2001 Financial StatementREGULAR AUDIT
-FOR THE YEARENDED DECEMBER 31, 3041
~~~I~~p~ f JIM PETRO
AUDITOR OF STATE
STATE OF OHIO
CITY OF FAIRLAWN
SUMMIT COUNTY
TABLE OF CONTENTS
TITLE
PAGE
Report of Independent Accountants .............................................................................................................. 1
Combined Balance Sheet
All Fund Types and Account Groups ......................................................................................................... 4
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
All Governrnental Fund Types ................................................................................................................... 8
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget (Non-GAAP) and Actual
All Governrnental Fund Types .................................................................................................................. 10
Notes to the General Purpose Financial Statements .....
.... 15
Report of Independent Accountants on Compliance and on
Internal Control Required by GavernmentAuditing Standards ................................................................ 37
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. ,ll\~IIIJf_
STATE (JF OHIO
OFFICE OF THE AUDITGIR
][h4 PETRO, AUDITOR OF STATE
111 Second Street N W
Fourth Floor
Canton, Ohio 44702
Telephone 330-435-0617
500-443-9272
Facsimile 330-471-0001
www.auditorstate.oh.us
REPORT OF INDEPENDENT ACCOUNTANTS
City of Fairlawn
Summit County
3487 South Smith Road
Fairlawn, Ohio 44333
To the Members of City Council:
We have audited the accompanying general purpose financial statements of the City of Fairlawn, Summit
County, (the City) as of and for the year ended December 31, 2001, as listed in the table of contents.
These general purpose financial statements are the responsibility of the City's management. Our
responsibility is to express an opinion on these general purpose financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. 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 that our audit provides a reasonable basis for our opinion.
In our opinion, the general purpose financial statements referred to above present fairly, in all material
respects, the financial position of the City of Fairlawn, Summit County, as of December 31, 2001, and the
results of its operations for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
In accordance with GavernmentAuditing Standards, we have also issued our report dated August 1, 2002
on our consideration of the City's internal control over financial reporting and our tests of its compliance
with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit
performed in accordance with Government Auditing Standards and should be read in conjunction with
this report in considering the results of our audit.
Jim Petro
Auditor of State
August 1, 2002
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City of Fairlawn, Ohio
Combined Balance Sheet
All Fund Types and Account Groups
December 31.2001
Assets and Other Debits:
Assets:
Equity in Pooled Cash and Cash
Equivalents
Cash and Cash Equivalents
In Segregated Accounts
With Fiscal Agent
Receivables:
Taxes
Accounts
Special Assessments
Intergovernmental
Due from Other Funds
Materials and Supplies Inventory
Fixed Assets
Other Debits:
Amount Available in Debt Service Fund
Amount to be Provided for Retirement
of General Long-Term Obligations
Total Assets and Other Debits
Governmental Fund Types
Special Debt
General Revenue Service
$10,588,834 $1,535,001 $198,832
44,323 0 0
0 0 0
1,481,771 184,508 0
9,064 4,777 0
0 0 4,362,829
1,031,902 309,957 0
12,834 5,226 0
146,258 12,250 0
0 0 0
0 0 0
0 0 0
$13,314,986 $2,051,719 $4,561,661
4
Fiduciary
Fund Type Account Groups
General General Totals
Capital Fixed Long-Term (Memorandum
Projects Agency Assets Obligations Only)
$5,525,708 $71,499 $0 $0 $17,919,874
0 26,131 0 0 70,454
124,773 0 0 0 124,773
416,784 0 0 0 2,083,063
22,601 0 0 0 36,442
0 0 0 0 4,362,829
0 0 0 0 1,341,859
0 0 0 0 18,060
0 0 0 0 158,508
0 0 15,545,013 0 15,545,013
0 0 0 198,832 198,832
0 0 0 8,722,234 8,722,234
$6,089,866 $97,630 $15,545,013 $8,921,066 $50,581,941
(Continued)
s
City of Fairlawn, Ohio
Combined Balance Sheet
All Fund Types and Account Groups (Continued)
December 31, 2001
Governmental Fund Types
Special Debt
General Revenue Service
Liabilities, Fund Balances and Other Credits:
Liabilities:
Accounts Payable $57,960 $13,135 $0
Contracts Payable 4,865 0 0
Accrued Wages 101,656 2,800 0
Compensated Absences Payable 29,316 36 0
Due to Other Funds 0 0 0
Intergovernmental Payable 81,476 650 0
Deferred Revenue 1,290,331 455,851 4,362,829
Undistributed Monies 0 0 0
OPWC Loans Payable 0 0 0
General Obligation Bonds Payable 0 0 0
Special Assessment Bonds Payable
with Governmental Commitment 0 0 0
Total Liabilities 1,565,604 472,472 4,362,829
Fund Balances and Other Credits:
Investment in General Fixed Assets 0 0 0
Fund Balances:
Reserved for Encumbrances 270,644 53,219 0
Reserved for Inventory 146,258 12,250 0
Designated for Sewer Line Repair 195,990 0 0
Undesignated 11,136,490 1,513,778 198,832
Total Fund Balances and Other Credits 11,749,382 1,579,247 198,832
Total Liabilities, Fund Balances and Other
Credits $13,314,986 $2,051,719 $4,561,661
See Accompanying Notes to the General Purpose Financial Statements
6
Fiduciary
Fund Type Account Groups
General General Totals
Capital Fixed Long-Term (Memorandum
Projects Agency Assets Obligations Only)
$36,892 $0 $0 $0 $107,987
100,146 0 0 0 105,011
0 0 0 0 104,456
0 0 0 844,359 873,711
0 18,060 0 0 18,060
0 0 0 185,976 268,102
191,217 0 0 0 6,300,228
0 79,570 0 0 79,570
0 0 0 810,731 810,731
0 0 0 5,685,000 5,685,000
0 0 0 1,395,000 1,395,000
328,255 97,630 0 8,921,066 15,747,856
0 0 15,545,013 0 15,545,013
614,029 0 0 0 937,892
0 0 0 0 158,508
0 0 0 0 195,990
5,147,582 0 0 0 17,996,682
5,761,611 0 15,545,013 0 34,834,085
$6,089,866 $97,630 $15,545,013 $8,921,066 $50,581,941
7
City of Fairlawn, Ohio
Combined Statement of Revenues, Expenditures and Changes in Fund Balances
All Governmental Fund Types
