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1981 Financial Statement a:.i.iI,iI2:JjUiI;'.~, I, :;",ld,'H¡:,Uii¡w.~'..:':j;::.1 BUREAU OF INSPECTION AND SUPERVISION OF PUBLIC OFFICES REPORT OF EXAMINATION - CITY OF FAIRLAWN 20977-04-0427-00 DISTRICT * 9, SUMMIT COUNTY REGULAR EXAMINATION SEPTEMBER 1, 1979 THROUGH FEBRUARY 28, 1982 FISCAL YEAR AUDITED UNDER GAAS: 1981 THOMAS E. FERGUSON Auditor of State 1l':iHIIIWII;Ii~ ,.; ,¡¡.Jj¡,:.:I,I,IJj,:iillJ<iJ::.. I , AUD-4754 (formerly Form 106) TO WHOM IT MAY CONCERN: Any person or persons examining this report for the purpose of obtaining information for the general public, as to the results of this examination, should: Always remember that it takes years for a man to build a reputation; Always remember that one of the purposes of these examinations is to safeguard the honest, well- meaning official who might have made a mistake, even as you and I; Always remember that a summary of findings, if any, as found in the body of this report, contains only the bare cold facts. Please read carefully the explan- atory material contained in this report for the precise description of the situations covered in the audit. Always remember that if this course is followed, the general public, which is served by the official, will receive an unprejudiced, unbiased report. Respectfully submitted, BUREAU OF INSPECTION AND SUPERVISION OF PUBLIC OFFICES - STATE OF OHIO ~ e;c ~ THOMAS E. FERGUSONT Chief Inspector i/:,JlliI!IiIHR';: :,:H¡H"I::¡i_UJ~;illJIt, , CITY OF FAIRLAWN - SUMMIT COUNTY TABLE OF CONTENTS Ti tIe Elected and Appointed Officials Index of Funds Auditor's Opinion Exhibit A-I - Combined Statement of Cash, Investments and Fund Cash Balances - All Fund Types Exhibit A-2 - Changes in Expendable Combined Statement Fund Cash Balances Trust Funds Exhibit A-3 - Combined Statement Changes in Fund Cash Balances Similar Fiduciary Funds ., f ¡ ¡ of Cash Receipts, Disbursements and - All Governmental Fund Types and of Cash Receipts, Disbursements and -All Proprietary Fund Types and Exhibit B - Statement of Receipts-Budget and Actual - All Budgetary Funds Exhibit C - Statement of Disbursements and Encumbrances Compared With Expenditure Authority - All Budgetary Funds Notes to Financial Statements Statutory Compliance: Summary of Citations: Revised Code Federal Revenue Sharing Conclusion Statement Management Comments and Recommendations Examiner's Certification Page 1 2 3-3a 4 5 6- 9 10-12 12 13-16 17 18 Name Joseph A. Hartlaub William F. Reed Michael J. Buza J. Michael Hannon Michael V. Markel Leonard L. Krause Ginnie L. Singleton Rosemarie A. Striegel Charles Walker Robert H. Maxson Ray E. Hartung " , CITY OF FAIRLAWN - SUMMIT COUNTI ELECTED AND APPOINTED OFFICIALS Title Mayor Director of Finance/ Clerk of Council Ward 6 - Counci1person Ward 3 - Counci1person Ward 5 - Counci1person At Large - Council person Ward 4 - Counci1person Ward 2 - Counci1person Ward 1 - Counci1person Law Director Tax Administrator u_-....",.-.-.-- Term Of Office 1-1-80 - 12-31-81 1-1-80 - 12-31-81 1-1-80 - 12-31-81 1-1-80 - 12-31-81 1-1-80 - 12-31-81 1-1-80 - 12-31-81 1-1-80 - 12-31-81 1-1-80 - 12-31-81 1-1-80 - 12-31-81 1-1-80 - 12-31-81 1-1-80 - 12-31-81 CITY OF FAIRLAWN - SUMMIT COUNTY INDEX OF FUNDS General Fund ~ " , Special Revenue Funds: Street Construction, Maintenance State Highway Improvement Income Tax Federal Revenue Sharing Recreation and Park Maintenance and Repair J. Capital Projects Fund: Capital Improvements it Special Assessment Fund: Special Assessment Bond Retirement ;. . Trust and Agency Funds: Street Opening Bonds Miscellaneous Trusts , ¡ , ~' JAMES A. BOLDEN DEPUTY AUDITOR THOMAS E. FERGUSON AUDITOR Of STATE CoLUMBVS. OHIO .U8UI RICHAR[) G. NUSS DEpUTY AUDiTOR CHARLES E. MAUG¡::R DEPUTY AUDITOR JQSEPH .J. SOMMER DEPUTY AUDITOR "ì' {- k Mr. Lawrence W. Pelland Director of Finance Members of Council City of Fairlawn Fairlawn, Ohio 44313 ., ,I 1 , We have examined, the Combined Statement of, Cash, Investments and Fund Cash Balances and the related Combined Statement of Receipts, Disburse~~nts and Changes in Fund Cash Balances, Statement of Receipts, Estimated and Actual, and Statement of Disbursements Compared to Expenditure Authori ty of th,~ various' funds of the City of Fairlawn as listed in the foregoing Index of Funds, as of December 31, 1981 and for the year then ended. Our examination wa:¡ made in accordance with generally accepted auditing standards and accordingly included such tests, of the accounting records and such other auditing procedures as we considered n~cessary in the circumstances. " I As described in Note 1 to the financial