2013 Financial Statement
CITY OF FAIRLAWN SUMMIT COUNTY
TABLE OF CONTENTS TITLE PAGE
Independent Auditor’s Report ....................................................................................................................... 1
Management’s Discussion and Analysis ....................................................................................................... 3
Basic Financial Statements:
Government-Wide Financial Statements:
Statement of Net Position ........................................................................................................ 17
Statement of Activities ............................................................................................................. 18
Fund Financial Statements:
Balance Sheet
Governmental Funds......................................................................................................... 19
Reconciliation of Total Governmental Fund Balances to Net Position of Governmental Activities ............................................................................ 20
Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds ......................................................................................................... 21
Reconciliation of the Statement of Revenues, Expenditures and Changes
in Fund Balances of Governmental Funds to the Statement of Activities ......................... 22
Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Non-GAAP Budgetary Basis) General Fund .............................................................................................................. 23
Statement of Fiduciary Net Position Fiduciary Funds ................................................................................................................. 24
Notes to the Basic Financial Statements .................................................................................................... 25
Independent Auditor’s Report on Internal Control Over
Financial Reporting and on Compliance and Other Matters Required by Government Auditing Standards .......................................................................................... 53
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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
1
INDEPENDENT AUDITOR’S REPORT
City of Fairlawn
Summit County 3487 South Smith Road
Fairlawn, Ohio 44333
To the Honorable Mayor and Members of City Council:
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major fund,
and the discretely presented component unit and remaining fund information of City of Fairlawn, Summit County, Ohio (the City), as of and for the year ended December 31, 2013, and the related notes to the
financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for preparing and fairly presenting these financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes designing, implementing, and maintaining internal control relevant to preparing and fairly presenting financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to opine on these financial statements based on our audit. We audited in accordance with auditing standards generally accepted in the United States of America and the financial audit
standards in the Comptroller General of the United States’ Government Auditing Standards. Those standards require us to plan and perform the audit to reasonably assure the financial statements are free
from material misstatement.
An audit requires obtaining evidence about financial statement amounts and disclosures. The procedures selected depend on our judgment, including assessing the risks of material financial statement
misstatement, whether due to fraud or error. In assessing those risks, we consider internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not to the extent needed to opine on the effectiveness of the City's internal control. Accordingly, we express no opinion. An audit also includes
evaluating the appropriateness of management’s accounting policies and the reasonableness of their significant accounting estimates, as well as our evaluation of the overall financial statement presentation.
We believe the audit evidence we obtained is sufficient and appropriate to support our audit opinions.
City of Fairlawn Summit County
Independent Auditor’s Report Page 2
2
Opinion
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, the discretely presented
component unit and the aggregate remaining fund information of City of Fairlawn, Summit County, Ohio, as of December 31, 2013, and the respective changes in financial position and the budgetary comparison
for the General fund thereof for the year then ended in accordance with the accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require this presentation to
include Management’s discussion and analysis, 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 applied certain limited
procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, consisting of inquiries of management about the methods of
preparing the information and comparing the information for consistency with management’s responses to our inquiries, to the basic financial statements, and other knowledge we obtained during our audit of the
basic financial statements. We do not opine or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to opine or provide any other assurance.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated November 28,
2014 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. That report describes the scope of our internal control testing over financial reporting and compliance, and the results of that testing, and does not opine on internal control over financial reporting
or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.
Dave Yost
Auditor of State Columbus, Ohio
November 28, 2014
CITY OF FAIRLAWN, OHIO
MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2013
Unaudited
3
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, 2013. 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 2013 are as follows:
The total net position of the City increased $23,708. The net position of governmental activities increased
$23,708 or 0.03% from 2012, to a total of $74,686,862 in 2013.
General revenues accounted for $14,575,101 of total governmental activities revenue. Program specific revenues accounted for $1,563,482 or 9.69% of total governmental activities revenue.
The City had $16,114,875 in expenses related to governmental activities; $1,563,482 of these expenses were
offset by program specific charges for services, grants or contributions. The remaining expenses of the governmental activities of $14,551,393 were offset by general revenues (primarily property taxes, income taxes,
unrestricted grants and entitlements, and Joint Economic Development District (JEDD) revenues).
The City has two major funds, the general fund and capital improvement fund. The general fund, the largest major fund, had revenues and other financing sources of $13,154,830 in 2013. This represents a decrease of
$178,498 from 2012 revenues and other financing sources. The expenditures and other financing uses of the general fund, which totaled $13,582,915 in 2013, increased $2,303,185 from 2012. The net decrease in fund
balance for the general fund was $330,573 or 2.38%.
The capital improvement fund had revenues and other financing sources of $3,762,474 in 2013. The expenditures of the capital improvement fund totaled $2,393,727 in 2013. The net increase in fund balance for
the capital improvement fund was $1,368,747 or 47.14%.
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 position 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 a longer-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, 2013
Unaudited
Reporting the City as a Whole
Statement of Net Position 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
2013?” The statement of net position 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 position and changes in net position. This change in net position 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 position 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 position and statement of activities can be found on pages 17-18 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 10.
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.
4
CITY OF FAIRLAWN, OHIO
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2013
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 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 19-23 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 24 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
25-52 of this report.
5
CITY OF FAIRLAWN, OHIO
MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2013
Unaudited
6
Government-Wide Financial Analysis
The Statement of Net Position provides the perspective of the City as a whole. The table below provides a summary
of the City’s net position for 2013 compared to 2012:
Net Position
Governmental Governmental
Activities Activities
2013 2012
Assets
Current and other assets 22,298,957$ 21,750,038$
Capital assets, net 60,095,459 61,153,632
Total assets 82,394,416 82,903,670
Liabilities
Current and other liabilities 911,193 1,047,139
Long-term liabilities 6,041,984 6,431,535
Total liabilities 6,953,177 7,478,674
Total deferred inflows of resources 754,377 761,842
Total liabilities and deferred inflows of resources 7,707,554 8,240,516
Net Position
Net investment in capital assets 55,442,354 56,075,250
Restricted 5,832,446 4,730,986
Unrestricted 13,412,062 13,856,918
Total net position 74,686,862$ 74,663,154$
Over time, net position can serve as a useful indicator of a government’s financial position. At December 31, 2013, the City’s assets exceeded liabilities and deferred inflows of resources by $74,686,862.
Capital assets reported on the government-wide statements represent the largest portion of the City’s assets. At
year-end, capital assets represented 72.94% 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, 2013, were $55,442,354. 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 position, $5,832,446, represents resources that are subject to external restriction on how
they may be used. In the governmental activities, the remaining balance of unrestricted net position of $13,412,062 may be used to meet the government’s ongoing obligations to citizens and creditors.
CITY OF FAIRLAWN, OHIO
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2013
Unaudited
The table below shows the change in net position for fiscal years 2013 and 2012.