For the Year Ended December 31.2001
Governmental
Special
General Revenue
Revenues
Municipal Income Taxes $5,282,566 $0
Property and Other Taxes 622,367 279,977
Charges for Services 41,321 199,711
Licenses, Permits and Fees 90,465 0
Fines and Forfeitures 125,397 185,294
Intergovernmental 4,135,732 290,159
Special Assessments 0 0
Interest 758, 371 18, 722
Rentals 0 15,524
Contributions/Donations 0 13,345
Other 74,496 688
Total Revenues 11,130,715 1,003,420
Ex vend itu res:
Current:
General Government 1,867,106 5,779
Security of Persons and Property 3,583,137 587,221
Public Health Services 100,783 0
Transportation 1,321,374 124,668
Community Environment 27,925 0
Basic Utility Services 143,430 103,961
Leisure Time Activities 30,831 223,787
Intergovernmental 651,450 0
Capital Outlay 0 0
Debt Service:
Principal Retirement 0 9,508
Interest and Fiscal Charges 0 492
Total Expenditures 7,726,036 1,055,416
Excess of Revenues Over/(Under) Expenditures 3,404,679 (51,996)
Other Financina Sources/(Uses
Sale of Fixed Assets 1,600 0
Operating Transfers In 0 180,000
Operating Transfers Out (2,180,000) 0
Total Other Financing Sources/(Uses) (2,178,400) 180,000
Excess of Revenues and Other Financing Sources Over
Expenditures and Other Financing Uses 1,226,279 128,004
Fund Balances Beginning of Year 10,518,029 1,446,904
Increase in Reserve for Inventory 5,074 4,339
Fund Balances End of Year $11,749,382 $1,579,247
See Accompanying Notes to the General Purpose Financial Statements
a
Fund Types Totals
Debt Capital (Memorandum
Service Projects Only)
$0 $2,078,592 $7,361,158
0 69,568 971,912
0 133, 411 374, 443
0 87,365 177,830
0 0 310,691
0 723, 443 5,149, 334
319,198 134,395 453,593
0 0 777,093
0 0 15,524
0 0 13,345
0 0 75,184
319,198 3,226,774 15,680,107
12,005 0 1,884,890
0 0 4,170, 358
0 0 100,783
0 0 1,446,042
0 0 27,925
0 0 247,391
0 0 254,618
0 447, 904 1, 099, 354
0 3, 932, 939 3, 932, 939
135,238 365,284 510,030
152,614 285,107 438,213
299,857 5,031,234 14,112,543
19,341 (1,804,460) 1,567,564
0 0 1,600
0 2, 000, 000 2,180, 000
0 0 (2,180,000)
0 2,000,000 1,600
19, 341 195, 540 1, 569,164
179, 491 5, 566, 071 17 , 710, 495
0 0 9,413
$198,832 $5,761,611 $19,289,072
9
City of Fairlawn, Ohio
Combined Statement of Revenues, Expenditures and Changes in Fund Balances
Budget (Non-GAAP) and Actual
All Governmental Fund Types
For the Year Ended December 31.2001
General Fund
Variance
Revised Favorable
Budget Actual (Unfavorable)
Revenues:
MunicipallncomeTaxes $5,133,376 $5,267,294 $133,918
Property and Other Taxes 553,618 568,045 14,427
Charges for Services 72,963 38,188 (34,775)
Licenses, Permits and Fees 60,912 90,465 29,553
Fines and Forfeitures 95,373 118,420 23,047
Intergovernmental 3,523,118 4,543,655 1,020,537
Special Assessments 0 0 0
Interest 519,008 809,685 290,677
Rentals 0 0 0
Contributions/Donations 0 0 0
Other 384,189 74,181 (310,008)
Total Revenues 10,342,557 11,509,933 1,167,376
Expenditures:
Current:
General Government 2,501,463 2,149,101 352,362
Security of Persons and Property 3,949,399 3,653,645 295,754
Public Health Services 101,072 100,783 289
Transportation 1,450,841 1,403,435 47,406
Community Environment 28,207 27,949 258
Basic Utility Services 158,852 150,813 8,039
Leisure Time Activities 39,428 34,567 4,861
Intergovernmental 423,359 651,450 (228,091)
Capital Outlay 65,000 0 65,000
Debt Service:
Principal Retirement 0 0 0
Interest and Fiscal Charges 0 0 0
Total Expenditures 8,717,621 8,171,743 545,878
Excess of Revenues Over/(Under) Expenditures 1,624,936 3,338,190 1,713,254
Other Financing Sources/(Uses
Sale of Fixed Assets 0 1,600 1,600
Operating Transfers In 0 0 0
Operating Transfers Out (2,180,500) (2,180,000) 500
Total Other Financing Sources/(Uses) (2,180,500) (2,178,400) 2,100
Excess of Revenues and Other Financing Sources Over
(Under)/Expenditures and Other Financing Uses (555,564) 1,159,790 1,715,354
Fund Balances Beginning of Year 8,894,118 8,894,118 0
Unexpended Prior Year Encumbrances 190,955 190,955 0
Fund Balances End of Year $8,529,509 $10,244,863 $1,715,354
See Accompanying Notes to the General Purpose Financial Statements
io
Special Revenue Funds
Variance
Revised Favorable
Budget Actual (Unfavorable)
Debt Service Fund
Variance
Revised Favorable
Budget Actual (Unfavorable)
$0 $0 $0 $0 $0 $0
255,079 264,445 9,366 0 0 0
186,751 202,773 16,022 0 0 0
0 0 0 0 0 0
45,450 60,981 15,531 0 0 0
278,282 420,318 142,036 0 0 0
0 0 0 319,128 319,198 70
18,576 19,314 738 0 0 0
15,135 15,524 389 0 0 0
18,000 13,345 (4,655) 0 0 0
800 688 (112) 0 0 0
818,073 997,388 179,315 319,128 319,198 70
8,500 5,779 2,721 15,500 12,005 3,495
686,063 607,015 79,048 0 0 0
0 0 0 0 0 0
236,165 199,653 36,512 0 0 0
0 0 0 0 0 0
188,002 138,977 49,025 0 0 0
282,148 225,483 56,665 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
9,508 9,508 0 135,238 135,238 0
492 492 0 152,614 152,614 0
1,410,878 1,186,907 223,971 303,352 299,857 3,495
(592,805) (189,519) 403,286 15,776 19,341 3,565
0 0 0 0 0 0
170,587 180,000 9,413 0 0 0
0 0 0 0 0 0
170,587 180,000 9,413 0 0 0
(422,218) (9,519) 412,699 15,776 19,341 3,565
1,292,530 1,292,530 0 179,491 179,491 0
188,298 188,298 0 0 0 0
$1,058,610 $1,471,309 $412,699 $195,267 $198,832 $3,565
(Continued)
11
City of Fairlawn, Ohio
Combined Statement of Revenues, Expenditures and Changes in Fund Balances
Budget (Non-GAAP) and Actual (Continued)
All Governmental Fund Types
For the Year Ended December 31.2001
Revenues:
Municipal Income Taxes
Property and Other Taxes
Charges for Services
Licenses, Permits and Fees
Fines and Forfeitures
Intergovernmental
Special Assessments
Interest
Rentals
Contributions/Donations
Other
Total Revenues
Capital Projects Funds
Variance
Revised Favorable
Budget Actual (Unfavorable)
$2,071,239
76, 385
19,030
0
0
500, 000
0
0
0
0
500, 000
3,166, 654
$2,071,239 $0
69,557 (6,828)
133, 411 114, 381
85,304 85,304
0 0
723,443 223,443
134,395 134,395
0 0
0 0
0 0
0 (500,000)
3,217,349 50,695
Expenditures:
Current:
General Government
Security of Persons and Property
Public Health Services
Transportation
Community Environment
Basic Utility Services
