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1995 Financial StatementCity of Fairlawn, Ohio General Purpose Financial Statements For the Year Ended December 31, 1995 /~p~Lq Compiled By: City of Fairlawn Finance Department \OH10/ CITY OF FAIRLAWN TABLE OF CONTENTS TITLE PAGE Table of Contents (I) Elected Officials and Administrative Personnel 1 Index of Funds 2 Report of Independent Accountants 3 Combined Balance Sheet -All Fund Types and Account Groups 4 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types 8 Combined Statement of Revenues, Expenditures and Ghanges in Fund Balances - Budget (Non-GAAP) and Actual -All Governmental Fund Types 10 Notes to the General Purpose Financial Statements 14 Report of Independent Accountants on Compliance at the Financial Statement Level 39 Report of Independent Accountants on the Internal Control Structure at the Entity Level 40 Conclusion Statement 42 <~~„ CITY OF FAIR SUMMIT COUNTY 3487 SOUTH SMITH ROAD FAIRLAWN.OHIO 44333 ELECTED OFFICIALS AND ADMINISTRATIVE PERSONNEL AS OF DECEMBER 31. 1995 Elected Offiaals Title Term of Office Suretv Amount Period Peter Kostoff' 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 1!1/94 - 12/31/95 (A} $10,000 (B) Stanley Bielevdcz Councilman 1/1!94 - 12/31/95 (A) $10,000 (B) Robert Donatelli Councilman 111/94- 12/31/95 (A) $10,000 (B} Frances Miller Councilwoman 1/1/94 - 12/31195 (A) $10,000 (B) Ginnie Singleton Councilwoman 111/94- 12/31/95 (A) $10,000 (B) R. Richard Snader Councilman 1/1/94 - 12/31/95 (A) $10,000 (B) Lawrence Pelland Director of Finance 1/1/92 - 12!31/95 (A) $50,000 (B) Administrative Personnel Patricia Bertsch Assistant Finance Director N!A (A) $50,000 (B) Legal Counsel Ricllarcl 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 Term " Replaced by William J. Roth, Jr. 111!96 1 CITY OF FAIRLAWN SUMMIT COUNTY INDEX OF FUNDS GOVERNMENTAL FUND TYPES: General Fund Specal Revenue Fund Tvpes: Street Construction, Maintenance and Repair Fund State Highway Improvement Fund Permissive Tax Fund Police Training Fund ChildrenlAdolescent 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 Tvpe: Bond Retirement Fund > ° Capital Project Fund Tvpes: Park Capital Improvement Fund WateNSewer Extension Fund Capital Improvemeni Fund Sewer lmprovemeni Fund Capital Reserve Fund FIDUCIARY FUND TYPES: Apencv Fund Tvpes: Various Escrow Fund Street Opening Deposit Fund Pertormance/Landscape Deposit Fund Police Pension Fund Fire Pension Fund Law Enforcement Trust Fund Drug Law Enforcement Fund Furtherance of Justice . ~~~1~ STATE OF OHIO OFFICE OF THE AUDITOR JIM PETROL AUDITOR OF STATE The Honorable Mayor and City Council Members City of Fairlawn, Ohio 3487 South Smith Road Fairlawn, Ohio 44333 Report of Indebendent Accountants 88 East Broad Stn:et P.O. Box 1140 Columbus, Ohio 43216-1140 Telephone 614-4664514 800-282-0370 Facsimile 6144664490 We have audited the accompanying general purpose financial statements of City of Fairlawn, Ohio, as of and for the year ended December. 31, -1995. 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 Auditinc tandards, 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. 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 raterial respects, the financial position of City of Fairlawn, Ohio, as of December 31, 1995, 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 July 13, 1996 on our consideration of City of Fairtawn's internal control structure, and a report dated July 13, 19!)6 on its compliance wiJ!>~~and regulations. State July 13, 1996 3 City of Faiilawn, Ohio Combined Balance Sheet All Fund Types and Account Groups December 31, 1995 Governmental Fund Types Special Debt Capital General Revenue Service .Projects Asse c and O h r D bi c• A,S$rt$: Equity in Pooled Cash and Cash Equivalents Cash and Cash Equivalents in Segregated Accounts Receivables: Taxes Accounts Special Assessments Intergovernmental Notes ' Interfund Receivable Due from Other Funds Materials and Supplies Inventory Advances Receivable Funds. on Deposit with Deferred Compensatioh Plaos Fixed Assets Other Debits: Amount Available in Debt Service Fund Amount to be Provided for Retirement of General Long-Term Obligations Total Assets and Other Debits $4,562,042 $1,068,162 $134,703 $2,390,169 0 0 0 0 788,432 123,730 0 182,416 1,756 1,460 0 393,376 0 0 5,305,920 0 68,500 14,830 0 346,411 0 150,000 0 0 0 0 0 167,424 6,467 2,995 0 0 112,206 3,356 0 0 8,000- 0' 0 0 0 0 0 0 0 0 0 0 l)- 0 0 0 0 0 0 0 $5,547,403 $1,364,533 $5,440,623. .$3,479,796 4 Fiduciary Fund Type Account Groups General General Totals Fixed. Long-Term (Memorandum Agency Assets Obligations Only) $100,802 $0 $0 $8,255,878 13,840 0 0 13,840 D 0 0 L,094,578 0 0 0 396,592 0 0 0 5,3D5,920 0 0 0 429,741 0 0 0 150,000 0 0 0 167,424 0 0 0 9,462 0 0 0 115,562 0 0 o a,ooo 1,012,933 0 0 1,012,933 0 7,564,982 0 7,564,982 0 0 ~ 126,703 126,703 0 0 6,359,035 6,359,035 $1,127,575 $7,564.982 $6.485.738 $31.010.650 (Continued) 5 City of Fairlawn; Ohio Combined BaLtnce Slieet All Fund Types and Account Groups (Contirnred) Decbmbei 31, 1995 Governmental Fund Tvoes I i?b'li i c, F>•*~1 E(Nity ~ h r dits_ T.iabilitie~~ Accounts Payable Contracts Payable Accrued Wages Compensated Absences Payable huerfund Payable Due to Other Fuuds Intergovernmental Payable Deferred Revemte Retaittage Payable Undistributed Monies Deferred Compensation Payable Payroll Withholdings Advances Payable Capital Lease Obligations Payable OPWC Loans Payable General Obligation Bond Payable Special Assessment Bond Payable with Governmental Commitment Tote! Liabilities Fug Empty and Other Credits: Investmem in General Feed Assets Fttnd Balances: Reserved for Encumbrances Reserved for Inventory Reserved for Advances Reserved for Noes Receivable Undesigoated: Designated for Sewer Line Repair Undesignated Total Fuffi Equity and Other Credits Special Debt Capital General Revenue Service Projects $56,295 $55,549 $0 $2:8,973 3,500 1,617 0 269,349 106,206 1,899 0 0 5,342 0 0 0 0 0 0 lfi7,424 0 0 0 0 156,608 72,665 0 39,452 416,231. 