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1994 Financial StatementCity of Fairlawn, Ohio. General Purpose Financial Statements For the Year Ended December 31, 1994 /~~~q Compiled By: City of Fairlawn Finance Department \~ H 1 O/ CITY OF FAIRLAWN TABLE OF CONTENTS TITLE PAGE Table of Contents (i) Elected Officials and Administrative Personnel 11 Index of Funds ;? Report of Independent Acccuntants ;l Combined Balance Sheet -All Fund, Types and Account Groups ~l Combined Statement. of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types ES Combined Statement of Revenues, Expenditures and Changes in Fund Balances - Budget (Non-GAAP) and Actual -All Governmental Fund Types 11) Notes to the General Purpose Financial Statements 1~4 Report of Independent Accountants on Compliance at the Financial Statement Level 3!3 Report of Independent Accountants on the Internal Control Structure at the Entity Level M] Contusion Statement 42 CITY OF FAIRLAVdN SUMMIT COUNTY 3487 SOUTH SMITH ROAD FAIRLAWN.OHIO 44333 ELECTED OFFICIALS AND ADMINISTRATIVE PERSONNEL AS OF DECEMBER 31.1994 Elected Officials Title Term of Office Suretv Amount Period Peter Kosloff Mayor 1/1/92 - 12!31/95 (A) $10,000 (B) James Swartz Council President 1/1/94 - 12!31/95 (A) $10,000 (B) David Effler Council-at-Large 111/94- 12/31/95 (A) $10,000 {B) Stanley Bielewicz Councilman 1/1/94- 12/31/95 (A) $10,000 (B) Robert Donatelli .Councilman 1/1194- 12/31/95 (A) $10,000 (B) Frances Miller Councilwoman 1/1/94- 12/31/95 (A) $10,000 (B) Ginnie Singleton Councilwoman 1/1/94-12/31/95 (A) $10,000 (B) R. Richard Snader Councilman 1 /1/94-12131195 (A) $10,000 (B) Lawrence Pelland Director of Finance 1!1!92 -12/31/95 (A) $50,000 (B) Administrative Personnel Pairiraa Bertsch_ Assistant Finance Director N/A (A) $50,000 (B) Leoal Counsel Richard Dobbins Director of Law 3882 Bywood Dr. Akron, Ohio 44313 James Graves 34 Merz Blvd. Fairlawn, Ohio 44333 (A) Personal Service Insurance Company (B) Concurrent with Tenn 1 CITY OF FAIRlAWN SUMMIT COUNTY INDEX OF FUNDS GOVERNMENTAL FUND TYPES: General Fund Special Revenue Fund Tvoes: Street Construction, Maintenance and Repair Fund State Highway Improvement Fund Permissive Tax Fund Police Training Fund ChildreNAdolescent Fund Recreation Special Events Fund Parks and Recreation Fund Income Tax Fund Enforcement and Education Fund Fire Equipment Fund Sewer Maintenance and Repair Fund Sewer Self Insurance Fund Water Maintenance and Repair Fund Towing Franchise Fee Fund Debt Service Fund Tvoe: Bond Retirement Fund Capital Project Fund Tvoes: Park Gapital Improvement Fund Water/Sewer Extension Fund Capital Improvement Fund Sewer Improvement Fund Capital Reserve Fund FIDUCIARY FUND TYPES: Anencv Fund Tvoes: Various Escrow Fund Street Opening Deposit Fund Performance/Landscape Deposit Fund Police Pension Fund Fire Pension Fund Law Enforcement Trust Fund Drug Law Enforcement Fund Furtherance of Justice 2 \\1~ STATE OF OHIO OFFICE OF THE AvnrrOR JIM I'E11tO, ASIDTTOR OF STATE The Honorable Mayor and City Council Members City of Fairlawn, Ohio 3487 South Smith' Road Fairlawn, Ohio 44333 wort of Indeeendent Accountants 66 East Broad Sheet P.O. Boz 1140 Columbus, Ohio 43216-1140 Telephone 614~4664!i14 800-282-0370 Facsimile 614~4GG-4490 We have audited the accompanying general purpose financial statements of City of Fairlawn, Ofiio, as of and for the year ended December 31, 1994. These general purpose financial statements are the responsibility of the City's management. 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 and Government Auditino Standards, issued by the Comptroller General of the United States. Those standards reiquire that we plan and perform the audit to obtain reasonable assurance about whether the general propose 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 aud'R 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#or ouropinion. In our opinion, the general purpose finahcial statements referred to above present fairly, in all material respects, the financial position of City of Fairlawn, Ohio, as of December 31, 1994, and the results of its operations for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued a report dated Juiy 13,. 1996 on cur consideration of City of Fairlawn's internal control structure, and a report dated July 13, 199Ei on its compliance wittylatc~and regulations. July 13, 1996 3 City of Fairlawn, Oleo Combined Balance Sheet All Fund Types and Account Groups December 31, 1994 o r nA Other Dehits• Assets Equity in Pooled Cash and Cash Equivalents Cash and Cash Equivalents in Segregated Accounts Receivables: Taxes Accounts Special Assessments Intergovernmental Notes Materials and Supplies Inventory Advances Receivable Funds on Deposit with Deferred Compensation; Plans Fixed Assets OLer Dehitc• Amount Available in Debt Service Fund Amount to be Provided for Retiremem of General Long-Term Obligations Total Assets and Other Debits Governmental Fund Types Special Debt Capital General Revenue Service Proiects $3,184,269 $864,081. 0 0 703,712 3,713 0 158,709 95,110 12,000 115,312 .6,792 0 12,428 180,000 .3,993 0 0 0 0 0 0 0 0 0 $83,146. $3,376,924 0 0 0 155,012 0 254,702 5,667,036 0 9 43,471 0 0 0 A 0 0 0 0 0 0 0 0 0 0 $4,157.513 $1,182.606 $5,750.182 $3.830.109 4 Fiduciary Fund Type Account. Groups General General Totals Fixed Long-Term (Memorandum Agency Assets Obligations Only) $58,951 $0 $0 $7,567,371 4,695 0 0 4,695 0 0 0 974,036 0 0 0 265,207 0 0 0 5,667,036 0 0 0 214,608 0 0 0 180,000 0 0 0 99,103 0 0 0 12,000 776,983 -0 0 776,983 0 7,394,862 0 7,394,862 0 0 71,146 71,14b 0 0 6,664,355 6,664,355 $840,629 $7,394,862 $6.735.,501 $29.891,402 (Continued) 5 City of Faiilawti, Ohio Combined Balance Sheet All Fund Types and Account Groups (Continued) December 31,.1994 Governmental Fund Types Special Debt Capital General Revemre Service Projects i .iabjli ie4. F and d , nd Other Credit s: i.iahilities: Accounts Payable $79,554 $17,414 $0 $5,640 Contracts Payable 810 13,475 0 124,183 Acciued Wages 94,242 2,644 0 0 Compensated Absences Payable 5,606 0 0 0 Imergovermnental Payable 135,040 66,070 0 110,548 Deferred Revenue 387,955 110,841 5,667,036 244,525 Retainage Payable 0 0 0 6,001 Undistributed Moneys 0 0 0 0 Deferred Compensation Payable 0 0 0 0 Advances Payable 0 0 12,000 0 Capital Lease Obligations Payable 0 0 0 0 OPWC Loans Payable 0 0 0 0 General Obligation Bond Payable 0 0 0 0 Special Assessment Bond Payable with Governmental Commitment 0 0 0 0 Total Liabilides 703,207 210,444 5,679,036 490,897 >~ and ii and Other Credits: Investmem in General Fixed Assets 0 0 0 0 Fund Balances: Reserved for Encumbrances 64,003 60,185 0 688,707 Reserved for Inventory 95,110 3,993 0 0 Reserved for Advances 12,000 0 0 0 Reserved for Notes Receivable 0 180,000 0 0 Undesignated: Designated for Sewer Line. Repair 240,060 0 0 0 Undesignated 3,043,133 727,984 71,146 2,650,505 Total Fund Equity and Other Credits 3,454,306 972,162 71,146 3,339,212 Total Liabilities, Fund Equity and Other Credits $4.157,513 $1,182,606 $5.750.182 $3.830.109 See Accompanying Notes to the General Purpase Financial Starenaents 6 Fiduciary Fund Type Account Groups General General Totals Fixed Long-Term (Memorandum Agency Assets Obligations Only) $0 $0 $0 $102,608 0 0 0 138,468 0 0 0 96,886 0 0 413,448 419,054 0 0 0 311,658 0 0 0 6,410,357 0 0 0 6,001 63,646 0 0 63,646 776,983 0 0 776,983 0 0 0 12,000 0 0 169,107 169,107 0 0 1,422,946 1,422,946 0 0 2,780,000 2,780,000 0 0 1,950,000 1,950,000 840,629 0 6,735,501 14,659,714 0 7,394,862.. . 0 7,394,862 0 D 0 812,895 0 0 0 99,103 0 0 0 12,000 0 0 0 180,000 0 0 0 240,060 0 0 -0 6,492,768 0 7,394,862 0 15,231,688 $840,629 $7,394,862 $6.735.501 $29,891,402 7 City of Fairlawn, Ohio Combined Statement of Revemtes> Expenditures and Changes in Fund Balances All Governmemal Fund Types For the Year Ended December 31, 1994 Governrental _ Speci~rl General Revenue RrvPnn_e_e•_ Taxes ~ $3,710,683 Charges for Services 34,976 Licenses, Permits and Fees 258+302 Fines and Forfeitures 120,209 Intergoverrnnental 838,653 Special Assessments 0 Interest. 