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1993 Financial Statement JIM PETRO AUDITOR OF STATE STATE OF OHIO REPORT OF EXAMINATION CITY OF FAIRLAWN 20977-04-0427-00 REGION 3 DISTRICT 8, SUMMIT COUNTY REGULAR AUDIT JANUARY I, 1992 THROUGH DECEMBER 31, 1993 FISCAL YEAR AUDITED UNDER GAGAS: 1993 CITY OF FAIItt.AWN SUMMIT COUNTY TABLE OF CONTENTS TITLE Elected Officials Añm~n;strative Personnel Index of Funds Entity's Table of Contents Xndependent Auditor's Report Mayor's Introductory Letter Combined Balance Sheet - All Fund Types and Account Groups Combined Statement of Revenues, Expenditures, and Changes in Fund Balances - All Governmental Fund Types Combined Statement of Révenues, Expenditures, and Changes in Fund Balance, Budget (Non-GAAP) and Actual - All Governmental Funds . . Notes to Financial Statements Reports on Legal Compliance Compliance at Financial Statement Level Ohio Compliance Supplement Status of Prior Audit's Citations and Recommendations Report on Internal Control Structure Entity Level General Comments Conclusion Statement Assistant Auditor Certification .f&m. (i) (ii) (Hi) 1-2 3 4':'7 8-9 10-13 14-39 40 41-42 43 44-45 46 47 ' 48 CITY ÖF rAIRLAWN SUMMIT COUNTY 3487 SOUTH SMITH ROAD FAIRLAWN. OHIO 44333 ELECTED OFFICIALS AS OF DECEMBER 31, 1993 ELECTED OFFICIALS TITLE TERM OF OFFICE SURETY AMOUNT PERIOD Peter M. Kostoff Mayor 1/1/92 - 12/31/95 (A) $10,000 (B) James L. Swartz Council 1/1/92 - 12/31/93 (A) $10,000 (B) President Stanley J. Bielewicz Councilman 1/1/92 - 12/31/93 (A) $10,000 (B) Frances A. Miller Councilwoman 1/1/92 - 12/31/93 (A) $10,000 (B) Ginnie L. Singleton Councilwoman 1/1/92 - 12/31/93 (A) $10,000 (B) R. Richard Snader Councilman 1/1/92 - 12/31/93 (A) $10,000 (B) William F. Stalker Council-at-Large 1/1/92 - 12/31/93 (A) $10,000 (B) Robert L. Donatelli (*) Councilman 10/19/92 - 12/31/93 (A) $10,000 (B) Lawrence W. Pelland Director of 1/1/93 - 12/31/95 (A) $50,000 (B) Finance (*) replaced Richard Steichen who resigned 10/1/92 Statutory Leqal Counsel Richard E. Dobbins Director of Law 3882 Bywood Rd. Akron, Oh 44313 Other Leqal Counsel James Graves 34 Morz Blvd. Fairlawn, Oh 44313 (A) Personal Service Insurance Company (B) Covers Term (i) CITY dF FAIRLAWN SUMMIT COUNTY ADMINISTRATIVE PERSONNEL AS OF DECEMBER 31. 1993 'l'ITLE TERM OF OFFICE OR CONTRACT PERIOD SURETY AMOUNT P:E:RIOD 'l'ax Administrator patricia Bertsch 4/23/90 - Continuous (A) $50,000 (B) (A) Personal Service Insurance Company (B) Covers Term (ii) CITY OF FAIRLAwN SUMMIT COUNTY INDEX OF FUNDS GOVERNMENTAL FUND TYPES: General Fund TYPe: General Fund Special Revenue Fund TYPes: Street Construction, Maintenance, and Repair Fund State Highway Improvement Fund Permissive Tax Fund Police and Fire Pension Fund Police Training Fund Law Enforcement Trust Fund Children and Adolescent Fund Drug Law Enforcement Fund Community :mprovement Corporation Fund Recreatic~al Special Events Fund Parks and Recreation Fund Income Tax Fund Drug Enforcement and Education Fund Fire Equipment Fund Fire Equipment Fund Debt Service Fund TYPe: Bond Retirement Fund ,. ',i' Capital Pro;ects Fund TYPes: Park Capital Improvement Fund Water Sewer Extension Fund Capital Improvement Fund Sewer Improvement Fund Sewer Maintenance and Repair Fund Water Maintenance and Repair Fund FIDUCIARY FUND TYPES: Aqencv Fund TYPes: Akron Clinic Fund Perfonnance Bond Fund Mayor's Court Fund Deferred Compensation .. Fund (iii) STATE OF OHIO OFFICE OF THE AUDITOR JIM PETRO, AUDITOR OF STATE 88 East Broad Street' P.O. Box 1140 Columbus, Ohio 43;216-1140 Telephone 614-466-4515 800-282-0370 Facsimile 614-466-4490 Independent Auditor's Report Peter M. Kostoff, Mayor Members of Council 3487 South Smith Road Fairlawn; Ohio 44333 We have audited the accompanying general purpose financial statements of ~Qe City of Fairlawn as of and for the year ended December 31, 1993. These general purpose financial statements are the responsibility of the City's managem~~t. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material .misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City, as of December 31, 1993 for the year then ended in conformity with generally accepted accounting principles. December 22, 1994 fAIRLAWN ,. A CITY ON TH~ MOV~" Office or the Mayor Petelr M. Kostorr August 1. 1994 Members of Council and Residents of the City of Fairlawn: This lener and the following report represent the City of Fairlawn'scontinuing commitment toward excellence in financial reporting. These unaudited general purpose financial statements were prepared by the City's Finance Department. Responsibility for both the accuracy 'of the presented data and the completeness and fairness of the presentation, including all discl()sures, rests with the City. We believe the data as presented is accurate in all material respects. that it is presented in a manner designed to set forth fairly the financial position and results of operations of the City as measured by financial activity of its various funds, and that all disclosures necessary to enable the reader to gain maximum understanding of the City's financial activity have been included. This report will provide the ta.~payers of the City of Fairlawn with financial data in a format which will enable them to gain an understandin.g of the City of Fairlawn's financial affairs. ß-~~ Peter M. Kostoff, Mayor City of Fairlawn ... 3 LaUr3 K. c,e:orge: f.;'tt:cutive Assistant 3487 S. Smith Rd.. ralrlawn. Ohio 44333.3007 (2116) 666.8873 City of Fairlawn, Ohio Combined Balance Sheet All Fund Types and Account Groups December 31, 1993 Governmental Fund Types Special Debt Capital General Revenue Service Prc~ects Asseto; and Other Debito;' ~ssets. Equity in Pooled Cash and Cash Equivalents $2,354,312 $563,786 $153,341 $3,691,529 Cash and Cash Equivalents in Segregated Accounts 0 1,320 0 0 Receivables: Taxes 697,345 112,124 0 165,162 Accounts 1,673 3,994 0 8,832 Special Assessments 0 0 5,737,2fY2 0 Intergovernmental 49,109 12,328 0 0 Notes 0 240,000 0 0 Due from Other Funds 9,808 3,460 0 0 Materials and Supplies Inventory 88,631 1,148 .0 0 Advances Receivable 8,700 0 0 0 Funds on Deposit with Deferred Compensation Plan 0 0 0 0 Fixed Assets 0 0 0 0 Other Debito;. Amount Available in Debt Service Fund 0 0 0 0 Amount to be Provided for Retirement of General Long-Term Obligations 0 0 0 0 Total Assets and Other Debits $3.209,578 $938,160 $5.890,543 $3,865,523 Unaudited Financial Statements 4 Fiduciary Fund Type Agency Account Groups General General FIXed Long-Term Assets Obligations Totals (Memorandum Only) $81,141 $0 $0 $6,844,109 16,467 0 0 17,787 0 0 0 974,631 0 0 0 14,499 0 0 0 5,737,202 0 0 0 61,437 0 0 0 240,000 0 0 o. 13 ,268 0 0 0 89,779 0 0 0 8,700 677,243 0 0 677,243 0 7,305,382 0 7,305,382 0 0 144,641 144,641 0 0 6,524,097 6,524,097 $774,851 $7,305,382 $6,668,738 $28,652,775 Unaudited Financial Statements (Continued) 5 City of Fairlawn. Ohio Combined Balance Sheet All Fund Types and Account Groups (Continued) December 31. 1993 Governmental Fund Types Special Debt C¡lpital General Revenue Service Projects {.iabilities Fund Eq¡Ii(y and Other Credits. Liabilities' Accounts Payable $39.776 $8,692 $0 1¡J6,733 Contracts Payable 0 0 0 ][89,212 Accrued Wages 77,194 1,574 0 764 Compensated Absences Payable 2,176 0 0 0 Due to Other Funds 0 0 0 0 lntergovernmental Payable 121,520 58,076 0 433 Deferred Revenue 365,483 104,059 5,737,2Cfl 0 Retainage Payable 0 0 0 28,533 . Undistributed Moneys 0 0 0 0 Deferred Compensation Payable 0 0 0 0 Advances Payable 0 0 8,700 0 Capital Lease Obligations Payable 0 0 0 0 OPWC Loans Payable 0 0 0 0 General Obligation Bonds Payable 0 0 0 0 Special Assessment Bonds Payable with Governmental Commitment 0 0 0 0 Total Liabilities 606,149 172,401 5,745,902 255.675 Fund EquitY and Other Credil~' Investment in General Fixed Assets Fund Balances: Reserved for Encumbrances Reserved for Inventory Reserved for Advances Reserved for Notes Receivable Undesignated: Designated for Sewer Line Repair Undesignated TOtal Fund Equity and Other Credits Total Liabilities, Fund Equity and Other . Credits UTlIludited Financial Statements See Accompanying Notes to the General Purpose Financial Statements 52,452 88,631 8,700 0 256.860 2,196,786 2,603,429 $3.209,578 6 0 0 67,593 1,148 0 240,000 0 457,018 765,759 $938.160 0 0 0 .1,040,057 0 0 0 0 0 0 0 0 144,641 2.569,791 144,641 3.609,848 $5.890.543 Jl865.523 Fiduciary Fund Type Account Groups General General Totals Fixed Long-Term (Memorandum Agency Assets Obligations Only) $0 $0 $0 $85,201 0 0 0 189,212 0 0 0 79,532 0 0 157,208 159,384 13,268 0 0 13,268 0 0 0 180,029 . '4,:: 0 0 0 6,206,744 0 0 0 28,533 84,340 0 0 84,340 677,243 0 0 677,243 0 0 0 8,700 0 0 203,584 203,584 0 0 1,422,946 1,422,946 0 0 2,875,000 2,875,000 0 0 2,010,000 2.010.000 774,851 0 6,668.738 14,223.716 0 7,305,382 0 7,305,382 0 0 0 1,160,102 0 0 0 89,779 0 0 0 8,700 0 0 0 240,000 0 0 0 256,860 0 0 0 5,368,236 0 7,305,382 0 14,429,059 $774.851 $7.305.382 $6.668.738 $28.652.775 Unaudited Financial Statements 7 City of Fairlawn, Ohio Combined Statement of Revenues, Expenditures and Changes in Fund Balances All Governmental Fund Types For the Year Ended December 31. 