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2009 Financial Statementci-~Y oE- E=A1E7E_~l1NhJ aUMMl1~ CC~UNI-Y _ Rf=GUL~IE~ t~U[J1~i~ f={af~ ~(~EiE" YE~e~R E.NC)E:() C~FCEME3E~ 31, ?_OQ3 , ~,` ,., ~ , 3. -~ Wiz: ~_~~~~ ~ l~~•, c,r ~~ m ~ CITY OF FAIRLAWN SUMMIT COUNTY TABLE OF CONTENTS TITLE RAGE Independenk Accountants' Report .................................................................................................................1 Management's Discussion and Analysis ....................................................................................................... 3 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Assets ..........................................................................................................15 Statement of Activities .............................................................................. Fund Financial Statements: balance Sheet Governmental Funds ......................................................................... Reconciliation of Total Governmenta! Fund Balances tv 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 8asis7 General Fund ............................................................................. Statement of Fiduciary Net Assets Fiduciary Funds ................................................................................ ...................15 ................... 17 ...................18 ................... 19 ................... 2Q ................... 21 ................... 22 Notes to the Basic Financial Statements .................................................................................................... 23 Independent Accountants' Report on internal Control Over Financial Reporting and on Compliance and Okher Matters Required by Government Auditing Standards ........................................................ ... 49 This page is intentionally left blank. ;~', ~ ? x~.tti~ifor of ~t~~t I?JD~PE~Jf3E=N C ACGC)l.J~lin~J7S' R[_F'Of21 `; I;rll~~. t C;: gun},. I i,. ilk, I_i']r ~.iD r.' '`:1. 1'11:1 .dl ;. ~•~ai'llll']tf:; U' I,I~`; ~.. ~l:l'.;. r, . I ~;,~~ , i1,-;i1: _: irllr :s~.c ~ lll; ~~n• IuI fin,,rll i,11 ~l'lr°r ~c!1'; >1 . 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' 1 i :. !. ,1.:1 .:r ~ ~ ~: City of Fairlawn Summit County Independent Accountants' Report Page 2 Management's Discussion and Analysis is not a required part of the basic financial 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 ~ctaber 15, 2414 CITY [lF FAIRLAIVN, Ol[IO MANAGEMENT'S DISCUSSION AND ANALYSIS FOR TIIE YEAR ENDED DFCEMI3ER 3l, 2()09 UNAUDITED The management's discussion and analysis of the City of Fairlawn's (the "City") financial perforntancc provides an overall review of the City's financial activities far the year ended December 3l, 2009. 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 enltancc their understanding of the City's financial performance. Financial Ilighlif;hts Key ftnancial highlights for 2(]09 are as follows: - The total net assets of the City decreased 5l ,068,649. Net assets of govemnental activities decreased S 1,[}68,649 or 1.48% from 2008, to a total of "70,920, l G6 in 2009. r General revenues accounted for 512,942,620 of total gvvenunental activities re4•er~ue. Program specific revenues accounted far 5l ,370,459 or 9.57°ra of total governmental activities revenue. The City had 515,381,72$ in expenses related tv governmental activities; 51,370,459 of these expenses were offset by ]}rogram specific charges for services, grants or contributions. The remaining expenses of the governmental activities of 514,011,269 were offset by general revenues {primarily prvpet~ty taxes, income taxes and unrestricted grants and entitlements, including Joint Economic Development District (JEDD] revenue). ~ The City has three ma}or funds, the general fund, lavnd retirement fund attd capital improvement fund. The general fund, the largest major Ftmd, lied revenues of 511,533,28# in 2009. This represents an irtcreasc of 51,027,694 from 200$ rcF•enues and other financing sources, and is due to the elimination of several special revenue and capital improvement funds during 2009. Revenues farnterly received by these firnds are now deposited to the general fintd. The expenditures and other financing uses of the general fund, which totaled S l 1,19$,971 in 2(109, increased 541$,287 from 2008, also due tv the elimination of fitnds as those expenditures are charged tv the general fiord as their respective fiord balances are exhausted. The net increase in fiord balance for the general fitnd 4vas 5423,630 or b.50%°. The bond retirement fund had revenues of 5265,414 in 2009. The expenditures of the bond retirement fund totaled 5299,699 in 2009. The net decrease in fund balance far the bond retirement fund was 534,285 yr 3$.6$°/a. The capital impro~°ement fund had revenues and other financing sources of 52,006,651 in 2009. The expenditures of the capital improvement Fund totaled 52,916,566 in 2009. The net decrease in fund balance for the capital intprovemcnt fiord vas 5904,915 or 26.70%. The decrease is attributed tv the see°ere restriction of transfers into the capital improvement fund. Using this Annual Financial Report This annual report consists of a series of financial statements and notes tv these statements. The statements are organized so the reader can understand the City as a financial 44•hole, au entire operating emit}°. The statements then proceed to provide anutcreasingiy detailed look at specific financial activities, The statement of net assets and statement of activities provide irtfamtalion about the activities of the City as a ~4•hvle, presenting both an aggregate G•icw of the City's finances and a longer-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 ~4'hat remains for future spending. The fiord financial statements also look at the City's most significant funds with all other nonmajor fiords presented in total in one: cohrmn. CITY OF FAIRLAV4'N, OHI^ MANAGEMENT'S DISCUSSION AND ANALYSIS FOR TIIE YEAR ENDED DECEMBER 31, 2449 CINAUDITED Reporting the Cit}• as a ~Vhnle Sfrrfenierrl of Nel fusels rrrrd llre Sfaferrrerrf of ticlivilies White this document contains a large number of funds used by the City to provide programs and activities, the view of the City as a whale looks at all financial transactions and asks the question, "I-low did ~4=e do Financially during 2009?" 's'he statement of net assets and the statement oFactivities answer this question. These statements include all assets, liabilities, revemtes and expenses using the accrual basis of accounting similar to the accounting used by most private-sector compar7ies, This basis of accounting will take into account all of the current year's rep°enues and expenses regardless ofrvhcn cash is received or paid. These two statements report the City's net assets and changes in those assess. This cltange in net assets is important becarrse it tells the reader that, for the City as a whole, the financial position of the City has improved or diminished. 'T`he causes of this change may be the result of many factors, some financial, soaze nat. Non-Fsnancial factors include the City's property tax bast, current property tax laws in Ohio restricting revenue growth, facility con{Gtions, required cvnununity programs and other Factors. in the statement of net assets and the statement of activities, the Governmental activities include the City's programs and services inclyding police, fire and rescue, street maintenance, capital improvements and general administratiari. 'T'hese 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 formd on pages 1S-1G of this relaort. Reporting the City's ~1vst Significant Funcls I'rrur! Frrrrrrrcirrl Sfrrlerrrerrls 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. '[`hc Cily, like other state and local govemntents, arses fluid accounting to ensure and demonstrate compliance -vith finance-related legal requirements. All of the funds of the City can be divided into t~vo categories: governmental funds and fiduciary fiords. Fund financial reports provide detailed information about the City's major funds. The City uses many funds to account for a multitude of fiaianciai transactions. ITowever, these fintd financial statentenls focus on the City's most significant funds. The analysis of the City's major governmental funds begins on page 9. Goverrarrrerrlrrl F'rrrrrls Govenunental funds are used to account for essentially file same functions reported as goverunental activities in the govennttent-wide financial statements. f-Io-4=ever, unlike file government-wide financia4 statements, gover-nmenfal fund financial statements focus on near-term inflows and outflows of spendable resources, as well as an balances of spendable resources available at the end of the fiscal year. 5ucl~ 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 gvvenunent-wide financial statements, it is useful to compare the information presented far governmental fluids with similar information presented for govenunental activities in the government-wide financial statements. E3y doing so, the readers may better understand the long-term impact of the government's near-term financing decisions. Loth the governmental fund balance sheet and the governrziental fund statement of rev°enues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. CITY OH I''AIItLA1~'N, ~H[~ MANAGEMENT'S DISCUSS[ON AND ANALYSIS FOR THE YEAR ENDED DECEMBEf2 31, 2449 UNAUDITED The City maintains a multitude of individual governmental funds. The City has segregated these funds into major funds and nonmajor Ftutds. The City's major governmental funds are the general fiord, band retirement fiord and capital improvement fund. Information for major funds is presented separately in the governmental fluid balance sheet anti in the governmental statement of revenues, expendihu•es, and changes in fiord balances. Data frotn the other govenunental fluids are contbined into a single, aggregated presentation. The basic gvvernntental fund financial statements can be found on pages 17-21 of this report. Fiduciary Fttieds 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-vvide financial statement because the resources of those funds are not available tv support the City's own programs. The City's only fiduciary funds are agetrcy funds. Agency funds are custodial in nahu•e [assets equal liabilities] and da 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 flee basic FirraucialSlaleruerrls The notes provide additional inforni3tivn that is essential to a full understanding of the data provided in the government-wide and fund financial statements. These notes to the basic financial statements can be found vn pages 23-47 of this report. Gv~•crnmrnt-~1'fdc !h'lnancial Analysis The Statement of Net Assets provides the perspective of the City as a 4~°hale. The table below provides a summary of the City's net assets far 2009 compared to 2(}08: \el assets Gv~cnuncntal Gorernnrcntal Activities Activities 2009 2008 Asset Current and other assets $ 16,884,184 S 18,SG 1,317 Capital assets, sect 5fi,08t,316 G5,912,702 Total assets 82,970,500 84,774,019 Liabilities Current anti outer liabilities 3,195,887 3, ! 86,903 Long-torn liabilities $,854,447 9,598,305 'T'otal liabilities 12,050,334 12,785,204 yet Assets ln~'estcrl in capital assets, net of related debt 58,554,4G4 57,55G,28{] itestricteti 5,~f50,323 `1,581,819 Unrestrictecl ._5,379 G,750,71G Total net assets $ 70,920, l GG 5 71,988,8 l5 C)v~er time, net assets can serve as a useful indicator of a government's financial position. At December 3l, 2049,. the City's assets exceeded liabilities by 574,920,16fi. S CITY ~F FAIRLA~VN, ~H1[l MANAGEMENT"5 DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBE€~ 31, 2009 UiVAUD[TED Capital assets reported vn the government-wide statements represent the largest portion of the City's assets. At year-end, capital assets represented 79.65% of total assets. Capital assets include land, land improvements, buildings and improvements, machinery and equipment, licenser! vehicles, infrastructure and construction in progress. Capital assets, net of related debt tv acquire the assets at December 31, 2009, were 558,554,464. These capital assets are used to provide services to citizens and are trot available Far 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 sortrces, since capital assets Wray not be used to liquidate these liabilities. A portion of the City's net assets, 55,450,323, represents resources that are subject to external restriction on ho«• they may be used. ht the governmental activities, the remaining balance of unrestricted net assets of $6,915,379 may be used to meet the government's ongoing obligat'tvns tv citizens and creditors. The table below shv~;~s the changes in net assets for tiscal years 2009 and 2008. Change ¢t Nct Assets Gorcntmental Gvvemmettlal Activities 2[709 Activities 2OD8 Revenues l'rograrn revenues: Charges for services $ 849,022 $ 767,7$9 Operating grants attd mntrbutions 154,749 378,9$2 Capital ~*rants and contributions 66,688 81,690 Total progt~nt revenues 1,370,459 1,22F,~1Gl Lateral revcttues: Propcxty attd other tapes 1,052,742 1,005,369 Income ta.