118,919 .5,305,920 2"",!3,246 0 0 0 36,938 -0 0 0 0 0 0 0 0 0 0 0 0 0 0 8,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 744,182 250,649 5,313,920 765,382 0 0 0 0 112,733 .83,746 0 5'70,131 112,206 3,356 0 0 8,000 0 0 0 0 150,000 0 0 223,260 0 0 0 4,347,022 876,782 126,703 X44,283 4,803,221 1,113,884 126,703 2,714,414 Total Liabilities, Fund Equity and Other Credits $5.547.403 $1.364.533 $5,440,623 $3,479.796 See Accompanying Notes ro the General Purpose Financial Statements 6 Fiduciary Fund Type Account Groups General General Totals Fixed Long-Term (Memorandum Agency Assets Obligations Only) $0 $0 $0 $140,817 0 0 0 274,466 0 0 0 108,105 0 0 464,189 469,531 0 0 0 167,424 9,462 0 0 9,462 0 0 0 268,725 0 0 0 6,064,316 0 0 0 36,938 87,329 0 0 87,329 1,012,933 A 0 1,012,933 17,851 0 0 17,851 0 0 0 8,000 0 0 131,759 131;759 0 0 1,319,790 1,319,790 0 0 2,685,000 2,685,000 0 0 1,885,000 1,885,000 1,127,575 0 6,485,738 14,687,446 A 7,564,982 0 7,564,982 0 0 0 766,610 0 0 0 115,562 0 0 0 8,000 0 0 0 150,000 0 0 0 223,260 0 0 0 7,494,790 p 7,564,982 0 16,323,204 $1,127,575 $7,564,982 $6,485,738 $31,010,650 7 City of Fairlawn, Oleo Combined Statement of Revenues, Expe~itures and Changes in Fund Balances All Govemmental Fund Types For the Year Ended December 31, 1995 Governmental _ .Special General Revemte Revem~rc• Municipal Income Taxes $3,668,132 50 Property and Other Taxes 377,494 192,fi28 Charges for Services 44,780 179,835 Licenses, Permits and Fees 212,433 26,415 Fines and Porfeitures 124,138 54;.:43 Luergovetmnental 892,379 258,395 Special Assessments 0 0 huerest 451,991 0 Contributions/Donations 0 34,562. Other 15,506 4,405 Total Revemies 5,786,853 750; t83 F,mendi ,r s: Cutzent: General Govermneot 883,461 0 Security of Persons and Property 2,249,676 318,090 Public Health Services 74,095 0 Transportation 719,787 176,885 Community Envirommem 30,892 A Basic Utility Services 230,585 85;293 Leisure Time Activities 26,101 148,881 Capital Outlay 0 0 Intergovernmental 119,412 0 Debt Service: Principal Retiremem 0 0 Interest and Fiscal Charges 0 0 Total Expenditures 4,334,009 729,149 Excess of Revemres Over (Under) Expenditures 1,452,844 21,334 (kher Financier S ~r ?c i cl• Operating Transfers In 0 121,025. Operating Transfers Out (121,025) 0 Total Other Financing Sources (Uses) (121,025) 121,.025 Excess of Revenues and Other Financing Sources Over(Under) Expenditures and Other Financing Uses .1,331,819 142„359 Fund Balances Beginning of Year 3,454,306 972,162 Increase (Decrease) in Reserve for Invemory 17,096 i'637 Fund Balances E~ of Year 54.803,221 $1,113 8, 84 See Accompanying Notes to the General Purpose Financial Statements 8 Fund T ypes ~.9 m,~ Totals Debt Capital (Memorandum Service Projects ONy) $0 $1,466,582 $5,134,714 0 56,916 627,038 0 102,245 326,860 0 239,223 478,071 0 0 178,381 0 933,976 2,084,750 361,115 0 361,115 0 0 451,991 0 0 34,562 0 47,117 67,028 361,115 ' 2,846,059 9,744,510 15,456 0 898,917 0 0 2,567,766 0 0 74,095 0 0 896,672 0 0 30,892 0 0 .315,878 0 0 174,982 0 3,106,753 3,106,753 0 0 119,412 93,222 207,282 300,504 196,880 156,823 353,703 305,558 3,470,858 8,839,574 55,557 (624,799) 904,936 0 157,483 278,508 0 (157,483) (278,308) 0 0 0 55,557 (624,799) 904,936 71,146 3,339,213 7,836,827 0 0 16,459 $126,703 $2,714,414 $8,758,222 9 City of Fairlawn, Ohio Combined Statement of Revenues, Expenditures and Changes in Fund Balances Budget (Non-GAAP) and Actual Al] Governmental Fund Types For the Year Ended December 31, 1995 Revenues' Municipal Dome Taxes Property and Otber Taxes Charges forServices Licenses, Permits and. Fees Fines and Forfeitures intergovernmental Special Assessments Imerest ContributionslDoaations Other Total Revenues Expenditurec• Current: General Government Security of Persons and Property Public Health Services Trutspomtion Community Environment Basic Utility Services Leisure Time Activities Capital Outlay Intergovernmental Debt Service: Principal Retirement Interest and Fiscal Chazges Total Expenditures Excess of Revenues Over (Under) Expenditures O her FitLtncllty 4nnrcec lcecl• Advances In Advances Out Sale of Fixed Assets 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 Unexpended Prior Year Encumbrances Fund Balances End of Year General Fund Variance Revised Favorable Budget Actual (Unfav<irable $3,683,654 $3,611,688 ($71,966) 385,338 377,494 (7,844) 7,360 44,997 37,637 189,415 212,433 .23,018 ..115,000 119,672 4,672 470,239 982,588 512,349 0 0 0 164,676 447,466 's:82,790 0 0 0 11,500 15,245 3,745 5,027,182 5,811,583 '84,401 1,127,885 964,828 163,057 2,388,123 2,276,723 111,400 g0,4g0 74,095 6,385 746,682 723,020 23,662 33,913 29,631 4.282 390,306 274,862 115,444 30,365 28,629 1,736 0 0 0 119,549 98',226 21,323 0 0 0 0 0 0 4,917,303 4,470,014 447.289 109,879 1,341,569 ],231,690 4,900 4,000 (9~) 0 0 0 0 0 0 0 0 0 551,530 121,025 430,505 (546.,630) 117,025 _ 429,605 (436,751) 1,224,544 1,661,295 3,025,338 3,025,338 0 127,835 _ 127,835 0 $2.716.422 $4,377,717 $L 661.295 See Accompanying Notes ro the General Purpose Financial Statements 10 Special Revenue Funds Variance Revised Favorable .Budget Actual (Unfavorable) Debt Service Fund _ Variance Revised Favorable Hudget Actual (Unfavorable) $o $o $a $o $o $~ ,175,236 192,288 17,052 0 0 1 175,800 185,063 9,263 0 0 ~ 28,380 26,415 (1,965) 0 0 ~ 58,570 51,352 (7,218) 0 0 ~ 251,526 255,993 4,467 0 0 ~ 0 0 0 360,000 361;115 l,ll, 0 0 0 0 0 ~ 30,000 34,562 4,562 0 0 ' ..2,000 4,405 2,405 0 0 721 512 078 750 28,566 360,000 361,115 1,11 , , 0 0 0 15,500 15,456 4 337,025 313,437 23,588 0 0 0 0 0 0 0 337,936 267,279 70,657 0 0 0 0 0 0 0 88,671 70,329 18,342 0 0 214,004 153,277 60,727 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 93,222 93,222 0 0 0 196,880 196,880 977,636 804,322 173,314 305,602 305,558 4 124) (256 244) (54 201,880 54,398 55,557 1_1' , , 0 0 0 0 0 0 0 0 (4.000) (4,000) 30,000 30,000 0 0 0 121,025 121,025 0 0 0 0 0 0 0 0 _ 151 025 025 151 0 (4,000) (4,000) , , (105;099) 96,781 201,880 50,398 51,557 1,1' 786,046 786,046 0 83,146 83,146 ?8 036 78 036 0 0 0 _ , , $758,983 $960.863 $201.880 $133,544 $134,703 $1,1: (Continu, 11 City of Fairlawn, Ohio Combined Statement of Revenues, Expenditures and Charges in Fuel Balances Hudget (Non-GAAP) and Actual All Goverrmental Fund Types (Continued) For the Year Ended December 31, 1995 Capital Projects Funds `tariacee Revised Favorable Budget Actual (Uxifavorable) Revenues: Municipal Income Taxes $1,696,807 $1,439,405 ($257,402) Property. and Other Taxes - 46,600 56,689 10,089 Charges for Services 50,000 ..102,245 52,245 Licenses, Pemuts and Fees 70,950 79,270 8,320 Fines and Forfeitures 0 0 0 Intergoverrmental 767,399 631.,036 (136,363) Special Assessments 0 0 0 Interest 0 0 0 Contributions/Donations 0 0 0 Other 4,950 47,117 42,167 Total Revenues 2,636,706 2,355,762 (280,944) Fxp n 1 1 q• Curren[: General Goverttment 0 0 0 Security of Persons and Propetty 0 0 0 Public Health Services 0 0 0 .Transportation 0 0 0 Community Environment 0 0 0 Basic Udlity Services 0 0 0 Leisure Time Activities 0 A 0 Capital Outlay 4,305,626 3,908;419 397,207 Intergovetmnental 0 0 0 Debt Service: Principal Retirement 170,000 169,934 66 Interest and Fiscal Charges` 145,403 142,743 2,660 Total Expenditures 4,621,029 4,221,096 399,933 Excess of Revenues Over (Under) Expe~ititres (1,984,323) (1,865,334) .118,989 Other Fi anring o rz c ( 1c cl• Advanceslr 0 167,424 167,424 Advances Out 0 (167,424) (167,424) Sale of Fixed Assets 0 0 0 Operating TtarsfersIr 0 157,483 157,483 Operaang Transfers Out (157,483) (157,483) 0 Total Other Firancing Sources (Uses) (157,483) 0 .157,483 Excess of Revenues and Otter. Financing Sources Over (Under) Expenditures and Other Financing Uses (2,141,806) (1,865,334) 276,472 Fund Balances Beginning of Year 2,451,881 2,451,881 0 Unexpended Prior Year Encumbrances 925,043 925,043 0 Fund Balances End of Year $1.,235.118 $1.511.590 $276.472 See Accompanying Notes to [he General Purpose Financial Starements 12 Totals (Memorandum Only) Variance 'Revised Favorable Budget Actual (Unfavorable) $5,380,461 $5,051,093 ($329,368) 607,174 626,471 19,297 233;160 332,305 99,145 288,745 318,118 29,373 173,570 171,024 (2,546) 1,489,164 1,869,617 380,453 360,000 361,115 1,115 164,676 447,466 282,790 30,000 34,562 4,562 " 18,450 66,767 48,317 8,745,400 9,278,538 533,138 1,143,385 980,284 163,101 2,725,148 2,590,160 134,988 80,480 74,095 6,385 1,084,618. 