Change in Net Position
Governmental Governmental
Activities Activities
2013 2012
Revenues
Program revenues:
Charges for services 1,018,191$ 1,033,478$
Operating grants and contributions 411,981 331,545
Capital grants and contributions 133,310 720,988
Total program revenues 1,563,482 2,086,011
General revenues:
Property and other taxes 1,012,195 998,924
Income taxes 9,145,788 10,227,345
Unrestricted grants and entitlements 1,155,970 1,028,872
JEDD revenues 3,129,020 2,823,033
Investment earnings 30,658 29,044
Miscellaneous 101,470 385,146
Total general revenues 14,575,101 15,492,364
Total revenues 16,138,583$ 17,578,375$
Expenses
General government 2,695,775$ 3,744,352$
Security of persons and property 6,771,086 6,370,474
Public health and welfare 118,475 118,910
Transportation 4,148,177 4,115,746
Community environment 336,175 361,857
Leisure time activity 535,214 455,823
Economic development 335,200 10,000
Utility services 1,082,170 948,396
Interest and fiscal charges 92,603 243,267
Total expenses 16,114,875 16,368,825
Change in net position 23,708 1,209,550
Net position at beginning of year 74,663,154 73,453,604
Net position at end of year 74,686,862$ 74,663,154$
Governmental Activities
Governmental activities net position increased $23,708 in 2013.
7
CITY OF FAIRLAWN, OHIO
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2013
Unaudited
Security of persons and property, which primarily supports the operations of the police and fire departments
accounted for $6,771,086 of the total expenses of the City. These expenses were partially funded by $408,473 in
direct charges to users of the services $19,600 in operating grants and contributions and $26,636 in capital grants
and contributions. Transportation expenses totaled $4,148,177. Transportation expenses were partially funded by
$1,090 in direct charges to users of the services, $383,647 in operating grants and contributions, and $77,826 in
capital grants and contributions.
The county, state, and federal governments contributed to the City a total of $411,981 in operating grants and
contributions. These revenues are restricted to a particular program or purpose. Of the total operating grants and
contributions, $19,600 subsidized security of persons and property, $383,647 subsidized transportation programs,
$4,934 subsidized utility services, and $3,800 subsidized community environment programs.
General revenues totaled $14,575,101, and amounted to 90.31% of total governmental revenues. These revenues
primarily consist of property and income tax revenues of $10,157,983 and JEDD revenues of $3,129,020.
The graph below illustrates the City’s dependence upon general revenues as program revenues are not sufficient to
cover total governmental 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.
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
2013 2012
$1,563,482 $2,086,011
$16,114,875 $16,368,825
Governmental Activities -Program Revenues vs. Total Expenses
Program Revenues
Expenses
8
CITY OF FAIRLAWN, OHIO
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2013
Unaudited
Total Cost of Net Cost of Total Cost of Net Cost of
Services Services Services Services
2013 2013 2012 2012
Program Expenses:
General government 2,695,775$ 2,337,533$ 3,744,352$ 3,362,012$
Security of persons and property 6,771,086 6,316,377 6,370,474 5,973,748
Public health and welfare 118,475 118,475 118,910 118,910
Transportation 4,148,177 3,685,614 4,115,746 3,121,232
Community environment 336,175 272,785 361,857 310,371
Leisure time activity 535,214 519,243 455,823 440,735
Economic development 335,200 335,200 10,000 10,000
Utility services 1,082,170 873,563 948,396 702,539
Interest and fiscal charges 92,603 92,603 243,267 243,267
Total 16,114,875$ 14,551,393$ 16,368,825$ 14,282,814$
Governmental Activities
The dependence upon general revenues for governmental activities is apparent, with 90.30% of expenses supported
through taxes and other general revenues.
The chart below illustrates the City’s program revenues versus general revenues for 2013 and 2012:
Financial Analysis of the Government’s Funds
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements.
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
2013 2012
$1,563,482 $2,086,011
$14,575,101 $15,492,364
Governmental Activities -General and Program Revenues
Program Revenues
General Revenues
9
CITY OF FAIRLAWN, OHIO
MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2013
Unaudited
10
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, unassigned 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 19) reported a combined fund balance of
$18,666,326 which is $860,255 more than last year’s total of $17,806,071. The schedule below indicates the fund balances and the total change in fund balances as of December 31, 2013 and 2012 for all major and nonmajor
governmental funds.
Fund Balances Fund Balances Increase
12/31/13 12/31/12 (Decrease)
Major funds:
General 13,583,556$ 13,914,129$ (330,573)$ (2.38) %
Capital improvement 4,272,175 2,903,428 1,368,747 47.14 %
Other nonmajor governmental funds 810,595 988,514 (177,919) (18.00) %
Total 18,666,326$ 17,806,071$ 860,255$ 4.83 %
Percentage
Change
General Fund
The City’s general fund balance decreased by $330,573. The table that follows assists in illustrating the revenues of the general fund.
2013 2012
Amount Amount
Revenues
Taxes 7,665,570$ 8,770,352$ (12.60) %
Charges for services 489,027 479,868 1.91 %
Licenses and permits 214,065 168,593 26.97 %
Fines and forfeitures 132,528 134,159 (1.22) %
Intergovernmental 1,181,205 1,190,081 (0.75) %
Investment income 34,897 21,565 61.82 %
JEDD revenues 3,261,056 2,332,631 39.80 %
Other 162,582 186,079 (12.63) %
Total 13,140,930$ 13,283,328$ (1.07) %
Percentage
Change
Tax revenue represents 58.33% of all general fund revenue. Tax revenue, as reported, decreased by 12.60% compared to the prior year. The decrease resulted from an income tax refund in excess of $1,240,000 which was
reported as a revenue reduction. The apparent increase in JEDD revenue is actually due to the timing of payments received during the available period.
CITY OF FAIRLAWN, OHIO
MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2013
Unaudited
11
The table that follows assists in illustrating the expenditures of the general fund.
2013 2012
Amount Amount
Expenditures
General government 2,544,713$ 2,639,186$ (3.58) %
Security of persons and property 5,853,773 5,358,420 9.24 %
Public health and welfare 118,475 118,910 (0.37) %
Transportation 1,902,790 1,871,835 1.65 %
Community environment 333,597 351,400 (5.07) %
Leisure time activity 373,588 367,426 1.68 %
Economic development 335,200 10,000 3,252.00 %
Utility services 198,879 190,053 4.64 %
Total 11,661,015$ 10,907,230$ 6.91 %
Percentage
Change
The increase in security of persons and property is a result of re-staffing efforts in the Police and Fire departments. Economic development reflects the City’s subsidy to the Community Improvement Corporation of Fairlawn, a discretely presented component unit of the City. All other expenditures remained comparable to 2012.
Taxes58.33%
Charges for services3.72%
Licenses & permits1.63%
Fines & forfeitures1.01%
Intergovernmental8.99%
Investment income
0.26%
JEDD revenues24.82%
Other
1.24%
Revenues 2013
Taxes66.03%
Charges for
services3.61%
Licenses
& permits1.27%
Fines & forfeitures1.01%
Intergovernmental8.96%
Investment income0.16%
JEDD revenues17.56%
Other1.40%
Revenues 2012
CITY OF FAIRLAWN, OHIO
MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2013
Unaudited
12
Capital Improvement Fund
The capital improvement fund had revenues and other financing sources of $3,762,474 in 2013. The expenditures of
the capital improvement fund totaled $2,393,727 in 2013. The net increase in fund balance for the capital improvement fund was $1,368,747 or 47.14%, mainly due to transfers-in from the general fund.
