2008 Financial Statementark PT'~y~ ~~
rA udircar oaf ~rar~
CITY OF FAIRLAWN
SUMMIT COUNTY
TABLE OF CONTENTS
Independent Accountants' Report .................................................................................................................1
Management's Discussion and Analysis .......................................................................................................3
Basic Financial Statements:
Government-Wide Financial Statements:
Statement of Net Assets ........................................................................................
Statement of Activities ...........................................................................................
Fund Financial Statements:
Balance Sheet
Governmental Funds ......................................................................................
Reconciliation of Total Governmental Fund Balances to
Net Assets of Governmental Activities ............................................................
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds .......................................................................................
Reconciliation of the Statement of Revenues, Expenditures and Changes
in Fund Balances of Governmental Funds to the Statement of Activities .......
Statement of Revenues, Expenditures and Changes in
Fund Balance -Budget and Actual (Non-GAAP Budgetary Basis)
General Fund ............................................................................................
Statement of Fiduciary Net Assets
Fiduciary Funds ...............................................................................................
Notes to the Basic Financial Statements ..................................................................................
Independent Accountants' Report on Internal Control Over
Financial Reporting and on Compliance and Other Matters
Required by Government Auditing Standards ........................................................................
15
16
17
18
19
20
21
22
23
49
This page is intentionally left blank.
r,
INDEPENDENT ACCOUNTANTS' REPORT
City of Fairlawn
Summit County
3487 South Smith Road
Fairlawn, Ohio 44333-3007
To the Honorable Mayor and Members of City Council:
We have audited the accompanying financial statements of the governmental activities, each major fund,
and the aggregate remaining fund information of the City of Fairlawn, Summit County, Ohio, (the City) as
of and for the year ended December 31, 2008, which collectively comprise the City's basic financial
statements as listed in the table of contents. These financial statements are the responsibility of the
City's management. Our responsibility is to express opinions on these financial statements based on our
audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in the Comptroller General of the
United States' Government Auditing Standards. Those standards require that we plan and perform the
audit to reasonably assure whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe our
audit provides a reasonable basis for our opinions.
In our opinion, the fnancial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, each major fund, and the aggregate remaining
fund information of the City of Fairlawn, Summit County, Ohio, as of December 31, 2008, and the
respective changes in f nancial position thereof and the respective budgetary comparison for the General
fund for the year then ended in conformity with accounting principles generally accepted in the United
States of America.
In accordance with Government Auditing Standards, we have also issued our report dated August 3,
2009, on our consideration of the City's internal control over fnancial reporting and our tests of its
compliance with certain provisions of laws, regulations, contracts and grant agreements and other
matters. While we did not opine on the internal control over financial reporting or on compliance, that
report describes the scope of our testing of internal control over financial reporting and compliance and
the results of that testing. That report is an integral part of an audit performed in accordance with
Government Auditing Standards. You should read it in conjunction with this report in assessing the
results of our audit.
101 Central Plaza South / 700 Chase Tower /Canton, OH 44702-1509
Telephone: (330) 438-0617 (800) 443-9272 Pax: (330) 471-0001
www.auditorstate.oh.us
1
City of Fairlawn
Summit County
Independent Accountants' Report
Page 2
Management's Discussion and Analysis is not a required part of the basic fnancial statements but is
supplementary information accounting principles generally accepted in the United States of America
requires. We have applied certain limited procedures, consisting principally of inquiries of management
regarding the methods of measuring and presenting the required supplementary information. However,
we did not audit the information and express no opinion on it.
Mary Taylor, CPA
Auditor of State
August 3, 2009
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2008
UNAUDITED
The management's discussion and analysis of the City of Fairlawn's (the °Cit}~') financial performance provides an
overall review of the City's financial activities for the year ended December 31, 2008. The intent of this discussion
and analysis is to look at the City's financial performance as a whole; readers should also review the basic financial
statements and the notes to the basic financial statements to enhance their understanding of the City's financial
performance.
Financial Highlights
Key financial highlights for 2008 are as follows:
- The total net assets of the City decreased $216,453. Net assets of governmental activities decreased $216,453
or 030% from 2007, to a total of $71,988,815 in 2008.
- General revenues accounted for $13,936,556 of total governmental activities revenue. Program specific
revenues accounted for $1,228,461 or 8.10% of total governmental activities revenue.
- The City had $15,381,470 in expenses related to governmental activities; $1,228,461 of these expenses were
offset by program specific charges for services, grants or contributions. The remaining expenses of the
governmental activities of $14,153,009 were offset by general revenues (primarily property taxes, income taxes
and unrestricted grants and entitlements, including Joint Economic Development District (JEDD) revenue).
- The City has three major funds, the general fund, bond retirement fund and capital improvement fund. The
general fund, the largest major fund, had revenues and other financing sources of $10,505,590 in 2008. This
represents a decrease of $357,715 from 2007 revenues and other financing sources, due to lower investment
earnings, decreased property tax receipts and a reduction in billable engineering fees. The expenditures and
other financing aces of the general fund, which totaled $10,780,684 in 2008, decreased $108,912 from 2007
primarily due to reduced transfers to other funds. The net decrease in fund balance for the general fund was
$197,268 or 2.90%.
- The bond retirement fund had revenues of $264,588 in 2008. The expenditures of the bond retirement fund
totaled $300,289 in 2008. The net decrease in fund balance for the bond retirement fund was $35,701 or
28.71 %.
- The capital improvement fund had revenues of $2,681,574 in 2008. The expenditures of the capital
improvement fund totaled $3,101,689 in 2008. The net decrease in fund balance for the capital improvement
fund was $420,115 or 10.98%. The decrease is attributed to the elimination of transfers into the capital
improvement fund.
Using this Annual Financial Report
This annual report consists of a series of financial statements and notes to these statements. These statements are
organized so the reader can understand the City as a financial whole, an entire operating entity. The statements then
proceed to provide an increasingly detailed look at specific financial activities.
The statement of net assets and statement of activities provide information about the activities of the City as a
whole, presenting both an aggregate view of the City's finances and alonger-term view of those finances. Fund
financial statements provide the next level of detail. For governmental funds, these statements tell how services
were financed in the short-term as well as what remains for future spending. The fund financial statements also look
at the City's most significant funds with all other nonmajor funds presented in total in one column.
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2008
UNAUDITED
Reporting the City as a Whole
Statement of Net AsseGS and the Statement of Activities
While this document contains a large number of funds used by the City to provide programs and activities, the view
of the City as a whole looks at all financial transactions and asks the question, "How did we do financially during
2008?" The statement of net assets and the statement of activities answer this question. These statements include
all assets, liabilities, revenues and expenses using the accrual basis of accounting similar to the accounting used by
most privatasector companies. This basis of accounting will take into account all of the current year's revenues and
expenses regardless of when cash is received or paid.
These two statements report the City's net assets and changes in those assets. This change in net assets is important
because it tells the reader that, for the City as a whole, the financial position of the City has improved or diminished.
The caries of this change may be the result of many factors, some financial, some not Non-financial factors
include the City's property tax base, current property tax laws in Ohio restricting revenue growth, facility
conditions, required community programs and other factors.
In the statement of net assets and the statement of activities, the Govemmental activities include the City's programs
and services including police, fire and rescue, street maintenance, capital improvements and general administration.
These services are funded primarily by property and income taxes and intergovernmental revenues including federal
and state grants and other shared revenues.
The City's statement of net assets and statement of activities can be found on pages 15-16 of this report.
Reporting the City's Most Significant Funds
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for
specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure
and demonstrate compliance with financesrelated legal requirements. All of the funds of the City can be divided
into two categories: governmental funds and fiduciary funds.
Fund financial reports provide detailed information about the City's major funds. The City uses many funds to
account for a multitude of financial transactions. However, these fund financial statements focal on the City's most
significant funds. The analysis of the City's major governmental funds begins on page 9.
Governmental Funds
Governmental funds are aced to account for essentially the same functions reported as governmental activities in the
government-wide financial statements. However, unlike the government-wide financial statements, governmental
fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of
spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a
government's near-term financing requirements.
Because the focus of the governmental funds is narrower than that of the government-wide financial statements, it is
useful to compare the information presented for governmental funds with similar information presented for
governmental activities in the government-wide financial statements. By doing so, the readers may better
understand the long-term impact of the government's near-term financing decisions. Both the governmental fund
balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide
a reconciliation to facilitate this comparison between governmental funds and governmental activities.
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2008
UNAUDITED
The City maintains a multitude of individual governmental funds. The City has segregated these funds into major
funds and nonmajor funds. The City's major govemmental funds are the general fund, bond retirement fund and
capital improvement fund. Information for major funds is presented separately in the governmental fund balance
sheet and in the governmental statement of revenues, expenditures, and changes in fund balances. Data from the
other governmental funds are combined into a single, aggregated presentation. The basic governmental fund
financial statements can be found on pages 17-21 of this report.
Fiduciary Funds
Fiduciary funds are used to account for resources held for the benefit of parties outside the City. Fiduciary funds are
not reflected in the government-wide financial statement becaase the resources of those funds are not available to
support the City's own programs. The City's only fiduciary funds are agency funds. Agency funds are custodial in
nature (assets equal liabilities) and do not involve the measurement of results of operations. The basic fiduciary
fund financial statement can be found on page 22 of this report.
Notes to the Basic Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in the
govemment-wide and fund financial statements. These notes to the basic financial statements can be found on pages
23-48 of this report
Government-Wide Financial Analysis
The Statement of Net Assets provides the perspective of the City as a whole. Net assets were restated at the
beginning of the year as described in Note 3.B of the notes to the financial statement. The table below provides a
summary of the City's net assets for 2008 compared to 2007:
Net Assets
Restated
Governmental Governmental
Activities Activities
2008 2007
Assets
Current and other assets $ 18,861,317 $ 19,101,939
Capital assets, net 65,912,702 66,556,364
Total assets 84,774,019 85,658303
Liabilities
Current and otirer liabilities 3,186,903 3,194,835
Long-term liabilities 9,598,301 10,258,200
Total liabilities 12,785,204 13,453,035
Net Assets
Im~ested in capital assets, net of
related debt 57,556,280 57,414,078
Reshicted 7,681,819 8,385,255
Unreshicted 6,750,716 6,405,935
Total net assets $ 71,988,815 $ 72,205,268
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2008
UNAUDITED
Over time, net assets can serve as a useful indicator of a government's financial position. At December 31, 2008,
the City's assets exceeded liabilities by $71,988,815.
Capital assets reported on the government-wide statements represent the largest portion of the City's assets. At
year-end, capital assets represented 77.75% of total assets. Capital assets include land, land improvements,
buildings and improvements, machinery and equipment, licensed vehicles, infrastructure and construction in
progress. Capital assets, net of related debt to acquire the assets at December 31, 2008, were $57,556,280. These
capital assets are used to provide services to citizens and are not available for future spending. Although the City's
investment in capital assets is reported net of related debt, it should be noted that the resources to repay the debt
must be provided from other sources, since capital assets may not be used to liquidate these liabilities.
A portion of the City's net assets, $7,681,819, represents resources that are subject to external restriction on how
they may be used. In the governmental activities, the remaining balance of unrestricted net assets of $6,750,716
may be used to meet the government's ongoing obligations to citizens and creditors.
The table below shows the changes in net assets for fiscal years 2008 and 2007.
Chafe in Net Assets
Governmental Governmental
Activities Activities
2008 2007
Revenges
Program revenues:
Charges for services $ 767,789 $ 993,268
Operating grants and contributions 378,982 343,651
Capital grants and contributions 81,690 11,050
Total program revenues 1,228,461 1,347,969
General revenues
Property and other taxes 1,005,369 1,092,559
Income taxes 8,603,919 8,036,775
Unrestricted grants and entitlements 1,194,046 1,338,583
JEDD revenue 2,538,263 1,912,115
Investment earnings 430,426 770,649
Miscellaneous 164,533 122,020
Total general revenues 13,93b,556 13,272,701
Total revenues $ 15,165,017 $ 14,620,670
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2008
UNAUDITED
Change in Net Assefs
Governmentd Governmental
Activities Activites
2008 2007
Expenses
General government $ 2,642,555 $ 2,713,607
Security of persons and properly 6,632,12b 6,456,013
Public healkh services 113,303 112,448
Transportation 3,854,123 3,174,519
Community emimament 61,780 38,696
Basic utility services 1,252,362 967,883
Leisure time activity 397,037 406,690
Interest and fiscal charges 424,184 459,736
Total expenses 15,381,470 14,329,592
Change in net assess {216,453) 291,078
Net assets at beginning of year as restated 72,205,268 71,914,190
Net assets at end of year $ 71,988,815 $ 72,205,268
Governmental Activities
Governmental activities net assets decreased $216,453 in 2008. This decrease is a result of an increase in operating
and capital costs.
