2011 Financial StatementCITY OF FAIRLAWN
SUMMIT COUNTY
REGULAR AUDIT
FOR THE YEAR ENDED DECEMBER 31, 2011
Dave Yost • Auditor of State
CITY OF FAIRLAWN
SUMMIT COUNTY
TABLE OF CONTENTS
TITLE PAGE
Independent Accountants' Report .................................................................................................................1
Management's Discussion and Analysis ....................................................................................................... 3
Basic Financial Statements:
Government-Wide Financial Statements:
Statement of Net Assets .............................................................................. ............................15
Statement of Activities ................................................................................. ............................16
Fund Financial Statements:
Balance Sheet
Governmental Funds ............................................................................ ............................ 17
Reconciliation of Total Governmental Fund Balances to
Net Assets of Governmental Activities .................................................. ............................ 18
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds ......................................................................................................... 19
Reconciliation of the Statement of Revenues, Expenditures and Changes
in Fund Balances of Governmental Funds to the Statement of Activities ......................... 20
Statement of Revenues, Expenditures and Changes in
Fund Balance -Budget and Actual (Non-GAAP Budgetary Basis)
General Fund ..............................................................................................................21
Statement of Fiduciary Net Assets
Fiduciary Funds ................................................................................................................. 22
Notes to the Basic Financial Statements .................................................................................................... 23
Independent Accountants' Report on Internal Control Over
Financial Reporting and on Compliance and Other Matters
Required by Government Auditing Standards .....................
47
This page intentionally left blank.
Dave Yost • Auditor of State
INDEPENDENT ACCOUNTANTS' REPORT
City of Fairlawn
Summit County
3487 South Smith Road
Fairlawn, Ohio 44333-3007
To the Honorable Mayor and Members of City Council:
We have audited the accompanying financial statements of the governmental activities, each major fund,
and the aggregate remaining fund information of the City of Fairlawn, Summit County, Ohio, (the City) as
of and for the year ended December 31, 2011, which collectively comprise the City's basic financial
statements as listed in the table of contents. These financial statements are the responsibility of the
City's management. Our responsibility is to express opinions on these financial statements based on our
audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in the Comptroller General of the
United States' Govemment Auditing Standards. Those standards require that we plan and pertorm the
audit to reasonably assure 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 our
audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, each major fund, and the aggregate remaining
fund information of the City of Fairlawn, Summit County, Ohio, as of December 31, 2011, and the
respective changes in financial position thereof and the budgetary comparison for the General for the
year then ended in conformity with accounting principles generally accepted in the United States of
America.
As described in Note 3, during the year ended December 31, 2011, the City adopted the provision of
Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and
Governmental Fund Type Definitions.
In accordance with Government Auditing Standards, we have also issued our report dated June 29, 2012,
on our consideration of the City's internal control over financial reporting and our tests of its compliance
with certain provisions of laws, regulations, contracts and grant agreements and other matters. While we
did not opine on the internal control over financial reporting or on compliance, that report describes the
scope of our testing of internal control over financial reporting and compliance and the results of that
testing. That report is an integral part of an audit pertormed in accordance with Govemment Auditing
Standards. You should read it in conjunction with this report in assessing the results of our audit.
101 Central Plaza South, 700 Chase Tower, Canton, Ohio 44702-1509
Phone: 330-438-0617 or 800-443-9272 Fax: 330-471-0001
www.ohioauditor.gov
City of Fairlawn
Summit County
Independent Accountants' Report
Page 2
Accounting principles generally accepted in the United States of America require this presentation to
include Management's discussion and analysis as listed in the table of contents, to supplement the basic
financial statements. Although this information is not part of the basic financial statements, the
Governmental Accounting Standards Board considers it essential for placing the basic financial
statements in an appropriate operational, economic, or historical context. We have applied certain limited
procedures to the required supplementary information in accordance with auditing standards generally
accepted in the United States of America, which consisted of inquiries of management about the methods
of preparing the information and comparing the information for consistency with management's responses
to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the
basic financial statements. We do not express an opinion or provide any assurance on the information
because the limited procedures do not provide us with sufficient evidence to express an opinion or
provide any other assurance.
Dave Yost
Auditor of State
June 29, 2012
2
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2011
Unaudited
The management's discussion and analysis of the City of Fairlawn's (the "City") financial performance provides an
overall review of the City's financial activities for the year ended December 31, 2011. The intent of this discussion
and analysis is to look at the City's financial performance as a whole; readers should also review the basic financial
statements and the notes to the basic financial statements to enhance their understanding of the City's financial
performance.
Financial Highlights
Key financial highlights for 2011 are as follows:
- The total net assets of the City increased $910,114. Net assets of governmental activities increased $910,114 or
1.25% from 2010, to a total of $73,453,604 in 2011.
- General revenues accounted for $14,682,933 of total governmental activities revenue. Program specific
revenues accounted for $1,432,587 or 8.89% of total governmental activities revenue.
- The City had $15,205,406 in expenses related to governmental activities; $1,432,587 of these expenses were
offset by program specific charges for services, grants or contributions. The remaining expenses of the
governmental activities of $13,772,819 were offset by general revenues (primarily property taxes, income taxes
and unrestricted grants and entitlements, including Joint Economic Development District (JEDD) revenues).
- The City has three major funds, the general fund, bond retirement fund and capital improvement fund. The
general fund, the largest major fund, had revenues and other financing sources of $13,208,738 in 2011. This
represents an increase of $456,408 from 2010 revenues and other financing sources, and is due to an increase in
income tax collections and JEDD revenues. The expenditures and other financing uses of the general fund,
which totaled $11,189,344 in 2011, increased $1,293,225 from 2010. The increase is due to the elimination, in
2010, of a liability for an anticipated income tax refund in the amount of $1,112,868. The elimination reduced
last year's expenditures. The net increase in fund balance for the general fund was $2,092,775 or 21.33%.
- The bond retirement fund had revenues and other financing sources of $294,171 in 2011. The expenditures of
the bond retirement fund totaled $299,316 in 2011. The net decrease in fund balance for the bond retirement
fund was $5,145 or 37.94%.
- The capital improvement fund had revenues of $2,319,622 in 2011. The expenditures of the capital
improvement fund totaled $2,003,404 in 2011. The net increase in fund balance for the capital improvement
fund was $316,218 or 12.29%.
Using this Annual Financial Report
This annual report consists of a series of financial statements and notes to these statements. The statements are
organized so the reader can understand the City as a financial whole, an entire operating entity. The statements then
proceed to provide an increasingly detailed look at specific financial activities.
The statement of net assets and statement of activities provide information about the activities of the City as a
whole, presenting both an aggregate view of the City's finances and alonger-term view of those finances. Fund
financial statements provide the next level of detail. For governmental funds, these statements tell how services
were financed in the short-term as well as what remains for future spending. The fund financial statements also look
at the City's most significant funds with all other nonmajor funds presented in total in one column.
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2011
Unaudited
Reporting the City as a Whole
Statement of Net Assets and the Statement of Activities
While this document contains a large number of funds used by the City to provide programs and activities, the view
of the City as a whole looks at all financial transactions and asks the question, "How did we do financially during
2011?" The statement of net assets and the statement of activities answer this question. These statements include
all assets, liabilities, revenues and expenses using the accrual basis of accounting similar to the accounting used by
most private-sector companies. This basis of accounting will take into account all of the current year's revenues and
expenses regardless of when cash is received or paid.
These two statements report the City's net assets and changes in those assets. This change in net assets is important
because it tells the reader that, for the City as a whole, the financial position of the City has improved or diminished.
The causes of this change may be the result of many factors, some financial, some not. Non-financial factors
include the City's property tax base, current property tax laws in Ohio restricting revenue growth, facility
conditions, required community programs and other factors.
In the statement of net assets and the statement of activities, the Governmental activities include the City's programs
and services including police, fire and rescue, street maintenance, capital improvements and general administration.
These services are funded primarily by property and income taxes and intergovernmental revenues including federal
and state grants and other shared revenues.
The City's statement of net assets and statement of activities can be found on pages 15-16 of this report.
Reporting the City's Most Significant Funds
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for
specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure
and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided
into two categories: governmental funds and fiduciary funds.
Fund financial reports provide detailed information about the City's major funds. The City uses many funds to
account for a multitude of financial transactions. However, these fund financial statements focus on the City's most
significant funds. The analysis of the City's major governmental funds begins on page 9.
Governmental Funds
Governmental funds are used to account for essentially the same functions reported as governmental activities in the
government-wide financial statements. However, unlike the government-wide financial statements, governmental
fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of
spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a
government's near-term financing requirements.
Because the focus of the governmental funds is narrower than that of the government-wide financial statements, it is
useful to compare the information presented for governmental funds with similar information presented for
governmental activities in the government-wide financial statements. By doing so, the readers may better
understand the long-term impact of the government's near-term financing decisions.
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2011
Unaudited
Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and
changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and
governmental activities.
The City maintains a multitude of individual governmental funds. The City has segregated these funds into major
funds and nonmajor funds. The City's major governmental funds are the general fund, bond retirement fund and
capital improvement fund. Information for major funds is presented separately in the governmental fund balance
sheet and in the governmental statement of revenues, expenditures, and changes in fund balances. Data from the
other governmental funds are combined into a single, aggregated presentation. The basic governmental fund
financial statements can be found on pages 17-21 of this report.
Fiduciary Funds
Fiduciary funds are used to account for resources held for the benefit of parties outside the City. Fiduciary funds are
not reflected in the government-wide financial statement because the resources of those funds are not available to
support the City's own programs. The City's only fiduciary funds are agency funds. Agency funds are custodial in
nature (assets equal liabilities) and do not involve the measurement of results of operations. The basic fiduciary
fund financial statement can be found on page 22 of this report.
Notes to the Basic Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in the
government-wide and fund financial statements. These notes to the basic financial statements can be found on pages
23-46 of this report.
Government-Wide Financial Analysis
The Statement of Net Assets provides the perspective of the City as a whole. The table below provides a summary
of the City's net assets for 2011 compared to 2010:
Net Assets
Governmental Governmental
Activities Activities
2011 2010
Assets
Current and other assets $ 19,356,210 $ 17,783,592
Capital assets, net 62,759,792 64,739,816
Total assets 82,116,002 82,523,408
Liabilities
Current and other liabilities 1,720,208 1,898,822
Long-term liabilities 6,942,190 8,081,096
Total liabilities 8,662,398 9,979,918
Net Assets
Invested in capital assets, net of
related debt 57,009,118 58,076,467
Restricted 4,842,587 5,038,389
Unrestricted 11,601,899 9,428,634
Total net assets $ 73,453,604 $ 72,543,490
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2011
Unaudited
Over time, net assets can serve as a useful indicator of a government's financial position. At December 31, 2011,
the City's assets exceeded liabilities by $73,453,604.
Capital assets reported on the government-wide statements represent the largest portion of the City's assets. At
year-end, capital assets represented 76.43% of total assets. Capital assets include land, land improvements,
buildings and improvements, machinery and equipment, licensed vehicles, infrastructure and construction in
progress. Capital assets, net of related debt to acquire the assets at December 31, 2011, were $57,009,118. These
capital assets are used to provide services to citizens and are not available for future spending. Although the City's
investment in capital assets is reported net of related debt, it should be noted that the resources to repay the debt
must be provided from other sources, since capital assets may not be used to liquidate these liabilities.
A portion of the City's net assets, $4,842,587, represents resources that are subject to external restriction on how
they may be used. In the governmental activities, the remaining balance of unrestricted net assets of $11,601,899
may be used to meet the government's ongoing obligations to citizens and creditors.
The table below shows the change in net assets for fiscal years 2011 and 2010.