~es 7,918,1 ]0 8,603,919 Unrestricted grants attd attitlemestls 1,290,485 1,144,046 J Ei}D revante 2,437,592 2,538,263 htvestment earnings 138,731 430,4215 Miscellaneous 104860 161, 533 Total general revalues 12,942 b20 13,93b,555 Total re<•enucs $ 14,313,079 $ 15,155,017 CITY QF FAIRLA~VN, ^HI~ MANAGEMENT'S []ISCUSS[C]N AND ANALYSIS FC]R TEiE YEAR ENE]ED DECEMi3ER 31, 2t)49 UNAUDITED Erpenses General gover7unent Security pf persons and property Public health services Transportation Cpnrnnmiry environment Basic utility services Leisure time activities Interest anti fiscal charges 1'vtai expenses Change in net assets ~Iet assets at beginning of year Net assets at cnci of year Ca-•ernrnental Acti-•itics Change in hlet Assets Governmental Governmental Activities Activities 2049 2448 ~ 2,757,297 5 2,642,555 G,818,565 6,632,126 116,288 113,303 3,776,443 3,851, l23 76,961 65,7so 1,424,612 1,252,302 425,772 397,637 385,744 424, l 84 15,3$1,728 15,381,470 {1,468,649) {216,453) 71,9&8,815 72,205,208 5 70,924,166 ~ 71,988,815 Governmental activities rtet assets decreased S 1,008,649 in 2009. This decrease is a result of lower revenues anti an increase in operaling and capital casts. Security of persons and property, which primarily supports the operations pf the police anti fire departments accounted for 56,818,565 of the total expenses of the City. These expenses «•ere partially funded by 5204,45U in direct charges tv users of the services and X2,018 in operating grant and cvritributions. Transportation expenses totaled 53,776,493. Transportation expenses were Partially funded by 5674 in direct charges to users of the services, and 5452,73 f in operating grants and coutribtrtivns. The county, state and federal governments conlributed to the City a total of 5454,749 in operating grants and contributions. These revenues are restricted tv a particular program yr purpose. Cif the total operating grants and contributions, 52,418 subsidized security of persons and property and $452,73 l subsidised transportation programs. General revenues totaled ~ 12,942,620, and amounted to 90.43% of total governntental revenues. These revenues primarily consist of property and income tax reF•enue of 58,970,852 and JEDD revenue of 52,437,692. I I..II ~ '` ~ 11. ;! I `r,' l .. ~ 1.1 I~. - . i'~ li,'I ~. II~~.~l:i:~ lil' I _.'I`~'~.I I-. .~ _. .'I ...'llll'i.~.'..~~ :~ .. I.. ..~,. ., ~.'i" .~. it II~: ~. .~ ,. ~I~.'•I I:. ~,. Iii:-~. il':'I~. :: \~. ~ .I lli~ i '..L" .~ I" '.~ `. l'. 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II,. : I!I; il~ ~.,1 I~Ir.~,. .i.,n I ~:~n~.i I:, . r.~lr. ,I, nr< II U .:U_.~ II' ~~i I l.\ i ~. ., I:I ICI II `, ...i. •. rll~~.l i::. ij ii'.,,. I.. .~ I-. 1 .., ~I; ili iii•.. ..~ ~ .~I~ .n. f _ I: ~.,il ~:l ~ '.'I~.'•I..'I. I rl. i "',L':.^ „l Itl~~. I ~... :'1 ~~.'.:ii i !_ l:, tll~." ^:I:II. :..,~C :~I :il...lll '..t.. ~'ll ~ :III ~.~•i' I°~rEr~'llllitnr~~~ - f~~i~ral 1~c,~r ,'_llil~)' F~ilrlxiiltlrt~~ k~~i~+'~il 1 i~al~ :'.Uli`i I:. ,~,.. ' ~ i ~~ / \ I .. . _. _~. ,'~~v~,l !,',~rrrrrrr'r,r 1 r,rt~~' . .. I '111.:11::I:I . I'.~., Ill.. .. .t'I I!,~•'i~ -1 i!i ;I:1 III:: I`;I I'.I I: ,' .il '. Iii": r,l :I.I' ! I.I.. :~I.!^, . 1,IY?'? ~ 'll,~ I ;l .. .... II' I i.. ~. i~.ILII~. .~ 1~1'. I•'. ~. I,'!II,'!:L'I ~. 11.:• ~•.. ~. .. .. i ~ _.. .. CITY OF FA[RLAL~'v, DIiI^ MAIVAGEiWENT'S DISCUSS[QN AND ANALYSIS F()R THE YEAR ENDED DEC:EiV1BER 3l, 2449 UNAUDiTE^ Crrpilrr! Isrprove--re-r~ Fre-rd The capital improvement fund had revenues and other financing sources of 52,046,65 l in 2049. The expenditures of the capital improvement fund totaled 52,916,566 in 2009. The net decrease in fund balance for the capital improvement fund vas 5949,915 or 26.70%. Budgelirrg Higlrligirls The City's budgeting process is prescribed by the Qltiv Revised Code (C}ftC). Cssentially the budget is the City's apltropriatio~ts Gvhich are restricted by the arttor~nts of anticipated revenues certified by the County Budget Commission in accordance with the C3RC. '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 fiord. Budgeted income tax revenue was decreased to reflect the decrease in income tax, however the amount recorded as revenue was much greater because the City did not make the anticipated refund of over one million dollars, which is recorded as a revenue adjustntcnt. The amount budgeted far investment income was increased to reflect actual earnings. All other chartges in budgeted revenue are related to the elimination of fiirtds process that began in 2049. The general fund now receives numerous revenues previously receipted to other funds, such as; hotel tax from the barks and recreation fund; aiubulance fees front the fire equipment tirnd; cable franchise fees from the park capital fund, and mayor's court costs from the children adolescent education fund. Likewise, budgeted expenditures were changed to retlect activities absorbed by the general fund, previously paid from special revemre or capital irnprovetnent funds; mast notably park expenditures now recorded in the general fund as leisure time activities. Cost saving measures and restrictions imposed by the Mayor in 2449 resulted in savings in e~°ery type of expenditure category in the general fiord. Capital Assets and flcbt Administration Capifrrd Assets At the end of fiscal 2049, ilte City ltad SGG,486,316 (net of accwnulated depreciation) invested in land, land impravernents, btrildings and intprvvements, ntachineiy and equipment, licensed vehicles, infrastructrrre and construction in progress. The fvllo~ving table shaves F'sscal 2004 balartces compared tv 2408: Capital tlssets at 17eeembcr 31 (let of Depreciation) Land Land intprvvcntcnts Buildings and intl}rvventznts Machinery and equipment Licensed vehicles intiastructurc Construction in progress Civverrunental Activities 2009 2008 5 3,224,888 8#5.282 11,424,22 l 1,960,986 1,503,364 4b,550,472 981,107 S 3,224,883 665, i 65 1 1,340,063 1,826,777 1,514,755 47,203,555 177,499 Totals S 66,086,316 S 65,912,742 l2 ~ II1~[11' f~.lilti 1i'.e,(11110 \1 1~: 1t 11 11' ,\ i .~ Ill'~i ! ':~I(}\ \~~: i \`.:`~ .l.l ~'~' I i11; !III' ! l '~.: 1 ~~-1?I ;~ lil l I `,1 t1:!~ ,I, .'lli!; 1 `, 11 ' ~I I I I i ~U.~ ... ''I~~~'• ~IU ., '.:1~: ICI ~.~1, i{~.' .'I :~~I~'_, `_CII'I'~.~ i-.i ~.i'~:It'!~ ~ ..' l', l ':I ;'~~. ''I `, .~{il :•~ ;ll iii ~'I:U~., 31111:11 ~~GCIc-I,ft~i'I~11111C'III H .~i~l ll if ll~~ (;a ?]t;il ~1til~ ed-trot: ill El]{`]ll :; .1t'1R11lC~ ~U1f'i ?III,1S I I, _ _. ,/, .. I - - ~ ~ i i I i ~ i I ~ I `. f I ~ II ~ ' \ i i _. _ ; ~ ~` l ~ _ _w _ Y , i ~ ~~ fL~xE:Y ~4~ ~ .. ~-4 ~ '~°'~ ~ ~~ ` I . ~ .. r ~, L. -- ~. ' '.... 4 j .......__. ~ .. ., ,._ .__..._. `. ~ % /' f. ~ i i J ` i I•: l ''.I •.', i~ '~ l':'•I~".i .I . •:I ..1 '. I il!i~...~`-1I,~'II!t' .. `i!l ~l II Ills 1'.: . , '.i I'.. ! I l{'.'. ~ l u'' ~'I I~ ~I I'' - .. ~..'~{. t' I~ir. .I~_~:' II~.' I`.'. .s l-.. it ll .~'.i i~~~.' .I ~: ~.! ~'~. `, I!I~ ~.'•Il In '.I~.: ( I ,- ilia .., ..,~ ,~ "'I I!.I ,~n ~,l ~.~' ~IIY. i:'. .I I';','il.~~.~ II..I ., . :i~. ,I~ I! ':I`I ~i.' I'.~, i`~. .. .'L !:,. .~~t ~~:- I I' - I,':J ~I :Il1:ll;' ... ~ .I!`.~I I!'.I I!:' I._,' li 1, ~-;,... I~!il~' is I. ..ill.. I'•I~I, .. !l:',.I~~ ...-~- ~ ,':I I~ (II`, I~,,I~ :it, I ~ ..:I~..il .~~~.~I1 i .t ..I .~l ~ . il l'I. ~`~r.' ~`i. ~!i_ ~' II Il~.l I' ~, I .'~.- I'. i•I ~',' i I~'. ~ ~::III-''.l !~ .~. ':., 1)~ !~!. irliuitri+Ir ulin~~ I ir• CII~~-. li .. li'~. !~ I ., ,n:~ I.I r t~l~li !lip :.: r~iiil~~ -il I'•~ I ~_i~~:_:. ;{ +I~ilin I .! .'ul~ _ ~('(l~i `i:n ~ ~~,I. r .II... I II. I. .. .' .t~ '. 11, - I ~ ..II ' I. I '.I nl~ l .ti.t• , , ~'. .,J,' 1 I .: ~I-'a~'-. ~I•.~I.I •. ~~II i'•.~ I ~I!~. .'I I.:-I,:I Il t~.lll".ii.. , inlu~niir (~nnliilinn: antl \c~1 1~c31~~5 t;ctirral I~unil I>tn1~~t'I lltl{lulll, C1'I`Y DF FAIRLAI~'N, QH[O MANAGEMENT'S DISCUSS[~N AND AiVALY5IS FAR THE YEAR ENDED DECEMBER 31, 2009 [..1NAUDITED '['he 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 for C}hiv .lobs Ready Sites funds to expand the park. The City is proud to offer outstanding city services to its residents. ]n addition tv excellent police arrd fire protection, Fairlawn safety forces are active in the cvnununity, offering education programs such as Drug Abuse Resistance Edracatian (BARE}, Fire Prevention, and Safety Town far our youngest residents. Fairlawn pvl'sce support neighborhood Block Parent groups, offer residential checks and a Senior Call program tv cheek on senior citiaens living alone. The popular Special 'Traffic Ettfarcement Program boosts traffic control where residents mast 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 Mwricipal Service Center Complex houses all public service functions and equipment in one area. The City provides trash and recycling services at nv charge tv residents at the Andre~v 5ambati 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 childrers and adults. The Learning Resource Center, staffed with afull-time Naturalist, offers nature-relaters programs and lectures to groups of all a;;es. The City is completing the addition of adult and youth soccer Celds to the l:airla~tn parks system. The new fields ~~Fill be fully v[terativnal next spring. The City's primary revenue source is the 2°fa local income tax withheld an the estimated 4{3,000 people warkiztg in the City. Due to the economic conditions in our area, incarne tax receipts fell by 5.44% in 2004 as compared to the previous year, •fhe City is projecting a slight decrease iu general fund revenue in 2010. Experrditures for 2010 are budgeted at 3.6% greater than 20x9 actual expenditures due to moderate ~~•age increases, general inflation and the elimination of several special revectue and capital impro~°enrent funds. The City is taking steps to farther reduce 2010 expenditures. Programs supported by the general fund are budgeted at the same level of service as last year. The City has instituted a hiring freeze and is finalising a voluntary selaaration incentive aimed at reducing personnel costs. Contactittg the City's Financial lianagement •1'his financial report is designed to provide our citiaens, taxpayers, investors and creditors with a general overview of the City's f-finances and to show the City's accountability for the money it receives. ff you have giro lions about this report or need additional financial infor-~nativn, contact Mr. Jerome L'. Apple, Finance Director, Ciry of Fairlawn, 3487 S. Smith Road, Fairlawn, Ohio 4}333. 14 C1TY t]F FA[RLA~VN, DHID STATI;ATC1dT DF NET ASSETS DEC)Ml'3Elt 31, 2009 Assets: Equity in pooled cash Ind cash equivalents..... ... . Cash and cash equivalents in segregated accounts .... . Receivables (net of allv~~ antes fear uncollectibles}; incarne 1a~es . . Real and oilier taxes ... ... ... ..... .... . Accrued irtteresl .... ... ... .... .... .. . Special assessments .... .... ... ....... . Uue From other gvvennnenls . ... ........ ... . Prepayments . . . . V3aterials and supplies in4•cntory. .. . Capital assets: Land and construction in progress. .. . Depreciable capital assets, net ..... ... .... . Total capital assets.... .. . Go~•ernmental Actla~ities 11,333,286 49,835 1,825,41 1 1,018,847 89,591 15,4? 2 I , l 82,634 890,937 95,057 3133,764 4,205,995 61,880,321 66,086,3 l6 Taal assets........... .. .. 82,970,500 [.ialailities: Accoiirtts payable.... .. 1,363,738 Contracts payable .... ... ... .... ... ..... 23},264 Accrued svagcs and benefits 101,208 Due to ullter govenunents .. .... ... ... ..... 584,655 Unearned revenue„ ... .... ... .... ... ... 370, l06 Accrued interest payable . .... .... ... ..... 38,916 Long-lean liabilities: Uue within one year .. ... ... .... .... .. 1,292,713 Due in more than one year .. 7,5(i I ,734 Total liabilities ..... ... ... .... .... ... 12,050,334 Nct assets: In4'cstcd in capital assets, net of rciated debt . 58,554,464 Restricted f'or: Capital prDJeC[S .. ... .... ... ... .... 3,224,297 Debt service 782,569 SeciFrity of persons and property .. 587,7#2 -Transportation projects.. 734,$59 Leisure lime actin^ities. 1,014 Cllher purposes ... ... ... ..... ... .... 1 19,837 Unrestricted. 6.915,379 Total net assets . $ 70,920,1 b6 SEC ACCDl~3PANYI1iG NDTES TD'THE SAS1C F[NAI~CIAL STATChTl:NTS 15 CITY pF FAIRI.AIVN', ^H[p STATEMENT OF ACT[V1T1E5 FOR THE YEAR ENDED DECEMBER 31, 2009 \et [Expense} Revenue and Changes in Program Revenues itiet Assets Operating Capital Charges for Grants and Grants and Governmental Expenses Services Contributions Contributions Activities Governmental Activities: General government . .. 5 2,757,297 S 489,038 5 - ~ G6,688 S [2,201,571 } Security of persons and property.. ....... 6,818,5b5 204,050 2,01 $ - {6,612,497] Puhlic heahh services .. i 16,288 - - - {1 16,288] Transportation .. ... .............. 3,776,493 670 452,731 - {3.323,092) Community environment .......... ... 76,961 4,934 - - {72,027} Basic utility sen•ices ........... .... 1,024,612 13b,954 - - (8$7,658} Leisure time activity .. 