Security of persons and property, which primarily supports the operations of the police and fire departments
accounted for $6,632,126 of the total expenses of the City. These expenses were partially funded by $195,239 in
direct charges to users of the services and $4,439 in operating grant and contributions. Transportation expenses
totaled $3,854,123. Transportation expenses were partially funded by $390 in direct charges to users of the services,
and $374,543 in operating grants and contributions.
The county, state and federal governments contributed to the City a total of $378,982 in operating grants and
contributions. These revenues are restricted to a particular program or purpose. Of the total operating grants and
contributions, $4,439 subsidized security of persons and property and $374,543 subsidized transportation programs.
General revenues totaled $13,936,556, and amounted to 91.90% of total governmental revenues. These revenues
primarily consist of property and income tax revenue of $9,609,288 and JEDD revenue of $2,538,263.
The statement of activities shows the cost of program services and the charges for services and grants offsetting
those services. The following table shows, for governmental activities, the total cost of services and the net cost of
services. That is, it identifies the cost of these services supported by tax revenue and unrestricted grants and
entitlements.
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2008
UNAUDITED
The graph below illustrates the City's dependence upon general revenues as program revenues are not sufficient to
cover total governmental expenses.
Governmental Activities -Program Revenues vs. Total Expenses
$17,500,000
$15,000,000
$12,500,000
$10,000,000
$7,500,000
$5,000,000
$2,500,000
$-
^ Program Revenues
®Expenses
Governmental Activities
Total Cost of Net Cost of Total Cost of Net Cost of
Services Services Services Services
2008 2008 2007 2007
Program Expenses:
Generalgovemment $ 2,642,555 $ 2,15Q,468 $ 2,713,607 $ 1,724,462
Sec~mty of persons and pmperty 6,632,126 6,432,448 6,456,0 l3 6,114,669
Public health services 113,303 113,303 112,448 112,448
Transportation 3,854,123 3,479,190 3,174,519 2,835,745
Community environment 65,780 60,780 38,696 33,696
Basic utility services 1,252,362 1,118,498 967,883 836,664
Leisure tie activity 397,037 374,138 406,690 385,699
Interest and fiscal charges 424,184 424,184 459,736 459,736
Total $ 15,381,470 $ 14,153,009 $ 14,329,592 $ 12,503,119
The dependence upon general revenues for governmental activities is apparent, with 92.01% of expenses supported
through taxes and other general revenues.
8
Fiscal Ycar 2008 Fiscal Ycar 2007
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2008
UNAUDITED
The chart below illustrates the City's program revenues versus general revenues for 2008 and 2007:
Governmental Activities -General and Program Revenues
$]4,000,000
$]2,000,000
$]0,000,000
$8,000,000
$fi,000,000
$4,000,000
$2,000,000
$-
Financial Analysis of the Government's Funds
D Program Revenues
General Revenues
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements.
Governmental Funds
The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances
of spendable resources. Such information is useful in assessing the City's financing requirements. In particular,
unreserved fund balance serves as a awful measure of the City's net resources available for spending at year-end.
The City's governmental funds (as presented on the balance sheet on page 17) reported a combined fund balance of
$12,369,122 which is $676,097 less than last year's total of $13,045,219. The schedule below indicates the fund
balances and the total change in fund balances as of December 31, 2008 and 2007 for all major and nonmajor
governmental funds.
Fiord Balances Fiord Balances Increase Percentage
12/31/08 1213 U07 {Decrease) Chance
Major fiords
General $ 6,520,332
Bond retirement 88,629
Capital improvement 3,407,556
Other nonmajor governmental fiords 2,352,605
Total $ 12,369,122
$ 6,717,600 $ (197,268) (2.94)
124,330 (35,701) (28.71)
3,827,671 {42Q,115} (10.98)
2,375,618 (23,013) (0.97)
$ 13,045,219 $ (676,097) {5.18}
9
Fiscal Year 2008 Fiscal Year 2007
CiTY OF FAiRLAWN, OHiO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2008
UNAUDITED
General Fund
The City's general fund balance decreased $197,268. The table that follows assists in illustrating the revenues of the
general fund.
20(18 2007 Percentage
Amount Amount C e
Revenues
Taxes $ 6,497,157 $ 6,386,468 173
Charges for services 18,030 49,082 (6327)
Licenses and permits 72,001 69,659 336
Fines and forfeihues 147,682 162,927 (936)
Investment income 428,857 681,060 (37.03)
Intergovernmental 1,202,903 1,447,590 (16.90)
JEDD revemre 1,900,815 1,912,115 (0.59)
Other 228,945 148,678 53.99
Total $ 10,496,390 $ 10,857,579 (333) °1°
Tax revenue represents 61.90% of all general fund revenue. Tax revenue increased by 1.73% over prior year. The
decrease in charges for services is a result of a decrease in the amount of billable engineering services. The decrease
in investment income is due to interest rate reductions in the City's investment accounts. The decrease in
intergovernmental revenue is due tp a large grant received in 2007 for radio equipment. All other revenue remained
comparable to 2007.
Revenues -Fiscal Year 2008 Revenues - Fiscal Year 2007
i„vem„e~,~ B,rergoven,-
BVergovem-
Bmmne menG~ Brvesmie~i[ me~iGl
4.OR% 11.46% IEDD Reve~me Bmmne 1333%
1R.11 % 637
IEDD Reve~me
Fvies acid OHier Reve~mes Fvies acid 17.63°0
fmfeihires ~
1R% fmfeihves
1.41% 180%
Lirzises and
Lirzises and
PenniLC
PenniLc OHier Reve~mes
0.69% Q64% 1.37%
Chazges for Chazges for
Servirzc Taxes Servirzc
0.17% 61.90% 0.45% Taxes
SR.R3%
10
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2008
UNAUDITED
The table that follows assists in illustrating the expenditures of the general fund.
Expenditures
General gwemment
Secimty of persons and property
Public health services
Transportation
Community environment
Basic utility services
Leisure tie activity
Total
2008 2007 Percentage
Amount Amount C e
$ 2,725,401 $ 2,580,161 5-63
5,510,246 5,373,068 2-55 °1°
113,303 112,448 076
1,836,374 1,646,962 11-50 °1°
61,304 37,512 63-43
197,103 179,103 10-OS °1°
35,613 30,156 18-10
$ 1Q,479,344 $ 9,959,410 522
Expenditures for transportation increased due to road improvements in 2008 and the cost of fuel. Community
environment expenditures increased due to the flood prevention and tree removal programs introduced in 2008. All
other expenditures remained comparable to 2007.
Expenditures -Fiscal Year 2008
basic utility
Community services
environment 1.88% Leisure time
0.58% activity
o.sa%
Transport-
ation General
9.52% ~govemme
26.01
Expenditures -Fiscal Year 2007
Basic otilirv
Community services Lcisorc time
cnviromncnt ~ x0/ activity
o.ax% o.ao%
Transport- Gcncral
anon goscrmncnt
15.54% ~~ ~ b91%
Public hea
services
1.08%
Security of
persons and
property
52.59
Bond Retirement Fund
Poblic health
services
1.13%
Sccoritv of
persons and
property
53.94%
The bond retirement fund had revenues of $264,588 in 2008. The expenditures of the bond retirement fund totaled
$300,289 in 2008. The net decrease in fund balance for the bond retirement fund was $35,701 or 28.71%.
Capitallmprovement Fund
The capital improvement fund had revenues of $2,681,574 in 2008. The expenditures of the capital improvement
fund totaled $3,101,689 in 2008. The net decrease in fund balance for the capital improvement fund was $420,115
or 10.98%.
11
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2008
UNAUDITED
Budgeting Highlights
The City's budgeting process is prescribed by the Ohio Revised Code (ORC). Essentially the budget is the City's
appropriations which are restricted by the amounts of anticipated revenues certified by the County Budget
Commission in accordance with the ORC. Therefore, the City's plans or desires cannot be totally reflected in the
original budget. If budgeted revenues are adjusted due to actual activity then the appropriations can be adjusted
accordingly.
Budgetary information is presented for the general fund. In the general fund, there was no significant change
between the original and final budgets for general fund revenue. Budgeted revenue was decreased to reflect the
decrease in income tax and property tax revenue, however amounts received for estate tax and JEDD revenues
exceeded budget estimates. One of the most significant changes was between the original and final budgeted
amount for basic utility services expenditures, which increased $58,000 from $172,987 to $230,987 due to increased
costs of trash disposal and recycle handling. Actual expenditures of $228,439 were less than final budgeted
expenditures by $2,548. The other significant change was between the final budgeted expenditures and actual
expenditures. Actual expenditures came in $1,884,631 lower than the final budgeted amounts due to less than full
staffing in the police, fire, and dispatch departments; substantially fewer transfers to other funds; fewer income tax
refunds than anticipated; and overall prudent management.
Capital Assets and Debt Administration
Capital Assets
At the end of fiscal 2008, the City had $65,912,702 (net of accumulated depreciation) invested in land, land
improvements, buildings and improvements, machinery and equipment, licensed vehicles, infrastructure and
construction in progress. The following table shows fisca12008 balances compared to 2007:
Capital Assets at December 31
(Net of Depreciation)
Land
Land improvements
Buildings and improvements
Machinery and equipment
Licensed vehicles
Infrastructure
Construction in progress
Governmental Activities
As restated
2008 2007
$ 3,224,888 $ 3,224,888
665,165 620,361
11,300,063 11,573,435
1,826,777 1,790,943
1,514,755 1,424,711
47,203,555 45,914,768
177,499 2,007,258
Totals $ 65,912,702 $ 66,556,364
12
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2008
UNAUDITED
The following graphs show the breakdown of governmental capital assets by category for 2008 and 2007.
Capital Assets -Governmental Activities
2008
91.63%
Buildings &
lechinery end
equipment
3J]%
sed
~ehides
3.J0%
Capital Assets -Governmental Activities
2007
Lend imp.
0.9~
Land
4.85% duildiny~~@
impmvemenn Machinery end
UH8%
~~p ~ ~ equipment
m^i~ 3.(9%
Lice sed
vehicles
3.14%
Inkasvucmre
(8.99%
The City's largest capital asset category is infrastructure which includes roads, bridges, culverts, sidewalks and
curbs. These items are immovable and of value only to the City, however, the annual cost of purchasing these items
is quite significant. The net book value of the City's infrastructure (cost less accumulated depreciation) represents
approximately 71.62% of the City's total governmental capital assets at December 31, 2008.
See Note 10 for more detail on the City's capital assets.
DeGt Adminisdation
The City had the following long-term obligations outstanding at December 31, 2008 and 2007:
Governmental Activities
2008 2007
General obligation booms $ 7,385,000
Spceial assessment bonds 520,000
OFWC loans 451,422
Compensated absences 1,241,879
Total long-term obligations $ 9,598,301
See Note 11 for more detail on the City's long-term obligations.
$ 7,460,000
670,000
512,286
1,115,914
$ 10,258,200
13
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2008
UNAUDITED
Economic Conditions and Next Year's General Fund Budget Outlook
The City of Fairlawn is a residential community with a strong diversified business base. The City is home to
several large corporations, a multitude of small, diverse businesses, and five thriving retail centers, including
Summit Mall, Rosemont Commons, the Shops at Fairlawn, the Fairlawn Towne Center, and Miller-Market Square.
The City's convenient location continues to attract and retain growing businesses. The City congratulates the
Fairlawn Hilton on reaching its 40`~ year in Fairlawn and RDA Hotel Management for being the longest continuous
franchise owner of a Hilton franchise in the world. The Hilton is currently undergoing a renovation to update the
interior and to add outdoor dining.
Summit Mall continues its $9 million renovation with Phase 2 to add P.F. Chang and First Watch to its impressive
eateries.