Leisure Time Activities
Intergovernmental
Capital Outlay
Debt Service:
Principal Retirement
Interest and Fiscal Charges
Total Expenditures
Excess of Revenues Over/(Under) Expenditures
Other Financing Sources/(Uses
0
0
0
0
0
0
0
0
5, 047, 416
365,284
285,107
5,697,807
(2,531,153)
Sale of Fixed Assets 0
Operating Transfers In 350,408
Operating Transfers Out 0
Total Other Financing Sources/(Uses) 350,408
Excess of Revenues and Other Financing Sources Over
(Under)/Expenditures and Other Financing Uses (2,180,745)
Fund Balances Beginning of Year 4,742,290
Unexpended Prior Year Encumbrances 692,117
Fund Balances End of Year $3,253,662
0 0
0 0
0 0
0 0
0 0
0 0
0 0
447,904 (447,904)
4,654,048 393,368
365,284 0
285,107 0
5,752,343 (54,536)
(2,534,994) (3,841)
0 0
2, 000, 000 1, 649, 592
0 0
2, 000, 000 1, 649, 592
(534,994) 1,645,751
4,742,290 0
692,117 0
$4,899,413 $1,645,751
See Accompanying Notes to the General Purpose Financial Statements
12
Totals (Memorandum Only)
Variance
Revised Favorable
Budget Actual (Unfavorable)
$7,204,615 $7,338,533 $133,918
885,082 902,047 16,965
278,744 374,372 95,628
60, 912 175, 769 114, 857
140, 823 179, 401 38, 578
4,301,400 5,687,416 1,386,016
319,128 453,593 134,465
537,584 828,999 291,415
15,135 15,524 389
18,000 13,345 (4,655)
884,989 74,869 (810,120)
14, 646, 412 16, 043, 868 1, 397, 456
2,525,463 2,166,885 358,578
4,635,462 4,260,660 374,802
101,072 100,783 289
1,687,006 1,603,088 83,918
28,207 27,949 258
346,854 289,790 57,064
321,576 260,050 61,526
423,359 1,099,354 (675,995)
5,112,416 4,654,048 458,368
510,030 510,030 0
438,213 438,213 0
16,129,658 15,410,850 718,808
(1,483,246) 633,018 2,116,264
0 1, 600 1, 600
520,995 2,180,000 1,659,005
(2,180,500) (2,180,000) 500
(1,659,505) 1,600 1,661,105
(3,142,751) 634,618 3,777,369
15,108,429 15,108,429 0
1,071,370 1,071,370 0
$13,037,048 $16,814,417 $3,777,369
13
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14
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
NOTE 1 -REPORTING ENTITY AND BASIS OF PRESENTATION
The City of Fairlawn (the "City") is a charter municipal corporation established and
operated under the laws of the State of Ohio. The City is organized as a Mayor/Council
form of government. The Mayor, Council and Finance Director are elected.
A. Renortin2 Entity
In evaluating how to define the City for financial reporting purposes, management has
considered all agencies, departments, and organizations making up the City (the primary
government) and its potential component units consistent with Governmental Accounting
Standards Board (GASB) Statement No. 14 "The Financial Reporting Entity."
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.
Component units are legally separate organizations for which the City is financially
accountable. The City is financially accountable for an organization if the City appoints
a voting majority of the organization's governing board and, (1) the City is able to
significantly influence the programs of services performed or provided by the
organization or (2) the City is legally entitled to or can otherwise access the
organization's resources; the City is legally obligated or has otherwise assumed the
responsibility to finance the deficits of, or provide financial support to the organization;
or the City is obligated for the debt of the organization. Component units may also
include organizations for which the City issues debt, levies taxes or determines the
budget. Based on this criteria, the City has no component units.
The Copley/Fairlawn City School District and the Summit County Public Library have
been excluded from the City's financial statements. Both are legally separate from the
City. Neither impose a financial burden nor provide a financial benefit to the City. The
City cannot significantly influence the operations of these entities.
The City participates in the Bath-Akron-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, Akron, 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 participants
15
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
degree of control is limited to its representation on the board. All 2001 JEDD revenues
were the result of the income tax levied by the JEDD effective January 1, 1999.
B. Basis of Presentation -FundAccountin2
The City uses funds and account groups to report its financial position and the results of
its operations. Fund accounting is designed to demonstrate legal compliance and to aid
financial management by segregating transactions related to certain City functions or
activities.
A fund is defined as a fiscal and accounting entity with aself-balancing set of accounts
recording cash and other financial resources, together with all related liabilities and
residual equities or balances, and changes therein, which are segregated for the purpose
of carrying on specific activities or attaining certain objectives in accordance with special
regulations, restrictions or limitations. An account group is a financial reporting device
designed to provide accountability for certain assets and liabilities that are not recorded
in the funds because they do not directly affect the net expendable available financial
resources.
Governmental Fund Types
Governmental funds are those through which most governmental functions of the City
are financed. The acquisition, use and balances of the City's expendable financial
resources and the related current liabilities are accounted for through governmental
funds. The following are the City's governmental fund types:
• General Fund -this fund is the operating fund of the City and is used to account for all
financial resources except those required to be accounted for in another fund. The
general fund balance is available to the City for any purpose provided it is expended
or transferred according to the general laws of Ohio.
• Special Revenue Funds -these funds are established to account for the proceeds of
specific revenue sources (other than amounts relating to major capital projects) that
are legally restricted to expenditure for specified purposes.