statements, the City of Fairlawn pre- pares its financial s'tatements on the basis of cash receipts' and disbursements; consequently, certain revenues and the related assets ,are recogniZt~d when received rather than when earned, and certain expenditures or expel1ses are recognized when paid rather than when a liabili ty ,is incurred. Acc:ordingly, the accompanying financial statements are not intended to present :Einancial position and ,results of operations in conformity with generally ac(:epted accounting principles. ' . } :Í t ¡ ¡ $ As described in Note 1 to the financial statements, the City øf FaiLrlawn is required to encumber appropriations for certain liabilities, contracts and open purchase commitments. Certain of these commitments existed as of December 31, 1981 that were not recorded by the City of Fair lawn. Had the City of Fairlawn properly encumbered, the effect would have been to increase "encumbrances" in the accompanying Exhibit C by amounts which, while material, cannot be fully determined at this time. ' ~' , .. In our opinion, except for the efiects of not encumbering certain liabilities, contracts and'open purchase commitments referred to in paragraph~lree above, the financial statements referred to above present fairly the combj~ned cash, investments and fund cash balances' of the various funds of the Cig' of Fairlawn, the related combined receipts, disbursements and changes in fund cash balances, and the various funds' estimated and actual ,receipts, prior year carryover and current year appropriations, and,disaursements as of December 31, 1981 and for the year then ended, on the'basis' of accounting described in Note Jl, which basis has been applied in a manner consistent with..that of the preceding year. ~¿~ '. . , ~~ . . THOMAS E. FERGUS(~ Auditor of state June 25, 1982 Inform.Ii.. Line toll free 1-800-282-0370 CITY OF FAIRLAWN - SUMMIT COUNTY COMBINED STATEMENT OF CASH, INVESTMENTS AND FUND CASH BALANCES - ALL FUND. TYPES AT DECEMBER 31, 1981 AND FEBRUARY 28, 1980 EXHIBIT A-I Cash Investments: Certificates of Deposit At Rates From 12.00 to 16.3% Interest Balance Balance December 31, 1981 February 28, 1982 $ 114,463.79 $ 55,762.03 600,000.00 650,000.00 $ 714,463.79 $ 705,762.03 :~ J' :~~ Total FUND CASH BALANCES BY GROUP Governmental Funds: General Fund $ 194,210.67 $ 11,483.27 Special Revenue Funds 157,412.08 372,032.75 Capital Projects Funds 258,473.61 218,278.58 Special Assessment Funds 89,089.13 89,089.13 Fiduciary Funds: Trust and Agency Funds 15,278.30 14,878.30 Total $ 714,463.79 $ 705,762.03 the notes to the financial statements are an integral part of this statement. -1- CITY OF FAIRLAWN - SUMMIT COUNTY COMBINED STATEMENT OF CASH RECEIPTS, DISBURSEMENTS AND CHANGES IN FUND CASH BA1ANCÈS-ALL GOVERNMENTAL FUND TYPES AND EXPENDABLE TRUST FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1981 EXHIBIT A-2 Fiduciary Governmental Fund Types Fund Type Total Special Capital Special Trust & Memorandum General Revenue' Projects Assessment Agency Only $ 135,087.06 $ 135,087.D6 965,218.18 965,218.18 93,423.57 93,423.57 322,047.35 34,591.85 356,639.20 2,172.13 2,172.13 10,379.33 36,389.71 46,769.04 117,966.24 117,966.24 21,903.60 21,903.60 45,916.00 45,916.00 6 , 543 . 19'. 68,326.06 74,869.25 $ 640,111. 30 $1,197,949.37 $ -0- $ 21,903.60 $ -0- $1,859,964.27 Revenue Receipts: Property Taxes Municipal Income Taxes Other Local Taxes State-Levied Shared Taxes Intergovernmental Receipts Charges for Services Fees, Licenses, Permits Interest Earnings Special Assessments Fines and Forfeits All Other Revenue Receipts Total Revenue Receipts Expenditure Disbursements: Security of Persons and Property Public Health & Welfare Leisure Time Activities Community Development Basic Utility Services Transportation General Government Capital Outlay 706,598.35 41,937.00 391,180.81 706,5.98.35 41,937.00 137,1.78.01 38,477.83 .52,252.16 441,514.27 234,776.91 391,180.81 137,178.01 38,477 .83 8,737.16 181,622.24 175,038.51 43,515.00 50,576.63 59,738.40 209,315.40 "<"1-'~ f:-",.-S-, ".,-.-..y;.-~'~ .~.-. """<"""'M ~''''~ F,~"'::~:'Ìq I I>';"M",~ \.;¡,--:.:;"",." 1(;e',"<'_'0:""') t"";"""";~"~';' îoi""","_"'-';i ~'""":,:",..\,,,.,,, ',""',;;'",-"".,';': :i:;':"-,'~it"~' \.<~~':"'-'-"N'4'¡ ~""-f':'^"-'IJ Debt Service: Bond Principal Retirement 24,000.00 24,000.00 Note Principal Retirement Interest & Fiscal Charges 1,253.75 1,253.75 Total Expenditure Disb. $1,152,411.09 $ 291,008.04 $ 600,496.21 $ 25,253.75 $ -0- $2,069,169.09 Total Revenue Receipts Over (Under) Expenditure Disbursements (512,299.79) 906,941. 