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. Budgeted intergovernmental revenue was increased to
reflect the estate tax received as well as a substantial refund from the Bureau of Workers Compensation. Likewise, budgeted JEDD revenue was increased to coincide with an increase in receipts. Actual income taxes, sewer tap-in
fees, and ambulance fees were greater than anticipated. Actual expenditures for general government and security of persons and property were less than anticipated do less than full staffing and conservative spending throughout the
year. Economic development expenditures decreased due to less subsidy than originally planned for the Community Improvement Corporation of Fairlawn, a discretely presented component unit of the City.
General government21.82%Security of persons and property50.20%
Public health and welfare
1.02%
Transportation16.32%
Community environment2.86%
Leisure time activity3.20%Economic
development2.87%
Utility
services1.71%
Expenditures 2013
General government24.20%Security of persons and
property49.13%
Public
health and welfare1.09%
Transportation
17.16%
Community environment3.22%
Leisure time activity
3.37%Economic development0.09%
Utility services1.74%
Expenditures 2012
CITY OF FAIRLAWN, OHIO
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2013
Unaudited
Capital Assets and Debt Administration
Capital Assets
At the end of fiscal 2013, the City had $60,095,459 (net of accumulated depreciation) invested in land, construction
in progress, buildings and improvements, land improvements, machinery and equipment, licensed vehicles and
infrastructure. The following table shows fiscal 2013 balances compared to 2012:
Capital Assets at December 31
(Net of Depreciation)
Governmental Activities
2013 2012
Land 2,357,497$ 2,357,497$
Construction in progress 185,921 829,507
Buildings and improvements 9,928,632 10,201,529
Land improvements 1,670,571 1,657,574
Licensed vehicles 1,321,330 1,266,336
Machinery and equipment 1,469,113 1,597,761
Infrastructure 43,162,395 43,243,428
Totals 60,095,459$ 61,153,632$
The following graphs show the breakdown of governmental capital assets by category for 2013 and 2012.
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 71.82% of the City’s total governmental capital assets at December 31, 2013.
Land3.92%
Construction
in progress0.31%
Buildings &
improvements
16.52%
Land improvements2.78%
Licensed
vehicles2.20%
Machinery &
equipment
2.45%Infrastructure
71.82%
Capital Assets -Governmental Activities 2013
Land
3.86%
Construction
in progress1.36%
Buildings &
improvements16.68%
Land
improvements
2.71%
Licensed
vehicles
2.07%
Machinery &
equipment
2.61%
Infrastructure
70.71%
Capital Assets -Governmental Activities 2012
13
CITY OF FAIRLAWN, OHIO
MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2013
Unaudited
14
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, 2013 and 2012:
Governmental Activities
2013 2012
General obligation bonds 4,400,000$ 4,725,000$
OPWC loans 86,778 168,574
Compensated absences 1,388,879 1,353,153
Total long-term obligations 5,875,657$ 6,246,727$
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.
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 a full-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 collections, net of shared revenue due to the City of Akron, increased 3.74% in 2013 as
compared to the previous year.
CITY OF FAIRLAWN, OHIO
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2013
Unaudited
The City is projecting a slight increase in general fund revenue, net of interfund transfers and advances, in 2014.
Expenditures for 2014, net of interfund transfers and advances, are budgeted at 1.71% greater than 2013 due to wage
increases 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. Mark H. Lugwig, Finance Director, City of
Fairlawn, 3487 S. Smith Road, Fairlawn, Ohio 44333.
15
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16
Primary Government Component Unit
Community
Improvement
Governmental Corporation
Activities of Fairlawn
Assets:
Equity in pooled cash and cash equivalents 17,374,075$ 229,033$
Cash and cash equivalents in segregated accounts 15,948 -
Receivables:
Income taxes 2,129,010 -
Real and other taxes 806,687 -
Accounts 97,349 -
Special assessments 386,258 -
Accrued interest 5,659 -
Due from other governments 899,264 -
Materials and supplies inventory 506,204 -
Prepayments 78,503 841
Assets held for sale - 87,234
Capital assets:
Land and construction in progress 2,543,418 -
Depreciable capital assets, net 57,552,041 -
Total capital assets, net 60,095,459 -
Total assets 82,394,416 317,108
Liabilities:
Accounts payable 202,807 3,281
Contracts payable 40,819 83,049
Accrued wages and benefits payable 188,032 -
Compensated absences payable 39,629 -
Due to other governments 430,351 -
Accrued interest payable 9,555 -
Long-term liabilities:
Due within one year 1,058,036 -
Due in more than one year 4,983,948 -
Total liabilities 6,953,177 86,330
Deferred inflows of resources:
Property taxes levied for the next fiscal year 754,377 -
Total deferred inflows of resources 754,377 -
Total liabilities and deferred inflows of resources 7,707,554 86,330
Net position:
Net investment in capital assets 55,442,354 -
Restricted for:
Debt service 102,984 -
Capital projects 4,791,473 -
Other purposes 937,989 -
Unrestricted 13,412,062 230,778
Total net position 74,686,862$ 230,778$
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
CITY OF FAIRLAWN, OHIO
STATEMENT OF NET POSITION
DECEMBER 31, 2013
17
Primary Component
Government Unit
Community
Operating Capital Improvement
Charges for Grants and Grants and Governmental Corporation
Expenses Services Contributions Contributions Activities of Fairlawn
Governmental activities:
Current:
General government 2,695,775$ 329,394$ -$ 28,848$ (2,337,533)$ -$
Security of persons and property 6,771,086 408,473 19,600 26,636 (6,316,377) -
Public health and welfare 118,475 - - - (118,475) -
Transportation 4,148,177 1,090 383,647 77,826 (3,685,614) -
Community environment 336,175 59,590 3,800 - (272,785) -
Leisure time activity 535,214 15,971 - - (519,243) -
Economic development 335,200 (335,200) -
Utility services 1,082,170 203,673 4,934 - (873,563) -
Interest and fiscal charges 92,603 - - - (92,603) -
Total governmental activities 16,114,875$ 1,018,191$ 411,981$ 133,310$ (14,551,393) -
Component Unit:
Community Improvement Corporation of Fairlawn 278,691$ -$ 335,200$ -$ - 56,509
General revenues:
Property taxes levied for:
General purposes 847,728 -
Police and fire pension 164,467 -
Income taxes levied for:
General purposes 6,917,147 -
Capital outlay 2,228,641 -
Grants and entitlements not restricted
to specific programs 1,155,970 -
JEDD revenues 3,129,020 -
Investment earnings 30,658 -
Miscellaneous 101,470 -
Total general revenues 14,575,101 -
Change in net position 23,708 56,509
Net position at beginning of year 74,663,154 174,269
Net position at end of year 74,686,862$ 230,778$
and Changes in Net Position
Net (Expense) Revenues
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
CITY OF FAIRLAWN, OHIO
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2013
Program Revenues
18
Other Total
Capital Governmental Governmental
General Improvement Funds Funds
Assets:
Equity in pooled cash and cash equivalents 12,454,472$ 4,011,682$ 907,921$ 17,374,075$
Cash and cash equivalents in segregated accounts 15,948 - - 15,948
Receivables:
Income taxes 1,596,757 532,253 - 2,129,010
Real and other taxes 631,189 - 175,498 806,687
Accounts 97,124 200 25 97,349
Special assessments - 295,265 90,993 386,258
Accrued interest 5,553 - 106 5,659
Due from other funds 35,000 - - 35,000
Due from other governments 739,805 - 159,459 899,264
Materials and supplies inventory 506,204 - - 506,204
Prepayments 78,503 - - 78,503
Total assets 16,160,555$ 4,839,400$ 1,334,002$ 22,333,957$
Liabilities:
Accounts payable 175,649$ 14,271$ 12,887$ 202,807$
Contracts payable 14,115 26,704 - 40,819
Accrued wages and benefits payable 188,032 - - 188,032
Compensated absences payable 39,629 - - 39,629
Due to other funds - - 35,000 35,000
Due to other governments 355,451 - 74,900 430,351
Total liabilities 772,876 40,975 122,787 936,638
Deferred inflows of resources:
Property taxes levied for the next fiscal year 586,738 - 167,639 754,377
Delinquent property tax revenue not available 27,432 - 7,859 35,291
Accrued interest not available 5,553 - 106 5,659
Special assessments revenue not available - 295,265 90,993 386,258
Miscellaneous revenue not available 6,430 - - 6,430
Income tax revenue not available 692,954 230,985 - 923,939
Intergovernmental revenue not available 126,650 - 134,023 260,673
JEDD revenues not available 358,366 - - 358,366
Total deferred inflows of resources 1,804,123 526,250 400,620 2,730,993
Total liabilities and deferred inflows of resources 2,576,999 567,225 523,407 3,667,631
Fund balances:
Nonspendable 611,448 - - 611,448
Restricted - 4,272,175 810,595 5,082,770
Committed 5,000 - - 5,000
Assigned 436,824 - - 436,824
Unassigned 12,530,284 - - 12,530,284
Total fund balances 13,583,556 4,272,175 810,595 18,666,326
Total liabilities, deferred inflows
of resources and fund balances 16,160,555$ 4,839,400$ 1,334,002$ 22,333,957$
DECEMBER 31, 2013
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
CITY OF FAIRLAWN, OHIO
BALANCE SHEET
GOVERNMENTAL FUNDS
19
Total governmental fund balances 18,666,326$
Amounts reported for governmental activities on the
statement of net position are different because:
Capital assets used in governmental activities are not financial
resources and therefore are not reported in the funds. 60,095,459
Other long-term assets are not available to pay for current-
period expenditures and therefore are deferred inflows in the funds.
