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1996 Financial StatementCity of Fairlawn, Ohio General Purpose Financial Statements For the Year Ended December 31, 1996 %FiLq Compiled By: City of Fairlawn Finance Department ~oHio/ CITY OF FAIItLAWN TABLE OF CONTENTS TITLE - Table of Contents Elected Officials and Administrative Personnel Iadex of Funds Report of Independent Accountants Combined Balance Sheet -All Fund Types and Account Groups Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types Combined Statement of Revenues, Expenditures and Changes in Fund Balances - Budget (Non-GAAP) and Actual -All Governmental Fund Types Notes to the General Purpose Financial Statement Report of Independent Accountants on Compliance at the Financial Statement Level Report of Independent Accountants on Internal Control Structure at the Entity Level PAGE {i) .(ii) (iii) 1 :L-5 b-7 .3-11 12-34 35 ?~6-37 (i) CITY OF FAIRLAWN sIJM1vnT coIJNTY 3487 SOUTH SMITH ROAD FAIRLAWN, OHIO 44333 ELECTED OFFICIALS AND ADMINISTRATIVE PERSONNEL AS OF DECEMBER31, 1996 Elected Officials Tide Term of Office Sur Amount Period William J. Rath, Jr. Mayor 1/1!96-12!31/99 (A) $10,000 (B) James Swartz Council President 1!1/96-12/31/97 (A) $10,000 (B) Jerome Apple Council-at-Large 1 /1 /96-1213 1/9 7 (A) $10,000 (B) James Butler Co~mcilman 1/1196-12/31/97 (A) $10,000 (B) Stanley Bielewicz Councilman 1/1/96-12/31/97 (A) $10,000 (B) Frances Miler Councilwoman 1/1/96-1 2/3 1197 (A) $10,000 (B) Philip Brilllrart Councilman 1/1196-12!31/97 (A) $10,000 (B) SteveYashnik Councilman 1/1 /96-1 213 1/9 7 (A) $10,000 (B) LawrencePelland Director of Finance 1/1/96-12/31/99 (A) $50,000 (B) Administrative Personnel Patricia Bertsdr Assistant Finance Director N/A (A) $50,000 iB) Leral Counsel David Eugene Waddell James Graves 707 Soaety Building 34 Merz Blvd. Akron, Ohio 44308 Fairlawn, Ohio 44333 (A) Personal Service Insurance Company (B) Concurrem with Term of Office (11) CITY OF FAIRLAWN SUMMIT COUNTY INDEX OF FUNDS GOVERNMENTAL FLED TYPES: General Fund Twes• General Fund Income Tax Fund ..Sewer Selflnsurance Fund Furtherance of Justice Fund Special Revenue Fund T~es• Street Construction, Maintenance and Repair Fund State FTighway Improvement Fund Permissive Tax Fund Fue Equipment Capital Fund Police Training Fund Law Enforcement Trust Fund Drug Law Enforcement Fund Children/Adolescent Fund Recreation Special Events Fund Packs and Recreation Fund Enforcement and Education Fund Sewer Maintenance and Repair Fund Towing Franchise Fee Fund Debt Service Fund Twe• Bond Retirement Fund Capital Proiect Fund Twec• Pazk Capitat Improvement Fund Capital Improvement Fiord Sewer Improvement Fund Capital Reserve Fund Water Maintenance and Repair Fund FIDUCIARY FUND TYPES: Agency Fund Types• Various Escrow Fund Street Opening Deposit Fund Performance2andscapebeposit Fund Police Pension Fund Fire Pension Fund ~~) `~~\l STATE OF OHIO OFFICE OF THE AUDI'T'OR JIM 1 C11(O, AUDITOR OF STATE Report of Independent Accountants The Honorable Mayor and City Council Members Gity of Fairlawn, Ohio 3487 South Smith Road ' Fairlawn, Ohio 44333 88 East Broad Street P.O. Box 1140 Columbus, Oluo 43216.1140 Telephone 67.4~F66-514 SCq-282-0370 Facsimile 614466-4490 We have audited the general purpose financial statements of Ciiy of Fairlawn (City), Summit County, as of and for the year ended December 31, 1996. 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 audft in accordance with generally accepted auditing standards and Gcnrern n Auditing Standard, issued by the Comptroller General of the United States. Those standards require that we plan and pertonn 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 discbsures in the general purpose financial statements. An audit also includes assessing the accounting principles used and sign'rficant estimates made by management, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City as of December 31, 1998, and the results of its operations for the year then ended in conformity with generallyaccepted accounting principles. In accordance with Government Auditino Standards, we have also issued a report dated June 6, 1997 on our ~nsideration of the City's internal control structure and a report dated June 6, 1997 on its compliance with laws and regulations. PEfRO ~ i~or of State 1997 1 City of Fairlawn, Ohio Combined Balance Sheet All Fund Types and Accoum Groups December 3l, 1996 Accetc nd O her D bits• ACCe~C• Equity in Pooled Cash and Cash Equivalents Cash and Cash Equivalents in Segregated Accounts Receivables: Taxes Accounts Special Assessments Intergovetmnental Notes Due from Other Funds Materiais and Supplies Inventory Advances Receivable Funds on Deposit with Deferred Compensation Plans Fixed Assets der Debitcc Amount Available in Debt Service Fund Amount to be Provided for Retirement of General Long-Term Obligations Total Assets and Other Debits Governmental Fund Tvoes Special Debt Capital General Revenue Service Projects $5,824,666 $1,088,388 $146,773 $3,243,572 0 0 0 0 808,573 143,883 0 170,753 3,682 9,670 0 213,067 0 0 4,986,718 p 95,672 15,729 0 0 0 120,000 0 0 9,413 3,783 0 0 131,275 3,753 0 0 4,000 0 -0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 $6,877,281 $1,385,206 $5,133,491 _ 33.627.392 2 Fiduciary _ '~~ Fund Type Account Groups ~~," General General Totals '~ Fixed Lon -Term g (Memorandum Agency Assets Obligadoas Only) ri; $97.064 $0 $0 $10,400,463 16,37b 0 0 16,376 0 0 0 1,123,209 0 0 0 226,419 0 0 0 4,986,718 0 0 0 111,401 0 0 0 120,000 0 0 0 13,196 0 0 0 135,028 0 0 0 4,000 1,249,646 0 0 1,249,646 0 7,651,527 0 7,651,527 0 0 142,773 142,773 0 0 6,657,297 6,657 297 $1,363,086 $7,651,527 $6.800,070 , _ $32,838 053 (Cwuinued) 3 Ciry of Fairlawn, Ohio Combined Balance Sheet All Fund Types and Account Groups (Continued) December 3i, 1996 1 iabiliti c F and Fn ~i and Other Credits• T aabilitiec: Accounts Payable Contracts Payable Accrued Wages Compensated Absences Payable Due m Outer Funds Intergovernmental Payable Deferred Revenue Undistributed Monies Deferred Compensation Payable Advances Payable Loans Payable Capital Lease Obligations Payable OPWC Loans Payable General Obligation Bonds Payable SpeciakAssessment Bonds Payable with Governmental Commitment Total Liabilities F and n ~itv nd hp~ r itc• Investment in General Fated Assets Fund Balances: Reserved for Encmnbrances Reserved for Invemory Reserved for Notes Receivable Reserved for Advances Undesignated: Designated for Sewer Line Repair Undesignated Total Fund Equity and Other Credits Total Liabilities, Fund Equity and Other Credits Governmental Fund 7Cwes Special Dt:bt Capital General Revenue .Service Projects $48,938 $3,673 $0 $9,736 7,146.. 