288,101. ConttibutionslDonations 0 Other 33,439 Total Revenues 5,284,363 F_..xngnditnree Current: General Government Security of Persons and Property Public Health Services Transportation Community Environment Basic Utility Services Leisure Time Activities Capital Outlay Intergover~aental Debt Service: Principal Retirement Interest and Fiscal Charges Total Expenditures Excess of Revenues Over (Under) Expenditures (hh~r Fina_ncan¢ o ~r c c cl: Sale of Fixed. Assets Operating Transfers In Operating Transfers Out Total Other Financing Sources (Uses) Excess of Revenues and Other Financing Sources Over (ilnder) Expenditures and Other Financing Uses Fund Balances Beginning of Year, asRestated-Note 5 Increase in Reserve for Inventory Fund Balances End of Yeaz 1,202,840 2,039,237 69,332- 658,365 4,436 88,793 23,714 0 0 0 0 4,086,717 1,197,646 $172,692 189..246 30,512 77,098 226,913 0 0 43,575 11,422 751,458 33P~,112 0 196,377 1.,320 9].,098 19?1,125 0 0 0 0 8215,032 (7,9,574 0 0 0 111,000 (360,548) 0 (360,548) 111,000 837,098 36,426 2,610,729 932,891 6,479 __2,845 $3,454306 $Y"2~162 See Accompanying Notes to the General Purpose Financial Statements Fund T ypes Totals Debt Capital (Memorandum Service Projects Only) $0 $1,538,385 $5,421,760 0 108,648 332,870 0 72,388 361,202 0 D 197,307 0 546,681 1,612,247 304,964 0 304,964 0 0 288,101 0 0 .43,575 0 3,099- 47,960 304,964 2,269,201 8,609,986 0 0 1,202,840 0 0 2,377,349 0 0 69,332 0 0 854,742 0 0 5,756 0, 0 179,891 0 0 222,839 0 2,381,995 2,381,995 0 110,548 110,548 60,000 129,477 189,477 153,839 162,354 316,193 213,839 2,784,374 7,910.962 91,125 (515,173) 699,024 0 34,800 34,800 0 556,868 667,868 (157,320) - (150,000) (667,868 (157,320) 441,668 34,800 (66,195) (73,505) 733,824 137,341 3,412,717 7,093,678 0 0 9,324 $71,146 $3,339,212 $7,836.826 9 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 Yeaz Ended December 31, 1994 General Fund Vaziance Revised Favorable Budget Actual (Unfavorable) Revenuer_ Taxes $2,909,778 $3,726,788. $817,010 Charges for Services 7,500 35,326 27,826 Licenses, Permits and Fees 178,800 258302 79,502 Fines and Forfeitures 11Q,000 127,544 17,544 .Intergovernmental 390,950 729,053 338,103 Special Assessments 0 0 0 Interest 100,000 274,124 174,124 Contributions/Donations 0 0 0 Other 500 33,522- 33,022 Total Revenues 3,697,528 .5,184,659 1,487,131 Expenditures: 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 Chazges Total Expenditures Excess of Revenues Over (Under) Expenditures Other Fiinancine Sources (l sell: Advances In Advances Out Sale of Fixed Assets Operating Transfers In Operating Transfers Out Total Other Financing Sources (Uses) Excess of Revemtes and Other Financing Som-ces Over (Under) Expenditures and Other Financing Uses Fund Balances Beginning of Yeaz. Unexpended Prior Year Encumbrances 1,364,162 2,117,438 76,000 692,185 26,000 99,730 25,921 0 0 0 4,401,436 (703,908) 1,240,663 2,053,885 69,332 655,632 20,849 74,684 24,921 0 0 0 4,139,966 1,044,693 123,499 63,553 6,668 36,553 5,151 25,046 1,000 0 0 0 261,470 1,748,601 0 0 0 0 (366,548) (366,548) (1,070,456) 2,273,476 63,717 Fund Balances End of Yeaz. $1,266,737 See Accompanying Notes to the General Purpose Financial Statements 4,000 0 0 0 (360,548) (356,548) 688,145 2,273,476 63,717 $3,025,338 4,000 D 0 0 6,000 10,000 1,758,601 0 0 $1,758.601 10 S m,p pecial Revenue Funds a ., Debt Service Fund Variance _ Variance . Revised Favorable Revised Favorable Budget Actual (Uufavorable) Budget Actual (Unfavorable) $168,856 $176,286 $7,430 $0 $0 9.0 172,950 186,616 13,666 0 0 0 31,500 30,512 (988) 0 0 0 47,500 8Q,390 32,890 0 0 0 184,986 226,813 41,827 0 0 0 0 0 0 310,232 304,964 (5,268) 0 0 0 0 0 0 30,000 43,575 13,575 0 0 0 1,500 11,422 9,922 0 0 637,292 755,614 118,322 310,232 304,964 (5,268 0 0 0 0 0 0 354,190 333,228 20,962 0 - 0 0 0 0 0 0 0 0 283,490 259,910 23,580 0 0 0 0 0 0 0 0 0 88,671 77,843 10,828 0 0 0 217,811 200,939 16,872 0 0 0 0 0 0 0 0 0 0 0 0 60,000 60,000 0 -0 0 0 154,138 153,839 259 944,162 871,920 72,242 214,138 213,839 299 (306,870) (116,306) 190,564 96,094 91,125 (4,96 0 0 0 0 0 0 0 0 0 (4,000) (4,000) 0 30,000 30,000 0 0 0 0 111,000 111,000 0 0 0 0 0 0 0 (157,320) (157,320) 0 141,000 141,000 D (161,320) (161,320) 0 (165,870) 24,694 190,564 (65,226). (70,195) (4,9Ei9} 690,592 690,592 0 153,341 153,341 0 70,757 70,757 0 0 0 0 $595.479 $786,043 $190.564 $88.115 $83 146 ($4,969) (Continued) 11 Ciry of Fairlawn, Ohio Combined Statement of Revenues, Expenditures and Changes in Fund Balan ces Budget (1Von-GAAl'} and Actual All Governmental Fund Types (Continued) For the Year Ended December 31, 1994 - Capital Proiects F'vnds Variance Revised Favorable Budget Actual (Unfavorable) Re..~ennec: T~~ $1,411,439 $1,548,535 $137,096 Chazges for Services 50,000 108,648 58,648 Licenses, Permits and Fees 66,000 71,043 5,043 Fines and Forfeitures p 0 0 Intergovernmental 795,404 503,210 (292,194) SpeciaLAssessments 0 0 0 .Interest 0 0 0 Contdbutions/Donafions A 0 0 Other 12,000 3,099 (8,901) Total Revenues 2,334,843 2,234,535 (100,308) Egl}rndin~rec• Current: General Government 0 0 0 .Security of Persons and Property 0 0 0 Public Health Services 0 0 0 Transportation 0 0 0 Community Environment 0 0 0 Basic Utility Services 67,205 54,774 12,431 Leisure Time Activities 0 0 0 Cap~talOutlaY 3,985,553 3,430,896 554,657. Debt Service: Principal Retirement 95,000 95,000 0 Interest and Fiscal Chazges 145,403 145,403 0 Total Expenditures 4,293,161 3,726,073 567,088 Excess of Revenues Over (Under) Expenditures (1,958,318) (1,491,538) 466,780 Other Financing n it ..c is cl• Advances: In 0 0 0 Advances Out 0 0 0 Sale of Fixed Assets 0 34,800 34,800 Operating Transfers In 150,000 556,868 406,868 Operating Tzansfers Out (150,000) (150,000) 0 Total Other Financing Sources (Uses) 0 441,668 441,668 Excess of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses (1,958,318) (1,049,870) 908,448 Fund Balances Beginning of Year 2,288,796 2,288,796 0 Unexpended Prior Yeaz Encumbrances 1,205,169 1,205,1b9 0 Fund Balances End of Yeaz $1,535,647 $2,444,095 $908,448 See Accompanying Notes to the General Purpose Financial Statements 12 Totals (Memorandum Only) Variance Revised Favorable Budget Actual (Unfavorable) $4,490,073 $5,451,609 $961,536 230,450 330,590 100,140 276,300 359,857 83,557 157,500. 207,934. 50,434 1,371,340 1,459,076 87,736 310,232 304,964 (5,268) 100,000 274,1?A 174,124 30,000 43,575 13,575 14,000 48,043 34,043 6,979,895 8,479,772 1,499,877. 1,364,162 1,240,663 123,499 2,471,628 2,387,113 84,515 76,000 69,332 6,668 975,675 915,542 60,133 26,000 20,849 5,151 255,606 207,301 48,305 243,732 225,860 17,872 3,985,553 3,43Q896 554,657 155,000 155,000 0 299,541 .299,242 299 9,852,897 8,951,798 901,099 (2,873,002) (472,026) 2,400,976 0 4,000 4,000 (4,000) (4,000) 0 30,000 64,800 34,800 261,000 667,868 406,868 .(673,868) (667,868) 6,000 (386,868) 64,800 451,668 (3,259,870) (407,226) 2,852,644 5,406,205 5,406,205. 0 1,339,643 1,339,643 0 $3,485,978 $6,338,622 $2,852,644 CITI' OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1994 NOTE 1 -REPORTING ENTITY AND BA OF PRESENTATION The City of Fairlawn (the "City") is a charter municipal corporation established and operated under the laws of the State,of Ohio.. The City is organized as a Mayor/Council form of government. The Mayor, Council, and Finance Director are elected. A. ReportingEntity 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 Boazd (GASB) Statement No. 14 "The Financial Reporting Entity." The City provides various services. including police and fire protection, emergency medical, recreation. (includingpazks),-.planning, zoning, streetmaintenance and repair, and general administrative services: ,The. operation of each of these activities is directly controlled by the Council through. the budgetary process. None of these services aze provided by a legally sepazate organization; therefore, these operations are included in the primary government. Component units are legally sepazate 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 boazd and (1) the City is able to significantly 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 provide financial support to, the organization; or the City is obligated for the debt of the organi2ation. Component units may also include organizations for which the city issues debt, levies taxes or determines the budget.. The Copley/Fairlawn City School District and the Summit County Public Library have been excluded from the City's financial statements. Both aze legally separate from the City. Neither impose a financial burden nor provide a financial benefit to the City. The City