1993 Revenues' Taxes Charges for Services Licenses, Permits and Fees Fines and ForfeitUres Intergovernmental Special assessments Interest Other Total Revenues Expendi tures. Current: General Government Security of Persons and Property Public Health Services Transportation Community Environment Basic Utility Services Leisure Time Activities Capital Outlay Debt Service: Principal Retirement Interest and Fiscal Charges Total ExpenditUres Excess of Revenues Over (Under) Expendirures Other Financing Sources (Uses). Proceeds from Discounted Bonds Proceeds from OPWC Sale of Fixed Assets Sale of InfrastructUre Operating Transfers In Operating Transfers Out Total Other Financing Sources (Uses) Excess of Revenues and Other Financin~ Sources Over (Under) ExpenditUres and Other Financing Uses Fund Balances (Deficit) Beginning of Year Increase in Reserve for Inventory Fund Balances End of Year Unaudited Financial Statemellls See Accumpanying Notes to the General Purpose Financial Statements 8 Governmental Special Revenue General $3,610,609 39,514 239,188 111.035 725,809 0 191,937 58,646 4,976,738 $149,194 89,461 24,997 40,930 199,184 0 0 35,149 538,915 1,051,151 0 1,842,998 285,891 69,754 0 558,109 263,548 65,981 0 129,490 0 23,792 152,571 0 0 0 0 0 0 3,741.275 702,010 1.235,463 (163,095) 0 0 0 0 2,275 0 0 0 0 99,885 (472,018) 0 (469,743) 99.885 765,720 (63,210) 1,827,484 829,018 10,225 (49) $2,603.429 $765,759 Fund Types Totals Debt Capital (Memorandum Service Projects Only) $0 $1,254,322 $5,014,125 0 234,327 363,302 0 46,904 311,089 0 0 151,965 0 193,766 1,118,759 180,481 0 180,481 0 0 191,937 ',$J. 0 50,239 144.034 180,481 1,779,558 7,475,692 0 0 \'051,151 0 0 2,128,889 0 0 69,754 0 0 821,657 0 0 65,981 0 0 129,490 0 0 176,363 0 2.299,753 2,299,753 60,000 31,828 91,828 136,226 307,226 443,452 196,226 2,638,807 7,278,318 (15,745) (859,249) 197,374 0 2,798,799 2,798,799 0 511,336 511,336 0 0 2,275 0 1,727,643 1,727,643 156,443 522,133 778,461 0 (306.443) (778.461) 156,443 5.253,468 5.040.053 140,698 4.394.219 5.237,427 3.943 (784,371) 1,876,074 0 0 10,176 $144.641 $3.609.848 $7.123,677 Unaudited Financial Statements 9 a,!.1J II\I!IIII(¡:': I ~ City of Fairlawn. Ohio Combined Statement of Revenues, Expenditures and Changes in Fund Balances Budget (Non-GAAP) and ActUal All Governmental Fund Types For the Year Ended December 31. 1993 I R~venues' Taxes Charges for Services Licenses. Permits and Fees Fines and ForfeitUres Intergovernmental Special Assessments Interest Other Total Revenues Expendirures' Current: General Government Security of Persons and Property Public Health Services Transportation Community Environment Basic Utility Services Leisure Time Activities Capital Outlay Debt Service: Principal Retirement Interest and Fiscal Charges Total ExpenditUres Excess of Revenues Over (Under) Expenditures Other Financing Sources (Uses)' Advances In Advances Out Proceeds from Discounted Bonds Proceeds from Notes Proceeds from OPWC Sal~ of Fixed Assets Sale of InfrastructUre Operating Transfers In Op~rating Transfers Out Total Other Financing Sources (Uses) I Excess of Revenues and Other Financing Sources Qver ("Cnder) ExpenditUres and Other Financing Uses !I Fund Balances Beginning of Year (J nexpended Prior Year Encumbrances 'I Fund Balanc~s End of Year Unaudited Financial Statements General Fund Variance Revised Favorable Budget ActUal (Unfavorable) $3,126,699 $3,553,659 $426,960 4.696 38.414 33,718 224.000 239.188 15.188 69.462 109,664 40.202 336.070 774,361 438.291 0 0 0 66,155 190.632 Il24,477 0 58.398 58,398 3.827,082 4.964.316 U37,234 1,244.930 1.094.916 150.014 1,929.722 1.856.676 73.046 72.895 69,754 3,141 589.730 548.553 41,177 82,573 65.981 16.592 147,226 123.610 23,616 25,934 23,825 2,109 0 0 0 0 0 0 0 0 0 4.093,010 3.783,315 :309,695 (265,928) 1.181.001 1.446,929 0 11,300 11 ,300 0 0 0 0 0 0 0 0 0 0 0 0 0 2.275 2.275 0 0 0 0 0 0 (134,518) (472.018) (337.500) (134.518) (458.443) (323.925) (400.446) 722.558 l,\23.oo4 1.416.047 lA16.047 0 136.123 136.123 0 $1.151.724 $2.274.728 $1.123.004 10 Special Revenue Funds Debt Service Fund Variance Variance Revised Favorable Revised Favorabll: Budget Actual (Unfavorable) Budget Actual (Unfavorab~ $161.571 $149,479 ($12,092) $0 $0 $0 85,689 85,467 (222) 0 0 0 19,367 24,997 5,630 0 0 0 38,500 40,489 1,989 0 0 0 198,221 211,566 13,345 0 0 0 0 0 0 221,000 180,481 (40;$19) 0 0 0 0 0 0 29.500 35,149 5,649 0 3,635 3,635 532,848 547,148 14,300 221.000 184,116 (36,!!.§1l 0 0 0 0 0 0 477,260 452,017 25,243 0 0 0 0 0 0 0 0 0 328,652 291,419 37,233 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 177,646 153,003 24.643 0 0 0 0 0 0 0 0 0 0 0 0 8,960,023 8,960,000 23 0 0 0 328,097 328,097 0 983,558 896,439 87,119 9,288.120 9,288.097 23 (450,710) (349,292) 101,419 (9,067,120) (9,103.981) (36,861) 0 0 0 0 0 0 0 0 0 (11,300) (11,300) 0 0 0 0 2,826,876 2,798,799 . (28,077) 0 0 0 4,575,444 4,530,000 (45,444) 0 0 0 0 0 0 0 30,000 30,000 0 0 0 0 0 0 0 0 41,76r 99,885 99,885 0 1,927,643 1.915,880 0 0 0 0 0 99.885 129,885 30,000 9.318.663 9.233.379 E6t;ffl) (350.825) (219,407) 131,419 251,543 129,398 (98.619) 535.986 535,986 0 23.943 23,943 0 180.386 180,386 0 0 0 0 $365.547 $496.966 $131.419 $275,486 $153.341 (.$9.8-,~ Unaudired Financial Statements (Continued) 11 City of Faitlawn. Oliio Combined Statement of Revenues. ExpeoditUres and Changes in Fund Balances Budget (Non-GAAP) and Actual AU Governmental Fund Types (Continued) For the Year Ended December 31, 1993 Capital Projects Funds Variance Favorable (Unfavorable) Revised Budget Revenues' Taxes Charges for Services Licenses. Permits and Fees Fines and ForfeitUres Intergovernmental Special Assessments Interest Other Total Revenues $1,302,500 201,000 20,000 0 1,634.555 0 0 42,000 3,200,055 EJI;pendirnres' CUITent: General Government Security of Persons and Property Public Health Services Transponation Community Environment Basic Utility Services Leisure Time Activities Capital Outlay Debt Service: Principal Retirement Interest and Fiscal Charges Total ExpenditUres Excess of Revenues Over (Under) 0 0 0 0 0 0 0 3.654.934 ExpenditUres 0 201.211 3,856.145 . (656.090) Other Financing Sources (Uses)' Advances In Advances Out Proceeds from Discounted Bonds Proceeds from Notes Proceeds from OPWC Sale of Fixed Assets Sale of infrastructUre Operating Transfers In Operating Transfers Out Total Other Financing Sources (Uses) Excess of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses Fund Balances Beginning of Year 'C nexpeoded Prior Year Encumbrances Fund Balances End of Year Unaudited Fincmcial Statements See Accompanying Notes to the General Purpose FiM/ldal Statements 12 0 0 0 0 511.336 0 0 150,000 (2.065.880) (1,404.544) (2.060.634) 2.328.367 1.183.370 $1.451.103 Actual $1,308,546 234,327 46.335 0 298,266 0 0 50,239 1,937,713 0 0 0 0 0 0 0 3,457,110 0 201.211 3.658.321 (1.720.608) 0 0 0 0 511.336 0 1.727,643 522.133 (2.065.880) 695.232 (1.025.376) 2.328.367 1.183.370 $2.486.361 $6,046 33,327 :26,335 0 (1,336,289) 0 0 8,239 (1,262,342) 0 0 0 0 0 0 0 197.824 0 0 Jl97.824 (1.064.518) 0 0 0 0 0 0 1.727,643 372.133 0 2.099.776 1.035.258 0 0 $1035.258 Totals (Memorandum Only) Variance Favorable (Unfavorable) Revised Budget $4,590.770 291.385 263.367 107.962 2.168.846 221,000 . 66.155 71.500 7.780.985 ActUal $5.011,684 358.208 310.520 150.153 1.284.193 180.481 190,632 147,421 7.633.293 $420,914 66,823 47.153 42,191 (884.653) (40.519) 124,477 75.921 (147.693) ,..",,,' 1.244.930 . 1.094,916 150,014 2.406.982 2,308,693 98.289 72.895 69,754 3,141 918.382 839.972 78.410 . 82.573 65,981 16,592 147.226 123,610 23,616 203.580 176,828 26.752 3.654,934 3,457,110 197,824 8,960.023 8.960.000 23 529,308 529.308 0 18.220.833 17.626,172 594,661 (10.439,848) (9,992,880) 446.969 0 I 1,300 11,300 (11.300) (11.300) 0 2,826.876 2,798,799 (28,077) 4.575.444 4.530.000 (45.444) 511.336 511,336 0 0 32,275 32.275 0 1.727.643 1,727.643 2,177,528 2,537.898 383.896- (2.200.398) (2.537,898) (337.500) 7.879,486 9.600,053 1,144.0n (2.560.362) (392.827) 2.191.0õ1 4.304.343 4.304.343 C [,499.879 1.499.879 0 $3.243.860 $5.411.395 $2,191.061- Unaudired Financial Statements 13 CITY OF FAIRLA WN Notes to the General Purpose Financial Statements December 31, 1993 The City of Fairlawn (the "City") is a charter municipal corporation established and ope:rated 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. A. Reoortin, Entitv In evaluating how to define the City for financial reporting purposes, management has considered all agencies, departments, and organizations making up the City of Fairlawn (the primary government) and its potential component units consistent with Governmental Accounting Standards Board Statement No. 14 "The Financial Reporting Entity." The City's reporting entity did not significantly change as a result of implementing this statement, 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 thesè services are provided by a legally separate organization; therefore, these operations are included in the primary government. Component units are legally separate organizations for which the City is financially accountable. The City is financially accountable for an organization if the City appoints a voting majority of the organization's governing board and (1) the City is able to signifi(;antly influence the programs or services performed or provided by the organization; or (2) the City is legally entitled to or can otherwise access the organizations resources; the City is legally obligated or has otherwise assumed the responsibility to finance the deficits of, or provilde.. financial support to, the organization; or the City is obligated for the debt of the organization. Component units may also include organizations for which the city issues debt, levies tiXes or determines the budget. The following potential component units have been excluded from the City's financial statements; All are legally separate from the City. None imposes a financial burden elr provide a financial benefit to the City. The City cannot significantly influence the operations of these entities: CoplylFairlawn City School District Tþe members of the Board of Education of the School District are elected by the vote11l within the School District. The Board is a body politic and corporate, capable of suing, contracting, and possessing, acquiring, and disposing of real property. The Board controls its own operations and budget. 