Change in Net Assets
Governmental Governmental
Activities Activities
2011 2010
Revenues
Program revenues:
Charges for services $ 940,055 $ 951,279
Operating grants and contributions 408,162 330,395
Capital grants and contributions 84,370 267,396
Total program revenues 1,432,587 1,549,070
General revenues:
Property and other taxes 1,089,410 980,789
Income taxes 9,272,072 8,299,564
JEDD revenues 2,846,855 2,539,728
Unrestricted grants and entitlements 1,363,207 1,478,728
Investment earnings 25,129 36,171
Miscellaneous 86,260 231,754
Total general revenues 14,682,933 13,566,734
Total revenues $ 16,115,520 $ 15,115,804
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2011
Unaudited
Change in Net Assets
Governmental Governmental
Activities Activities
2011 2010
Expenses
General government $ 2,669,058 $ 1,537,614
Security of persons and property 6,369,280 6,707,077
Public health and welfare 117,996 122,137
Transportation 4,381,927 3,486,979
Community environment 58,394 44,161
Leisure time activity 423,062 358,449
Utility services 885,373 891,502
Interest and fiscal charges 300,316 344,561
Total expenses 15,205,406 13,492,480
Change in net assets 910,114 1,623,324
Net assets at beginning of year 72,543,490 70,920,166
Net assets at end of year $ 73,453,604 $ 72,543,490
Governmental Activities
Governmental activities net assets increased $910,114 in 2011. The increase is due an increase in income tax
receipts.
Security of persons and property, which primarily supports the operations of the police and fire departments
accounted for $6,369,280 of the total expenses of the City. These expenses were partially funded by $333,724 in
direct charges to users of the services and $7,250 in operating grants and contributions. Transportation expenses
totaled $4,381,927. Transportation expenses were partially funded by $550 in direct charges to users of the services,
$395,978 in operating grants and contributions, and $49,238 in capital grants and contributions.
The county and state governments contributed to the City a total of $408,162 in operating grants and contributions.
These revenues are restricted to a particular program or purpose. Of the total operating grants and contributions,
$7,250 subsidized security of persons and property, $395,978 subsidized transportation programs, and $4,934
subsidized utility services.
General revenues totaled $14,682,933, and amounted to 91.11% of total governmental revenues. These revenues
primarily consist of property and income tax revenue of $10,361,482 and JEDD revenues of $2,846,855.
C[TY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSS[ON AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2011
Unaudited
The graph below illustrates the City's dependence upon general revenues as program revenues are not sufficient to
cover total governmental expenses.
Governmental Activities -Program Revenues vs. Total Expenses
$l~soo,ooo
$ls,ooo,ooo
$12,500,000
$10,000,000
$7,500,000
$5,000,000
$2,500,000
$-
^ Program Revenues
^ Expenses
The statement of activities shows the cost of program services and the charges for services and grants offsetting
those services. The following table shows, for governmental activities, the total cost of services and the net cost of
services. That is, it identifies the cost of these services supported by tax revenue and unrestricted grants and
entitlements.
Total Cost of
Services
~nii
Program Expenses:
General government $ 2,669,058
Security of persons and property 6,369,280
Public health and welfare 117,996
Transportation 4,381,927
Community environment 58,394
Leisure time activity 423,062
Utility services 885,373
Interest and fiscal charges 300,316
Total $ 15,205,406
Governmental Activities
Net Cost of Total Cost of Net Cost of
Services Services Services
2011 2010 2010
$ 2,179,538 $ 1,537,614 $ 789,147
6,028,306 6,707,077 6,384,963
117,996 122,137 122,137
3,936,161 3,486,979 3,170,379
58,394 44,161 39,227
408,193 358,449 337,696
743,915 891,502 755,300
300,316 344,561 344,561
$ 13,772,819 $ 13,492,480 $ 11,943,410
The dependence upon general revenues for governmental activities is apparent, with 90.58% of expenses supported
through taxes and other general revenues.
8
Fiscal Year 2011 Fiscal Year 2010
C[TY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2011
Unaudited
The chart below illustrates the City's program revenues versus general revenues for 2011 and 2010:
Governmental Activities -General and Program Revenues
$16,000,000
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
Financial Analysis of the Government's Funds
^ Program Revenues
^ General Revenues
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements.
Governmental Funds
The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances
of spendable resources. Such information is useful in assessing the City's financing requirements. In particular,
unreserved fund balance serves as a useful measure of the City's net resources available for spending at year-end.
The City's governmental funds (as presented on the balance sheet on page 17) reported a combined fund balance of
$15,816,349 which is $2,170,885 more than last year's total of $13,645,464. The schedule below indicates the fund
balances and the total change in fund balances as of December 31, 2011 and 2010 for all major and nonmajor
governmental funds.
Major funds:
General
Bond retirement
Capital improvement
Other nonmajor governmental funds
Total
Fund Balances Fund Balances Increase Percentage
12/31/11 12/31/10 (Decrease) Change
$ 11,905,632 $ 9,812,857 $ 2,092,775 21.33
8,416 13,561 (5,145) (37.94)
2,888,310 2,572,092 316,218 12.29
1,013,991 1,246,954 (232,963) (18.68)
$ 15,816,349 $ 13,645,464 $ 2,170,885 15.91
9
Fiscal Year 2011 Fiscal Year 2010
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2011
Unaudited
General Fund
The City's general fund balance increased by $2,092,775. The table that follows assists in illustrating the revenues
of the general fund.
2011
Amount
Revenues
Taxes $ 7,878,863
Charges for services 366,067
Licenses and permits 215,213
Fines and forfeitures 139,783
Intergovernmental 1,365,859
Investment income 23,202
JEDD revenues 3,038,493
Other 180,608
Total $ 13,208,088
2010 Percentage
Amount Change
$ 7,527,776 4.66
364,532 0.42
210,198 2.39
177,787 (21.38)
1,367,781 (0.14)
37,458 (38.06)
2,772,250 9.60
294,548 (38.68)
$ 12,752,330 3.57
Tax revenue represents 59.65% of all general fund revenue. Overall, tax revenue increased by 4.66% as compared
to the prior year. The reduction of fines and forfeitures is due to less activity in Mayor's Court as more cases are
being referred to Akron Municipal Court. The decrease in investment income is due to the continued interest rate
decline.
Revenues -Fiscal Year 2011
JEDD Other
Revenues Revenues
23 00% 1.37%
Intergovern
mental
10.34%
Investment
Income
0 18%
Fines and
forfeitures Charges for
1.06% Licenses Services
and Permits 2.77%
l .63%
Revenues -Fiscal Year 2010
Other
JEDD
Revenues Revenues
31%
2
21.74% .
[ntergovem
mental
10.73%
Investment
Income
0.29%
Taxes
59.65% Fines and
forfeitures Charges for
1
39% Services
. Licenses
2 86%
and Permits
1.65%
Taxes
59 03%
10
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2011
Unaudited
The table that follows assists in illustrating the expenditures of the general fund.
2011 2010 Percentage
Amount Amount Change
Expenditures
General government $ 2,660,926
Security of persons and property 5,511,267
Public health and welfare 117,996
Transportation 1,979,052
Community environment 53,598
Leisure time activity 326,847
Utility services 207,572
Total $ 10,857,258
$ 1,503,749 76.95
5,592,117 (1.45)
122,137 (3.39)
1,792,325 10.42
41,806 28.21
277,175 17.92
182,337 13.84
$ 9,511,646 14.15
Expenditure for general government appears to have increased but the change between years is due to the
cancellation of a large income tax refund, recorded as a payable, which was eliminated in 2010. Community
environment expenditure increased in 2011 due to increased utilization of the flood prevention program. Increases
in leisure time activity and utility services are due to the lifting of expenditure restrictions in 2011. All other
expenditures remained comparable to 2010.
Expenditures -Fiscal Year 2011
Utility Leisure time
services activity
L9l% 3.01%
Community
environment
0.49%
General
Transport- governme
ation 24.51
18.23%
Public health
and welfaze
l .09%
Security of
persons and
property
50.76%
Expenditures -Fiscal Year 2010
Utility Leisure time
services activity
Community 1.92% 2.91%
environment
0.44%
General
Transport-
ation
18.84%
Public health
and welfaze
1.29%
Bond Retirement Fund
15.81%
Security of
persons and
property
58.79%
The bond retirement fund had revenues and other financing sources of $294,171 in 2011. The expenditures of the
bond retirement fund totaled $299,316 in 2011. The net decrease in fund balance for the bond retirement fund was
$5,145 or 37.94%. Proceeds from special assessments are collected in the bond retirement fund and used to pay the
debt service for two special assessed projects. The final maturity for bonds issued for the largest project was
December 1, 2011 and the fund balance is depleting as expected.
11
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2011
Unaudited
Capital Improvement Fund
The capital improvement fund had revenues of $2,319,622 in 2011. The expenditures of the capital improvement
fund totaled $2,003,404 in 2011. The net increase in fund balance for the capital improvement fund was $316,218
or 12.29%.
Budgeting Highlights
The City's budgeting process is prescribed by the Ohio Revised Code (ORC). Essentially the budget is the City's
appropriations which are restricted by the amounts of anticipated revenues certified by the County Budget
Commission in accordance with the ORC. Therefore, the City's plans or desires cannot be totally reflected in the
original budget. If budgeted revenues are adjusted due to actual activity then the appropriations can be adjusted
accordingly.
Budgetary information is presented for the general fund. There were no significant changes to budgeted revenues in
the general fund. Actual income tax and estate revenue was greater than anticipated. JEDD revenues, however,
were less than expected. The budget for transportation expenditures was increased for the anticipated personnel
costs due to several retirements during the year. One such termination payment was not made until 2012. The
budget for utility services was increased to cover escalating charges for waste disposal, mostly relating to fuel
surcharges. Expenditures for general government, security of persons and property and transportation were less than
budgeted as several departments were understaffed during 2011.
Capital Assets and Debt Administration
Capital Assets
At the end of fiscal 2011, the City had $62,759,792 (net of accumulated depreciation) invested in land, construction
in progress, buildings and improvements, land improvements, machinery and equipment, licensed vehicles and
infrastructure. The following table shows fisca12011 balances compared to 2010:
Capital Assets at December 31
(Net of Depreciation)
Governmental Activities
Land
Construction in progress
Buildings and improvements
Land improvements
Machinery and equipment
Licensed vehicles
Infrastructure
2011 2010
$ 3,229,638 $ 3,229,638
10,927 -
10,474,426 10,747,3 24
1,740,401 1,823,873
1,738,969 1,921,330
1,356,528 1,527,150
44,208,903 45,490,501
Totals
$ 62,759,792 $ 64,739,816
The following graphs show the breakdown of governmental capital assets by category for 2011 and 2010.
12
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2011
Unaudited
Capital Assets -Governmental Activities
2011
Buildings &
Land imp. `~~~~p1O°`""
2 77 % / 16.69%
Land 5.
Capital Assets -Governmental Activities
2010
Land 4.
Machinery and
'onstruction in
rtogress 0 02% equipment
2.77%
a,:.
Licensed
Infrastructure
70.44
2.16
Infrastructure
70.26%
Machinery and
equipment
2.97%
Licensed
vehicles
2.36%
The City's largest capital asset category is infrastructure which includes roads, bridges, culverts, sidewalks and
curbs. These items are immovable and of value only to the City, however, the annual cost of purchasing these items
is quite significant. The net book value of the City's infrastructure (cost less accumulated depreciation) represents
approximately 70.44% of the City's total governmental capital assets at December 31, 2011.
See Note 9 for more detail on the City's capital assets.
Debt Administration
The City had the following long-term obligations outstanding at December 31, 2011 and 2010:
Governmental Activities
General obligation bonds
Special assessment bonds
OPWC loans
Compensated absences
Total long-term obligations
2011 2010
$ 5,505,000 $ 6,160,000
- 185,000
245,674 318,349
1,191,516 1,417,747
$ 6,942,190 $ 8,081,096
See Note 10 for more detail on the City's long-term obligations.