• Debt Service Fund -this fund is used to account for the accumulation of resources for,
and the payment of, general and special assessment long-term debt principal, interest,
and related costs.
• Capital Projects Funds -these funds are used to account for financial resources to be
used for the acquisition or construction of major capital facilities.
16
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
Fiduciary Fund Types
Fiduciary funds are used to account for assets held by the City in a trustee capacity or as
an agent for individuals, private organizations, other governmental units and/or other
funds. There are two types of fiduciary funds, trust and agency. The City has no trust
funds. The City's agency funds are purely custodial (assets equal liabilities) and thus do
not involve measurement of results of operations.
Account Groups
To make a clear distinction between fixed assets related to specific funds and those of
general government, and between long-term liabilities related to specific funds and those
of a general nature, the following account groups are used:
• General Fixed Asset Account Group -this account group accounts for all general fixed
assets of the City.
• General Long-Term Obligarions Account Group -this account group accounts for all
unmatured long-term indebtedness of the City, including special assessment debt for
which the City is obligated in some manner.
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed in the preparation of these financial
statements are summarized below. These policies conform to generally accepted
accounting principles (GAAP) for local governmental units as prescribed in the
statements issued by the GASB and other recognized authoritative sources.
A. Measurement Focus and Basis ofAccountin2
The accounting and financial reporting treatment applied to a fund is determined by its
measurement focus. All governmental fund types are accounted for using a flow of
current financial resources measurement focus. With this measurement focus, only
current assets and current liabilities are generally included on the combined balance
sheet. Operating statements of these funds present increases (revenues and other
financing sources) and decreases (expenditures and other financing uses) in net current
assets.
Basis of accounting refers to when revenues and expenditures are recognized in the
accounts and reported in the financial statements. Basis of accounting relates to the
timing of the measurement made.
The modified accrual basis of accounting is followed for the governmental and agency
funds.
17
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
On a modified accrual basis, revenue resulting from exchange transactions in which each
party gives and receives essentially equal value 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.
Non-exchange transactions in which the City receives value without directly giving equal
value in return, include income tax, property taxes, grants, entitlements and donations.
Revenue from property taxes is recognized in the fiscal year for which the taxes are
levied. (See Note 6) Revenue from grants, entitlements and donations is recognized in
the fiscal 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 used or the fiscal year when use is first permitted, matching requirements
in which the City must 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 non-exchange
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 fiscal year-end: interest, state-levied locally shared
taxes (including gasoline tax), grants, fines and forfeitures and income tax.
Deferred revenue arises 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, 2001, but
which were levied to finance 2002 operations, have been recorded as deferred revenue.
Grants and entitlements received before the eligibility requirements are met are also
recorded as deferred revenue. On the modified accrual basis, receivables that will not be
collected within the available period have also been reported as deferred revenue.
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 the
governmental funds.
B. Bud2etary Process
The budgetary process is prescribed by provisions of the Ohio Revised Code and entails
the preparation of budgetary documents within an established timetable. The major
documents prepared are the tax budget, the certificate of estimated resources, and the
appropriation ordinance, all of which are prepared on the budgetary basis of accounting.
18
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
The certificate of estimated resources and the appropriation ordinance are subject to
amendment throughout the year with the legal restriction that appropriations cannot
exceed estimated resources, as certified. All funds, other than agency funds, are legally
required to be budgeted and appropriated. The legal level of budgetary control has been
established by City Council at the object level within each department. Any budgetary
modifications at this level may only be made by resolution of the City Council.
Tax Budget
At the first City Council meeting in July, the Mayor presents the annual operating budget
for the following fiscal year to City Council for consideration and passage. The adopted
budget is submitted to the County Auditor, as Secretary of the County Budget
Commission, by July 20 of each year, for the period January 1 to December 31 of the
following year.
Estimated Resources
The County Budget Commission determines if the budget substantiates a need to levy all
or part of previously authorized taxes and reviews estimated revenue. The Commission
certifies its actions to the City by 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 appropriation ordinance. On or about
January 1, the certificate of estimated resources is amended to include unencumbered
fund balances at December 31 of the preceding year. The certificate may be further
amended during the year if the Finance Director determines, and the Budget
Commission, agrees that an estimate needs to be either increased or decreased. The
amounts reported on the budgetary statements reflect the amounts in the final amended
official certificate of estimated resources issued during 2001.
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 allocation of appropriations among the
departments and objects within a fund may be modified during the year by an ordinance
of Council. During the year, several supplemental appropriation measures were passed.
19
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
None of these supplemental appropriations had any significant affect on the original
appropriations. The budget figures that appear in the statement of budgetary comparisons
represent the final appropriation amounts, including all amendments and modifications.
Encumbrances
As part of formal budgetary control, purchase orders, contracts, and other commitments
for the expenditure of moneys are recorded as the equivalent of expenditures on the non-
GAAP budgetary basis in order to reserve that portion of the applicable appropriation and
to determine and maintain legal compliance. The Ohio Revised Code prohibits
expenditures plus encumbrances from exceeding appropriations at the fund, department
and object level. On the GAAP basis, encumbrances outstanding at year-end are reported
as reservations of fund balances for subsequent year expenditures.
Lapsing ofAppropriations
At the close of each year, the unencumbered balance of each appropriation reverts to the
respective fund from which it was appropriated and becomes subject to future
appropriations. The encumbered appropriation balance is carried forward to the
succeeding year and is not re-appropriated.
C. Cash and Cash Equivalents
To improve cash management, cash received by the City is pooled. Monies for all funds
are maintained in this pool. Individual fund integrity is maintained through the City's
records. Each fund's interest in the pool is presented as "equity in pooled cash and cash
equivalents" on the combined balance sheet.
During 2001, investments were limited to overnight repurchase agreements, certificates
of deposit and interest in STAR Ohio, the State Treasurer's Investment Pool.
Except for nonparticipating investment contracts, investments are reported at fair value,
which is based on quoted market prices. Nonparticipating investment contracts such as
repurchase agreements are reported at cost.
The City had invested funds in the State Treasury Asset Reserve of Ohio (STAR Ohio)
during 2001. 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 investments
could be sold for on December 31, 2001.
20
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
Investment procedures are restricted by the provisions of the Ohio Revised Code.
Interest revenue credited to the general fund during 2001 amounted to $758,371, which
includes $335,353 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 combined
balance sheet as "cash and cash equivalents in segregated accounts" since they are not
required to be deposited into the City treasury.
For presentation on the combined balance sheet, 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.