The City's Land Use Plan designated 200+ acres of former farmland as an office park in the City's southwest
corner. Fairlawn Corporate Park continues to develop and the City is applying Federal Stimulus Funds for three
projects that are ready to begin construction.
The City's primary revenue source is the 2% local income tax withheld on the estimated 40,000 people working in
the City. The City is fortunate to be able to weather the economic conditions through its broad tax base and is
projecting nominal growth for 2009.
The City is proud to offer outstanding city services to its residents. In addition to excellent police and fire protection,
Fairlawn safety forces are active in the community, offering education programs such as Drug Abuse Resistance
Education (DARE), Fire Prevention, and Safety Town for our youngest residents. Fairlawn police support
neighborhood Block Parent groups, offer residential checks and a Senior Call program to check on senior citizens
living alone. The popular Special Traffic Enforcement Program boosts traffic control where residents most see a
need. The City's highly trained emergency medical teams are outfitted with advanced medical equipment and
provide free emergency medical care to Fairlawn residents. The Municipal Service Center Complex houses all
public service functions and equipment in one area. The City provides trash and recycling services at no charge to
residents at the Andrew Sombati Compactor site, an all-weather drive-thru trash compactor facility.
The City operates fifty-three (53) acres of parks which offer year-round recreational programs for children and
adults. The Learning Resource Center, staffed with afull-time Naturalist, offers nature-related programs and
lectures to groups of all ages. The City is currently accepting bids for the addition of adult and youth soccer fields to
the Fairlawn parks system.
The City is projecting no growth in general fund revenue in 2009. Expenditures for 2009 are budgeted at 1.9%
greater than the prior year due to projected full staffing, moderate wage increases and general inflation. Programs
supported by the general fund are budgeted at the same level of service as last year. There are no new hires planned
for 2009.
Contacting the City's Financial Management
This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview
of the City's finances and to show the City's accountability for the money it receives. If you have questions about
this report or need additional financial information, contact Mr. Jerome E. Apple, Finance Director, City of
Fairlawn, 3487 S. Smith Road, Fairlawn, Ohio 44333.
14
CITY OF FAiRLAWN, OHiO
STATEMENT OF NET ASSETS
DECEMBER 3 L, 2008
Governmental
Activities
Assets:
Equity in pooled cash and cash equivalents. .. S L2,846,788
Cash and cash equivalents in segregated accounts .. 47,07 L
Receivables (net of allowances for uncollectibles):
Income taxes . .. .. L,805,295
Real and other taxes .. .. 988,624
Accounts . .. .. 38,227
Accrued interest . .. .. L25,227
Special assessments .. .. L,444,366
Due from other governments . .. .. L,L67,760
Prepayments .. .. 98,695
Materials and supplies inventory. .. .. 299,264
Capital assets:
Land and construction in progress. .. .. 3,402,387
Depreciable capital assets, net . .. 62,5 LQ3 LS
Total capital assets. .. .. 65,9 L2,702
Total assets. .. .. .. 84,774,OI9
Liabilities:
Accounts payable. .. .. L,305,670
Contracts payable. .. .. 2 L6,789
Accrued wages and benefits .. .. 330,435
Due to other governments .. .. 402,3 LO
Unearned revenue. .. .. 887,77 L
Accrued interest payable. .. 43,928
Long-term liabilities:
Due within one year . .. .. L,252,546
Due in more than one year .. .. 8,345,755
Total liabilities .. .. .. L2,785,204
Net assets:
Invested in capital assets, net of related debt . .. 57,556,280
Restricted for:
Capital projects. .. .. 4,906,562
Debt service .. .. L,04Q988
Security of persons and propery .. 668,472
Transportation projects. .. 788,945
Leisure time activities. .. 95,794
Other purposes . .. .. L 8 L,O58
Unrestricted. .. .. 6,750,7 L 6
Total net assets. .. .. S 7L,988,SI5
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
15
CITY OF FAiRLAWN, OHiO
STATEMENT OF ACTNITIES
FOR THE YEAR ENDED DECEMBER 3l, 2008
Net (Expense)
Revenue and
Changes in
Revenues Net Assets
Operating Capital
Charges for Grants and Grants and Governmental
Expenses Services Contributions Contributions Activities
Governmental Activities:
General government .. S 2,642,555 S 410,397 S - S SL,690 S (2, L50,468)
Security of persons and properly. .. 6,632,L26 L95,239 4,439 - (6,432,448)
Public health services .. .. L L3,303 - - - (L L3,303)
Transportation. .. . . 3,854,L23 390 374,543 - (3,479, L90)
Community environment . .. 65,780 5,000 - - (60,780)
Basic utility services. .. L,252,362 L33,864 - - (L,LL8,498)
Leisure time activity . .. 397,037 22,899 - - (374, L38)
Interest and fiscal charges .. 424, L84 - - - (424, L84)
Total governmental activities. .. .. S L5,38 L,470 S 767,789 S 378,982 S SL,690 Q4, L53,009)
General Revenues:
Properly and other taxes levied for:
General purposes . .. .. .. 620,288
Police and fire pension .. .. .. L78,30L
Parks and recreation .. .. 206,780
Income taxes levied for:
General purposes . .. .. .. 5,949,29 L
Capital projects . .. .. .. 2,654,628
JEDD revenue . .. .. .. 2,538,263
Grants and entitlements not restricte d to specific progra ms . .. L, L94,046
Investrnent earnings . .. .. .. 430,426
Miscellaneous . .. . . . . L64,533
Total general revenues. .. .. L3,936,556
Change in net assets. .. .. (2 L6,453)
Net assets at beginning of year (Restated). .. .. 72,205,268
Net assets at end of year.. .. .. S 7 L,988,815
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
16
CITY OF FAiRLAWN, OHiO
Assets:
Equity in pooled cash and
cash equivalents. .. .
Cash and cash equivalents
in segregated accounts .. .
Receivables (net of allowance for uncollectibles):
Income taxes. .. .. .
Real and other taxes . .. .
Accounts. .. .. .
Accrued interest. .. . .
Special assessments . .. .
Due from other funds . .. .. .
Due from other governments. .. .
Prepayments . .. .. .
Materials and supplies invenmry. .. .
Total assets . .. .. .
Liabilities:
Accounts payable . .. .
Contracts payable .. .
Accrued wages and benefits . .. .
Due m other funds .. .. .
Due m other governments . .. .
Unearned revenue. .. .
Deferred revenue.. .. .
Total liabilities . .. .. .
Fund Balances:
Reserved for encumbrances . .. .
Reserved for prepayments. .. .
Reserved for materials and supplies invenmry. .
Reserved for unclaimed monies .. .
Reserved for debt service .. .
Unreserved:
Undesignated, reported in:
General fund . .. .
Special revenue funds .. .
Capital projects funds .. .
Total fund balances. .. .
Total liabilities and fund balances .. .
BALANCE SHEET
GOVERNMENTAL FUNDS
DECEMBER 3 L, 2008
Bond
General Retirement
Other
Capital Governmental
imprm-ement Funds
S 6,992,425 S 88,629 S 3,289,773 S 2,475,96E S L2,846,788
47,07E - - - 47,07E
L,2 L8,574 - 586,72E - L,805,295
760,660 - - 227,964 988,624
LQ260 - - 27,967 38,227
LL7,675 - - 7,552 L25,227
- 968,935 475,43 L - L,444,366
- - - 6,048 6,048
L,017,L33 - - L50,627 L,L67,760
98,695 - - - 98,695
278,4LL - - 20,853 299,264
S LQ54Q904 S L,057,564 S 4,35L,925 S 2,916,972 S L8,867,365
S L,247,494 S - S 23,2 L6 S 34,960 S L,305,670
23,554 - L93,235 - 216,789
322,060 - - 8,375 330,435
6,048 - - - 6,048
233,775 - - L68,535 402,3 L0
690,489 - - L97,282 887,77E
L,497,L52 968,935 727,9L8 L55,215 3,349,220
4,020,572 968,935 944,369 564,367 6,498,243
499,025 - 3L6,L28 208,892 L,024,045
98,695 - - - 98,695
278,4LL - - 20,853 299,264
28,790 - - - 28,790
- 88,629 - - 88,629
5,615,4LL - - - 5,615,4LL
- - - L,488,672 L,488,672
- - 3,09 L,428 634,L88 3,725,616
6,520,332 88,629 3,407,556 2,352,605 L2,369,L22
S L0,540,904 S L,057,564 S 4,35L,925 S 2,916,972 S L8,867,365
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
Total
Gm-ernmental
Funds
17
CITY OF FAiRLAWN, OHiO
RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCES TO
NET ASSETS OF GOVERNMENTAL ACTNITIES
DECEMBER 3 L, 2008
Total gmvernmental fund balances
Amounts reported for governmental activities in the
statement of net assets are different because:
Capital assets used in governmental activities are not financial resources
and therefore are not reported in the funds.
Other long-term assets are not available to pay for current period
expenditures and therefore are deferred in the funds.
Income taxes
Investment income
Special assessments
Licenses and permits
Rentals
Other
Intergovernmental revenues
Total
Long-term liabilities are not due and payable in the current period and
therefore are not reported in the funds. The long-term liabilities
are as follows:
Accrued interest payable
General obligation bonds
Special assessment bonds
OPWC loans
Compensated absences
Net assets of governmental activities
S 776,882
89,216
L,444,366
25,563
4,9LL
L,654
L,006,628
(43,928)
(7,385,000)
(520,000)
(45 L,422)
( L,24 L, 879)
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
S L2,369,L22
65,9 L 2,702
3,349,220
(9,642,229)
S 7L,988,8 L5
18
CITY OF FAiRLAWN, OHiO
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 3 L 2008
Revenues:
Income taxes . .. .
Properly and other taxes .. .
Charges for services .. .
Licenses and permits . .. .
Fines and forfeitures . .. .
Intergovernmental .. .
Special assessments. .. .. .
Investment income . .. .. .
Rentals . .. .. .
Contributions and donations . . .
JEDD revenue . .. .. .
Other. .. .. .
Total revenues .. .
r,...,....a
Bond
n,.«:..,..,.,...«
Other
Capital Governmental
imprm-ement Funds
Total
Governmental
Funds
Expenditures:
Current:
General government .. .
Security of persons and properly .
Public health services . .. .
Transportation.. .. .
Community environment .
Basic utility services. .. .
Leisure time activities . .. .
Capital outlay . .. .
Debt serv ice:
Principal retirement . .. .
Interest and fiscal charges . .. .
Total expenditures. .. .
Excess (deficiency) of revenues
over (under) expenditures . .. .
Other financing sources (uses):
Proceeds ffom sale of capital assets .. .
Transfers in .. .. .
Transfers out .. .
Total other financing sources (uses) .
Net change in fund balances .. .
S 5,876,869 S - S 2,619,758 S - S 8,496,627
620,288 - - 385,08E L,005,369
L8,030 - - 249,073 267, L03
72,00E - - 96,490 L68,49L
L47,682 - - SL,389 229,07E
L,202,903 - - 426,980 L,629,883
- 264,588 6L,816 - 326,404
428,857 - - 22,062 450,919
7L,717 - - L4,835 86,552
- - - L,400 L,400
L,900,8 L5 - - - L,900,8 L5
L57,228 - - 6,442 L63,670
L0,496,390 264,588 2,68 L,574 L,283,752 L4,726,304
2,725,40E L2,687 - L20 2,738,208
5,5 L0,246 - - 78L,363 6,29 L,609
L L3,303 - - - L L3,303
L,836,374 - - 3L6,35L 2,L52,725
6L,304 - - - 6L,304
L97,L03 - - L00,72L 297,824
35,613 - - 3 L0,465 346,078
- - 2,L74,549 9L,369 2,265,918
- 2L0,864 575,000 - 785,864
- 76,738 352, L40 - 428,878
L0,479,344 300,289 3,LOL,689 L,600,389 L5,48 L,7LL
L7,046 (35,70 L) (420, LLS) (3 L6,637) (755,407)
9,200 - - - 9,200
- - - 30L,340 30 L,340
(30L,340) - - - (30 L,340)
(292,L40) - - 30L,340 9,200
(275,094) (35,70 L) (42QLL5) (L5,297) (746,207)
Fund balances at beginning of year ....... 6,7 L7,600 L24,330 3,827,67 L 2,375,618 L3,045,2 L9
increase (decrease) in reserve for inventory .. 77,826 - - (7,716) 7Q L LO
Fund balances at end of year .......... S 6,520,332 S 88,629 S 3,407,556 S 2,352,605 S L2,369, L22
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
19
CITY OF FAiRLAWN, OHiO
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANCES
IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTNITIES
FOR THE YEAR ENDED DECEMBER 3 L 2008
Net change in fund balances -total gmvernmental funds
Amounts reported for governmental activities in the
statement of activities are different because:
Government funds report capital outlays as expenditures. However,
in the statement of activities, the cost of those assets are allocated
over their estimated useful lives as depreciation expense. This is the
amount by which capital outlays (S L,896,404) were exceeded by
depreciation expense (52,098,784) in the current period.