Income taxes receivable 923,939$
Real and other taxes receivable 35,291
Accounts receivable 6,430
Special assessments receivable 386,258
Accrued interest receivable 5,659
Due from other governments 619,039
Total 1,976,616
Accrued interest payable is not due and payable in the current
period and therefore is not reported in the funds. (9,555)
Unamortized premiums on bond issuances are not recognized
in the funds.(166,327)
Long-term liabilities, including bonds payable, are not due and
payable in the current period and therefore are not reported
in the funds.
Compensated absences (1,388,879)
General obligation bonds payable (4,400,000)
Loans payable (86,778)
Total (5,875,657)
Net position of governmental activities 74,686,862$
DECEMBER 31, 2013
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
CITY OF FAIRLAWN, OHIO
RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCES TO
NET POSITION OF GOVERNMENTAL ACTIVITIES
20
Other Total
Capital Governmental Governmental
General Improvement Funds Funds
Revenues:
Income taxes 6,805,293$ 2,191,356$ -$ 8,996,649$
Real and other taxes 860,277 - 168,040 1,028,317
Charges for services 489,027 - 136,608 625,635
Licenses and permits 214,065 - - 214,065
Fines and forfeitures 132,528 - 1,620 134,148
Intergovernmental 1,181,205 - 397,893 1,579,098
Special assessments - 57,836 92,006 149,842
Investment income 34,897 - 968 35,865
Rental income 70,196 - - 70,196
Contributions and donations 32,431 - - 32,431
JEDD revenues 3,261,056 - - 3,261,056
Other 59,955 10,677 3,860 74,492
Total revenues 13,140,930 2,259,869 800,995 16,201,794
Expenditures:
Current:
General government 2,544,713 - 1,000 2,545,713
Security of persons and property 5,853,773 - 580,812 6,434,585
Public health and welfare 118,475 - - 118,475
Transportation 1,902,790 - 595,044 2,497,834
Community environment 333,597 - - 333,597
Leisure time activity 373,588 - - 373,588
Economic development 335,200 - - 335,200
Utility services 198,879 - 91,954 290,833
Capital outlay - 1,961,347 41,302 2,002,649
Debt service:
Principal retirement - 325,000 81,796 406,796
Interest and fiscal charges - 107,380 8,906 116,286
Total expenditures 11,661,015 2,393,727 1,400,814 15,455,556
Excess (deficiency) of revenues
over (under) expenditures 1,479,915 (133,858) (599,819) 746,238
Other financing sources (uses):
Sale of capital assets.13,900 2,605 - 16,505
Transfers in - 1,500,000 421,900 1,921,900
Transfers (out)(1,921,900) - - (1,921,900)
Total other financing sources (uses)(1,908,000) 1,502,605 421,900 16,505
Net change in fund balances (428,085) 1,368,747 (177,919) 762,743
Fund balances at beginning of year 13,914,129 2,903,428 988,514 17,806,071
Increase in reserve for inventory 97,512 - - 97,512
Fund balances at end of year 13,583,556$ 4,272,175$ 810,595$ 18,666,326$
FOR THE YEAR ENDED DECEMBER 31, 2013
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
CITY OF FAIRLAWN, OHIO
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
21
Net change in fund balances - total governmental funds 762,743$
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 cost of those assets is allocated over their estimated useful lives as
depreciation expense. This is the amount by which depreciation expense exceeds
capital outlays in the current period.
Capital asset additions 1,223,845$
Current year depreciation (2,220,886)
Total (997,041)
The net effect of various transactions involving capital assets (i.e., sales,
disposals, trade-ins, and donations) is to decrease net assets. (61,132)
Revenues in the statement of activities that do not provide current
financial resources are not reported as revenues in the funds.