The City has monies on deposit with Ohio Department of Transportation (ODOT) to be
used for road improvement projects. This amount is presented as "cash and cash
equivalents with fiscal agent' on the combined balance sheet.
D. Inventory
Inventories of governmental funds are stated at cost. For all funds, cost is determined on
a first-in, first-out basis. The costs of inventory items are recorded as expenditures in the
governmental fund types when purchased. Reported materials and supplies inventory is
equally offset by a fund balance reserve in the governmental fund which indicates that it
does not constitute available expendable resources even though it is a component of net
current assets.
E. Fixed Assets and Depreciation
General fixed assets are not capitalized in the funds used to acquire or construct them.
Instead, capital acquisition and construction costs are reflected as expenditures in
governmental funds, and the related assets are reported in the general fixed asset account
group.
All purchased fixed assets are valued at cost when historical records are available and at
an estimated historical cost when no historical records exist. Donated fixed assets are
valued at their estimated fair market value on the date received.
The costs of normal maintenance and repairs that do not add to the value of the asset or
materially extend asset lives are not capitalized. Improvements are capitalized.
Public domain (infrastructure) general fixed assets consisting of roads, bridges, curbs and
gutters, streets and sidewalks, drainage systems, and lighting systems are not capitalized,
21
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
as these assets are immovable and of value only to the City. Assets in the general fixed
assets account group are not depreciated.
F. ComnensatedAbsences
Vacation benefits are accrued as a liability as the benefits are earned if the employees'
rights to receive compensation are attributable to services already rendered and it is
probable that the City will compensate the employees for the benefits through paid time
off or some other means. The City records a liability for accumulated unused vacation
time when earned 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,
1991.
For governmental funds, the current portion of unpaid compensated absences is the
amount expected to be paid using expendable available resources. These amounts are
recorded in the account "compensated absences payable" in the fund from which the
employees who have accumulated unpaid leave are paid. The remainder is reported in
the general long-term obligations account group.
G. Interfund Assets/Liabilities
During the course of operations, numerous transactions occur between individual funds
for goods provided or services rendered. These receivables and payables are classified as
"due from other funds" or "due to other funds."
A. Fund Balances
Reservations of fund balance are established to identify the existence of assets that,
because of their non-monetary nature or lack of liquidity, represent financial resources
not available for current appropriation or expenditure including amounts that are legally
segregated for a specific future use. Fund balances are reserved for encumbrances and
inventories of supplies and materials. A designated fund balance has been established for
sewer line repairs.
22
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
L Interfund Transactions
Quasi-external transactions are accounted for as revenue and expenditures. Transactions
that constitute reimbursements to a fund for expenditures initially made from it that are
properly applicable to another fund are recorded as expenditures in the reimbursing fund
and as reductions of expenditures in the fund that is reimbursed.
Nonrecurring or non-routine permanent transfers of equity are reported as residual equity
transfers. All other inter-fund transfers are reported as operating transfers.
J. Accrued and Lone-Term Liabilities
In general, governmental fund payables and accrued liabilities are reported as obligations
of the funds regardless of whether they will be liquidated with current resources.
However, claims and judgments, compensated absences and contractually required
pension contributions are reported as a liability in the general long-term obligations
account group to the extent that they will not be paid with current expendable available
financial resources. Payments made more than thirty-one days after year-end are
generally considered not to have been paid with current available financial resources.
Bonds and long-term loans are recognized as a liability of the general long-term
obligations account group until due.
K Estimates
The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual results
may differ from those estimates.
L. Total Columns on General Purpose Financial Statements
Total columns on General Purpose Financial Statements are captioned Memorandum
Only to indicate that they are presented only to facilitate financial analysis. Data in these
columns do not present financial position or results of operations, in conformity with
GAAP. Neither is such data comparable to a consolidation. Inter-fund eliminations have
not been made in the aggregation of this data.
NOTE 3 -CHANGE IN ACCOUNTING PRINCIPLES
For 2001, the City has implemented GASB Statement No. 33, "Accounting and Financial
Reporting for Nonexchange Transactions" and GASB Statement No. 36, "Recipient
Reporting for Certain Shared Nonexchange Revenues." The implementation of these
statements did not result in any change in fund balance from the prior year.
23
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
NOTE 4 -BUDGETARY BASIS OF ACCOUNTING
While reporting financial position, results of operations, and changes in fund balance on
the GAAP basis, the budgetary basis as provided by law is based upon accounting for
transactions on a basis of cash receipts, disbursements, and encumbrances.
The Combined Statement of Revenues, Expenditures and Changes in Fund Balances -
Budget (Non-GAAP) and Actual -All Governmental Fund Types is presented on the
budgetary basis to provide a meaningful comparison of actual results with the budget and
to demonstrate compliance with state statute. The major difference between the budget
basis and the GAAP basis are as follows:
1. Revenues are recorded when received in cash (budget) as opposed to when
susceptible to accrual (GAAP).
2. Expenditures are recorded when paid in cash (budget) as opposed to when the
liability is incurred (GAAP).
3. Outstanding year-end encumbrances are treated as expenditures (budget) rather
than as a reservation of fund balance for governmental fund types (GAAP).
The following table summarizes the adjustments necessary to reconcile the GAAP basis
statements to the budgetary basis statements on a fund type basis:
Excess of Revenues and Other Financing Sources Over/(Under)
Expenditures and Other Financing Uses
Special Capital
General Revenue Debt Service Projects
GAAPBasis $1,226,279 $128,004 $19,341 $195,540
Revenue Acca-uals 327,904 (7,245) 0 (9,42
Uin-eported Cash 51,314 1,213 0 0
Expendihu-e Accauals (87,934) (68,87 0 29,958
Fnannbrances (357,773) (62,615) 0 (751,067)
Budget Basis $1,159,790 $(9,519) $19,341 $(534,994)
NOTE 5 -DEPOSITS AND INVESTMENTS
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.
24
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
Inactive deposits are public deposits that Council has identified as not required for use
within the current period of designation of depositories. Inactive deposits must either be
evidenced by certificates of deposit maturing not later than the end of the current period
of designation of depositories, or by savings or deposit accounts including, but not
limited to, passbook accounts.
Interim deposits are deposits of interim monies. Interim monies are those monies which
are not needed for immediate use but will be needed before the end of the current period
of designation of depositories. Interim deposits must be evidenced by time certificates of
deposit maturing not more than one year from the date of deposit or by savings or deposit
accounts including pass book accounts.
Protection of the City's deposits is provided by the Federal Deposit Insurance
Corporation, by eligible securities pledged by the financial institution as security for
repayment, by surety company bonds deposited with the treasurer by the financial
institution or by a single collateral pool established by the financial institution to secure
the repayment of all public monies deposited with the institution.