Governmental funds only report the disposal of capital assets to the
extent proceeds are received from the sale. In the statement of
activities, a gain or loss is reported for each disposal.
Revenues in the statement of activities that do not provide current
financial resources are not reported as revenues in the funds.
Governmental funds report expenditures for inventory when purchased.
However, in the statement of activities, they are reported as an expense
when consumed.
Repayment of bond and loan principal is an expenditure in the
governmental funds, but the repayment reduces long-term
liabilities in the statement of net assets.
In the statement of activities, interest is accrued on outstanding bonds
and loans whereas in governmental funds, an interest expenditure is
reported when due.
Some expenses reported in the statement of activities, such as compensated
absences and pension obligations, do not require the use of current
financial resources and therefore are not reported as expenditures
in governmental funds.
Change in net assets of gm'ernmental activities
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
(746,207)
(202,380)
(44 L,282)
438,7 L3
70,LL0
785,864
4,694
(L25,965)
S (2 L6,453)
20
CITY OF FAiRLAWN, OHiO
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE -BUDGET AND ACTUAL (NON-GMP BUDGETARY BASIS)
GENERAL FUND
FOR THE YEAR ENDED DECEMBER 3l, 2008
Variance with
Bud¢eted Amounts Final Budget
Positive
Ori¢inal Final Actual (Ne¢ative)
Revenues:
Income taxes. .. .. S 5,662,045 S 5,64 L,540 S 5,835,832 S L94,292
Properly and other taxes . .. 656,000 648,833 617,342 (3 L,49 L)
Charges for services . .. .. 24,900 23,900 28,739 4,839
Licenses and permits. .. .. 65,260 66,260 72,00E 5,74E
Fines and forfeitures. .. .. L80,200 L80,200 L42,5 L4 (37,686)
Intergovernmental. .. .. 75L,9 L9 75L,9 L9 L, L78,L84 426,265
Investrnent income .. 552,000 552,000 446,904 Q05,096)
Rentals. .. .. .. 64,000 64,000 7L,7 L7 7,7 L7
Contributions and donations. .. 2,000 2,000 - (2,000)
JEDD revenue. .. .. 2,000,000 2,000,000 2,366,L2L 366,L2L
Other .. .. 70,400 70,400 L56,69L 86,29E
Total revenues. .. .. L0,028,724 LO,OOL,052 L0,916,045 914,993
Expenditures:
Current:
General government . .. 4,22 L,L72 4,3 L9,058 3,290,2 L7 L,028,84L
Security of persons and properly . 6,243,843 6,299,572 5,567,3 LS 732,257
Public health services . .. .. L L4,500 L L4,500 L L3,303 L,L97
Transportation .. L,926,258 L,956,614 L,893,039 63,575
Community environment .. L02,L04 LL6,440 6L,829 54,6LL
Basic utility services .. .. L72,987 230,987 228,439 2,548
Leisure time activities. .. .. 42,364 42,364 40,762 L,602
Total expenditures. .. .. L2,823,228 L3,079,535 LL,L94,904 L,884,63L
Excess (deficiency) of revenues
over (under) expenditures . .. (2,794,504) (3,078,483) (278,859) 2,799,624
Other financing sources (uses):
Proceeds from sale of capital assets. .. 5,000 5,000 9,200 4,200
Transfers out .. (L,020,334) (L,020,334) (30 L,340) 718,994
Totalother financing sources (uses) (L,015,334) (L,015,334) (292,L40) 723, L94
Net change in fund balance .. (3,809,838) (4,093,8 L7) (570,999) 3,522,818
Fund balance at beginning of year ........ 6,369,2 L3 6,369,2 L3 6,369,2 L3 -
Prioryear encumbrances appropriated ...... 507,499 507,499 507,499 -
Fund balance at end of year ............ S 3,066,874 S 2,782,895 S 6,305,713 S 3,522,5 l8
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
21
CITY OF FAiRLAWN, OHiO
STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS
DECEMBER 3 L, 2008
Agency
Assets:
Equity in pooled cash and cash equivalents . S 43,904
Total assets. .. 43,904
Liabilities:
Undistributed monies.. 43,904
Total liabilities .. .. S 43,904
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
22
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 1 -DESCRIPTION OF THE CITY
The City of Fairlawn (the °Cit}~') 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.
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements (BF S) of the City have been prepared in conformity with accounting
principles generally accepted in the United States of America (GAAP) as applied to local governmental
units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for
establishing governmental accounting and financial principles. The City also applies Financial Accounting
Standards Board (FASB) Statements and Interpretations issued on or before November 30, 1989, to its
governmental funds provided they do not conflict with or contradict GASB pronouncements. The most
significant of the City's accounting policies are described below.
A. Reporting Entity
For financial reporting purposes, the City's BFS include all funds, agencies, boards, commissions, and
departments for which the City is financially accountable. Financial accountability, as defined by the
GASB, exists if the City appoints a voting majority of an organization's governing board and is either
able to impose its will on that organization or there is a potential for the organization to provide
specific financial benefits to, or impose specific burdens on, the City. The City may also be financially
accountable for governmental organizations with a separately elected governing board, a governing
board appointed by another government, or a jointly appointed board that is fiscally dependent on the
City. The City also took into consideration other organizations for which the nature and significance
of their relationship with the City are such that exclusion would cause the City's basic financial
statements to be misleading or incomplete. Based on these criteria, the City has no component units.
The City provides various services including police and fire protection, emergency medical, recreation
(including parks), planning, zoning, street maintenance and repair, and general administrative services.
The operation of each of these activities is directly controlled by the Council through the budgetary
process. None of these services are provided by a legally separate organization; therefore, these
operations are included in the primary government.
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 imposes a
financial burden nor provides a financial benefit to the City. The City cannot significantly influence
the operations of these entities.
The City participates in the Bath-Almon-Fairlawn Joint Economic Development District (JEDD),
which is a jointly governed organization. The JEDD was created to assure the continued economic
viability of Bath Township. Anine-member board of directors, three appointed from Bath Township,
Almon, and Fairlawn, respectively, controls the operation of the JEDD. The board exercises total
control over the operation of the JEDD including budgeting, appropriating, contracting and designating
management.
Each participant's degree of control is limited to its representation on the board. All 2008 JEDD
revenues were the result of the income tax levied by the JEDD effective January 1, 1999.
23
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
B. Basis of Presentation -Fund Accounting
The City's BFS consist of government-wide statements, including a statement of net assets and a
statement of activities, and fund financial statements which provide a more detailed level of financial
information.
Government-wide Financial StatemenGS -The statement of net assets and the statement of activities
display information about the City as a whole. These statements include the financial activities of the
primary government, except for fiduciary funds.
The statement of net assets presents the financial condition of the governmental activities of the City at
year-end. The statement of activities presents a comparison between direct expenses and program
revenues for each program or function of the City's governmental activities. Direct expenses are those
that are specifically associated with a service, program or department and therefore clearly identifiable
to a particular function. Program revenues include charges paid by the recipient of the goods or
services offered by the program, grants and contributions that are restricted to meeting the operational
or capital requirements of a particular program and interest earned on grants that is required to be used
to support a particular program. Revenues which are not classified as program revenues are presented
as general revenues of the City, with certain limited exceptions. The comparison of direct expenses
with program revenues identifies the extent to which each business segment or governmental functions
are self-financing or draw from the general revenues of the City.
Fund Financial StatemenGS -During the year, the City segregates transactions related to certain City
functions or activities in separate funds in order to aid financial management and to demonstrate legal
compliance. Fund financial statements are designed to present financial information of the City at this
more detailed level. The focus of governmental fund financial statements is on major funds. Each
major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a
single column. Fiduciary funds are reported by type.
C. Fund Accounting
The City uses funds to maintain its financial records during the year. A fund is defined as a fiscal and
accounting entity with a self balancing set of accounts. There are two categories of funds:
governmental and fiduciary.
Governmental Funds - Governmental funds are those through which most governmental functions
typically are financed. Governmental fund reporting focuses on the sources, uses and balances of
current financial resources. Expendable assets are assigned to the various governmental funds
according to the purposes for which they may or must be used. Current liabilities are assigned to the
fund from which they will be paid. The difference between governmental fund assets and liabilities is
reported as fund balance. The following are the City's major governmental funds:
General Fund -The general fund accounts for all financial resources except those required to be
accounted for in another fund.
Bond Reziremenz -The bond retirement fund accounts for the accumulation of resources for, and
payment of, long-term debt principal, interest and related costs.
Capizallmprovemenz -This fund is used to account for the acquisition and construction of major
capital facilities.
24
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Other governmental funds of the City are used to account for (a) the accumulation of resources for, and
payment of, general long-term debt principal, interest and related costs; (b) financial resources to be
used for the acquisition, construction, or improvement of capital facilities; and (c) for grants and other
resources whose use is restricted to a particular purpose.
Fiduciary Funds -Fiduciary fund reporting focuses on net assets and changes in net assets. The
fiduciary fund category is split into four classifications: pension trust funds, investment trust funds,
privatapurpose trust funds and agency funds. Trust funds are used to account for assets held by the
City under a trust agreement for individuals, private organizations, or other governments and are
therefore not available to support the City's own programs. Agency funds are custodial in nature
(assets equal liabilities) and do not involve measurement of results of operations. The City's only
fiduciary funds are agency funds. The agency funds are used to account for deposits that will be
returned after the proper performance of certain landscape or street repair projects.
D. Measurement Focus and Basis of Accounting
Government-wide Financial StatemenGS -The government-wide financial statements are prepared
using the economic resources measurement focus. All assets and all liabilities associated with the
operation of the City are included on the statement of net assets.
Fund Financial StatemenGS -All governmental funds are accounted for using a flow of current
financial resources measurement focus. With this measurement focus, only current assets and current
liabilities generally are included on the balance sheet. The statement of revenues, expenditures and
changes in fund balances reports on the sources (i.e., revenues and other financing sources) and uses
(i.e., expenditures and other financing uses) of current financial resources. This approach differs from
the manner in which the governmental activities of the government-wide financial statements are
prepared. Governmental fund financial statements therefore include reconciliation with brief
explanations to better identify the relationship between the government-wide statements and the
financial statements for governmental funds.
E. Basis of Accounting
Basis of accounting determines when transactions are recorded in the financial records and reported on
the financial statements. Government-wide financial statements are prepared using the accrual basis of
accounting. Governmental funds use the modified accrual basis of accounting. Agency funds also use
the accrual basis of accounting. Differences in the accrual and modified accrual basis of accounting
arise in the recognition of revenue, the recording of deferred revenue and in the presentation of
expenses versus expenditures.
Revenues -Exchange and Non-exchange Transactions - Revenue resulting from exchange
transactions, in which each party gives and receives essentially equal value, is recorded on the accrual
basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal
year in which the resources are measurable and become available. Available means that the resources
will be collected within the current fiscal year or are expected to be collected soon enough thereafter to
be used to pay liabilities of the current fiscal year. For the City, available means expected to be
received within thirty-one days of year-end.
25
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Nonexchange transactions, in which the City receives value without directly giving equal value in
return, include income taxes, property taxes, grants, entitlements and donations. On an accrual basis,
revenue from income taxes is recognized in the period in which the income is earned (See Note 7).
Revenue from property taxes is recognized in the year for which the taxes are levied (See Note 6).
Revenue from grants, entitlements and donations is recognized in the year in which all eligibility
requirements have been satisfied. Eligibility requirements include timing requirements, which specify
the year when the resources are required to be aced or the year when use is first permitted, matching
requirements, in which the City mast provide local resources to be used for a specified purpose, and
expenditure requirements, in which the resources are provided to the City on a reimbursement basis.