33 (600,496.21) 0,350.15) -0- (209,204.82) Other Financing Sources (Uses): Proceeds of Bonds Proceeds of Notes Operating Transfers In 657,143.00 280,000.00 937,143.00 Operating Transfers Out (896,000.00) (41,143.00) (937,143.00) I Other Financing Sources 11,882.29 11,882; 29 N Other Financing Uses 33,966.49 (11,101.99) ___2~,864.50 I Total Financing Sources (Uses) $ 65.7,143.00 $ (896,000.00) $ 272,823.49 $ -0- $ 780.30 $ 34,746.79 Excess of Receipts and Other Sources Over (Under) Disbursements and Other Uses $ 144,843.21 $ 10,941. 33 $ (327,672.72) $ (3,350.15) $ 780.30 $ (174,458.03) Fund Cash Balance, January 1 $ 49,367.46 $ 146,470.75 $ 586,146.33 $ 92,439.28 $ 14,498.00 $ 888,921.82 Fund Cash Balance, December 31 $ 194,21Q.67 $ 157,412.08 $ 258,473.61 $ 89,089.13 $ 15,27~. 30 $ 714,463.79 The notes to the financial statements are an integral part of this statement. CITY OF FAIRLAWN - SUMMIT COUNTY COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS/FUND BALANCES-ALL PROPRIETARY FUND TYPES: AND SIMILAR FIDUCIARY FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1981 EXHIBIT A-3 f f r, ;\, Operating Revenues: Charges for Services Interest Contributions Gifts Other Operating Revenue Total Operating Revenue Fiduciary Fund Type Trust And Agency Fund Total Memorandum Only t $ -0- -0- -0- -0- -0- -0- $ -0- -0- -0- -0- -0- -0- > ¡ 1 $ $ 4: Operating Expenses: Personal Services Contractual Services Materials and Supplies Utilities Capital Outlay Benefit Payments Other Opera ti ng Expenses Total Operating Expenses Operating Income $ -0- -0- -0": -0- -0- -0- -0- -0- -0- $ -0- -0- -0- -0- -0- -0- -0- -0- -0- ~ * '1 ,> 1 l' Nonoperating Revenues (Expenses): 1 Interest Revenue -0- -0- Note and Bond Proceeds -0- -0- Note and Bond Retirement -0- -0- Interest Expense and Fiscal Charges -0- -O- J; Other Nonoperating Revenues 11,882.29 11,882.29 Other Nonoperating Expenses (11,101.99) (11,101.99) Total Nonoperating Revenues (Expenses) $ 780.30 $ 780.30 Income Before Operating Transfers $ 780.30 $ 780.30 -3- 1 CITY OF FAIRLAWN- SUMMIT COUNTY COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS/FUND BALANCES-ALL PROPRIETARY FUND TYPES. AND SIMILAR FIDUCIARY FUNDS FOR THE. FISCAL YEAR ENDED DECEMBER 31, 1981 :. æ 'Ii. Operating Transfers In Operating Transfers Out EXHIBIT A-3 (Cont'd) Fiduciary Fund Type Total Trust .And Memorandum Agency Fund Only $ -0- $ -0- -0- -0- $ 780.30 $ 780.30 1 ] ¥ > Net Income Residual Equity/Fund Balance, January 1 $ 14,498.00 $ 14,498.00 ¡ 1. Residual Equity/Fund Balance, December 31 $ 15,278.30 $ 15,278.30 , , , .1 .:: , ~ The notes to the financial statements are an integral part of this !Itatement. -3a- CITY OF FAIRLAWN - SUMMIT COUNTY STATEMENT OF RECEIPTS-BUDGET AND ACTUAL-ALL BUDGETARY FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1981 EXHIBIT B Variance Estimated Actual Favorable Fund Types/Funds Receipts Receipts (Unfavorable) Governmental Funds: General Fund $ 1,160,059.00 $ 1,297,254.30 $ 137,195.30 Special Revenue Funds: Street Construction, Maintenance and Repair 51,200.00 51,927~75 727.75 State Highway Improvement .4,150.00 4,210.35 60.35 Income Tax 1,000,000.00 965,218.18 (34,781. 82) Federal Revenue Sharing 38,000.00 39,163.00 1,163.00 Recreation and Park Maint. 111,700.00 137,430.09 25,730.09 Total-Special Revenue Funds $ 1,205,050.00 $ 1,197,949.37 $ C7 ,100.63) Capital Project Funds: t Capital Improvement 757,584.00 313,966.49 (443,617.51) Special Assessment Funds: Special Assessment Bond Ret. 19,807.50 21,903.60 2,096.10 Fiduciary Funds: Trust and Agency Funds: Street Opening Bonds -0- 3,000.00 3,000.00 " Miscellaneous Trusts -0- 8,882.29 8,882.29 ,. 1 Ä Total-Trust and Agency Funds $ -0- $ 11,882.29 $ 11,882.29 Total - All Funds (Memorandum Only) $ 3,142,500.50 $ 2,842,956.05 $ (299,544.45) The notes to the financial statements are an integral part of this statement. -4- ¡.,... CITY OF FAIRLAWN - SUMMIT CouÑTY STATEMENT OF DISBURSEMENTS AND ENCUMBRANCES COMPARED WITH EXPENDITURE AUTHORITY-ALL BUDGETARY FOR THE FISCAL YEAR ENDED DECEMBER 31, 1981 FUNDS EXHIBIT C Prior Year Encumbrances Variance Fund Typesl Carryover 1981 Actual 1981 Outstanding Favorable Funds Appropriations Appropriations Total Disbursements At 12-31-81 Total (Unfavorable) Governmental Funds: General Fund $ -0- 1,159,523.00 $1,159,523.00 $1,152,411.09 $ -0- $1,152,411.09 $ 7,111.91 Special Revenue: Street Constr., Maint. & Repair -0- 50,577.00 50,577 .00 50,576.63 -0- 50,576.63 .37 State Highway Improvement -0- 7,000.00 7,000.00 -0- -0- -0- 7,000.00 Income Tax -0- 59,722.00 59,722.00 59,738.40 -0- 59,738.40 (16.40) Federal Revenue Sharing -0- 43,515.00 43,515.00 43,515.00 -0- 43,515.00 -0- Recreation & Park Maint. 