cannot significantly influence the operations of these entities. B. Basis of Presentation. -Fund Accounting 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 and accounting entity with aself-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 14 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1994 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 aze nor 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 aze 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 aze the City's governmental fund types: • General Fund - this fund is the operating fund of the City and is used u~ account for all financial resources except those required to be accounted far in another fund. The 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 aze established to account for the proceeds of specific revenue sources (other than amounts relating to major capital projects) that aze 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,. • Capital Projects Funds -these funds aze used to account for financial resources to be used for the acquisition or construction of major capital facilities. Fiduciary Fund Types Fiduciary funds aze 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 aze purely custodial (assets equal liabilities) and thus do not involve measurement of results of operations. Account Groups To make a cleaz distinction between fixed assets related to specific funds and chose of general government, and between long-term liabilities related to specific funds and those'of a general nature, the following accounh groups aze used: 15 CITP OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1994 + General Fired Asset Account Group -this account group accounts for all general .fixed assets of the City. • General Long-Term Obligations Account Group.:- is account group accounts for all unmatured long-term indebtedness of the. City, including special assessment debt for which the City is obligated in some manner. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies followed. in the preparation of these financial statements are summarized below: These policies conform o generally accepted accounting principles (GAAP) for local governmental units as prescribed. in .the statements issued by the Governmental Accounting Standards Boazd and other-recognized authoritative sources. A. Measurement. Focus and Basis of Accaunkn$ The accounting and reporting treatment applied to a fund is determined by its measurement focus. All governmental funds types aze accounted for using a flow of current financial. resources measurement focus. With this measurement focus, only current assets and current liabilities are generally included on the balance sheet. Operating statements of these funds present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Basis of accounting refers to when revenues and expenditures are recognized in the aca~unts 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 accrual basis of accounting. Under this basis, revenues aze 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 yeaz or soon enough thereafter to be used to pay liabilities of the current yeaz. The available period for the City is thirty-one days after yeaz end. In applying the susceptible to accrual concept under the modified accrual basis, the following revenue sources aze deemed both measurable and available: • Investment earnings • State levied locally shared taxes (including gasoline tax) • ,Fines and forfeitures • Income tax withheld by employers 16 CITY OF FAIRI.AWN Notes to the General Purpose Financial Statements December 31, 1994 The City reports deferred revenues on its combined balance sheet. Deferted 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 aze met, the liability for deferred revenue is removed from the combined balance sheet and revenue is recognized. Current and delinquentproperiy takes measurable as of December 31, 1994,. whose availability is indeterminate and which aze not intended to finance current period obligations, have been recorded as a receivable and deferred revenue. Levied special assessments are measurable, and have been recorded as a receivable. Since all assessments aze due outside of the available period., the entire amount has been deferred. The measurement focus of governmentaFfund accounting is on decreases in net littancial resources (expenditures) rather. than expenses.- Expenditures aze recognized in the accounting period in which. the fund liability is incurred, if measurable. Principal and interrst 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 yeaz. 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 the period eazned by employees. Allocations of cost, such as depreciation and amortization, aze not recognized imthe governmental funds. B. Budgetary Process The budgetary process is prescribed by provisions of the Ohio Revised Code and entails the prepazation of budgetary documents within an established timetable. The major documents prepared aze the tax budget, the certificate of estimated resources, and the appropriation ordinance, all of which aze prepazed on the budgetary basis of accounting. The certificate of estimated. resources and the appropriations ordinance aze subject to amendment throughout the yeaz 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 Taz Budget At the fast City council meeting in July, the Mayor presents the annual operating budget for the following fiscal yeaz 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 1 to December 31 of the following year. 17 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1994 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 m the. City by October L As pazt of this certification, the City receives the official certificate of estimated resources, which states the projected revenue of each fund. Prior to December 31, the City must revise its budget so that the total contemplated expenditures from any fund during the ensuing fiscal yeaz will not exceed the amount available as stated in the certificate of estimated resources. The revised budget then serves as the basis for the armual appropriation ordinance. On or about January 1, 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 yeaz if the Finance Director determines, and the Budget Commission agrees that an estimate needs to be either increased or decreased. ",Che amounts reported on the budgetary statements reflect the amounts in the final amended official certificate of estimated resources issued during 1994. Appropriations A temporary appropriation ordinance to control expenditures may be passed on or aboul: January 1 of each year for the period Januazy 1 to March 31. An annuaLappropriation ordinance must be passed by April i of each yeaz for the period January 1 to December 31. The appropriation ordinance fixesspending authority at the fund,. department, and object level. The appropriation ordinance maybe amended during the year as new information becornes 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 yeaz by an ordinance of Council. During the yeaz, several supplemental appropriation measures were passed. None of these supplemental appropriations had any significant affect on the original appropriations. The budget figures which appeaz in the. statement of budgetary compazisons represent the final appropriation amounts, including all amendments and modifications. Encumbrances As part of formalbudgetary 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 expenditures plus encumbrances from exceeding appropriations at the fund, department and object level. On the GAAP basis, encumbrances outstanding at year end aze reported as reservations of fund. balances for subsequent yeaz expenditures for governmental funds. 18 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, .1994 Lapsing of Appropriations At the close of each year, the unencumbered balance of each appropriation reverts to the respective fund from which it was appropriated and becomes subject to future appropriations. 