425,772 13,376 - - (112,396} [nterest and Fiscal charges ......... ... 385,74D - - - (385,746] 'Total governmental activities..... .. S i5,3f31,72$ S $49,022 S 454,749 S b6,688 [14,01 l,2fi9) General Revenues: Property and other taxes le~•ied for: General purE~oses . .. 775, i 35 Police and fire pension . . . . .. 194,344 Parks and recreation ..... .. ... ..... . ....... $3,263 ]ncome loxes levied For: General purposes . .. ... (,064,251 Capital projects ... .. 1,853,859 JEDD rc~enue ... .. 2,437,692 Grants and entitlements not restrict ed to specific programs . 1,290,485 Investment earnings ... .. .. 138,731 Miscellaneous ... .. .. l0ti,860 Total general revenues. . . . . .. 12,942,620 Change in net assets..... .. .. .. (1,068,649] Rlet assets at beginning of year ...................... 71,985,815 Net assets at end of year . ..................... 5 70,920,1_6 SEF. ACCOMPANYING NpTES TO T[[E BASIC FINANCIAL STATEMIENTS l6 C[TY DF FAIRLA~V\, DH[D BALANCE S}FEET GOVERN~YtE\TAL FUNDS DECEMC3ER 31, 2009 Assets: Equity in pooled cash and cash equivalents. . Cash and cash equivalents in segregated accounts .. . Receivables (net of allowance for uncollcctibles}: f ncome taxes.. .. .. . . . [tea! and other taxes ............. . Accounts.. . Accrued interest ............. . Special assessments .... . }7uc from other funds . . Due from other goventmenss... . l repayrncnts . . Materials and supplies inventory. . . ..... . Total assets . . . . [,iahilities: Accounts payable .. . Contracts payable .. .. . Accnied wages ancf benefits . .. . Duc to other funds ............... . Due tv other govemmenis . .. .. . Uneanred revenue. .. . Deferred revenue ............... . 'Dotal liabilities . .. .. . . . Fnnd Balances: Reserved for encumbrances .. . . . Reserved for prepayments. . . . Reserved for materials and supplies inventory. . Reserved for unclaimed monies ... ..... . Reserved tar debt service .. ... ...... . Unrescn•cd: Undesignated, reported in' C;etteral fund ....... .. ...... . Special rep°cnue fiends .. . Capital prcjccts funds . Dotal hmd balances .............. . Total liabilities and fund balances .... ... . Bond Capital General Rctirentent Inrpryvement Other Total Governmental Governmental Funds E'unds S 7,041,420 5 5x,344 S 2,188,433 S 1,749,039 S 11,333,286 49,835 - - - 49,835 1,369,058 - 456,353 - 1,$25,411 794,586 - - 224,261 1,61$,847 84,368 - - 5?23 89,591 14,245 - - 1,177 15,422 - 741,936 440,104 - 1,182,034 _ _ - 5D SD 716,351 - - 15D,586 890,937 95,657 - - - 95,057 367,728 - - 16,636 383,764 S 10,556,648 S 796,274 $ 3,384,89D S 2,146,422 S 16,884,234 S 1,257,032 ~ - S 92,469 S 14,237 5 1,363,733 9,200 - 15},275 70,789 234,264 1 D3,513 - - 695 104,208 SD - - - 56 247,955 - - 336,7D0 584,655 676,749 - - 193,357 870,106 1,31$, i 87 741,936 640,505 127, 156 2,327,773 3,Gf2,686 741,930 887,249 742,934 5,98=4,799 454,942 - 134,785 79,216 668,943 95,057 - - - 95,057 367,728 - - 16,036 383,764 24,175 - - - 24,175 - 54,34=1 - - 5=1,34} 6,062,060 - - - 6,002,660 - - - 1,242,099 1,242,699 - - 2,362,856 66, f 37 2,42$,993 6,943,962 54,344 2,497,641 1,}03,488 10,899,435 5 ]0,556,648 S 796,274 S 3,381,&9D S 2,116,422 S 16,$34,234 _ SEE ACCO14iFANYING \O'I'ES Tt7 T11E F3ASIC F1Nr1NC1AL STATEh3E;NT5 17 CITY OF FA[RLAFYN, OH[0 RECQNCILIAT[ON OF 'FO'CAL GOVERNMENTAL FUND BALANCES TO NET ASSETS OF GOVERNMENTAL ACTIVITIES DECEMBER 3 i , ZD04 Total gay°crnmental fund balances $ Iq,899,435 .~f~ravunrs repor•teclfor•,~or°errr~iie,r[a! rrcri~°rrres r,i rize srnr~,~ic,i! of rred crss~[.s nre differerrr bcc•rrrrse: Capital assets used in govcrninental activities are not financial resources and therefore arc not reported in the funds. bb,t)8G,31G Other loner term assets arc not available to pay For current period expendihtres and therefore are deferred in the funds. Income taxes receivable 5 801,b03 Properly & other taxes receivable 9,G87 Licenses and permits receivable SD,935 Intergovernmental receivable 767,152 Special assessrrents receivable I,I82,D34 [nvesttnent i~rcomc receivable G,949 Other receivable 9,11 Total 2,827,778 Long-tcmr liabilities are not due and payable in the current period and therefore are not reported in the funds. 'Che long-term liabilities are as follows: Accrued interest payable {38,916} Creneral obligation bonds {Ca,785,DOD} Special asscssrncnt bonds (3Gt7,Qgq] C)PWC loans {38b,852} Compensated absences {1,322,595} (8,893,363} i<'et assets of go~'ernmental activities S 7D,920,1bb SEE ACCO~1l'AIhYiNG NOTES TO TIIE BASIC' FINANCIAL STATEMENTS l8 C1T1' DF FAIRLA~3'`, dHld STATE~r1E,N"f l7F REVENUES, EXPENI)[TURES AND CIIANGES IN FUND 1311LANCE5 GdVERNiv3EN1'AI. FUNDS FOR T][E YEAR Ei\DED DECEMBER 3l, 2009 Re-•enrres: income taxes ... .. . Property and other taxes . Charges for services ......... ... . Licenses and permits ............ . Fiitcs and forfeitures .......... .. . [ n to rgovern menta l ......... ..... . Special assessments ............. . . ]nvesttnent income . . .. . . . . . . . . . . . Rentals . .. .. . Contributions and donatiaits . . JEDD revenue ........... ..... . t7tlter ..... ..... .... ...... . Total re4•cnues .. . );xpenditures: Current: General ~U~•ernment. .. . Security of persons anti property ..... . Public health services .... ...... . Transportation .......... ..... . Community environrncnt ..... .. . . k3asic utility sen lees....... .... . Leisure time aelivities . .. . Capital outlay ... . Debt service: Principal retirement ....... ..... . ]nterest and fiscal charges .. ..... .. . Total expenditures......... . Excess {deficiency] of revenues over {under] expenditures . .. . Qther financing sources {uses]: tither '1'vtal Bond Capital Co-•ernmental Governmental General Retirement Improvement Funds Funds 5 5,987,444 5 - S 1,905,945 5 - 5 7,1393,389 765,448 - - 277,607 1,043,055 l 17,869 - - 222, l 12 339,9$1 120,&53 - - 23,682 114,535 213,569 - - 36,552 250,221 1,294,609 - - 455,947 1,780,556 265,414 63,606 - 329,020 208,4913 - - 12,500 220,998 66,918 - - 3,992 70,9}0 1,440 - - l5 1,415 2,650,980 - - - 2,650,980 105,666 - - 3,755 149,431 11,533,284 265,:14 1,969,551 1,066,272 14,334,521 2,639,835 12,597 - 1 12, l35 2,764,567 5,736,067 - - 742,794 6,478,861 116,2.88 - - - 116,288 1,357,902 - - S 12.995 2,37{],89 71,674 - - - 71,674 I S I,r155 - - 196,403 348,555 112,781 - - 222,726 335,507 - - 1,988,34E 698,385 2,686,734 - 224,570 600,000 - 824,570 - 62,532 328,220 - 390,752 10,686,502 299,699 2,916,56E 2,45],941 16,388,708 846,782 {34,285} {947,015} [1,419,669] (1,554,1$7] Transfers in .. .. - - 37,100 475,369 512,469 Transfers out .. {512,46 - - - (512,469) Total other Fu~ancing sources (uses} . . (512,469} `~ - ~~ 37,100 175,369 ~ - Net change in fiord balances 334,313 (34,285} (909,915} {94},300] (1,554,187) Fund balances at beginning vf'vear .... 5,520,332 88,629 3,407,556 2,352,605 12,369,122 increase [decrease] in reserve t'or inventvr-• . $9,317 - - (4,817} 84,50D Fund balances at end of -•ear ....... S 6,943,962 S 54,314 S 2,497,641 5 1,403,488 S 10,899,435 SEE t~CCCJh1Pr1NYlNG \C]TES T[7 l'liE BASIC FINANCIA[. STATEit=lENTS l9 CITY O[' FAIRLALi'N, DH[D RECONC[LiAT[DN OF THE STA'['EiG4ENT OF REVENUES, EXPENDITURES, ANT] CEIANGES 1N FUND BALANCES DF GOVERNMENTAL FUNDS TD THE STATEMENT QF ACT[VI'F[ES FDR 1"HE YEAR ENDED DECEMBER 3 I , 20[}9 Net change in fund halanees -total ga-•ernmentai funds 5 (1,554,187) rlrrrorcrNs repor7ec~f~r governrrrentcrl crclivirres rn the stcrferrren! afrrc[rvilirs rrr•c dif~r:r•[:rr1 6rcrurse: Gay°crtunent funds report capital outlays as cxpendihrres. [-Iv«ever, itt the statement oFactivities, the cosl of those assets are allocated over their estitnaled useful lives as depreciation expense. 'i'bis is the amount by which capital outlays (52,45,748}exceeded depreciation expense (52,166,958} in the current period. 238,790 Gavernntcntal Funds only rcpvrt the disposal oFcapilal assets tv the extent proceeds are received from the sale. In the statement of activities, a gain or loss is reported for each disposal. {65,176} Re4•enues in the statvntcnt oFactivities that do not provide current Financial resources are not reported as revenues in the funds. (521,442) Go~ernntental funds rcpvrt cxpenditures for inventory «•hen purchased. Hvwerer, in the statement of actin°ities, they are reported as an expense tvhcn cvnsurned. 84,SQ0 Repayment oFiaoncl and Ivan principal is an e!tpendintre in the governmental Funds, taut the repay°ntcnt reduces Ivng-tvnn liabilities in dte statement oFnet assets. 824,5?0 in the statement of activities, interest is accnred vn outstanding bonds and loans whzrcas in l;ovennnenlal fintds, an interest expenditure is reported ~ti•lten due. 5,012 Some expenses reported in the stalenteul aFactivities, such as vompensatcd atasences and pension obligations, do not recluire the use vFcurrcnt financial resources and therefore are not reported as expenditures in governnrenlal funds. {$0,716} Change in net assets of go-crnmental activities 5 (1,068,649} SEE AC'CO~4PANYiNG NDTES TD TI1C BASIC FINA\C[AL STATEMENTS ~U CITY pF FAIRLA~VN, OH1O STATFA4CWT OF REVEN[IES, EXPENI]ITURES, ANl] CHAhiGES 1N FUND BALANCE - BUllGE'l' AND ACTUr1L {NUN-GAAP BUDCrETARY BASiS} GENERAL F[]NI} FOR THE YEAR ENUEU I7ECE1~1$IiR 31, 2DD9 Re-enucs: inev~ne taxes. .. . . . Property and other taxes . ......... .... . Charges for services .. . Licenses and permits ........ ....... . . Fines and forfeilanes. .. . Intergovernmental .. ..... ..... .... . . Im•eslment income Rentals . ... ... .... ..... ..... . . Cantrihulions and donations..... .. . 1F.I7D revenue ...... .... ... ... . . O t h e r .......... .... ... ..... . Total revenues . . Expenditures: Current: General government .. . Security aFpersons and property . . Public heahh services .. .... ..... .. . Transportation .. . Conmlunily em~ironutenl . . $asic utility services . Leisure tiirre activities . . . . Total expenditures. . . . Excess (deficiency} of revenues over (under} expenditures ...... ... .. . 3'arlance tFith _ _ Budgeted r~mvunts Final Budget PositiF•e Drignal____ _ Final Actual {Nc ati-c] 5 5,251,726 S 4,751,720 ~ 5,913,767 ~ 1,162,647 617,500 735,989 727,469 (8,520} 3D,OOD 75,DD0 94,551 19,651 SR,750 126,756 12D,853 l D3 147,200 167,200 267,438 46,288 7D4,DDD 1,121,521 1,332,566 21 i,D39 120,006 232,422 237,2D7 4.785 71,7fl0 59,497 66,918 7,451 206 206 1,460 1,2D0 2,ODO,DflD 2,275,600 2,650,986 375,98D 121,D00 121,066 105 566 {15,43 9,129,076 9 56D 299 l 1,458,889 1,798,59D ~ 3,821,11 i 4,133,865 3,136,945 996,919 6,437,657 6,272,42 I 5,42£3,124 34-},297 116,5DD 116,506 116,288 212 1,994.912 2,047,887 1,992,464 55.423 165,(135 169,508 71,671 37,834 229,212 23],212 179,306 55,966 }4,901 158,855 165 534 53,221 12,749,329 13 074 248 l 1,534,435 1,513,812 _ (3,620,259) [3,413,949] 71547 3,342,402 Other financing sources {uses): Proceeds From sale of capital assets. 17,660 17,ODD - (17,00D} Transfers out . ...... ... ... .... _ { 1,661,271) (l, l 15,434_ i512,~}h9} 602,965 _ Total other Cutancing sources (uses} , , .. ... {1,617,271) (1,098,434] [512,4G9~_ 585,955 het change in fund balance .. ... ..... ... (5,267,530] {4,512,3$3} {584,016] 3,92$,357 Fund halancc atlrcginningof}•ear ........ 5,305,713 6,3D5,713 5,3115,713 - Prior Fear encumhrances appropriated . 741,972 7D1,972 7D1,972 - Fund halancc at end of near ....... ~ 1,740,155 5 ? 445,3D2 _ S 6,423,669 S 3,92$,367_ SEE AC'CQhfPANY1NG ?tiC]"i'F5 "f0 TEIE BASIC: hINANCIAL 53'AT[?'sRL'•NT5 2l CITE' pT FAIi2LA~Y\, UH[D STATL•.tifENT pF FI17UClARY NE'C AS5ET5 FIDUCIARY FUNi]S C]ECE~iBER 31, 2004 A~cnry Assets: Equily in pooled cash and clsh equivttlents ...... 5 34,204 Total xssels. 34,204 Liuuilities: Undistributed monies. 34,204 Total liabilities ....... ..... .... ... S 34,204_ 5EE ACCUI~iPANYING iiUTES TD'CHE $AS1C 1=1i~IANCIAL 51'ATEiv1CNTS 22 C1'I'Y ^F FAIRLAli'N, OHID N~]TES TD THE BASK FINANCIAL STATEMENTS F(7R THF. YEAR Ei~DED DECEMBER 31, 20D9 ~DTE i - EfESCRIY'CID~1 DF THE CITY The City ^f Fairlawn (the "City") is a charter municipal corporation established and operated under the laws of the State of Qhio. The City is organized as a lAayor/Council fvrrn of gar•entment, The Mayor, Council and Finance Director are elected. NDTE 2 -SIJIVI~IAR7' OI~ SIGN[PICA~iT ACCDUNTI\G POLICIES The basic tnancial statements (BFS] of the City have been prepared in canfonnity with accounting principles generally accepted in the United States of America {GAAP] as applied to local governrrtental units. The Cvr•ernmental Accounting Standards Board (GASl3} is the accepted standard-setting body for establishing governmental accounting and financial principles. The City also applies Financial Accounting Standards Board (FASB] guidance issued on or before November 30, 1989, tv its governmental funds provided they do not conflict with or contradict GASB pronouncements. The most significant of the City's accounting policies Ire described below. A. Reporting Entity For financial reporting purposes, the City's gFS include all fiords, 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 rrtajvrity of an organisation's governing beard and is either able to irrrpose its will on that organization yr there is a potential for the organization to provide specific financial benefits to, or impose specific burdens ort, 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 Uvard 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 tirtancial 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. '1'hc CopleylFairla~vn City School District and the Summit County Public Library have been occluded from the City's financial statements. Both are legally separate from the City. Neither imposes a ftnancial burden nor provides a financial benefit to the City. The City cannot significantly influence the operations of these entities. The City particil}aces in the Bath-Akron-Fairlawn Joint Economic Development ^istrict {JEDD), which 'rs a jointly governed organization. The JEDD `vas created tv assure the continued economic viability of Bath Township. Anine-member board of directors, three appointed from Bath Ta~4°nship, Akron, anti Fairlawn, respectir•e1y, controls the operation of the JEDD. The board exercises total control ovor the operation of the JIrDD including budgeting, appropriating, contracting and designating management. Each participant's degree of control is limited to its representation on the board. All 2009 JEDD revenues were the result vfthe incante tax levied by the JEDD effective January 1, 1949. 