906 0' 12,861 128,205 5,020 0 0 11,141 0 0 0 0 0 0 0 73,927 22,050 0 0 468,028 133,700 4,966,718 200,690 -0 0 0 0 0 0 0 0 0 0 4,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 737,385 165,349 4,990,718 223,287 0 85,055 26,849 0 263,056 131,275 3,753 0 0 0 120,000 0 0 4,000 0 0 0 209,625 0 0 0 5,709,941 1,069,255 ]142,773 3,141,049 6,139,896 1,219,857 Il42,773 3,404,105 $6.877.281 $1.385.206 $~5 ;133,491 $3.627,392 See Accompanying Notes to the general Purpose Financial Statements 4 Fiduciary :Fund Type Account Groups General __ General Totals Fixed Long-Term (Memorandum Agency Assets Obligations Only) $0 $0 $0 $62,347 0 0 0 20,913 0 0 0 133,225 0 0 494,596 505,737 13,.196 0 0 13,196 0 0 124,257 220,234 ' 0 0 0 5,789,136 100,244 0 0 100,244 1,249,646 0 0 1,249,646 0 0 0 4,000 0 0 475,000 475,000 0 0 91,302 91,302 0 0 1,214,915 1,214,915 0 0 2,585,000 2,585,000 0 0 1,815,000 1,815,000 1,363,086 0 6,800,070 14 279 898 , , 0 7,651,527 0 7,651,527 0 0 0 374,960 0 0 0 135,028 0 0 0 120,000 0 0 0 4,000 0 0 0 209,625 0 0 0 10,063,018 0 7,651,527 0 18 558 158 , , $1363.086 $7,651,527 $6,80D.070 $32,838.053 5 Ciry of Fairlawn, Ohio Combined Statement of Revenues, Expenditures and Changes in Fund Balances All Governmental Fund Types For the Yeaz Ended December 31, 1996 Govennmental Special General Revenue fieyrmt~S: Municipal Dome Taxes $3,929,740 $0 Property and Other Taxes 401,646 200,037 Charges for Services 73,950 216,807 Licenses, Permits and Fees 252,642 3,440 Fines antl Forfeitures 118,634 54,396 Luergovernmental 758,597 197,186 Special Assessments 0 0 Interest 461,855 - 0 Rentals 0 18,900 Contributions/Donazions 0 29,321 Other 16,234 100 Total Revenues 6,013,298 720,187 F~.pni ve5~ Current: General Government 994,623 4,780 Secuciry of Persons and Property 2,383,447 391,835 Public Health Services 79,769 0 Transportation 797,641 154,633 Community Environment 14,282 0 Basic Utility Services 228,008 105,928 Leisure Time Activities 21,450 163,699 Capital Outlay 0 0 Tntetgovetnmental 85,156 0 Debt Service: Principal Retirement 0 0 Interest and Fiscal Charges 0 0 Total Expenditures 4,604,376 820.,875 Excess of Revenues Over (Under) Expenditures 1,408,922 (100,688) Oci,_er Financing S[mrces Ts clc Proceeds of Loan 0 0 Operating Transfers In 0 135,236 Operating Transfers Out (135,236) 0 Total Other Financing Sources (Uses) (135,236) 135,236 Excess of Revemres and Other Financing Sources Over (Under) Expenditures and Other Financing Uses 1,273,686 34,548 Fund Balances Beginning of Yeaz as Restated (See Note 3) 4,847,141 1,184,912 Increase in Reserve for Inventory 19,069 397 Fund Balances End of Yeaz $6.139.896 $1,219.857 See Accompanying Notes to the General Purpose Financial Statements 6 Fund Types Totals Debt Capital (Memorandmn Service Projects Only) $0 $1,649,083 $5,578,823 0 57,263 658,946 0 188,438 479,195 0 92,357 348,439 0 0 173,030 0 154,636 1,110,419 319,203 0 319,203 0 0 461,855 0 0 18,900 0 0 29,321 0 0 16,334 319,203 2,141,777 9,194,465 11,971 0 1,011,374 0 0 2,775,282 0 0 79,769 0 0 952,274 0 0 14,282 0 0 333,936 0 0 185,149 0 . 1,561,116 1,561,116 0 0 .85,156 99,941 215,391 315,332 191,221 150,579 341,800 303,133 1,927,086 7,655,470 16,070 214,691 1,538,995 0 475,000 475,000 0 .300,000 435,236 0 (300,000) (435,236) 0 475,000 475,000 16,070 689,691 2,013,995 126,703 2,714,414 8,873,170 0 0 19,466 _ $142.773 $3.404.105 $10.906.631 7 City of Fairlawn, Ohio Combined Smtement of Revenues, Expenditures and Changes in Fund Balances Budget (Non-GAAP) and Actual All Governmental Fund Types For the Year Ended December 31, 1996 trrvenues: Municipal Income Taxes property and Other Taxes Charges for Services Licenses, Permits and. Fees Fines and Forfeitures Intergovermmental Special Assessments Interest Rentals ContributionslDonations Odrer Total Revenues Current: General l3iovernment Security of Persons and Property Public Health Services Transportation Community Environment Basic Utility Services Leisure Time Activities Capital Outlay Intergovernmental Debt Service: Principal Retirement Interest and Fiscal Charges Toro! Expenditures Excess of Revenues Over (Under) Expenditures llrh a Fimnril7,~Grn~ PS (Ss~C1- Advances In Advances Out Sale of Fixed Assets Proceeds of Loan Operating Transfers ]n Operating Transfers Out Total Odrer Financing Sources (Uses) Excess of Revenues arm Other Financing Sources Over (Under) Expendiures and Other Financing Uses Fund Balances Beginn=ng of Year Unexpended Prior Year Ertcumbrances Fund Balances End of Year General lrund Variance Revised Favorable Budget Actuai_ (Unfavorable) $3,405,675 $3,961,3'96 $555,721 370,338 401,646 31,308 28,500 73,958 45,458 157,300 252,ti42 95,342 115,000 114,424 (576) 441,137 731,425 290,288 0 0 0 397,129 454,855 57,726 0 0 0 0 0 0 11,000 15,564 4,564 926 079 4 6,005,910 1,079,831 , , 1,283,361 1,028,023 255,338 2,620,368 2,401,925 218,443 86,170 79,.769 6,401 873,508 825.,404 48,104 19,178 14,282 4,896 348,988 241,243 107,745 29,433 23,284 6,149 0 0 0 133,600 106,342 27,258 0 0 0 0 0 0 5,394,606 4,720,272 674,334 468,527 1,28_',638 1,754,165 3,500 4,000 500 0 0 0 0 0 0 0 0 0 0 0 0 143,736 (13.5~23~ 8,500 (140,236) (131,236) 9.000 (608,763) 1,154,402 1,763,165 4,377,717 4,377,717 0 148,704 1481704: C $3 917.658 5 6E~0_ 8, 23 $1.763.16`_ See Accompanying Notes to the General Purpose Futartcial Statements 8 Sp ecial Revenue Funds Debt Service Fuud Variance _ Variance Revised Favorable Revised Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable $0 $0 $0 $0 $0 $0 182,019 194,665 12,646 0 0 0 ..163,500 184,886 .21,386 0 0 0 26,500 27,295 795 0 0 0 .50,000 53,464 3,464 0 0 0 178,829 196,287 17,458 0 0 0 0 0 0 319,000 319,203 203 0 0 0 0 0 0 .9,000 18,900 9,900 0 0 0 14,OOD 29,321 15,321 0 0 0 ..2,500 .100 (2,400) 0 0 0 b26,348 704,918 78,570 319,000 319,203 203 5,000 4,780 220 15,500 11,971 3,529 432,508 398,152 34,356 0 0 0 0 0 0 0 0 0 280,461 198,157 82,304 0 0 0 0 0 0 0 0 0 121,780 115,858 5,922 0 0 0 211,419 161,768 49,651 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 99,941 99,941 0 0 0 0 191,221 191,221 0 1,051,168 878,715 172,453 306,662 303,133 3,529 (424,820) (173,797) 251,023 12,338 16,070 _ 3,732 -0 0 0 0 0 0 0 0 0 (4,000) (4,000) 0 30,000 30,000 0 0 0 0 0 0 0 0 0 0 135,236 135,236 0 0 0 0 0 0 0 0 0 0 165,236 165,236 0 (4,000) (4,000) 0 (259,584) (8,561) 251,023 .8,338 12,070 3,732 96(1,842 960,842 0 134,703 134,703 0 107318 107,318 0 0 0 0 $808 576 $1,059,599 $251,023 $143.041 $146 773 $3,732 (Corepnued) 9 City of Fairlawn, Ohio Combined Statement of Revem~es, Expenditures and Changes in Fund Balances Budget (Non-GAAP) and Actual (Continued) All Governmental Fund Types For the Year Ended December 31, 1996 - Capital PIOleCI3 Fins Variance Revised Favorable Budget Actual _ (Unfavorable) Revenuer Municipallneome Taxes $1,664,325 $1,664,325 $0 Property and Other Taxes 50,000 53,684 3,684 Charges for Services 102,339 374,3b~0 272,021 Licenses, Permits and Fees 75,980 79,980 4,000 Fines and Forfeitures 0 0 0 Irttergovernmenral 565,000 485,255 (79,745) Special Assessments 0 0 0 Interest 0 0 0 Rentals 0 0 A Contributions/Donations 0 0 0 Odrer 50,000 0 (50,000) Total Revenues 2,507,644 2,657,604 149,960 Current: General Government 15,500 15,478 22 Security of Persons and Property 10,000 9,780 220 Public Health Services 0 0 0 Transportation 0 0 0 Community Environment 0 0 0 Basic Utility Services 19,000 13,681 5,319 Leisure Time Acrivities 0 0 0 CapitalOutlaY 2,882,048 2,190,2A9 691,799 Intergovermnental - 0 0 0 Debt Service: Principal Retirement 174,934 174,934 0 Tautest and Fiscal Charges 139,608 139,608 0 Total Expenditures 3,241,090 :2,543,730 697,360 Excess of Revemres Over (Under) Expenditures (733,446) 113,874 847,320 t+Pr Fi an ing_4~~r~ i(Lad).;. Advances In 0 167,424 167,424 Advances Out (167,424) (167,424) 0 Sale of Fized Assets 0 0 0 Proceeds of Loan 0 475,000 475,000 Operating Ttansfersln 300,000 300,000 0 Operating Transfers Out (300,000) (300,00 0 Total Other Financing Sources (Uses) (167,424). 