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 fiords aze maintained in this account or temporarily used to purchase short term investmen~s. Individual fund integrity is maintained through City records. Each fund's interest in the pooled. bank account is presented as "equity in pooled cash and cash equivalents" on the balance sheet. During 1994, investments were limited to overnight repurchase agreements and interest in STAR Ohio, the State Treasurer's Investment Pool These investments are. stated at cost which approximates market value, except for investments in deferred compensation, whhich aze reported at mazket value. Investment procedures aze 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 beazing depository accounts are presented in the combined balance sheet as "cash and cash equivalents in segregated accounts" since they aze not required to be deposited into the City reasury. 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. Inventory Inventories of governmental funds aze stated at cost. For all funds, cost is determined on a first-in, fast-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 i.t does. not constitute available expendable resources even though it is a component of nei current assets. E. Fined Assets and D~reciation General fixed assets aze. not capitalized in the funds used to acquire or construct them. Instead, capital acquisition and construction are reflected as expenditures in governmental funds, and the related assets are reported in the general fixed asset group. CT1'I' OF FAIRLAWN Notes to the General Purpose Financial Statements December 31,1994 All purchased fixed assets aze valued at cost when historical records aze available and ai: an estimated historical cost when no historical records exist. Donated fixed assets aze valued at their estimated fair mazketvalue 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 aze not capitalized, as these assets are immovable and of value only to the government. Assets in the general 'fixed assets account group aze not depreciated. F. Compensated Absences For 1994, the City has implemented the provisions of GASB Statement No. 16, "Accounting for Compensated Absences". Vacation benefits aze accrued as a liability as the benefits are eazned i£the employees';rights toaeceive compensation are amibutable to services alreauly rendered and it is probable that the employer will compensate the employees for the benefits through paid time off or by some other means. Sick leave benefits are accrued as a liability using the termination method. The liability is based on the estimate of amount of accumulated sick leave that. will. probably be paid as a termination benefit. For governmental funds; the current portion of unpaid compensated absences is the amount expected to be paid using expendable available resources. These amounts are recorded in the account "compensated absences payable" in the fund from which the employees who have accumulated unpaid leave aze paid. The remainder is reported in the general long-term obligations account group. G. Interfund 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 aze classified as "adva.nces receivable/payable" on the balance sheet: H. Fund Eauity 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 fir encumbrances, inventory, advances, .and notes receivable. A designated fund balance has been established for sewer line repairs. 20 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1994 I. Interfund 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 groperly applicable to another fund aze 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 aze reported as residual equity transfers. All other interfund transfers are reported as operating transfers. J. Long-term Obligations 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 eazly iin the following yeaz. For other. long-term obligations, only that portion expected robe financed from expendable available financial resources is reported as a fund liability of a governmental fund. The remaining portion of such obligation isseported in the general long-teen obligations account group. Under Ohio law, a debt retirement.fund must be created and. used for the pa}~ment of all 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 reporter 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 resources used to pay both. principal and. interest have also been allocated accordingly. K. Total Columns on General Purpose 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, nor cash flows. in conformity with generally accepted accounting principles (GAAP). Memorandum totals aze not compazable to a consolidation. Additionally, interfund elimination has not yet been made in the aggregation of this data. NOTE 3 -BUDGETARY BASIS OF 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 transactions on a basis of cash. receipts, disbursements, and encumbrances.- 21 CITY AF FA1(RLAWN Notes to the General Purpose Financial. Statements December 31,..1994 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 fate statute. The major difference between the budget basis and the GAAP basis aze as follows: 1. Revenues recorded when received in cash (budget). as opposed to when susceptible 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 ate;,treated as expenditures (budget). rather thhan as a reservation offund balance for governmental fund types (GAAP). 4. Proceeds from and principal payment on short. term note obligations aze reportec! on the operating statement. (budget) rather than on the balance sheet (GAAP}. The following table summazizes the adjustments. necessazy to reconcile the GAAP basis statementsto the budgetarybasis statements on a fund type basis: GAAP Basis Revenue Accruals Advances In Expenditure Accruals Advances Out General $837,098 (99,704) 4,000 74,586 0 Special Revenue $36,426 34,156 0 32,148. 0 .$(73,505) (34;666) 0 (8,870) 0 (932,829) $(1;049,870) Capital Debt Service Proj~zcts $(66,195) 0 0 0 (4,000) Encumbrances (127,835) (78,036) 0 Budget Basis $688,145 $24,694 $(70,195) NOTE 4 -FUND DEFICTT The following fund had a deficit fund balance as of December 31.,.1994: Deficit Fund Balance Police & Fire Pension Special Revenue Fund $44,216 This fund. deficit arose due to the recognition of accrued liabilities. The general fund is liable for any deficit in this fund and provides operating transfers when cash. is required, not when accruals occur. 22 ,. . o CTTY OF FAIRLAWN Notes to the General Purpose Financial Statements .December 31, 1994 NOTE 5 - CHANGE IN ACCOUNTING PRINCIPLES During 1994 the City implemented the criteria of GASB Statement No. 16, "Accounting for Compensated Absences." The implementation of this statement generated signiificant changes in the long-term liability for compensated absences presented in the general long-term obligations account group. The amount previously reported December3l, 1993 was $157,208. This amount increased under the provisions of Statement No. 36 6y $219,193 to $376,401. -The total of all general long-term obligations increased from $6,6613,738 to $6,887,931: Also during 1994, the City reviewed all fund classifications and determined the Sewer Maintenance and Repair fund should be classified as a special revenue, rather than a capital projects fund. The restatement of the Sewer Maintenance and Repair fund had the net effect of reducing the capital projects beginning fund balance by$197,131 and increasing the special revenue fund balance by the same amount: NOTE 6 -DEPOSITS AND INVESTMENTS State statues classify moneys held by the City 'into three categories which dcter~mines the type of investments which can be made. Active deposits are public deposits necessary to meet current demands on the treasury. Such moneys must be maintained as cash in the. City Treasury, in commercial. accounts payable or withdrawable on demand, including negotiable order of withdrawal (NOW) accounts, or in money market deposit accounts. Inactive deposits aze public deposits that Council has identified as not required for use within the current two year period of designation of depositories. Inactive deposits must either be evidenced by certificates of deposit maturing not later than the end of the current period of designation of depositories, or by savings or by deposit accounts including, but: not limited to, passbook accounts. Interim deposits aze deposits of interim moneys. Interim moneys aze those moneys that are not needed for immediate use but which will be needed before the end of the current period of designation of depositories. Interim deposits must be evidenced by time certificates of deposit maturing not more than one yeaz from the date of deposit or by savings or deposit accounts. including