23 CITY OF FAIRLALV\', OIIID Nt7TES TD THE BASIC FINAIVC[AL STATEMENTS FOIt'I'IIE YEt1R ENQED DECEMBER 31, 209 VOTE 2 - SUAii~7ARY OF SIGNIFICANT ACCOUNTING YOLIC[I;S - (Continued) S. Basis of 1Presentatiort -Fund Accounting The City's E3F5 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. Gotilerrurrer:t-ruide Fi+rarrcial Slalenrerrls -The statement of net assets and the statement of activities display infarntation about the City as a ~vltole. These statements include the financial activities of the printery govemsmcnt, except fns fidrreiary funds. The statement oFnet assets presents the financial condition of the governmental activities of the City at year-end. The statement of activities presents a comparison behveen 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 ar department and therefore clearly identifiable to a particular function. Program revemres include charges paid by the recipient of the goods or services offered by the program, grants and contributions that are restricted to sneering the npcrational or capital reyuirentertts 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 identities the extent tv which each business segment or governmental functions are self-tinartcing yr draw from the general revenues of the City. f r[rrt~ I'i+ra+rcra! Slaters+errls - i)uring 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 #"inancial information of the City at this snore detailed level, The Focus of gnves-rtntcntal fund financial statements is on major fisnds. Each ntajar fiord is presented in a separate column. Nonmajor Funds are aggregated and presented in a single coltunn. Fiduciary funds are reported by type. C. Fund ~lccaunting The Cily uses funds to maintain its financial records during the year. A fund is defined as a tiscal and accounting entity with a self balancing set of accounts. There are two categories of funds: governmental and tiduciasy. Gnuer+++rre++lal F'+rrrrts -Governmental funds are those tlu•nuglt which mast gnvenunental functions typically are financed. Governmental fiend reporting focuses on the sources, uses and balances of current financial resources. Expendable assets are assigned to the various governmental fiords 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 dif'terence behveen governmental fund assets and liabilities is repnrtect as fund balance. The following are the City's major govemmerttal fisnds: Gexerrrl Frrrrc! - •flte general fund accnunls for all financial re:snurces except those required to be accounted fns in astother fund. Bond RerrrerxerN -The bond retirement fund accounts fear the accunnilation of resources far, and payntenl oF, long-tern debt principal, interest and related costs. C'r.1++rrrl Irrrprot~ena~n! - •fhis fired is used tQ account for the acquisition and cvnstrlrction of major capital facilities. 2~3 CITY OF FAIRLA~VN, OHID NOTES TO TEiE F3A5[C F1Nr~.NCIAL STAT]/ulEiV'1'S FOR THE YEAR ENDED DECEMBER 31, 2~t}9 \DTE 2 - SiItti911IARY OF SIGNIFICANT ACCDllNT'[it'G 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 casts; [b} financial resources to be used for the acquisition, constrtrction, or impra~°ement of capital facilities; and {c} for grants and vtlter resources whose rrse is restricted to a particular purpose. Fiderciary Furxls -Fiduciary fired 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, private-putpase tnrst firds and agency funds. Tilrst fiords are used tv account for assets held by the City under a tnrst agreemettt far individuals, private organizations, ar atfter governments and are therefore not available to support the City's own programs. Agency funds are custodial in nattfre (assets equal liabilities) and da not involve measurement of results of operations. The Ciry's only fiduciary funds are agency funds. The agency funds are used to account far deposits that will be returned after the proper performance of certain landscape or street repair projects. D, iVieasurement Focus And Basis of Accounting Gover-r-rre-rt-wide Fi-rarrcirrd Slate-rrer~ls -The government-wide financial statements are prepared using the economic resources measurement focus. Al] assets and all liabilities associated with the operation of the City are included on the statement of net assets. Furrri F'irrrrrrrial Slale-rrerrls - Al! gaven~mental firncls are accounted for using a flv«° of current financial resources measurement Focus. 1~'ith this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Tfie statement of revenues, expenditures and changes in fund balances reports on the sources (i.e., revenues and other financing sarfrces} 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 life government-~i~idc f-inancial statements are prepared. Gay°enunental fiord financial statements thereFvre include reconciliation with brief explanations to better identify the relationship between tfte government-~r•ide statements and the financial statements for governmental firds. E. Basis of Accounting Basis of accounting determines when transactions are recorded in the financial records and reported an the financial statements. Gvvermnent-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use lire modified accntal basis of accounting. Agency funds also use the accrual basis of accounting. Differences in the accrual and modified accr-tral basis of accounting arise in the rcevgnitiou of revenue, the recording of deferred revenue and in the presentation of exlaenses versus expenditures. Rereraues - E.rclrara~e acrd ~~ajr-r:rclaarage Trairsrrctio-rs - Revenue resulting from exchange transactions, in which each party gives and receives essentially equal vahte, is recorded on the accnral Uasis ~t-lren the exchange takes place. On a rnvdificd accrual basis, revenue is recorded in the fiscal year in which the resout~ces are measurable and became available. Available means that tfie resvru•ces 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. Far the City, available means expected to be recei~°ed ~~•ithin thirty-one days vfyear-end. 25 CITY OF FAIRLA~VN, OHIO NOTES TD TIIE BASIC F1NAI~CIAL STATEMENTS t'OR TIIE YEAR ENDED DECEMBER 3l, 2009 ~'OTF 2 - SUliAIARY OF SIGNIFICANT r+-CCOU\'TI~G POLICIES - {Continued] Nonexchange transactions, in which the City receives value without directly giving equal value in return, include income taxes, properly taxes, grants, entitlements and donations, Ora an accrual basis, revenue from income taxes is recognized in the period in which the income is earned (See Note 7]. Revenue from property [axes is recognized in the year for vvhich the taxes are levied [See Note 6]. Re~°enue from grants, entitlements and donations is recogniaed in the year in which all eligibility requirements have been sat'sstied. Eligibility requirements include timing requirements, which specify the year when the resources arc required to be used or the year -vhen use is first permitted, matching regturements, in which the City must provide local resources to be used for a specified purpose, and expenditure requirements, itt which the resources are provided to the City on a reimbursement basis. Dn a modified accrual basis, revenue from r~onexchange transactions must also be available before it can 6e recognized. Under the modified accrual basis, the fallowing revenue sources are considered to be both measurable and available at year-end: income tax, state-levied locally shared taxes (including gasoline tax, local government funds and permissive tax], fines and forfeitures, fees and special assessments. U+rear-2erl Reve+r+re r++rr! Deferred Reve++e+e -Unearned revenue and deferred revenue arise when assets are recogniaed before revenue recognition criteria have been satisfied. Property taxes far which there is an enforceable legal claim as of DecemUer 31, 2009, Uut which «=ere levied to finance year 2Q10 operations, and other revenues received in advance of the fiscal year for which they were intended to fiuattce, have been recorded as unearned revenue, [ncontc taxes and special assessments not received within the available period, grants and entitlements received be Fore the eligibility requirements are met, and delinquent property taxes due at Ueccmber 3l, 2009, are recorded as deferred revenue in the governmental funds. On governmental hold financial statements, receivables that will not be collected within the available period have been reported as deferred revenue. F..rpe++seclE.rpe+rrlifrr+•es - On the accnaal basis of accounting, expenses are recogniaedi at the time they are incurred. The measurement focus ^f govenunental fund accounting is on decreases in net financial resaurccs [expenditures] rather than expenses. Expenditures are generally recogniaed in the accounting period in which the relaters fund liability 'ss 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 ~r•ithin an established timetable. The major documents prepared are the tax budget, the certificate of estimated resources and the appropriations resolution, all of 4vhich are prepared on the budgetary basis of accounting. 'i'hc certificate of estimatedl resaurccs 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 knvwr3 as the legal 4evel 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, arc legally required to be brtdgeted and appropriated. 2b CITY DF FAIRLAWN, OHIO NOTES TD 1`IIE BASK Fli~'ANCIAI. S'CtLTEME~TS FOR THE YC.AR ENDED DECEMBER 3l, 2.009 \DTE 2 - SUr~IlIARY DF S1G\I1H'ICANT ACCDiJNTI\G POLICIES - (Continued] Trtr Budget -Alternative tax budget infvrmativrt of estimated revenue and expenditures far all funds is submitted to the 5ununit County Fiscal Officer, as Secretary of the Counly Budget Commissiact, by 3uly 20 of each year, for the period January I tv December 31 of the following year. All funds, except agency funds, are legally required to be budgeted; however, only governmental funds are legally required tv be reported. ~stinrater! Res~rrrces -The County Budget Commission determines if the budget substantiates a heed to levy all or park of previously authvriaed taxes and reviews estimated revenue. The Contrnission certifies its activrts tv the City by September 1. As part of this certification, the Ciry receives the oRicial 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 cantcmplaled 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 mcasttre. Dn or about January 1, the certificate of estimated resources is amended to include encumbered cash balances at December 34 of the preceding year. The certif-icate may be firrther amended during the year if the City f ulance Director determines, acid the Budget Commission agrees, that an estimate needs 1o be either increased or decreased. The anrouttts reported act the budgetary statement reflect the amounts in the original and final amended official certificate of estimated resources issued during 2009. AJ~t~ropr•iatioirs - A temporary al~prol}riation ordinance to control expenditures may be passed on or about January l of each year for the period January 1 to March 3l. An annual appropriation ordinance must be passed by April 1 of each year far the period Jattuary 1 to December 3l. The aplarolariativn 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 fiord appropriations do not exceed current estimated resources, as certified. '1'hc appropriations for a fiord may only be modified during the year by an ordinance of Council. The amounts an the budgetary statement reflect the original artd final appropriation amounts, including all amendments and modifications legally enacted by Council. Lrrpsirrg aj .-fpproprrotrarrs - At the close of each year, the unencumbered balance of eacl3 appropriation reverts to the respective fluid from which it was appropriated and becomes subject to ficture apprapriatious. 