Economic Conditions and Next Year's General Fund Budget Outlook
The City of Fairlawn is a residential community with a strong diversified business base. The City is home to
several large corporations, a multitude of small, diverse businesses, and five thriving retail centers, including
Summit Mall, Rosemont Commons, the Shops at Fairlawn, the Fairlawn Towne Center, and Miller-Market Square.
The City's convenient location continues to attract and retain growing businesses.
Buildings &
Land imp. ''"'"""`
2 8~"~ 16.60%
13
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2011
Unaudited
The City's Land Use Plan designated 200+ acres of former farmland as an office park in the City's southwest
corner. Fairlawn Corporate Park continues to develop as planned, work will begin on the A. Schulman building
soon. The City has formed a Community Improvement Corporation (CIC) to expand its economic development
capabilities and to attract and retain businesses. The CIC recently hired a commercial real estate firm to market the
Fairlawn Corporate Park.
The City is proud to offer outstanding city services to its residents. In addition to excellent police and fire protection,
Fairlawn safety forces are active in the community, offering education programs such as Drug Abuse Resistance
Education (DARE), Fire Prevention, and Safety Town for our youngest residents. Fairlawn police support
neighborhood Block Parent groups, offer residential checks and a Senior Call program to check on senior citizens
living alone. The popular Special Traffic Enforcement Program boosts traffic control where residents most see a
need. The City's highly trained emergency medical teams are outfitted with advanced medical equipment and
provide free emergency medical care to Fairlawn residents. The Municipal Service Center Complex houses all
public service functions and equipment in one area. The City provides trash and recycling services at no charge to
residents at the Andrew Sombati Compactor site, an all-weather drive-thru trash compactor facility.
The City operates seventy (70) acres of parks which offer year-round recreational programs for children and adults.
The Learning Resource Center, staffed with afull-time Naturalist, offers nature-related programs and lectures to
groups of all ages. The City recently added the adult and youth soccer fields and a community garden to the
Fairlawn parks system.
The City's primary revenue source is the 2% local income tax withheld on the estimated 40,000 people working in
the City. Income tax receipts increased 6.2% in 2011 as compared to the previous year.
The City is projecting a decrease in general fund revenue in 2012 due to the elimination of estate tax and reductions
in other intergovernmental revenues. Expenditures for 2012 are budgeted at 14.55% greater than 2011 due to the
resumption of full staffing, increased legal fees and general inflation. Programs supported by the general fund are
budgeted at the same level of service as last year.
Contacting the City's Financial Management
This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview
of the City's finances and to show the City's accountability for the money it receives. If you have questions about
this report or need additional financial information, contact Mr. Jerome E. Apple, Finance Director, City of
Fairlawn, 3487 S. Smith Road, Fairlawn, Ohio 44333.
14
CITY OF FAIRLAWN, OHIO
STATEMENT OF NET ASSETS
DECEMBER 31, 2011
Governmental
Activities
Assets:
Equity in pooled cash and cash equivalents $ 14,171,614
Cash and cash equivalents in segregated accounts 16,265
Receivables:
Inwme taxes 1,740,364
Real and other taxes 851,663
Accounts 49,543
Special assessments 624,491
Accrued interest 9,152
Due from other governments 1,338,800
Materials and supplies inventory 472,168
Prepayments 82,150
Capital assets:
Land and construction in progress 3,240,565
Depreciable capital assets, net 59,519,227
Total capital assets, net 62,759,792
Total assets 82,116,002
Liabilities:
Accounts payable 198,817
Contracts payable 29,455
Accrued wages and benefits payable 140,113
Compensated absences payable 80,952
Due to other governments 476,239
Accrued interest payable 27,857
Unearned revenue 766,775
Long-term liabilities:
Due within one year 1,209,215
Due in more than one year 5,732,975
Total liabilities 8,662,398
Net assets:
Invested in capital assets, net
of related debt 57,009,118
Restricted for:
Debt service 253,942
Capital projects 3,483,555
Other purposes 1,105,090
Unrestricted (deficit) 11,601,899
Total net assets $ 73,453,604
SEE ACCOMPANYING NOTES TO THE BAS[C FINANCIAL STATEMENTS
15
CITE' OF FAIRLAWN, OIIIO
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2011
Net (Expense)
Revenue and
Changes in
Program Revenues Net Assets
Operating Capital
Charges for Grants and Grants and Governmental
Expenses Services Contributions Contributions Activities_
Governmental activities:
Current:
General government $ 2,669,058 $ 454,388 $ - $ 35,132 $ (2,179,.538)
Security of persons and property 6,369,280 333,724 7,250 - (6,028,:306)
Public health and welfare 117,996 - - - (117,996)
Transportation 4,381,927 550 395,978 49,238 (3,936,161)
Community environment 58,394 - - - (58,.394)
Leisure time activity 423,062 14,869 - - (408,193)
Utility services 885,373 136,524 4,934 - (743,'915)
Interest and fiscal charges 300,316 - - - (300,316)
Total governmental activities 15,205,406 940,055 408,162 84,370 (13,772,;819)
General revenues:
Property taxes levied for:
General purposes 898,810
Police and fire pension 190,600
Income taxes levied for:
General purposes 7,049,819
Capital outlay 2,222,253
JEDD revenues 2,846,855
Grants and entitlements not restricted
to specific programs 1,363,207
Investment earnings 25,129
Miscellaneous 86,260
Total general revenues 14,682,933
Change in net assets 910,114
Net assets at beginning of year 72,543,490
Net assets at end of year $ 73,453,604
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
16
CITY OF FAIRLAWN, OHIO
Assets:
Equity in pooled cash and cash equivalents
Cash and cash equivalents in segregated accounts
Receivables:
Income taxes
Real and other taxes
Accounts
Special assessments
Accrued interest
Due from other funds
Due from other govemments
Materials and supplies inventory
Prepayments
Total assets
Liabilities:
Accounts payable
Contracts payable
Accrued wages and benefits payable
Compensated absences payable
Due to other funds
Due to other governments
Defen•ed revenue
Unearned revenue
Total liabilities
BALANCE SHEET
GOVERNMENTAL FUNDS
DECEMBER 31, 2011
Bond Capital
General Retirement Improvement
$ 10,336,034 $ 8,416 $ 2,641,894
16,265 - -
Other Total
Governmental Governmental
Funds Funds
$ 1,185,270 $ 14,171,614
- 16,2.65
1,305,273 - 435,091 - 1,740,364
665,746 - - 185,917 851,663
49,182 - - 361 49,543
- 252,896 371,595 - 624,491
8,766 - - 386 9,152
_ _ _ 50 50
1,164,934 - 15,040 158,826 1,338,E00
453,793 - - 18,375 472,168
82,150 - - - 82,150
$ 14,082,143 $ 261,312 $ 3,463,620 $ 1,549,185 $ 19,356,260
$ 156,698 $ - $ 864 $ 41,255 $ 198,817
13,246 - 16,209 - 29,455
140,113 - - - 140,1. l3
80,952 - - - 80,5>52
50 - - - 50
301,288 - - 174,951 476,:!39
887,783 252,896 558,237 148,594 1,847,`.110
596,381 - - 170,394 766,775
2,176,511 252,896 575,310 535,194 3,539,911
Fund balances:
Nonspendable 546,413 - - 18,375 564,'188
Restricted - 8,416 2,888,310 921,976 3,818,'102
Committed 5,000 - - 73,640 78,640
Assigned 266,417 - - - 266,417
Unassigned (deficit) 11,087,802 - - - 11,087,802
Total fund balances 11,905,632 8,416 2,888,310 1,013,991 15,816,349
Total liabilities and fund balances $ 14,082,143 $ 261,312 $ 3,463,620 _ $ 1,549,185 $ 1~9 356.260
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
17
CITY OF FAIRLAWN, OIIIO
RECONCIL[AT[ON OF TOTAL GOVERNMENTAL FUND BALANCES TO
NET ASSETS OF GOVERNMENTAL ACTIVITIES
DECEMBER 31, 2011
Total governmental fund balances
Amounts reported for governmental activities on the
statement of net assets are different because:
Capital assets used in governmental activities are not financial
resources and therefore are not reported in the funds.
Other long-term assets are not available to pay for current-
period expenditures and therefore are deferred in the funds.
Income taxes receivable $ 686,409
Real and other taxes receivable 84,888
Accounts receivable 1,395
Intergovernmental receivable 446,220
Special assessments receivable 624,491
Accrued interest receivable 4,107
Total
Accrued interest payable is not due and payable in the current
period and therefore is not reported in the governmental funds.
Long-term liabilities, including bonds payable, are not due and
payable in the current period and therefore are not reported
in the funds.
General obligation bonds (5,505,000)
OPWC loans (245,674)
Compensated absences (1,191,516)
Total
Net assets of governmental activities
15,816,349
62,759,792
1,847,510
(27,857)
(6,942,190)
$ 73,453,604
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
18
C[TY OF FAIRLAWN,-OHIO
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 201 I
Other Total
Bond Capital Governmental Governmental
General Retirement Improvement Funds Funds
Revenues:
Income taxes $ 7,049,418 $ - $ 2,222,120 $ - $ 9,271,538
Real and other taxes 829,445 - - 175,077 1,004,522
Charges for services 366,067 - - 136,524 502,591
Licenses and permits 215,213 - - - 215,213
Fines and forfeitures 139,783 - - 8,897 148,680
Intergovernmental 1,365,859 - 38,858 425,368 1,830,085
Special assessments - 259,171 58,644 - 317,815
Investment income 23,202 - - 1,075 24,277
Rental income 73,571 - - - 73,571
Contributions and donations 34,482 - - - 34,482
JEDD revenues 3,038,493 - - - 3,038,493
Other 72,555 - - 7,042 79,597
Total revenues 13,208,088 259,171 2,319,622 753,983 16,540,864
Expenditures:
Current:
General government 2,660,926 10,664 - 8 2,671,598
Security of persons and property 5,511.267 - - 649,440 6,160,707
Public health and welfare 117,996 - - - 117,996
Transportation 1,979,052 - - 520,637 2,499,689
Community environment 53,598 - - - 53,598
Leisure time activity 326,847 - - - 326,847
Utility services 207,572 - - 103,335 310,907
Capital outlay - - 1,073,374 12,905 1,086,279
Debt service:
Principal retirement - 257,675 655,000 - 912,675
Interest and fiscal charges - 30,977 275,030 - 306,007
Total expenditures 10,857,258 299,316 2,003,404 1,286,325 14,446,303
Excess (deficiency) of revenues
over (under) expenditures 2,350,830 (40,145) 316,218 (532,342) 2,094,561
Other financing sources (uses):
Sale of capital assets 650 - - - 650
Transfers in - 35,000 - 297,086 332,086
Transfers (out) (332,086) - - - (332,086)
Total other financing sources (uses) (331,436) 35,000 - 297,086 650
Net change in fund balances 2,019,394 (5,145) 316,218 (235,256) 2,095,211
Fund balances at beginning of year 9,812,857 13,561 2,572,092 1,246,954 13,645,464
Decrease in reserve for inventory 73,381 - - 2,293 75,674
Fund balances at end of year $ 11,905,632 $ 8,416 $ 2,888,310 $ 1,013,991 $ 15,81E~,349
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
19
CITE' OF FAIRLAWN, OHIO
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2011
Net change in fund balances -total governmental funds
Amounts reported for governmental activities in the
statement of activities are different because:
Governmental funds report capital outlays as expenditures.
However, in the statement of activities, the wst of those assets
is allocated over their estimated useful lives as depreciation
expense. This is the amount by which capital outlays were
exceeded by depreciation expense in the current period.