137,286.00 137,286.00 137 ,178.01 -0- 137,178.01 107.99 Total-Special Revenue Funds $ -0- $ 298,100.00 $ 298,100.00 $ 291,008.04 $ -0- $ 291,008.04 $ 7,091.96 Capital Project: Capital Imp. -0- 600,000.00 600,000.00 600,496.21 -0- 600,496.21 (496.21) Special Assessment: Special Assessment Bond Retirement -0- 25,250.00 25,250.00 25,253.75 -0- 25,253.75 (3.75) Fiduciary Funds: Trust & Agency: Street Opening Bonds Misc. Trusts Total-Trust and Agency Total-All Funds Memorandum Only I V1 I ',.;..t:~ii,"~;' ¡:,,';~,*''''1O;¡; !t_';"'~i;'-,'~;/ "f.":""'";',..''' ~-'''I~h';'1' -0- -0- -0- 1,000.00 -0- -0- -0- 10,101. 99 $ -0- $ -0- $ -0- $ 11,101.99 $ $ -0- $2,082,873.00 $2,082,873.00 $2,08(),271.08 $ The notes to the financial statements are an integral part of this statement. -0- 1,000.00 0,000.00) -0- 10,101.99 (10,101.99) -0- $ 11,101.99 $ (11,101. 99) -0- $2,080,271.08 $ 2, 601. 92 1. . ilCjjJllIiiIllI;:, i,i]U!;d,:!¡L!'Jliiiml CITY OF FAIRLAWN - SUMMIT. COUNTY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1981 1. Policies: nificant Accountin by Various Statutes A. Basis of Accounting: The City of Fairlawn prepares its financial statements on a basis of cash receipts and disbursements, consequently, certain revenues and the related assets are recognized when received rather than when earned, and certain expenditures are recognized when paid rather then when the obligation is incurred. A general fixed asset group and long term debt group of accounts are not recorded on the financial statements by the City of Fairlawn under the basis of accounting used. By virtue of Ohio law, the City of Fairlawn is required to maintain the encumbrance method of accounting and to make appropriations for budgetary funds. B. Investments and Inactive Funds: Investment procedures are restricted by the provisions of the Revised Code. Purchased investments are valued at cost and are neither charged when purchased nor credited at the time of redemption to their respective fund balances. Interest earned is recognized and recorded when received. C. Fund Accounting: The City of Fairlawn is required to maintain its accounting in accordance with the principles of "fund" accounting. Fund accounting is a conclapt developed to meet the needs of governmental entities in which legal or other restraints require the recording of specific receipts and disbursements. The trans- actions of each fund are reflected in a self-balancing group of accounts, an accounting entity which stands separate from the activities repl:>rted in other funds. The restrictions associated with each class of funds ar,a as follows: Governmental Funds: General Fund - Available to the government for any purpose including those required to be accounted for in another fund, provided the fund balance is disbursed or transferred in accordance with Ohio law. S ecial Revenue Fund - To account for the proceeds of specific revenue sources other than special assessments, expendable trusts IJr major capital projects) that are legally restricted to disbursements for specified purposes. -6- ... ..-_.".,-^"."_....~ -..-'. , ! ; } , . } 1i ~ 1. .....,-...-.,...^"" CITY OF FAIRLAWN - SUMMIT COUNTY NOTES TO FINANCIAL STATEMENTS (Cont'd) Summary of Significant Accounting Policies: (Cont'd) c. Fund Accounting: (Cont'd) Capital Projects Funds - To account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds, special assessment funds and trust funds). . Special Assessment Funds - To account for the financing of public improvements or services needed to benefit the properties against which special assessments are levied. Fiduciary Funds.: Trust and Agency Funds - To account for assets held by. a governmental unit in a trustee capacity or as an agent for individuals, private organizations, other governmental units and/or other funds. These include (a) Expendable Trust Funds, (b) Nonexpendable Trust Funds, (c) Pension Funds and (d) Agency Funds. D. Budgetary Process: 1. Budget: A budget of estimated cash receipts and disbursements is submitted to the county auditor, 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. 2. Estimated Resources: The county budget commission certifies its actions to the City of Fairlawn by September 1. As part of this certification, the City of Fairlawn receives the official c,ertificate of estimated resources which states the projected receipts of each fund. On or about January 1 this certificate is amended to includ,e any unen- cumbered balances from the preceding year. Prior to December 31, the City of Fairlawn must revise its budget so that the total c:ontemplated êxpendi tures from any fund during ,the ensuing fiscal year wi 11 not exceed the amount stated in the certificate of estimated re:sources. The revised budget then serves as the basis for the annual appropriation measure. Estimated receipts as shown on Exhibit B do not i.nclude January 1, 1981 unencumbered fund balances. However, those, fund balances are available for appropriations shown on Exhibit C. -7- . ~-'. -,'. ~..'