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 paalecl and invested in investments maturing within five years in order to provide improved cash managetment. Individual fund integrity is maintained through City rceorcls. Each fund's interest in the pooled bank account is presented an the balance sheet as "Equity in Pooled Cash and Cash Equivalents" vrt the financial statements. During fiscal year 2009, it-vestntents «erc limited to overnight repurchase agreements, certificates of deposit, and the State Treasury Asset Reserve of Qhio (STAR Dhia]. Except for ctvnparticipating investment contracts, investments are reported at fair value which is based on quoted market prices. itionparticipating inveslc7tent contracts, such as nonnegotiable certificates of deposit and repurchase agreements, are reported at cost. 27 C!"1'Y DF FAIRLAWN, OII[O N[3TES TO THE BASIC FINANCIAL STATEMENTS FDR THE YEAR ENI3ED DECEaviBER 31, 2009 VOTE 2 - SUiV1AiAR1' OF SICNIFICA~iT ACCDUNTlNG FOLCCIES - {Continued} The City im~ested fitnds in STAR Ohio during fiscal 2009. STAR Ohio is an investment pool managed by the State '1'rcasurer's Office which allo-vs gaventments within the State to pool their funds far investment purposes. STAR Dhia is not registered 4ti°ith the SEC as an investment company, but does operate in a manner consistent with Rule 2a7 of the Investment Company Act of 1940. ]nvestments in STAR Ohio are valued at STAR Ohio's share price which is the price the investment weld Uc sold far on December 3l, 2009, Under existing Ohio statutes all investment earnings are assigned to the general fund unless statutorily required to Ue credited to a specific fund. During fiscal 2009, interest revenue credited to the general fund amounted to 5208,498, which includes S l 10,072 assigned from other City funds. The City has segregated bank accartnts far 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. Far purlaase of presentation art the financial statements, investments of the cash management pool and investments with original maturities of three months ar less at the time they are pin•chased by the City are considered to be cash equivalents. lnvesttnents ~vitlt an initial maturity of more than three months are reported as investments. An analysis of the City's investment account at year-end is provided in Nate ~l. H. lnvetttaries of ]Ilaterlals and Supplies Qn government-wide and fund financial statements, inventories are presented at the lower of cast or market an a first-in, first-nut basis and are expensed when used. Inventories are accounted for using the eonsutttptian method. Dn the fund financial statements, repar-ted material and supplies inventory is equally otTset by a fiord balance reserve in the goventmental funds wlticlt indicates that it does not constitute availalale spendable resources even thottglt it is a component of net current assets. lnventary consists of expendable supplies held for consumption. 1. Capital Assets These assets generally result from expenditures in the governntcntal funds. These assets are reported in the governmental activities column of the gaventment-wide statement of net assets taut are oat reported in the I;overnntcntal fund financial statements. All capital assets are capitalized at wst (ar estimated historical cast) and updated far additions and retirements during the year, Donated capital assets are recardetl at [heir Fair market values as of the date received. The City maintains a capitalization threshold of $5,000. The City's infraslruclut'e consists of roads, bridges, eurUs and graters, streets and sidewalks, drainage systems and lighting systems. Improvements are capitalized; the costs of normal maintenance and repairs that dv not add to the value of the asset ar materially extend an asset's lift are nat. 28 CITY OF FAIRLA~'4'N, D[-IED NOTES TO THE BASIC FINANCIAL STATEMENTS E'OR TILE YEAR ENDED DECEMBER 31, 2009 N'DTE 2 - SUhIh9ARY DI' 5IGNIFICANT ACCOUN"1'INC POLICIES - (Continued) All reported capital assets are depreciated except for land and cvnstntction in progress. Improvements are depreciated over the remaining usefu4 lives of the related capital assets. Useful lives for infrastructure ~;sere estimated based on the City's historical records of necessary improvements and replacement. Depreciation is computed using the straight-litre method over the following useful lives: Governmental Activities Descri lion Estimated Lives Land improventenls 25 - 75 years Buildings and itnproventents 15 - 50 years iV[achinety and Equipment 5 - 30 years Licensed Vehicles 3 - 25 years ]nfi•astrrtclure lQ - b0 years 3. Compensated Absences Vacation beneftts are acctued 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 ar some other means. The Ci[y records a liability for accummlated 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 recetve termination benefits and those the City has identified as probable of rcreiving benefits in the ftrhn'e. 't'he amount is based on accumulated sick leave and the cntployees' wage rates at tiscal year end, taking into consideration any limits specified in the City's termination policy. Ttte City records a iialtility for accumulated unused sick leave for ail employees hired before fJecember 31, 1994. The entire compensated absence liability is reported art the govertnnent-vide financial statements. On governmental fund financial statements, compensated absences are recognized as liabilities and expenditures to the extent payments came due each period upon the occurrence of employee resignations and retirements. These amounts are recorded in [he account "compensated absences [aa}•able" in the fund From which the employees «•ho have accumulated leave are paid. The nvncun•ent portion of the liability is not reported. The City had no compensated absences payable in 2009. K. Accrued Liabil9ties and bong-Term Dbligtrtfons All payables, accrued liabilities anc! long-term obligations are reported in the governmr:nt-~r•ide financial statements. In general, govennmental fund payables and accued liabilities that, once incurred, are paid in a timely manner and in full from current financial resources are reported as obligations of the fitnds. llo~vevrr, claims and }udgments 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 are titre for payment during the current year. 29 CITY t]F FAIRI,AVVN, t71[IO NOTES TQ THE BASIC FINANCIAL STATEMF..NTS Felt THE YEAR ENDED DECEMBER 3l, 2~t79 N(]TE. 2 - SUAilIARY ^F SIGNIFICANT ACCOUNTING PQLICIES - (Cantlnued) L. Interfund Balances t7n fund financial statements, receivables and payables resulting from goads and services provided between funds are classified as "due toliCOlll other funds." These amounts are eliminated in the governmental column of the statement of net assets. ill, Interfund Activity Exchange transactions between funds are reported as revenues in the seller funds and as exlaenditureslexpenses in the purchaser funds. f=laws of cash ar goods from arts fund to another without a requirement for repayment are reported as interftmd transfers. htterfund transfers arc reported as other financing sourcesluses in gavernrnental funds. Repayments from funds responsible for particular expenditures.~expecises t^ 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 frmd equity which is not available for current appropriation or use. The unreserved attd undesignated portions of fund equity reflected in the governmental funds are available for use within the specific purposes of the funds. The City reparis a reservation of fund balance For amounts representing encumbrances outstanding,. prepayments, unclaimed monies, debt service and materials and supplies inventory, in the gay°ernmentai Fund Cinancial statements. D. Estitrtates The preparation of the [3FS in confarrnity with GAAP requires management to make estimates and assumptions that affect the amowtts reported in tltc IIF5 and accompanying notes. Actual results may diflFer from those estimates. P. Net Assets Net assets represent the difference bel~veen assets anti liabilities. Net assess invested itt capital assets, net of related debt consists of capital assets, net of accunnrlatec! depreciation, reduced by the outstanding balances of any Uarra«~ing used far the acquisition, construction ar improven;ent of those assets. Nct assets are reported as restricted when there are limitations imposed on their use either through the enabling legislation or through external restrictions imposed by ereditars, g,'antors or laws or regulations of other goG•ernments. Net assets restricted f'vr Other purposes include rurclaimed marries. The City applies restricted resources first when an expense. 'rs incurred for purposes far which both restricted and unrestricted net assets are available. Q. Prepaid items Prepayments made to 4•endors For services that ~viil benefit future periods beyond December 3l, 2~t74 are recorded as prelraid items trsirrg the consumption melhati by recording a current asset tar the prepaid amount and reflecting the expenditurelexpense in the year in which it vas consumed. 30 CITY GF FAIRLA~L'N, OIIIO NC]TES TO TIIE BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2[769 NOTE 3 - ACCUUN'TAB1L[Tl' ANU COt1~1PL1At\CI'; Change in Accounting Principles For 2009, the City has implemented GASB Statement l,o. 52, "[.and arnd Otlner EZeal Estate Held as Investments b Endowments", GASB Statement Na. 55, "The Hierarchy of Generall Acce ted Accounting Principles for State anti Local Gvvenunents", GASB Statement Na. 5ti, "Codification of Accountin and Financial Re ortin Guidance Contained in the AICPA Statements vn Auditin Standards", and GASB Statement No. 57 "Other Pvstem la anent Benefit OPEB Measurements by A Employers anti Agent Multiple-Employers". GASB Statement No. 52 improves the quality of financia4 reporting by requiring endowments to report their laud and other real estate im~estnzents at Fair value, creating consistency in reporting among similar entities that exist to invest resources for the purpose of generating income. The implementation of GASB Statement itio. 52 did not have an effect on the financial statements of the City. GASB Statement No. 55 incorporates the hierarchy of generally accepted accounting principles {CiAAP] for state and local ga~~ernments int^ she GASB's authoritative literature. 'T`he implementation of GASB Statement Nv. 55 did not have an effect on the financial statements of the City. GASB Statement Na. 56 incorporates into tine GASB's authoritative literature certain accounting and financial reporting guidance presented in the Annericara Institute czf Certified Public Accountants' {AICPA) Statements vn Accounting Standards. The implementation of GASR Statement Na. 5G did oat have an effect vn the financial statements of the City. GASB Statement No. 57 estaUlishcs standards for the measurement and financial reporting of actuarially determined infvrmatican by agent employers with individual-employer OPER plans that ha-•e fewer that f OD total Talon members and by the agent nutltiple-ennploycr OPEB plans in which they par•ticipale. The implementation of GASB Statement No. 57 did not have an effect on the financial statements of the City. i1'OTE 4 - Ei~U[TY l\ POaLEU CASH ANU CASH EQU11'ALENTS State statutes classify monies held lay the City 'tnto three categories: Active deposits arc puUlic deposits necessary to meet current demands on the treasury. Such tnanies must be maintained either as cash in floe City '['reasury, in canunercial accounts payable yr withdra~rable on demand, including negotiable order of withdrawal {NOGV} accownts, or in money market depcasit accounts. Inactive deposits are pulalic deposits that Council has identified as not required far use within the current five year laeriad of designation c+f depositaries. Inactive deposits roust be evidenced by certificates of deposit mariu•ing oat Eater than the end of the current period of designatifln of depositories, or by savings or deposit accounts including, but oat limited ta, passbook accounts. Interim deposits are deposits of interim monies. lntcrinn monies are those monies «•hich 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 delaasit maturing not more than one year f'rorn the date of deposit or by savings yr deposit accounts including, but not limited to, passbook accounts. 