On a modified accrual basis, revenue from nonexchange transactions must also be available before it
can be recognized.
Under the modified accrual basis, the following revenue sources are considered to be both measurable
and available at year-end: income tax, statalevied locally shared taxes (including gasoline tax, local
government funds and permissive tax), fines and forfeitures, fees and special assessments.
Unearned Revenue and Deferred Revenue -Unearned revenue and deferred revenue arise when
assets are recognized before revenue recognition criteria have been satisfied.
Property taxes for which there is an enforceable legal claim as of December 31, 2008, but which were
levied to finance year 2009 operations, and other revenues received in advance of the fiscal year for
which they were intended to finance, have been recorded as unearned revenue. Income taxes and
special assessments not received within the available period, grants and entitlements received before
the eligibility requirements are met, and delinquent property taxes due at December 31, 2008, are
recorded as deferred revenue in the governmental funds.
On governmental fund financial statements, receivables that will not be collected within the available
period have been reported as deferred revenue.
Expenses/Expenditures - On the accrual basis of accounting, expenses are recognized at the time they
are incurred.
The measurement focus of governmental fund accounting is on decreases in net financial resources
(expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in
which the related fund liability is incurred, if measurable. Allocations of cost, such as depreciation and
amortization, are not recognized in governmental funds.
F. Budgetary Data
The budgetary process is prescribed by provisions of the Ohio Revised Code and entails the
preparation of budgetary documents within an established timetable. The major documents prepared
are the tax budget, the certificate of estimated resources and the appropriations resolution, all of which
are prepared on the budgetary basis of accounting. The certificate of estimated resources and the
appropriations ordinance are subject to amendment throughout the year with the legal restriction that
appropriations cannot exceed estimated resources, as certified. For all funds, Council appropriations
are made at the object level within each department. This is known as the legal level of budgetary
control. Budgetary modifications may only be made by resolution of the City Council at the legal level
of control. All funds, other than agency funds, are legally required to be budgeted and appropriated.
26
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Tax Budget -Alternative tax budget information of estimated revenue and expenditures for all funds
is submitted to the Summit County Fiscal Officer, as Secretary of the County Budget Commission, by
July 20 of each year, for the period January 1 to December 31 of the following year. All funds, except
agency funds, are legally required to be budgeted; however, only governmental funds are legally
required to be reported.
Estimated Resources -The County Budget Commission determines if the budget substantiates a need
to levy all or part of previously authorized taxes and reviews estimated revenue. The Commission
certifies its actions to the City by September 1. As part of this certification, the City receives the
official certificate of estimated resources, which states the projected revenue of each fund. Prior to
December 31, the City must revise its budget so that the total contemplated expenditures from any
fund during the ensuing fiscal year will not exceed the amount available as stated in the certificate of
estimated resources. The revised budget then serves as the basis for the annual appropriations
measure. On or about January 1, the certificate of estimated resources is amended to include
encumbered cash balances at December 31 of the preceding year. The certificate may be further
amended during the year if the City Finance Director determines, and the Budget Commission agrees,
that an estimate needs to be either increased or decreased. The amounts reported on the budgetary
statement reflect the amounts in the original and final amended official certificate of estimated
resources issued during 2008.
Appropriations - A temporary appropriation ordinance to control expenditures may be passed on or
about January 1 of each year for the period January 1 to March 31. An annual appropriation ordinance
must be passed by April 1 of each year for the period January 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 year as new information becomes available, provided that total
fund appropriations do not exceed current estimated resources, as certified. The appropriations for a
fund may only be modified during the year by an ordinance of Council. The amounts on the budgetary
statement reflect the original and final appropriation amounts, including all amendments and
modifications legally enacted by Council.
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. Encumbrances are carried forward and are not reappropriated as part of the
subsequent year appropriations.
G. Cash and Cash Equivalents
Cash balances of the City's funds are pooled and invested in investments maturing within five years in
order to provide improved cash management. Individual fund integrity is maintained through City
records. Each fund's interest in the pooled bank account is presented on the balance sheet as "Equity
in Pooled Cash and Cash Equivalents" on the financial statements.
During fiscal year 2008, investments were limited to overnight repurchase agreements, certificates of
deposit, and the State Treasury Asset Reserve of Ohio (STAR Ohio).
Except for nonparticipating investment contracts, investments are reported at fair value which is based
on quoted market prices Nonparticipating investment contracts, such as nonnegotiable certificates of
deposit and repurchase agreements, are reported at cost.
27
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
The City invested funds in STAR Ohio during fisca12008. STAR Ohio is an investment pool managed
by the State Treasurer's Office which allows governments within the State to pool their funds for
investment purposes. STAR Ohio is not registered with the SEC as an investment company, but does
operate in a manner consistent with Rule 2a7 of the Investment Company Act of 1940. Investments in
STAR Ohio are valued at STAR Ohio's share price which is the price the investment could be sold for
on December 31, 2008.
Under existing Ohio statutes all investment earnings are assigned to the general fund unless statutorily
required to be credited to a specific fund. During fiscal 2008, interest revenue credited to the general
fund amounted to $428,857, which includes $262,614 assigned from other City funds.
The City has segregated bank accounts for monies held separate from the City's central bank account.
These interest bearing depository accounts are presented in the financial statements as "Cash and Cash
Equivalents in Segregated Accounts" since they are not required to be deposited into the City treasury.
For purpose of presentation on the financial statements, investments of the cash management pool and
investments with original maturities of three months or less at the time they are purchased by the City
are considered to be cash equivalents. Investments with an initial maturity of more than three months
are reported as investments.
An analysis of the City's investment account atyear-end is provided in Note 4.
H. Inventories of Materials and Supplies
On government-wide and fund financial statements, inventories are presented at the lower of cost or
market on a first-in, first-out basis and are expensed when used. Inventories are accounted for using
the consumption method.
On the fund financial statements, reported material and supplies inventory is equally offset by a fund
balance reserve in the governmental funds which indicates that it does not constitute available
spendable resources even though it is a component of net current assets.
Inventory consists of expendable supplies held for consumption.
I. Capital Assets
These assets generally result from expenditures in the governmental funds. These assets are reported
in the governmental activities column of the government-wide statement of net assets but are not
reported in the governmental fund financial statements.
All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and
retirements during the year. Donated capital assets are recorded at their fair market values as of the
date received. The City maintains a capitalization threshold of $5,000. The City's infrastructure
consists of roads, bridges, curbs and gutters, streets and sidewalks, drainage systems and lighting
systems. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to
the value of the asset or materially extend an asset's life are not
28
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
All reported capital assets aze depreciated except for land and construction in progress. Improvements
aze depreciated over the remaining useful lives of the related capital assets. Useful lives for
infrastructure were estimated based on the City's historical records of necessary improvements and
replacement. Depreciation is computed using the straight-line method over the following useful lives:
Governmental
Activities
Description Estimated Lives
Land improvements 25 - 75 yeazs
Buildings and improvements 15 - 50 yeazs
Machinery and Equipment 5 - 30 yeazs
Licensed Vehicles 3 - 25 yeazs
Infrastructure 10 - 60 yeazs
J. Compensated Absences
Vacation benefits are accrued as a liability as the benefits aze earned 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. The City
records a liability for accumulated unused vacation time when eazned for all employees with more than
one year of service.
Sick leave benefits are accrued as a liability using the vesting method. The liability includes
employees currently eligible to receive termination benefits and those the City has identified as
probable of receiving benefits in the future. The amount is based on accumulated sick leave and the
employees' wage rates at fiscal year end, taking into consideration any limits specified in the City's
termination policy. The City records a liability for accumulated unused sick leave for all employees
hired before December 31, 1993.
The entire compensated absence liability is reported on the government-wide financial statements.
On governmental fund financial statements, compensated absences aze recognized as liabilities and
expenditures to the extent payments come due each period upon the occurrence of employee
resignations and retirements. These amounts aze recorded in the account "compensated absences
payable" in the fund from which the employees who have accumulated leave aze paid. The noncurrent
portion of the liability is not reported. The City had no compensated absences payable in 2008.
K. Accrued Liabilities and Long-Term Obligations
All payables, accrued liabilities and long-term obligations aze reported in the government-wide
financial statements.
In general, governmental fund payables and accrued liabilities that, once incurred, aze paid in a timely
manner and in full from current financial resources are reported as obligations of the funds. However,
claims and judgments and compensated absences that will be paid from governmental funds are
reported as a liability in the governmental fund financial statements only to the extent that they aze due
for payment during the current yeaz.
29
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
L. Interfund Balances
On fund financial statements, receivables and payables resulting from goods and services provided
between funds are classified as "Due to/from other funds." These amounts are eliminated in the
govemmental column of the statement of net assets.
M. Interfund Activity
Exchange transactions between funds are reported as revenues in the seller funds and as
expenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another
without a requirement for repayment are reported as interfund transfers. Interfund transfers are
reported as other financing sources/uses in governmental funds. Repayments from funds responsible
for particular expenditures/expenses to the funds that initially paid for them are not presented on the
BFS.
N. Fund Balance Reserves and Designations
Reserved or designated fund balances indicate that portion of fund equity which is not available for
current appropriation or use. The unreserved and undesignated portions of fund equity reflected in the
govemmental funds are available for use within the specific purposes of the funds.
The City reports a reservation of fund balance for amounts representing encumbrances outstanding,
prepayments, unclaimed monies, debt service and materials and supplies inventory, in the
govemmental fund financial statements.
O. Estimates
The preparation of the BFS in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the BFS and accompanying notes. Actual results may
differ from those estimates.
P. Net Assets
Net assets represent the difference between assets and liabilities. Net assets invested in capital assets,
net of related debt consists of capital assets, net of accumulated depreciation, reduced by the
outstanding balances of any borrowing used for the acquisition, construction or improvement of those
assets. Net assets are reported as restricted when there are limitations imposed on their use either
through the enabling legislation or through external restrictions imposed by creditors, grantors or laws
or regulations of other governments. Net assets restricted for other purposes consist of unclaimed
monies and amounts restricted for the maintenance and repair of sewers. The City applies restricted
resources first when an expense is incurred for purposes for which both restricted and unrestricted net
assets are available.
Q. Prepaid Items
Prepayments made to vendors for services that will benefit future periods beyond December 31, 2008
are recorded as prepaid items using the consumption method by recording a current asset for the
prepaid amount and reflecting the expenditure/expense in the year in which it was consumed.
30
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 3 -ACCOUNTABILITY AND COMPLIANCE
A. Change in Accounting Principles
For 2008, the City has implemented GASB Statement No. 45, °Accountine and Financial Renortine
for Postemnlovment Benefits Other than Pensions", GASB Statement No. 49, °Accountine and
Financial Renortine for Pollution Remediation Oblieations" and GASB Statement No. 50, "Pension
Disclosures".
GASB Statement No. 45 establishes uniform standards of financial reporting for other postemployment
benefits and increases the usefulness and improves the faithfulness of representations in the financial
reports. The implementation of GASB Statement No. 45 did not have an effect on the financial
statements of the City; however, certain disclosures related to postemployment benefits (see Note 15)
have been modified to conform to the new reporting requirements.
GASB Statement No. 49 addresses accounting and financial reporting standards for pollution
remediation obligations, which are obligations to address the current or potential detrimental effects of
existing pollution by participating in pollution remediation activities such as site assessments and
cleanups. The implementation of GASB Statement No. 49 did not have an effect on the financial
statements of the City.
GASB Statement No. 50 establishes standards that more closely align the financial reporting
requirements for pensions with those of other postemployment benefits. The implementation of GASB
Statement No. 50 did not have an effect on the financial statements of the City.
B. Restatement of Net Assets
The City's net assets have been restated to correct for an understatement of certain accumulated
depreciation amounts previously reported at December 31, 2007. The prior period adjustment had the
following effect on net assets as previously reported by the governmental activities:
Governmental
Activities
Net assets, December 31, 2007 $ 75,567,981
Adjustment to accumulated depreciation
on capital assets (3,362,713)
Restated net assets, December 31, 2007 $ 72,205,268
See Note 10 for the effect of the change on capital assets balances as previously reported by the City at
December 31,2007.