Interim monies maybe deposited or invested in the following securities:
1. United States treasury notes, bills, bonds, or any other obligation or
security issued by the United States treasury or any other obligation
guaranteed as to principal and 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 division (1) or (2) of this section and repurchase agreements
25
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
secured by such obligations, provided that investments in securities described
in this division are made only through eligible institutions; and
6. The State Treasurer's investment pool (STAR Ohio).
Investments in stripped principal or interest obligations reverse repurchase agreements
and derivatives 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 matclgdto aspecific oblig~on 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 treasurer or qualified trustee or, if the securities are not represented by
a certificate, upon receipt of confirmation of transfer from the custodian.
The following information classifies deposits and investments by categories of risk as
defined in GASB Statement 3, "Deposits with Financial Institutions, Investments
(including Repurchase Agreements), and Reverse Repurchase Agreements."
Cash on Hand
At year end, the City had $1,400 in un-deposited cash on hand which is included on the
balance sheet as part of "equity in pooled cash and cash equivalents."
Cash with Fiscal Agents
The City has $124,773 on deposit with the Ohio Department of Transportation (ODOT).
Information regarding the classification of ODOT's deposits and investments per GASB
Statement No. 3 may be found in the State's Comprehensive Annual Financial Report for
the fiscal year ended June 30, 2001.
City Deposits
At year-end, the carrying amount of the City's deposits was $495,404 and the bank
balance was $327,693. Of the bank balance, $144,323 was covered by federal depository
insurance and $183,370 was uninsured and un-collateralized.
City Investments
The City's investments are required to be categorized to give an indication of the level of
risk assumed by the City at year-end. Category 1 includes investments that are insured or
registered or are held by the City or its agent in the City's name. Category 2 includes
uninsured and unregistered investments which are held by the counterparty's trust deposit
26
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
or agent in the City's name. Category 3 includes uninsured and unregistered investments
which are held by the counterparty's trust department or agent but not in the City's name.
STAR Ohio is an unclassified investment since it is not evidenced by securities that exist
in physical or book form.
Repurchase Agreements
STAR Ohio
Total Investments
3 Carrying Value Fair Value
$2,722,517 $2,722,517 $2,722,517
14,771,007 14,771,007
$2,722,517 $17,493,524 $17,493,524
The classification of cash and cash equivalents, and investments on the combined
financial statements are based on criteria set forth in GASB Statement No. 9, "Reporting
Cash Flows of Proprietary and Non-Expendable Trust Funds and Government Entities
That Use Proprietary Fund Accounting".
A reconciliation between the classifications of cash and cash equivalents and investments
on the combined financial statements and the classification per GASB Statement No. 3 is
as follows:
GASB Statement No. 9
Investments which are part of
the cash management pool:
Repurchase Agreement
STAR Ohio
ODOT
GASB Statement No. 3
NOTE 6 -RECEIVABLES
Cash and Cash
Equivalents/Deposits Investments
$18,115,101 $0
(2,722,517) 2,722,517
(14,771,007) 14,771,007
(124,773) 0
$496,804 $17,493,524
Receivables at December 31, 2001 consist primarily of taxes, intergovernmental
receivables, special assessments and accrued interest on investments. All receivables are
considered fully collectible.
A. Property Taxes
Property taxes include amounts levied against all real, public utility, and tangible
personal property located in the City. Property tax revenue received during 2001 for real
and public utility property taxes represents collections of 2000 taxes. Property tax
payments received during 2001 for tangible personal property (other than public utility
property) are for 2001 taxes.
27
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
2001 real property taxes are levied after October 1, 2001, on the assessed value as of
January 1, 2001, the lien date. Assessed values are established by State law at 35 percent
of appraised market value. 2001 real property taxes are collected in and intended to
finance 2002.
Public utility tangible personal property currently is assessed at varying percentages of
true value; public utility real property is assessed at 35 percent of true value. 2001 public
utility property taxes became a lien December 31, 2000, are levied after October 1, 2001,
and are collected in 2002 with real property taxes.
2001 tangible personal property taxes are levied after October 1, 2000, on the value as of
December 31, 2000. Collections are made in 2001. Tangible personal property
assessments are 25 percent of true value.
The full tax rate for all City operations for the year ended December 31, 2001 was $2.70
per $1,000 of assessed value. The assessed values of real and tangible personal property
upon which 2001 property tax receipts were based are as follows:
Assessed Value
Real Estate $268,976,820
Public Utility Property 4,258,140
Tangible Personal 28,351,317
Total $301,586,277
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.
Tangible personal property taxes paid by multi-county taxpayers are due September 20.
Single county taxpayers may pay annually orsemi-annually. If paid annually, payment is
due Apri130; if paid semi-annually, the first payment is due Apri130, with the remainder
payable September 20.
The County Treasurer collects property taxes on behalf of all taxing districts in the
county, including the City of Fairlawn. The County Auditor periodically remits to the
City its portion of taxes. Property taxes receivable represent real and tangible personal
property taxes and outstanding delinquencies which are measurable as of December 31,
2001, and for which there is an enforceable legal claim. Although total property tax
collections for the next year are measurable, amounts to be received during the available
period are not subject to reasonable estimation at December 31, nor were they levied to
finance 2001 operations. The receivable is offset by deferred revenue.
28
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
B. Income Taxes
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.
C. Intergovernmental Receivables
A summary of intergovernmental receivables follows:
29
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
Intergovernmental Receivable Amount
General Fund:
Local Government Tax $281,432
Tangible Exempt 4,379
Liquor Permits 4,106
Building Permits 6,457
Estate Tax 189,557
Akron Court Fines 1,664
JEDD Disbursements 285,437
Reimbursements for Shared Projects 228,091
Homestead & Rollback 30,779
Total General Fund 1,031,902
Special Revenue Funds:
Gasoline Tax 105,209
Motor Vehicle 32,152
Motor Vehicle Permissive 12,124
Police DARE Grant 9,000
Fire Equipment Grants 141,272
Court Fines 110
Tangible Exempt 1,264
Homestead & Rollback 8,826
Total Special Revenue Funds 309,957
Total $1,341,859
NOTE 7 -FIXED ASSETS
Changes in general fixed assets during 2001 were as follows:
Balance Balance
January 1, 2001 Additions Deletions December 31, 2001
Land $1,073,002 $1,070,000 $0 $2,143,002
Land Improvements 1,193,738 35,295 0 1,229,033
Buildings 6,554,698 0 0 6,554,698
Machinery and
Equipment 2,866,404 443,902 40,942 3,269,364
Vehicles 2,013,619 335,297 0 2,348,916
Total $13,701,461 $1,884,494 $40,942 $15,545,013
NOTE8-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.