3l CITY OF FAIRLA~~'N, D}IID lv`DTES TD TI}E BAS[C F1NAi~`CIAL STATEMENTS F'OR TIIE YEAfi ENflED DECEMBER 3l, 2009 NDTE 4 -EQUITY 1N POOLED CASK AND CASH EQUIVALENTS - [Oontinued) Interim monies Wray be deposited or invested in the following: 1. United States Treasury itbtes, 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 arty other obligations or securities issued by arty federal government agency or instrumentality, including but not limited to, the Federal National Mortgage Association, Federal Monte E.aan Bank, Federal Farm Credit Bank, Federal }ionte Loan Mortgage Corporation, Government National ~ivrtgage Association, and Student Loan iViarketing Association. All federal agency securities shall be direct issuances of federal gvvemment agencies or instrumentalities; 3. Written repurchase agreements in the securities listen above provided that the market value of the securities subject to the repurchase agreement must exceed the princil~af value of the agreement 6y at least two percent and be marked to market daily, and that fire term of the agreement must not exceed thirty days; 4. Bonds Ind other obligations of the State of Dhio; 5, i~a-load money market mutual fiords cvnsistirtg exclusively ofabligations 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 instihrtions; G. The State Treasury Asset Reserti c of Ohio investment pool (S 1'AR Ohio}; 7. High grade commercial paper for a period not to exceed 1$0 days in an amattnt not to exceed twenty- five percent of the City's interim monies available for investment; and S. Bankers acceptances For a lteriad not to exceed l80 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 ^r mare in the fallowing: L Bonds of the Stale of Dhiv; 2. Bonds of any municipal cctrporatian, village, cotntty, township, or other political subdivision of this State, as to «°hich there is na default of principal, interest ar coupons; 3. Obligations of the City. Protection at' the City's deposits is provided by the Federal ^eposit ]nsurance Corporation (FDIC}, by eligible securities pledged by the financial institution as security for repayment, by surety company bortds deposited with thz finance director by the financial institution or by a single 4ollatcrai pool established by the financial institution [o secure the repayment of all public moneys deposited wish the institution. 32 CI"1'Y DF FAIRLA~VN, OHID NDTFS TD Ti-IE BASK FINANCIAL STATEMENTS FaR THE YEAR ENDED DECEMBER 31, 21709 ['D'I'E 4 -EQUITY IN PDDI.FI] CASK AND CASH EQUIVALE\TS - (Continued) Investments in stripped principal or interest obligations, reverse repurchase agreements and derivatives are prohibited. 'Che 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 front the date of purchase unless matched to a specific oUligation 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 ant! institutions. Payment for investments may be made only upon delivery of the securities representing the investments to the finance director or qualified tn[stee or, if the securities are not represented by a certificate, upon receipt of cnntirrnatiorr of transfer from the custodian. A, Cash ^n 1[and At year-end, the City had S1,SS0 in un-deposited caslt vn hand which s5 l[lCitlded Rn the Financial statements of the City as part ~f "equity in pooled cash and cash equivalents". B. Casft in 5cgrcgated Accounts At December 3l, 2Qt79, the City had 549,835 in bank accounts outside of the City Treasury related to Mayor's CQnrt operations anti income tax refunds. These amounts are included vn the financial statements as "cash and cash egt[ivaleuts itt segregated accounts" and are included in deposits with financial institutions below. C. Deposits --•ith Financial Institutions At December 31, 21709, the carrying amount of the City's deposits vas 58,25$,784 exclusi~~e of the 51,579,11[} repurchase agreement included in investments below. As of December 31, 2449, 57,585,144 of the City's bank balance of 58,~1T3,374 was exposed to custodial risk as tiiscussed below, while 5888,230 ~~~as covered by Federal Deposit Insurance Corporation. Custodial credit risk is the risk that, in the er•ent of bank failure, the City will not be able to recover deposits or collateral securities that are in the possession of arr outside party. As permitted by Olrio Revised Cotie, 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 hank and pledged as a pool of collateral against all public deposits held by the depository. The City has n^ deposit policy for custodial credit risk beyond the requirements of the State stahrte. Although the securities were held by the pledging institurions' trust department and all statutory regtirements for the deposit of money had been followed, noncampliancc ~4•ith federal requirements could potentially subject the City to a successfirl claim by the FDIC. 33 C['1'Y ^F FAIRLAWN, DHID NOTES TO THE BAS[C F1N'ANCIAL STA'T'EMENTS FOCI THE YF..AR ENDED DECEMBER 3l, 2009 NOTE 4 -EQUITY IN PDDLE[? CASH AN^ CA51I EQLIIYALENTS - (Continued} H, Investments As of fecember 3l, 2049, the City had the fallowing investments and maturities: [nvcstmcnt~~e Repurchase Agreement STAR Ohio 1 nvestntcnt Viaturity Balance at G months or C~air Value less ~ 1,579,110 5 1,579,110 1,577,881 1,577,881 S 3, l 56,991 S 3,156,991 Irirer•esr Rate Rirk: The Dhio Revised Cade generally limits security purchases to those that mature ~r•ithin five years of the settlement date. lntrrest 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 ]tvlicy addresses interest rate risk by requiring the consideration of market conditions and cash flow requirements in deternrining the terra of the investment. C'+~.rlnrlial Creclir Risk: For an investment, custodial risk is the risk that, in the event of the failure of the counterpart}, the City will not be able to recover the value of its investment or collateral securities that are in the possessiott of an outside party. The City has no investment laolicy dealing with investment custodial risk be}•ond the requirement in Dhi^ la~v that prohibits payments for in4°estnzents prior to the delivery of the securities representing such im~eslrnents to the finarrce director or qualified trustee. 'f he City's investrrent in repurchase agreements is collateralized by underlying securities pledged Uy the investment's counterpart}, not in the name oftlre City. Ohio law requires that market value of the securities subject to a repurchase agreement nnrst exceed the principal value of the securities subject to a rcprrrchase agreement by 2 percent. Gr•edrl Risk: STAR Dhiv carries a rating of AAA by Standard & Poor's. Ohio law requires that STAR Dhio maintain the highest rating provided by at least one nationally recognized standard service rating. 1'hc federal agency securities that underlie the City's repurchase agreement were rated AAA and Aaa by Standard & Poor's and Maady's [nvestor Services, respectively. C'or~ceiarrnlior, oJ•Crerlir Rrsk: 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. Tlie following table. includes the percentage of each investment type held by the City at December 3l, 2009: [nvcstment tvue t'air Value % of Total Repurchase Agreement S 1,579,110 50.02 STAR Ohio 1,577,881 49.98 5 3,15G,991 100.00 34 CITY DF FAIRi.AWN, DHID NOTES TD TIIE BASIC FINANCIAL STATEMENTS FCIR TIIE YEAR ENDED DECEMBER 3l, 21709 \'OT~: 4 -EQUITY 1N POOLED CASH AND CASH EQUIVALENTS - (Continued} E. Reconciliation of Cash and lnvcstmcnt to the Statcnecnt of Met Assets The follo4ving is a reconciliation of cash and investments as reported in the footnote above to cash and investments as reported on the statement of net assets as of December 3l, 2009: Cash and [nvcstlncnts per footnote CarYying anx~unt ofdeppsits 5 $,2SS,78~} Investments 3,156,991 Cash au hand 1,550 Total $ 11,417,325 Cash and investu~ents er Statement of'I~et Assets Cx~ventmental activities $ l 1,383,121 Agency fitnds 34,2[)4 Total $ 11,417,325 \DT'F, 5 - IN'I'ERFU'~D TRANSAC'f1DNS A. ]nterfrtnd transfers f'ar tl~e year ended December 3l, 217179 consisted of the follo4ving, as reported in the fund financial statements: Transfers from Transfers to General Capital Illlhl'o4'e1llCIlt I'tnld 5 37,100 Nonmajar Governmental funds 475,369 S 512,469 Transfers are rtsed [o { 1 }moo°e revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, (2] nto4 a receipts restricted to debt service from the fiords collecting the receipts to the debt service fitnd as debt serr•ice payments become due, and (3} use unrestricted rer•cnues collected in the general fund to finance 4•ariarts programs accounted far in otlter fiords in accordance with budgetary authariaations. Transfers behveen governmental funds made in compliance 4vit}t QRC Sections 5705.14-16, are elimillated far reporting on tltc govemnrent- 4vide statement of activities. B. Due fron>fty other funds consisted of rite follo4ving at December 31, 2009, as rel~or-ted in the go4•et7lmental fiord financial statements: Receivable Fund Payable Fund Amount Nonmajor govemtental funds General fired 5 50 Amounts due fron>.~to other firds relaresent IVtayar's Court tines collected by the court and due to the DU [ Enforcement and Education fund. 35 CITY Dr I'AIRLALYN, ^HIU NQTES TD 1'HE BAS1C FINANC[AL STATEMENTS FQR THE YEAR EiVDED DECEMBER 31, 2009 NDTE 5 -1NTERFUN^ TRr'1i\SAC'1'Is7N5 - (Continued) Amounts due fronv'to other Funds bet4vecn gvventmental funds are eliminated on the government-wide financial statements. NOTE ti - P12~PEItTY '1'A~>ES Property taxes include amounts levied against all real and public utility 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 l 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 tv be revaluated every six years. Real property taxes are payable annually or semi- annually. ff paid annually, payment is due December 31; if paid semi-annually, the t'irst 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. 3l 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 3S percent of true value. 2009 public utility property taxes became a lien December 3l, 2Q48, are levied after October 1, 2049, and are collected in 2410 with real propcrty taxes. Public utility property taxes are payable on the same dates as real property taxes dcscribecl previously. Beginning in calendar year 2049 tangible ]personal propcrty tax an business im~entary, manufacturing machinery and egrripment, and funtiture and fixtures is nv longer levied and collected. The ^ctaber 2008 tangible personal property tax settlement was the last property tax settlement Far general personal property taxes. Tangible personal propcrty tax eollectians in calendar year 2009 represent delinquent collections. House Bill No. GG was signed into la~v on June 30, 2005. f Ivuse Sill Na. 66 phases out the tax on tangible personal property of general businesses, telephone and telecommunications companies, attd railroads. 'l'he tax vn general business and railroad property will be eliminated by calendar year 2409, and the tax an telelahone and telecommunications property 4vi11 he elimir~ated by calendar year 2Q l 1. The tax is phased cut 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. hi calendar years 2008-214, the Ciry will be fully reimbursed for the last revenue. In calendar years 20l 1-2417, the reimbursements will be phased out. 'I'hc County Fiscal Clffiicer collects property taxes on behalf of all taxing districts in the County, including the City vf'Fairla«'n. The County Fiscal L7fficer periodically remits tv the City its pvrtioai 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 3l, 2(}09 and for which there is an enforceable legal claim. In the governmental funds, the current portion receivable has been offset by uuetu•ned revenue since the cw~rent taxes were not levied tv finance 2{749 operations and the collection of delinquent taxes has been offset by deferred rer•enue 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 while on a mvditied accrual basis the revenue is deferred. 3G C1TY OF FA1R1,AWi~, OHIO NOTES TO TIIE BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 3l, 20179 NOTE G -PROPERTY TAPES - (Continued) The full tax rate for all City operations for the year ended December 31, 2009 was 52.70 per X1,1700 of assessed slue. The assessed vaitres of real and tangible personal property upon ~i~hich 2009 property tax receipts were based are as follows: Category Assessed Value Residential S 176,108,070 Conuncrc ial 1 G8,920,3 20 fatal real estate 345,328,390 Public utility property 2,~1d8,140 Remaining TPP telephone slue 432,603 Grand total S 34$,209,133 Nt]TF 7 - Lt]CAL lr~'COr'~lE TAX 'E'he City levies a municipal income tax of 2 percent on gross salaries, wages, and other persona! service compensation earned Uy residents of the City and on the earnings of nonresidents ~s~orking «°ithin the City. This tax aisv applies to the net income of business operations within the City. Residents of the City are granted a credit of up to 2 percent fur taxes paid tv other nnrnicipalities. Employers 4vithin the City are renuired to Fvithhald income tax on enrplayee compensation and remit the tax to the City either monthly yr quarterly, as renuired. Corporations and other individual taxpayers are required to pay their estimated tax quarterly and file a declaration annually. [n 2009 the City changed the amount of income tax proceeds credited to the general and capital improvement Cunds. Beginning in 2009 the general firnd receives 75 percent and the capital improvement fund receives 25 percent of income tax proceeds. In the past, the genera! fiend received G7.5 percent and the capital improvement firnd received 32.5 percent of the income tax. ;tii[]TE $ - EST1i11A'l'ED 1NCClh1F. TAX REFU\1!