475,000_ 642,424 Excess of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses (900,870) 588,874 1,489,744 Fund Balances Beginning of Yeaz 1,511,589 1,511,589 0 Unexpended Prior Yeaz Encumbrances 878,578 878,578 0 Fund Balances End of Year $1,489,297 $2,979,041 $1,489,744 See Accompanying Notes to the General Purpose Financial Statements 10 Totals (Memorandum Only) Variance Revised Favorable Budget Actual (Unfavorable) $5,070,000 $5,625,721 $555,721 $602,357 649,995 47,638 294,339 633,204 338,865 259,780 359,917 100,137 165,000 167,888 2,888 1,184,966 1,412,967 228,001 319,000 319,203 203 .397,129 454,855 57,726 9,000 18,900 :9,900. 14,000 29,321 15,321 63,500 15,664 (47,836) 8, 3 79, 071 9, 687 , 635 1, 308 , 564 1,319,361 1,060,252 259,109 3,062,876 2,509,857 253,019 86,170 79,769 6,401 1,153,969 1,023,561 130,408 19,178 . 14,282 4,896 489,768 370,782 118,986 240,852 185,052 55,800 2,882,048 2,190,249 691,799 133,600 106;342 27,258 ' 0 274,875 274,875 0. 330,829 330,829 0 9,993,526 8,445,850 1,547,676 1,614,455) 1,241,785 2,856,240 3,500 171,424 167,924 (171,424) (171,424) 0 30,000 30,000 0 0 475,000 475,000 435,23fi 435,236 0 443,736 (435,236) 8,500 146,424 505,000 651,424 (1,760,879) 1,746,785 3,507,664 6,984,851 6,984,851 0 _ 1,134 600 1,134,600 0 6 358 572 $9.866.236 $3.507.664 it CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1996 NOTE 1 -REPORTING ENTITY AND BASI 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. Reporting Entity In evaluating how to define the City for financial reporting purposes,. management has considered all agencies, departments, and organizations making up the City (the primary government) and its potential component units consistent with Governmental Accounting Standards Boazd Statement No. 14 °The Financial Reporting Entity." The City provides various services including police and fire protection, emergency medical, recreation (including pazks), planning, zoning, street mainteru3nce and repair, and general administrative services. The operation of each of these activities is duectly controlled by the Council through the budgetary process. None of these services aze provided by a legally sepazate organization; therefore, these operation. aze included. in the primary government. Component units aze legally sepazate organizations for which the City is fmancially 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 of services performed or provided by the organization or (2) the City is legally entitled to or can otherwise access the organization's 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 organization. Component units may also include organizations for which the City issues debt, tevies Guces or determines the budget. Based on this criteria, the City has no component units. The Copley/Fairlawn City School District and the Summit County Public Library have been excluded from the City's financial statements. Both are 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 Accounlracg The City uses funds and account groups to report to its financial position and the results of its operations.. Fund accounting is designed to demonstrate legal compliance and to t2 CITY OF FAiRLAWN Notes to the General Purpose Financial Statements December 31, 1996 aid financial management by segregating transactions related to certain City functions or activities. A fund i defined as a fiscal and accounting entity with aself-balancing set of acca~unts recording cash and other financial resources, together with all related liabilities and residual equities or balances,. and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. An account group is a financial reporting device designed to provide accountability for certain assets and liabilities that aze not recorded in the funds because they do not directly affect the net expendable available financial resources. Governmental Fund Types Governmental funds aze 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 are accounted for through governmental!. funds. The following are the City's governmental fund types: • General Fund -this fund is the operating fund of the City and is used to account For all financial resources 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 aze used to account for financial resources t:o be used for the acquisition or construction of major capital facilities. Fiduciary Fund Types Fiduciary funds are used to account for assets held by the City in a trustee. capacity or as an agent for individuals, private organizations,. other governmental units and/or other funds. There aze 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. 13 CITY OF FAIItLAWN Notes to the General Purpose Financial Statements December 31, 1996 Account Groups To make a cleaz distinction between fixed assets related to specific funds and those of general government, and between long-term liabilities telated to specific funds and those of a general nature, the following account groups aze used:. • General Fined Asset Accotou Group -this account group accounts for alt ..general fixed assets of the City. • .General Long-Term Obligations Account Group r this 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 POLL IES The. significant accounting policies followed. in the prepazation of these financial statements aze summarized below. These policies conform to generally accepted accounting principles (GAAP) for local governmental units as prescriibed in the statements issued by the Governmental Accounting Standazds Boazd (GASB) and other recognized authoritative sources. A. Measurement Focus and Basis of Accountine 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 qn 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 collextable 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 yearend. In applying the susceptible to accrual concept under the modified accnial basis, the following revenue sources aze deemed both measurable and available: 14 ., n .r. S. zw.`i. RS~i`YG.S.'3Y v..YT~-uee`a+'i:_ CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1996 • Investrnent earnings • :State levied locally shazed taxes (including gasoline tax) • Fines and forfeitures • Income tax withheld by employers The City reports deferred revenues on its combined balance sheet. Deferred revenues arise,when a potential revenue does not meet both the measurable and available criteria for recognition in the current period. In the. subsequent period, when both revenue recognition criteria are met, the liability for defected revenue is removed from the combined balance sheet and revenue is recognized, Current and delinquent prap~erty taxes measurable as of December 31,,1946, 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. Alla;ations of cost, such as depreciation and amortization, aze not recognized in the governmental funds. B. BrLdPC1Qr'l' j~l»~aec The budgetary process is_prescribed by provisions of the Ohio Revised Code and a:ntails 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 are prepared on the budgetary basis of accounting. The Certificate of Estimated Resources and the Appropriation Ordinance are subject to amendment throughout the year with.the legal restriction that appropriations cannot exceed estimated resources, as certified. All funds, other than agency funds and any activity or balance, aze legally required to be budgeted and appropriated. The legal level of budgetary control is at the object level within eaclh department. Any budgetary modifications at this level may only be made by resohuion of the City Council. Tpx Budget At the fast City council meeting