990,299 94,319 33,913 29,631 4,282 478,977 345,191 133,786 244,369 " 181,906 62,463 4,305,626 3,908,419 397,207 119,549 98,226 21,323 263,222 263,156 66 342,283 339,623 2,660 10,821,570 9,800,990 1,02D,580 (2",076,170) (522,452) 1,553,718 4,900. 171,424 166,524 (4,000) (171,424) {167,424) 30,000 30,000 0 121,025 278,508 157,483 (709,D13) (278,508) 430,505 (557,088) 30,000 587,088 (2,633,258) (492,452) 2,140,806 6,346,411 6,346,411 0 1,130,914 1,130,914 0 $4,844,067 $6,984,873 $2,140,806 13 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1995 NOTE I -REPORTING ENTTTY AND BASIS 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 off government. The Mayor, Council, and Finance Director are elected. A. Reporting Entity In evaluating hovv to define the City for financialxeporting purposes, management has considered all agencies, depaztments, and organizations making up the City of Fairlawn (the primazy government) and its potential component units consistent with Governmental Accounting Standards Boazd (GASB) Statement No. 14 "The Financial Reporting Entity." The City provides vazious services including police and fire: protection, emergency medical, recreation (including pazks), planning, zoning, street maintenance and repair,. and general administrative services. The operation of each of these activities is directly controlled by the Council through the budgetary process: None of these services aze provided by a legally separate organization; therefore, these operations aze 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 board 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 islegally obligated or has otherwise assumed the responsibility to finance the deficits of, orprovide 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 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 sepazate 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 changes therein, which aze segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or 14 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31; 1995 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 Types 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 aze 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 to aixount for all financial resources except those required to be accounted for 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 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. • 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 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 are purely custodial (assets equal liabilities) and thus do not involve measurement of results of operations. 15 CITY OF FAIRLAWN Notes to the General Putpose Financial Statements December 31, 1995 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 Asset Account Group -this account group accounts for all general fixed .assets of the City. • General Long-Term Obligations Account Group -this account group accounts 4or all unmatured long-term indebtednessof the City, including special assessment debt for which the City is obligated irrsome manner.- NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies followed. in the preparation of these financial statements are summazized below. These policies conform to generally accepted accounting principles (GAAP) for local governmental units as prescribed in the statements issued by the Governmental Accounting Standazds Board (GASB) 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 fund types are 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 aze 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 aze accounted for using the modified accrual 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. 16 _.. .a .. ..w ... CITY bF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1995 In applying the susceptible to accrual concept under the modified accrual basis, the follo 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 azise 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 balance sheet and revenue is recognized. Current and delinquent property taxes measurable as of December 31, 1995, whose availability is indeterminate and-which :are: 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 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 aze 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 eazly in the following year. The costs of accumulated unpaid vacationand sick leave are reported as fund liabilities iin 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 in the governmental funds. B. Budgetarv Process The budgetazy 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 aze the tax budget, the. certificate of estimated resources, .and the appropriation ordinance, all of which aze prepared on the budgetary basis of aceounting: 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 any activity or balance, are legally required to be budgeted and appropriated. The legal level of budgetary control is at the object levva within each depaztment. Any budgetary modifications at this level may only be made by resolution of the City Council 17 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1995 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 Secretazy of the County Budget Commission, by July 20 of each year, for the period January 1 to December 31 of the following year. Estimated Resources The County Budget Commission determines if the budget substantiates a need to levy ala or part of previously authorized taxes and reviews estimated revenue. The Commission certifies its actions to the City by October 1. As part of this certification, the City receives the offit•.ial 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. The7evised budget then serves as the basis for the annual 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 year :if the Finance Director determines, a.nd the Budget Commission agrees that an estimate