pass book accounts. Interim moneys may be invested in the following obligations provided they mature or aze redeemable within two yeazs 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 federal government agency, or instrumentality; 3. Written repurchase agreements for a period not to exceed thirty days in securities listed above that mature within five years from the date of purchase; 23 CITY OF FAIItLAWN Notes to the General Purpose Financial Statements December 31, 1334 4. Bonds and other obligations of the State. of Ohio; 5. No-load money mazket mutual funds consisting exclusively of obligations described in division (1) or (2) of this section and repurchase agreements secured by such obligations, :provided that investments in securities: described in this division aze made only through eligible institutions; and 6. The State Treasurer's investment pool. {STAR Ohio). Protection of the City's deposits is provided by the Federal Deposit Insurance Corporation, by eligible securities pledged by the financial institution as security for repayment, by surety. company bonds deposited. with the treasurer by the financial institution or by a single collateral pool established by the financial. institution to secure the repayment of all public moneys deposited with the institution. Investments may only be made through specified dealers and institutions.- Payment for investments may be made only upon delivery of the securities representing the. investments to the treasurer or, if the securities aze not represented by a certificate, upon receipt of confirmation of transfer from the custodian. City Deposits At year end, the carrying amount of the City's deposits was ($87,051) and the bank balance was $77,116. The entire bank balance was covered by the federal depository insurance. City Investments GASB Statement No. 3, "Deposits with Financial Institutions, Investments (including Repurchase Agreements), and Reverse Repurchase Agreements" requires the City to categorize investments to give an indication of the level of risk assumed by the City,at yeai end. Category One. includes investments that aze 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 department or agent in the City's name. CaU:gory Three includes uninsured and unregistered investments which aze held by the counterparty's trust department or agent but not. in the City's name. STAR Ohio and Deferred Compensation aze unclassified investments since they aze not evidence by securities that exist in physical or book form. CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1994 Repurchase Agreement Investment in State Treasurer's Investment Pool (STAR Ohia) Deferred Compensation Total Investments Category. 1 2 3 Carrying Value Mazket Value $0 $0 $5,453,517. $5,453,517. $5,453,517 ' ' 2,205,600 2,205;600 776;983 776,983 $8,436,100 $8,436,.100 The classification of cash and cash equivalents, and investments on the combined financial statements is based on criteria set forth in GASB Statement No. 9. Castr andl cash equivalents are defined to include investments with original maturities of three months oar 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 No. 3 is as follows: Cash and Cash Equivalents/Deposits Investments GASB Statement 9 $7,572,066 $776;983 Investments which aze part of a .cash management gool; Repurchase Agreement STAR Ohio GASB Statement 3 NOTE 7 - PR PERTY TAXES (5,453,517) 5,453,517 (2,205,600) 2,205,600 .$(87,051). $8,436,100 Property tax includes amounts levied against ap real and public utility propenty, and tangible personal (used in business) property located in the City. Real property taxes were levied after October 1, 1993, on the assessed value as of January 1, 1993, the lien date, amd were collected in 1994. Assessed values are established by State law at 35 percent of appraised market value. All property is required to be revalued every six years. Public utility property taxes received in 1994 attached as a lien on December 31, 1992, were levied after October 1.993 and are collected with real property taxes. Public utility property taxes were assessed on tangible personal property at 88 percent of true value. 1994 tangible personal property taxes were levied after October 1, 1993, on the value listed as of December 31, 1993, acid were collected 25 CITY OF FAIRLAWN Notes to the General Purpose Finaiiciat5tatements December 3d, 1994 in 1994. Tangible personal property assessments are 25 percent of true value. The assessed value upon which the 1994 taxes were collected was $183,426,586. Real estate represented 88 percent ($161,527,080) of this total, public utility tangible personal property represented 3 percent ($4,987,680) of this total and general tangible personal property represented 9 percent ($16,911,826) of this total. The full tax rate for all City operations applied to taxable property for the year ended December 31, 1994 was $2:70 per $1,000 of assessed vatuation. Real and public utility property taxes aze 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 Tune 20. Under certain circumstances; state statute permits later payment dates to be established. Tangible personal property taxes paid by multi-county taxpayers are due September 20. Single county 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 taking districts within the County. The Count Auditor periodically remits to the taxing districts their.portions of the taxes collected: Accrued property taxes receivable represents delinquent taxes outstanding and real property, public utility, and tangible personal property taxes which became measurable as of December 31, 1994. However, since these tax collections will not be received during the available period nor are they intended to finance 1994 operations, the receivable is offsetby a credit to deferred7evenue. ` NOTE 8 -RECEIVABLES Receivables at Decembei 31, 1994, consisted of taxes, accounts (billings for user chazged service), special assessments, notes (sale of land to developer) and intergovernmental receivable arising from grants, entitlements, and shared revenues. Accounts, taxes, special assessments,-and intergovernmental receivables are deemed collectable in full. A summazy of the principal items of intergovernmental receivables is as follows: 26 I. Y Itl1Y ~ IL 0tlt G:I1: I CITY' OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 4994 Intergovernmental Receivable Genetal Fund: Local Government Tax Estate Tax Immobilization Fee Total General Fund Special Revenue Funds: Gasoline Tax Motor Vehicle Motor. Vehicle Permissive. Total Special Revenue Funds: Capital Projects Funds: State. Grants Total Capital Projects .Funds Total Amount $18,367 140,042 300 158,709 9,011 2,444 973 12,428 43,471 43,471 $214,608 NOTE 9 -INCOME TAR 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 is also imposed on the net income of businesses operating within the City. Residents of the City are granted a credit up to 2 percent for taxes paid to other municipalities. Employers within the City are required to withhold income tax on employee compensation and remit the tax to the City either monthly or quarterly, as required. Corporations and other individual taxpayers are required to pay their estimated tax .quarterly and file a declaration annually. By City ordinance, income tax proceeds are credited as follows: the general fund receives 90 percent and capital improvements fund receives 10 percent of the first 1.5 percent of the 2 percent income tax. The capital improvements fund receives the remaining .5 percent of the income tax. NOTE 10 -FRED ASSETS A summary of changes in the general fixed assets group is as follows: 27 CITY OF FAIRLAWN Notes to the General Purpose Finahcial Statements December 31,1994 Balance Balance January 1,1994 Additions Deletions December 31,1994 Land Land Improvements Buildings' Machinery and Equipment Vehicles Construction in Process Total $1,029,126 $0 $0 $1,029,126 1,188,138 0 0 1,188,138 2,257,320 370,765 0 2,628,085 1,396,572 144,882' 36,347 1,505,107 1,050,544 11, 862. 