in July, the Mayor presents the annual operating budget for the following fiscal year to City council for consideration and passage. The adopted budget is submitted to the County Auditor, as Secretary of the County Budget Commission, by July 20 of each yeaz, for the period January 1 to December 31 of the following year. IS CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31,.1996 Estimated Resources The County Budget Commission determines if the budget substantiatts a need to levy all or part of previously authorized taxes and reviews. estimated revenue.. The commission certifies its actions to the City by October L As pazt of this certification, the City receives the official Certificate of Estimated Resources, which states the projectedaevenue 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 servesas 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, and the Budget Commission agrees that an estimate needs to be either increased or decreased. The amounts reported on the budgetary statements reflect the amounts in the final amended official Certificate of Estimated Resources issued during 19!96. Appropriations A temporary ordinance to control expenditures may be passed on or about January l of each year for the period January 1 to March 31. An annual Appropriation Ordinance must be passed by April 1 of each year for the period January 1 to December 31. The .appropriation ordinance fixes spending authority at the fund, department, and object level. The Appropriation Ordinance may be amended during the yea~• as new information becomes available; provided that total fund appropriations do not exceed current estimated resources, as certified. The allocation of appropriations among the departments and objects within a fund may be modified during the year by an ordinance of Council During the year, several supplemental appropriation measures were passed. None of these supplemental appropriations had any 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 formal budgetary control, purchase orders, contracts, and other commitments for the expenditure of moneys are recorded as the equivalent of expenditures on the non-GAAP budgetary basis in order to reserve tlktt 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, departmenEand object level. On'the GAAP basis, encumbrances 16 CITY OF FAIltLAWN Notes to the General Purpose F"mancial Statements December 31, 1996 outstanding at yeaz end aze reported as reservations of fund balances for subsequent year expenditures of governmental funds. Lapsin8' 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 forwazd to the succeeding yeaz and is not reappropriated. C. Ga§h -and Cash Eouivalents Cash received by the City. is pooled in a central bank account. Moneys for all funds aze maintained in this account or temporarily 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 combiined balance sheet. During 1996,. 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, except for investments in deferred compensation, which 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 field sepazate from the City's cE;ntral bank account. These interestbeazing depository,accounts aze 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 treasury. Refer to Note 5, Deposits and Investments. For presentation on 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. Inventory Inventories of governmental funds aze stated at costa 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 :omponent of net current assets. 17 CITY OF FAIRLAWN Notes to the General purpose Financial Statements December 31, 1996 E. Fixed Assets and Deoreciatu~ 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 account 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 mazket value on the date received. The costs of normal maintenance and repairs that do not add to the value o£ the asset or materially extend: asset lives are not capitalized. Improvements aze 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 aze immovable and of value only to the government. Assets in the general fixed assets account group aze -not depreciated. F. Compensated Abcences Vacation benefits aze accrued as a liability as the benefits aze eanned if the employees' rights to receive compensation aze attributable to services already rendered and it is probable that the City. will. compensate the employees for the benefits through paid time off or some other means. Sick leavebenefits are accrued as a liability using the termination method. An accrual for earned sick leave is made to the: extent it is probable that benefits will result in termination payments. The liabillity is an estimate based on the City's past experience of making termination payments.. 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. ~terfnnd Assets/Liabilities During the course of operations, numerous transactions occur between individual funds for goods provided orservices rendered. These receivables and payaibles are classified as "due from other funds" or "due to other funds." Long-term interfund loans are classified as "advances receivable/payable" on the balance sheet. 18 ~ ~ tr,.*< ,~~, a CTTY OF FAI1tLAWN Notes to the General Purpose Financial Statements December 31, 1996 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 been established for sewer line repairs. L ~erfund Transactionc Quasi-external transactions aze 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 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 aze reported as operating transfers. J. Accrued and Lonr-term Li bidities In general, governmental fund payables and accrued Liabilities are reported as obligations of the fundsregazdless of whether they will be liquidated with current resources. However, claims and judgments, compensated absences, and special termination benefits and contractually required pension contributions are 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. Payments made more than 31 days after yeaz end are generally considered not to have beenpaid with current available financial resources. Bonds, long-term loans and capital leases are recognized as a liability of the general long-term obligations account group until clue. K. Total Co%m„a .,., r;a.,e..,., n...____ .,,. . _ _ Total columns on General Purpose Financial Statements are captioned memorandum only to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial. position, results of operations, or cash flows in conformity with GAAP. Neither is such data compazable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. NOTE 3 - C)GiANGE IN ACCOUNTING PRINCIpr F For the fiscal yeaz 1996, the City has implemented Statement No. 27 of the Governmental Accounting Standazds Boazd, "Accounting for Pensions by the State: and Local. Governmental Employers". Statement No. 27 modifies the disclosure 19 CITY OF FAIItLAWN Notes to the General Purpose Financial Statements December 31, 1996 requirements for the defined benefit pension plans. The adoption of'this statement required no other change from prior yeazs. In prior years, the City reported the entire unpaid wntractually required pension contribution as a fund liability.;: This year, the portion of the pensiorrpayments which are paid from governmental funds outside the available period of the_ City aze being reported in the general long-term obligations account group. The effect of this change on the excess of revenues and other financing