needs to be either increased oi• decreased. T'he amounts reported on the budgetazy statements reflect the amounts- in the final amended official certificate,of estimated resources issued during 1995. Appropriations A temporary appropriation ordinance to control expenditures may be passed on or about Januazy 1 of each year for the period January 1 to Mazch 31. An annual appropriation ordinance: must be passed by April 1 of each yeaz for the period Januazy 1 to December 31. The appropriation ordinance fixes spending authority at the fund, department, and object IeveL The appropriation ordinance may be amended during the yeaz 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 yeaz by an ordinance of Council. During the year, several supplemental appropriation. measures were passed. None of these supplemental appropriations had any significant affect on the original appropriations. The budget figures which appear in the statement of budgetary compazisons represent the final appropriation amounts, including all amendments and modifications. Encumbrances As pazt of formal budgetary control, purchase orders, contracts, and other commitments for the expenditure of moneys are recorded on the budgetary basis in order to reserve that porticm 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, 18 .. n ... s„., ....... CITY OF FAIRI.AWN Notes to the General Purpose Financial Statements December 31, 1995 depaztment and object level. On the GAAP basis, encumbrances outstanding at yeaz end aze reported as reservations of fund balances for subsequent year expenditures of governmental funds. 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 cazried forward to the succeeding year and is not reappropriated. C. Cash and Cash Equivalents Cash z•eceived by the City is pooled in a central. bank account. Moneys for all funds are maintained in this account or temporazily used to purchase short=term investments.: Individual fund integrity is maintained through City records.. Each funds'. interest in the pool is presented as "equity in pooled cash and cash equivalents" on the combined balance sheet. During:1995, investments were limited to overnight repurchase agreements and interest in STAR Ohio, the State Treasurer's Investment Pool. These investments aze stated:at cost which approximates market value, except for investments in deferred wmpensation; .which are stated at 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 presentatiomon the combined balance sheet, investments with an original maturity of three months. or less and investments. from 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. 19 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1995 E. Fixed Assets and Depreciation General fixed assets are not capitalized. in the funds used to acquire or construct them.. ]nstead, capital acquisition and construction aze reflected as expenditures in governmental funds, and the related assets are repotted in the general fixed asset group. All purchased fixed assets aze valued at cost when historical records are available and at an estimated historical cost when no historical records exist. Donated fixed assets are valued 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 aze 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 City. Assets in the general fixed assets account group are not depreciated. F. Compensated Absences Vacation benefits aze accrued as a liability as the benefits are earned if the employees' rights to receive compensation are attributable to services already rendered and it is probable that the City will compensate the employees for the benefits through paid time off or some other mezns. Sick leave benefits are accrued as a liability using the termination method.-The liability is based on an estimate of the amount of accumulated sick leave that will 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 are paid. The remainder is reported in the general long-term obligations account group. G. Interfund AssetslLiabilities During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as "due fi-om other funds" or "due to otherfunds." Long-term interfund loans are classified as "advances receivable/payable" on the balance sheet. 20 CITY OF FAIRLAWN Notes to the General Purpose Financial. Statements December. 31, 1995 H. Fund Eouity Reserves represent those portions of fund equity not available for appropriation or expenditure and aze legally segregated for a specific future use. Designated fund balances are reserved for encumbrances, inventory, advances, and notes receivable. A designated fund balance has also been established for sewer line repairs. I. I•nterfund 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 equity transfers..All other interfund transfers are reported as operating transfers. , J. Accrued and Long-term Obligations In general, governmental fund payables and accrued liabilities are reported as obligations of the funds regardless of whether they will be liquidated with currentxesources. However, claims and judgments, compensated absences, and special termination benefits aze reported as a liability in the general long-term obligations account group to the extent that they will not be paid with current expendable available financial resources. Bonds, long-term loans and capital leases are recognized as a liability of the general long-term obligations account group until doer Under Ohio law, a debt retirement fund must be created and used for the payment 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 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 resources used to pay both principal and interest have also been allocated accordingly. K. Total Columns on General 1'urnose Financial Statements Total columns on the General Purpose Financial Statements aze captioned memorandum only to indicate that they aze presented only to facilitate financial analysis: Data in ese columns do not present financial. position or results of operations in conformity with generally accepted accounting principles (GAAP). Memorandum totals are not comparable to a consolidation. Additionally, interfund eliminations have not yet been made in the aggregation of this data. 21 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December. 