14 CITY OF FAIRLA WN Notes to the General Purpose Financial Statements December 31, 1993 Summit County Public Library The library is a distinct political subdivisions of the State of Ohio governed by a board of trUStees appointed by the Summit County Commissioners. The board of trustees possesses its own contracting and budgeting authority, hires and fires personnel, does not depend on the City for operational subsidies and the Summit County Commissioners serve as the taxing authority. . B. Basis of Presentation - Fund A.ccountinl! The City uses funds and account groups to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain City functions or activities. A fund is defined as a fiscal arid accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and change therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. An account group is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect the net expendable available financial resources. Governmental Fund Type Governmental funds are those through which most governmental functions of the City are financed. The acquisition, use and balances of the City's expendable financial resources and .. the related current liabilities (except those accounted for in proprietary funds and trust funds) are accounted for through governmental funds. The following are the City's governmental fund types: . General Fund - this fund is the operating fund of the City and is used to account for all financial resources expect those required to be accounted for in another fund. Th~~ general fund balance is available to the City for any purpose provided it is expended or transferred according to the general laws of Ohio. . Special Revenue Funds - these funds are established to account for the proceeds of specific revenue sources (other than amounts relating to major capital projects) that are legally restricted to expenditure for specified purposes. . Debt Service Fund - this fund is used to account for the accumulation of resources for, and the payment of, general and special assessment long-term debt principal, interest, and related costs. 15 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1993 . Capital Projects Funds - these funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities. Fiduciary Fund Types Fiduciary funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governmental units and/or other funds" there are two types of fiduciary funds, trust and agency. The City has no trust funds. The City's agency funds are purely custodial (assets equal liabilities) and thus do not involve measurement of results of operations. Account Groups To make a clear distinction between fixed assets related to specific funds and those of general government, and between long-term liabilities related to specific funds and those of a general nature, the following account groups are used: . General Fixed Assets Account Group - this account group accounts for all general f1xed assets of the City. . General Long-Term Obligations Account Group - this account group accounts for ~Lll unmatured long-term indebtedness of the City, including special assessment debt for which the city is obligated in some manner. NOTE 2 - SUMMARY OF SIGNIFICAID' ACCOT.!NfING POLICIES , ., The significant accounting policies followed in the preparation of these financial statements are summarized below. These policies conform to GAAP for local governmental units as prescribed in the statements issued by the Governmental Accounting Standards Board and other recOgnized authoritative sources. A. Measurement Focus and Basis of Accounting The accounting and reporting treatment applied to a fund is determined by its measurement focus. All governmental funds types are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and CUITent liabilities are generally included on the balance sheet. Operating statements of these fun.ds present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. 16 CITY OFFAIRLAWN Notes to the General Purpose Financial Statements December 31, 1993 Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made. All governmental fund types and agency funds are accounted for using the modified accIual basis of accounting. Under this basis, revenues are recognized in the accounting period when they become measurable and available. Measurable means the amount of the transaction can be determined and available means collectable within the current year or soon enough thereafter to be used to pay liabilities of the current year. The available period for the City is thirty-one days after year end. In applying the susceptible to accrual concept under the modified accrual basis, the following revenue sources are deemed both measurable and available: . Investment earnings . State levied locally shared taxes (including gasoline tax) . Fines and forfeitures . Income tax withheld by employers The City reports deferred revenues on its combined balance sheet. Deferred revenues arise when a potential revenue does not meet both the measurable and available criteria for recognition in the current period. In the subsequent period, when both revenue recognition criteria are met, the liability for deferred revenue is removed from the combined balancl~ sheet and revenue is recognized. Current and delinquent property taxes measurable as of December 31, 1993, whose availability is indeterminate and which are not intended to finance current period obligations, have been recorded as a receivable and deferred revenue. Levied sp,ecial assessments are measurable, and have been recorded as a receivable. Since all assessme:nts are due outside of the available period, the entire amount has been deferred. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable. Principal and interest on general long-term obligations are recorded as fund liabilities when due or when amounts have been accumulated in the debt service fund for payments to be made early in the following Y~If. The costs of accumulated unpaid vacation and sick leave are reported as fund liabilities in the . period in which they will be liquidated with available financial resources rather than in 1the period earned by employees. Allocations of cost, such as depreciation and amortizatioIll, are not recognized in the governmental funds. 17 CITY OF FAIRLA WN Notes to the General Purpose Financial Statements December 31, 1993 B. Budgetary Process 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 appropriation ordinance, 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. All funds, other than agency funds and the Community Improvement Corporation special revenue fund, are legally required to be budgeted and appropriated. Budgetary information for the Community Improvement Corporation special revenue fund is not reported because it is not included in the entity for which the "appropriated budget" is adopted, and does not itself maintain budgetary financial records. The legal level of budgetary control is at the object level within each department. Any budgetary modifications at this level may ,only be made by resolution of the City Council. . Tax Budget At the first City council meeting in July, the Mayor presents the annual operating budget for the following fiscal year to City council for consideration and passage. The adopted budget is submitted to the County Auditor, as Secretary of the County Budget Commission, by July-20 of each year, for the period January I to December 31 of the following year. 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 October I. As part of this certification, the City receives the clfficial certificate of estimated resources, which states the projected revenue of each fund. Priclr to December 31, the City must revise its budget so that the total contemplated expenditure:s 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 appropriation ordinance. On or about January I, the certificate of estimated resources is amended to include unencumbered fund balances at December 31 of the preceding year.. The certificate may be further amended during the year if the Finance Director determines, :and the Budget Commission agrees that an estimate needs to be either increased or decreased. The amounts reported on the budgetary statements reflect the amounts in the final amended <official certificate of estimated resources issued during 1993. 18 CITY OF FAlRLA WN Notes to the General Purpose Financial Statements December 31, 1993 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 I to December 31. The appropriation ordinance ftxes 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 allocation of appropriations among the departments and objects within a fund may be modified during the year by an ordinance of Council. During the year, several supplemental appropriation measures were passed. None of these supplemental appropriations had any signiftcant affect on the original appropriations. The budget ftgures which app~:ar in the statement of budgetary comparisons represent the ftnal appropriation amounts, incl\Jlding all amendments and modifications. Encumbrances As part of formal budgetary control, purchase orders, contracts, and other commitments for the expenditure of moneys are recorded as the equivalent of expenditures on the non-GAAP budgetary basis in order to reserve that portion of the applicable appropriation and to determine and maintain legal compliance. The Ohio Revised Code prohibits expenditu(i¡~s plus encumbrances from exceeding appropriations at the fund, department and object level. On the GAAP basis, encumbrances outstanding at year end are reported as reservations of fund balances for subsequent year expenditures for governmental funds. Lapsing of Appropriations At the close of each year, the unencumbered balance of each appropriation reverts to th4~ respective fund from which it was appropriated and becomes subject to future appropriations. the encumbered appropriation balance is carried forward to the succeeding year and is not reappropriated. C. Cash and Cash Equivalents Cash received by the City is pooled in a central bank account. Moneys for all funds arl~ maintained in this account or temporarily used to purchase short term investments. Individual fund integrity is maintained through City records. Each fund' s interest in the pooled b2mk account is presented as -equity in pooled cash and cash equivalents- on the balance shec~t. During 1993, investments were limited to overnight repurchase agreements and interest in STAR Ohio, the State Treasurer's Investment Pool. These investments are stated at CO!