sources over (under) expenditures and other uses as previously reported for the year ended December 31, 1995 is as follows: .Excess as previously reported Restatement for pension obligation Restatement amounts for the year ended December 31, 1995 Special General Revenue $ .1,331,819. $ 142,359 a3s2o 71,oas $ 1,375,739 $ 213,387 The implementation of GASB Statement No. 27 had the following e1`fect on fund balance as it was previously reported as of December 31, 1995: Special General Revenue Balances as previously reported $ 4,803,221. $ 1,113,884 Restatement for pension obligation 1,516 7,364 Restated Balances as of January i, 1996 $ 4,804,737 $ .1,121,248 The general long-term obligations account group total liabilities incrc;ased from $6,485,738 to $6,600,686 as of December 31, 1995 due to the restatement. NOTE 4 -BUDGETARY BASIS OF ACCOUNTING While reporting financial position, results of operations, and changes in funds 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 budgetary basis to provide a relevant compazison of actual results with the budget and to demonstrate compliance with state statute. The major difference between the budget basis and the GAAP basis aze as follows: 1. Revenues are recorded when received in cash (budget) as opposed to when susceptible to accrual (GAAP). 20 - - _ ~ . ~, ~,,~,~ aK,~.,~~~ CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1996 2: Expenditures are recorded when paid in cash (budget) as opposed to when the liability is incurred (GAAP). 3. Outstanding yeaz end encumbrances aze treated as expenditures (budget) rather than as a reservation of fund balance for governmental fund types (GAAP). 4. Proceeds from and principal payment on short-term note obligations are reported on the operating statement (budget) rather than on the balance sheet (GAAP). The following table summarizes the adjustments necessazy to reconcile the GAAF' basis statements. to the budgetary basis statements on a fund type basis: Cs4APBasis It~ueAceuals Advances)h IditureAaauals Advances Out 'Eua~mlxances FA~et Basis NOTE 5 -DEPOSITS A_ND INVES NTc State statutes classify monies held by the City into three categories. Active deposits aze public deposits necessary to meet current demands on the treasury. Such monies must be maintained either as cash in the City Treasury, in commercial accounts payable or withdrawable on demand, including negotiable order of withdrawal (NOS accounts, or in money mazket deposit accounts. Inactive deposits are 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 aze those monies which aze 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 21 1,273,686 $ 34,548 $ 16,070 $ 689,@r91 (7~~) 14,731 0 S15,E~7 4,000 0 0 0 (14,674) (29,053) 0 (352,115) 0 0 (4.000) n CITY OF FA)RLAWN Notes to the General Purpose Financial Statements December 31, 1996 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. Through September 26, 1996, interim monies could be invested in the following obligations provided they mature or are redeemable within two years from the date of purchase; Bonds, notes, orother 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 yeazs from the date of purchase;, 4. Bonds and other obligations of the Slate of Ohio; 5. No-load money market mutual funds consisting ezclusive>I;y 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). New legislation, effective September 27, 1996, now permits inactive: monies to be deposited or invested in the following securities: 1. United States treasury notes, bills, bonds, or any other obligation or security issued by the United States treasury or any other obligation guaranteed as to principal or interest by the United States; 2. Bonds, notes, debentuzes, or any other obligations or securities issued by any federal government agency or instrumentality, including but not limited. to, the Federal National Mortgage Association, Federal Home: Loan Bank, Federal' Fazm Ciedit Bank, Federal Home Loan Mortgage Corporation, Government National Mortgage Association, and Student ]Loan Marketing Association. All federal agency securities shall be direct issuances of federal government agencies or instrumentalities; 22 CITY OF FAIRLAWN Notes to the General purpose Financial Statements December 31, 1996 3. Written repurchase agreements in the securities listed above, provided that the market value of the securities subject to the repurchase agreement must exceed the principal value of the agreement by at least two percent and be marked to mazket daily, and that the term of the agreement must not ez,ceed :,thirty-days; 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). Investments in stripped principal or interest obligations, reverse repurchase agreements and derivatives aze prohibited. The issuance of taxable notes for the purpose of azbitrage, the use of leverage and short selling are also prohibited. An investment must mature within five yeazs from the date of purchase unless matched to a specific. obligation or debt of the Ciry, and must be purchased with the expectation that it will be held'.to maturity. 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 monies deposited with the institution. Investments may pnly 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 qualified trustee or, if the securities are 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 $5,141 and the bank balance was $116,671. Of the bank balance, $100,0pp was covered by federal depository insurance and $16,671 was uninsured and uncollateralized. 23 CTTY OF FAIRIAWN Notes to the General Purpose Financial Statements December 31, 1996 City Investmeras 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 custodial credit risk assumed by the City at year end. Category One includes investments that are: insured or registered or aze held by the City or its agent in the City's name. Category Two includes uninsured and unregistered investments which aze held by the counterparty's trust depositor agent in the City's name. Category Three includes uninsured and unregistered investments which are held by the counterpart's frost 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. Repurchase Agreements $0 $0 Investment in State Treasruer's IrNestmerrt Paol (STAR Curio) Deferred Compensation Total lrrvestrnents ~lalue Nlazket Value 0,653 $7,845,750 2,461.045 2,461,045 1,24£1,646 1,249,646 $11,661,344 $11,556,441 The classification of cash and cash equivalents, and investments on ithe combined financial statements are based on criteria set forth in GASB Statement No. 9. Cash and cash equivalents aze 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 acid the classification per GASB Statement No. 3 is as follows: Cash and Cash Investments EquivalentslDeposits GASB Statement No. 9 5 70,416,839 S 1,249,646 Investmems which are part of the cash management pool: Repurchase Agreement (7,950,653.00) .7,950,653.00 STAR Ohio (2;461,045.00) 2,461,045.00 GASB Statement No. 3 S 5,141 S 17,661,344 24 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1996 NOTE 6 -PROPERTY TA FS Property tax includes amounts levied against all real and public utility property, a.nd tangible personal (used in business) property located within the City. Real property taxes were levied after October 1, 1995, on the. assessed value as of Januazy 1,.1995, the lien date; and were collected in 1996. Assessed values are established by-State law at,35 percent of appraised mazket value. All property is required to be revalued every six yeas. Public utility property taxes received in 1996 attached as a lien on December 31;1995; were. levied after C+ctober 1, 1995 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. 