Income taxes 149,139
Real and other taxes (16,122)
Licenses and permits (25,853)
Intergovernmental revenues (21,824)
Special assessments (120,994)
Investment income (5,207)
JEDD revenues (132,036)
Other (230)
Total (173,127)
Governmental funds report expenditures for inventory when purchased. However,
in the statement of activities, they are reported as an expense when consumed. 97,512
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 position. 406,796
In the statement of activities, interest is accrued on outstanding bonds and loans,
whereas in governmental funds, an interest expenditure is reported when due. 23,683
Some expenses reported in the statement of activities, such as compensated
absences, do not require the use of current financial resources and therefore
are not reported as expenditures in governmental funds. (35,726)
Change in net position of governmental activities 23,708$
FOR THE YEAR ENDED DECEMBER 31, 2013
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
CITY OF FAIRLAWN, OHIO
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
22
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Income taxes 5,779,211$ 5,753,747$ 6,878,754$ 1,125,007$
Real and other taxes 822,655 809,755 859,979 50,224
Charges for services 372,500 360,700 483,520 122,820
Licenses and permits 170,200 171,500 183,041 11,541
Fines and forfeitures 132,000 122,000 128,975 6,975
Intergovernmental 814,440 1,204,140 1,222,059 17,919
Investment income 22,000 32,000 37,399 5,399
Rental income 71,500 64,500 69,881 5,381
Contributions and donations - 26,200 32,431 6,231
JEDD revenues 2,650,000 3,042,500 3,042,551 51
Other 59,000 53,000 59,562 6,562
Total revenues 10,893,506 11,640,042 12,998,152 1,358,110
Expenditures:
Current:
General government 3,481,345 3,450,495 2,993,350 457,145
Security of persons and property 6,303,565 6,582,715 5,955,752 626,963
Public health and welfare 123,300 123,300 118,475 4,825
Transportation 2,061,918 2,097,195 1,985,099 112,096
Community environment 345,822 401,822 376,954 24,868
Leisure time activity 379,726 390,460 378,996 11,464
Economic development 420,000 420,000 335,200 84,800
Utility services 249,969 249,969 209,666 40,303
Total expenditures 13,365,645 13,715,956 12,353,492 1,362,464
Excess (deficiency) of revenues
over (under) expenditures (2,472,139) (2,075,914) 644,660 2,720,574
Other financing sources (uses):
Sale of capital assets - 7,900 8,100 200
Advances in 35,000 - - -
Advances (out)(35,000) (35,000) (35,000) -
Transfers (out)(1,921,900) (1,921,900) (1,921,900) -
Total other financing sources (uses) (1,921,900) (1,949,000) (1,948,800) 200
Net change in fund balances (4,394,039) (4,024,914) (1,304,140) 2,720,774
Fund balances at beginning of year 12,309,320 12,309,320 12,309,320 -
Prior year encumbrances appropriated 720,560 720,560 720,560 -
Fund balance at end of year 8,635,841$ 9,004,966$ 11,725,740$ 2,720,774$
GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2013
Budgeted Amounts
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
CITY OF FAIRLAWN, OHIO
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCE - BUDGET AND ACTUAL (NON-GAAP BUDGETARY BASIS)
23
Agency
Assets:
Current assets:
Equity in pooled cash
and cash equivalents 48,613$
Receivables:
Accounts 301
Total assets 48,914$
Liabilities:
Undistributed monies 48,914
Total liabilities 48,914$
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
CITY OF FAIRLAWN, OHIO
FIDUCIARY FUNDS
DECEMBER 31, 2013
STATEMENT OF FIDUCIARY NET POSITION
24
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
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 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. The City has one component unit.
Community Improvement Corporation of Fairlawn, Ohio - The Community Improvement
Corporation of Fairlawn, Ohio (the “CIC”) was formed pursuant to Ordinance 2010-030 passed
June 21, 2010 and incorporated as a corporation not-for-profit under Title XVII, Chapters 1702
and 1724 of the Ohio Revised Code for the purpose to advance, encourage, and promote
industrial, economic, commercial and civic development of the City of Fairlawn. The CIC has
been designated as the City of Fairlawn’s agent for industrial, commercial, distribution, and
research development. The Board of Trustees of the CIC is to be comprised of no less than five
members: three City representatives (the Mayor, the Council President, and the Finance Director)
and two or more additional members appointed by a majority of the Board of Trustees. At all
times no less than two-fifths of the members shall be elected or appointed officials of the City.
The CIC is also dependent on the City for financial support and is therefore presented as a
component unit of the City. The CIC began operations on July 24, 2012. Financial statements can
be obtained from the City of Fairlawn, Department of Finance, 3487 S. Smith Road, Fairlawn,
Ohio 44333, and further disclosures for the discretely presented component unit can be found in
Note 19.
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.
25
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013
26
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
The Copley/Fairlawn City School District and the Akron-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. A nine-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 2013 JEDD revenues were the result of the income tax levied by the JEDD effective January 1, 1999.
B. Basis of Presentation - Fund Accounting
The City’s BFS consist of government-wide statements, including a statement of net position 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 position 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 position presents the financial condition of the governmental activities of the City
at year-end. The 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 a self-balancing set of accounts. There are two categories of funds:
governmental and fiduciary.
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
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 and deferred
outflows are assigned to the fund from which they will be paid. The difference between governmental
fund assets and liabilities and deferred inflows 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.
Capital Improvement - This fund is used to account for the acquisition and construction of major
capital facilities.
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 position and changes in net position. 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 deferred outflows and all liabilities
and deferred inflows associated with the operation of the City are included on the statement of net
position.
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 deferred
outflows and current liabilities and deferred inflows 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.
27
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
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 outflows 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.
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.
Deferred Inflows – Deferred inflows 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, 2013, but which were
levied to finance year 2014 operations, and other revenues received in advance of the fiscal year for
which they were intended to finance, have been recorded as deferred inflows. 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, 2013, are
recorded as deferred inflows in the governmental funds.
On governmental fund financial statements, receivables that will not be collected within the available
period have been reported as deferred inflows.
Expenses/Expenditures - On the accrual basis of accounting, expenses are recognized at the time they
are incurred.
28
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
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.
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 2013.
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.
29
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
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 2013, 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.
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 2013, interest revenue credited to the general
fund amounted to $34,897, which includes $9,812 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.
30
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
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 position 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.
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:
Description
Governmental Activities
Estimated Lives
Buildings and improvements 15 – 50 years
Land improvements 25 – 75 years
Licensed vehicles 3 – 25 years
Machinery and equipment 5 – 30 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, 1998.
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 $39,629 in
2013.
31
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
K. Accrued Liabilities and Long-Term Obligations
All payables, accrued liabilities and long-term obligations are reported in the government-wide
financial statements.
In 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.
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 position.
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.
32
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
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. In 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.
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 Position
Net position represents the difference between assets and deferred outflows and liabilities and deferred
inflows. The net position component “net investment in capital assets,” 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 position is 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 position
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 position is
available.
Q. Prepaid Items
Prepayments made to vendors for services that will benefit future periods beyond December 31, 2013
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.
33
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013
34
NOTE 3 - ACCOUNTABILITY AND COMPLIANCE
A. For fiscal year 2013, the City has implemented GASB Statement No. 61, “The Financial Reporting Entity: Omnibus an amendment of GASB Statements No. 14 and No. 34” and GASB Statement No.
66, “Technical Corrections-2012”.
GASB Statement No. 61 modifies certain requirements for inclusion of component units in the financial reporting entity. The Statement amends the criteria for reporting component units as if they
were part of the primary government in certain circumstances. Finally, the Statement also clarifies the reporting of equity interests in legally separate organizations. The implementation of GASB Statement
No. 61 did not have an effect on the financial statements of the City.
GASB Statement No. 66 improves accounting and financial reporting by resolving conflicting guidance that resulted from the issuance of two pronouncements; GASB Statement No. 54, “Fund
Balance Reporting and Governmental Fund Type Definitions” and GASB Statement No. 62, “Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989
FASB and AICPA pronouncements”. The implementation of GASB Statement No. 66 did not have an effect on the financial statements of the City.
B. In June 2012, the GASB issued Statement No. 68, “Accounting and Financial Reporting for Pensions”.
Statement No. 68 requires governments providing defined benefit pensions to recognize their unfunded pension benefit obligation as a liability for the first time, and to more comprehensively and comparably
measure the annual costs of pension benefits. This net pension liability that will be recorded on the City’s financial statements will be computed differently than the current unfunded actuarial accrued
liability, using specific parameters set forth by the GASB. The Statement also enhances accountability and transparency through revised note disclosures and required supplemental information (RSI). The
City is currently evaluating the impact this standard will have on the financial statements when adopted. The provisions of this Statement are effective for financial statements for the year ending
December 31, 2015.