_lS PAYABLE !n 2005, the City erroneously received estimated income tax payments For public utility companies partially located in the City. The allocation of income taxable to t}re City vas incorrectly calculated. The Cily will •sssue refrntds to llie public utility companies far the overpayment upon receiving ~=erificatiun from the State of t7hia Department of Taxation that proper corrected tax returns have been Tiled. The estimated overpayment is S l,l 12,8G8. A liability ltas been recorded in the general fund fur the estimated refund due. This liability is a component of "accounts payable" reported an the financial statements. \GTE 9 - RECEIVAF3LES Receivables at December 3l, 2009, consisted of taxes, accounts {billings for user charged services), accrued interest, special assessments, and intcrgoverunental receivables arising from grants, entitlements, and shared revenue. All intergovernmental receivables have been classified as "due from other governments" vn the financial statements. Receivables have been recorded to the cxtertk that they are nreasurable at December 3l, 20{J9. 37 C1TY C?F FAIRLAIVN, OHIO i~QTES TD THE BAS1C F[NANCIAL STATEMENTS FDR T1~E YEAR ENDED [7ECEMEjER 31, 2009 NDTE 9 - EtECEIVAB[,F5 - (Continued] A summary of the principal items of receivables reported on the statement of net assets follo«~s: Go-+ernmental Activities: Income taxes $ 1,825,41 l Real and vthertaxes l,Ol$,$47 Accounts 89,591 Accn[ed interest 15,422 Special assessments 1,182,t)34 Dice from athcr~ovemments 890,937 Total $ 5,022,242 ReceivaUles have been disa~~re~ated 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 aver the life of the assessment. Delinquent special assessments due to the City were 53,313 as of RecemUer 31, 2069. 38 CITY DF FAIRLA~VN, OH1D NOTES TO THE BASIC FiNAi~CiAL S'l'A'fEMEi9TS FDR THE YEAR ENDED l7ECEMBER 31, 2444 \OTE 10 -CAPITAL ASSETS Capital asset activity for the year ended December 31, 2D09 was as follows: Governmental Activities: E3alas~ce l3alancc 12!31108 Additions Disposals 12131109 Capital assets, nor l~eirag cleprecrarerl: Land Constnrclian in progress Total eapitai assets, not being depreciated Ccrprral assets, bei~tg depreciarert: 13usldings and Improvements Land lmpro~~cntents Vlachincry and Equipment Licensed Vehicles [nt'rastructurc Total capital assets, being deprecialed Less: acerrrrrrrkrrecl rleprecrrrrio~r: t3uil[lings and fmprovemcnts Land [mprovemenls IVlachinery and Equipment Licensed Vehicles InFrastnicturc Total aecurnttla[ed depreciation T'olal capital assets, being depreciated, nel $ 3,224,848 "~ - S - 5 3,224,888 177,494 981,107 [177,499) 981,1D7 3,442,387 981,1x7 X177,499} 4,2D5,995 14, 109,223 - 1,326,a30 222,91 b 3,32x,442 367,766 2,913,1 l & 212,220 75,x33,4D4 799,238 (25,44x] 14,D84,223 - 1,548,94b (65,D48} 3,623,16x (l17,14R} 3,DD8,230 {122,904} 75,710,143 96,7 02,622 1,bD2,140 (33D,D60) 97,974,702 (2,8D9,16U) (273,095) 18,253 {3,a64,aa2) (6b0,865} (42,749) - (7x3,664) (1,493,665} (229,457} 60,948 (1,662, l74} (1,398,3b3} {206,925) 1x0,418 (1,504,870} {27,830,254} (1,414,fi~ 85,2b5 (29,159,671} (34,192,347) (2,166,958} 264,884 {36,x94,381) b2,510,3i5 (564,818) (65,176} 61,880,321 Governmental activities capital assets, net ~55,912,7a2 S 416,2$9 5 2~] S66,aRb,3l6 39 CITY DF FA[RLAtiV\', OHIa NOTES 1'O I"HE BASIC FINANCIAL STATE~IEIVTS FDR'1'IIE YEAR ENDED DECEMBE€~ 31, 20Q9 \pTF l0 -CAPITAL A55ETS - {CnntinuerfJ IJepreciation expense was charged to functiotrsJprograms of the City as follows: GnF°ernntental Activities: General government Basic utility services Security of persons and property Transportation Conurtunity environment lueisttre time activity Total depreciation exltense -governmental activities ~iDTE 11 - LD1'C-TERM DBL[GATIDNS $ 43,164 562,95 l 366,937 1,13 fi,43 6 2,625 5~,8~5 $ ? 16b,958 A. During the fiscal year 2009, the fallowing cltanges occurred in governmental activities long-term oUligations: Interest Balance Qalance ^uc in Governntental~lctivitics; Rate i21311D8 additions Reductions 12.~31J09 ~neYear General obligation bonds 2.8~-5.75°~'o S 7,385,000 S - S{GQQ,(}Qt)1 S G,785,000 5 G25,000 5peci:tl assessment band 4.80-7.00°l0 52Q,000 - (iG{1,OflQ] 3GO,OflO i 75,000 aPL'vC loans fi.00°.~a 451,422 - (G4,570} 38G,852 68,503 Compensated absences 1,241,879 81,053 (337} 1,322,595 421,210 Total S 9,598,301 5 $1,053 S{824,907) 5 8,854,447 51,292,7I3 The general obligation bonds «-ill be paid from income taxes receipted into the capital improvement fiend. The special assessment bond and OPIVC loans will be paid from the 1}raceeds of special assessments levied against the benefited property vwtzers. In the er•ent that a property owner fails to pay the assessment, payment will be made by the Ciry. Compensated absences reported in the "long- term liabilities" account will be paid from the fund from ~vhicle the employees' salaries are paid; the Getzeral Fund and the Childret~iAdolesccnt fund, a nanmajor governmental fund. ~0 CITY OF FAIRLAtiVN, UHID NUTES TD TiIE BASIC E'IblAl~'CIAL STA7'EMEi~TS FUR TIIE YEAR ENDED DECEMBER 31, 2009 i\i71'E 11 -LUNG-TERM UBLICAT[ONS - Continued] B. Principal and interest requirements tv retire long-term obligations outstanding at Dccentber 3l, 2009 are follows: General Clbl~ation E3onds Special Assessment Bond Year Pri~nci~al Interest Total Prime lntcrest Total 2.014 S G25,OOU S 342,534 S 927,530 S 1 T5,444 $ 25,200 S 240,204 2011 655,444 275,430 934,030 185,Ot14 12,950 197,950 2012 680,444 245,815 925,845 - - - 2013 710,004 211,943 924,943 - - - 2U l4 545,004 182,173 G87,173 - - - 2015 - 2019 2,575,000 564,973 3,139,973 - - - 2424 - 2422 1,035,400 98,044 1,133,040 - - - Total S 6,785,040 S 1,883,534 S 8,668,534 S 360,444 S 38, l50 S 398,154 QPWC Loans Year Principal- Interest Total 2410 S G3,503 S 22,199 S 90,702 2011 72,675 18,027 90,702 2012 77,1{1 l ! 3,601 90,702 2013 81,796 8,90E 90,702 2014 86,777 3,92} 90,701 Cotal S 386,852 5 66,657 5 453,509 nUTE 12 - t7TIiER EAIPI.UYEE 13E\EFITS A. Compensated Ahsence T'he criteria for determining vested vacation and sick leave components are derived from negotiated agreements and state laws. Employees earn ten to thirty days ^f vacation per yaar, depending upon lengt}~ of sen•ice. Vacation accumulation is typically limited to one ;gear. Employees may carry over vacation earned For three years prior to their retirement date. Ail accumulated urursed vacation time is paid upon termination of employment. Employees giant sick leave at the rate of 1,25 days per month of service. [~pvn retirement, employees hired before 1994 are eligible to receive payment for accumulated unused sick days. The exact terms vary in accordance ~vitlt the negotiated collective bargaining agreement in effect. ]rt most cases, the sick leave termination payment is limited to 90 days. Employees with a hire date subsequent to 1944 are not eligible to receive termination payments for sick leave. As of [7ecember 3l, 2049 the total liability for unpaid compensated absences was S l ,322,595. 4l CITY DC FAIRLAtiV\`, UI-IIO NOTES TD Tl-iE BASIC FINANC[AL STATEMEiVT'S FOR TIIE 'YF;AR ENDED DCCEMBER 3l, 2009 1\OTE l2 - D'F'HER E~9PLOY~:E BENEFITS - (Continued) B. Health Care Benefits The City provides life insurance and accidental Beath and dismemberment insurance to mast employees. The City has elected to provide employees' medicallsurgical benefits through Medical Mutual of Dhio. The crnployees share the cost of the monthly premium. Derttal insurance is provided by the C ity through Guardian Life lnsurance. NOTE l3 - RISC ~]ArYAGEiiIENT The City is exposed to various risks of loss related to torts; theft of, damage ta, and destntction of assets; en~ors Ind omissions; injuries to employees; and natural disasters. During 2409, the City contraetecl with 1Vichert [nsurance Service, Inc. for property and general liability insurance, including boiler and machinery. Police and professional liability policies are provided by Scottsdale lndentnity Company with a ~ 1,000,440 limit and a S 10,404 deductible. A canutiercial umbrella policy through Selective lnsurartce Company provides additional general liability and auto liability insurance up to an 5l 1,400,000 limit. Vehicles are covered by Westfield Insurance Company and hold a 51,000 deductible far collision. Automobile liability coverage has nv limit for collision, a 5504,D06 limit far rminsuredlunderinsured motorist and a 51,000,440 limit far bodily injury. Settled claims have not exceeded this conunercial coverage in any of the past three years. There has oat been a significant reduction in coverage from fife prior year. Volunteer Fireman's [nsurance Services covers Firemen and EMT professional liability with a limit of S1,004,004 and na deductible. The Ciry participates in the C]hio Municipal League (DM L) public entity insurance purchasing pool for ~t~vrkers' compensation. The Group Rating Plan is administered by Gates i4#c Donald Company. The ^Mt. Group Rating Plan is intended to achieve lower workers' compensation premium rates far the participants, and result in the establishmertt of a safer working environment. There are no additional contributions required by a participant other than their annual fee. Tlie City pays the State Workers' Compensation system a premium based on a rate per 5100 of salaries. 't'his rate is calculated based on accident history and administrative costs. NDTE l~t - PEi~SIDN PLANS A. Dhia Public Employ^ccs Retirement S~°strm Plan Description -The City participates in the Dhio Ptrblic Employees Retirement System ([]PERS). OPEItS administers three separate pension puns. The Traditional Pensiort Plan is a cost-sharing, multiple-employer defined benefit pension lalan. The Member-Directed Plan is a det"ined contribution plan in w°hich the member invests both member and employer con[r'rbutians (employer contributions vest over five years at 24 percent per year). Under the ~#enther-Directed Plan, members accumulate retirement assets equal tv the value of the member and vested employer contributions plus any investment earnings, The Combined Plan is acast-sharing, multiple-eruplayer detinecl benefit pension plan that leas elements of both a defined benefit and a defined contribution plan. Under the C.ombirted Plan, employer contributions are invested by the retirement system to provide a formula retirement benefit similar to the Traditional Pension Plan bene#it, ;+riember contributions, whose investment is self-directed by the member, accurstulate retirement assets in a manner similar to the Member Directed Plan. 42 C['1'Y OF FAlRLA1i'N, OHIO NOTES TD THE BASK FINANCIAL STATEMENTS E'OR THE YEAR ENDED DECEMBER 3l, 2049 NOTE 14 - PEiVS[ON PLA\`S - (Continued) DPERS 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 Plar3 da not qualify for ancillary benefits. Authority to establish and amend benefits is provided by Chapter 145 of the Qhio Revised Code. QPERS issues astand-alone financial report that tnay be ofitaincd by writing to OPERS, Attention: Finance Director, 277 E. Town St„ Columbus, QH 43 2 1 5-4642 ar by calling (b l4} 222-56{] 1 or {844} 222-7377. Finding Policy -The Ohia Revised Code provides statutory authority for member and entlaloyer contributions. For 2U09, member and contribution rates were consistent across all three plans. While members in the State and local divisions may participate in ail three plans, law enforcement anti public safety divisions exist only ~vitlrin the 't'raditional Plan. 1"he 2449 men-ber contribution rates ~i~ere 14.44 percent for members in the State and local classifications. The City's contribution rate Far 2flt}9 was 14,Q0 percent. The City's contribution rate For pension benefits for 2409 was 7 percent from January l through March 3l, 2009 and 8.5 percent from April 1 through December 3l, 2409. The City's required contributions for pension obligations to the Traditional Pension and Combined Plans far the years ended December 31, 2449, 2008, antl 2007 were 5246,865, 5197,378, ant! 5221,691, respectively; 91.39 percent has been contributed for 2449 and 100 percent for 2448 and 2007. 13. ahia Police and E'irc Pension Fund Plan Description -The City contributes to tha Ohia Police and Fire Pension Fund (DP&F), a cost- sharing multiple-employer defined benefit pension plan. ^P&F pro~idcs retirement and disability benefits, annual cast-aF living adjustments, and death benefits to plan members and beneficiaries. Benefit pro~risions are established by the Ohio State Legislahrre and are codified in Chapter 742 of the Ohio Revised Code. DP&F issues a publicly available financial report that includes financial statements and required suPl3lementary information for the plan. That report may be obtained fly ~vritir3g to the Ohio Police and Fite Pension l~ruld, 140 East To-vn Street, Columbus, Qhio 43215-5164. Funding Policy -Plan members are required to contribute ]0 percent of their annual co~~ered salary while the City is required to contribute 19.54 and 24.44 percent for police ofTicers and firefighters, respect'svely. Contribution rates are established by State statute. For 2404, the portion of the City's contributions to fund pension obligations «'as 12.75 percent For police officers and 17.25 percent for firefiglttcrs. The City's required contributions far pension obligations to OP&F far police officers and firefighters ~4•ere 5245,137 and S 184,975 Far the year ended December 3 1, 2409, 5 f 9S,U27 and 5168,474 far the year ended December 3l, 2fl4~3, and 5176,494 anti 5153,483 for the year ended December 31, 2007. 