18, 000 1,044,406 127,582 0 < 127,582 0 $7,049;282 $527;509 `` $181,929 $7,394,862 NOTE 11 - RISK M ANAGEMENT The City is exposed to vazious risks ofloss related to torts, theft of, damage to, and destruction of assets, errors, omissions, .injuries to employees and natural disasters.. DLiring 1994, the City contracted with Wichert Insurance Service, Inc. for property and general liability insurance, including boiler and machinery. Police and professional liability 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 Iimit for uninsured motorist.. Settled claims have not exceeded 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. NOTE 12 - DEFIlVED BENEFIT PENSION PLANS A. Public Em~yee Retirement System All City of Fairlawn employees, other than uniformed employees, participate in the Public Employees Retirement System of Ohio (PERS), acost-sharing multiple-employer public employee retirement system created by the State of Ohio. The payroll for employees covered 28 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1994 by the PERS for the yeaz ended December 31, 1994 was $1,239,033; the City's total payroll was $2,423,050.. All City employees, except uniformed employees, must participate in PERS. Students . working for the school, college, or university they attend have an option to exrmpt themselves from membership. Benefits fully vest upon reaching five yeazs 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. Members are entitled to a retirement benefit, payable monthly for life, equal to 2.1 percent of their final average salary for each yeaz of credited service up to thirty years.. Members aze entitled to 2.5 percent of their final average salary for each year of service imexcess of thirty yeazs. Final average salary is the employee's average salary over the highest three years of earnings. The Ohio Revised Code provides statutory authority for employee and employer contributions. The employee contribution rate for 1994 was 8.5 percent. The employer contribution rate was 13.55 percent of covered payroll; 8.44 percent was the portion. used to fund thie pension obligations for 1994. The difference between the total employer rate and the portion used to fund pension obligations was the amount used. to fund the health care program for retirees. These rates were the actuarially determined contribution requirements for PEF:S. House Bill i51 became effective on February 9, 1994.. Under the bill, the two month prohibition of PERS retirees to return to work increased to six months. If the re-employed retiree elects to receive both the retirement allowance and a salary for there-employment period, the employer must provide the retiree's primary health coverage if it is available to employees in comparable positions. House Bill 151 also provides that an 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 begins. If this does. occur, the elected official will forfeit the new term of office if re-elected. The retirement wntribution requirement for the yeaz ended December 31, 1994 was $209,892 which consisted of $105,318 paid by the City as an employee benefit and $104,574 from the City; these contributions represented 8.5 percent and 8.44 percent of the covered payroll respectively. The "pension benefit obligation" is the actuazial present value of credited projected benefits, adjusted for the effects or projected salazy increases and step-rate benefits, estimated to be payable in the future as a result of the employee's service date. The measure is intended to help users assess PERS's funding status on agoing-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make compazisons among retirement systems and employers. This calculation does not reflect the method used by PERS to determine funding requirements. PERS determines it's actuazial liability based on the entry 29 ~;. a a~i~ .. ;~ I I CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1994 age normal method of funding. PERS does not make separate measurements of assets and pension benefit obligations for individual. employers. The pension benefit obligation at December 31; 1993 (the latest information available) :for PERS as a whole, was $23,239.4 million. PERS's net assets. available for benefits on that date were $22,888.8 million, leaving an unfunded pension benefit obligation of $350..6 million. The total. pension benefit obligation does not include any health care data. The City's 1994 actuazially determined contribution represented :015 percent. of total contributions required of all participating entities. Historical trend information showing the PERS's progress for the past eight years in accumulating sufficient assets to pay benefits when due is presented in the PERS's December 31,1994 Comprehensive Annual Financial Report. B. Police and Firemen' s Disability and Pension Fund Full-time uniformed employees of the City pazticipate in the Police and Firemen's Disability and Pension Fund of Ohio (the "Fund"), a cost shazing multiple-employer public employee retirement system created by the State of Ohio. This is a single retirement system with one administration that provides retirement benefits to two classes of employees. The payroll for the police and fire employees covered by the Fund for the. year ended. December 31, 1994 was $718,764 and $333,758. The City's total payroll was $2,423,050. The Fund operates under the authority of the Ohio Revised Code Chapter 742. The Fund provides pension, disability, and health care benefits to qualified members and survivor and death benefits to qualified spouses, children, and dependent parents. Members become vested in certain benefits after fifteen years of service and fully vest after twenty-five -years of service. Members aze eligible for normal retirement benefits at age forty-eight with twenty-five years of service credit or at age sixty-two with fifteen years of service credit. The normal tetirement benefit is equal to 2.5 percent of annual earnings for each of the first twenty years of service, 2 percent for each of the next five yeazs of service and 1.5 percent for each yeaz thereafter.. However, this normal retirement benefit. is not to exceed 72 percent of the member's average annual earnings for the three yeazs during which the total earnings were greatest. Members with fifteen years of service may retire with reduced benefits at the later age of forty-eight or twenty-five years from their full-time hire date. The reduced benefit is equal to 1.5 percent 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. An actuazy, however, is used to determine. the actuarial implications of the statutory requirement. Contribution rates as a percentage of covered payroll established'. by the Ohio. Revised Code and calculated by the Fund's actuary for the yeaz 1993 were as follows: 30 CTTY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1994 Employee Contribution Rate Employer Contribution Rate Less Portion To Finance Health Care (Board-Defined Statutorily Determined .Police Fire 10.00 % 10.00 % 19.50 24.00 29.50 34.00 Actuarially Determined Police Fire n/a n/a n/a n/a 34.78% 32.62% (6.50) (6.50) (6.50) (6.50) allocatmon) Contribution Rate To Pund Pension Obligations 23.00 % 27.50 % 28.28 % 26,12 % Actual contributions as a percentage of covered payroll and the actuarially determined contribution amount for the year ended December 31, 1993 were as follows: Police of Covered Amount Payroll Fire :Amount % of Covered Payroll Statutory Employee Contribution, Paid by Employer Statutory Employer Contribution Portion to Fund Health Care Total Statutory Contribution Actuarially Determined Contribution $71,876 10.00% $33,376 10.00% ..140,159 19.50 80,102 24.00; (46,720) (6.50)' (21,694) (6.50) $165,315 23.00% $91,784 27.50 °k $203,266 28.28 % $87,178 26.12 % Although this schedule indicates that the actuarially determined contribution rate for employers is greater than the statutory contribution for police, no liability has been recognized since no demand for additional contributions has been made by the Fund and since an alternative source of funding, other than increased employer contributions, may be found. The "pension benefit obligation" is a standardized disclosure measure of the 2~ctuarial present value of credited projected benefits, adjusted for the effects of projected salary increases and step-rate benefits, estimated to be payable in the future as a result of employee service to date.. The measure, is Intended to help users assess the funding status on agoing-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make 31 _ _ e- _._, ~.~ ~ .: y: ~~._.