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, but not limited to, passbook accounts.
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 4 - EQUITY IN POOLED CASH AND CASH EQUIVALENTS - (Continued)
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.
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.
35
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 4 - EQUITY IN POOLED CASH AND CASH EQUIVALENTS - (Continued)
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 $1,200 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, 2013, the City had $15,948 in bank accounts outside of the City Treasury related to
Mayor’s Court operations. 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, 2013, the carrying amount of the City’s deposits was $17,437,436. As of
December 31, 2013, $7,122,796 of the City’s bank balance of $17,895,356 was exposed to custodial
risk as discussed below, while $10,772,560 was covered by Federal Deposit Insurance Corporation.
Custodial credit risk is the risk that, in the event of bank failure, the City will not be able to recover
deposits or collateral securities that are in the possession of an outside party. As permitted by Ohio
Revised Code, the City’s deposits are collateralized by a pool of eligible securities deposited with
Federal Reserve Banks, or at member banks of the Federal Reserve System, in the name of the
depository bank and pledged as a pool of collateral against all public deposits held by the depository.
The City has no deposit policy for custodial credit risk beyond the requirements of the State statute.
Although the securities were held by the pledging institutions’ trust department and all statutory
requirements for the deposit of money had been followed, noncompliance with federal requirements
could potentially subject the City to a successful claim by the FDIC.
D. Investments
The City had no investments at December 31, 2013.
36
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013
37
NOTE 4 - EQUITY IN POOLED CASH AND CASH EQUIVALENTS - (Continued)
E. Reconciliation of Cash and Investment to the Statement of Net Position
The following is a reconciliation of cash and investments as reported in the footnote above to cash and investments as reported on the statement of net position as of December 31, 2013:
Cash and Investments per Footnote
Carrying amount of deposits 17,437,436$
Cash on hand 1,200
Total 17,438,636$
Cash and Investments per Statement of Net Position
Governmental activities 17,390,023$
Agency funds 48,613
Total 17,438,636$
NOTE 5 - INTERFUND TRANSACTIONS
A. Interfund transfers for the year ended December 31, 2013 consisted of the following, as reported in the fund financial statements:
Transfers from
Transfers to General
Major
Capital Improvement 1,500,000$
Nonmajor
Governmental funds 421,900
1,921,900$
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.
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 5 - INTERFUND TRANSACTIONS - (Continued)
B. Due from/to other funds consisted of the following at December 31, 2013, as reported in the
governmental fund financial statements:
Due from Other Funds
Due to Other Funds Governmental funds
General 35,000$
Amounts due from/to other funds represent an advance from the General Fund to the Bond Retirement
Fund in anticipation of special assessment revenue.
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.
2013 public utility property taxes became a lien December 31, 2012, are levied after October 1, 2013,
and are collected in 2014 with real property taxes. Public utility property taxes are payable on the
same dates as real property taxes described previously.
The Fiscal Officer collects property taxes on behalf of all taxing districts in the County, including the
City of Fairlawn. The 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,
2012 and for which there is an enforceable legal claim. In the governmental funds, the current portion
receivable has been offset by a deferred inflow of resources since the current taxes were not levied to
finance 2012 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 a deferred inflow of resources.
38
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 6 - PROPERTY TAXES - (Continued)
The full tax rate for all City operations for the year ended December 31, 2013 was $2.70 per $1,000 of
assessed value. The assessed values of real and public utility property upon which 2013 property tax
receipts were based are as follows:
Real property
Residential/agricultural 161,250,130$
Commercial/industrial/mineral 146,891,960
Public utility
Personal 3,122,550
Total assessed value 311,264,640$
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, net of collection
expenditures. NOTE 8 - RECEIVABLES
Receivables at December 31, 2013, 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, 2013.
A summary of the principal items of receivables reported on the statement of net position follows:
Governmental Activities:
Income taxes 2,129,010$
Real and other taxes 806,687
Accounts 97,349
Special assessments 386,258
Accrued interest 5,659
Due from other governments 899,264
Total 4,324,227$
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.
39
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 9 - CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2013 was as follows:
Balance Balance
Governmental Activities: 12/31/12 Additions Disposals 12/31/13
Capital assets, not being depreciated:
Land 2,357,497$ -$ -$ 2,357,497$
Construction in progress 829,507 185,921 (829,507) 185,921
Total capital assets, not being depreciated 3,187,004 185,921 (829,507) 2,543,418
Capital assets, being depreciated:
Buildings and improvements 14,084,223 - - 14,084,223
Land improvements 2,604,212 93,590 (27,089) 2,670,713
Licensed vehicles 3,179,361 239,903 (161,541) 3,257,723
Machinery and equipment 3,772,153 99,274 (50,512) 3,820,915
Infrastructure 76,713,831 1,539,126 (726,314) 77,526,643
Total capital assets, being depreciated 100,353,780 1,971,893 (965,456) 101,360,217
Less: accumulated depreciation:
Buildings and improvements (3,882,694) (272,897) - (4,155,591)
Land improvements (946,638) (79,593) 26,089 (1,000,142)
Licensed vehicles (1,913,025) (177,909) 154,541 (1,936,393)
Machinery and equipment (2,174,392) (225,922) 48,512 (2,351,802)
Infrastructure (33,470,403) (1,464,565) 570,720 (34,364,248)
Total accumulated depreciation (42,387,152) (2,220,886) 799,862 (43,808,176)
Total capital assets, being
depreciated, net 57,966,628 (248,993) (165,594) 57,552,041
Total capital assets, net 61,153,632$ (63,072)$ (995,101)$ 60,095,459$
Depreciation expense was charged to functions/programs of the City as follows:
Governmental activities:
General government 40,739$
Security of persons and property 350,347
Transportation 1,169,747
Community environment 2,311
Leisure time activity 80,148
Utility services 577,594
Total depreciation expense 2,220,886$
40
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 10 - LONG-TERM OBLIGATIONS
A. Description of Long-Term Obligations
The maturity date, interest rate, and original issue amount for the City’s long-term obligations are as
follows:
Maturity Interest Original
Date Rate Issue Amount
General obligation bonds
1993 Sewer System Improvement 2013 2.80 - 5.75%2,875,000$
2012 Various Purpose Refunding 2022 1.25 - 2.00%4,500,000
OPWC loans
West Market Street Roadway Reconstruction 2014 6.00% 1,048,277
B. Changes in Long-Term Obligations
During 2013, the following changes occurred in governmental activities long-term obligations:
Balance Balance Due in
Governmental Activities:12/31/12 Additions Reductions 12/31/13 One Year
General obligation bonds
1993 Sewer System Improvement 225,000$ -$ (225,000)$ -$ -$
2012 Various Purpose Refunding 4,500,000 - (100,000) 4,400,000 465,000
Total General Obligation Bonds 4,725,000 - (325,000) 4,400,000 465,000
OPWC loans
West Market Street Roadway Reconstruction 168,574 - (81,796) 86,778 86,778
Other Long-Term Obligations
Compensated absences 1,353,153 36,817 (1,091) 1,388,879 506,258
Total long-term obligations 6,246,727$ 36,817$ (407,887)$ 5,875,657$ 1,058,036$
Add: Unamortized premium on bond issue 184,808 166,327
Total reported on the Statement of Net Position 6,431,535$ 6,041,984$
41
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013
42
NOTE 10 - LONG-TERM OBLIGATIONS - (Continued)
The general obligation bonds will be paid from income taxes receipted into the capital improvement fund. The 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.