¡t which approximates market, except for investments in deferred compensation, which are repoll"ted at 19 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1993 market value.. Investment procedures are restricted by the provisions of the Ohio Revised Code. The City has segregated bank accounts for moneys held separate from the City's central bank account. These interest bearing depository accounts are presented in the combined balance sheet as .cash and cash equivalents in segregated accounts- since they are not required to be deposited into the City treasury. Refer to Note 6, Deposits and Investments For presentation on the combined balance sheet, investments with an original maturity of three months or less and cash and investments in the cash management pool are considered to be cash equivalents. Investments with an original maturity of more than three months are reported as investments. D. Inventorv Inventories of governmental funds are stated at cost. For all funds, cost is determined on a fIrst-in, fIrst-out basis. The costs of inventory items are recorded as expenditures in the governmental fund type when purchased. Reported materials and supplies inventory is equally offset by a fund balance reserve in the governmental fund which indicates that it does not constitute available expendable resources even though it is a component of net current assets. E. Fixed Assets and Depreciation General fIxed assets are not capitalized in the funds used to acquire or construct them. Instead, capital acquisition and construction are reflected as expenditures in governmenull funds, and the related assets are reported in the general fIXed asset group. All purchased fIxed assets are valued at cost when historical records are available and at an estimated historical cost when no historical records exist. Donated fIXed assets are value:d at their estimated fair market value on the date received. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Improvements are capitalized. Public domain (infrastructure) general fIXed assets consisting of roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems are not capitalized, as these assets are immovable and of value only to the government. Assets in the general fixed assets account group are not depreciated. 20 CITY OF FAIRLA WN Notes to the General Purpose Financial Statements December 31, 1993 F. Compensated Absences Codification of Governmental Accounting and Financial Reporting Standards Section C60.lOS specifies that a liability should be accrued for leave benefits that meet the following conditions: 1. The employer's obligation relating to the employee's rights to receive compensati,on for future absences is attributed to employee's service already rendered. 2. The obligation relates to rights that vest or accumulate. 3. Payment of the compensation is probable. 4. The amount can be reasonably estimated. For governmental funds, the City records a liability for accumulated unused vacation time when earned for all employees with more than one year of service. The City records a liability for accumulated sick leave in the period the employee becomes eligible to receive payment. The current portion of unpaid compensated absences is the amount expected tQ be recorded in the account "compensated absences payable" in the fund from which the employees who have accumulated unpaid leave are paid. The remainder is reported in the general long-term obligations account group. G. Inteifand Assets/Liabilities During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivable and payable are classified as "due from other funds" or "due to other funds". Long-term interfund loans are classified as "advances receivable/payable" on the balance sheet. . H. Fund Eauitv Reserves represent those portions of fund equity not available for appropriation, expendIture, or legally segregated for a specific future use. Designated fund balances are reserved for encumbrances, inventory, advances, and notes receivable. A designated fund balance has been established for sewer line repairs. L Interrand Transactions Quasi-external transactions are accounted for as revenue and expenditures. Transactions that constitute reimbursements to a fund for expenditures initially made from it that are properly applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the fund that is reimbursed. Nonrecurring or non-routine permanent transfers of equity are reported as residual equilty transfers. All other interfund transfers are reported as operating transfers. 21 , CITY OF FAJRLA WN Notes to the General Purpose Financial Statements December 31, 1993 J. Lonv-term Oblitlation9 Long-term debt is recognized as a liability of a governmental fund when due, or when resources have been accumulated in the debt service fund for payment early in the following year. For other long-term obligations, only that portion expected to be financed from expendable available financial resources is reported as a fund liability of a governmental fund. The remaining portion of such obligation is reported in the general long-term obligatioru; account group. Under Ohio law, a debt retirement fund must be created and used for the payment of alJ debt principal and interest. GAAP require the allocation of the obligations liability among appropriate funds and the general long-term obligations account group, with principal and interest payments on matured special assessment bonds payable being reported in the debt service fund. To comply with GAAP reporting requirements, the City's debt retirement fund has been split among the appropriate funds and account group.' Debt service fund resoulrces . used to pay both principal and interest have also been allocated accordingly. K. Total Columns on General Pur:pose Financial Statements Total columns on the General Purpose Financial Statements are captioned memorandum only to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or cash flows in conformity with genera1ly accepted accounting principles (GAAP). Neither is such data comparable to a. consolidation. Interfund elimination have not yet been made in the aggregation of this data. NOTE 3 - BUDGETAR~ ACCOUNTING While reporting financial position, results of operations, and changes in fund balance on the GAAP basis, the budgetary basis as provided by law is based upon accounting for trans:ictions on a basis of cash receipts, disbursements, and encumbrances. The Combined Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget (Non-GAAP) and Actual - All Governmental Fund Types is presented on the budgetary basis to provide a relevant comparison of actual results with the budget and to demonstrate compliance with state statute. 22 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1993 The major difference between the budget basis and the GAAP basis are as follows: 1. Revenues recorded when received in cash (budget) as opposed to when susceptilble to accrual (GAAP). 2. Expenditures are recorded when paid in cash (budget) as opposed to when the liability is incurred (GAAP). . 3. Outstanding year end encumbrances are treated as expenditures (budget) rather than as a reservation of fund balance for governmental fund types (GAAP). 4. Proceeds from and principal payment on short term note obligations are reported on the operating statement (budget) rather than on the balance sheet (GAAP). The following table summarizes the adjustments necessary to reconcile the GAAP basù; statements to the budgetary basis statements on a fund type basis: Special Debt Capital General Revenue Service Pr~jects GAAP Basis $765,720 ($63,210) $140,698 $4,394,219 Revenue Accruals (12,422) 8,233 0 161,789 Advances In 11,300 0 0 0 Repayment of Note 0 30,000 0 0 Proceeds of Note 0 0 4,530,000 0 Proceeds of Bond 0 0 2,798,799 (2,798,799) Transfers in for Debt 0 0 1,759,437 0 Repayment ' .. Revenue for Debt 0 0 3,635 (3,635) Repayment Expenditure Accruals 21,677 (123,672) 0 '377,526 Advances Out 0 0 (11,300) 0 Debt Principal Retirement 0 0 (8,900,000) 0 Debt Interest and Fiscal 0 0 (191,871) (191,871) Charges Transfer Out for Debt 0 0 0 (1,7:59,437) Payment Encumbrances (63,717) (70,757) 0 (1,205,168) Budget Basis $722,558 ($219,406) $129,398 ($1,025,376) 23 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1993 N TE 4 - FUND DEFI IT The following funds had a deficit fund balance as of December 31, 1993: Police and Fire Pension Special Revenue Fund Sewer Maintenance and Repair Capital Projects Fund Deficit Fund Balance $41,156 433 These fund deficits arose due to the recognition of accrued liabilities. The general fund is liable for any deficit in these funds and provides operating transfers when cash is requirc~d, not when accruals occur. NOTE 5 - DEPOSITS AND INVESTMENTS Statues require classifications of the moneys held by the City into three categories. Category One consists of "active" moneys, those moneys required to be kept in a "cash" or -near-cash" status for immediate use by the City. Such moneys must be maintained eiùter as cash in the City treasury or in depository accounts payable or withdrawalable on demand, including negotiable order of withdrawal (NOW) accounts. Category Two consists of "inactive" moneys, those moneys not required for use within the current two year period of designation of depositories. Inactive moneys may be deposited or invested only as certificates of deposit maturing not later than the end of the current period of. designation of depositories. Category Three consÍsts of "interim" moneys, those moneys which are not needed for immediate use but which will be needed before the end of the current period of designation. Interim moneys may be invested or deposited in the following securities provided they mature or are redeemable within two years from the date of purchase: 1. Bonds, notes, or other obligations of or guaranteed by the United States, or those for which the faith of the United States is pledged for the payment of principal; and interest. 2. Bonds, notes, debentures, or other obligations or securities issued by any fedelëtl government agency, or the Export-Import Bank of Washington. 3. Repurchase agreements in the securities enumerated above. 4. Interim deposits in the eligible institutions applying for interim moneys. 5. Bonds and other obligations of the State of Ohio. 6. The State Treasurer's investment pool (STAR Ohio). 