Capital asset additions $ 267,788
Current year depreciation (2,238,988)
Total
The net effect of various miscellaneous transactions involving
capital assets (i.e., sales, disposals, trade-ins, and donations) is to
decrease net assets.
Revenues in the statement of activities that do not provide
current financial resources aze not reported as revenues in
the funds.
Income taxes 534
Real and other taxes 84,888
Intergovernmental revenues (9,478)
Special assessments (282,683)
Investment income 852
JEDD revenues (191,638)
Other (27,819)
Total
Governmental funds report expenditures for inventory when purchased.
However, in the statement of activities, they are reported as an expense
when consumed.
Repayment of bond and lease principal is an expenditure in the
governmental funds, but the repayment reduces long-term
liabilities on the statement of net assets.
In the statement of activities, interest is accrued on outstanding
bonds and loans, whereas in governmental funds, an interest
expenditure is reported when due.
Some expenses reported in the statement of activities,
such as compensated absences, do not require the use
of current financial resources and therefore aze not
reported as expenditures in governmental funds.
Change in net assets of governmental activities
2,095,211
(1,971,200)
(8,824)
(425,344)
75,674
912,675
5,691
226,231
$ 910,114
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
20
CITE' OF FAIRLAWN, OHIO
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCE -BUDGET AND ACTUAL (NON-GAAP BUDGETARY BASIS)
GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2011
Variance with
Budgeted Amounts Final Budget
Positive
Original Final Actual (Negative) _
Revenues:
Income taxes $ 5,486,835 $ 5,486,835 $ 7,031,553 $ 1,544,718
Real and other taxes 875,000 849,119 891,373 42,254
Charges for services 347,819 344,319 379,962 35,643
Licenses and permits 185,400 185,400 188,816 3,416
Fines and forfeitures 212,000 212,000 137,761 (74,239)
Intergovernmental 774,2]6 774,216 1,283,708 509,492
Investment income 50,000 50,000 21,104 (28,896)
Rental income 80,000 73,500 73,571 71
Contributions and donations 3,700 3,700 34,482 30,782
JEDD revenues 2,704,300 2,704,300 2,575,723 (128,577)
Other 115,200 115,200 71,693 (43,507)
Total revenues 10,834,470 10,798,589 12,689,746 1,891,157_
Expenditures:
Current:
General government 3,400,389 3,526,464 3,018,589 507,875
Security of persons and property 5,856,615 6,031,218 5,555,858 475,360
Public health and welfare 120,300 120,300 117,996 2,304
Transportation 1,911,131 2,112,932 1,976,753 136,179
Community environment 74,632 75,632 53,598 22,034
Leisure time activity 335,284 364,334 334,543 29,791
Utility services 195,833 255,833 221,746 34,087'
Total expenditures 11,894,184 12,486,713 11,279,083 1,207,630
Excess (deficiency) of revenues
over (under) expenditures (1,059,714) (1,688,124) 1,410,663 3,098,787
Other financing sources (uses):
Sale of capital assets - - 650 650
Transfers (out) (424,447) (369,447) (332,086) 37,361_
Total other financing sources (uses) (424,447) (369,447) (331,436) 38,011
Net change in fund balances (1,484,161) (2,057,571) 1,079,227 3,136,79E
Fund balances at beginning of year 8,201,909 8,201,909 8,201,909
Prior year encumbrances appropriated 559,776 559,776 559,776 -
Fund balance at end of year $ 7,277,524 $ 6,704,114 $ 9,840,912 $ 3,136,79E
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
21
CITE' OF FAIRLAWN, OHIO
STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS
DECEMBER 3l, 2011
Agency
Assets:
Equity in pooled cash
and cash equivalents $ 39,700
Total assets $ 39,700
Liabilities:
Undistributed monies $ 39,700
Total liabilities $ 39,700
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
22
CITY OF FAIRLAWN, OHIO
NOTES TO THE BAS[C FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 1 -DESCRIPTION OF THE CITY
The City of Fairlawn (the "City") is a charter municipal corporation established and operated under the
laws of the State of Ohio. The City is organized as a Mayor/Council form of government. The Mayor,
Council and Finance Director are elected.
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements (BFS) of the City have been prepared in conformity with accounting
principles generally accepted in the United States of America (GAAP) as applied to local governmental
units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for
establishing governmental accounting and financial principles. The City also applies Financial Accounting
Standards Board (FASB) guidance issued on or before November 30, 1989, to its governmental funds
provided they do not conflict with or contradict GASB pronouncements. The most significant of the City's
accounting policies are described below.
A. Reporting Entity
For financial reporting purposes, the City's BFS include all funds, agencies, boards, commissions, and
departments for which the City is financially accountable. Financial accountability, as defined by the
GASB, exists if the City appoints a voting majority of an organization's governing board and is either
able to impose its will on that organization or there is a potential for the organization to provide
specific financial benefits to, or impose specific burdens on, the City. The City may also be financially
accountable for governmental organizations with a separately elected governing board, a governing
board appointed by another government, or a jointly appointed board that is fiscally dependent on the
City. The City also took into consideration other organizations for which the nature and significance
of their relationship with the City are such that exclusion would cause the City's basic financial
statements to be misleading or incomplete. Based on these criteria, the City has no component units.
The City provides various services including police and fire protection, emergency medical, recreation
(including parks), planning, zoning, street maintenance and repair, and general administrative services.
The operation of each of these activities is directly controlled by the Council through the budgetary
process. None of these services are provided by a legally separate organization; therefore, these
operations are included in the primary government.
The Copley/Fairlawn City School District and the Summit County Public Library have been excluded
from the City's financial statements. Both are legally separate from the City. Neither imposes a
financial burden nor provides a financial benefit to the City. The City cannot significantly influence
the operations of these entities.
The City participates in the Bath-Akron-Fairlawn Joint Economic Development District (JEDD),
which is a jointly governed organization. The JEDD was created to assure the continued economic
viability of Bath Township. Anine-member board of directors, three appointed from Bath Township,
Akron, and Fairlawn, respectively, controls the operation of the JEDD. The board exercises total
control over the operation of the JEDD including budgeting, appropriating, contracting and designating
management.
Each participant's degree of control is limited to its representation on the board. All 2011 JEDD
revenues were the result of the income tax levied by the JEDD effective January 1, 1999.
23
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
B. Basis of Presentation -Fund Accounting
The City's BFS consist of government-wide statements, including a statement of net assets and a
statement of activities, and fund financial statements which provide a more detailed level of financial
information.
Government-wide Financial Statements -The statement of net assets and the statement of activities
display information about the City as a whole. These statements include the financial activities of the
primary government, except for fiduciary funds.
The statement of net assets presents the financial condition of the governmental activities of the City at
year-end. T'he statement of activities presents a comparison between direct expenses and program
revenues for each program or function of the City's governmental activities. Direct expenses are those
that are specifically associated with a service, program or department and therefore clearly identifiable
to a particular function. Program revenues include charges paid by the recipient of the goods or
services offered by the program, grants and contributions that are restricted to meeting the operational
or capital requirements of a particular program and interest earned on grants that is required to be used
to support a particular program. Revenues which are not classified as program revenues are presented
as general revenues of the City, with certain limited exceptions. The comparison of direct expenses
with program revenues identifies the extent to which each business segment or governmental functions
are self-financing or draw from the general revenues of the City.
Fund Financial Statements -During the year, the City segregates transactions related to certain City
functions or activities in separate funds in order to aid financial management and to demonstrate legal
compliance. Fund financial statements are designed to present financial information of the City at this
more detailed level. The focus of governmental fund financial statements is on major funds. Each
major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a
single column. Fiduciary funds are reported by type.
C. Fund Accounting
The City uses funds to maintain its financial records during the year. A fund is defined as a fiscal and
accounting entity with aself-balancing set of accounts. There are two categories of funds:
governmental and fiduciary.
Governmental Funds -Governmental funds are those through which most governmental functions
typically are financed. Governmental fund reporting focuses on the sources, uses and balances of
current financial resources. Expendable assets are assigned to the various governmental funds
according to the purposes for which they may or must be used. Current liabilities are assigned to the
fund from which they will be paid. The difference between governmental fund assets and liabilities is
reported as fund balance. The following are the City's major governmental funds:
General Fund -The general fund accounts for all financial resources except those required to be
accounted for in another fund.
Bond Retirement -The bond retirement fund accounts for the accumulation of resources for, and
payment of, long-term debt principal, interest and related costs.
Capital Improvement -This fund is used to account for the acquisition and construction of major
capital facilities.
24
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Other governmental funds of the City are used to account for (a) the accumulation of resources for, and
payment of, general long-term debt principal, interest and related costs; (b) financial resources to be
used for the acquisition, construction, or improvement of capital facilities; and (c) for grants and other
resources whose use is restricted to a particular purpose.
Fiduciary Funds -Fiduciary fund reporting focuses on net assets and changes in net assets. The
fiduciary fund category is split into four classifications: pension trust funds, investment trust funds,
private-purpose trust funds and agency funds. Trust funds are used to account for assets held by the
City under a trust agreement for individuals, private organizations, or other governments and are
therefore not available to support the City's own programs. Agency funds are custodial in nature
(assets equal liabilities) and do not involve measurement of results of operations. The City's only
fiduciary funds are agency funds. The agency funds are used to account for deposits that will be
returned after the proper performance of certain landscape or street repair projects.
D. Measurement Focus and Basis of Accounting
Government-wide Financial Statements -The government-wide financial statements are prepared
using the economic resources measurement focus. All assets and all liabilities associated with the
operation of the City are included on the statement of net assets.
Fund Financial Statements -All governmental funds are accounted for using a flow of current
financial resources measurement focus. With this measurement focus, only current assets and current
liabilities generally are included on the balance sheet. The statement of revenues, expenditures and
changes in fund balances reports on the sources (i.e., revenues and other financing sources) and uses
(i.e., expenditures and other financing uses) of current financial resources. This approach differs from
the manner in which the governmental activities of the government-wide financial statements are
prepared. Governmental fund financial statements therefore include reconciliation with brief
explanations to better identify the relationship between the government-wide statements and the
financial statements for governmental funds.
E. Basis of Accounting
Basis of accounting determines when transactions are recorded in the financial records and reported on
the financial statements. Government-wide financial statements are prepared using the accrual basis of
accounting. Governmental funds use the modified accrual basis of accounting. Agency funds also use
the accrual basis of accounting. Differences in the accrual and modified accrual basis of accounting
arise in the recognition of revenue, the recording of deferred revenue and in the presentation of
expenses versus expenditures.
Revenues - Exchange and Non-exchange Transactions - Revenue resulting from exchange
transactions, in which each party gives and receives essentially equal value is recorded on the accrual
basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal
year in which the resources are measurable and become available. Available means that the resources
will be collected within the current fiscal year or are expected to be collected soon enough thereafter to
be used to pay liabilities of the current fiscal year. For the City, available means expected to be
received within thirty-one days of year-end.
25
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Nonexchange transactions, in which the City receives value without directly giving equal value in
return, include income taxes, property taxes, grants, entitlements and donations. On an accrual basis,
revenue from income taxes is recognized in the period in which the income is earned (See Note 7).
Revenue from property taxes is recognized in the year for which the taxes are levied (See Note 6).
Revenue from grants, entitlements and donations is recognized in the year in which all eligibility
requirements have been satisfied. Eligibility requirements include timing requirements, which specify
the year when the resources are required to be used or the year when use is first permitted, matching
requirements, in which the City must provide local resources to be used for a specified purpose, and
expenditure requirements, in which the resources are provided to the City on a reimbursement basis.
On a modified accrual basis, revenue from nonexchange transactions must also be available before it
can be recognized.