1996 tangible; personal property taxes were levied after October, 1, .1995, on the value listed as of December 31, 1995, and were collected in 1996.. Tangble personal property assessments are 25 percent of true value. The assessed value upon which the 1996 taxes were collected was $235,090,518. Real estate represented 86 percent ($202,338,610) of this total, public utility tangible persoial property represented 2 percent ($4,691,600) of this total and general tangible personal property represented 12 percent ($28,060,308) of this total. The full tax rate for all City operations applied to taxable property for the year ended December 31, 1996, was $2.70 per $1;000 of assessed valuation. Real and public utility property taxes aze payable annually or semi-annually. If paiid 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 aze 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 County 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 become measurable as of December 31, 1996. However, since these tax collections were not received during the available period nor were they intended to 5nanee 1996 operations, the receivable is offset by a credit to deferred revenue.. 2s CITY OF FAIRIAWN Notes to the General Repose Financial Statements December 31, 1996 NOTE 7 -RECEIVABLES Receivables at December 31, 1996, consisted of taxes, accounts (billings for user. charged service), special assessments, interest, notes (sale of land toy developer) and intergovernmental receivables wising from grants, entitlements, and shared revenues. Accounts, taxes, special assessments, interest, and governmental receivables aze deemed collectable in full A summary of the principal items of intergovernmental receivables its as follows: Intergovernmental Receivable Amount. General Fund: Local Government Tax Liquor Permits Estate Tax Federal COPS Fast Grant Total General Fund Spacial Revenue Funds: Gasoline Tax Motor Vehicle Motor Vehicle Permissive Ohio Emergency Medica] Grant Total Special Revenue Funds Total 27,261 5,182 59,063 .4,166 95,672 10,192 2,110 889 2,538 15,729 $ 111,401 NOTE S -INCOME TAX The City levies a municipal income: tax of 2 percent on gross salazies, wages and other personal service compensation eazned by residents of the City and on the earnings of nonresidents working within the City. This tax also applies to the net income of business operations within the City. Residenu of the City are granG~d 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 are required to pay their estimated tax quarterly and file a declazation annually. By City ordinance, income tax proceeds aze credited as followsi 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. 26 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements Decembez 31, 1996 NOTE 9 -FIXED ASSETS A summary of changes in the general fixed assets group is as follows: Balance Balance '` January 1, 1996 Additions Deletions December 31 1996 Land S 1,029,126 S s O S 0 , S 1,021 126 Land Improvements 1,788,988 0 0 , .1,1.88 988 Buildings 2,628,085 0 0 , 2 628 085 Nfachinery and , , Equipment 1,594,165 57,619 21,127 1 630 657 Vehicles 1,124,618 50,053 0 , , fi17~t 671 Total S 7.684 9A9 c ,m a~~ a ~, ,..-. , _ __. __ NOTE 10 - Ri. K MAMA FAINT The City is exposed to vazious risks of loss related to torts; theft of, damage to, and .destruction of assets; errors and omissions; injuries to employees; and natural disasters. During 1996, the City contracted with Wichert]nsurance Service, Inc. for property and general liability insurance, including boiler and machinery. Police and professiontl liability aze 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, ; $1,000,000 limit 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. There has not been a significant reduction in coverage from the prior yeaz. Volunteer Fireman's Insurance Services covers Firemen and EMT professional liat~iIity 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 saiazies. This rate is calculated based on accident history and administrative costs. 27 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1996 NOTE 11-DEFINED BENEFIT PENSION PLAN A. Public Emplovees Retirement Svstem The City contributes to the Public Employees Retirement. System of Ohio (PERS), a cost-sharing multiple employer public employee retirement system administered by the Publie Employees Retirement Board. PERS provides basic retirement, disability, and survivor benefits based on eligible service credit to members and beneficiaries: Benefits aze established by Chapter 145 of the Ohio Revised Code. PEES issues a publicly available financial report that includes financial statements and required supplementary information for PERS. That report may be obtained by writing to the Public. Employees Retirement System, 277 East Town Street, Columbus, Ohio 43215. Plan members, aze required to contribute 8.5 percent of their annual covered salary to fund pension obligations and the City is required to contribute 8.44 percent. Contributions aze authorized by state statute. The contribution rates are determined actuazially. The City's required contributions to PERS for the years end'.ed December 31; 1996, 1995, and 1994 were $116;SSQ, $110,191, and $104,574, respectively. The full. amount has been contributed for 1995 and 1994. Of the requirement, 74 percent , has .been contributed for 1996. with the remainder being reported as a liability within the general long-term obligations account, group. B. Police and Firemen's Disability and Pension Pund The City contributes to the Police and Firemen's Disability and Pension Fund of Ohio (the "Fund"), acost-sharing multiple employer public employee retirement system administered by the Fund's Boazd of Trustees: The Fund provides Tetire:ment and disability benefits to qualified participants and survivor and death benefi~x to qualified spouses, children and dependent pazents. Benefits aze based on eligble ;service credit: Benefits are established by Chapter 742 of the Ohio Revised Code. The Fund issues publicly available financial report that includes financial statements and required supplementary information for the Fund. That report may be obtained by writing to the Police and Firemen's Disability and Pension Fund of Ohio; 140 East Town Street, Columbus, Ohio 43215. Police and firefighters aze required to contribute 10 percent of their aanual covered salazy w fund pension obligations and the City is required to contribute :i3 percent for. police and 17.5 percent for firefighters. Contributions are authorized by state statute. An actuary, however, is used to determine the actuarial implications of the statutory requirements. The City's contributions to the Fund for police and firefii;hters were $113,866 and $68,170 for the yeaz ended December 31, 1996, $111,225 and $67,873 for 1995 and $93,439 and $58,408 for 1994. The full amount has been contributed for 2s <.. CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1996 1995 and 1994. Of the requirement, 73 percent has been contributed for 1996 with the remander.being reported as a fund liability within the general long-term obligations account group. C. Social Security Svstem EffecEive 7uly 1, 1991, all