-"' .-~"- CITY OF FAIRLAWN - SUMMIT COUNTY NOTES TO FINANCIAL STATEMENTS (Cont'd) 1. Summary of Significant Accounting Policies: (Cont'd) D. Budgetary Process: (Cont'd) 3. Appropriations: A temporary appropriation measure to ,=ontrol cash disbursements may be passed on or about January 1 of each :rear for the period January 1 to March 31. An annual appropriation ¡nea,suremust be passed by April 1 of each year for the period January 1 to December 31. The appropriation measure may be amended or supplemented d1Jring the year as new information becomes available. Appropriations may not exceed estimated resources. ~ \, \; 4. Encumbrances: The City of Fairlawn is required to use the encum- brance method of accounting by Ohio law. Under this systeI~, purchase orders, contrac ts and other commi tments for the expendi turf! of funds are recorded in order to reserve the portion of the applicable appropria tion. E. Property, Plant and Equipment: Fixed assets acquired or constructed for general governmental !Iervices are recorded as expenditures. Depreciation is not recorded for thE!se fixed assets as the purpose of the financial statements for the general govern- mental services is to report the expenditure of resources, not costs. f' ~. Total Columns on Financial Statements: F. ¡ )~ ii Total columns on the financial statements are captioned "Memorëlndum Only" to indicate that they are presented only to facilitate financial ónalysis. This data is not comparable to a consolidation. Interfund-type elin~nations have not been made in the aggregation of this data. 2. Property Tax: >.... The City of Fairlawn's real property tax is levied each January 1st on the assessed value listed on the prior September 1st for all real property located in the government. Assessed values are established by the county auditor at 35% of current market value, and reappraisal of all property is required every six years with triennial update. The last update was completed for the tax year 1978. The assessed values per categories are as follows: Real Estate 1978 Valuation Public Utility 1978 Valuation Tangible Personal 1978 Valuation Total Valuation $ 85,208,790 2,654,100 7,310,803 95,173,693 $ -8- ¡ CITY OF FAIRLAWN - SUMMIT COUNTY NOTES TO FINANCIAL STATEMENTS (Cont'd) 2. Property Tax: (Cont'd) The city's personal property tax is determined annual tax returns filed by taxpayers with the assessed for tax purposes at varying statutory by the county auditClr based on county auditor. The~ property is percentages of cost. The tax rate to finance the city's services for the year ended Dece,mber 31. 1981 was $2.70 assessed per $1,000.00 of real estate and personal property valuation. 3. Local Income Tax: This locally levied tax of one percent applied to gross salaries, wages and other personal service compensation earned by residents both in and out Clf the City of Fair1awn and to earnings of nonresidents (except certain transients:) earned in the city. It also applies to net income of business organizations conducted within the City of Fair1awn. Tax receipts are credited to the Incc,me Tax Fund and amounted to $965,218.18 in 1981. 4. Insurance: . The city maintains comprehensive insurance coverage with private ca.rriers for . property, building contents and vehicles. Vehicle policies include, liability coverage for bodily injury and property damage. real !. 5. Retirement Commitments: t The employees of the City of Fairlawn were--covered by the Public Employees Retire- ment System of Ohio. The State of Ohio accounts for the activities: of the retire- ment system and the amount of that fund is not reflected in the acc:ompanying financial statements. As of December 31, 1981, the City of Fair1a~m's employees contributed 8.5% of their gross wages. The city matches this with a contribution equal to 13.95% of employees' gross wages. The firemen and policemen of the City of Fair1awn are covered by the Police and Firemen's Disability Pension Fund, also accounted for by the State of Ohio and also not reflected in the ac:companying financial statements. Policemen and firemen contribute 8.5% of the,ir gross wages to the plan and the city matches this with a contribution equal to 20.72% of firemen's and 15.60% of policemen's gross wages. ! J t ~ -9- -"""_'_0""_-. . JAMES A. SOLDEN DEPUTY AUDITOR THOMAS