Under the modified accrual basis, the following revenue sources are considered to be both measurable
and available at year-end: income tax, state-levied locally shared taxes (including gasoline tax, local
government funds and permissive tax), fines and forfeitures, fees and special assessments.
Unearned Revenue and Deferred Revenue -Unearned revenue and deferred revenue arise when
assets are recognized before revenue recognition criteria have been satisfied.
Property taxes for which there is an enforceable legal claim as of December 31, 2011, but which were
levied to finance year 2012 operations, and other revenues received in advance of the fiscal year for
which they were intended to finance, have been recorded as unearned revenue. Income taxes and
special assessments not received within the available period, grants and entitlements received before
the eligibility requirements are met, and delinquent property taxes due at December 31, 2011, are
recorded as deferred revenue in the governmental funds.
On governmental fund financial statements, receivables that will not be collected within the available
period have been reported as deferred revenue.
Expenses/Expenditures - On the accrual basis of accounting, expenses are recognized at the time they
are incurred.
The measurement focus of governmental fund accounting is on decreases in net financial resources
(expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in
which the related fund liability is incurred, if measurable. Allocations of cost, such as depreciation and
amortization, are not recognized in governmental funds.
F. Budgetary Data
The budgetary process is prescribed by provisions of the Ohio Revised Code and entails the
preparation of budgetary documents within an established timetable. The major documents prepared
are the tax budget, the certificate of estimated resources and the appropriations resolution, all of which
are prepared on the budgetary basis of accounting. The certificate of estimated resources and the
appropriations ordinance are subject to amendment throughout the year with the legal restriction that
appropriations cannot exceed estimated resources, as certified. For all funds, Council appropriations
are made at the object level within each department. This is known as the legal level of budgetary
control. Budgetary modifications may only be made by resolution of the City Council at the legal level
of control. All funds, other than agency funds, are legally required to be budgeted and appropriated.
26
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Tax Budget -Alternative tax budget information of estimated revenue and expenditures for all funds
is submitted to the Summit County Fiscal Officer, as Secretary of the County Budget Commission, by
July 20 of each year, for the period January 1 to December 31 of the following year. All funds, except
agency funds, are legally required to be budgeted; however, only governmental funds are legally
required to be reported.
Estimated Resources -The County Budget Commission determines if the budget substantiates a need
to levy all or part of previously authorized taxes and reviews estimated revenue. The Commission
certifies its actions to the City by September 1. As part of this certification, the City receives the
official certificate of estimated resources, which states the projected revenue of each fund. Prior to
December 31, the City must revise its budget so that the total contemplated expenditures from any
fund during the ensuing fiscal year will not exceed the amount available as stated in the certificate of
estimated resources. The revised budget then serves as the basis for the annual appropriations
measure. On or about January 1, the certificate of estimated resources is amended to include
encumbered cash balances at December 31 of the preceding year. The certificate may be further
amended during the year if the City Finance Director determines, and the Budget Commission agrees,
that an estimate needs to be either increased or decreased. The amounts reported on the budgetary
statement reflect the amounts in the original and final amended official certificate of estimated
resources issued during 2011.
Appropriations - A temporary appropriation ordinance to control expenditures may be passed on or
about January 1 of each year for the period January 1 to March 31. An annual appropriation ordinance
must be passed by April 1 of each year for the period January 1 to December 31. The appropriation
ordinance fixes spending authority at the fund, department and object level. The appropriation
ordinance may be amended during the year as new information becomes available, provided that total
fund appropriations do not exceed current estimated resources, as certified. The appropriations for a
fund may only be modified during the year by an ordinance of Council. The amounts on the budgetary
statement reflect the original and final appropriation amounts, including all amendments and
modifications legally enacted by Council.
Lapsing of Appropriations - At the close of each year, the unencumbered balance of each
appropriation reverts to the respective fund from which it was appropriated and becomes subject to
future appropriations. Encumbrances are carried forward and are not reappropriated as part of the
subsequent year appropriations.
G. Cash and Cash Equivalents
Cash balances of the City's funds are pooled and invested in investments maturing within five years in
order to provide improved cash management. Individual fund integrity is maintained through City
records. Each fund's interest in the pooled bank account is presented on the balance sheet as "Equity
in Pooled Cash and Cash Equivalents" on the financial statements.
During fiscal year 2011, investments were limited to certificates of deposit.
Except for nonparticipating investment contracts, investments are reported at fair value which is based
on quoted market prices. Nonparticipating investment contracts, such as nonnegotiable certificates of
deposit, are reported at cost.
27
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Under existing Ohio statutes all investment earnings are assigned to the general fund unless statutorily
required to be credited to a specific fund. During fiscal 2011, interest revenue credited to the general
fund amounted to $23,202, which includes $5,584 assigned from other City funds.
The City has segregated bank accounts for monies held separate from the City's central bank account.
These interest bearing depository accounts are presented in the financial statements as "Cash and Cash
Equivalents in Segregated Accounts" since they are not required to be deposited into the City treasury.
For purpose of presentation on the financial statements, investments of the cash management pool and
investments with original maturities of three months or less at the time they are purchased by the City
are considered to be cash equivalents. Investments with an initial maturity of more than three months
are reported as investments.
An analysis of the City's investment account at year-end is provided in Note 4.
H. Inventories of Materials and Supplies
On government-wide and fund financial statements, inventories are presented at the lower of cost or
market on a first-in, first-out basis and are expensed when used. Inventories are accounted for using
the consumption method.
On the fund financial statements, reported material and supplies inventory is equally offset by a fund
balance reserve in the governmental funds which indicates that it does not constitute available
spendable resources even though it is a component of net current assets.
Inventory consists of expendable supplies held for consumption.
I. Capital Assets
These assets generally result from expenditures in the governmental funds. These assets are reported
in the governmental activities column of the government-wide statement of net assets but are not
reported in the governmental fund financial statements.
All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and
retirements during the year. Donated capital assets are recorded at their fair market values as of the
date received. The City maintains a capitalization threshold of $5,000. The City's infrastructure
consists of roads, bridges, curbs and gutters, streets and sidewalks, drainage systems and lighting
systems. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to
the value of the asset or materially extend an asset's life are not.
28
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
All reported capital assets are depreciated except for land and construction in progress. Improvements
are depreciated over the remaining useful lives of the related capital assets. Useful lives for
infrastructure were estimated based on the City's historical records of necessary improvements and
replacement. Depreciation is computed using the straight-line method over the following useful lives:
Governmental
Activities
Description Estimated Lives
Land improvements 25 - 75 years
Buildings and improvements 15 - 50 years
Machinery and Equipment 5 - 30 years
Licensed Vehicles 3 - 25 years
Infrastructure 10 - 60 years
J. Compensated Absences
Vacation benefits are accrued as a liability as the benefits are earned if the employees' rights to receive
compensation are attributable to services already rendered and it is probable that the City will
compensate the employees for the benefits through paid time off or some other means. The City
records a liability for accumulated unused vacation time when earned for all employees with more than
one year of service.
Sick leave benefits are accrued as a liability using the vesting method. The liability includes
employees currently eligible to receive termination benefits and those the City has identified as
probable of receiving benefits in the future. The amount is based on accumulated sick leave and the
employees' wage rates at fiscal year-end, taking into consideration any limits specified in the City's
termination policy. The City records a liability for accumulated unused sick leave for all employees
hired before December 31, 1996.
The entire compensated absence liability is reported on the government-wide financial statements.
On governmental fund financial statements, compensated absences are recognized as liabilities and
expenditures to the extent payments come due each period upon the occurrence of employee
resignations and retirements. These amounts are recorded in the account "compensated absences
payable" in the fund from which the employees who have accumulated leave are paid. The noncurrent
portion of the liability is not reported. The City had compensated absences payable of $80,952 in
2011.
K. Accrued Liabilities and Long-Term Obligations
All payables, accrued liabilities and long-term obligations are reported in the government-wide
financial statements.
[n general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely
manner and in full from current financial resources are reported as obligations of the funds. However,
claims and judgments and compensated absences that will be paid from governmental funds are
reported as a liability in the governmental fund financial statements only to the extent that they are due
for payment during the current year.
29
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
L. Interfund Balances
On fund financial statements, receivables and payables resulting from goods and services provided
between funds are classified as "due to/from other funds." These amounts are eliminated in the
governmental column of the statement of net assets.
M. Interfund Activity
Exchange transactions between funds are reported as revenues in the seller funds and as
expenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another
without a requirement for repayment are reported as Interfund transfers. Interfund transfers are
reported as other financing sources/uses in governmental funds. Repayments from funds responsible
for particular expenditures/expenses to the funds that initially paid for them are not presented on the
BFS.
N. Fund Balance
Fund balance is divided into five classifications based primarily on the extent to which the City is
bound to observe constraints imposed upon the use of the resources in the governmental funds. The
classifications are as follows:
Nonspendable -The nonspendable fund balance classification includes amounts that cannot be
spent because they are not in spendable form or legally required to be maintained intact. The "not
in spendable form" criterion includes items that are not expected to be converted to cash. It also
includes the long-term amount of loans receivable, unclaimed monies and year-end balances of
materials and supplies inventories and prepaid assets.
Restricted -Fund balance is reported as restricted when constraints are placed on the use of
resources that are either externally imposed by creditors (such as through debt covenants),
grantors, contributors, or laws or regulations of other governments, or imposed by law through
constitutional provisions or enabling legislation.
Committed -The committed fund balance classification includes amounts that can be used only for
the specific purposes imposed by a formal action (ordinance) of the City Council (the highest level
of decision making authority). Those committed amounts cannot be used for any other purpose
unless the City Council removes or changes the specified use by taking the same type of action
(ordinance) it employed to previously commit those amounts. Committed fund balance also
incorporates contractual obligations to the extent that existing resources in the fund have been
specifically committed for use in satisfying those contractual requirements.
Assigned -Amounts in the assigned fund balance classification are intended to be used by the City
for specific purposes but do not meet the criteria to be classified as restricted nor committed. In
governmental funds other than the general fund, assigned fund balance represents the remaining
amount that is not restricted or committed. In the general fund, assigned amounts represent
intended uses established by policies of the City Council.
Unassigned -Unassigned fund balance is the residual classification for the general fund and
includes all spendable amounts not contained in the other classifications. [n other governmental
funds, the unassigned classification is only used to report a deficit fund balance resulting from
overspending for specific purposes for which amounts had been restricted, committed, or assigned.
30
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
The City applies restricted resources first when expenditures are incurred for purposes for which
restricted and unrestricted (committed, assigned, and unassigned) fund balance is available. Similarly,
within unrestricted fund balance, committed amounts are reduced first followed by assigned, and then
unassigned amounts when expenditures are incurred for purposes for which amounts in any of the
unrestricted fund balance classifications could be used.
O. Estimates
The preparation of the BFS in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the BFS and accompanying notes. Actual results may
differ from those estimates.
P. Net Assets
Net assets represent the difference between assets and liabilities. Net assets invested in capital assets,
net of related debt consists of capital assets, net of accumulated depreciation, reduced by the
outstanding balances of any borrowing used for the acquisition, construction or improvement of those
assets. Net assets are reported as restricted when there are limitations imposed on their use either
through the enabling legislation or through external restrictions imposed by creditors, grantors or laws
or regulations of other governments. Net assets restricted for other purposes include unclaimed
monies. The City applies restricted resources first when an expense is incurred for purposes for which
both restricted and unrestricted net assets are available.
Q. Prepaid Items
Prepayments made to vendors for services that will benefit future periods beyond December 31, 201 1
are recorded as prepaid items using the consumption method by recording a current asset for the
prepaid amount and reflecting the expenditure/expense in the year in which it was consumed.