~~~-, CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1994 comparisons among the public retirement systems and employers. The Fund does not make sepazate measurements of assets and pension benefit obligations for individual employers. The pension benefit obligation and net assets available for benefits of the Fund as of January 1, 1994, the most recent actuarial valuation date, aze as follows (amounts expressed in thousands): Pension Benefit Obligation Net Assets Available for Benefits Unfunded Pension Obligation Police Fire Total $3,115,500 $2,415,100 $5,530;600 2,432,000 1,925,800 4,357,800 $683;500• $489,300 $1,172,800 We aze presenting sepazate asset and obligation amounts for police and fire since the Fund establishes distinct contribution rates. The total pension benefit obligation and net assets available for benefits apply to the police and fire plan as a whole. The City'S1994 actuazially determined contributions represented .08 percent of total contributions required of all participating entities. Eight yeaz historical trend information showing the Fund's progress in accumulating sufficient assets to pay benefits when due is presented in the Fund's December 31, 1994 audited financial statements. NOTE 13 -POST EMPLOYMENT BENEFITS A. Public Emplovees Retirement System The Public Employees Retirement System of Ohio (PERS) provides postretirement health care coverage to age and service retirees with ten or more years of qualifying Ohio service credit. Health care coverage for disability recipients and primary survivor recipients is available. The health care coverage provided by the retirement system is wnsidered an Other Postemployment Benefit as described in GASB Statement No. 12. A portion of each employer's contribution to the PERS is set aside for the funding of postretirement health caze based on authority granted by state statute. The 1994 employer contribution rate was 1:3.55 percent of covered payroll; 5.11 percent was the portion that was used to fund health caze for 1994. Benefits aze advance-funded using the. entry age normal cost method. Significant actuaz•ial assumptions based on PERS's latest actuazial review performed as of December 31, 1993, include a rate of return on investments of 7.75 percent, active employee payroll increases of 5.25 percent for inflation and an increase of between zero and S.l percent based on additional annual pay increases. Health care premiums were assumed to increase 5.25 percent annually. 32 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1994 Short-term securities consisting of commercial paper and U.S. treasury obligations aze carried at cost, which approximates mazket value. Equity securities, fixed income investments, and investments in real estate aze carried at market value: For actuazial valuation purposes, a smoothed market approach is used. Assets aze adjusted to reflect 25 percent of unrealized mazket appreciation or depreciation on investment assets. The number of active contributing participants was 358,149. The City's actual contributions for 1994, which were used to fund postemployment benefits, were $63,315. The actual contribution and the actuazially required contribution amounts are the same: PERS's net assets available for payment of benefits at December 31, 1993 (the latest information available) were $6,18'7.5 million. The actuarially accrued liability and the unfunded actuazial accrued liability were $7,673.6 million and $1,486.1 million, respectively.. B. Police and Firemen's Disabilit and Pension Fund The Police and Firemen's Disability and Pension Fund (the "Fund") provides postretirement health care coverage to any person who .receives or is eligible to receive a mtanthly benefit check or is a spouse or eligible dependent 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 atwo-thirds basis. The health care coverage provided by the retirement system is considered an Other Postemployment Benefit as described in GASB Statement No. 12. The Ohio Revised Code provides the authority allowing the Police and Firemen's Disability and Pension Fund's board of trustees to provide health care coverage and states that health care costs paid from the Police and Firemen's Disability and Pension Fund shall be included in the employer's contribution rate. Health care funding and accounting is on spay-as-you-go basis. The total police employer contribution is 19.5 percent of covered payroll and the total firefighter employer contribution rate is 24 percent of covered payroll, of which 6.5 percent of awered payroll is applied to the postemployment health care program. In addition, since July 1, 1992, most retirees have been required to contribute a portion of the cost of their health care coverage through a deduction from their monthly benefit payment. The number of pazticipants eligible to receive health caze benefits as of December 31, 1993 was 16,131 for police and 13,461 for firefighters. The Ciry's actual contributions for 1994 that were used to fund postemployment benefits were $46,720 for police and. $21,694 for firefighters. The Fund's total health caze expenses for the yeaz ended Decenber 31, 1993 (the latest information available) were $63,135,.402. 33 ., , .. .~_ CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1994 NOTE 14 -OTHER EMPLOYEE BENEFTTS A. Deferred Compensation Plans City employees; and elected officials may participate in one of two deferred compensation plans created in accordance with Internal Revenue Code 457. Participation is on a voluntary payroll deduction basis. The plans permit deferral of compensation until future years. According to the plans, the deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. All amounts of compensation deferred under the plans, 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 plans), subject only to the claims of the City's general creditors: Participants' rights under the plans are equal to those of general creditors of the City in an amount equal to the fair market value of the deferred. account for each pazticipant. Both Plan Agreements state that the City, Ohio Public Employees Deferred Compensation Boazd, and Aetna Life Insurance and Annuity have no liability for losses under. the plan with the exception of fraud or wrongful taking. As o:F December 31, 1994, the amount of deposit with the Ohio Public Employees Deferred Compensation Board and Aetna Life Insurance and Annuity were $60,319 and $716,664, respectively. B. Compensated Absences The criteria for determining vested vacation and sick leave components aze derived from negotiated agreements and State laws. Employees eazn ten to thirty days of vacation per yeaz, 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 for each 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. Generally, employees with a hire date subsequent to 1991 aze not eligible to receive termination payments for sick leave. As of December 31, 1994, the total liability for unpaid compensated absences was $419,054. NOTE 15 -CAPITALIZED LEASES -LESSEE DISCLOSURE In prior years the City entered into capitalized leases for the. acquisition of radio equiprnent. Each lease meets criteria of a capital lease as defined by FASB No. 13 "Accounting for 34 CTTY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1994 Leases", which defines capital leases as one which generally transfers benefits and. risks of ownership to the lessee. Capital lease payments have been reclassified and are reflected as debt service in the general purpose financial statements for the governmental lands. These.- expenditures are reflected as program/function expenditures on a budgetary b<~sis. General fixed assets. acquired by lease have been capitalized. in the general. fixed assets account group. 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 general long-term obligations account group. The following is a schedule of the future long-term minimum: lease payments required. under the capital leases and the present values of the minimum lease payments as of December 31, .1994: Year Ending 1995 1996 1997 1998 Total Minimum Lease Payment Less Amount Representing Interest Present Value of Minimum Lease Payments Amount $51,428 51,428 51,428 51,428 205,712 (36,605) $169,107. NOTE 16 -LONG TERM OBLIGATIONS Long term obligations of the City as of December 31, 1994 were as follows: 35 CITY OF FAIRLAWN Notes to the Genet~al Purpose Financial Statements December 31 1994`' Balance Balance December 31; 1993 Additions Deletions December 3]., 1994 ~. General Obhgation Bond Special Assessment Various Purpose Bond OPWC Loans Capital Leases Compensated Absences (as restated) Total General Long-Term Debt $2,875,000 2,010,000 1,422,946 203,584 $0 $95,000 0 60,000 0 0 0 34,477 376,401. 