C. Debt Service Requirements
Principal and interest requirements to retire long-term obligations outstanding at December 31, 2013 are as follows:
General Obligation Bonds OPWC Loan
Year Principal Interest Total Principal Interest Total
2014 465,000$ 83,425$ 548,425$ 86,778$ 3,924$ 90,702$
2015 610,000 74,125 684,125 - - -
2016 620,000 66,500 686,500 - - -
2017 635,000 54,100 689,100 - - -
2018 640,000 41,400 681,400 - - -
2019 - 2022 1,430,000 72,000 1,502,000 - - -
Total 4,400,000$ 391,550$ 4,791,550$ 86,778$ 3,924$ 90,702$
D. 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, 2013, there were two series of Health Care Facilities Revenue Bonds with an aggregate outstanding principal amount payable of $10,665,000 and an original issue amount of
$12,105,000.
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
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 1998 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 1998 are not eligible to receive termination payments for sick leave. As of
December 31, 2013 the total liability for unpaid compensated absences was $1,388,879.
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 2013, the City contracted with
Wichert Insurance Service, Inc. for property and general liability insurance, including boiler and machinery
provided by Selective Insurance Company. Police and professional liability policies are provided by
Scottsdale Indemnity Company with a $1,000,000 limit and a $10,000 deductible. Selective Insurance
Company covers Firemen and EMT professional liability with a limit of $1,000,000 and no 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 Selective 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 combined limit for bodily injury and property damage. 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.
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.
43
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
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 a cost-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 a cost-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.
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 a stand-alone financial report
which may be obtained by visiting https://www.opers.org/investments/cafr.shtml, writing to OPERS,
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 2013, member and contribution rates were consistent across all three plans. The
2013 member contribution rates were 10.00% for members. The City’s contribution rate for 2013 was
14.00% of covered payroll.
The City’s contribution rate for pension benefits for members in the Traditional Plan for 2013 was
13.00%. The City’s contribution rate for pension benefits for members in the Combined Plan for 2013
was 13.00%. The City’s required contributions for pension obligations to the Traditional Pension and
Combined Plans for the years ended December 31, 2013, 2012, and 2011 were $381,966, $276,424
and $278,349, respectively; 91.28% has been contributed for 2013 and 100% for 2012 and 2011.
Contributions to the member-directed plan for 2013 were $2,700 made by the City and $1,929 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 plan 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 or by visiting the website at
www.op-f.org.
44
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013
45
NOTE 13 - PENSION PLANS - (Continued)
Funding Policy – From January 1, 2013 through July 1, 2013, plan members were required to contribute 10.00% of their annual covered salary. From July 2, 2013 through December 31, 2013, plan
members were required to contribute 10.75% of their annual covered salary. Throughout 2013, the City was required to contribute 19.50% and 24.00% for police officers and firefighters, respectively.
Contribution rates are established by State statute.
For 2013, the portion of the City’s contributions to fund pension obligations was 14.81% for January 1, 2013 through May 31, 2013 and 16.65% for June 1, 2013 through December 31, 2013 for
police officers and 19.31% for January 1, 2013 through May 31, 2013 and 21.15% for June 1, 2013 through December 31, 2013 for firefighters. The City’s required contributions for pension obligations
to OP&F for police officers and firefighters were $258,005 and $208,854 for the year ended December 31, 2013, $204,674 and $164,450 for the year ended December 31, 2012, and $197,448 and
$178,967 for the year ended December 31, 2011. The full amount has been contributed for 2012 and 2011. 91.07% has been contributed for police and 91.94% has been contributed for firefighters for
2013. The remaining 2013 pension liability has been reported as due to other governments on the basic financial statements.
NOTE 14 - POSTRETIREMENT BENEFIT PLANS
A. Ohio Public Employees Retirement System
Plan Description - OPERS maintains a cost-sharing multiple employer defined benefit post-
employment health care 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.
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 other post-employment benefits
(OPEB) 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 health care plan are presented separately in the OPERS financial report which may
be obtained by visiting https://www.opers.org/investments/cafr.shtml, writing to OPERS, 277 E. Town St., Columbus, OH 43215-4642 or by calling (614) 222-5601 or (800) 222-7377.
Funding Policy - The post-employment health care 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 health care 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 2013, 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 post-employment health care benefits. The portion of employer contributions allocated to fund post-employment health care for members in the Traditional Plan for 2013 was 1.00%.
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013
46
NOTE 14 - POSTRETIREMENT BENEFIT PLANS - (Continued)
The portion of employer contributions allocated to fund post-employment health care for members in the Combined Plan for 2013 was 1.00%.
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 health care plan.
The City’s contributions allocated to fund post-employment health care benefits for the years ended December 31, 2013, 2012, and 2011 were $29,369, $112,331 and $113,619, respectively; 91.28% has
been contributed for 2013 and 100% has been contributed for 2012 and 2011. The remaining 2013 post-employment health care benefits liability has been reported as due to other governments on the
basic financial statements.
Changes to the health care plan were adopted by the OPERS Board of Trustees on September 19, 2012, with a transition plan commencing January 1, 2014. With the recent passage of
pension legislation under State Bill 343 and the approved health care changes, OPERS expects to be able to consistently allocate 4 percent of the employer contributions toward the health care fund after
the end of the transition period.
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 post-employment health care plan administered by OP&F.
OP&F provides health care 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.
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 or by visiting the website at www.op-f.org.
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.
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013
47
NOTE 14 - POSTRETIREMENT BENEFIT PLANS - (Continued)
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. The portion of employer contributions allocated to health care was 4.69% of covered payroll from January 1, 2013 through May 31, 2013 and 2.85% of covered payroll
from June 1, 2013 through December 31, 2013. 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 health care benefits for police officers and firefighters were $59,291 and $36,979 for the year ended December 31, 2013,
$108,357 and $64,350 for the year ended December 31, 2012, and $104,531 and $70,031 for the year ended December 31, 2011. The full amount has been contributed for 2012 and 2011. 91.07% has been
contributed for police and 91.94% has been contributed for firefighters for 2013. The remaining 2013 post-employment health care benefits liability has been reported as due to other governments on the
basic financial statements.
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 committed or assigned 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.
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 15 - BUDGETARY BASIS OF ACCOUNTING - (Continued)
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 (1,304,140)$
Net adjustment for revenue accruals 148,578
Net adjustment for expenditure accruals (1,255)
Adjustment for encumbrances 728,732
GAAP basis (428,085)$ 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
Capital Other Governmental
Fund Balance General Improvement Governmental Funds
Nonspendable:
Materials and supplies
inventory 506,204$ -$ -$ 506,204$
Prepayments 78,503 - - 78,503
Unclaimed monies 26,741 - - 26,741
Total nonspendable 611,448 - - 611,448
Restricted:
Capital Improvements - 4,272,175 - 4,272,175
Debt service - - 14,594 14,594
Law enforcement - - 129,999 129,999
Police and fire pensions - - 103,418 103,418
Sewer maintenance - - 282,323 282,323
Streets and highways - - 280,261 280,261
Total restricted - 4,272,175 810,595 5,082,770
Committed:
Law enforcement 5,000 - - 5,000
Assigned:
Encumbrances 436,824 - - 436,824
Unassigned 12,530,284 - - 12,530,284
Total fund balances 13,583,556$ 4,272,175$ 810,595$ 18,666,326$
48
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 17 - CONTINGENCIES
A. Grants
The City receives 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, 2013.