31
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 4 -EQUITY IN POOLED CASH AND CASH EQUIVALENTS
State statutes classify monies held by the City into three categories:
Active deposits are 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 (NOW) accounts, or in money market deposit accounts.
Inactive deposits are public deposits that Council has identified as not required for use within the current
five year period of designation of depositories. Inactive deposits must 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 which will be needed before the end of the current period of designation of depositories.
Interim deposits must be evidenced by time certificates of deposit maturing not more than one year from
the date of depositor by savings or deposit accounts including, but not limited to, passbook accounts.
Interim monies may be deposited or invested in the following:
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, debentures, 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 Farm Credit 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;
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 market daily, and that the term of the agreement must not exceed
thirty days;
4. Bonds and other obligations of the State of Ohio;
5. No-load money market mutual funds consisting exclusively of obligations described in items (1) or (2)
above and repurchase agreements secured by such obligations, provided that investments in securities
described in this division are made only through eligible institutions;
6. The State Treasury Asset Reserve of Ohio investment pool (STAR Ohio);
7. High grade commercial paper for a period not to exceed 180 days in an amount not to excced twenty-
fivepercent of the City's interim monies available for investment; and
8. Bankers acceptances for a period not to exceed 180 days and in an amount not to exceed twenty-five
percent of the City's interim monies available for investment.
The City may also invest any monies not required to be used for a period of six months or more in the
following:
32
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 4 -EQUITY IN POOLED CASH AND CASH EQUIVALENTS - (Continued)
1. Bonds of the State of Ohio;
2. Bonds of any municipal corporation, village, county, township, or other political subdivision of this
State, as to which there is no default of principal, interest or coupons;
3. Obligations of the City.
Protection of the City's deposits is provided by the Federal Deposit Insurance Corporation (FDIC), by
eligible securities pledged by the financial institution as security for repayment, by surety company bonds
deposited with the finance director by the financial institution or by a single collateral pool established by
the financial institution to secure the repayment of all public moneys deposited with the institution.
Investments in stripped principal or interest obligations, reverse repurchase agreements and derivatives are
prohibited. The issuance of taxable notes for the purpose of arbitrage, the use of leverage and short selling
are also prohibited. An investment must mature within five years from the date of purchase unless matched
to a specific obligation or debt of the City, and must be purchased with the expectation that it will be held
to maturity. 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 finance
director or qualified trustee or, if the securities are not represented by a certificate, upon receipt of
confirmation of transfer from the custodian.
A. Cash on Hand
At year-end, the City had $1,550 in un-deposited cash on hand which is included on the financial
statements of the City as part of "Equity in Pooled Cash and Cash Equivalents".
B. Cash in Segregated Accounts
At December 31, 2008, the City had $ 47,071 in bank accounts outside of the City Treasury related to
Mayor's Court operations and income tax refunds. These amounts are included on the financial
statements as "Cash and Cash Equivalents in Segregated Accounts" and are included in deposits with
financial institutions below.
C. Deposits with Financial Institutions
At December 31, 2008, the carrying amount of the City's deposits was $8,747,216 exclusive of the
$1,616,020 repurchase agreement included in investments below. As of December 31, 2008,
$8,077,327 of the City's bank balance of $8,904,555 was exposed to custodial risk as discussed
below, while $827,228 was covered by Federal Deposit Insurance Corporation.
Custodial credit risk is the risk that, in the event of bank failure, the City will not be able to recover
deposits or collateral securities that are in the possession of an outside party. As permitted by Ohio
Revised Code, the City's deposits are collateralized by a pool of eligible securities deposited with
Federal Reserve Banks, or at member banks of the Federal Reserve System, in the name of the
depository bank and pledged as a pool of collateral against all public deposits held by the depository.
The City has no deposit policy for custodial credit risk beyond the requirements of the State statute.
Although the securities were held by the pledging institutions' trust department and all statutory
requirements for the deposit of money had been followed, noncompliance with federal requirements
could potentially subject the City to a successful claim by the FDIC.
33
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 4 -EQUITY IN POOLED CASH AND CASH EQUIVALENTS - (Continued)
D. Investments
As of December 31, 2008, the City had the following investments and maturities:
Investment
Maturity
Balance at 6 months or
Investment tune Fair Value less
Repurchase Agreement $ 1,616,020 $ 1,616,020
STAR Ohio 2,572,977 2,572,977
$ 4,188,997 $ 4,188,997
Inzeresz Raze Risk: The Ohio Revised Code generally limits security purchases to those that mature
within five years of the settlement date. Interest rate risk arises because potential purchasers of debt
securities will not agree to pay face value for those securities if interest rates subsequently increase.
The City's investment policy addresses interest rate risk by requiring the consideration of market
conditions and cash flow requirements in determining the term of the investment.
Custodial Crediz Risk: For an investment, custodial risk is the risk that, in the event of the failure of
the counterparty, the City will not be able to recover the value of its investment or collateral securities
that are in the possession of an outside party. The City has no investment policy dealing with
investment custodial risk beyond the requirement in Ohio law that prohibits payments for payments for
investments prior to the delivery of the securities representing such investments to the finance director
or qualified trustee. The City's investment in repurchase agreements is collateralized by underlying
securities pledged by the investment's counterparty, not in the name of the City. Ohio law requires
that market value of the securities subject to a repurchase agreement must exceed the principal value of
the securities subject to a repurchase agreement by 2 percent
Crediz Risk: STAR Ohio carries a rating of AAA by Standard & Poor's. Ohio law requires that
STAR Ohio maintain the highest rating provided by at least one nationally recognized standard service
rating. The federal agency securities that underlie the City's repurchase agreement were rated AAA
and Aaa by Standard & Poor's and Moody's Investor Services, respectively.
Concentration of Crediz Risk: The City's investment policy addresses concentration of credit risk by
requiring investments to be diversified to reduce the risk of loss resulting from over concentration of
assets in a specific issue or specific class of securities. The following table includes the percentage of
each investment type held by the City at December 31, 2008:
Investment type Fair Value % of Total
Repurchase Agreement $ 1,616,020 38.58
STAR Ohio 2,572,977 61.42
$ 4,188,997 100.00
34
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 4 -EQUITY IN POOLED CASH AND CASH EQUIVALENTS - (Continued)
E. Reconciliation of Cash and Investment to the Statement of Net Assets
The following is a reconciliation of cash and investments as reported in the footnote above to cash
ands investments as reported on the statement of net assets as of December 31,2008:
Cash andIrirasCinents var Taa?n€rte
f.'am~iizg amaant a£ daI?asits $ u;'~1'.2ICi
I:z4'a3tn7evtt ~£. ].45.x?
C'.asi 4>n l~ai~d I.~4f7
Cacti and inc~e st~nants Baer Statement of Net .'islets
Cxnern~nGn°.alactitiites ~ 12.?~53,5~~
AY~e~c)~' hinds ~ -I3.9t//7'4
NOTE 5 - INTERFiJND TRANSACTIONS
A. Interfund transfers for the year ended December 31, 2008 consisted of the following, as reported in the
fund financial statements:
Transfers from
Transfers to General
Nonmaj or
Govemmental funds 301,340
$ 301,340
Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to
the fund that statute or budget requires to expend them, (2) move receipts restricted to debt service
from the funds collecting the receipts to the debt service fund as debt service payments become due,
and (3) use unrestricted revenues collected in the general fund to finance varioas programs accounted
for in other funds in accordance with budgetary authorizations. Transfers between governmental funds
made in compliance with ORC Sections 5705.14-16, are eliminated for reporting on the govemment-
wide statement of activities.
B. Due from/to other funds consisted of the following at December 31, 2008, as reported in the
govemmental fund financial statements:
Receivable Fund
Nonmajor govemmental funds
Payable Fund Amount
General fund $ 6,048
Amounts due from/to other funds represent Mayor's Court costs and fines collected by the court and
due to the Children/Adolescent and the DUI Enforcement and Education funds.
35
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 5 - INTERFiJND TRANSACTIONS - (continued)
Amounts due from/to other funds between governmental funds are eliminated on the government-wide
financial statements.
NOTE 6 -PROPERTY TAXES
Property taxes include amounts levied against all real, public utility and tangible personal property
located in the City. Taxes collected from real property taxes (other than public utility) in one calendar
year are levied in the preceding calendar year on the assessed value as of January 1 of that preceding
year, the lien date. Assessed values are established by the County Auditor at 35 percent of appraised
market value. All property is required to be revaluated every six years. Real property taxes are
payable annually or semi-annually. If paid annually, payment is due December 31; if paid semi-
annually, the first payment is due December 31, with the remainder payable by June 20. Under certain
circumstances, State statute permits later payment dates to be established.
Public utility real and tangible personal property taxes collected in one calendar year are levied in the
preceding calendar year on assessed values determined as of December 31 of the second year
preceding the tax collection year, the lien date. Public utility tangible personal property is assessed at
varying percentages of true value; public utility real property is assessed at 35 percent of true value.
2008 public utility property taxes became a lien December 31, 2007, are levied after October 1, 2008,
and are collected in 2009 with real property taxes. Public utility property taxes are payable on the
same dates as real property taxes described previously.
Tangible personal property tax revenues received in 2008 (other than public utility property) represent
the collection of 2008 taxes. Tangible personal property taxes received in 2008 were levied after
October 1, 2007, on the true value as of December 31, 2007. Tangible personal property tax is being
phased out -the assessment percentage for property, including inventory, is 6.25% for 2008. This
percentage will be reduced to zero for 2009. Amounts paid by multi-county taxpayers are due
September 20. Single county taxpayers may pay annually or semiannually. If paid annually, the first
payment is due April 30; if paid semiannually, the first payment is due April 30, with the remainder
payable by September 20.
House Bill No. 66 was signed into law on June 30, 2005. House Bill No. 66 phases out the tax on
tangible personal property of general businesses, telephone and telecommunications companies, and
railroads. The tax on general basiness and railroad property will be eliminated by calendar year 2009,
and the tax on telephone and telecommunications property will be eliminated by calendar year 2011. The
tax is phased out by reducing the assessment rate on the property each year. The bill replaces the revenue
lost by the City due to the phasing out of the tax. In calendar years 2008-2010, the City will be fiilty
reimbursed for the lost revenue. In calendar years 2011-2017, the reimbursements will be phased out.
The County Fiscal Officer collects property taxes on behalf of all taxing districts in the County,
including the City of Fairlawn. The County Fiscal Officer periodically remits to the City its portion of
the taxes collected. Property taxes receivable represents real and tangible personal property taxes,
public utility taxes and outstanding delinquencies which are measurable as of December 31, 2008 and
for which there is an enforceable legal claim. In the governmental funds, the current portion receivable
has been offset by unearned revenue since the current taxes were not levied to finance 2008 operations
and the collection of delinquent taxes has been offset by deferred revenue since the collection of the
taxes during the available period is not subject to reasonable estimation. On a full accrual basis,
collectible delinquent property taxes have been recorded as a receivable and revenue.
36
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 6 -PROPERTY TAXES - (Continued)
The full tax rate for all City operations for the year ended December 31, 2008 was $2.70 per $1,000 of
assessed value. The assessed values of real and tangible personal property upon which 2008 property
tax receipts were based are as follows:
Cateeorv Assessed Value
Residential $ 176,408,070
Commercial 168,920,320
Total real estate 345,328,390
Public utility property 2,448,140
Remaining TPP telephone value 432,603
Grand total $ 348,209,133
NOTE 7 -LOCAL INCOME TAX
The City levies a municipal income tax of 2 percent on gross salaries, wages, and other personal service
compensation earned by residents of the City and on the earnings of nonresidents working within the City.
This tax also applies to the net income of business operations within the City. Residents of the City are
granted a credit of up to 2 percent for taxes paid to other municipalities.
Employers within the City are required to withhold income tax on employee compensation and remit the
tax to the City either monthly or quarterly, as required. Corporations and other individual taxpayers are
required to pay their estimated tax quarterly and file a declaration annually. By City ordinance, income tax
proceeds are credited as follows: the general fund receives 90 percent and the capital improvement fund
receives 10 percent of the first 1.5 percent of the 2 percent income tax. The capital improvement fund
receives the remaining .5 percent of the income tax.