30
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
During 2001, 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 CNA Insurance Companies with a $1,000,000 limit and
a $10,000 deductible. A commercial umbrella policy through RLI 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 $500 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 pays the State Worker's Compensation system a premium based on a rate per
$100 of salaries. This rate is calculated based on accident history and administrative
costs.
NOTE 9 -DEFINED BENEFIT PENSION PLANS
A. Public Employees Retirement System (PERS)
All City full-time employees, other than non-administrative full-time police officers and
firefighters, participate in the Public Employees Retirement System of Ohio (PERS), a
cost-sharing multiple-employer public employee retirement system administered by the
Public Employees Retirement Board. PERS provides basic retirement and disability
benefits, annual cost of living adjustments, and death benefits to plan members and
beneficiaries. Benefits are established by Chapter 145 of the Ohio Revised Code. PERS
issues astand-alone financial report which may be obtained by writing to the Public
Employees Retirement System, 277 East Town Street, Columbus, Ohio 43 2 1 5-4642.
Plan members are required to contribute 8.5 percent of their annual covered salary to
fund pension obligations. The 2001 employer contribution rate for the City was 9.25
percent of covered payroll, increased from 6.54 percent in 2000. Contributions are
authorized by State statute. The contribution rates are determined actuarially. The City's
required contributions to PERS for the years ended December 31, 2001, 2000, and 1999
were $187,231, $115,321 and $155,881, respectively. The full amount has been
contributed for 2000 and 1999. 74 percent has been contributed for 2001 with the
remainder being reported as a liability within the general long-term obligations account
group.
31
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
B. Ohio Police and Fire Pension Fund
The City contributes to the Ohio Police and Fire Pension Fund (OP&F), acost-sharing
multiple employer public employee retirement system administered by the OP&F's
Board of Trustees. 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 by Chapter 742 of the Ohio
Revised Code. OP&F issues a publicly available financial report that includes financial
statements and required supplementary information. That report may be obtained by
writing to the Ohio Police and Fire Pension Fund, 140 East Town Street, Columbus, Ohio
432 1 5-5 1 64.
Police and firefighters are required to contribute 10 percent of their annual covered salary
to fund pension obligations and the City is required to contribute 12.00 percent for police
and 16.50 percent for firefighters. For 2000, the City contributions were 12.25 percent
for police and 16.75 percent for firefighters. Contributions are authorized by State
statute. The City's contributions to the OP&F for police and firefighters were $135,718
and $96,404 for the year ended December 31, 2001, $123,958 and $77,119 for the year
ended December 31, 2000 and $126,806 and $84,204 for the year ended December 31,
1999. The full amount has been contributed for 2000 and 1999. 73.4 percent and 72.9
percent, respectively, have been contributed for 2001 with the remainder being reported
as a liability in the general long-term obligations account group.
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.
NOTE 10 -POST EMPLOYMENT BENEFITS
A. Public Employees Retirement System
The Public Employees Retirement System of Ohio (PERS) provides postretirement
health care coverage to age and service retirees with ten or more years of qualifying Ohio
service credit. Health care coverage for disability recipients and primary survivor
recipients is available. The health care coverage provided by the retirement system is
considered an Other Postemployment Benefit (OPEB) as described in GASB Statement
No. 12. A portion of each employer's contribution to the PERS is set aside for the
funding of postretirement health care based on authority granted by State statute. The
2001 employer contribution rate was 13.55 percent of covered payroll; 4.30 percent was
the portion that was used to fund health care for 2001. For 2000, the contribution rate
was 10.84 percent of covered payroll; 4.30 percent was the portion that was used to fund
health care.
32
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
Benefits are advance-funded using the entry age normal cost method. Significant
actuarial assumptions, based on PERS's latest actuarial review performed as of
December 31, 2000, include a rate of return on investments of 7.75 percent, an annual
increase in active employee total payroll of 4.75 percent compounded annually (assuming
no change in the number of active employees) and an additional increase in total payroll
of between .54 percent and 5.1 percent based on additional annual pay increases. Health
care premiums were assumed to increase 4.75 percent annually.
All investments are carried at market. For actuarial valuation purposes, a smoothed
market approach is used. Assets are adjusted to reflect 25 percent of unrealized market
appreciation or depreciation on investment assets.
The number of active contributing participants was 411,076. The City's actual
contributions for 2001 which were used to fund postemployment benefits were $87,037.
The actual contribution and the actuarially required contributions are the same. PERS's
net assets available for payment of benefits at December 31, 2000, (the latest information
available) were $11,735.9 million. The actuarially accrued liability and the unfunded
actuarial accrued liability were $14,364.6 million and $2,628.7 million, respectively.
B. Ohio Police and Fire Pension Fund
The Ohio Police and Fire Pension Fund (OP&F) provides postretirement health care
coverage to any person who receives or is eligible to receive a monthly benefit check or
is a spouse or eligible dependent child of such person. An eligible dependent child is any
child under the age of 18 whether or not the child is attending school or under the age of
22 if attending school full-time or on a 2/3 basis.
The health care coverage provided by the retirement system is considered an Other
Postemployment Benefit as described in GASB Statement No. 12. The Ohio Revised
Code provides the authority allowing the Ohio Police and Fire Pension Fund's Board of
Trustees to provide health care coverage and states that health care costs paid from the
Ohio Police and Fire Pension Fund shall be included in the employer's contribution rate.
Health care funding and accounting is on apay-as-you-go basis. The total police
employer contribution rate is 19.5 percent of covered payroll and the total firefighter
employer contribution rate is 24 percent of covered payroll, of which 7.5 percent of
covered payroll was applied to the postemployment health care program during 2001.
For 2000, the percent used to fund healthcare was 7.25 percent. In addition, since July 1,
1992, most retirees have been required to contribute a portion of the cost of their health
care coverage through a deduction from their monthly benefit payment.
The City's actual contributions for 2001 that were used to fund postemployment benefits
were $84,824 for police and $73,820 for fire. The OP&F's total health care expenses for
the year ended December 31, 2000, (the latest information available) were $106,160,054,
33
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
which was net of member contributions of $5,657,431. The number of OP&F participants
eligible to receive health care benefits as of December 31, 2000, was 12,853 for police
and 10,037 for firefighters.