31, 1995 NOTE 3 - CHANGE IN ACCOUNTING PRINCIPLES For 1995, the City has implemented Statement No. 22 of the Governmental Accounting Standards Board, "Accounting for Taxpayer-Assessed Revenues in Governmental Fund." Statement No. 22 requires that revenues from taxpayer-assessed income taxes net of established refunds be recognized in the accounting period in which they become measurable and available. The adoption of this statement required no change from prior years. NOTE 4 -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. The Combined Statement of Revenues, Expenditures and Changes in Fund Balances -Budget (Non-GAAP) and Actual -All Governmental Fund Types is presented on the budgetaq~ basis to provide a relevant comparison of actual results with the budget and to demonstrate compliance with state statute. The major differences between the budget basis and the GAAPbasis 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 are treated as expenditures (budget) ratherthan 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 basis statements to the budgetary basis statements on a fund type basis: Special Capital General Revenue Debt Service Projects GAAP Basis $1,331,819 $142,359. $55,557 $(624,799) Revenue Accruals 24,730 32,469 0 (490,297) Advances In 4,000 ~0 0 167,424 Expenditure Accruals 12,697 29,252 0 128,341 Advances Out 0 0 (4,000) (167,424) Encumbrances (148,702) (107,299) 0 1:878,579) Budget Basis $1,224,544 _ __$96,781 $51,557 $(1,865,334) 22 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1995 NOTE 5 -FUND DEFICIT The following fund had a deficit fund balance as of December 31, 1995: Deficit Fund Balance Police & Fire Pension Special Revenue'Fund $55,437 This fund deficit arose due to the recognition of accrued liabilities. The genetal fiord is liable for any deficit in this fund and provides operating ttansfers when cash is required, noit when accruals occur.... NOTE 6 -DEPOSITS AND INVESTMENTS State statutes classify monies held by the City into three categories which determines the type of investments which can be made. Active deposits are public deposits necessazy to meet current demands on the treasury. _Such monies must by maintained either as cash in the City Treasury, in commercial accounts payable or withdrawable on demand, including negotiable order of withdrawal (NOW) accounts, or in money;mazket deposit accounts. Inactive deposits. aze public deposits that Council has identified as not required for use within the current 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 deposit accounts including, but not limited to, passbook accounts. Interim deposits are deposits of interim monies.. Interim monies. are those monies which are not needed for immediate use but will be needed before the end of the current period of designation of depositories. Interim deposits must be evidenced by the time certificates of deposit maturing not more than one year from the, date. of deposit or by savings or deposit accounts including pass book accounts. Interim monies may be invested in the following obligations provided they mature or are redeemable within two years of 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 .+~, tB Wi~l ._!,ure ,, CITY OF FAIRLAWN Notes to the. General 1'uspose Financial Statements December 31;.1995 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 irrsecurities described in this division are 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 gootestablislied by the Financial institution to secure therepayment of all public monies 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 treasures or; if the securities aze not represented bya certificate, upon receipt of confirmation of transfer from the custodian. City Deposits At yeaz end, the carrying amount of the City's .deposits was ($154,129). and the bank balance was $115,685. 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 yeaz 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 aze held by the counterpazty's trust depaztment or agent in the City's name. 'Category Three includes uninsured and unregistered investments which are held by the counterpazty's trust department or agent but not in the City's name. STAR Ohio and Deferred Compensation aze unclassified investments since they are not evidenced by securities that exist in physical or book form. 24 f®uuu ~a CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1995 Category Repurchase Agreement Investment in State Treasurer's Investment Pool (STAR Ohio) 1 2 3 $0 $0 $6;089,551 Carrying Value $6,089,551 2,334,296 Market Value $6,089,551 2,334,296 Deferred ,Compensation 1,012,933 1,012,933 Total Investments $9,436;780 $9,436,780 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. 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 No. 3 is as follows: GASB Statement No. 9 Investments which are part of a cash management pool: Repurchase Agreement STAR Ohio GASB Statement No. 3 NOTE7-PROPERTY TAXES Cash and Cash Equivalents/Deposits $8,269,718 (6,089,551) (2,334,296) ($154,129) Investments $1,012,933 6,(189,551 `2,334,296 $9,436,780 Property taxes include 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, 1994, on the assessed value as of January 1, 1994, the lien date, and were collected in 1995. 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 1995 attached as a lien on December 31, 1994, were levied after October 1, 1994 and are collected with real property taxes. Public utility property taxes were assessed on tangible personal property at 88 percent of true value and on real property at 35 percent of assess valuation. 1995 tangible personal property taxes were levied after October 1, 1994, on the value listed as of 25 S31'. d §91~LL I .~. 11 WI ik CITY OF FAIRI,AWN Notes to the General Purpose Financial Statements December 31, 1995 December 31, 1994, and were collected in 1995. Tangible personal property assessments are 25 percent of true value. The assessed value upon which the 1995 taxes were collected was $194,244,044. Real estate represented 88 percent ($169,971,300) of this total, public utillity tangible personal property represented 3 percent($5,314,340) of this total and general tangible personal property represented 9 percent ($18,958,404) of this total. The full tax rate for all City operations applied to taxable property for the year ended December 31, 1995 was $2.70 per $1,000 of assessed valuation. 