employees not otherwise covered by a State Retirement System have an option to choose social security or the appropriate state system. ,4s of December 31; 1996, the part-time firefighters have :elected social security. The City's liablity;s.6.2 percent of wages paid. NOTE 12 -POST EMPLOYMENT BENEFTT~S A. ~blic Emnlovees Retirement System The Public Employees Retirement System of Ohio {PERS) provides postretiremen.t health. care coverage to age and service retirees with ten or more years of qualifying Ohio ervice credit. Health caze coverage for disability recipients and pritnary survivor recipients is available. The health care coverage provided by the retirement systetn 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 forthe funding of postretirement health care based on authority granted by state statute. The 1996 employer contribution rate was 13.55 percent of covered payroll. for employees. not engaged in law enforcement; 5.11 percent was the portion that was used to fund. health care for 1996. For law enforcement employees,. the employer contribution rate was 16.7. percent of which 5.89 percent was used to fund health care. Benefits are advance-funded using the entry age of normal cost method. Significant actuazial assumptions, based on PERS latest actuazial,review performed as of December 31, 1995, (the latest informatiotravailabie), 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 mazket value::Equity securities, fixed income investments, and investments in real estate aze carried at mazket. For actuarial valuation purposes, a smoothed mazket approach is used. Assets aze adjusted to rei3ect 25 percent of unrealized market appreciation or depreciation on investment assets. The number of active contributing participants statewide was 369,467. The City's actual contribution for 1996, which was used to fund postetnployment benefits, was, 29 CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1996 $70,565. The actual contribution and the actuarially required contribution amounts are the same. PERS net assets available for payment of benefits at December 31, 1995, (the latest information available).were $7,226 million. The actuarially ,accrued liability and the unfunded actuazial accrued liability were $8,597 million and $1,371 million, respectively. B. Po&ce 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 aspouse orefigible dependent child or such person. An eligible dependent child is any child under the age of`eighteen whethef or not the child is attending school or under the age of twenty-two if attending school fidl-time or on a two-thirds basis. The healthcare coverage provided by the retirement system is considera;d 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 board of trustees to provide health care coverage artd 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 rate is 19.5 percent of covered payroll and the total firefighteremployer'contribution rate is 24 percent of covered payroll, of which 6.5 percent of the covered 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 participants eligible to receive health care benefits as of December 31, 1995, (the latest information available) was 17,102-for police and 13,8ii1 for firefighters. The City's actual contributions for 1996 that were used to fund postemployment benefits were $56,932 for police and $25,321 for firefighters. The Fund's total health care. expenses for the yeaz ended December 31, 199:5, were $70,170,717. NOTE 13 - OTB~R EMPLOYEE BENEFTTS A. Deferred Com~nsation Plans City employees and elected officials may participate in deferred compe~uation 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 yeazs. 30 ,. :. .N. ... .~:., 7 .. _ .., fr ...~ rar_.. w~aP~z~mwuxitb .a. CITY OF FAIRLAWN Notes to the General Purpose Financial Statements December 31, 1996 According to the plans, 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, prolperty, onrights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the City (without beingsestricted to the provisions of benefits under the plans), suhject only to the claims of the City's general creditors. Participants' 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 participant, The plan agreements state that the City, Ohio Public Employees Deferred CompensatiogBoazd, 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, 1996; the amount on deposit with the Ohio Public Employees Deferred Compensation Board and Aetna Life Insurance and Annuity were $157,672 and $1,091,974, respectively.. B. Comaensated 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 year, depending upon length of service.. Vacation accumulation is lunited to one year. All accumulated unused vacation time is paid upon termination of employment. Employees earn sick leave at the rate of 1.25 days-per month of service. Sick leave accumulation is limited to ninety days, provided that any person who was a City employee on July 6, 1954, who has accumulated any number of sick days between 90 and 120, may accumulate in a time bank up to a total of 180 days, upon retirement such employees will be paid for the total number of days accumulated up to, but not exceed the amount of time accumulated on July 6, 1984. Generally, employees with a hire date subsequent to 1991 aze not eligible to reeei4e termination payments for sick leave. As of December 31, 1996, the total liability for unpaid compensated absenr_es was $505,737. 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 CrossBlue Shield of Northern Ohio. Tlie employees shaze the cost of the monthly premium. The premium varies with employees depending on the terms of the 31 CITY OF FAIRLAWN Notes to the General I'~upose Financial Statements December 31, 1996 union contract or employee type. Dental insurance is provided by the Ciry to ali employees through Delta Dental NOTE 14 - CAPTTALIZED LEASES -LESSEE DISCLOSURE In prior yeazs the City entered into capitalized leases for the acquisition of radio equipment.. Each lease meets criteria of a capital lease as defined by F.ASB 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. aze reflected as debt service in the general purpose financial. statements for the governmental funds.-::These expenditures aze 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 I~;asepayments required under the capital leases and the present values of the minimum lease payments as of December 31,1996: Year Ending Amount 1997 $ 51,428 1998 51,428 Total Minimum Lease Payment 102;856 Less Amount Representing interest (1 1,55 Present Value of Minimum Lease Payments $ 91,302 NOTE 15 -LONGTERM OBLIGATIONS Long-term obligations of the City as of December 31, 1996, were as follows: CTl'Y OF FAIlLI.AWN Notes to the General purpose Financial Statements December 31, 1996 Balance E3alance General Obligation Bonds December 3l, 1995 $ 2 685 000 Additions S Deletions December 3l, 1996 Specal Assessment , , 0 $ 100,000 $ 2,585,000 Various Purpose Bond 1,885,000 0 70 000 OPWC Loans 1,319,790 0 , 104 875 1,815,000 Capital Leases 131,759 0 , 40 457 1,214,915 Capital Loan 0 475 000 , p 91,302 Intergovernmental Payable 114,948 , .9,309 0 475,000 ;-:Compensated Absences : 464,189 63,32D 32 913 124,257 ... Total General , 494,596 Long Terrn Debt $ 6,600,686 $ ,547,629 $ 348 245 $ 6,800,070 The general obligation bonds will be paid from income taxes receipted into the capital :improvement 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 