24 CITY OF FAIRLA WN Notes to the General Purpose Financial Statements December 31, 1993 NotWithstanding the foregoing requirements, the City may invest any moneys not required to be used for a period of six months in the following classes of investments: 1. Bonds or other obligations of the United States, or those for which the faith of thf~ United States is pledged for the payment of principal and interest. 2. Discount notes of the federal national mortgage association. 3. Bonds issued by the home owners' loan corporation. 4. Bonds of the State of Ohio. S. Bonds of any municipal corporation, village, county, township, or other political subdivision of the state, as to which there is no default of principal, interest, or coupons. Protection of the City's cash and investments is provided by the Federal Deposit Insuran<:e Corporation (FDIC) as well as qualified securities pledged by the institution holding the assets. By law, financial institutions may establish a collateral pool to cover all public deposits. The face value of the pooled collateral must equal at least 110 percent of public funds deposited. Collateral is held by trustees including the Federal Reserve Bank and designated third party trustees of the financial institutions. City Deposits At year end, the carrying amount of the City's deposits was ($136,453) and the bank balance was $83,119. The entire bank balance was covered by the federal depository insurance. City Investments GASB Statement Number 3 "Deposits with Financial Institutions, Investmènts (including; Repurchase Agreements), and Reserve Repurchase Agreements" requires the City to catf~gorize investments to give an indication of the level of risk assumed by the City at year end. Category One includes investments that are insured or registered or are held by the City or its agent in the City's name. Category Two includes uninsured and unregistered investments which are held by the counterparty's trust deposit or agent in the City's name. Category Three includes uninsured and unregistered investments which are held by the counterparty's tnJlst department or agent but not in the City's name. STAR Ohio and Deferred Compensation are unclassified investments since they are not evidence by securities that exist in physical or book form. 25 CITY OF FAIRLA WN Notes to the General Purpose Financial Statements December 31, 1993 Repurchase Agreement Investment in State Treasurer's Investment Pool (STAR Ohio) Deferred Compensation Total Investments 1 $0 Category 2 3 $0 $4,881,877 Carrying Value $4,881,877 Market Value $4,881,877 2,116,472 2,116,472 677 ,243 $7,675,592 677,243 $7,67.5,592 The classification of cash and cash equivalents, and investments on the combined financial statements is based on criteria set forth in GASB Number 9. Cash and cash equivalents are defined to include investments with original maturities of three months or less and cash and investments of the cash management pool. A reconciliation between the classifications of cash and investments on the combined financial statements and the classification per GASB Statement Number 3 is as follows: GASB Statement 9 Investments Which are Part of a Cash Management Pool: Repurchase Agreement STAR Ohio GASB Statement 3 Cash and Cash Equivalents/Deposits $6,861,896 Investments - $677,243 , (4,881,877) (2,116,472) ($136,453) 4,881,877 2,116,472 $7,675,592 NOTE 6 - PROPERTY TAXES Property tax includes amounts levied against all real and public utility property, and tangible personal (used in business) property located in the City. Real property taxes were levied after October 1, 1992, on the assessed value as of January I, 1992, the lien date, and were collected in 1993. Assessed values are established by State law at 35 percent of appraised market value. All property is requked to be revalued every six years. Public utility property taxes received . in 1993 attached as a lien on December 31, 1991, were levied after October 1992 and are collected with real property taxes. Public utility property taxes were assessed on tangible personal property at 88 percent of true value. 1993 tangible personal property taxes were 26 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31. 1993 levied after October 1. 1992, on the value listed as of December 31. 1992, and were collected in 1993. Tangible personal property assessments are 2S percent of true value. The asSe:5Sed value upon which the 1993 taxes were collected was $165,004,537. Real estate represented 87 percent ($142,780,590) of this total, public utility tangible personal property representedl3 percent ($4,522,050) of this total and general tangible personal propeny represented 10 percent ($17,701,897) of this total. The full tax rate for all City operations applied to talXable property for the year ended December 31, 1993 was $2.70 per $1,000 of assessed valua1tion. Real and public utility 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 or later payment dates to be established. Tangible personal propeny taxes paid by multi-county are due September 20. Single colllnty taxpayers may pay annually or semi-annually. If paid annually, payment is due April 30. If paid semi-annually, the first payment is due April 30 with the remainder payable by September 20. The County Treasurer collects property tax on behalf of all taxing districts within the County. The Count Auditor periodically remits to the taxing districts their portions of the taxes collected. Accrued propeny taxes receivable represents delinquent taxes outstanding and real propE:rty, public utility, and tangible personal propeny taxes which became measurable as of Dece:mber 31, 1993. However, since these tax collections will not be received during the available: period nor are they intended to finance 1993 operations, the receivable is offset by a credit to deferred revenue. . . NOTE 7 - RECEIVABLES Receivables at December 31, 1993, consisted of taxes, accounts (billings for user chargc~ service), special assessments, interest, notes (sale of land to developer) and intergovernmental receivable arising from grants, entitlements, and shared revenues. Accounts, taxes, special assessments, interest, and intergovernmental receivables are deemed collectable in full. 27 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1993 A summary of the principal items of intergovernmental receivables is as follows: Intergovernmental Receivable General Fund: Local Government Tax Estate Tax Building, Permit and Fees Immobilization Fee Total General Fund Special Revenue Funds: Gasoline Tax Motor Vehicle Motor Vehicle Permissive Total Special Revenue Funds Total NOTE 8 - INCOME TAX Amount $19,138 16,828 13,043 100 49,109 9,378 2,054 896 12,328 $61,437 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 businf:sses operation within the City. Residents of the City are granted a credit up to 2 percent fOlr taxes paid to other municipalities. . Employers within the City are required to withhold income tax on employee compensaltion 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. By City ordinance, income tax proceeds are credited as follows: the generaJl fund receives 90 percent and capital improvements fund receives 10 percent of the fu:st 1.5 percent of the 2 percent income tax. The capital improvements fund receives the remaining .5 percent of the income tax. 28 CITY OF FAIRLA WN Notes to the General Purpose Financial Statements December 31, 1993 NOTE 9 - mE..D ASSETS A summary of changes in the general fIXed assets group is as follows: Balance Balance January 1,1992 Additions Deletions December 31,]l993 . Land $1,283,351 $1,875 $0 $1,285,226 Land Improvements 1,188,138 0 0 1,188,138 Buildings 2,257,320 0 0 2,257,320 Machinery and Equipment 1,398,296 89,749 91,473 1,396,572 Vehicles 901,628 279,940 131,024 1,050,544 Construction in Process 0 127,582 0 127,582 Total $7,028,733 $499,146 $222,497 $7,305,382 During 1993, the City sold water and sewer lines to the City of Akron. This sale is reflel:ted as .sale of infrastructure" on the City's financial statements. NOTE 10 - RISK MANAGEMENT The City is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets, errors, omissions, injuries to employees and natural disasters. During 1993, the City contracted with Wichert Insurance Service, Incorporated for property and general liability insurance, including boiler and machinery. Police and professionalliabilit:y are protected by the National Casualty Company with a $1,000,000 limit and a $10,000 deductible. A commercial umbrella policy through International Insurance Company provides additional general liability and auto liability insurance up to a $6,000,000 limit. Vehicles are covered by Personal Service Insurance Company and hold a $500 deductible for collision. Automobile liability coverage has no limit for collision, a $1,000,000 limit for bodily injury and a $1,000,000 limit for uninsured motorist. Settled claims have not excl~eded this commercial coverage in any of the past four years. Volunteer Fireman's Insurance Services covers Fireman and EMT professional liability with a limit of $1,000,000 and no deductible. The City pays the State Worker's Compensation system a premium based on a rate per $100 of salaries. This rate is calculated based on accident history and administrative costs. .29 CITY OF FAIRLA WN Notes to the General Purpose Financial Statements December 31, 1993 - N TE 11- DEFINED BENEFIT PEN I A. Mlk..Prnplôvee 8Mfrement System All City of Fairlawn full-time employees, except non-administrative full-time uniformed police officers and firemen, participate the Public Employees Retirement System ("System"), a cost-sharing multiple-employer public employee retirement system created by the State. The payroll for employees covered by the System for the year ended December 31, 1993 was $1,107,375, the City's total payroll was $2,233,837. All employees, except non-administrative full-time police officers and firemen, are required to be members of the System. Those students working less than 1,500 hours per calendar y ~ar for the school, college, or university