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:
Year-End
Fund Encumbrances
General 436,824$
Capital Improvement 244,415
Other governmental 100,941
Total 782,180$
NOTE 19 - COMMUNITY IMPROVEMENT CORPORATION OF FAIRLAWN, OHIO
The Community Improvement Corporation of Fairlawn, Ohio (the “CIC”) was formed pursuant to
Ordinance 2010-030 passed June 21, 2010 and incorporated as a corporation not-for-profit under Title
XVII, Chapters 1702 and 1724 of the Ohio Revised Code for the purpose to advance, encourage, and
promote industrial, economic, commercial and civic development of the City of Fairlawn (the “City”). The
CIC has been designated as the City’s agent for industrial, commercial, distribution, and research
development.
The Board of Trustees is to be comprised of no less than five members, and at all times no less than two-
fifths of the members shall be elected or appointed officials of the City. The following three elected or
appointed officials of the City (“City Representatives”) constitute three of the members of the Board of
Trustees: President of Council, Mayor, and Director of Finance. The City Representatives hold office for
as long as they hold their position at the City. In addition to the three City Representatives, two or more
additional members may be appointed by a majority vote of the Board of Trustees (“Community
Representatives”). The Community Representatives serve two year terms.
49
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
NOTE 19 - COMMUNITY IMPROVEMENT CORPORATION OF FAIRLAWN, OHIO - (Continued)
Summary of Significant Accounting Policies
The basic financial statements (BFS) of the CIC have been prepared in conformity with accounting
principles generally accepted in the United States of America (GAAP) as applied to governmental units.
The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for
establishing governmental accounting and financial principles. The most significant of the CIC’s
accounting policies are described below.
A. Basis of Accounting
The basic financial statements of the CIC are prepared using the accrual basis of accounting in
conformity with GAAP.
B. Basis of Presentation
The CIC’s basic financial statements consist of a statement of net position and a statement of activities.
The CIC distinguishes operating revenues and expenses from nonoperating items. Operating revenues
and expenses generally result from providing services and producing and delivering goods in
connection with the CIC’s principal ongoing operation. The principal operating revenues of the CIC
are proceeds from the sale of assets held for sale and contributions from the City. Operating expenses
for the CIC primarily include construction costs for improvements made to City infrastructure and
other contract services. All revenues and expenses not meeting these definitions are reported as
nonoperating revenues and expenses. The CIC did not have any nonoperating revenues or expenses in
2013.
C. Federal Income Tax
The CIC has applied for an exemption from federal income tax under Section 501 (c) (3) of the
Internal Revenue Code.
D. Cash and Cash Equivalents
All cash in the CIC’s checking account is considered to be cash and cash equivalents. All monies
received by the CIC are deposited in a demand deposit account.
E. Assets Held for Sale
Assets held for sale represent real property donated to the CIC by the City, which will be sold for
development purposes.
During 2013, the CIC purchased 4.89 acres of real property for $87,234 and sold 0.28 acres for
$296,000. The balance remaining in assets held for sale at December 31, 2013 was $87,234.
50
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013
51
NOTE 19 - COMMUNITY IMPROVEMENT CORPORATION OF FAIRLAWN, OHIO - (Continued)
F. Prepayments
Certain payments to vendors reflect the costs applicable to future accounting periods and are recorded as prepaid items in the statement of net position. These items are reported as assets on the statement of
net position using the consumption method. A current asset for the prepaid amounts is recorded at the time of the purchase and the expense is reported in the year in which services are consumed.
G. Accrued Liabilities
The CIC has recognized certain expenses due, but unpaid as of December 31, 2013. These expenses
are reported as accrued liabilities in the accompanying financial statements.
H. Net Position
Net position represents the difference between assets and liabilities. Net position is reported as restricted when there are limitations imposed on its use either through the enabling legislation adopted
by the CIC or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. The CIC has no net position restrictions.
I. Estimates
The preparation of the basic financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect the amounts reported in the basic financial statements and accompanying notes. Actual results may differ from those estimates.
J. Deposits
At December 31, 2013, the carrying amount of the CIC’s deposits was $229,033. Based on the criteria
described in GASB Statement No. 40, “Deposits and Investment Risk Disclosures”, as of December 31, 2013, the entire bank balance of $229,033 was covered by the Federal Deposit Insurance
Corporation. There are no significant statutory restrictions regarding the deposits and investments of funds held by the not-for-profit corporation.
K. Contributions from the City of Fairlawn
Cash
The CIC received $335,200 in contributions from the City during the year.
Services
Pursuant to City of Fairlawn Resolution 2012-046 passed June 4, 2012, an agreement was executed
June 5, 2012, between the City and the CIC, whereby the City will provide technical and administrative services and assistance at no cost to the CIC. No amounts have been reflected in the
financial statements for these services, because the CIC has not estimated their value.
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
L. Risk Management
The CIC is exposed to various risks of loss related to torts; theft of, damage to, and destruction of
assets; errors and omissions; injuries to contracted personnel; and natural disasters. For 2013, the CIC
had general liability insurance through Auto-Owners Insurance Company and directors and officers
insurance through Darwin Selective Insurance Company.
Settled claims have not exceeded commercial coverage in either of the past two years.
M. Litigation
The CIC is involved in no material litigation as either plaintiff or defendant.
52
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
53
INDEPENDENT AUDITOR’S 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
To the Honorable Mayor and Members of City Council:
We have audited, in accordance with auditing standards generally accepted in the United States and the Comptroller General of the United States’ Government Auditing Standards, the financial statements of the
governmental activities, each major fund, and the discretely presented component unit and remaining fund information of City of Fairlawn, Summit County, (the City) as of and for the year ended December 31,
2013, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements and have issued our report thereon dated November 28, 2014.
Internal Control Over Financial Reporting
As part of our financial statement audit, we considered the City’s internal control over financial reporting
(internal control) to determine the audit procedures appropriate in the circumstances to the extent necessary to support our opinions on the financial statements, but not to the extent necessary to opine on
the effectiveness of the City’s internal control. Accordingly, we have not opined on it.
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 a reasonable possibility that internal control will not prevent or detect and timely
correct a material misstatement of the City’s financial statements. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet
important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all internal control deficiencies that might be material
weaknesses or significant deficiencies. Given these limitations, we did not identify any deficiencies in internal control that we consider material weaknesses. However, unidentified material weaknesses may
exist.
City of Fairlawn Summit County
Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters
Required by Government Auditing Standards Page 2
54
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, opining 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 Government Auditing Standards.
Purpose of this Report
This report only describes the scope of our internal control and compliance testing and our testing results,
and does not opine on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed under Government Auditing Standards in considering the City’s
internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Dave Yost Auditor of State
Columbus, Ohio
November 28, 2014
88 East Broad Street, Fourth Floor, Columbus, Ohio 43215-3506 Phone: 614-466-4514 or 800-282-0370 Fax: 614-466-4490
www.ohioauditor.gov
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.
CLERK OF THE BUREAU CERTIFIED
DECEMBER 16, 2014