E. FERGUSON AUDITOR OF STATE CoWMBUS. OHIO 48810 RICHARt) G. NUSS DEPUTY AUDiTOR CHARLES E. MAUGJ:;R DEPUTY AUDITOR JOSEPH _I. SOMMER DEPUTY AUDITOR Mr. Lawrence W.Pelland Director of Law Members of Counci 1 City of Fairlawn Fair lawn , Ohio 44313 Re: Statutory Compliance We have examined the financial statements of the various funds, as listed in the Index of Funds, of the City of Fair lawn , Ohio as of December 31, lSi8l and have issued our audit report thereon dated June 25, 1982. Our examinati.on was made with generally accepted auditing standards and accordingly, include.d such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In the course of our examination, we (1) performed tests of compliance with the Revenue Sharing and Antirecession Fiscal Assistance Acts and regulations as required by Sections II C.3 and III C.3 of the Audit Guide and Standards for Revenue Sharing and Antirecession Fiscal Assistance Fund Recipients (Audit Guide) issued by the Office of Revenue Sharing, U.S. Department of the Treasury, and (2) compared the data on Bureau of Census Form RS-9 with the unaudited 1980 records of the City of Fairlawn, as required by Section II C.4 of the Audit Guide. Our findings are set forth below in the section entitled "Federal Revenue Sharing." For the period September 1, 1979 through December 31, compliance with various provisions of state statutes, and applicable local authority, if any. Our findings below in the appropriate sections. 1980 we performed tests of regulations and case law and citations are set fòrth Finding for Recovery: A review of recreation department collections was conducted for programs and activities held during 1981. This'review revealed that on numerous occasions monies were deposited into the treasury of the City of Fairlawn without being properly receipted by the recreation director. Also, sevêral progr,ams were found to have monies collected and receipted in excess of amounts paid into the treasury of the City of Fairlawn. The following is a list of programs where receipted collections exceeded amounts deposited into the city treasury. -10- 1.10""01100 Line toll free 1-800 - 28 2-03 70 "'t '( 1 t > J -); ¡ ¡ À' '~ , 1 1 if f .í f i :f~ t , ! ... City of Fairlawn Summit County Page -2- Finding for Recovery: (Cont'd) Program Receipts Tennis Lessons $ 119.00 Gymnastics 98.00 Sea World Trip 288.00 Cedar Point Trip 820.00 Pro Football Hall of Fame .35.00 Totals $ 1,360.00 Deposi ts To Treasury .Shortage $ 69.00 94.00 267.40 710.00 20.50 $ 50.00 4.00 20.60 110.00 14.50 $ 1,160.90 $ 199.10 Mr. Stephen Youngblood, Recreation Director, City of Fairlawn,was responsible for making all deposits to the treasury of the City of Fairlawn. Based on the foregoing facts, a Finding for Recovery is hereby returned against Mr. Stephen Youngblood, Recreation Director, and the Allstate Insurance Company, his bonding company, jointly and severally, in the amount of One Hundred Ninety- Nine Dollars and Ten Cents ($199.10) and in favor of the Treasury of the City of Fairlawn. Noncompliance Citations: 1. Section 5705.4l(B), Revised Code, prohibits a subdivision from making an expenditure unless it has been properly appropriated. The Incc)me Tax, Special Assessment Bond Retirement, Capital Improvements, StreE!t Opening Bonds and Miscellaneous Trust Funds had expenditures in excess of amounts appropriated, which was in violation of this section. 2. Section 5705.41(D), Revised Code, states that no subdivision shall make any contract or order any expenditure of money unless the certific~Lte of the fiscal officer is attached. The fiscal officer must cerit£y that the amount required to meet such a commitment has been lawfully appropriated and is in the treasury or in the process of collection to the credit of ¡¡in appropriate fund free from any previous encumbrance. 3. Section 5705.10, Revised Code, states that interest earned on investments should be distributed on a prorata basis, based on fund balance.s at the time the investment was made, unless designated by charter or ordins.nce per provisions of 1958 Attorney General Opinion 2190. This exception never applies to revenue sharing funds. -11- City of Fairlawn Summit County Page -3- Noncompliance Citations: (Cont'd) 4. Section 117.17, Revised Code, provides "A public officer or employee who collects or receives payments due the public shall deposit all public moneys received by him with. the treasurer of the taxing district once every twenty-four consecutive hours." A cash count performed on February 28, 1982 reflected income tax and police department accident reports cQllections were not deposited on a. timely basis in accordance with the aforementioned section. f \ .