they attend have an option to exempt themselves from membership. Benefits fully vest upon reaching five years of service and are established by state statute. Employees may retire at any age with thirty years of service, at age sixty with a minimum of five years of credited service, and at age fifty-five with a minimum of twenty-five years of service. Those individuals retiring with less than thirty years of service or less than age sixty-five receive reduced retirement benefits. Eligible employees are entiùed to a retirement benefit, payable monthly for life, equal to 2.1 percent of their final average salary for each year of credited service up to thirty years. Employees are entitled to 2.5 percent of their final average salary over the highest three years of earnings. Contribution rates are statutorily authorized and actuarially determined. Covered employees are required by statue to contribute 8.5 percent of their salaries to the plan. The total 1993 employer contribution rate for local government employers is 13.55 percent of covered payroll; 8.44 percent was the portion used to fund the pension obligations. This statutory.rate is identical to the actuarially determined rate. The difference between the total employer rate and the portion used to fund pension obligations was the amount used to fund the health lcare program for retirees. The retirement contribution requirement for the year ended December 31, 1993 was $187,589 which consisted of $93,462 from the City and $94,127 from the City as an employee benefit; these contributions represented 8.44 percent and 8.5 percent of the covered payroll respectively. House Bil1151 was passed by the legislature in October 1993. Under this bill, the two month probation of PERS retirant to return to work will increase to six month beginning Febru:ary 9, 1994. If the re-employed retirant elects to receive both the retirant allowance and a salary for the re-employment period, the employer must provide the retirants primary health coverage if it is available to employees in comparable positions. H.B. 151 also provides than elected official who runs for re-election will be penalized for retiring with an effective benefit date which occurs between 31 days before the election and 31 days after the new term begirni. If this does occur, the elected official will forfeit the new term of office if re-elected. There were 30 CITY OF FAIRLA WN Notes to the Generaì Purpose Fil1år1cial Statements December 31, 1993 no other changes in actuarial assumptions, benefit provisions, actuarial funding methods or other significant factors during 1993. The .pension benefit obligation. is a standardized disclosure measure of the present value of credited projected benefits, adjusted for the effects or projected salary increases and su:p-rate benefits, estimated to be payable in the future as a result of the employee's service datc~. The measure is intended to help users assess the System's funding status on a going-concem basis, assess progress made in accumulating sufficient assets to pay benefitS when due, and make comparisons among PERS and employers. The System does not make separate measulrementS of assetS and pension benefit obligations for individual employers. The pension benefit obligation at December 31, 1992 (the latest date for which information is available) for the System as a whole, determined through an actuarial valuation performed as of that datc~, was $21,579 million. The System's net assetS available for benefitS on that date were $20,783.2 million, leaving and unfunded pension benefit obligation of $795,8000 thousand. The City contribution represented .01 percent of total contributions required of all participating entities. Historical trend information showing the System's progress in accumulating sufficient assetS to pay benefits when due is presented in the System's December 31, 1993 comprehensive: annual financial report. B. Police and Firemen's Disabüity and Pension All City of Fairlawn non-administrative full-time uniformed police officers and fireme:n participate in the Police and Firemen's Disability and Pension Fund ("System"), a cost sharing multiple-employer public employee retirement system created by the State. This is a single retirement system with one administration that provides retirement benefitS to two classes pf employees. The payroll for employees covered by the System for the year ended December 31, 1993 was $681,961 for police and $298,933 for firemen; the City's total payroll was $2,233,837. The System operates under the authority of the Ohio Revised Code Chapter 742. The System provides pension, disability, and health care benefitS to qualified police and firemen and survivor and death benefitS to qualified spouses, children, and dependent parents, whem due. All non-administrative full-time uniformed police officers and f11'emen are required to be members of the System. Members partially vest after fifteen years of service and fully vest after twenty-five years of service credit. Members are eligible for normal retirement benefits at age forty-eight with twenty-five years of service credit or at age sixty-two with fiftl~n years of service credit. The normal retirement benefit is equal to 2.5 percent of annual earnings for each of the f11'st twenty years of service, 2 percent for each of the next five years of service and 1.5 percent for each year thereafter; however, this normal retirement benefit is not to exceed 72 percent of the member's average annual earnings for the three years during which the total earnings were greatest. Retirement with reduced benefits is available to members 31 CITY OF FAIRLA WN Notes to the General Purpose Fil'lartcial Statements December 31, 1993 with fifteen years of service credit at the later age of forty-eight or twenty-five years from the date the member became a qualified employee. The reduced benefit is equal to 1.5 perccmt of the average annual salary multiplied by the number of complete years of service. The Ohio Revised Code Chapter 742 provides statutory authority for employee and employer contributions. Actuarially contribution rates as a percentage of covered payroll for the year ended December 31, 1993 were as follows: Determined Acwarially by Statue Determined Police Firemen Police Firemen not not Employee Contribution Rate 10.00% 10.00% available available not not Employer Contribution Rate 19.50 24.00 available available 29.50 34.00 33.78 34.18 Less Portion to Fund Health Care (Actuarially Determined) (6.50) (6.50) (7.51) (7.51) Contribution Rate to Fund Pension Obligations 23.00% 27.50% 26.66% 25.63% Actual contributions, actual contributions as a percentage of covered payroll and the actuarially determined contribution amount for the year ended December 31, 1993 were as follows: Amount Statutory Employee Contribution Paid by Employer Statutory Employer Contribution Portion to Fund Health Care Total Statutory Contribution Actuarially Determined Contribution $68,196 132,982 (44,327) $156,851 $181,811 .32 Police Percentage of Covered Payroll 10.00% 19.50 (6.50) 23.00% 26.66% . Amount Fire Percentage of Covered Payroll $29,893 71,744 (19,431) $82,206 $76,616 10.00% 24.00 (6.50) -- 27.50% -- -- 25.63% -- -- CITY OF FAIRLA WN Notes to the General Purpose Firiâncial Statements December 31, 1993 Although this schedule indicates that the actuariaUy determined contribution rate for empJioyers is greater than the statuary contribution for police, no liability has been recognized since no demand for additional contributions has been made by the System and since an alternate s:ource of funding, other than increased employer contributions, may be found. The "pension benefit obligation" is a standardized disclosure measure of the present valU€~ of pension benefits, adjusted for the effects of projected salary increases and step-rate benefits, estimated to be payable in the future as a result of the employee's service date. The measure, which is the actuarial present value of credited projected benefits, is intended to help users assess the System's funding status on going-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among the System and employees. The System does not make separate measurements of assets and pension benefit obligations for individual employers. The pension benefit obligation at January I, 1993 (the latest date for which information is available) and net assets available for benefits for the System as a whole, determined through actuarial valuation as of that date are as follows (in thousands): Pension Benefit Obligation Net Assets Available for Benefits Unfunded Pension Obligation Police $2,879,800 2,252,100 $627,700 Fire $2,253,000 1,775,400 $477,600 Total $5,132,800 4,027,500 $1,105,300 : We are presenting separate assets and obligation amounts for police and fire since the System establishes distinct contribution rates. The total pension benefit obligation and net assets available for benefit figures apply to the police and fire plan as a whole. .. The City's police and fire contributions represented .09 percent and .07 percent of total contributions required of all participating entities, respectively. Historical trend information showing the System's progress in accumulating sufficient assets to pay benefits when due is presented in the System's December 31, 1993 audited financial statements. 1S0~ 12- POST EMPLOYMENT ~FITS A. PubUc Employees Retirement Svstem The Public Employees Retirement System of Ohio provides postretirement health care coverage to age and service retirants with ten or more years of qualifying Ohio service c:redits. Health care coverage for disability recipients and primary survivor recipients is availabll~. .33 CITY OF FAIRLA WN Notes to the General Purpose Financial Statements December 3l, 1993 A portion of each employer's contribution to the System is set aside for the funding of the post retirement health care based on the authority granted by State statute. The employer contribution rate was 13.55 percent of covered payroll. 