NOTE 3 -ACCOUNTABILITY AND COMPLIANCE
For fiscal year 2011, the City has implemented GASB Statement No. 54, "Fund Balance Reporting and
Governmental Fund Type Definitions", and GASB Statement No. 59, "Financial Instruments Omnibus".
GASB Statement No. 54 establishes fund balance classifications that comprise a hierarchy based primarily
on the extent to which a government is bound to observe constraints imposed upon the use of the resources
reported in governmental funds. GASB Statement No. 54 also clarifies the definitions of governmental
fund types. The implementation of GASB Statement No. 54 did not have an effect on the financial
statements of the City.
GASB Statement No. 59 updates and improves guidance for financial reporting and disclosure
requirements of certain financial instruments and external investment pools. The implementation of GASB
Statement No. 59 did not have an effect on the financial statements of the City.
31
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANC[AL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 4 -EQUITY IN POOLED CASH AND CASH EQUIVALENTS
State statutes classify monies held by the City into three categories:
Active deposits are public deposits necessary to meet current demands on the treasury. Such monies must
be maintained either as cash in the City Treasury, in commercial accounts payable or withdrawable on
demand, including negotiable order of withdrawal (NOW) accounts, or in money market deposit accounts.
Inactive deposits are public deposits that Council has identified as not required for use within the current
five year period of designation of depositories. Inactive deposits must be evidenced by certificates of
deposit maturing not later than the end of the current period of designation of depositories, or by savings or
deposit accounts including, but not limited to, passbook accounts.
Interim deposits are deposits of interim monies. Interim monies are those monies which are not needed for
immediate use but which will be needed before the end of the current period of designation of depositories.
Interim deposits must be evidenced by time certificates of deposit maturing not more than one year from
the date of deposit or by savings or deposit accounts including, bui not limited to, passbook accounts.
Interim monies may be deposited or invested in the following:
1. United States Treasury Notes, Bills, Bonds, or any other obligation or security issued by the United
States Treasury or any other obligation guaranteed as to principal or interest by the United States;
2. Bonds, notes, debentures, or any other obligations or securities issued by any federal government
agency or instrumentality, including but not limited to, the Federal National Mortgage Association,
Federal Home Loan Bank, Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation,
Government National Mortgage Association, and Student Loan Marketing Association. All federal
agency securities shall be direct issuances of federal government agencies or instrumentalities;
3. Written repurchase agreements in the securities listed above provided that the market value of the
securities subject to the repurchase agreement must exceed the principal value of the agreement by at
least two percent and be marked to market daily, and that the term of the agreement must not exceed
thirty days;
4. Bonds and other obligations of the State of Ohio;
5. No-load money market mutual funds consisting exclusively of obligations described in items (1) or (2)
above and repurchase agreements secured by such obligations, provided that investments in securities
described in this division are made only through eligible institutions;
6. The State Treasury Asset Reserve of Ohio investment pool (STAR Ohio);
7. High grade commercial paper for a period not to exceed 180 days in an amount not to exceed twenty-
five percent of the City's interim monies available for investment; and
8. Bankers acceptances for a period not to exceed 180 days and in an amount not to exceed twenty-five
percent of the City's interim monies available for investment.
32
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANC[AL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 4 -EQUITY IN POOLED CASH AND CASH EQUIVALENTS - (Continued)
The City may also invest any monies not required to be used for a period of six months or more in the
following:
1. Bonds of the State of Ohio;
2. Bonds of any municipal corporation, village, county, township, or other political subdivision of this
State, as to which there is no default of principal, interest or coupons;
3. Obligations of the City.
Protection of the City's deposits is provided by the Federal Deposit Insurance Corporation (FDIC), by
eligible securities pledged by the financial institution as security for repayment, by surety company bonds
deposited with the finance director by the financial institution or by a single collateral pool established by
the financial institution to secure the repayment of all public moneys deposited with the institution.
Investments in stripped principal or interest obligations, reverse repurchase agreements and derivatives are
prohibited. The issuance of taxable notes for the purpose of arbitrage, the use of leverage and short selling
are also prohibited. An investment must mature within five years from the date of purchase unless matched
to a specific obligation or debt of the City, and must be purchased with the expectation that it will be held
to maturity. Investments may only be made through specified dealers and institutions. Payment for
investments may be made only upon delivery of the securities representing the investments to the finance
director or qualified trustee or, if the securities are not represented by a certificate, upon receipt of
confirmation of transfer from the custodian.
A. Cash on Hand
At year-end, the City had $1,550 in un-deposited cash on hand which is included on the financial
statements of the City as part of "equity in pooled cash and cash equivalents".
B. Cash in Segregated Accounts
At December 31, 2011, the City had $16,265 in bank accounts outside of the City Treasury related to
Mayor's Court operations and income tax refunds. These amounts are included on the financial
statements as "cash and cash equivalents in segregated accounts" and are included in deposits with
financial institutions below.
C. Deposits with Financial Institutions
At December 31, 2011, the carrying amount of the City's deposits was $14,226,029. As of December
31, 2011, $13,030,280 of the City's bank balance of $14,412,661 was exposed to custodial risk as
discussed below, while $1,382,381 was covered by Federal Deposit Insurance Corporation.
33
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 4 -EQUITY IN POOLED CASH AND CASH EQUIVALENTS - (Continued)
Custodial credit risk is the risk that, in the event of bank failure, the City will not be able to recover
deposits or collateral securities that are in the possession of an outside party. As permitted by Ohio
Revised Code, the City's deposits are collateralized by a pool of eligible securities deposited with
Federal Reserve Banks, or at member banks of the Federal Reserve System, in the name of the
depository bank and pledged as a pool of collateral against all public deposits held by the depository.
The City has no deposit policy for custodial credit risk beyond the requirements of the State statute.
Although the securities were held by the pledging institutions' trust department and all statutory
requirements for the deposit of money had been followed, noncompliance with federal requirements
could potentially subject the City to a successful claim by the FDIC.
D. Investments
The City had no investments at December 31, 2011.
E. Reconciliation of Cash and Investment to the Statement of Net Assets
The following is a reconciliation of cash and investments as reported in the footnote above to cash and
investments as reported on the statement of net assets as of December 31, 2011:
Cash and Investments per Footnote
Carrying amount of deposits $ 14,226,029
Cash on hand 1,550
Total $ 14,227,579
Cash and Investments per Statement of Net Assets
Governmental activities $ 14,187,879
Agency funds 39,700
Total $ 14,227,579
NOTE 5 - INTERFUND TRANSACTIONS
A. Interfund transfers for the year ended December 31, 2011 consisted of the following, as reported in the
fund financial statements:
Transfers to
Major
Bond Retirement
Nonmajor
Governmental funds
Transfers from
General
35,000
297,086
$ 332,086
34
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 5 - INTERFUND TRANSACTIONS - (Continued)
Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to
the fund that statute or budget requires to expend them, (2) move receipts restricted to debt service
from the funds collecting the receipts to the debt service fund as debt service payments become due,
and (3) use unrestricted revenues collected in the general fund to finance various programs accounted
for in other funds in accordance with budgetary authorizations. Transfers between governmental funds
made in compliance with ORC Sections 5705.14-16, are eliminated for reporting on the government-
wide statement of activities.
B. Due from/to other funds consisted of the following at December 31, 2011, as reported in the
governmental fund financial statements:
Receivable Fund Payable Fund Amount
Nonmajor governmental funds General fund $ 50
Amounts due from/to other funds represent Mayor's Court fines collected by the court and due to the
DUI Enforcement and Education fund.
Amounts due from/to other funds between governmental funds are eliminated on the government-wide
financial statements.
NOTE 6 -PROPERTY TAXES
Property taxes include amounts levied against all real and public utility property located in the City.
Taxes collected from real property taxes (other than public utility) in one calendar year are levied in
the preceding calendar year on the assessed value as of January 1 of that preceding year, the lien date.
Assessed values are established by the County Fiscal Officer at 35 percent of appraised market value.
All property is required to be revaluated every six years. Real property taxes are payable annually or
semi-annually. If paid annually, payment is due December 31; if paid semi-annually, the first payment
is due December 31, with the remainder payable by June 20. Under certain circumstances, State
statute permits later payment dates to be established.
Public utility real and tangible personal property taxes collected in one calendar year are levied in the
preceding calendar year on assessed values determined as of December 31 of the second year
preceding the tax collection year, the lien date. Public utility tangible personal property is assessed at
varying percentages of true value; public utility real property is assessed at 35 percent of true value.
2011 public utility property taxes became a lien December 31, 2010, are levied a8er October 1, 2011,
and are collected in 2012 with real property taxes. Public utility property taxes are payable on the
same dates as real property taxes described previously.
The County Fiscal Officer collects property taxes on behalf of all taxing districts in the County,
including the City of Fairlawn. The County Fiscal Officer periodically remits to the City its portion of
the taxes collected. Property taxes receivable represents real property taxes, public utility taxes,
delinquent tangible personal property taxes and other outstanding delinquencies which are measurable
as of December 31, 2011 and for which there is an enforceable legal claim. In the governmental funds,
the current portion receivable has been offset by unearned revenue since the current taxes were not
levied to finance 2011 operations and the collection of delinquent taxes has been offset by deferred
revenue since the collection of the taxes during the available period is not subject to reasonable
estimation. On a full accrual basis, collectible delinquent property taxes have been recorded as a
receivable and revenue while on a modified accrual basis the revenue is deferred.
35
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 6 -PROPERTY TAXES - (Continued)
The full tax rate for all City operations for the year ended December 31, 2011 was $2.70 per $1,000 of
assessed value. The assessed values of real and public utility property upon which 2011 property tax
receipts were based are as follows:
Real property
Residential/agricultural $ 175,962,760
Commercial/industrial/mineral 162,991,470
Public utility
Personal 2,734,790
Total assessed value $ 341,689,020
NOTE 7 -LOCAL INCOME TAX
The City levies a municipal income tax of 2 percent on gross salaries, wages, and other personal service
compensation earned by residents of the City and on the earnings of nonresidents working within the City.
This tax also applies to the net income of business operations within the City. Residents of the City are
granted a credit of up to 2 percent for taxes paid to other municipalities.
Employers within the City are required to withhold income tax on employee compensation and remit the
tax to the City either monthly or quarterly, as required. Corporations and other individual taxpayers are
required to pay their estimated tax quarterly and file a declaration annually. The general fund receives 75
percent and the capital improvement fund receives 25 percent of income tax proceeds.
NOTE 8 -RECEIVABLES
Receivables at December 31, 2011, consisted of taxes, accounts (billings for user charged services),
accrued interest, special assessments, and intergovernmental receivables arising from grants, entitlements,
and shared revenue. All intergovernmental receivables have been classified as "due from other
governments" on the financial statements. Receivables have been recorded to the extent that they are
measurable at December 31, 2011.
A summary of the principal items of receivables reported on the statement of net assets follows:
Governmental Activities:
Income taxes $ 1,740,364
Real and other taxes 851,663
Accounts 49,543
Special assessments 624,491
Accrued interest 9,152
Due from other governments 1,338,800
Total $ 4,614,013
Receivables have been disaggregated on the face of the BFS. The only receivable not expected to be
collected within the subsequent year are the special assessments which are collected over the life of the
assessment. Delinquent special assessments due to the City were $7,647 as of December 31, 2011.
36
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 9 -CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2011 was as follows:
Balance Balance
Governmental Activities: 12/31/10 Additions Disposals 12/31/11
Capital assets, not being depreciated.•
Land $ 3,229,638 $ - $ - $ 3,229,638
Construction in progress - 10,927 - 10,927
Total capital zssets, not being depreciated 3,229,638 10,927 - 3,240,565
Capital assets, being depreciated
Buildings and Improvements 14,084,223 - - 14,084,223
Land Improvements 2,604,212 - - 2,604,212
Machinery and Equipment 3,717,015 50,668 (65,105) 3,702,578
Licensed Vehicles 3,061,655 33,101 (21,000) 3,073,756
Infrastructure 76,099,130 173,092 (23,034) 76,249,188
Total capital assets, being depreciated 99,566,235 256,861 (109,139) 99,713,957
Gess: accumulated depreciation.