~, Federal Revenue Sharing: 1. Subpart F, Section Sl.lOO(c) > Revenue Sharing Regulations, requires that entitlement funds be expended in accordance with law applicable to all other revenue of the City of Fairlawn. In .the following respect, the city had not complied with this section: }- f a. Some commitments for revenue sharing money were not encumbe,red, contrary to Section S70S.4l(D), Revised Code. . .\ \ l, J ~¿ß? ~ THOMAS E. FER~ Auditor of State j \ ¡ '1; , r 1 ~ June 25, 1982 f . -12- '. , '.,," , -, JAMES A. BOLDEN DEPUTY AUDITOR THOMAS E. FERGUSON AUDITOR OF STATE CoWMB'US. OHIO 43810 RICHARD G. NUSS DEPUTY AUCliTOR . . CHARLES E. MAUGER DEPUTY AUDITOR JOSEPH J. S()MMER DEPUTY AUC'ITOR Mr. Lawrence W. Pelland Members of Council City of Fairlawn Fairlawn, Ohio 44313 Re: Management Comments and Recommendations We have examined the financial statements of the City of Fairlawn for the year ended December 31, 1981 and have issued our report thereon dated June 25, 1982. As part of our examination, we made a study and evaluation of the City of Fairlawn's system of internal accounting control to the extent we considered necessary to evaluate the system as required by generally accepted auditing standards. The purpose of our study and evaluation was to determine the nature, timing and extent of the auditing procedures necessary for expressing an opinion on the government's financial statements. Our study and evaluation was more limited than would be necessary to express an opinion on the system of internal accounting control taken as a whole. The management of the City of Fairlawn is responsible for establishing and main- taining a system of internal accounting control. . In fulfilling this r.~sponsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of a system are to provide management with reasonable, but not absolute, assurance that a:;sets are safeguarded against loss from unauthorized use or disposition and that trans- actions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordan,:e with the basis of accounting prescribed by the Bureau of Inspection and Supervi:~ion of Public Offices. Because of inherent limitations in any system of internal accounting cI)ntrol, errors or irregularities may nevertheless occur and not be detected. J~lso, pro~ jection of any evaluation of the system to future periods is subject t¡) the risk that procedures may be. inadequate because of changes in conditions or that the degree of compliance with the procedures may deteriorate. Our study and evaluation made for the limited purpose described in the first para- graph would not necessarily disclos~ all material weaknesses in the system. Accordingly. we do not express an opinion on the system of internal ac(:ounting control of the City of Fairlawn taken as a whole. However, our study ,;lnd evaluation disclosed the following conditions that we believe result in more than a relatively low risk that errors or irregularities in amounts that would be material in relation to the financial statements of the City of Fairla'~ may occur and not be detected within a timely period. -13- Inlo,...lio. Line toll Ii.. -800 - 23 2-03 70 .. , . City of Fairlawn Summit County Page -2- Purchasing: While reviewing purchasing procedures of the City of Fairlawn, we noted the following conditions: 1. Purchase orders were not being used for all purchases. 2. The purchasing function was being handled on an individual department basis. To improve the control over the purchasing function: 1. The fiscal officer should not honor requests for payment that lack his certificate of the availability of sufficient funds (purchase orders). 1 j 2. The fiscal office should establish a formal policy for purchasing. A written set of these instructions (or a manual) should be provided to department heads, who initially approve all purchases and supervise the receiving function. Departmental Collections: '. 4 We reviewed cash receipting procedures used at the City of FairlaWD's Building, Police and Recreation Departments. At each of these locations, one employee had . sole responsibility for the cashier and bookkeeping functions. The weakness of this system is that it allows for the diversion of money without sufficient documentation being available to trace its disposition. To st.rengthen control over the receiving of cash within the City of Fairlawn we recommend: 1. Receipts should be written. for all collections received by the various departments. 