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 June 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 taxing 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, 1995. However, since these tax collections will not beseceived during the available period nor are they intended to finance 1995 operations, the receivable is offset by a credit to deferred revenue. NOTE 8 - IfiECEIVABLES Receivables at December 31, 1995, consisted of taxes, accounts (billings for user charged service), special assessments, notes (sale of land to developer) and intergovernmental receivable azising from grants, entitlements, and shared revenues. Accounts, taxes, special assessments,. and intergovernmental receivables are deemed collectable in full. 26 ~ ~ ~~ ; ~ ~_ CITY OF FAIRLAWN Notes to the General Purpose Financial. Statements December 3i, 1995 A summary of the principal items of intergovernmental receivables is as follows: Intergovernmental Receivable Amount General Fund: Local Government Tax $23,769 Tangible Exempt Settlement 4,228 Estate Tax 40,503 Total General Fund 68,500 Special Revenue Funds: - Gasoline Tax 10,051 Motor Vehicle 2,503 Motor Vehicle Permissive 1,066 Tangible Exempt Settlement 1,210 Total Special Revenue Funds: 14,830 Capital Projects Funds:. State Grants 346,411 Total Capital Projects Funds 346,411 Total $429,741 NOTE 9 -INCOME TAX The City levies a municipal income tax of 2 percent on gross salaries, wages anal other personal service compensation earned by residents of the City and on the earnings of nom•esidents 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 aze 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 aze required to pay their estimated tax quarterly and file a declazation annually.. By City ordinance, income tax proceeds aze 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. 27 ~` -.iP: tl,S Elul l 3 ~I H-; CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31; 1995 NOTE 10 -FIXED ASSETS A summary of changes in the general fixed assets group is as follows: Land Land Improvements Buildings Machinery and Equipment Vehicles Total Balance January 1,1995 Additions $1,029,126 $0 1,188,138. 850 2,628,085 0 1,505,107 102,370 1,044,406 - 198,415 $7,394,862. $301,635 NOTE 11 -RISK MANAGEMENT Balance Deletions December 31,1995 $0 $1,029,126 0 1,188,988 0 2.,628,085 13,312 1,594,165 118,203. 1.,124,618 $131,515 $7,564,982 The City is exposed to various risks` of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. During 1995, 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 deductibble for collision. Automobile liability coverage has no limit for collision; a $1,000,0001imit for bodily injury and a $1,000,000 limit 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 liabilir~ 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. 28 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1995 NOTE l2 -DEFINED BENEFIT PENSION PLANS A. Public Employee Retirement System All City of Fairlawn employees, other than uniformed employees, participate in tl a 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. by the PERS for the year. ended December 31, 1995, was $1,305,584; the City's total payroll was .$2;611,003. All .City employees, except uniformed employees, must pazticipate in PERS. Students working 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 aze 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 are entitled to 2.5 percent of their final average salary for each year of service: in excess of 30,yeazs. Final average salary is the employees average over the highest.. three. years of earnings. The Ohio Revised Code provides statutory authority for employee and employer contributions. The employee. contribution rate for 1995 was 8.5 percent.. The employer contribution rate was 13.55 percent of covered payroll; 8.44 percent was the portion used to fund the pension obligations for 1995. 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 PERS. The retirement contribution requirement for the year ended December 31, .1995 was $221,166 which consisted of $1.10,191 from the City and $110,975 from the City as an employee benefit; these contributions represented 8.44 percent and 8.5 percent of the covered payroll respectively. House Bill 151 became effective on February 9, 1994. Under the bill, the two month prohibition for 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 the re-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. 29 CTTY OF FAIItLAWN Notes to the General Purpose Financial Statements December 31, 1995 The "pension benefit obligation" is the actuarial present value of credited projected benefits, adjusted for the effects of projected salazy increases and step-rate benefits, estimated to be payable in the future as a result of employee service date. The measure is intended to help users assess PERS's funding status on agoing-concern basis; assess progress made inaccumulating sufficient assets to pay benefits when due, and make comparisons among retirement systems and employers. This calculation does not reflect the method used by PERS to determine funding requirements. PERS determines it's actuarial .liability based on the entry. 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. '1Che total pensionbenefit obligation does not include any health care data. The City's 1995 actuarially determined contribution represented .016 percent of total contributions required of all participating entities. Historical trend information showing the PERS progress for the past eight years in accumulating sufficient assets to pay benefits when due is presented in the PERS December 31, 1995., Comprehensive Annual Financial Report. B. Police• and Firemen' s Disability and Pension H'rend Full-time uniformed employees of the City participate in the Police and Firemen's Disability and Pension Fund of Ohio (the "Fund"), a cost sharing multiple-employer public employee retirement system created by theState of Ohio. This is a single retirement system with one administration that provides retirement benefits to two classes of employees. The payroll for the employees covered by the Fund for the year ended December 31, 1995 was $855,573 for police at~d $387,845 for firemen. The City's total paytoll was $2,611,003. 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 yeazs of service and become vested in full normal retirement benefits after twenty-five yeazs 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 fifteen yeazs of service credit. The normal retirement benefit is equal to 2.5 percent of annual earnings for each of the first twenty yeazs 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 eaznings 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 yeazs from their full-time hire date. The reduced CITY OF FAIRLAWN Notes to the General-Purpose Financial Statements December 31, 1995 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 actuary; 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 year ending December3l, 1994, the most recent actuarial: valuation date are as follows: Statutorily Actuarially Determined Determined - Police Fire Police Fire Employee Contribution Rate 10.00% 10.00 n/a n/a Employer Contribution Rate 19.50 24.00 n/a n/a 29.50 34.00 36.26% 33.55 less Portion To Finance Health. Care (Board-Defined .allocation) (6.50) (6.50) (6.50) , (6.50) Contribution Rate To Fund Pension Obligations 23.00% 27.50% 29.76% 27.05% _. ~~ ,~ CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1995 Actual contributions as a percentage of covered payroll and the actuarially determined contribution amount for the year ended December 31; 1994, were as follows: Police Fire of °k