentmakeshealthcare benefitsavailabletoeligibleformeremployeesandeligibledependents.Certainrequirementsareoutlinedbythe federalgovernmentforthiscoverage.Thepremiumispaidinfullbytheinsured.Thereisnocosttothe government under this program. NOTE 5 - DEFINED BENEFIT PENSION PLAN PlanDescription–TheSalineCounty-CityBuildingAuthorityparticipatesintheKansasPublicEmployees RetirementSystem(KPERS),acost-sharingmultiple-employerdefinedbenefitpensionplanasprovidedby K.S.A.74-4901,etseq.Kansaslawestablishesandamendsbenefitprovisions.KPERSissuesapublicly availablefinancialreportthatincludesfinancialstatementandrequiredsupplementaryinformation.KPERS' financialstatementsareincludedinitsComprehensiveAnnualFinancialReportwhichcanbefoundonthe KPERSwebsiteatwww.kpers.orgorbywritingtoKPERS(611S.Kansas,Suite100,Topeka,KS66603)orby calling 1-888-275-5737. Contributions–K.S.A.74-4919andK.S.A.74-49,210establishtheKPERSmember-employeecontributionrate. KPERShasmultiplebenefitstructuresandcontributionratesdependingonwhethertheemployeeisKPERS1, KPERS2orKPERS3member.KPERS1membersareactiveandcontributingmembershiredbeforeJuly1, 2009.KPERS2memberswerefirstemployedinacoveredpositiononorafterJuly1,2009,andKPERS3 memberswerefirstemployedinacoveredpositiononorafterJanuary1,2015.EffectiveJanuary1,2015, KansaslawestablishedtheKPERSmember-employeecontributionrateat6%ofcoveredsalaryforKPERS1, KPERS2,andKPERS3members.MembercontributionsarewithheldbytheiremployerandpaidtoKPERS according to the provisions of section 414(h) of the Internal Revenue Code. 6 SALINE COUNTY-CITY BUILDING AUTHORITY Salina, Kansas NOTES TO FINANCIAL STATEMENTS December 31, 2018 NOTE 6 - DEFINED BENEFIT PENSION PLAN (Cont'd.) StatelawprovidesthattheemployercontributionratesforKPERS1,KPERS2andKPERS3bedetermined basedontheresultsofeachannualactuarialvaluation.Kansaslawsetsalimitationonannualincreasesinthe employercontributionrates.Theactuariallydeterminedemployercontributionrate(notincludingthe1% contributionratefortheDeathandDisabilityProgram)andthestatutorycontributionratewas8.39%forthefiscal yearendedDecember31,2018.ContributionstothepensionplanfromtheAuthoritywere$25,753fortheyear ended December 31, 2018. NOTE 7 - DEBT SERVICE TheAuthoritymakestheleasepaymentsonimprovementstothe building’s HVACsystem.Costsofthose improvements were financed with a capital lease that is the obligation of the City of Salina and Saline County. NOTE 8 - SUBSEQUENT EVENTS TherearenosubsequenteventsthatwereidentifiedinproceduresperformedthroughMay30,2019,whichalso is the date these financial statement were available to be issued. 7 SUPPLEMENTAL INFORMATION SALINE COUNTY-CITY BUILDING AUTHORITY Salina, Kansas Schedule 1 General Fund Schedule of Receipts and Expenditures - Actual and Budget Regulatory Basis For the year ended December 31, 2018 Over (Under) ActualBudgetBudget Cash Receipts City of Salina - Regular$ 478,114$ 478,114$ - Miscellaneous receipts760-760 Salina Public Library9,0009,000- Saline County717,171717,171- Interest income19,7081,00018,708 Reimbursements1,353-1,353 Vending commissions1,265-1,265 Total Cash Receipts1,227,371$ 1,205,285$ 22,086 Expenditures Salaries295,274312,726(17,452) Health insurance82,49999,406(16,907) KPERS retirement plan25,75329,206(3,453) FICA 16,21319,141(2,928) Medicare3,7924,477(685) Unemployment tax306432(126) Workers compensation insurance13,44116,000(2,559) Contractual consultants-5,000(5,000) Education6952,000(1,305) Employee services799-799 Equipment repair4,0305,000(970) Property insurance33,09138,000(4,909) Audit fee8,2858,000285 Banking fees50-50 Supplies25,82024,0001,820 Maintenance agreement12,32126,000(13,679) Miscellaneous expenditures3,4712,0001,471 Maintenance27,14940,000(12,851) Telephone22,08022,080- Utilities157,306175,000(17,694) Yard & beautification11,4175,0006,417 Debt service234,816234,816- Equipment 4,3579,500(5,143) Capital outlay - transfer out1,190,0001,190,000- Total Expenditures and Transfers 2,172,965$ 2,267,784$ (94,819) Receipts Over (Under) Expenditures(945,594) Unencumbered Cash, Beginning1,173,041 Unencumbered Cash, Ending$ 227,447 The above exhibit was prepared using the basis of accounting, which documents compliance with the cash basis and budget laws of the State of Kansas. 8 SALINE COUNTY-CITY BUILDING AUTHORITY Salina, Kansas Schedule 2 Capital Outlay Fund Schedule of Receipts and Expenditures Regulatory Basis For the year ended December 31, 2018 Cash Receipts Transfers in$ 1,190,000 Total Cash Receipts1,190,000 Expenditures122,862 Total Expenditures122,862 Receipts Over (Under) Expenditures1,067,138 Unencumbered Cash, Beginning- Unencumbered Cash, Ending$ 1,067,138 The above exhibit was prepared using the basis of accounting, which documents compliance with the cash basis and budget laws of the State of Kansas. 9