Buildings and Improvements (3,336,899) (272,898) - (3,609,797)
Land Improvements (780,339) (83,472) - (863,811)
Machinery and Equipment (1,795,685) (231,279) 63,355 (1,963,609)
Licensed Vehicles (1,534,505) (201,223) 18,500 (1,717,228)
Infrastructure (30,608,629) (1,450,116) 18,460 (32,040,285)
Total accumulated depreciation (38,056,057) (2,238,988) 100,315 (40,194,730)
Total capital assets, being
depreciated, net 61,510,178 (1,982,127) (8,824) 59,519,227
Governmental activities capital assets, net $ 64,739,816 $ (1,971,200) $ (8,824) $ 62,759,792
37
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 9 -CAPITAL ASSETS - (Continued)
Depreciation expense was charged to functions/programs of the City as follows:
Governmental activities:
General government
Security of persons and property
Transportation
Community environment
Leisure time activity
Utility services
53,276
356,056
1,171,716
930
83,382
573,628
Total depreciation expense -governmental activities $ 2,238,988
NOTE 10 -LONG-TERM OBLIGATIONS
A. Governmental Activities Long-Term Obligations
During the fiscal year 2011, the following changes occurred in governmental activities long-term
obligations:
Governmental Activities:
General obligation bonds
Special assessment bond
OPWC loans
Compensated absences
Total
Interest Balance Balance Due in
Rate 12/31/10 Additions Reductions 12/31/11 One Year
2.80-5.75% $ 6,160,000 $ (655,000) $ 5,505,000 $ 680,000
4.80-7.00% 185,000 (185,000) -
6.00% 318,349 (72,675) 245,674 77,101
1,417,747 22,191 (248,422) 1,191,516 452,114
$ 8,081,096 $ 22,191 $ (1,161,097) $ 6,942,190 $ 1,209,215
The general obligation bonds will be paid from income taxes receipted into the capital improvement
fund. The special assessment bond and OPWC loans will be paid from the proceeds of special
assessments levied against the benefited property owners. In the event that a property owner fails to
pay the assessment, payment will be made by the City. Compensated absences reported in the "long-
term liabilities" account will be paid from the fund from which the employees' salaries are paid; the
General Fund.
38
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 10 -LONG-TERM OBLIGATIONS - (Continued)
B. Debt Service Requirements
Principal and interest requirements to retire long-term obligations outstanding at December 31, 2011
are follows:
General Obligation Bonds OPWC Loans
Year Principal Interest Total Principal Interest Total
2012 680,000 245,845 925,845 77,101 13,601 90,702
2013 710,000 214,943 924,943 81,796 8,906 90,702
2014 505,000 182,173 687,173 86,777 3,924 90,701
2015 530,000 161,007 691,007
2016 550,000 138,378 688,378
2017 - 2021 2,170,000 346,708 2,516,708
2022 360,000 16,920 376,920
Total $ 5,505,000 $ 1,305,974 $ 6,810,974 $ 245,674 $ 26,431 $ 272,105
C. Conduit Debt Obligations
From time to time, the City has issued Health Care Facilities Revenue Bonds to provide financial
assistance to a private, non-profit sector entity for the acquisition and construction of health care
facilities deemed to be in the public interest. The bonds are secured by the property financed and are
payable solely from payments received on the underlying mortgage loans. Upon repayment of the
bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond
issuance. Neither the City, the State of Ohio, nor any political subdivision thereof is obligated in any
manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the
accompanying financial statements. As of December 31, 2011, the Series 2011 Health Care Facilities
Revenue Bonds had a principal amount payable of $10,000,000.
NOTE 11 -OTHER EMPLOYEE BENEFITS
A. Compensated Absences
The criteria for determining vested vacation and sick leave components are derived from negotiated
agreements and state laws. Employees earn ten to thirty days of vacation per year, depending upon
length of service. Vacation accumulation is typically limited to one year. Employees may carry over
vacation earned for three years prior to their retirement date. All accumulated unused vacation time is
paid upon termination of employment.
Employees earn sick leave at the rate of 1.25 days per month of service. Upon retirement, employees
hired before 1996 are eligible to receive payment for accumulated unused sick days. The exact terms
vary in accordance with the negotiated collective bargaining agreement in effect. In most cases, the
sick leave termination payment is limited to a maximum of 90 days. Employees with a hire date
subsequent to 1996 are not eligible to receive termination payments for sick leave. As of December
31, 2011 the total liability for unpaid compensated absences was $1,272,468.
39
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 11 -OTHER EMPLOYEE BENEFITS - (Continued)
B. Health Care Benefits
The City provides life insurance and accidental death and dismemberment insurance to most
employees. The City has elected to provide employees' medical/surgical benefits through Medical
Mutual of Ohio. The employees share the cost of the monthly premium. Dental insurance is provided
by the City through Assurant Employee Benefits.
NOTE 12 -RISK MANAGEMENT
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets;
errors and omissions; injuries to employees; and natural disasters. During 2011, the City contracted with
Wichert Insurance Service, Inc. for property and general liability insurance, including boiler and
machinery. Police and professional liability policies are provided by Scottsdale Indemnity Company with a
$1,000,000 limit and a $10,000 deductible. A commercial umbrella policy through Selective Insurance
Company provides additional general liability and auto liability insurance up to a $10,000,000 limit.
Vehicles are covered by Westfield Insurance Company and hold a $1,000 deductible for collision.
Automobile liability coverage has no limit for collision, a $500,000 limit for uninsured/underinsured
motorist and a $1,000,000 limit for bodily injury. Settled claims have not exceeded this commercial
coverage in any of the past three years.
There has not been a significant reduction in coverage from the prior year.
Volunteer Fireman's Insurance Services covers Firemen and EMT professional liability with a limit of
$1,000,000 and no deductible.
The City participates in the Ohio Municipal League (OML) public entity insurance purchasing pool for
workers' compensation. The Group Rating Plan is administered by Gates McDonald Company. The OML
Group Rating Plan is intended to achieve lower workers' compensation premium rates for the participants,
and result in the establishment of a safer working environment. There are no additional contributions
required by a participant other than their annual fee. The City pays the State Workers' Compensation
system a premium based on a rate per $100 of salaries. This rate is calculated based on accident history
and administrative costs.
NOTE 13 -PENSION PLANS
A. Ohio Public Employees Retirement System
Plan Description -The City participates in the Ohio Public Employees Retirement System (OPERS).
OPERS administers three separate pension plans. The Traditional Pension Plan is acost-sharing,
multiple-employer defined benefit pension plan. The Member-Directed Plan is a defined contribution
plan in which the member invests both member and employer contributions (employer contributions
vest over five years at 20% per year). Under the Member-Directed Plan, members accumulate
retirement assets equal to the value of the member and vested employer contributions plus any
investment earnings. The Combined Plan is acost-sharing, multiple-employer defined benefit pension
plan that has elements of both a defined benefit and a defined contribution plan. Under the Combined
Plan, employer contributions are invested by the retirement system to provide a formula retirement
benefit similar to the Traditional Pension Plan benefit. Member contributions, whose investment is
self-directed by the member, accumulate retirement assets in a manner similar to the Member-Directed
Plan.
40
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 13 -PENSION PLANS - (Continued)
OPERS provides retirement, disability, survivor and death benefits and annual cost of living
adjustments to members of the Traditional Pension and the Combined Plans. Members of the
Member-Directed Plan do not qualify for ancillary benefits. Authority to establish and amend benefits
is provided by Chapter 145 of the Ohio Revised Code. OPERS issues astand-alone financial report
which may be obtained by visiting http~~~w~~.u~r,~~.r~,i~i.~_;~tm~nt_, ,:>i~r_,htmi, writing to OPERS,
Attention: Finance Director, 277 E. Town St., Columbus, OH 43215-4642 or by calling (614) 222-
5601 or (800) 222-7377.
Funding Policy -The Ohio Revised Code provides statutory authority for member and employer
contributions. For 2011, member and contribution rates were consistent across all three plans. The
2011 member contribution rates were 10.00% for members. The City's contribution rate for 2011 was
14.00% of covered payroll.
The City's contribution rate for pension benefits for members in the Traditional Plan for 2011 was
10.00%. The City's contribution rate for pension benefits for members in the Combined Plan for 2011
was 7.95%. The City's required contributions for pension obligations to the Traditional Pension and
Combined Plans for the years ended December 31, 2011, 2010, and 2009 were $278,349, $260,137,
and $246,865, respectively; 100% has been contributed for 2011, 2010, and 2009. Contributions to the
member-directed plan for 2011 were $1,730 made by the City and $1,236 made by the plan members.
B. Ohio Police and Fire Pension Fund
Plan Description -The City contributes to the Ohio Police and Fire Pension Fund (OP&F), a cost-
sharing multiple-employer defined benefit pension plan. OP&F provides retirement and disability
benefits, annual cost-of-living adjustments, and death benefits to plar- members and beneficiaries.
Benefit provisions are established by the Ohio State Legislature and are codified in Chapter 742 of the
Ohio Revised Code. OP&F issues a publicly available financial report that includes financial
statements and required supplementary information for the plan. That report may be obtained by
writing to the OP&F, 140 East Town Street, Columbus, Ohio 43215-5164.
Funding Policy -Plan members are required to contribute 10.0% of their annual covered salary, while
the City is required to contribute 19.50% and 24.00% for police officers and firefighters, respectively.
Contribution rates are established by State statute. For 2011, the portion of the City's contributions to
fund pension obligations was 12.75% for police officers and 17.25% for firefighters. The City's
required contributions for pension obligations to OP&F for police officers and firefighters were
$197,448 and $178,967 for the year ended December 31, 2011, $197,356 and $183,840 for the year
ended December 31, 2010, and $205,137 and $180,975, for the year ended December 31, 2009. The
full amount has been contributed for 2010 and 2009. 71.93% has been contributed for police and
75.95% has been contributed for firefighters for 2011.
NOTE 14 - POSTRETIREMENT BENEFIT PLANS
A. Ohio Public Employees Retirement System
Plan Description - OPERS maintains acost-sharing multiple employer defined benefit post-
employment healthcare plan, which includes a medical plan, prescription drug program and Medicare
Part B premium reimbursement, to qualifying members of both the Traditional Pension and the
Combined Plans. Members of the Member-Directed Plan do not qualify for ancillary benefits,
including post-employment health care coverage.
41
CITY OF FAIRLAWN, OHIO
NOTES TO THE BAS[C FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 14 - POSTRETIREMENT BENEFIT PLANS - (Continued)
To qualify for post-employment health care coverage, age-and-service retirees under the Traditional
Pension and Combined Plans must have ten years or more of qualifying Ohio service credit. The Ohio
Revised Code permits, but does not mandate, OPERS to provide OPEB benefits to its eligible
members and beneficiaries. Authority to establish and amend benefits is provided in Chapter 145 of
the Ohio Revised Code.
Disclosures for the healthcare plan are presented separately in the OPERS financial report which may
be obtained by visiting https: w~ww.~~persu~in~esuuents_cafr,.~html, writing to OPERS, Attention:
Finance Director, 277 E. Town St., Columbus, OH 43215-4642 or by calling (614) 222-5601 or (800)
222-7377.
Funding Policy -The post-employment healthcare plan was established under, and is administered in
accordance with, Internal Revenue Code Section 401(h). State statute requires that public employers
fund post-employment healthcare through contributions to OPERS. A portion of each employer's
contribution to the Traditional or Combined Plans is set aside for the funding of post-employment
health care.