NOTE S -ESTIMATED INCOME TAX REFUNDS PAYABLE
In 2005, the City erroneously received estimated income tax payments for public utility companies partially
located in the City. The allocation of income taxable to the City was incorrectly calculated. The City will
issue refunds to the public utility companies for the overpayment upon receiving verification from the State
of Ohio Department of Taxation that proper corrected tax returns have been filed. The estimated
overpayment is $1,112,868. A liability has been recorded in the general fund for the estimated refund due.
This liability is a component of "accounts payable" reported on the financial statements.
NOTE 9 -RECEIVABLES
Receivables at December 31, 2008, consisted of taxes, accounts (billings for user charged services),
accrued interest, special assessments, and intergovernmental receivables arising from grants, entitlements,
and shared revenue. All intergovernmental receivables have been classified as "Due from Other
Governments" on the financial statements. Receivables have been recorded to the extent that they are
measurable at December 31, 2008.
37
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 9-RECEIVABLES-(Continued)
A summary of the principal items of receivables reported on the statement of net assets follows:
Governmental Acfivilies:
Income taxes $ 1,805,295
Real and other taxes 988,624
Accounts 38,227
Accmed interest 125,227
Special assessments 1,444,366
Due from other governments 1,167,760
Total $ 5,564,499
Receivables have been disaggregated on the face of the BFS. The only receivable not expected to be
collected within the subsequent year are the special assessments which are collected over the life of the
assessment Delinquent special assessments due to the City were $14,323 as of December 31, 2008.
NOTE 10 -CAPITAL ASSETS
A. Capital assets of the governmental activities have been restated to properly report accumulated
depreciation at December 31, 2007. The adjustment to accumulated depreciation had the following
effect on the governmental activities capital asset balances as previously reported:
38
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
Governmental Activities:
Capital assets, not heing depreeiazed:
Land
Construction in progress
Total capital assets, not being depreciated
Capital assets, heing depreeiazed:
Buildings and improvements
Land improvements
Machinery and equipment
Licensed vehicles
Infrastructure
Total capital assets, being depreciated
Less: accumulated depreciation
Buildings and improvements
Land improvements
Machinery and equipment
Licensed vehicles
Infrastructure
Total accumulated depreciation
Total capital assets, being depreciated
Govemmental activities capital assets, net
Restated
Balance Balance
12/31/07 Adjustment 12/31/07
$ 3,224,888 $ - $ 3,224,888
2,007,258 - 2,007,258
5,232,146 - 5,232,146
14,109,223 - 14,109,223
1,245,525 - 1,245,525
3,112,517 - 3,112,517
2,761,979 - 2,761,979
72,629,645 - 72,629,645
93,858,889 - 93,858,889
(2,625,845) 90,057 (2,535,788)
(645,498) 20,334 (625,164)
(1,322,889) 1,315 (1,321,574)
(1,351,363) 14,095 (1,337,268)
(23,226,363) (3,488,514) (26,714,877)
(29,171,958) (3,362,713) (32,534,671)
64,686,931 (3,362,713) 61,324,218
$ 69,919,077 $ (3,362,713) $ 66,556,364
39
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 10 -CAPITAL ASSETS - (continued)
B. Capital asset activity for the year ended December 31, 2008 was as follows:
Governmental Activities:
Restated
Balance
12!31/07 Additions
Balance
Disposals 12J31/08
Caprfad assets, not being depreciated.-
Land
Construction in progress
Total capital assets, not being
depreciated
Cap¢al assets, being depreciated.-
Buildingsand Improvements
Land Improvements
Machinery aad Equipment
Licensed Vehicles
Infrash~ture
Total capital assets, being
depreciated
Less: accumulated depreciation:
Buildings and Improvements
Land Improvements
Machinery and Equipment
Licensed Vehicles
Infrastructure
Total accumulated depreciation
Total capital assets, being
depreciated, net
Governmental activities capital
assets, net
$ 3,224,888 $ - $ - $ 3,224,888
2,007,258 177,494 (2,007,258) 177,499
5,232,146 177,499 (2,007,258} 3,402,387
14,109,223 - - 14,109,223
1,245,525 80,505 - 1,326,030
3,112,517 251,694 (43,769) 3,32Q442
2,761,979 300,699 (149,560) 2,913,118
72,629,645 3,093,265 (689,101) 75,033,804
93,858,889 3,726,163 (882,430) 96,702,622
(2,535,788) (273,372) - (2,809,160)
(b25,164) (35,701) - (660,865)
(1,321,574) (199,591) 27,500 (1,493,665)
(1,337,268) (195,922) 134,827 (1,398,363)
(26,714,877) (1,394,198) 278,821 (27,83Q254)
(32,534,671} (2,098,784} 441,148 (34,192,307)
61,324,218 1,627,379 (441,282) b2,51Q315
$66,SSb,364 $ 1,804,878 $ (2,448,540) $65,912,702
40
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 10 -CAPITAL ASSETS - (Continued)
Depreciation expense was charged to functions/programs of the City as follows:
Governmental aciivifies:
Genemlgnvemment $ 39,155
Basic Utilities 560,369
Security of persons and property 342,389
Transportation 1,103,675
Community environment 3,018
Leis~ue time activity 50,178
Total depreciation expense -governmental activities $ 2,098,784
NOTE 11 -LONGTERM OBLIGATIONS
A. During the fiscal year 2008, the following changes occurred in govemmental activities long-term
obligations:
Interest Balance Due in
Governmental Activities: Rate 12131!07 Addifions Reductions 12131108 One Year
General obligation bonds 2.80-S.7S% $ 7,96Q,000 $ - $(S7S,000) $ 7,385,000 $ 600,000
Special assessment bond 4.80-7.00% 67Q,000 - (1SQ,000) 520,000 16Q,000
OPWC loans 6.00% 512,286 - (6Q,86d) 451,422 64,570
Compensated absences 1,115,914 127,637 (1,672) 1,241,879 427,976
Total $1Q,2S8,200 $127,637 $ 787,536 $ 9,598,301 $1,2S2,S46
The general obligation bonds will be paid from income taxes receipted into the capital improvement
fund. The special assessment bond and OPWC loans will be paid from the proceeds of special
assessments levied against the benefited property owners. In the event that a property owner fails to
pay the assessment, payment will be made by the City. Compensated absences reported in the °long-
term liabilities" account will be paid from the fund from which the employees' salaries are paid; the
General Fund, Children/Adolescent Fund and the Parks and Recreation Fund.
41
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 11 -LONGTERM OBLIGATIONS - (Continued)
B. Principal and interest requirements to retire long-term obligations outstanding at December 31, 2008
are follows:
General Obligation Booms Spe cial Assessment Bond
Year Principal Interest Total Principal Interest Total
2004 $ 600,000 $ 328,220 $ 928,220 $ 160,000 $ 36,400 $ 196,400
2010 625,000 302,530 927,530 175,000 25,200 200,200
2011 655,000 275,030 930,030 185,000 12,950 197,450
2012 68Q000 245,845 925,845 - - -
2013 71Q000 214,943 424,443 - - -
2014 - 2018 2,760,000 685,080 3,445,080 - - -
2019-2022 1,355,000 160,105 1,515,105 - - -
Total $ 7,385,000 $2,211,753 $ 9,59b,753 $ 52Q000 $ 74,550 $ 594,550
OPWC Loans
Year Principal Interest Total
2009 $ 64,570 $ 26,130 $ 90,700
2010 68,503 22,199 90,702
2011 72,675 18,027 90,702
2012 77,101 13,601 90,702
2013 81,796 8,906 90,702
2014 86,778 3,924 90,702
Total $ 451,423 $ 92,787 $ 544,210
NOTE 12 -OTHER EMPLOYEE BENEFITS
A. Compensated Absence
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 typically limited to one year. Employees may carry over
vacation earned for three years prior to their retirement date. 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. Upon retirement, employees
hired before 1993 are eligible to receive payment for accumulated unused sick days. The exact terms
vary in accordance with the negotiated collective bargaining agreement in effect. In most cases, the
sick leave termination payment is limited to 90 days. Employees with a hire date subsequent to 1993
are generally not eligible to receive termination payments for sick leave. As of December 31, 2008 the
total liability for unpaid compensated absences was $1,241,879.
42
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 12 -OTHER EMPLOYEE BENEFITS - (Continued)
B. Health Care Benefits
The City provides life insurance and accidental death and dismemberment insurance to most
employees. The City has elected to provide employees' medicaUsurgical benefits through Medical
Mutual of Ohio. The employees share the cost of the monthly premium. Dental insurance is provided
by the City through Sun Life and Health Insurance Company.
NOTE 13 -RISK MANAGEMENT
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 2008, the City contracted with
Wichert Insurance Service, Inc. for property and general liability insurance, including boiler and
machinery. Police and professional liability policies are provided by Scottsdale Indemnity Company with a
$1,000,000 limit and a $10,000 deductible. A commercial umbrella policy through Westfield Insurance
Company provides additional general liability and auto liability insurance up to an $11,000,000 limit.
Vehicles are covered by Westfield Insurance Company and hold a $1,000 deductible for collision.
Automobile liability coverage has no limit for collision, a $500,000 limit for uninsured/underinsured
motorist and a $1,000,000 limit for bodily injury. Settled claims have not exceeded this commercial
coverage in any of the past three years.
There has not been a significant reduction in coverage from the prior year.
Volunteer Fireman's Insurance Services covers Firemen and EMT professional liability with a limit of
$1,000,000 and no deductible.
The City participates in the Ohio Municipal League (OML) public entity insurance purchasing pool for
workers' compensation. The Group Rating Plan is administered by Gates McDonald Company. The OML
Group Rating Plan is intended to achieve lower workers' compensation premium rates for the participants,
and result in the establishment of a safer working environment. There are no additional contributions
required by a participant other than their annual fee. The City pays the State Workers' Compensation
system a premium based on a rate per $100 of salaries. This rate is calculated based on accident history
and administrative costs.
NOTE 14 -PENSION PLANS
A. Ohio Public Employees Retirement System
Plan Description -The City participates in the Ohio Public Employees Retirement System (OPERS).
OPERS administers three separate pension plans. The Traditional Pension Plan is acost-sharing,
multiplesemployer defined benefit pension plan. The Member-Directed Plan is a defined contribution
plan in which the member invests both member and employer contributions (employer contributions
vest over five years at 20 percent per year). Under the Member-Directed Plan, members accumulate
retirement assets equal to the value of the member and vested employer contributions plus any
investment earnings. The Combined Plan is acost-sharing, multiplesemployer defined benefit pension
plan that has elements of both a defined benefit and a defined contribution plan. Under the Combined
Plan, employer contributions are invested by the retirement system to provide a formula retirement
benefit similar to the Traditional Pension Plan benefit. Member contributions, whose investment is
self-directed by the member, accumulate retirement assets in a manner similar to the Member Directed
Plan.
43
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 14 -PENSION PLANS - (Continued )
OPERS provides retirement, disability, survivor and death benefits and annual cost of living
adjustments to members of the Traditional Pension and the Combined Plans. Members of the
Member-Directed Plan do not qualify for ancillary benefits. Authority to establish and amend benefits
is provided by Chapter 145 of the Ohio Revised Code. OPERS issues astand-alone financial report
that may be obtained by writing to OPERS, Attention: Finance Director, 277 E. Town St., Columbus,
OH 43215-4642 or by calling (614) 222-5601 or (800) 222-7377.
Funding Policy -The Ohio Revised Code provides statutory authority for member and employer
contributions. For 2008, member and contribution rates were consistent across all three plans. While
members in the State and local divisions may participate in all three plans, law enforcement and public
safety divisions exist only within the Traditional Plan. The 2008 member contribution rates were
10.00 percent for members in the State and local classifications.
The City's contribution rate for 2008 was 14.00 percent. For 2008, a portion equal to 7 percent of
covered payroll was allocated to fund the post-employment health care plan.
The City's contribution rate for pension benefits for 2008 was 7 percent. The City's required
contributions for pension obligations to the Traditional Pension and Combined Plans for the years
ended December 31, 2008, 2007, and 2006 were $197,378, $221,691, and $243,867, respectively;
9138 percent has been contributed for 2008 and 100 percent for 2007 and 2006.
B. Ohio Police and Fire Pension Fund
Plan Description -The City contributes to the Ohio Police and Fire Pension Fund (OP&F), a cost-
sharing multiple-employer defined benefit pension plan. OP&F provides retirement and disability
benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries.