improvement fund. In the event that a property owner would fail to pay the assessment, payment would be =made by the City. Compensated absences reported in the "compensated absence,; payable" account will be paid from the fund from which the employees' salaries ,are paid. Intergovernmental payable represents unfunded pension contribution not paid -with current available financial resources and will be paid from the general fund and special revenue funds. The capital loan will be paid from the revenues derived .from emergency medical transports in the fire equipment fund and the revenues of the capital improvement fund. Capital leases are paid from`cevenues of the capital improvement fund. Principal and interest requirements to retire long-term obligations outstanding at December 31, 1996 are as follows: Special General Assessment Obligation OPWC ' Capital Year Ending Bond Bond. Loans < ~ ,,,,,, r_._, 1998 196,375 237,208 _ --- ~" 16x`,636 °"~""< 90 108 '~ voo, 1 Zb 689 327 1999 2000 .200,000 238,008 165.636 , 84,762 , 698,406 2001 197,775 238,388 90,702 89,656 626,5:21 2002-2006 197,150 992,953 238,328 1,194,571 90,702 453,510 104,792 630,9'72 2007-2011 988,150 1,187,500 . 453 510 0 2,641,034 2012-2016 0 478,238 , 272;106 0 2,629,1ti0 Total $ 2.973203 $ 4.048.249 ~ ~ ue~ ..... _ 0 __ 750,344 CITY OF FAIItLAC~N Notes to the General Purpose Financial Statements December 31, 1996 NOTE 16 -CONSTRUCTION COMMIT`M(ENTS As of December 31, 1996, the City had outstanding contractual commitments. of $242,866 for various road. and sewer improvements. NOTE 17 - INTERFUND TRANSACTIONS Interfund balances at Decembet3l, 1996; consist of the following: Advances Receivable Advances Payable General Fund $ _ 4,000 $ 0 Debt Service Fund 0 4,000 .Total $ 4,000 $ 4.000 Due' From l7ve TO General Fund $ , 9,413 $ 0 Children Adolescent SAEF - Special Revenue Fund 3,783. 0 Mayor's Court -Agency Fund 0 13,196 Total $ 13.196 $ 13,196 NOTE 18 -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 are 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 raterial effect on the overall financial position of the City as of December 31, 1996. B, .. .ott The City is party to legal proceedings. The City management is of ttre 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. 34 STATE OF OHIO 88 Eau Braid Street OFFICE OF THE AUDITOR- Colnmb~sslOhio 43216.1140 JIM METRO. AUDITOR OF STATE Telephone 614966-4514 800-782-0370 racsimile 614466.4490 Report of Independent Accountants on Compliance at the Financial Statement Level The Honorable Mayor and City Counal Members ' City of Fairlawn, Ohio `3487 South Smith Road Fairlawn, Ohio 44333 We have audited the general purpose financial statements of City of Fairlawn (City), Summit County, as of and for the year ended December 31, 1996, and have issued our report thereon dated June 6, 1997. We conducted our audit in accordance with generally accepted auditing standards and S~ovemment Auditing Standards, issued by the Comptroller Generalof the United States.. Those standards require that we plan and pertonn 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 the City is the responsibility of the management of the City. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement; we performed tests of the City'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 Auditino Standards. However, we noted certain immaterial instances of noncompliance that we have reported to management and City Council in a separate letter dated June 6, 1997. This report is intended for the information of management and City Council. However,. this report is a matter of public record and its distribution is not limited.;;- PETR ~UOI~CR ~ o` ~ -~'f. s " s, 4~ C STATE OF OHIO OFFICE OF THE AUDITOR JIM PEl'RO, .AUDITOR OF STATE 88 East Bzoad',Rreet P.O. Box 1140 Columbus, Ohio 432]rr1140 Telephone. 61~k-066-4514 Sq~282-0370 Faaimile 61~1A66-4490 Report of Independent Accountants on Internal Contra) Structure at the Entity Level The Honorable Mayor and City Council Members City of Fairlawn, Ohio 3487 South Smith Road Fairlawn, Ohio 44333 We have audited the general purpose financial statements of City of Faidawn (City), Summit County, as of ahd for the year ended December 31,.1996, and have issued our report thereon dal:ed June 6, 1997. We conducted cur audit in accordance with generally accepted auditing standards and Goven Auditing Standards, issued by the Comptroller General of the United States. Those standards that we plan and perform the audh to obtain reasonable assurance about whether the general financial statements are free of material misstatement. The management of the City is responsible for establishing and maintaining an intemal Control structure. In fulfilling this responsibility, estimates and judgements by management are required to assess the expected benefits and .related costs of intemal 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 usa or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permft the preparation of general purpose financial statements in accordance with generalty accepted accounting principles. Because of inherent limitations in any internal control structure, ercors or irregularities may nevertheless occur and not be detected. Also, projr:ction 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 the Catyl for the year ended December31,1996, we obtained an understanding of the'intemal control structure. With respect to the intemal control structure, we obtained an understanding of the design cf re;levant policies and procedures, and whether they have been placed in operation, and we assessed control. -' risk in order tc 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 contrcd stuucture. `! Accordingly, we do not express such an opinion. Our consideration of the internal control structure would not necessarily disclose all matters in the intemal control structure that might be material weaknesses under standards establishes! by the American Institute of Certified Public Accountants. A material weakness is a condition ira which the '`i design or operation of one or more of the internal control structure elements does not reduce to a relativery low level the risk that errors and irregularities in amounts that would be material in relatiomtc the general purpose financial statements being audited may occur and not be detected within a limey period by employees in the normal course of pertorming their assigned functions. We noted no matters involving the intemal control structure and its operations that we consider to be material weaknesses as defined above. 36 City of Fairlawn Summit County, Ohio Report of Independent Accountants on 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 management and City Council in a separate letter dated June 6, 1997. This report is intended for the information of management and City Council. However, this report is a matter of public record and its distribution is not limited. v - ~,; :~,<' , ~~~~~~~~ - STATE OF OHIO OFFICE OF THE AUDITOR JIM 1 C1riV, AUDTTOR OF STATE CITY OF FAIRLAWN, SUMMIT COUNTY 88 Ease Broad Svcet P.O. Box 1140 cotuma,s, ce,io a32163141 Telephone 614~466i514 800-282-0370 Faaim~7e 614-4fi6~4490 CLERK'S CERTIFICATION This is a true and correct copy of the report which is required to be filed in the Oflfice of the Auditor of State pursuant to Section 117.26, Revised Code, and which is Tiled in Columbus, By: Clerk of the Bureau