of Covered Covered Amount Payroll Amount Payroll Statutory Employee Contribution, Paid by Employer $85,557 10.00% $38,784 10.00% Statutory Employer Contribution 166,837 19.50 93,083 24.00 Portion to Fund Health Caze (55,612) (6.50) (25,210) (6.50) Totat Statutory Contribution $196,782 23.00% $106,657 27.50% Actuarially Determined Contribution $235,283 27.50% $104,912 27.05% Although this schedule indicates that the actuarially determined contribution rate for employers is greater than the statutory .contribution for police, no liability has beensecognized 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 actuarial 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 coimparisons among the public retirement systems and employers. The Fund does not make separate 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 actuazial valuation date, aze as follows (amounts expressed in thousands): Police Fire Total Pension Benefit Obligation $3,306,800 $2,546,400 $5,853,200 Net Assets Available for Benefits 2,571,300 2,054,200 4,625,SW Unfunded Pension Obligation $735,500 $492,200 $1,227,700 32 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements Decembec3l, 1995 We are presenting separate asset and obligation amaunts for police and fire since tlhe Fund establishes distinct contribution rates. The totalpension benefit obligation and net assets available for benefits apply [o the police and fire plan as a whole. The City's 1994 actuarially determined contributions represented .08 percent of total contributions required of all participating entities. Eight year 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, 1995, audited financial statements. NOTE 13 -POST EMPLOYMENT BENEFITS. A. Public Emnlovees Retirement Svstem The public Employees Retiretent System of Ohio (PERS) provides postretiremen.t 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 considered 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 care based on authority granted by state statute. The 1994 employer contribution rate was 13.55 percent of covered ppayroll; 5.11 percent was the portion that was used to fund health care for 1995. Benefits aze advance-funded using the entry age normal cost method. Significant actuarial assumptions, based on PERS's latest actuarial review performed as of December 31, 1994; (the latest information available), 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 5.1 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 carried at cost, which approximates market value.' Equity securities, fixed income investments, and investments in real estate are cazried at market value. For actuarial valuation purposes, a smoothed market approach is used. Assets aze adjusted to reflect 25 percent of unrealized market appreciation or depreciation on investment assets. The number of active contributing participants was 365,383 as of December 31, 1995. The City's. actual contributions for 1995, which were used to fund postemployment benefits, were $66,715. The actual contribution and the actuazially required contribution amounts .are the same. PERS's net assets available for payment of benefits at December 31, 1994, (the latest information available) were $6,840.4 million. The actuarially accrued liability and the unfunded actuarial accrued liability were $7,952.1 million and $1,111.7 million, respectively. 33 GTTY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1995 B. Police and Firemen's Disability 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 monthly 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 a two-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 Chapter 742 provides the authority allowing the Police and Firemen's Disability and Pension Fund's boazd 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 apay-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 covered. payroll is applied to the postemploymenthealth Gaze program.:Inaddition, since July 1, 1992, most retirees have been required to contribute a portion of the cost of their health caze coverage through a deduction. from their monthly benefit payment. The number of pazticipants eligible to receive health care benefits as of December 31, 1995, was 16,532 for police and 13,306 for firefighters. The City's actual contributions for 1995 that were used to fund postemployment benefits were $55,612 for police and $25,210 for firefighters. The Fund`s total health care expenses for the year ended December 31, 1994, (the latest information available) were. $63,687,537. .NOTE 14 -OTHER EMPLOYEE BENEFITS 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 purchased with those amounts, and all income attributable to those amounts, property, or rights aze (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 oNy to the claims of the City's general creditors.. Pazticipants' rights under the plans aze equal to those of general creditors of the City in an amount equal to the fair market value of the deferred account for each 34 CITY OF FAIRLAWN Notes to the General 1'tii'pose Financial Statements December3l, 1995 participant. 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 of December 31, 1995, the amount on deposit with the Ohio Public Employees Deferred Compensation Boazd and Aetna Life Insurance and Annuity was $106,531-and- $906,402, 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 per year, depending upon length of service. Vacation accumulation is limited to one yeaz•. 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 aceumulate'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 are not eligible to receive termination payments for sick leave.. As of December 31, 1995, .the total liability for unpaid compensated absences was $469,531. C. Health Care Benefits .The City provides life insurance and accidental death and dismemberment insurance to most employees. The City has elected to provide employees medical/surgical benefits through Blue Cross/Blue Shield of Northern Ohio. The employees share the wst of the monthly premium. The premium varies with employee depending on the terms of the union contractor employee type. Dental insurance is provided by the City to all employees through Delta Dental NOTE 15 CAPITALIZED LEASES -LESSEE DISCLOSURE In prior years, the City entered into leases for. the acquisition of radio equipment: Each lease meets the criteria of a capital lease as defined by FASB Statement No. 13 "Accounting for 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 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 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 35 :, ®,u ~ : ~ .... CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1995 under the capital leases and the present values of the minimum lease payments as of December 31, 1995: Year