Benefit provisions are established by the Ohio State Legislature and are codified in Chapter 742 of the
Ohio Revised Code. OP&F issues a publicly available financial report that includes financial
statements and required supplementary information for the plan. That report may be obtained by
writing to the Ohio Police and Fire Pension Fund, 140 East Town Street, Columbus, Ohio 43215-5164.
Funding Policy -Plan members are required to contribute 10 percent of their annual covered salary
while the City is required to contribute 19.50 and 24.00 percent for police officers and firefighters,
respectively. Contribution rates are established by State statute. For 2008, the portion of the City's
contributions to fund pension obligations was 12.75 percent for police officers and 17.25 percent for
firefighters. The City's required contributions for pension obligations to OP&F for police officers and
firefighters were $195,027 and $168,470 for the year ended December 31, 2008, $176,094 and
$153,083 for the year ended December 31, 2007, and $166,037 and $147,911 for the year ended
December 31, 2006. 70.63 percent has been contributed for police and firefighters for 2008.
C. Social Security System
Effective August 3, 1992, all volunteer firefighters, not otherwise covered by another retirement
system, are covered by social security. The City's liability is 6.20 percent of wages paid.
44
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 15 -POST RETIREMENT BENEFIT PLANS
A. Ohio Public Employees Retirement System
Plan Description - OPERS maintains a cost-sharing multiple employer defined benefit post-
employment health care plan, which includes a medical plan, prescription drug program and Medicare
Part B premium reimbursement, to qualifying members of both the Traditional Pension and the
Combined Plans. Members of the Member-Directed Plan do not qualify for ancillary benefits,
including post-employment health care coverage.
To qualify for post-employment health care coverage, age-and-service retirees under the Traditional
Pension and Combined Plans must have ten years or more of qualifying Ohio service credit. The Ohio
Revised Code permits, but does not mandate, OPERS to provide OPEB benefits to its eligible
members and beneficiaries. Authority to establish and amend benefits is provided in Chapter 145 of
the Ohio Revised Code.
Disclosures for the health care plan are presented separately in the OPERS financial report which may
be obtained by writing to OPERS, Attention: Finance Director, 277 E. Town St., Columbus, OH
43215-4642 or by calling (614) 222-5601 or (800) 222-7377.
Funding Policy -The post-employment health care plan was established under, and is administered in
accordance with, Internal Revenue Code Section 401(h). State statute requires that public employers
fund post-employment health care through contributions to OPERS. A portion of each employer's
contributions to the Traditional or Combined Plans is set aside for the funding of post-employment
health care.
Employer contribution rates are expressed as a percentage of the covered payroll of active employees.
In 2008, local government employers contributed 14 percent of covered payroll (17.40 percent for
public safety and law enforcement). Each year the OPERS Retirement Board determines the portion of
the employer contribution rate that will be set aside for the funding of the post-employment health care
benefits. The amount of the employer contributions which was allocated to fund post-employment
health care for 2008 was 7 percent of covered payroll.
The OPERS Retirement Board is also authorized to establish rules for the payment of a portion of the
health care benefits provided by the retiree or their surviving beneficiaries. Payment amounts vary
depending on the number of covered dependents and the coverage selected. Active members do not
make contributions to the post-employment health care plan.
The City's contributions allocated to fund post-employment health care benefits for the years ended
December 31, 2008, 2007, and 2006 were $197,378, $147,845, and $119,283, respectively; 9138
percent has been contributed for 2008 and 100 percent has been contributed for 2007 and 2006.
The Health Care Preservation Plan (HCPP) adopted by the OPERS Retirement Board on September 9,
2004, was effective January 1, 2007. Member and employer contribution rates increased as of January
1, 2006, January 1, 2007 and January 1, 2008, which will allow additional funds to be allocated to the
health care plan.
45
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 15 -POST RETIREMENT BENEFIT PLANS - (continued)
B. Ohio Police & Fire Pension Fund
Plan Description -The City contributes to the OP&F Pension Fund sponsored health care program, a
cost-sharing multiplesemployer defined post-employment health care plan administered by OP&F.
OP&F provides healthcare benefits including coverage for medical, prescription drugs, dental, vision,
Medicare Part B Premium and long term care to retirees, qualifying benefit recipients and their eligible
dependents.
OP&F provides access to post-employment health care coverage to any person who receives or is
eligible to receive a monthly service, disability or survivor benefit check or is a spouse or eligible
dependent child of such person.
The Ohio Revised Code allows, but does not mandate OP&F to provide OPEB benefits. Authority for
the OP&F Board of Trustees to provide health care coverage to eligible participants and to establish
and amend benefits is codified in Chapter 742 of the Ohio Revised Code.
OP&F issues a publicly available financial report that includes financial statements and required
supplementary information for the plan. That report may be obtained by writing to the OP&F, 140
East Town Street, Columbus, Ohio 43215-5164.
Funding Policy -The OP&F's post-employment health care plan was established and is administered
as an Internal Revenue Code Section 401(h) account within the defined benefit pension plan, under the
authority granted by the Ohio Revised Code to the OP&F Board of Trustees. The Ohio Revised Code
sets the contribution rates for participating employers and for plan members to the OP&F.
Participating employers are required to contribute to the pension plan at rates expressed as a
percentage of the payroll of active pension plan members, currently, 19.50% and 24.00% of covered
payroll for police and fire employers, respectively.
The Board of Trustees is authorized to allocate a portion of the total employer contributions made into
the pension plan into the Section 115 trust and the Section 401(h) account as the employer contribution
for retiree health care benefits. For the year ended December 31, 2008, the employer contribution
allocated to the health care plan was 6.75% of covered payroll. The amount of employer contributions
allocated to the health care plan each year is subject to the Trustees' primary responsibility to ensure
that the pension benefits are adequately funded and is limited by the provisions of Sections 115 and
401(h).
The OP&F Board of Trustees also is authorized to establish requirements for contributions to the
health care plan by retirees and their eligible dependents, or their surviving beneficiaries. Payment
amounts vary depending on the number of covered dependents and the coverage selected. Active
members do not make contributions to the OPEB Plan.
The City's contributions to OP&F which were allocated to fund post-employment health care benefits
for police officers and firefighters were $103,249 and $65,923 for the year ended December 31, 2008,
$93,226 and $59,902 for the year ended December 31, 2007, and $109,514 and $70,542, for the year
ended December 31, 2006. The full amount has been contributed for 2007 and 2006. 70.63 percent
has been contributed for police and firefighters for 2008.
46
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 16 -BUDGETARY BASIS OF ACCOUNTING
While the City is reporting financial position, results of operations and changes in fund balance on the basis
of generally accepted accounting principles (GAAP), the budgetazy basis as provided by law is based upon
accounting for certain transactions on a basis of cash receipts, disbursements and encumbrances. The
Statement of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual (Non-GAAP
Budgetary Basis) presented for the general fund is presented on the budgetary basis to provide a
meaningful comparison of actual results with the budget. The major differences between the budget basis
and GAAP basis aze as follows:
1. Revenues are recorded when received in cash (budget) as opposed to when susceptible to accrual
(GAAP).
2. Expenditures/expenses aze recorded when paid in cash (budget) as opposed to when the liability is
incurred (GAAP).
3. Encumbrances aze treated as expenditures (budget) rather than as a reservation of fund balance
(GAAP).
4. Unreported cash represents amounts received but not included as revenue on the budget basis operating
statements. These amounts are included as revenue on the GAAP basis operating statement.
The following table summarizes the adjustments necessary to reconcile the GAAP basis statements (as
reported in the fund financial statements) to the budgetazy basis statements for all governmental funds for
which a budgetary basis statement is presented.
Net Change in Fund Balance
General
Budget basis $ (570,999)
Net adjustment for revenue accruals (419,655)
Net adjustment for expenditure accruals 13,588
Adjustment for encumbrances 701,972
GAAP basis $ (275,094)
NOTE 17 -CONTINGENCIES
A. Grants
The City receives significant financial assistance from numerous federal and state agencies in the form
of grants. The disbursement of funds received under these programs generally requires compliance
with the terms and conditions specified in the grant agreements and is subject to audit by the grantor
agencies. Any disallowed claims resulting from such audits could become a liability of the general
fund or other applicable funds. However, in the opinion of management, any such disallowed claims
will not have a material effect on any of the financial statements of the individual fund types included
herein or on the overall financial position of the City at December 31, 2008.
47
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,2008
NOTE 17-CONTINGENCIES-(Continued)
B. Litigation
The City is party to legal proceedings. The City management is of the opinion that the ultimate
disposition of these legal claims and legal proceedings will not have a material effect, if any, on the
financial condition of the City.
NOTE 18 -CONTRACTUAL COMMITMENTS
As of December 31, 2008, the City had various contractual commitments; for road maintenance and
improvements of $212,358; sewer cleaning and improvements of $35,000; traffic signals $78,104;
consulting services of $54,234; purchases of various capital equipment of $206,932; and park equipment
and improvements of $157,690.
48
~.
.~ ~~ ,m ud~t~~r c~~' tat
INDEPENDENT ACCOUNTANTS' REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
REQUIRED BY GOVERNMENT AUDITING STANDARDS
City of Fairlawn
Summit County
3487 South Smith Road
Fairlawn, Ohio 44333-3007
To the Honorable Mayor and Members of City Council:
We have audited the financial statements of the governmental activities, each major fund, and the
aggregate remaining fund information of City of Fairlawn, Summit County, Ohio, (the City) as of and for
the year ended December 31, 2008, which collectively comprise the City's basic f nancial statements and
have issued our report thereon dated August 3, 2009. We conducted our audit in accordance with
auditing standards generally accepted in the United States of America and the standards applicable to
financial audits contained in the Comptroller General of the United States' Government Auditing
Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the City's internal control over financial reporting as
a basis for designing our audit procedures for expressing our opinions on the financial statements, but not
to opine on the effectiveness of the City's internal control over financial reporting. Accordingly, we have
not opined on the effectiveness of the City's internal control over financial reporting.
A control defciency exists when the design or operation of a control does not allow management or
employees, in performing their assigned functions, to prevent or detect misstatements on a timely basis.
A significant deficiency is a control defciency, or combination of control deficiencies, that adversely
affects the City's ability to initiate, authorize, record, process, or report financial data reliably in
accordance with its applicable accounting basis, such that there is more than a remote likelihood that the
City's internal control will not prevent or detect a more-than-inconsequential fnancial statement
misstatement.
A material weakness is a signifcant deficiency, or combination of significant deficiencies resulting in more
than a remote likelihood that the City's internal control will not prevent or detect a material fnancial
statement misstatement.
Our consideration of internal control over f nancial reporting was for the limited purpose described in the
first paragraph of this section and would not necessarily identify all internal control deficiencies that might
be significant deficiencies or material weaknesses. We did not identify any defciencies in internal control
over f nancial reporting that we consider material weaknesses, as defined above.
101 Central Plaza South / 700 Chase Tower /Canton, OH 44702-1509
Telephone: (330) 438-0617 (800) 443-9272 Pax: (330) 471-0001
www.auditorstate.oh.us
49
City of Fairlawn
Summit County
Independent Accountants' Report on Internal Control Over
Financial Reporting and on Compliance and Other Matters
Required By Government Auditing Standards
Page 2
Compliance and Other Matters
As part of reasonably assuring whether the City's financial statements are free of material misstatement,
we tested its compliance with certain provisions of laws, regulations, contracts, and grant agreements,
noncompliance with which could directly and materially affect the determination of financial statement
amounts. However, providing an opinion on compliance with those provisions was not an objective of our
audit and accordingly, we do not express an opinion. The results of our tests disclosed no instances of
noncompliance or other matters we must report under GovernmentAuditing Standards.
We intend this report solely for the information and use of management and City Council. We intend it for
no one other than these specified parties.
Mary Taylor, CPA
Auditor of State
August 3, 2009
50
r,
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 Columbus, Ohio.
CLERK OF THE BUREAU
CERTIFIED
SEPTEMBER 10, 2009
88 E. Broad St. /Fourth Floor /Columbus, OH 43215-3506
Telephone: (614)466-4514 (800) 282-0370 Fax: (614)466-4490
www.auditorstate.oh.us