NOTE 11 -OTHER EMPLOYEE BENEFITS
A. ComnensatedAbsences
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 the
employee's 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. Sick leave
accumulation is limited to 220 days. Upon retirement, employees hired before 1991 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 1991 are generally not eligible to receive termination payments for sick
leave. As of December 31, 2001, the total liability for unpaid compensated absences was
$873,711.
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 medical/surgical benefits
through Medical Mutual of Northern Ohio. The employees share the cost of the monthly
premium. Dental insurance is provided by the City through Delta Dental.
NOTE 12 -LONG-TERM OBLIGATIONS
Long-term obligations of the City as of December 31, 2001, were as follows:
34
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
General Obligation Bonds (2.80-5.75%)
Special Assessment
Various Purpose Bond (4.80-7.00%)
OPWC Loans (6.00%)
Capital Loan (5.18%)
Intergovernmental Payable
Compensated Absences
Total General Long-Tenn Debt
Balance Balance
December 31, 2000 Additions Deletions December 31, 2001
$5,955,000 $0 $270,000 $5,685,000
1,490,000 0 95,000 1,395,000
850,969 0 40,238 810,731
104,792 0 104,792 0
132,674 185,976 132,674 185,976
761,189 112,528 29,358 844,359
$9,294,624 $298,504 $672,062 $8,921,066
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
the a piuperiy owner fails to pay the assessmetQ payment will be made by the City. Compensated
absences reported in the "compensated absences payable" account will be paid from the
fund from which the employees' salaries are paid. Intergovernmental payable represents
unfunded pension contribution not paid with current available financial resources and
will be paid from the general fund and special revenue funds.
Principal and interest requirements to retire long-term obligations outstanding at
December 31, 2001 are as follows:
Year
2002
2003
2004
2005
2006
2007 - 2011
2012 - 2016
2017+
Total principal and interest
Less interest
Total princpal
Special General
Assessment Obligation OPWC
Bond Bonds Loans Total
$201,117 $549,255 $90,702 $841,074
199,345 547,583 90,702 837,630
197,140 550,212 90,702 838,054
199,550 546,790 90,702 837,042
195,800 552,692 90,702 839,194
988,150 2,736,940 453,509 4,178,599
0 2,022,135 272,106 2,294,241
0 620,983 0 620,983
1,981,102 8,126,590 1,179,125 11,286,817
586,102 2,441,590 368,394 3,396,086
$1,395,000 $5,685,000 $810,731 $7,890,731
NOTE 13 -CONTRACTUAL COMMITMENTS
As of December 31, 2001, the City had various contractual commitments; for road
maintenance and improvements of $305,994, sewer cleaning and improvements of
$36,960, building improvements of $219,442, purchases of various capital equipment of
$256,958 and park equipment and improvement of $66,281.
35
City of Fairlawn
Notes to the General Purpose Financial Statements
For the Year Ended December 31, 2001
NOTE 14 -CONTINGENCIES
A. Grants
The City received financial assistance from federal and state agencies in the form of
grants. The disbursement of funds received under these programs generally requires
compliance with terms and conditions specified in the grant agreements and are subject
to audit by the grantor agencies. Any disallowed claims resulting from such audits could
become a liability of the general fund or other applicable funds. However, in the opinion
of management, any such disallowed claims will not have a material effect on the overall
financial position of the City as of December 31, 2001.
B. Litigation
The City is party to legal proceedings. The City management is of the opinion that the
ultimate disposition of these claims and legal proceedings will not have a material effect,
if any, on the financial condition of the City.
NOTE 15 - INTERFUND TRANSACTIONS
Interfund balances at December 31, 2001, consist of the following:
General Fund
Special Revenue Funds:
Children Adolescent SAEF -
Enforcement & Education
Total Special Revenue Funds
Mayor's Court -Agency Fund
Total
Due From Due To
$12,834 $0
5,133 0
93 0
5,226 0
0 18,060
$18,060 $18,060
36
~AAllll/~
. ~d
STATE OF OHIO
OFFICE OF THE AUDITOR
JIM PETRO, AUDITOR OF STe1TE
111 Second Street N W
Fourth Floor
Canton, Ohio 44702
Telephone 330-435-0617
500-443-9272
Facsimile 330-471-0001
www.auditorstate.oh.us
REPORT OF INDEPENDENT ACCOUNTANTS ON COMPLIANCE AND ON
INTERNAL CONTROL REQUIRED BY GOVERNMENTAUDITINGSTANDARDS
City of Fairlawn
Summit County
3487 South Smith Road
Fairlawn, Ohio 44333
To the Members of City Council:
We have audited the general purpose financial statements of the City of Fairlawn, Summit County, (the
City) as of and for the year ended December 31, 2001 and have issued our report thereon dated August 1,
2002. 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 Government Audifing
Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether City's financial statements are free of material
misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts
and grants, noncompliance with which could have a direct and material effect on 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 such an opinion. The results of our tests
disclosed no instances of noncompliance that are required to be reported under Government Auditing
Standards.
However, we noted certain immaterial instances of noncompliance that we have reported to management
of the City in a separate letter dated August 1, 2002.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered City's internal control over financial reporting in
order to determine our auditing procedures for the purpose of expressing our opinion on the financial
statements and not to provide assurance on the internal control over financial reporting. Our
consideration of the internal control over financial reporting would not necessarily disclose all matters in
the internal control over financial reporting that might be material weaknesses. A material weakness is a
condition in which the design or operation of one or more of the internal control components does not
reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to
the financial statements being audited may occur and not be detected within a timely period by employees
in the normal course of performing their assigned functions. We noted no matters involving the internal
control over financial reporting and its operation that we consider to be material weaknesses.
However, we noted other matters involving the internal control over financial reporting that do not require
inclusion in this report, that we have reported to management of the City in a separate letter dated August
1, 2002.
37
City of Fairlawn
Summit County
Report of Independent Accountants on Compliance and on
Internal Control Required by GavernmentAudifing Standards
Page 2
This report is intended for the information and use of management and City Council, and is not intended
to be and should not be used by anyone other than these specified parties.
Jim Petro
Auditor of State
August 1, 2002
38
,l\\Ut/~ j
~:a~
• ,-;
STATE OF OHIO
OFFICE OF THE AUDITOR
JIM PETKQ AUDTTOR OF STATE
CITY OF FAIRLAWN
SUMMIT COUNTY
88 East Bmad Sheet
P.O. Box 1140
Columbus, Ohio 4321 6-1 1 40
Telephone 6 1 446 6-45 1 4
800-282-0370
Facsimile 614466-4490
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 12, 2002