5.l1 percent was the portion that was used to fund health care in 1993. Benefits are advance funded using the entry age normal cost method. Significant actuarial assumptions include a rate of return on investments of 7.55 percent, active employee payroll increases of 5.25 percent for inflation and between zero and 5.10 percent based on additional annual pay increases. Health care premiums were assumed to increase 5.25 percent annually. Short-term securities consisting of commercial paper and U.S. treasury obligations are cårried at cost. Equity securities and investments in real estate are carried at cost. Fixed income: investments are carried at amortized cost, using the effective interest rate method of amortization. All investments are subject to adjustment for market declines judged to be other than temporary. For actuarial valuation purposes, assets are judged to reflect 25 percent of unrealized market appreciation or depreciation on investment assets. The number of active contributing participating was 347,937 as of December 31,1993. The City's actual contribution for 1993, which was used to fund postemployment benefits, was $56,587. The actual contribution and the actuarially required contribution are the same. Net assets available for payment of benefits as December 31, 1992 (the last date for which information is available) were $5,604.5 million. The actuarially accrued liability and thC~ unfunded actuarial accrued liability was $7,039.8 and $1,435.3 million, respectively. B. Police and Firemen's (Jisabüity Pension Fund , The Police and Firemen's Disability and PenSion Fund provides postretirement health care. coverage to any person who receives or is eligible to receive a monthly benefit check or is a spouse or eligible depended child of such person. An eligible dependent child is any child under the age of eighteen whether or not the child is attending school or under the age of twenty-two if attending school full-time or on a two-thirds basis. The Ohio Revised Code Chapter 742 provides the authority allowing the System's board of trustees to provide hc~lth care coverage and states that health care costs paid from the System shall be included in the contribution rate. The contribution rate for Police is 19.50 percent and Firemen is 24.00 percent of covered payroll of which 6.5 percent was applied to the postemployment health care program. Health care funding and accounting is on a pay-as-you-go basis. The number of participants eligible to receive health care benefits as of December 31, 1993 is 15,945 for policemen and 13,365 for firemen. The City's actual contributions for 1993 that were used to fund postemployment benefits were $44,327 for Police and $19,431 for firemen. The fund's total health care expenses for the year ended December 31, 1993 was $67,419,506. 34 CITY OF FAIRLA WN Notes to the General Purpose Financial StatementS December 31, 1993 A.'pefen-ed Compensation Plans City employees and elected officials participate in a statewide deferred compensation plan created in accordance with Internal Revenue Code 457. Participation is on a voluntary payroll deduction basis. The plan permitS deferral of compensation until future years. According to the plan, the deferred compensation is not available to employees until termination, retÌIement, death or unforeseeable emergency. All amountS of compensation deferred under the plan, all property and rightS purchases with those amountS, and all income attributable to those amounts, property, or rightS are (until paid or made available to the employee or other beneficiary) solely the property and rightS of the City (without being restricted to the provisions of benefitS under the plan), subject only to the claims of the City's general creditors. Participants' rightS under the plan are equal to those of general creditors of the City in an amount equal to the faÌI market value of the deferred account for each participant. The Plan Agreement states that the City, Ohio Public Employees Deferred Compensation Board, and Aetna Life Insurance and Annuity have no liability for losses under the plan with the exception of fraud or wrongful taking. As of December 31, 1993, the amount of deposit with the Ohio Public Employees Deferred Compensation Board and Aetna Life Insurance and Annuity were $2,836 and $674,407 respectively. B. 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 pelr years, depending upon length of service. Vacation accumulation is limited to one year. 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. Sick leave accumulation is limited to ninety days, provided that any person who was a City employee on July 6, 1984, who has accumulated any number of sick days between ninety and 120, may accumulate in a time bank up to a total of 180 days, upon retirement such employee will be paid for the total number of days accumulated up to, but not to exceed the amount of time accumulated on July 6, 1984. As of December 31, 1993, the total liability for unpaid compensated balances was $159,384. NOTE 14 - CAPITALIZED T .RASES - T ,RSSEE DISCLOSURE In prior years the City entered into capitalized leases for the acquisition of radio equipment. Each lease meetS criteria of a capital lease as defined by FASB Number 13 "Accounting for Leases", which defines capital leases as one which generally transfers benefitS and risks, of .35 CITY OF FAIRLA WN NoteS to the General Purpose Fihancial Statements December 31, 1993 ownership to the lessee. Capital lease payments have been reclassified and are reflected ;15 debt service in the general purpose financial statements for the governmental funds. These expenditures are reflected as program/function expenditures on a budgetary basis. General fixed assets acquired by lease have been capitalized in the general fixed assets account grloup in an amount equal to the present value of the future minimum lease payments at the time of acquisition. A corresponding liability was recorded in the generallong-tenn obligations account group. The following is a schedule of the future long-term minimum lease payments required uI1lder the capital leases and the present values of the minimum lease payments as of December 31, 1993: . . Year Ending Amount $51,428 51,428 51,428 51,428 51,428 1994 1995 1996 1997 1998 Total Minimum Lease Payment Less Amount Representing Interest Present Value of Minimum Lease Payments 257,140 (53,556) $203,584 .36 CITY OF FAIRLA WN Notes to the General Purpose Financial Statements December 31, 1993 NOTE 15 - LONG-TERM OBLIGATIONS Long term obligations of the City as of December 31, 1993 were as follows: Balance Balance December 31, 1992 Additions Deletions December 31, 1993 1991 Special Assessment Various Purpose $2,070,000 $0 $60,000 $2,01.0,000 1993 General Obligation Bonds 0 2,875,000 0 2,875,000 OPWC Loans Payable 911,610 511,336 0 1,422,946 Capital Leases 235,412 0 31,828 203,584 Compensated Absences 162,958 47,964 53,714 157,208 Total General Long-Term Debt $3,379,980 $3,434,300 $145,542 $6,668,738 During 1993, the City issued $2,875,000 in general obligation bonds. These bonds were. issued at a discount of $76,201. These bonds will be paid from income taxes receipted into the capital projects fund. The special assessment bond and will be paid from the procef:ds of special assessments levied against benefited property owners. OPWC loans will be paid in part from proceeds of special assessments levied against benefited property owners and in p~Lrt from income taxes receipted into the capital projects fund. In the event that a property owner would fail to pay the assessment, payment would be made by the City. Compensated absence~¡ reported in the "compensated absences payable" account will be paid from the fund from which the employees' salaries are paid. Capital leases are paid for revenues of the capital improvement capital projects fund. 37 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 3 L. 1993 Principal and interest requirements to retire long-term obligations outstanding at Decemb~:r 31, 1993 are as follows: Year Ending 1994 1995 1996 1997 1998 1999 - 2003 2004 - 2008 2009 - 2013 2014 - 2018 Total SpeciaL Assessment Bonds $L96,740 198,500 199,860 200,800 196,375 995,388 986,090 594,550 ° $3,568,303 NOTE 16 - NOTE DEBT General Obligation Bonds $240,403 237,743 239,608 236,008 237,208 1,189,401 1.194,793 1,190,838 0 $4,766,002 OPWC $15.899 165.636 165,636 165,636 165,636 528,443 453.510 453,508 90,702 $2,204,606 Total $453,()42 601,879 605,104 602,444 599,219 2,713,232 2,634,:393 2.238,:896 90,702 $10,538,911 The City's note activity, including amounts outstanding. interest rates and the purpose f(Jlr which the note was issued is a follows: Balance Balance December 31,1992 Additions Deletions December 31,1993 Water/Sewer Extension 3.6% $4,370,000 $0 $4,370.000 $0 Water/Sewer Extension 2.73 % 0 4,530,000 4,530,000 0 Total $4,370,000 $4,530,000 $8,900,000 $0 There were no notes outstanding for the year ended December 31, 1993 As of December 31, .1993. the City had outstanding contractual commitments of $327.629 for the sewer improvements capital projects fund. 38 CITY OF FAIRLA WN Notes to the General Purpose Financial Statements December 31, 1993 Interfund balance at December 31, 1993, consist of the following: General Fund Child and Adolescent SAEF Special Revenue Fund Mayor's Court Agency Fund Total Due From $9,808 Due To $0 3,460 0 $13,268 0 13,268 $13,268 General Fund Debt Service Fund Total Advances Receivable $8,700 0 $8,700 Advances Payable $0 8,700 $8,700 NOTE 19 - NTINGENCIE A. Grants The City received financial assistance from federal and state agencies in the form of grallts. The disbursements of funds received under these programs generally requires compliance with 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 adverse opinion on the overall financial position of the City as of December 31, 1993. B. Litigation The City of Fairlawn is party to legal proceedings. The City management is of the opinion that ultimate disposition of these claims and legal proceedings will not have a material e:ffect, if any, on the financial condiûon of the City. 39 STATE OF OHIO OFFICE OF THE AUDITOR 88 East Broad Street . P.O. Box 1140 Columbus, Ohio 43":16 -1140 Telephone 614-466-4515 800-282-0370 JIM PETRO, AUDITOR OF STATE Facsimile 614-466-4490 Peter M. Kostoff, Mayor Members of Council 3487 South Smith Road Fairlawn, Ohio 44333 Re: Compliance at the Financial Statement Level We have audited the general purpose financial statements as of and for the year ended December 31, 1993, and have thereon dated December 22, 1994. of the City of Fairlawn issued our report We conducted our audit in accordance with generally accepted auditing standards and Government Auditinq Standards, issued by the Comptroller General of the, United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. Compliance with laws, regulations, contracts. and grants applicable to the City of Fairlawn is the responsibility of City of Fairlawn's management. As pa%:t of obtaining reasonable assurance about whether the general purpose financial statements are free of material misstatement, we performed tests of the City of Fairlawn's compliance with certain provisions of laws, regulations, contrac:ts, and grants. However, the objective of our audit of the general purpose fiILancial statements was not to provide an opinion on overall compliance wi th such provisions. Accordingly, we do not express such an opinion. The results of our tests indicate that, with respect to the items tested, C:ity of Fairlawn complied, in all material respects, with the provisions referred t;o in the preceding paragraph. with respect to items not tested, nothing came tCI our attention that caused us to believe that City of Fairlawn had not complied. in all material respects, with those provisions. This report is intended for the information of management and City Council.. However, this report is a matter of public record and its distribution is not limited. PETRO of State December 22, 1994 -40- STATE OF OHIO OFFICE OF THE AUDITOR JIM PETRo, AUDITOR OF STATE 88 East Broad Stre!t P.O. Box 1140 Columbus, Ohio 43216-1140 Telephone 614-466-4515 800-282-0370 Facsimile 614-466-4490 Peter M. Kostoff, Mayor Members of Council 3487 South Smith Road Fairlaw.n, Ohio 44333 Re: Ohio Compliance Supplement Report We have audited the general purpose financial statements of City of Fairla.w.n as of and for the year ended December 31, 1993, and have issued our report th~reon dated December 22, 1994. We have applied procedures to test City of Fairlawn's compliance with prov~sions of laws and regulations that the Auditor of State has determined to be significant as a matter of public policy, public stewardship, or public accountability, as identified in the Auditor of State's Ohio Compliance Supplement, revised December 5, 1992, for the period January 1, 1992 through December 31, 1993. OUr procedures were limited to the tests of compliance described in the .Q!:¡.io Compliance Supplement and to related audit procedures associated with the objectives of these tests. These procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on City of Fairlawn's compliance with the requirements listed in the preceding paragraph. Accordingly, we do not express such an opinion. With respect to items not tested, nothing came to our attention that caused us to believe that City of Fairlawn was not materially in compliance with those .. requirements. However, the results of our procedures disclosed instances of noncompliance with those findings, which are described below. Although these items do not have a material effect on the financial statements, we regard them as reportable conditions because of the public policy, public stewardship, and public accountability issues involved. We also performed the audit procedures described in Auditor of State Audit Bulletin 92-003 designed to identity certain procurements subject to applicable competitive bidding requirements, and we applied procedures to test the City's compliance with those requirements. The results of our procedures indicate that, for the items tested, the City complied with these applicable competitive .bidding requirements. except as described below. This report is intended for the information of management and City Council. However, this report is a matter of public record and its distribution is :not limited. -41- CITY OF FAIRLAWN SUMMIT COUNTY STATUS OF PRIOR AUDIT'S CITATIONS AND RECOMMENDATIONS '!'he prior audit report, as of December 31, 1991, included various citatioIU¡ and recommendations. Each of these has either been satisfied, corrected or is reflected. again in the appropriate section of this report. Such citations and recommendations are indicated with an asterisk (*). -43- STATE OF OHIO OFFICE OF THE AUDITOR 88 East Broad Street P.O. Box 1140 Columbus, Ohio 43216-1140 Telephone 614-466 -4515 800-282-()370 JIM PETRO, AUDITOR OF STATE Facsimile 614-466-4490 Peter M. Kostoff, Mayor Members of Council 3487 South Smith Road Fairlawn, Ohio 44333 Re: Internal Control Structure We have audited the general purpose financial statements as of and for the year ended December 31, 1993, and have thereon dated December 22, 1994. of the City of Fairlawn issued our report We conducted our audit in accordance with generally accepted auditing standards and Government Auditinq Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. In planning and performing our audit of the general purpose financial statements of the City, for the year ended December 31, 1993, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on the internal control structure. . ~e City's management is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgmet1ts by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of general purpose financial statements in accordance with gene:rally accepted accounting principles. Because of inherent limitations in any internal control structure, errors o:r irregularities may nevertheless occur and not be detected. Also, projectioJIl of any evaluation of the structure to future periods is subject to the risk th!lt procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. For the purpose of this report, we have classified the significant internal control structure policies and procedures in the following categories: Cash Investments Receipts Disbursements Debt Budgetary -44- City of Fairlawn Summit County Internal Control Report Page -2- . For all of the internal control structure categories listed above, we obtained an understanding of the design of relevant policies and procedures and whetheJ~ they have been placed in operation, and we assessed control risk. We noted certain matters involving the internal control structure and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control structure that, in our judgment, could adversely affect the entity's abilil~y to record, process, summarize, and report financial data consistent with the assertions of management in the general purpose financial statements. Deposits Review of deposits revealed that.money was not always deposited.withthe Finance Department every twenty four hours. While reviewing Zoning Department receipts it was noted that the secretary did not make pay-ins with the .Finance Department on a daily basis. Money was ]~eld from seven to ten days before being deposited with the Finance Department. We performed a cash count on December 12, 1994 of moneys held by the Zoning Department for seven days and found $3,610 in cash and checks. It is recommended that every collection point outside the. Finance Department deposit collections every 24 hours with the Finance Department. This will lower the risk of money being misplaced or taken. Also, this will aid the City in reporting its true daily receipts. I \1\ \\\\ . i,~\¡\ ~ A material weakness is a reportable condition in which the design or operation of one or more of the specific internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material to the general purpose financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned or statutory functions. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses as defined above. However, we believe the reportable condition described above is not a material weakness. This report is intended for the information of the management and City C01Jnsel. However, this report is a matter of public record and its distribution is not limited. December 22, 1994 -45- CITY OF FAIRLAWN SUMMIT COUNTY GENERAL COMMEN'l'S Although the accompanying financial statements reflect activity and balances through December 31, 1993, the Auditor of State's office conducted a cash count on December 12, 1994. Limited audit procedures also were conducted up to this date and such procedures are reflected in the audit working papers. The City's personnel were generally cooperative and available for questions and assistance during regular working hours. .. -46- CITY OF FAIRLAWN SUMMIT COUNTY CONCLUSION STATEMENT The audit report, including citations and recommendations, was reviewed with and acknowledged by the following officials on December 22, 1994: Member of Council: Stanley J. Bielewicz Peter M. Kostoff Mayor: Director of Finance: Lawrence W. Pelland Assistant Director of Finance: patricia Bertsch These officials were informed that they had five working days from the dat~e of the post audit conference to respond to, or contest, in writing, the contE~ts of this report. No such written response was received during the five day pE!riod. -47- ASSISTANT AUDITOR CERTIFICATION we, the 1 ndersigned hereby certify ~hat I, or we, have audited the 0 Gl' County, in accordance with generally accepted government auditing standards (GAGAS). 0 It or we, the undersigned hereby certify that It or we, have audited the . County, in accordaILce with Rule 117-8:.03 of the Ohio Administrative Code (NON-GAGAS). DEPARTMENT OF AUDIT Auditor of State of Ohio ~kf!w.~ Assistant Auditor (oJ) )- <J(~,J7. ~ Assistant Auditor ~~ ~ '4Gl-: Assistant Auditor ~ ~~~ Ass ant Auditor Date:~ - J.q -?.5 , Signed: JjJIlJf)I.af; f.¡(1IJJ fJ¿~ Typist . CLERK'S CERTIFICATION A true and correct copy of this report is filed in the Office of the Auditor of State in Columbus, Ohio. . By: Date: MAR 0 11995 -.4.~- AUD-4753 (Revised 8/92)