Employer contribution rates are expressed as a percentage of the covered payroll of active employees.
In 2011, local government employers contributed 14.00% of covered payroll. Each year the OPERS'
Retirement Board determines the portion of the employer contribution rate that will be set aside for the
funding of the postemployment health care benefits. The portion of employer contributions allocated
to fund post-employment healthcare for members in the Traditional Plan for 2011 was 4.00%. The
portion of employer contributions allocated to fund post-employment healthcare for members in the
Combined Plan for 2011 was 6.05%.
The OPERS Retirement Board is also authorized to establish rules for the payment of a portion of the
health care benefits provided by the retiree or their surviving beneficiaries. Payment amounts vary
depending on the number of covered dependents and the coverage selected. Active members do not
make contributions to the post-employment healthcare plan.
The City's contributions allocated to fund post-employment health care benefits for the years ended
December 31, 2011, 2010, and 2009 were $113,619, $147,430, and $176,702, respectively; 100% has
been contributed for 2011, 2010, and 2009.
The Health Care Preservation Plan (HCPP) adopted by the OPERS Board of Trustees on September 9,
2004, was effective January 1, 2007. Member and employer contribution rates for state and local
employers increased on January 1 of each year from 2006 to 2008. Rates for law and public safety
employers increased over a six year period beginning on January 1, 2006, with a final rate increase on
January 1, 2011. These rate increases allowed additional funds to be allocated to the health care plan.
B. Ohio Police and Fire Pension Fund
Plan Description -The City contributes to the OP&F Pension Fund sponsored health care program, a
cost-sharing multiple-employer defined postemployment health care plan administered by OP&F.
OP&F provides healthcare benefits including coverage for medical, prescription drugs, dental, vision,
Medicare Part B Premium and long term care to retirees, qualifying benefit recipients and their eligible
dependents.
42
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 14 - POSTRETIREMENT BENEFIT PLANS - (Continued)
OP&F provides access to post-employment health care coverage to any person who receives or is
eligible to receive a monthly service, disability or survivor benefit check or is a spouse or eligible
dependent child of such person.
The Ohio Revised Code allows, but does not mandate OP&F to provide OPEB benefits. Authority for
the OP&F Board of Trustees to provide health care coverage to eligible participants and to establish
and amend benefits is codified in Chapter 742 of the Ohio Revised Code.
OP&F issues a publicly available financial report that includes financial statements and required
supplementary information for the plan. That report may be obtained by writing to the OP&F, 140
East Town Street, Columbus, Ohio 43215-5164.
Funding Policy -The Ohio Revised Code provides for contribution requirements of the participating
employers and of plan members to the OP&F (defined benefit pension plan). Participating employers
are required to contribute to the pension plan at rates expressed as percentages of the payroll of active
pension plan members, currently, 19.50% and 24.00% of covered payroll for police and fire
employers, respectively. The Ohio Revised Code states that the employer contribution may not exceed
19.50% of covered payroll for police employer units and 24.00% of covered payroll for fire employer
units. Active members do not make contributions to the OPEB Plan.
OP&F maintains funds for health care in two separate accounts. One account is for health care
benefits under an Internal Revenue Code Section 115 trust and the other account is for Medicare Part B
reimbursements administered as an Internal Revenue Code Section 401(h) account, both of which are
within the defined benefit pension plan, under the authority granted by the Ohio Revised Code to the
OP&F Board of Trustees.
The Board of Trustees is authorized to allocate a portion of the total employer contributions made into
the pension plan into the Section 115 trust and the Section 401(h) account as the employer contribution
for retiree health care benefits. For the year ended December 31, 2011, the employer contribution
allocated to the health care plan was 6.75% of covered payroll. The amount of employer contributions
allocated to the health care plan each year is subject to the Trustees' primary responsibility to ensure
that the pension benefits are adequately funded and is limited by the provisions of Sections 115 and
401(h).
The OP&F Board of Trustees also is authorized to establish requirements for contributions to the
health care plan by retirees and their eligible dependents, or their surviving beneficiaries. Payment
amounts vary depending on the number of covered dependents and the coverage selected.
The City's contributions to OP&F which were allocated to fund post-employment healthcare benefits
for police officers and firefighters were $104,531 and $70,031 for the year ended December 31, 2011,
$104,472 and $71,937 for the year ended December 31, 2010, and $108,602 and $70,816, for the year
ended December 31, 2009. The full amount has been contributed for 2010 and 2009. 71.93% has been
contributed for police and 75.95% has been contributed for firefighters for 2011.
43
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 15 -BUDGETARY BASIS OF ACCOUNTING
While the City is reporting financial position, results of operations and changes in fund balance on the basis
of generally accepted accounting principles (GAAP), the budgetary basis as provided by law is based upon
accounting for certain transactions on a basis of cash receipts, disbursements and encumbrances. The
Statement of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual (Non-GAAP
Budgetary Basis) presented for the general fund is presented on the budgetary basis to provide a
meaningful comparison of actual results with the budget. The major differences between the budget basis
and GAAP basis are as follows:
1. Revenues are recorded when received in cash (budget) as opposed to when susceptible to accrual
(GAAP).
2. Expenditures/expenses are recorded when paid in cash (budget) as opposed to when the liability is
incurred (GAAP).
3. Encumbrances are treated as expenditures (budget) rather than as a reservation of fund balance
(GAAP).
4. Unreported cash represents amounts received but not included as revenue on the budget basis operating
statements. These amounts are included as revenue on the GAAP basis operating statement.
The following table summarizes the adjustments necessary to reconcile the GAAP basis statements (as
reported in the fund financial statements) to the budgetary basis statements for all governmental funds for
which a budgetary basis statement is presented.
Net Change in Fund Balance
General
Budget basis $ 1,079,227
Net adjustment for revenue accruals 518,342
Net adjustment for expenditure accruals (73,137)
Adjustment for encumbrances 494,962
GAAP basis $ 2,019,394
44
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 16 -FUND BALANCE
Fund balance is classified as nonspendable, restricted, committed, assigned and/or unassigned based
primarily on the extent to which the City is bound to observe constraints imposed upon the use of resources
in the governmental funds. The constraints placed on the fund balances for the governmental funds
follows:
Total
Bond Capital Other Governmental
Fund balance General Retirement Improvement Governmental Funds
Nonspendable:
Materials and supplies
inventory $ 453,793 $ - $ - $ 18,375 $ 472,168
Prepayments 82,150 - - - 82,150
Unclaimed monies 10,470 - - - 10,470
Total nonspendable 546,413 - - 18,375 564,788
Restricted:
Capital Improvements - - 2,888,310 - 2,888,310
Debt service - 8,416 - - 8,416
Law enforcement - - - 147,876 147,876
Police and fire pensions - - - 87,270 87,270
Sewer maintenance - - - 177,818 177,818
Streets and highways - - - 509,012 509,012
Total restricted - 8,416 2,888,310 921,976 3,818,702
Committed:
Fire and emergency
rescue equipment - - - 6,179 6,179
Law enforcement 5,000 - - 9,966 14,966
Park capital improvements - - - 4,263 4,263
Sewer maintenance - - - 53,232 53,232
Total committed 5,000 - - 73,640 78,640
Assigned:
Encumbrances 266,417 - - - 266,417
Total assigned 266,417 - - - 266,417
Unassigned (deficit) 11,087,802 - - - 11,087,802
Total fund balances $ 11,905,632 $ 8,416 $ 2,888,310 $ 1,013,991 $ 15,816,349
45
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
NOTE 17 - CONTINGENCES
A. Grants
The City receives significant financial assistance from numerous federal and state agencies in the form
of grants. The disbursement of funds received under these programs generally requires compliance
with the terms and conditions specified in the grant agreements and is subject to audit by the grantor
agencies. Any disallowed claims resulting from such audits could become a liability of the general
fund or other applicable funds. However, in the opinion of management, any such disallowed claims
will not have a material effect on any of the financial statements of the individual fund types included
herein or on the overall financial position of the City at December 31, 2011.
B. Litigation
The City is party to legal proceedings. The City management is of the opinion that the ultimate
disposition of these legal claims and legal proceedings will not have a material effect, if any, on the
financial condition of the City.
NOTE 18 -CONTRACTUAL AND OTHER COMMITMENTS
The City utilizes encumbrance accounting as part of its budgetary controls. Encumbrances for contractual
and other commitments outstanding at year end may be reported as part of restricted, committed, or
assigned classifications of fund balance. At year end, the City's commitments for encumbrances in the
governmental funds were as follows:
Fund
General fund
Capital Improvement
Other governmental
Year-End
Encumbrances
$ 266,417
67,421
108,259
Total $ 442,097
46
,...
': _- -
- =~~-~= - N • Dave Yost • Auditor of State
__ =~~ - .
~~;'~ •
INDEPENDENT ACCOUNTANTS' REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
REQUIRED BY GOVERNMENT AUDITING STANDARDS
City of Fairlawn
Summit County
3487 South Smith Road
Fairlawn, Ohio 44333-3007
To the Honorable Mayor and Members of City Council:
We have audited the financial statements of the governmental activities, each major fund, and the
aggregate remaining fund information of the City of Fairlawn, Summit County, Ohio, (the City) as of and
for the year ended December 31, 2011, which collectively comprise the City's basic financial statements
and have issued our report thereon dated June 29, 2012, wherein we noted the City adopted
Governmental Accounting Standards Board Statement No. 54. We conducted our audit in accordance
with auditing standards generally accepted in the United States of America and the standards applicable
to financial audits contained in the Comptroller General of the United States' Government Auditing
Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the City's internal control over financial reporting as
a basis for designing our audit procedures for the purpose of expressing our opinion on the financial
statements, but not for the purpose of opining on the effectiveness of the City's internal control over
financial reporting. Accordingly, we have not opined on the effectiveness of the City's internal control
over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, when performing their assigned functions, to prevent, or detect and timely
correct misstatements. A material weakness is a deficiency, or combination of internal control
deficiencies resulting in more than a reasonable possibility that a material misstatement of the City's
financial statements will not be prevented, or detected and timely corrected.
Our consideration of internal control over financial reporting was for the limited purpose described in the
first paragraph of this section and was not designed to identify all deficiencies in internal control over
financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not
identify any deficiencies in internal control over financial reporting that we consider material weaknesses,
as defined above.
101 Central Plaza South, 700 Chase Tower, Canton, Ohio 44702-1509
Phone: 330-438-0617 or 800-443-9272 Fax: 330-471-0001
www.ohioauditor.gov
47
City of Fairlawn
Summit County
Independent Accountants' Report on Internal Control Over
Financial Reporting and on Compliance and Other Matters
Required By Government Auditing Standards
Page 2
Compliance and Other Matters
As part of reasonably assuring whether the City's financial statements are free of material misstatement,
we tested its compliance with certain provisions of laws, regulations, contracts, and grant agreements,
noncompliance with which could directly and materially affect 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 an opinion. The results of our tests disclosed no instances of
noncompliance or other matters we must report under Govemment Auditing Standards.
We intend this report solely for the information and use of management, City Council and others within
the City. We intend it for no one other than these specified parties.
~~
Dave Yost
Auditor of State
June 29, 2012
48
-" Dave Yost • Auditor of State
:~=
CITY OF FAIRLAWN
SUMMIT COUNTY
CLERK'S CERTIFICATION
This is a true and correct copy of the report which is required to be filed in the Office of the
Auditor of State pursuant to Section 117.26, Revised Code, and which is filed in Columbus, Ohio.
~~.r~
CLERK OF THE BUREAU
CERTIFIED
JULY 12, 2012
88 East Broad Street, Fifth Floor, Columbus, Ohio 43215-3506
Phone: 614-466-4514 or 800-282-0370 Fax: 614-466-4490
www auditoa',state.uh.us