Ending Amount 1996 $51,428 1997 51,428 1998 51,428 Total Minimum Lease Payment 154,284 Less Amount Representing Interest (22,525) Present Value of Minimum Lease Payments $131,759 NOTE 16 -LONG-TERM OBLIGATIONS Long. term obligations of the City as of December 31, 1995, were as follows: Balance Balance . December 31, 1994 Additions Deletions December 31, 1995 General Obligation Bond $2,780,000 $0 $95,000 $'1_,685,000 Special Assessment Vazious Purpose Bond 1,950,000 0 65,000 1,885,000 OPWC Loans 1,422,946 0 103,156 1,319,790 Capital Leases .169,107 0 37,348 131,759 Compensated Absences 413,448- 68,974 18,233 464,189 Total General Long-Term Debt $6,735,501 $68,974 $318,737 $6,485,738 The general obligation bond will be paid from income 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 owners and 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 36 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1995 absences payable" account will be paid from the fund from which the employees' salazies aze paid. Principal and interest requirements to retire bonds and loans outstanding at December 31, 1995 are as follows: Special Assessment General Obligation OPWC Year Ending Bond Bond Loans Total 1996 $199,860 $239,608 $165,636 $605,104 1997 200,800 236;008 165,636. 602,444 1998 196,375 237,208. `165;636 599,219 1999 200,000 238,008 165,636 603,644 2000 197,775 238,388 90,702 526,865 2001- 2005. 994,303. 1,191,935 453,510. 2,639,748 2006-2010 986,000 1,191,663 453,510 2,631,173 2011 - 2015 197,950 715,038 362,808 1,275,796 Total $3,173,063 .$4,287,856 .$2,023,074 $9,483,993 NOTE 17 -CONSTRU CTION COMMITMENTS As of December 31, 1995, the City had outstanding contractual commitments of $399,743 for various road and sewer improvements. NOTE 18 - INTERFUND TRANSACTIONS Interfund balances at December 31, 1995, consist of the following: Advances Receivable General Fund $8,000 Debt Service Fund 0 Total $8,000 Advances Payable $0 8,000 $8,000 37 CTTY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1995 Interfund Receivable Capital Improvement - Capital Projects Fund Sewer Improvement - Capital Projects Fund Total $167,424 0 $167,424 General Fund Children Adolescent SAEF - Special Revenue Fund Mayor's Court - Agency Fund Total NOTE 19 -CONTINGENCIES A. Grants Due From $6,467 2,995 0 $9,462 Interfund Payable $0 167,424 $167,424 Due To $0 0 9,462 $9,462 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 liability of the general fund or other applicable funds. However, in the opinion of management, any such disallowed claims will not have a material effect on the overall financial position of the City as of December 31, 1995. B. Litigation The City of Fairlawn is pazty to legal proceedings. The City management is of the opinion 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 ` paoiioa ors v ~ -' _~ v :~ STATE OP OHIO OPFICE OF THE AUDITOR JIM PfTRO, AUDITOR OF STATE The Honorable Mayor and City Council Members City of Fairlawn, Ohio 3467 South Smith Road Fairlawn, Ohio 44333 88 East Broad Street P.O. Box 1140 Columbus, Ohio 43216.1140 Telephone 614-966-4514 1300-262-0370 Facsimlle 614-066-4490 Report of Independent Accountants on Compliance at the Financial Statement Level We have audited the general purpose financial statements.of City of Fairlawn, Ohio, as of arni for the year ended December 31, 1995, and have issued our report thereon dated July 13, 1996. We conducted our audit in accordance with generally accepted auditing standards and Government 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 financial 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 overall compliance 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 reported herein under Government Auditing Standards. However, we noted certain immaterial instances of noncompliance that we have reported to the management, Mayor and City Council of the City of Fairlawn, Ohio, in a separate letter dated July 13, 1996. This report is intended for the information of management, the Mayor and City Council. However, this report is a matteyef-pLLblic record and its distribution is not limited. July 13, 1996 39 `~tpbp~ STATE OF OHIO OFFICE OF THE AUDI'T'OR JIM PETRO, AtmrrOR OF STATE 88 East Broad Street P.O. Boz 1140 Columbus, Ohio 43216-1140 Telephone 614-466-4514 SCq-282-0370 Facsimile 674A66.4490 The Honorable Mayor and City Council Members City o€Fairlawn, Ohio 3487 South Smith Road Fairlawn, Ohio 44333 Report of Independent Accountants on the Internal Control Structure at th Entity Level We have audited the general purpose financial statements of City of Fairlawn, Ohio, as of and for the year ehded December 31, 1995, and have issued our report thereon dated July 13, 1996. We conducted our audit in accordance with generelly accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and pertorm 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 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 generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the 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 performing our audit of the general purpose financial statements of City of Fairlawn, Ohio, for the year ended December 31, 1995, 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 Amedcan InstRute of Certified Public Accountants. A material weakness is a condition in which the design or operation of one or more of the specific intemal 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 performing their assigned functions. We noted no matters involving the intemal control structure and its operations mat 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- However, we noted other matters involving the internal control structure and its operation that we have reported to the management,.Mayorond the City Council of City of Fairlawn; Ohio, in a separate letter dated July 13, 1996. This report is intended for the information of management, the Mayor and City Council. However, this report is a matt ublic record, and its distribution is not limited. .~~ 41 The audit reports were reviewed with and acknowledged by the following officials on July 31, 1996: 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 officials 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 contents. No such responses were received. 42 ppoiroHo .` o` ~_ ~ m _~ s ~ ~ se STATE OF OHIO OFFICE OF THE AUDITOR JIM PETRO, AUDITOR OF STATE 88 East Broad Street P.O. Box 1140 Columbus, C6uo 43216.1140 Telephone 614-46G-~L514 800-262-0370 Facsimile 6144490 CITY OF FAIRLAWN, SUMMIT COUNTY CLERK'S CERTIFICATION This is a true and correct copy of the report which is required to be filed in the Office of the Auditor of State pursuant to Section 117.26, Revised Code, and which is filed in Coluunbus, Ohio. By: Clerk of the Bureau