2. Each department should maintain a cashbook listing all receipts issued for monies collected and showing amounts deposited into the city treasury evidenced by a copy of the pay in order. Cash Receipts: In a review of procedures relating to accountability for cash assets, at December 31, 1981, we found some checks carried as outstanding had been issued over six months prior to year end. This can cause the outstanding check list to become cumbersome and thus hamper reconciliation efforts. . . -14- , ' .J ~ ~. \ ì , City of Fair1awn Summit County Page -3- Cash Receipts: (Cont'd) To improve safeguards over the cash assets of the City of Fair1awn we recommend: 1. The fin,ance director should prepare a list of and issue a stop-'order payment for all outstanding checks over six months aged. The list shot!lld show the check number, date of issue, payee, fund and amount of the chax'ge. This list should be maintained as a historical record to support any subsequent claims for these payments. 2. Each fund should be credited with the amount originally charged. Payroll Distribution: In reviewing payroll distribution procedures in effect at December 31, 1981, we noted the following conditions: 1. Distribution of paychecks is handled by payroll clerical personnel. Though we found no evidence of irregularities, this overlapping of payroll prepara- tion with distribution functions would make it possible for paychecks to be written for nonexistent employees. ' To improve controls over payroll distribution we recommend': 1. Payroll checks should be distributed by personnel not involved 'Nith payroll preparation. Those involved with the distribution duty should be rotated from time to time. Petty Cash and Change Funds: We reviewed petty cash procedures used by the City of Fairlawn at D(~cember 31, 1981. The only control by the fiscal office over petty cash was at the time of replenishment. The timing of replenishment has been left to the discretion of the fund custodians. Though we found no indication of abuse, this mann(~r of operation would make it easy for the custodians to use the funds for personal purposes. To establish proper control over the use of petty cash and change funds we recommend: 1. Outstanding cash or change funds should be turned in to the finance department at year end by the custodians for inventory and accountability purposes. 2. In addition, or as an alternative to the recommendation above, an official from the fiscal office should make periodic surprise cash counts of these funds. -15- . City of Fairlawn Summit County Page -4- Cash Receipts: While reviewing procedures involving cash receipts we noted the following conditions: 1. Mail containing receipts was being opened by a person associat,ad with accounting functions. '1 2. A list of mail receipts was not being prepared by the mail opener. 3. Deposits were not being made on a timely basis. To improve the control over the cash receipts function we recommend: 1. Mail should be opened by a person having no other accounting func tions. 2. A timely list of receipts should be prepared by the person opetLing the mail. 3. Deposits should be made on a daily basis. ~¿9~ - . THOMAS E. FERGUS¡;¡-- Auditor of State June 25, 1982 ~ .. )- ~ .~ .. -16- CITY OF FAIRLAWN - SUMMIT COUNTY CONCLUSION STATEMENT The audit report, including recommendations and citations, was reviewed with and acknowledged by the following officials on April 21, 1982: i Lawrence W. Pelland Robert H. Maxson James R. Graves Ginnie L.Singleton Ray E. Hartung Director of Finance Mayor Director of Law President of Council Assistant Finance Director " '¥ These officials were informed that they had five days from the d~lte of the post audit conference to respond to or contest in writing thE~ citations made. No such written response was received. ¡ , i ~. ,,¡ -17- " . ll'O'UoI .. EXAMINER CUTlflCATION ~or we, the undersiqned hereby certify that~ or we, have examined the books, records and accounts of the within named, Ci tv of Fairlawn Summi t Caunty, anci'ì.t. a: we, further certify that the fcreqoinq is a true and accurate summation of the same a~or we, verily believe. BUREAU OF INSPECTION AND SUPERVISION OF PUBUC OFf'ICES - STATE OF OHIO ~j),~ ~ State E~cvnine: ~q' /e~ State Exanune Timothy C. Steitz TYPIST CERTifiCATION I hereby certify that the fa:eqaiDq repert is a true and correct copy of the oriqina! report :U=::,ofl;::tmnqs::~' \/J-Lf 12J;~-r-_A~' ¡} Typist xr~'d r y~' 'K)'"). Proofreader Azea Supervisor BUREAU CERTifiCATION A true and correct copy of this repert is ffled in the Offices of the Bureau of inspec:tioa and SupervlsiOl1 of Public Offices at Colwnhus, Ohio. THE BUREAU OF INSPECTION AND SUPERVISION OF PUBLIC OFFICES -.----- By f~d~J~)43~~ ./ CIOtIr. ; K . JUL 26 1982 Dat.: -18- i'