72.16 percent has been contributed for police and firefighters fnr 2049. C. Saeial Security System L•;ffective August 3, 1992, all ~•olunteer firetigltters, not othen4ise co4•ered by another retirement system, are co~~ered by social security. The C'ity's liability is 6.24 percent of wages paid. 43 Ci'I'Y OF FAiRI,AV4'N, OH[O Nt7TES TQ THE >3AS[C FINANCIAL S"I'Al'EMENTS FQR THE. YEAR F,NDED DECEMBER 31, 2009 NOTE 15-POST RE'I'1REAlE[N7' BENEFIT PLANS A. Dhia Public Employees Retirement System Plan Description - ClPF.RS maintains acost-sharing multiple employer defined benefit post- employment health care plan, which includes a medical plan, prescription drug program and Viedicare Pa[1 13 premium reimbursement, to qualifying members of both the Traditional Pension and the Combined Plans. Members of the Member-17irected Plan dv not qualify far ancillary benefits, including post-employment health care coverage. To qualify for post-employment health care eaverage, age-and-service retirees under the Traditional Pension and Combined Plans must have ten years or more of qualifying Ohio service credit. Tile Ohio Revised Cvde permits, but does not mandate, OPERS to provide ^PF13 benefits to its eligible members and beneficiaries. Eluthority to establish and amend benefits is provided in Chapter 145 of the Ohio Revised Cade. l7isclosures far the health care plan are presented separately in the ^PERS financial report which may be obtained by writing to ClPERS, Attention: Finance Dirertar, 277 E. Town St., Columbtts, ^I1 43215-4642 yr by calling (614) 222-56Q1 or (80D] 222-7377. Fwtdi~tg Policy -The host-employment health care plan vas established under, and is administered in accordance with, lnternal Revenue Cvde Sectipn 4D l (h}, State statute requires that public employers fund post-cntployment 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 past-eatplayntent Health care. L•'mplayer contribution rates are expressed as a percentage of the covered payroll of active employees. In 2009, local government employers contributed 14 percent of covered payroll (17,63 percent for public safety and la~v enforcement}. Faeh year the DPERS kctircment Board determines the portion of the entplayer contribution rate that will be set aside for the funding of the post-employment health care benefits. The a[ttouttt of the employer contributions which was allocated to fiord past-employment health care for 2009 was 7 percent from January i through ivtarch 31, 2DD9 and 5.5 perce[tt from April i through December 3l, 2.009. The OPEkS Retirement Board is also authorized to establish rules for the payment of a portion of the health care benefits provided by the retiree ar their surviving beneficiaries. Payment amounts vary depending an the number of covered dependents and the eaverage selected. Active members do not make contributions to llte post-employment health care plan. The City's contributions allocated to fund post-employment health care benefits for the years ended Deee[ttUer 31, 2004, 2008, and 2007 ~verc S 176,702, S 197,378, and S 147,845, respectively; 92.22 percent has been contributed for 2x09 and l00 percent has been contributed far 2008 and 2007. The Health Care Presen•ativrt Plan (IiCPP) adopted by the OPER5 Retirement Board on September 9, 2Q04, ~i=as ef~'ective January 1, 2007. Vlembzr and ~ntplayer contribution rates increased as of Ja[ura[y 1, 2006, January 1, 2007 and January 1, 2008, ~vhiclt «=i11 allow additional funds to be allocated to the health care plan. 44 CITY OF FAIRLAlVN, ^NIQ 1~0'1'ES TO TI-{E BASIC F1NAl~'CIAL STATEMENTS FC}R'1 HE YEAR ENDED DECEiV1BEEt 31, 2U09 \'~TE 15 -POST RE'T1R)a;~ih:N'[' l3E\'E1H I'I' PLANS - (Continued) B. Uhio Police & Fire Pension Fund Plan ^escription -The City contributes t^ the QP&F Pensiott Fund sponsored health cars program, a cost-sharing multiple-employer defined post-employment health care plan administered by QP&F, DP&F I}rovides healthcare benefits including coverage for medical, prescription drugs, dental, vision, Medicare Part B Premium and fang term care to retirees, qualifying benefit recipients and their eligible dependents. Of &F provides access tv post-ern}~loyment health care cv~crage tv any person ~~•ha receives or is eligible to recei~°e a monthly service, disability or survivor benefit check or is a spouse yr eligible dependent child of such person. The Ohio Revised Code allows, bur does not mandate DP&F to provide OPF.l3 benefits. Authority for the DP&F Saard of Trustees tv provide health care coverage to eligible participants and to establish attd amend benefits is codified in Chapter 742 of the C]hiv Revised Cade. UP&F issues a publicly available financial report that includes financial statements and required supplementary information far the plan. That report may be attained by writing to the QP~F, 140 East 'T'own Street, Columbus, Ohio 43215-5164. Funding Policy -The Clhio Revised Cade provides for contribution requirements of t}te i~articipating employers and of plan members to t}te ~Pc&F (defined benefit pension plan). Participating employers are required to cautribute to the pension plan at rates expressed as a percentage of the payroll of active pension plan members,. currently, ! 9.50°lo and 24.00% of covered payroll far police and fire emi}foyers, respectively. 'T'he Dhiv Revised Cade states that the employer contribtttian tnay not exceed 19.50 percent of covered payroll for police employer urtits and 24 percent of covered Iaayrall for firz cmploycr writs. Active members do not mane contributions to t}te OPEl3 Pian, OP&F maintains funds for health care in two separate accounts. ^ne for health care benefits under an IRS Code Section l 15 tntst and one far Medicare Part B reimbursements administered as art lntetY~al Rey°entte Cvde 4Ql(h) account, bath of which are within the defined benefit pension plan, under the authority granted by the lJhio Revised Cvde to the QPc&F Board of Tntstees. '['hc Board of Trustees is authvri~ed to allocate a portion of the total employer contributions made into the pension plan into t}te Section 1 !5 tntst and the Section 40l(h} account as the employer contribution for retiree health care benetts. Far the year envied December 3 l , 2009, the cmploycr contribution allocated tv the health care plan was 6.75% of covered payroll. The amount of employer contributions allocated tv the health care plan each year is subject to the Tnistees' primary responsibility to ensure that the pension benefits are adequately funded and is limited by the provisions of Sections 11S and 4Dl(h}. The QP&F Board of "I~rttstees also is autharixed to establish requirements far contributions to the health care plan by retirees and their eligible dependents, yr t}fair sttrviv ing beneficiaries. Payment amo>mts vary depending on the number of covered dependents and the coverage selected. The City's contributions to OP&F which were allocated to fund post-employment health care benefits f'vr police officers and firefighters v~~ere S i D8,642 and 57Q,816 for the year ended December 31, 2DD9, 51D3,249 and 565,923 for the year ended December 31, 2D0~, and 593,226 and 55R,9D2, for the year ended Ucccmber 31, 20D7. The fitll amount has been contributrd for 2008 and 200T. 72.16 percent has bectt contributed for police and firefighters for 2D09. 45 CITY DF FAIRLALYY, DHID A'DTES TD THE BASK FIiVANC[AL S'1'ATF1ilEiVTS FDR THE YEAR ENDED DECEMBEk 31, 20U9 i\OTF, lb -BUDGETARY BASIS DF ACCDUi~'I'ING While the City is reporting financial position, results of operations and changes in fluid balance on the basis of generally accepted accounting principles {GAAP}, the budgetary 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 t}re general fund is presented vrt the budgetary basis tv provide a meaningful comparison of actual results with the budget. Tile major differences between the budget basis and GAAP basis are as follows: 1. Revenues are recorded when received ire cash (budget] as opposed to when susceptible tv accnral (GAAP]. 2, Expenditureslcxpenses are recorded when paid in cash (budget} as opposed tv when the liability is incurred (GAAP}. 3. Encumbrances arc treated as expenditures (budget] rather than as a reservation of fluid balance (GAAP]. 4. Unreported cash represents amounts received but not included as revenue vn the budget basis operating statements. These amounts are included as revenue on the GAAP' basis operating statement. Tlie following table summarizes the adjustments necessary to reconcile the GAAP basis statements {as reported in the fund financial statements] to the budgetary bas'ss statements far all governmental funds for which a budgetary basis statement is presented. i~ct Change in Fund Balance General Budget basis S {584,016] Not acljtrstmer7t for revenue accruals 74,395 Net adjusuncnt for expenditure accruals ~4b,345 Adjustment far encumbrances ti37,589 GAAP basis S 334,313 1'DTE l7-CD~iTI\'GENCIES A. Grants The City receives significant financial assistance from numerous federal and state agencies ir3 the Form of grants. The disbursement of ftmds received under these programs generally requires compliance with the terms and conditions specified in the grant agreenrcnts and is subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could became a liability of the general fund or other applicable funds. However, in the opinion of management, any such disalio«~ed claims ~r•ill not hawe a material effect on auy of tl~e f±nancial statements of the individual fund types included herein or on the overall financial position of the City at December 31, 2449. ~}6 CfTY DF FAIRLA~YN, OHIO NOTES '1`D THE 13AS[C PINANC[AL STATEMENTS FDEt'1'HE YEAR ENDED DECEMBER 3l, 2009 \OTE 17-CONTINGENCIES - [Continued] [3. Lftfgatian The City is party tv legal proceedings. The City managetuent is ^f 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 ^f the City. NDTE iR - CO\'1'HAC'T'UAL CU~iill[T~IF.NTS As of December 31, 2449, the City had various contractual commitments; fur road maintcnattce and improvements of 5}40,794; sewer cleaning and improvements ^F 520,250; land development 551,920; building imprv~°enrents oF59,958; purchases of various capital equipu~ent of 5119,71 l; and park equipment and impr^vements ^f 598,148. ~} 7 This page intentionally loft flank. 48 f~%~' ~, ~-- . ;~, ,~ .:~~~ e ~~tt~~it~t' O~ ~CxtCE' ~ ~~ `~~., I~~]C}F=F'E=N[)EN r. ACCOUN fAPJ l S' f2E"f'Of27 C3PJ lNTEftiVAt_ C(~NTf~E~I_ AVER Fih'AfJClA1. ltEf'DRTING /1N[) ON COPv1f'[_IANCE= >'~~~[) Ql EVER 1111\TTFf3S f~EC,}U1RE[) t3Y GQVFR!`J,9~7EfdT~lUDiTl1Jf~ S]~EaNf~Af2f)S 5,;:~:~li~ f ~:r,,llilV .~~#i':7., Till .`;II1i11 --~~~<lii ~~i% flip.' !r. ` i~ f :i ~~.~ r' ~s'y:i' :-irii] ~.~~ flil?~'(:::. ~ ~~•I#'•:' (.,~.l.l~l~.,,,, .';~' '. '. ,_ ~, ~ .'i+ '. I.~li~..i~ i'. :III;_; r;1 1!',. 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'~Jr'f~ I'a~lrl.il I~~l~ ~'i `rJ .1:;. ~i l);i',I:; f'.I P`. ;il; fC'~ !+~11 I~': '(;' fiii I?i f i f r I'r; tlf f;:;~l' ar :'il II'.! 'r tllr 1,31. If#ill'hl nl.l :Il li r~_Iii i~l.! ~li~~ 'r.r !i~:. Il~,r1, ~~f ~~;_~I~,ili;. :in t'I~ ~f[r~l ~i~~~: .i tl~ i11~~_ I i.,l~~ ~~,rltr~, rw~~r I ~~ ~~ I f ;rfl!'~]. ~~~.'~_:l I,1 .. ,. ?l,s.r 'n'. !)iiir.~, ra': ::. _ :1 _ _ ..'Ili' ~., ,l ii' _. I:I" Ifi~~'i~fY3 ~.l.~f'+~ _, 1'~, ~. ..7ill, f] '~' 1'di r. :~.?~ l:k ,>1 ,;rli?Il tl'' i1i' ~I~IrI f 111ri1 ~_ ~ .~I'fIr_. Ci.~ . . ii[.~I , 'J':^! Il'~i i ir]~ Illl~lll_ i:f Ili1i1`ji ... ,~;' :l 'rf) .It lil:a' .. jllu~! L'(~.ir'ri'~, .. a I!# r?I ~1~''(.~:. :ii-'( ',ili~~~'j c~,:Inr: t r.il t :•:_;'n r,ts ~'~ ~~~ ,'. :,~ .,i ~~.. __ i~, ;i ,';fir_i~~~lr;q. r_ i :nn ~'~r•~~ii~:n ~:.f i'it rn:,' , lirnl ~f~~1i i~~ ~~~i-.. 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'I .. n::l ~ .~ City of Fairlawn Summit County Independent Accountants' Report an Internal Control Over Financial Reporting and an Compliance and Qther Matters Required by Government Auditing Standards Page 2 Compliance and Dther 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 an 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 Government Audifrng Standards. We intend this report solely for the information and use of management, City Council and others within the City. We intend it for no one other than these specified parties. ~"Y1 ~ -~~ Mary Taylor, CPA Auditor of State ^ctober 15, 2l]1i7 5~ al i; ~-. ,~ ~~~ ~~~_ ~ ~ ~~ ~ ~ ~~y ~~ ~1~ v ~. ~~ cIT~ ~~f. F~If~~.av~~r~ 5U h9h11T CGUfVTY Cl..f=RK'S C~I~TIFIC/~TION 1-his is ~a true' anti c~orrE~ct copy of the repor~_ ti^rhic:h is rer~i3irerl try he file! iii tiiF~ Gffi~:e :>f tf~e ~uditi~r e3f 5t,e1_~~ F:+ur~uant to Section"117.26, f2evisi~ri Code, anti r~hich is filE~~! iu Ci>h_~€i~k~us. C]liit~. ~., CLARK OF Tf~E BURFnU CERTIFIED ~1C)VFr'yliit~f2 d, 2Q10> .. ..... ~ .~,:I~. ..:I... is