41,851 _ 4,804... $2,780,000 1,950,000 1,4.22,946 ].69,107 413,448 $6,887,931 $41,851 $194,281 $6,735,501 The general. obligation bond will be paid from inwme taxes receipted into the capital projects fund. The special assessment bond will be paid from the proceeds of special assessments levied .against the benefited property owners. OPWC loans will be paid in part from proceeds of special assessments levied against the benefited property ownersand in part 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. Capital leases are paid from revenues of the capital improvement capital projects fund. Compensated absences. reported in the "compensated absences payable" account will be paid from the fund from which the: employees' salazies are paid. Principal and interest requirements to retire long-term obligations outstanding at December 31, 1994 aze as follows: 36 CTfY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1994 Special Assessment General Obligation OPWC Yeaz Ending Bond Bond Loans Total 1995 $198,500 $237,743 $165,636 $601,879 1996 199,860 239,608... 165,636 605,104 1997 200,800. -236,00$ 165,636 602,444 1998 196,375 237,208 165,636 599,219 1999 200,000 238,008 165,636 603,644 2000 - 2004 992,528 1,191,894 453,510 2,637,932 2005 - 2009 985,350 1,192,368 453,510 2,631,228 2010 - 2014 398,150 952,763 .453,510 1,804,423 Total $3,371,563 $4,525,600 .$2,188,710 $10;085,873 NOTE 17 -CONSTRUCTION COMMITME NTS As of December 31, 1994, the City had outstanding contractual commitments of $657;161 foi• various Rothrock Road improvements. NOTE 18 - INTERFUND TRANSACTIONS Interfund balance at December 31, 1994., consists of the following: Advances Receivable Advances Payable General Fund $12,000 $0 Debt Service Fund 0 12,000 Total $12,000 $12,000 NOTE 19 -CONTINGENCIES A. Grants The City received financial assistance from federal and state agencies in the form of grants. The disbursements of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and aze subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a l;~ability of the general fund or other applicable funds. However, in the opinion of management, any such disallowed claims will not have a material effect on the overall financial positron of the City as of December 31, 1994. 37 CITY OF FAIRLAWN ` Notes to the General purpose Financial Statements December 3i, 1994' B. Litigation The City of Fairlawn is party to legal proceeding§. The City management is of the opiinion that ultimate disposition of these claims and legal proceedings will not have a material effect, if any, on the financial condition of the City. 38 88 East Broad Sereei `~~t_~ .STATE OF OHIO p.0. Box 1140 OFFICE OF THE AUDITOR Columbus, Oluo 4;2161140 jIM 1" C l1(Q, AUDITOR OF STATE Telephone 614-166x1514 800-782-0370 Facsimile 614146-4490 The Honorable Mayor and City Council Members City of Fairlawn, Ohio 3487 South Smith Road Fairlawn, Ohio 44333 Report of Independent Accountams on Compliance at the Financial Statement Level We have audited the general purpose financial statements of City of Fairlawn, Ohio, as of and for the year ended December 31, 1994, and have issued our report thereon dated July 13, 1996. We conducted our audit in accordance with generally acceptedauditing standardsand Govemment Auditing 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 financial statements -are free of material misstatement_ Compliance with laws, regulations, contracts, and grants applicable to City. of Fairlawn, Ohio, is the responsibility of City of Fairlawn, Ohio's management: As part of obtaining- reasonable assurance about whether the finanaal statements are free of material misstatement, we performed tests of City of Fairlawn, Ohio's compliance with certain provisions of laws, regulations, contracts, and grants. However, the objective of our audit of the general purpose financial statements was not to provide an opinion on overalta~mpliance with such provisions. Accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reporGSd herein under Government Auditing Standards. This report is intended for the information of management, the Mayor and Ciiy Council. However, this report is a matter of public record and its distribution is not limited. ~~ State July 13, 1996 39 #''i i; d! S,: f f/ti.~ig'hnn~ \\llf//~ STATE OF OHIO ;~ OFFICE OF THE AUDITOR JIM PETRO, AUDTIOR OF STATE The Honorable Mayor and City Council Members City of Fairlawn, Ohio 3487 South Smith Road Fairlawn, Ohio 44333 86 Fast Broad Street P.O. Box 1140 Columbus, Ohio ~L3216-1140 Telephone 614-416-4514 800-2!32-0370. Facsimile 6141ti6~4490 Report of Indecendent Accountants on the Internal Control Stru ure at the Entity Leyei We have audited the general purpose financial statements of City of Fairlawn, Ohio, as of and for the year ended December 31, 1994, and have issued our report thereon dated July t3, 1996. We conducted our audit in accordance with generally accepted auditing standards and Government Auditinc 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. The management of City of Fairlawn, Ohio, is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgements by management are required to assess the expected benefits and related costs of internal comrol 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 managements authorization and recorded property to permit the preparation of general purpose financial statements in accordance with generally accepted accounting principles. Elecause of inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of arty evaluation of the structure to future periods is subject to Ble risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. In planning and pertonning our audit of the general purpose financial statements of City of Fairlawn, Ohio, for the year ended December 31, 1994, we obtained an understanding of the internal control structure. With respect to the internal control structure, we obtained an understanding of the design of relevant policies and procedures, and whether they have been placed in operation, and we assessed control risk in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide. an opinion on the internal control structure. Accordingly, we do not express such an opinion. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the Americaln Institute of Certified Public Accountants. A material weakness is a condition iri 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 and irregularities in amounts that would be material in relation 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 pedorming their assigned functions. We noted no matters involving the internal control structure and its operations that we consider to be material weaknesses as defined above. 40 The Honorable Mayor and City Council Members City of Fairlawn, Ohio Report of Independent Accountants on the internal Control Structure at the Entity Level Page -2- This report is intended for the information of management, the Mayor and City Council. However, this report is a r~ra'geTef~ublic record, and its distribution is not limited. CITY OF FAIR eyyN ,, ,~_. CONCLUSION STATEN NT The audit reports were reviewed with and acknowledged by the following off~ials on July 31, 19tt6: William Roth Gene Waddell Lawrence Pelland James Swartz Jerome Apple Patricia Bertsch Mayor Law Director Finance Director Council President Council Member Assistant Finance Director These officals were informed that the City had five working days from the date of the post audit conference to respond to, or contest, in writing, the. report contenls. No such responses were received. 42 4 ~~~~~~~~ j` STATE OF OHLO • a~ OFFICE OF THE AUDITOR JIM PETRO, AUDTTOR OF STATE BS East Broad Sheet P.O. Hox 3140 Colmnbus, Ohio 432161140 Telephone 614166-4514 800-:?82-0370 Facsimile 614-'.166-4490 CITY OF FAIRLAWN, SUMMIT COUNTY CLERK'S CERTIFICATION This is a true and correct copy of the report which is required to be filed in the Office of the Auditor of State pursuant to Section 717.26, Revised Code, and which is filed in Columbus, Ohio. Clerk of the Bureau Date: