2010 Financial StatementCITY O FAIRLAWN
SUM IT COUNTY
REG ' LAR AUDIT
FOR THE YEAR EN~ED DECEMBER 31, 2010
i
'~
x`~ .
Dave Yost • Auditor of State
CITY OF FAIRLAWN
SUMMIT COUNTY
TABLE OF CONTENTS
TITLE PAGE
Independent Accountants' Report .................................................................................................................1
Management's Discussion and Analysis ...................................................................................................... . 3
Basic Financial Statements:
Government-Wide Financial Statements:
Statement of Net Assets .......................................................................................................... 17
Statement of Activities ............................................................................................................. 18
Fund Financial Statements:
Balance Sheet
Govemmental Funds ........................................................................................................ 19
Reconciliation of Total Governmental Fund Balances to
Net Assets of Govemmental Activities .............................................................................. 20
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds ......................................................................................................... 21
Reconciliation of the Statement of Revenues, Expenditures and Changes
in Fund Balances of Governmental Funds to the Statement of Activities ......................... 22
Statement of Revenues, Expenditures and Changes in
Fund Balance -Budget and Actual (Non-GAAP Budgetary Basis)
General Fund .............................................................................................................. 23
Statement of Fiduciary Net Assets
Fiduciary Funds ................................................................................................................. 24
Notes to the Basic Financial Statements .................................................................................................... 25
Independent Accountants' Report on Internal Control Over
Financial Reporting and on Compliance and Other Matters
Required by Government Auditing Standards .......................................................................................... 49
This page intentionally left blank.
~~ Dave Yost • Auditor of State
INDEPENDENT ACCOUNTANTS' REPORT
City of Fairlawn
Summit County
3487 South Smith Road
Fairlawn, Ohio 44333-3007
To the Honorable Mayor and Members of City Council:
We have audited the accompanying financial statements of the governmental activities, each major fund,
and the aggregate remaining fund information of the City of Fairlawn, Summit County, Ohio, (the City) as
of and for the year ended December 31, 2010, which collectively comprise the City's basic financial
statements as listed in the Table of Contents. These financial statements are the responsibility of the
City's management. Our responsibility is to express opinions on these financial statements based on our
audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in the Comptroller General of the
United States' Govemment Auditing Standards. Those standards require that we plan and perform the
audit to reasonably assure whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe our
audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, each major fund, and the aggregate remaining
fund information of the City of Fairlawn, Summit County, Ohio, as of December 31, 2010, and the
respective changes in financial position thereof and the budgetary comparison for the General fund for
the year then ended in conformity with accounting principles generally accepted in the United States of
America.
In accordance with Government Auditing Standards, we have also issued our report dated June 17, 2011,
on our consideration of the City's intemal control over financial reporting and our tests of its compliance
with certain provisions of laws, regulations, contracts and grant agreements and other matters. While we
did not opine on the internal control over financial reporting or on compliance, that report describes the
scope of our testing of internal control over financial reporting and compliance and the results of that
testing. That report is an integral part of an audit performed in accordance with Govemment Auditing
Standards. You should read it in conjunction with this report in assessing the results of our audit.
101 Central Plaza South, 700 Chase Tower, Canton, Ohio 44702-1509
Phone: 330-438-0617 or800-443-9272 Fax: 330-471-0001
www.auditor.state.oh.us
City of Fairlawn
Summit County
Independent Accountants' Report
Page 2
Accounting principles generally accepted in the United States of America require this presentation to
include Management's Discussion and Analysis as listed in the Table of Contents, to supplement the
basic financial statements. Although this information is not part of the basic financial statements, the
Governmental Accounting Standards Board considers it essential for placing the basic financial
statements in an appropriate operational, economic, or historical context. We have applied certain limited
procedures to the required supplementary information in accordance with auditing standards generally
accepted in the United States of America, which consisted of inquiries of management about the methods
of preparing the information and comparing the information for consistency with management's responses
to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the
basic financial statements. We do not express an opinion or provide any assurance on the information
because the limited procedures do not provide us with sufficient evidence to express an opinion or
provide any other assurance.
~~
Dave Yost
Auditor of State
June 17, 2011
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2010
Unaudited
The management's discussion and analysis of the City of Fairlawn's (the "City") financial performance provides an
overall review of the City's financial activities for the year ended December 31, 2010. The intent of this discussion
and analysis is to look at the City's financial performance as a whole; readers should also review the basic financial
statements and the notes to the basic financial statements to enhance their understanding of the City's financial
performance.
Financial Highlights
Key financial highlights for 2010 are as follows:
- The total net assets of the City increased $1,623,324. Net assets of governmental activities increased
$1,623,324 or 2.29% from 2009, to a total of $72,543,490 in 2010.
- General revenues accounted for $13,566,734 of total governmental activities revenue. Program specific
revenues accounted for $1,549,070 or 10.25% of total governmental activities revenue.
- The City had $13,492,480 in expenses related to governmental activities; $1,549,070 of these expenses were
offset by program specific charges for services, grants or contributions. The remaining expenses of the
governmental activities of $11,943,410 were offset by general revenues (primarily property taxes, income taxes
and unrestricted grants and entitlements, including Joint Economic Development District (JEDD) revenue).
- The City has three major funds, the general fund, bond retirement fund and capital improvement fund. The
general fund, the largest major fund, had revenues of $12,752,330 in 2010. This represents an increase of
$1,219,046 from 2009 revenues, and is due to an increase in income tax collections and the elimination of
several special revenue and capital improvement funds during 2009. Revenues formerly received by these
funds are now deposited to the general fund. Several funds, however, have remaining fund balances that will be
used to support expenditure for their specific purpose until the fund balance is exhausted. 'The expenditures and
other financing uses of the general fund, which totaled $9,896,119 in 2010, decreased $1,302,852 from 2009.
The reduction is due to the City's sincere efforts to reduce expenditures and the elimination of a substantial
liability recorded in previous years for an anticipated income tax refund in the amount of $1,112,868. The
statute of limitations has expired and the refund will not be issued. The net increase in fund balance for the
general fund was $2,856,211 or 41.13%.
- The bond retirement fund had revenues of $262,166 in 2010. The expenditures of the bond retirement fund
totaled $302,949 in 2010. The net decrease in fund balance for the bond retirement fund was $40,783 or
75.05%.
- The capital improvement fund had revenues of $1,996,282 in 2010. The expenditures of the capital
improvement fund totaled $1,921,831 in 2010. The net increase in fund balance for the capital improvement
fund was $74,451 or 2.98%.
Using this Annual Financial Report
This annual report consists of a series of financial statements and notes to these statements. The statements are
organized so the reader can understand the City as a financial whole, an entire operating entity. The statements then
proceed to provide an increasingly detailed look at specific financial activities.
The statement of net assets and statement of activities provide information about the activities of the City as a
whole, presenting both an aggregate view of the City's finances and alonger-term view of those finances. Fund
financial statements provide the next level of detail. For governmental funds, these statements tell how services
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2010
Unaudited
were financed in the short-term as well as what remains for future spending. The fund financial statements also look
at the City's most significant funds with all other nonmajor funds presented in total in one column.
Reporting the City as a Whole
Statement of Net Assets and the Statement of Activities
While this document contains a large number of funds used by the City to provide programs and activities, the view
of the City as a whole looks at all financial transactions and asks the question, "How did we do financially during
2010?" The statement of net assets and the statement of activities answer this question. These statements include
all assets, liabilities, revenues and expenses using the accrual basis of accounting similar to the accounting used by
most private-sector companies. This basis of accounting will take into account all of the current year's revenues and
expenses regardless of when cash is received or paid.
These two statements report the City's net assets and changes in those assets. This change in net assets is important
because it tells the reader that, for the City as a whole, the financial position of the City has improved or diminished.
The causes of this change may be the result of many factors, some financial, some not. Non-financial factors
include the City's property tax base, current property tax laws in Ohio restricting revenue growth, facility
conditions, required community programs and other factors.
In the statement of net assets and the statement of activities, the Governmental activities include the City's programs
and services including police, fire and rescue, street maintenance, capital improvements and general administration.
These services are funded primarily by property and income taxes and intergovernmental revenues including federal
and state grants and other shared revenues.
The City's statement of net assets and statement of activities can be found on pages 17-18 of this report
Reporting the City's Most Significant Funds
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for
specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure
and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided
into two categories: governmental funds and fiduciary funds.
Fund financial reports provide detailed information about the City's major funds. The City uses many funds to
account for a multitude of financial transactions. However, these fund financial statements focus on the City's most
significant funds. The analysis of the City's major governmental funds begins on page 9.
Governmental Funds
Governmental funds are used to account for essentially the same functions reported as governmental activities in the
government-wide financial statements. However, unlike the government-wide financial statements, governmental
fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of
spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a
government's near-term financing requirements.
Because the focus of the governmental funds is narrower than that of the government-wide financial statements, it is
useful to compare the information presented for governmental funds with similar information presented for
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2010
Unaudited
governmental activities in the government-wide financial statements. By doing so, the readers may better
understand the long-term impact of the government's near-term financing decisions. Both the governmental fund
balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide
a reconciliation to facilitate this comparison between governmental funds and governmental activities.
The City maintains a multitude of individual governmental funds. The City has segregated these funds into major
funds and nonmajor funds. The City's major governmental funds are the general fund, bond retirement fund and
capital improvement fund. Information for major funds is presented separately in the governmental fund balance
sheet and in the governmental statement of revenues, expenditures, and changes in fund balances. Data from the
other governmental funds are combined into a single, aggregated presentation. The basic governmental fund
financial statements can be found on pages 19-23 of this report.
Fiduciary Funds
Fiduciary funds are used to account for resources held for the benefit of parties outside the City. Fiduciary funds are
not reflected in the government-wide financial statement because the resources of those funds are not available to
support the City's own programs. The City's only fiduciary funds are agency funds. Agency funds are custodial in
nature (assets equal liabilities) and do not involve the measurement of results of operations. The basic fiduciary
fund financial statement can be found on page 24 of this report.
Notes to the Basic Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in the
government-wide and fiznd financial statements. These notes to the basic financial statements can be found on pages
25-47 of this report.
Government-Wide Financial Analysis
The Statement of Net Assets provides the perspective of the City as a whole. The table below provides a summary
of the City's net assets for 2010 compared to 2009:
Net Assets
Acc . s
Current and other assets
Capital assets, net
Total assets
Liabilities
Cun•ent and other liabilities
Long-teiYn liabilities
Total liabilities
Net Assets
Invested in capital assets, net of
related debt
Restricted
Unrestricted
Total net assets
Governmental Govemmental
Activities
2010 Activities
2009
$ 17,783,592 $ 16,884,184
64,739,816 66,086,316
82,523,408 82,970,500
1,898,822
8,081,096
9,979,918
5 8,076,467
5,038,389
9,428,634
$ 72,543,490
3,19 5, 887
8, 85 4,447
12,05 0,334
5 8,554,464
5,450,323
6,915,379
$ 70,920,166
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2010
Unaudited
Over time, net assets can serve as a useful indicator of a government's financial position. At December 31, 2010,
the City's assets exceeded liabilities by $72,543,490.
Capital assets reported on the government-wide statements represent the largest portion of the City's assets. At
year-end, capital assets represented 78.45% of total assets. Capital assets include land, land improvements,
buildings and improvements, machinery and equipment, licensed vehicles and infrastructure. Capital assets, net of
related debt to acquire the assets at December 31, 2010, were $58,076,467. These capital assets are used to provide
services to citizens and are not available for future spending. Although the City's investment in capital assets is
reported net of related debt, it should be noted that the resources to repay the debt must be provided from other
sources, since capital assets may not be used to liquidate these liabilities.
A portion of the City's net assets, $5,038,389, represents resources that are subject to external restriction on how
they may be used. In the governmental activities, the remaining balance of unrestricted net assets of $9,428,634
may be used to meet the govemment's ongoing obligations to citizens and creditors.
The table below shows the change in net assets for fiscal years 2010 and 2009.
Change ~ Net Assets
Governmental Govemmental
Activities
2010 Activities
2009
Revenues
Program revalues:
Charges for services $ 951,279 $ 849,022
Operating grants and contributions 330,395 454,749
Capital grants and contributions 267,396 66,688
Total program revenues 1,549,070 1,370,459
Gaieral revalues:
Property and other taxes 980,789 1,052,742
Income taxes 8,299,564 7,918,110
JIDD revalue 2,539,728 2,437,692
Unrestricted grants and entitlements 1,478,728 1,290,485
Investment earnings 36,171 138,731
Miscellaneous 231,754 104,860
Total general revalues 13,566,734 12,942,620
Total revenues $ 15,115,804 $ 14,313,079
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2010
Unaudited
Change in Net Assets
Governmental Governmental
Activities
2010 Activities
2009
Expenses
General government $ 1,537,614 $ 2,757,297
Security of persons and property 6,707,077 6,818,565
Public health services 122,13 7 116,28 8
Transportation 3,486,979 3,776,493
Community environment 44,161 76,961
Basic ut>7ity services 891,502 1,024,612
Leisure time activities 358,449 425,772
Interest and fiscal charges 344,561 385,740
Total expenses 13,492,480 15,381,728
Change in net assets 1,623,324 (1,068,649)
Net assets atbeginning ofyear 70,920,166 71,988,815
Net assets at endofyear $ 72,543,490 $ 70,920,166
Governmental Activities
Governmental activities net assets increased $1,623,324 in 2010. The increase is a result of the reduction in both
operating and capital costs and the reversal of the liability previously recorded for an income tax refund.
Security of persons and property, which primarily supports the operations of the police and fire departments
accounted for $6,707,077 of the total expenses of the City. These expenses were partially funded by $307,774 in
direct charges to users of the services and $14,340 in operating grant and contributions. Transportation expenses
totaled $3,486,979. Transportation expenses were partially funded by $545 in direct charges to users of the services,
and $316,055 in operating grants and contributions.
The county, state and federal governments contributed to the City a total of $330,395 in operating grants and
contributions. These revenues are restricted to a particular program or purpose. Of the total operating grants and
contributions, $14,340 subsidized security of persons and property and $316,055 subsidized transportation
programs.
General revenues totaled $13,566,734, and amounted to 89.75% of total governmental revenues. These revenues
primarily consist of property and income tax revenue of $9,280,353 and JEDD revenue of $2,539,728.
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2010
Unaudited
The graph below illustrates the City's dependence upon general revenues as program revenues are not sufficient to
cover total governmental expenses.
Governmental Activities -Program Revenues vs. Total Expenses
$l~soo,ooo
$15,000,000
$12,500,000
510,000,000
$7,500,000
$5,000,000
$2,500,000
$-
O Program Revenues
^ Expenses
The statement of activities shows the cost of program services and the charges for services and grants offsetting
those services. The following table shows, for governmental activities, the total cost of services and the net cost of
services. That is, it identifies the cost of these services supported by tax revenue and unrestricted grants and
entitlements.
Governmental Activities
Total Cost of Net Cost of Total Cost of Net Cost of
Services Services Services Services
2010 2010 2009 2009
Program Expenses:
General government $ 1,537,614 $ 789,147 $ 2,757,297 $ 2,201,571
Securityofpersons and property 6,707,077 6,384,963 6,818,565 6,612,497
Public health services 122,137 122,137 116,288 116,288
Transportation 3,486,979 3,170,379 3,776,493 3,323,092
Community environment 44,161 39,227 76,961 72,027
Basic utility services 891,502 755,300 1,024,612 887,658
Leisure time activities 358,449 337,696 425,772 412,396
1n~restandfiscalcharges 344,561 344,561 385,740 385,740
Total $ 13,492,480 $ 11,943,410 $ 15,381,728 $ 14,011,269
The dependence upon general revenues for governmental activities is apparent, with 88.52% of expenses supported
through taxes and other general revenues.
8
Fiscal Year 2010 Fiscal Year 2009
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2010
Unaudited
The chart below illustrates the City's program revenues versus general revenues for 2010 and 2009:
Governmental Activities -General and Program Revenues
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
Financial Analysis of the Government's Funds
^ Program Revenues
General Revenues
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements.
Governmental Funds
The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances
of spendable resources. Such information is useful in assessing the City's financing requirements. In particular,
unreserved fund balance serves as a useful measure of the City's net resources available for spending at year-end.
The City's governmental funds (as presented on the balance sheet on page 19) reported a combined fund balance of
$13,645,464 which is $2,746,029 more than last year's total of $10,899,435. The schedule below indicates the fund
balances and the total change in fund balances as of December 31, 2010 and 2009 for all major and nonmajor
governmental funds.
Fund Balances Fund Balances Increase
' 12/31 /10 12/31/09 (Decreasel
Major funds:
General $ 9,812,857 $ 6,943,962 $ 2,868,895
Bond retirement 13,561 54,344 (40,783)
Capital improvement 2,572,092 2,497,641 74,451
Othernonmajorgovemmental funds 1,246,954 1,403,488 (156,534)
Total $ 13,645,464 $ 10,899,435 $ 2,746,029
Percentage
Chanee
41.31 °ro
(75.05) °~o
2.98 °~o
(11.15) °~o
25.19 %a
9
Fiscal Year 2010 Fiscal Year 2009
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2010
Unaudited
General Fund
The City's general fund balance increased by $2,868,895. The table that follows assists in illustrating the revenues
of the general fund.
2010
Revenues
Taxes
Charges for serves
Licenses and permits
Fines and forfeitures
Intergovernmental
Investment income
JEDD revenue
Other
Total
$ 7,527,776
364,5 32
210,198
177,787
1,367,781
37,458
2,772,250
294,548
2009
$ 6,752,892
117,869
120,853
213,569
1,294,609
208,498
2,650,980
174,014
,y ~.,i ~. ,..r ., ,y a,.ir
Percentage
Chance
11.47
209.27
73.93
(16.75)
5.65
(82.03)
4.57
69.27
10.57
Tax revenue represents 59.03% of all general fund revenue. Overall, tax revenue increased by 11.47% as compared
to the prior year. During 2009 the City began the process of eliminating several special revenue and capital
improvement funds. The revenue formerly receipted into those funds is now received by the general fund. This
process accounts for the increase in charges for services and licenses and permits. The decrease in investment
income is due to interest rate reductions in the City's investment accounts.
Revenues -Fiscal Year 2010
Revenues -Fiscal Year 2009
JEDD Other JEDD
Revenue Revenues Revenue
21.74% 2.31% 22.99%
Intergovern Other
Intergovern mental Revenues
mental 11.23% 1.51
10.73%
},
Investment
Investment Income
Income 1.81
0.29%
Taxes
Fines and 59.03% Fines and
forfeitures Charges for forfeitures Licenses Charges for
1.39% Licenses Services 1.85% and Permits Services
and Permits
2.86%
1.04%
1.02%
1.65%
Taxes
58.55%
10
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2010
Unaudited
The table that follows assists in illustrating the expenditures of the general fund.
Expenditures
General government
Security of persons and property
Public health services
Transportation
Community environment
Basic utility services
Leisure time activities
Total
2010 2009 Percentage
Amount Amount Change
$ 1,503,749 $ 2,639,835 (43.04)
5,592,117 5,736,067 (2.51)
122,137 116,288 5.03
1,792,325 1,857,902 (3.53)
41,806 71,674 (41.67)
182,337 151,955 19.99
277,175 112,781 145.76
$ 9,511,646 $ 10,686,502 (10.99)
Expenditures for general government decreased due to expenditure reduction efforts implemented by the Mayor in
2010. Additionally, the City reversed a liability in the amount of $1,112,868 which was previously recorded in
anticipation of a large income tax refund. The liability will not be realized due to the expiration of the statute of
limitations for income tax refunds. Community environment expenditure decreased in 2010 due to less utilization of
the flood prevention and tree removal programs introduced in 2008. Basic utility services were higher than last year
due to an increase in disposal costs for the City's trash compactor and recycle programs. Leisure time activities
have increased due to the elimination of Parks and Recreation special revenue fund. All other expenditures
remained comparable to 2009.
Expenditures -Fiscal Year 2010
Basic utility
services
t92%
Community
environment
0.44%
Transport-
ation
18.84%
Public health
services
t29%
Bond Retirement Fund
Leisure time
activity
2.9 P/o
General
government
15.8P/o
Security of
persons and
property
58.79%
Expenditures -Fiscal Year 2009
Community
environment
0.67%
Transport-
ation
17.38%
Public health /
services J
1.09%
Basic utility Leisure time
services activity
L42% r L06%
Security of
persons and
property
53.68%
General
24.70%
The bond retirement fund had revenues of $262,166 in 2010. The expenditures of the bond retirement fund totaled
$302,949 in 2010. The net decrease in fund balance for the bond retirement fund was $40,783 or 75.05%. Proceeds
11
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2010
Unaudited
from special assessments are collected in the bond retirement fund and used to pay the debt service for two special
assessed projects. The property owner's portion of the largest project, water and sewer extension was financed with
special assessments bonds issued in 1991. The final maturity for the bonds is December 1, 2011 and the fund
balance is expected to be depleted at that time.
Capital Improvement Fund
The capital improvement fund had revenues of $1,996,282 in 2010. The expenditures of the capital improvement
fund totaled $1,921,831 in 2010. The net increase in fund balance for the capital improvement fund was $74,451 or
2.98%.
Budgeting Highlights
The City's budgeting process is prescribed by the Ohio Revised Code (ORC). Essentially the budget is the City's
appropriations which are restricted by the amounts of anticipated revenues certified by the County Budget
Commission in accordance with the ORC. Therefore, the City's plans or desires cannot be totally reflected in the
original budget. If budgeted revenues are adjusted due to actual activity then the appropriations can be adjusted
accordingly.
Budgetary information is presented for the general fund. There were two significant changes to budgeted revenues
in the general fund. JEDD revenue was reduced because receipts were not remitted timely in 2010. A change in
personnel at the City of Akron made monthly payment questionable. Actual receipts were higher than anticipated
due to a payment for three months that was received on December 15, 2010. The amount budgeted for investment
income was decreased to better reflect actual earnings. Income tax revenue was greater than budgeted because the
City did not make the anticipated refund of over one million dollars, which is recorded as a revenue adjustment.
Charges for services have increased due to the elimination of funds process that began in 2009. The general fund
now receives ambulance fees previously receipted to the fire equipment special revenue fund. Intergovernmental
revenues were greater than budgeted due to higher than usual estate tax receipts. Other revenue exceeded budget
due to a one-time payment from Ohio Edison related to our utility aggregation program. Cost saving measures and
restrictions imposed by the Mayor in 2010 resulted in budget reductions and savings in every type of expenditure
category in the general fund.
Capital Assets and Debt Administration
Capital Assets
At the end of fiscal 2010, the City had $64,739,816 (net of accumulated depreciation) invested in land, land
improvements, buildings and improvements, machinery and equipment, licensed vehicles and infrastructure. The
following table shows fisca12010 balances compared to 2009:
12
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2010
Unaudited
Capital Assets at December 31
(Net of Depreciation)
Land
Land improvements
Buildings and improvements
Machinery and equipment
Licensed vehicles
Infrastructure
Construction in progress
Totals
Governmental Activities
2010 2009
$ 3,229,638 $ 3,224,888
1,823,873 845,282
10,747,324 11,020,221
1,921,330 1,960,986
1,527,150 1,503,360
45,490,501 46,550,472
981,107
$ 64,739,816 $ 66,086,316
The following graphs show the breakdown of governmental capital assets by category for 2010 and 2009.
Capital Assets -Governmental Activities Capital Assets -Governmental Activities
2010 2009
Buildings & Land imp.
Land imp, improvements l 28 %
2 82% 16.60 % Land
Land 4.99 % 4.88°
Machinery and CIP
equipment L48%
2.97
Licensed
vehicles
2.36°
Infrastructure
70.26%
Infrastructure
70.44
Machinery and
equipment
2.97%
Licensed
vehicles
2.27
The City's largest capital asset category is infrastructure which includes roads, bridges, culverts, sidewalks and
curbs. These items are immovable and of value only to the City, however, the annual cost of purchasing these items
is quite significant. The net book value of the City's infrastructure (cost less accumulated depreciation) represents
approximately 70.26% of the City's total governmental capital assets at December 31, 2010.
See Note 9 for more detail on the City's capital assets.
Debt Administration
The City had the following long-term obligations outstanding at December 31, 2010 and 2009:
13
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2010
Unaudited
Governmental Activities
2010
General obligation bonds
$ 6,160,000 2009
$ 6,785,000
Special assessment bonds 185,000 360,000
OPWC loans 318,349 386,852
Compensated absences 1,417,747 1,322,595
Total long-termobligations $ 8,081,096 $ 8,854,447
See Note 10 for more detail on the City's long-term obligations.
Economic Conditions and Next Year's General Fund Budget Outlook
The City of Fairlawn is a residential community with a strong diversified business base. The City is home to
several large corporations, a multitude of small, diverse businesses, and five thriving retail centers, including
Summit Mall, Rosemont Commons, the Shops at Fairlawn, the Fairlawn Towne Center, and Miller-Market Square.
The City's convenient location continues to attract and retain growing businesses.
The City'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 as planned. The City has recently formed a Community
Investment Corporation to expand its economic development capabilities and to attract and retain businesses.
The City is proud to offer outstanding city services to its residents. In addition to excellent police and fire protection,
Fairlawn safety forces are active in the community, offering education programs such as Drug Abuse Resistance
Education (DARE), Fire Prevention, and Safety Town for our youngest residents. Fairlawn police support
neighborhood Block Parent groups, offer residential checks and a Senior Call program to check on senior citizens
living alone. The popular Special Traffic Enforcement Program boosts traffic control where residents most see a
need. The City's highly trained emergency medical teams are outfitted with advanced medical equipment and
provide free emergency medical care to Fairlawn residents. The Municipal Service Center Complex houses all
public service functions and equipment in one area. The City provides trash and recycling services at no charge to
residents at the Andrew Sombati Compactor site, an all-weather drive-thru trash compactor facility.
The City operates seventy (70) acres of parks which offer year-round recreational programs for children and adults.
The Learning Resource Center, staffed with afull-time Naturalist, offers nature-related programs and lectures to
groups of all ages. The City is completing the addition of adult and youth soccer fields to the Fairlawn parks
system. The new fields will be fully operational this fall. We are excited to offer a Community Garden area as a
part of the expansion.
The City's primary revenue source is the 2% local income tax withheld on the estimated 40,000 people working in
the City. Income tax receipts increased 3.9% in 2010 as compared to the previous year.
The City is projecting a slight decrease in general fund revenue in 2011. Expenditures for 2011 are budgeted at
1.92% greater than 2010 due to general inflation and the increased cost of fuel. Programs supported by the general
fund are budgeted at the same level of service as last year and the City continues the hiring and salary freeze
instituted last year.
14
CITY OF FAIRLAWN, OHIO
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2010
Unaudited
Contacting the City's Financial Management
This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview
of the City's finances and to show the City's accountability for the money it receives. If you have questions about
this report or need additional financial information, contact Mr. Jerome E. Apple, Finance Director, City of
Fairlawn, 3487 S. Smith Road, Fairlawn, Ohio 44333.
15
This page intentionally left blank.
16
CITY OF FAIRLAWN, OHIO
STATEMENT OF NET ASSETS
DECEMBER 31, 2010
Governmental
Activities
Assets:
Equity in pooled cash and cash equivalents......... $ 12,684,242
Cash and cash equivalents in segregated accounts 14,318
Receivables (net of allowances for uncollectibles):
Income taxes . .. ..... ... ... .. 1,716,010
Real and other taxes .. ... .. ... .. 909,169
Accounts . ... .. ... ...... 63,823
Accrued interest 6,060
Special assessments ........... .. .. 907,174
Due from other governments .. .... ... .. 999,781
Prepayments .. .. .. ... 86,521
Materials and supplies inventory .. ... ... ... .. 396,494
Capital assets:
Land and construction in progress. .. .. ... 3,229,638
Depreciable capital assets, net ............. 61,510,178
Total capital assets .................... 64,739,816
Total assets ......................... 82,523,408
Liabilities:
Accounts payable .. .. ... .. .......... 153,346
Contracts payable .. ... ........ .. .. 202,gg7
Compensated absences payable. .. .. .. .. 81,504
Accrued wages and benefits .. ... ...... 120,686
Due to other governments ... .. ... ....... 469,119
Unearned revenue .. ... .......... ... .. 837,732
Accrued interest payable ... ... ... .. .. .. 33,548
Long-term liabilities:
Due within one yeaz . ... .. ..... ... .. 1,520,575
Due in more than one year 6,560,521
Total liabilities ...................... 9,979,918
Net assets:
Invested in capital assets, net of related debt .. ..... 58,076,467
Restricted for:
Capital projects ..................... 3,202,476
Debt service ...................... 503,332
Security of persons and property .. ... .. 418,225
Transportation projects .. ... ... ......... 757,134
Other purposes .... ..... ..... ... ... 157,222
Unrestricted ........................ 9,428,634
Total net assets . .. ..... ... ... .. .. $ 72,543,490
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
17
CITY OF FAIRLAWN, OHIO
Governmental Activities:
General government ... ..... ... ... . .
Security of persons and property. .. ... .. .
Public health services ... ..... ... ... .
Transportation . .
Community environment ..... ... ... .. .
Basic utility services . .. .. ... ...... .
Leisure time activity .... .... ..... .. .
Interest and fiscal charges ............ .
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2010
Net (Expense)
Revenue and
Change!. in
Program Revenues Net Assets
Operating Capital
Charges for Grants and Grants and Governmental
Expenses Services Contributions Contributions Activities
$ 1,537,614 $ 481,071 $ - $ 267,396 $ (789,147)
6,707,077 307,774 14,340 - (6,384,963)
122,137 - - - (122,137)
3,486,979 545 316,055 - (3,171),379)
44,161 4,934 - - (39,227)
891,502 136,202 - - (75:5,300)
358,449 20,753 - - (33'7.,696)
344,561 - - - (344,5
Total governmental activities... .. ... ... $ 13,492,480 $ 951,279 $ 330,395 $ 267,396 11,943„4102
General Revenues:
Property and other taxes levied for:
General purposes . 800,403
Police and fire pension ... ... .... .. .... ..... 17I,386
Income taxes levied for:
General purposes ... .... ... .... .. .... ..... 6,621,890
Capital projects .............................. 1,67"x,674
JEDD revenue .. .... ..... .... .... ....... ... 2,539,728
Grants and entitlements not restricted to specific programs . .... ... 1,478,728
Investment earnings . ... .... .. ..... .... ... .. 3f;,171
Miscellaneous . 231,754
Total general revenues......... .. ..... ... ... .. 13,566,'734
Change in net assets.. 1,623,:324
Net assets at beginning of year. 70,920, l66
Net assets at end of year... ..... .... ... .. ... $ 72,543; 390
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
18
CITY OF FAIRLAWN, OHIO
BALANCE SHEET
GOVERNMENTAL FUNDS
DECEMBER 31, 2010
Other Total!
Bond Capital Governmental Governmental
General Retirement Improvement Funds Funds
Assets:
Equity in pooled cash and
cash equivalents ... .... ... .. ... $ 8,761,156 $ 13,561 $ 2,506,847 $ 1,402,678 $ 12,684,242
Cash and cash equivalents
in segregated accounts ... .. ..... 14,318 - - - 14,318
Receivables (net of allowance for uncollectibles):
Income taxes .. ... .. ... .... .. .. 1,287,007 - 429,003 - 1,71Ei,010
Real and other taxes .. ... ......... 713,498 - - 195,671 909,169
Accounts .. .. ... ... ...... ... 63,637 - - 186 63,823
Accrued interest ..... .......... .. 5,721 - - 339 6,060
Special assessments .. .. ...... ... - 500,400 406,774 - 90%,174
Due from other funds ...... .. .... .. - - - 33 33
Due from other governments........... 827,961 - 4,660 167,160 499,781
Prepayments . ..... ... ..... .. ... 86,521 - - - 86,,521
Materials and supplies inventory......... 380,412 - - 16,082 396;494
Total assets . ... ....... ........ .. $ 12,140,231 $ 513,461 _ $ 36347,284 $ 1,782,149 $ 17,783,~Ss
Liabilities:
Accounts payable .. ... ........ .. $ 138,240 $ - $ 883 $ 14,223 $ 153,346
Contracts payable ... ..... ....... 11,481 - 191,406 - 202,887
Compensated absences payable ..... ... 81,504 81,:04
Accrued wages and benefits . ...... .. ... 120,067 - - 619 120,686
Due to other funds .. ... .... .. ..... 33 - - - 33
Due to other governments ............. 271,555 - - 197,564 469,119
Unearned revenue . .. ... ...... ... 651,570 - - 186,162 837; 732
.. ...
Deferred revenue 1,052,924 500,400 582,903 136,627 2,272,!354
. .... ... ...
..... ... ......
.
Total liabilities 2,327,374 500,400 775,192 535,195 4,138,161
.. .
.
Fund Balances:
Reserved for encumbrances ... ..... .. 331,801 - 65,965 94,694 492,460
Reserved for prepayments ...... ..... .. 86,521 - - - 86.,`21
Reserved for materials and supplies inventory... 380,412 - - 16,082 396,494
Reserved for unclaimed monies . 19,400 - - - 19,400
Reserved for debt service ... ... .... .. - 13,561 - - 13.,561
Unreserved:
Undesignated, reported in:
General fund .......... ...... .. 8,994,723 - - - 8,994,.723
Special revenue funds .... .... .. ... - - - 1,070,041 1,070,041
Capital projects funds ............. - - 2,506,127 66,137 2,572,2:64
Total fund balances . .... ... ..... ... 9,812,857 13,561 2,572,092 1,246,954 13,645,4.64
Total liabilities and fund balances .. .... $ 12,140,231 $ 513,961_ $ 3,347,284 $ 1,782,149 $ 17,783,625
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
19
CITY OF FAIRLAWN, OHIO
RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCES TO
NET ASSETS OF GOVERNMENTAL ACTIVITIES
DECEMBER 31, 2010
Total governmental fund balances $ 13,645,464
Amounts reported for governmental activities in the
statement of net assets are different because:
Capital assets used in governmental activities are not financial resources
and therefore are not reported in the funds. 64,739,816
Other long-term assets are not available to pay for current period
expenditures and therefore are deferred in the funds.
Income taxes receivable $ 685,875
Licenses and permits receivable 28,840
Intergovernmental receivable 647,336
Special assessments receivable 907,174
Investment income receivable 3,255
Other receivable 374
Total 2,272,8`'4
Long-term liabilities are not due and payable in the current period and
therefore are not reported in the funds. The long-term liabilities
are as follows:
Accrued interest payable (33,548)
General obligation bonds (6,160,000)
Special assessment bonds (185,000)
OPWC loans (318,349)
Compensated absences (1,417,747)
(8,114,644)
Net assets of governmental activities $ 72,543,490
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
20
CITY OF FAIRLAWN, OHIO
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2010
Revenues:
Income taxes .. .... .. ... ..... .
Property and other taxes .
Charges for services ... ... ... .. .
Licenses and permits . .
Fines and forfeitures . .
Intergovernmental .... ... .. ... . .
Special assessments .... ... ... .. . .
Investment income .. ... ... .. .. . .
Rentals .................... .
Contributions and donations .... ..... .
JEDD revenue ................ .
Other .. ... .. ... .. ..... .. .
Total revenues .. .. ... ... ... . .
Expenditures:
Current:
General government ...... ...... .
Security of persons and property ..... .
Public health services ... .... .... .
Transportation ....... .. ..... .
Community environment . ... .... .
Basic utility services. ... ... .... .
Leisure time activities . .... .... .. .
Capital outlay ...... ... .... .. .
Debt service:
Principal retirement .... ... ... .. .
Interest and fiscal charges ... .. .. . .
Total expenditures... .
Other Total
Bond Capital Governmental Governmental
General Retirement Improvement Funds Funds_
$ 6,708,686 $ - $ 1,706,606 $ - $ 8,415,292
819,090 - - 171,386 99f1,476
364,532 - - 137,019 501,551
210,198 - - - 210,198
177,787 - - 5,031 182,818
1,367,781 - 219,968 338,715 1,926,464
- 262,166 55,462 - 317,628
37,458 - - 2,407 3),865
82,517 - - - 82,517
4,250 - - 100 4,350
2,772,250 - - - 2,772.,250
207,781 - 14,246 5,292 227,319
12,752,330 262,166 1,996,282 659,950 15,670,728
1,503,749 12,047 - 78 1,S1~i,874
5,592,117 - - 764,099 6,356,216
122,137 - - - 122,137
1,792,325 - - 295,511 2,087,836
41,806 - - - 4X,806
182,337 - - 99,334 281,671
277,175 - - 1,019 278,194
- - 994,301 40,962 1,035,263
- 243,503 625,000 - 868,503
- 47,399 302,530 - 349,929
9,511,646 302,949 1,921,831 1,201,003 12,937,429
Excess (deficiency) of revenues
over (under) expenditures . .. ... .... 3,240,684 (40,783) 74,451 (541,053) 2,73:5,299
Other financing sources (uses):
Transfers in ... ..... ... ..... - - - 384,473 384„473
Transfers out ... .......... .. (384,473) - - - 384„47~
Total other financing sources (uses) (384,473) - - 384,473 __
Net change in fund balances ... .... ... 2,856,211 (40,783) 74,451 (156,580) 2,73:3„299
Fund balances at beginning of year ....... 6,943,962 54,344 2,497,641 1,403,488 10,899„435
Increase (decrease) in reserve for inventory .. 12,684 - - 46 12„730
Fund balances at end of year .......... $ 9,812,857 $ 13,561 $ 2,572,092 $ 1,246,954 $ 13,645.,464
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
21
CITY OF FAIRLAWN, OHIO
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES
IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2010
Net change in fund balances -total governmental funds $ 2,733,299
Amounts reported for governmental activities in the
statement of activities are different because:
Government funds report capital outlays as expenditures. However,
in the statement of activities, the cost of those assets are allocated
over their estimated useful lives as depreciation expense. This is the
amount by which capital outlays ($982,261) were exceeded by
depreciation expense ($2,245,717) in the current period. (1,263,456)
Governmental funds only report the disposal of capital assets to the
extent proceeds are received from the sale. In the statement of
activities, a gain or loss is reported for each disposal. (83,044)
Revenues in the statement of activities that do not provide current
financial resources are not reported as revenues in the funds. (554,924)
Governmental funds report expenditures for inventory when purchased.
However, in the statement of activities, they are reported as an expense
when consumed. 12,730
Repayment of bond and loan principal is an expenditure in the
governmental funds, but the repayment reduces long-term
liabilities in the statement of net assets. 868,503
In the statement of activities, interest is accrued on outstanding bonds
and loans whereas in governmental funds, an interest expenditure is
reported when due. 5,368
Some expenses reported in the statement of activities, such as compensated
absences and pension obligations, do not require the use of current
financial resources and therefore are not reported as expenditures
in governmental funds. (95,152)
Change in net assets of governmental activities $ 1,623,324
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
22
CITY OF FAIRLAWN, OHIO
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE -BUDGET AND ACTUAL (NON-GAAP BUDGETARY BASIS)
GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2010
Budeeted Amounts
Revenues:
Income taxes.... ... ... . .
Property and other taxes . .. .. ... .... .
Charges for services .. ... ... .. ... . .
Licenses and permits ... ... .. .. .. . .
Fines and forfeitures... .
Intergovernmental . .. .. .. . .
Investment income .. .. ....... .
Rentals .... .. .. .. ....... . .
Contributions and donations ............ .
JEDD revenue . ..... ... .. .. .
Other .......................
Total revenues .................. .
$ 4,822,238
749,285
279,400
164,750
222,200
834,836
75,000
80,000
2,339,275
112,000
$ 6,703,941
865,312
355,304
210,198
190,016
1,144,758
42,759
82,517
4,250
2,772,250
207,718
12,579,023
Expenditures:
Current:
General government ............. .
Security of persons and property ..... .. .
Public health services . .
Transportation .
Community environment . ...... ... .
Basic utility services .. . .
Leisure time activities .. ... .. .. .
Total expenditures. .. ... .. .. .
OriEinal Final Actual
$ 4,817,938
671,285
171,715
69,126
154,200
874,995
237,207
79,700
200
2,969,929
115,200
10,161,495
3,367,688
6,138,578
118,300
1,946,055
67,806
247,351
328.271
12,214,049
Excess (deficiency) of revenues
9,678,984
3,108,463
5,837,438
122,300
1,977,080
58,806
207,351
317.721
11,629,159
2,987,777
5,527,517
122,137
1,881,311
53,718
190,581
290.858
11,053,899
Variance with
Final Budl;et
Positive
(Negative~_
$ 1,881.,703
116.,027
75„904
45.,448
(32,184)
309.,922
(3'1..,241)
?.,517
4,250
43:?.975
95,'118
2,900,039
120,686
309,921
163
95,769
5,088
16,'770
26.863
575,260
over (under) expenditures ............. (2,052,554) (1,950,175) 1,525,124 3,475>_99
Other financing sources (uses):
Proceeds from sale of capital assets........ 17,000 - - -
Transfers out ............... 225,565 (919,435) (384,473) 534,!162
Total other financing sources (uses) ... .. 242,565 (919,435) (384,473) 534,!)62
Net change in fund balance .. .. (1,809,989) (2,869,610) 1,140,651 4,010,:?61
Fund balance at beginning of year ........ 6,423,669 6,423,669 6,423,669 -
Prior year encumbrances appropriated ...... 637,589 637,589 637,589 -
Fund balance at end of year ............ $ 5,251,269 $ 4,191,648 $ 8,201,909 ~ 4,010,261
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
23
CITY OF FAIRLAWN, OHIO
STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS
DECEMBER 31, 2010
Agency
Assets:
Equity in pooled cash and cash equivalents . $ 33,000
Total assets.. .. .. .. 33,000
Liabilities:
Undistributed monies. .. .. .. .. 33,000
Total liabilities .................... $ 33,000
SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS
24
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 1 -DESCRIPTION OF THE CITY
The City of Fairlawn (the "City") is a charter municipal corporation established and operated under the
laws of the State of Ohio. The City is organized as a Mayor/Council form of government. The Mayor,
Council and Finance Director are elected.
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements (BFS) of the City have been prepared in conformity with accounting
principles generally accepted in the United States of America (GAAP) as applied to local governmental
units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for
establishing governmental accounting and financial principles. The City also applies Financial Accounting
Standards Board (FASB) guidance issued on or before November 30, 1989, to its governmental funds
provided they do not conflict with or contradict GA5B pronouncements. The most significant of the City's
accounting policies are described below.
A. Reporting Entity
For financial reporting purposes, the City's BFS include all funds, agencies, boards, commissions, and
departments for which the City is financially accountable. Financial accountability, as defined by the
GASB, exists if the City appoints a voting majority of an organization's governing board and is either
able to impose its will on that organization or there is a potential for the organization to provide
specific financial benefits to, or impose specific burdens on, the City. The City may also be financially
accountable for governmental organizations with a sepazately elected governing board, a governing
boazd appointed by another government, or a jointly appointed boazd that is fiscally dependent on the
City. The City also took into consideration other organizations for which the nature and significance
of their relationship with the City are such that exclusion would cause the City's basic financial
statements to be misleading or incomplete. Based on these criteria, the City has no component units.
The City provides various services including police and fire protection, emergency medical, recreation
(including pazks), planning, zoning, street maintenance and repair, and general administrative services.
The operation of each of these activities is directly controlled by the Council through the budgetary
process. None of these services are provided by a legally separate organization; therefore, these
operations are included in the primary government.
The CopleylFairlawn City School District and the Summit County Public Library have been excluded
from the City's financial statements. Both are legally separate from the City. Neither imposes a
financial burden nor provides a financial benefit to the City. The City cannot significantly influence
the operations of these entities.
The City participates in the Bath-Akron-Fairlawn Joint Economic Development District (JEDD),
which is a jointly governed organization. The JEDD was created to assure the continued economic
viability of Bath Township. Anine-member board of directors, three appointed from Bath Township,
Akron, and Fairlawn, respectively, controls the operation of the JEDD. The board exercises total
control over the operation of the JEDD including budgeting, appropriating, contracting and designating
management.
Each participant's degree of control is limited to its representation on the board. All 2010 JEDD
revenues were the result of the income tax levied by the JEDD effective January 1, 1999.
25
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
B. Basis of Presentation -Fund Accounting
The City's BFS consist of government-wide statements, including a statement of net assets and a
statement of activities, and fund financial statements which provide a more detailed level of financial
information.
Government-wide Financial Statements -The statement of net assets and the statement of activities
display information about the City as a whole. These statements include the financial activities of the
primary government, except for fiduciary funds.
The statement of net assets presents the financial condition of the governmental activities of the City at
year-end. The statement of activities presents a comparison between direct expenses and program
revenues for each program or function of the City's governmental activities. Direct expenses are those
that are specifically associated with a service, program or department and therefore clearly identifiable
to a particular function. Program revenues include charges paid by the recipient of the goods or
services offered by the program, grants and contributions that are restricted to meeting the operational
or capital requirements of a particular program and interest earned on grants that is required to be used
to support a particular program. Revenues which are not classified as program revenues are presented
as general revenues of the City, with certain limited exceptions. The comparison of direct expenses
with program revenues identifies the extent to which each business segment or governmental functions
are self-financing or draw from the general revenues of the City.
Fund Financial Statements -During the year, the City segregates transactions related to certain City
functions or activities in separate funds in order to aid financial management and to demonstrate legal
compliance. Fund financial statements are designed to present financial information of the City at this
more detailed level. The focus of governmental fund financial statements is on major funds. Each
major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a
single column. Fiduciary funds are reported by type.
C. Fund Accounting
The City uses funds to maintain its financial records during the year. A fund is defined as a fiscal and
accounting entity with a self balancing set of accounts. There are two categories of funds:
governmental and fiduciary.
Governmental Funds -Governmental funds are those through which most governmental functions
typically are financed. Governmental fund reporting focuses on the sources, uses and balances of
current financial resources. Expendable assets are assigned to the various governmental funds
according to the purposes for which they may or must be used. Current liabilities are assigned to the
fund from which they will be paid. The difference between governmental fund assets and liabilities is
reported as fund balance. The following are the City's major governmental funds:
General Fund -The general fund accounts for all financial resources except those required to be
accounted for in another fund.
Bond Retirement -The bond retirement fund accounts for the accumulation of resources for, and
payment of, long-term debt principal, interest and related costs.
Capital Improvement -This fund is used to account for the acquisition and construction of major
capital facilities.
26
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Other governmental funds of the City are used to account for (a) the accumulation of resources for, and
payment of, general long-term debt principal, interest and related costs; (b) financial resources to be
used for the acquisition, construction, or improvement of capital facilities; and (c) for grants and other
resources whose use is restricted to a particular purpose.
Fiduciary Funds -Fiduciary fund reporting focuses on net assets and changes in net assets. The
fiduciary fund category is split into four classifications: pension trust funds, investment trust funds,
private-purpose trust funds and agency funds. Trust funds are used to account for assets held by the
City under a trust agreement for individuals, private organizations, or other governments and are
therefore not available to support the City's own programs. Agency funds are custodial in nature
(assets equal liabilities) and do not involve measurement of results of operations. The City's only
fiduciary funds are agency funds. The agency funds are used to account for deposits that will be
returned after the proper performance of certain landscape or street repair projects.
D. Measuremeut Focus and Basis of Accounting
Government-wide Financial Statements -The government-wide financial statements are prepared
using the economic resources measurement focus. All assets and all liabilities associated with the
operation of the City are included on the statement of net assets.
Fund Financial Statements -All governmental funds are accounted for using a flow of current
financial resources measurement focus. With this measurement focus, only current assets and current
liabilities generally are included on the balance sheet. The statement of revenues, expenditures and
changes in fund balances reports on the sources (i.e., revenues and other financing sources) and uses
(i.e., expenditures and other financing uses) of current financial resources. This approach differs from
the manner in which the governmental activities of the government-wide financial statements are
prepared. Governmental fund financial statements therefore include reconciliation with brief
explanations to better identify the relationship between the government-wide statements and the
financial statements for governmental funds.
E. Basis of Accounting
Basis of accounting determines when transactions are recorded in the financial records and reported on
the financial statements. Government-wide financial statements are prepared using the accrual basis of
accounting. Governmental funds use the modified accrual basis of accounting. Agency funds also use
the accrual basis of accounting. Differences in the accrual and modified accrual basis of accounting
arise in the recognition of revenue, the recording of deferred revenue and in the presentation of
expenses versus expenditures.
Revenues -Exchange and Non-exchange Transactions - Revenue resulting from exchange
transactions, in which each party gives and receives essentially equal value is recorded on the accrual
basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal
year in which the resources are measurable and become available. Available means that the resources
will be collected within the current fiscal year or are expected to be collected soon enough thereafter to
be used to pay liabilities of the current fiscal year. For the City, available means expected to be
received within thirty-one days of year-end.
27
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Nonexchange transactions, in which the City receives value without directly giving equal value in
return, include income taxes, property taxes, grants, entitlements and donations. On an accrual basis,
revenue from income taxes is recognized in the period in which the income is earned (See Note 7).
Revenue from property taxes is recognized in the year for which the taxes are levied (See Note 6).
Revenue from grants, entitlements and donations is recognized in the year in which all eligibility
requirements have been satisfied. Eligibility requirements include timing requirements, which specify
the year when the resources are required to be used or the year when use is first permitted, matching
requirements, in which the City must provide local resources to be used for a specified purpose, and
expenditure requirements, in which the resources are provided to the City on a reimbursement basis.
On a modified accrual basis, revenue from nonexchange transactions must also be available before it
can be recognized.
Under the modified accrual basis, the following revenue sources are considered to be both measurable
and available at year-end: income tax, state-levied locally shared taxes (including gasoline tax, local
government funds and permissive tax), fines and forfeitures, fees and special assessments.
Unearned Revenue and Deferred Revenue -Unearned revenue and deferred revenue arise when
assets are recognized before revenue recognition criteria have been satisfied.
Property taxes for which there is an enforceable legal claim as of December 31, 2010, but which were
levied to finance year 2011 operations, and other revenues received in advance of the fiscal year for
which they were intended to finance, have been recorded as unearned revenue. Income taxes and
special assessments not received within the available period, grants and entitlements received before
the eligibility requirements are met, and delinquent property taxes due at December 31, 2010, are
recorded as deferred revenue in the governmental funds.
On governmental fund financial statements, receivables that will not be collected within the available
period have been reported as deferred revenue.
Expenses/Expenditures - On the accrual basis of accounting, expenses are recognized at the time they
are incurred.
The measurement focus of governmental fund accounting is on decreases in net financial resources
(expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in
which the related fund liability is incurred, if measurable. Allocations of cost, such as depreciation and
amortization, are not recognized in governmental funds.
F. Budgetary Data
The budgetary process is prescribed by provisions of the Ohio Revised Code and entails the
preparation of budgetary documents within an established timetable. The major documents prepared
are the tax budget, the certificate of estimated resources and the appropriations resolution, all of which
are prepared on the budgetary basis of accounting. The certificate of estimated resources and the
appropriations ordinance are subject to amendment throughout the year with the legal restriction that
appropriations cannot exceed estimated resources, as certified. For all funds, Council appropriations
are made at the object level within each department. This is known as the legal level of budgetary
control. Budgetary modifications may only be made by resolution of the City Council at the legal level
of control. All funds, other than agency funds, are legally required to be budgeted and appropriated.
28
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Taz Budget -Alternative tax budget information of estimated revenue and expenditures for all funds
is submitted to the Summit County Fiscal Officer, as Secretary of the County Budget Commission, by
July 20 of each year, for the period January 1 to December 31 of the following year. All funds, except
agency funds, are legally required to be budgeted; however, only governmental funds are legally
required to be reported.
Estimated Resources -The County Budget Commission determines if the budget substantiates a need
to levy all or part of previously authorized taxes and reviews estimated revenue. The Commission
certifies its actions to the City by September 1. As part of this certification, the City receives the
official certificate of estimated resources, which states the projected revenue of each fund. Prior to
December 31, the City must revise its budget so that the total contemplated expenditures from any
fund during the ensuing fiscal year will not exceed the amount available as stated in the certificate of
estimated resources. The revised budget then serves as the basis for the annual appropriations
measure. On or about January 1, the certificate of estimated resources is amended to include
encumbered cash balances at December 31 of the preceding year. The certificate may be further
amended during the year if the City Finance Director determines, and the Budget Commission agrees,
that an estimate needs to be either increased or decreased. The amounts reported on the budgetary
statement reflect the amounts in the original and final amended official certificate of estimated
resources issued during 2010.
Appropriations - A temporary appropriation ordinance to control expenditures may be passed on or
about January 1 of each year for the period January 1 to March 31. An annual appropriation ordinance
must be passed by April 1 of each year for the period January 1 to December 31. The appropriation
ordinance fixes spending authority at the fund, department and object level. The appropriation
ordinance may be amended during the year as new information becomes available, provided that total
fund appropriations do not exceed current estimated resources, as certified. The appropriations for a
fund may only be modified during the year by an ordinance of Council. The amounts on the budgetary
statement reflect the original and final appropriation amounts, including all amendments and
modifications legally enacted by Council.
Lapsing of Appropriations - At the close of each year, the unencumbered balance of each
appropriation reverts to the respective fund from which it was appropriated and becomes subject to
future appropriations. Encumbrances are carried forward and are not reappropriated as part of the
subsequent year appropriations.
G. Cash and Cash Equivalents
Cash balances of the City's funds are pooled and invested in investments maturing within five years in
order to provide improved cash management. Individual fund integrity is maintained through City
records. Each fund's interest in the pooled bank account is presented on the balance sheet as "Equity
in Pooled Cash and Cash Equivalents" on the financial statements.
During fiscal year 2010, investments were limited to overnight repurchase agreements, certificates of
deposit, and the State Treasury Asset Reserve of Ohio (STAR Ohio).
Except for nonparticipating investment contracts, investments are reported at fair value which is based
on quoted market prices. Nonparticipating investment contracts, such as nonnegotiable certificates of
deposit and repurchase agreements, are reported at cost.
29
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
The City invested funds in STAR Ohio during fisca12010. STAR Ohio is an investment pool managed
by the State Treasurer's Office which allows governments within the State to pool their funds for
investment purposes. STAR Ohio is not registered with the SEC as an investment company, but does
operate in a manner consistent with Rule 2a7 of the Investment Company Act of 1940. Investments in
STAR Ohio are valued at STAR Ohio's share price which is the price the investment could be sold for
on December 31, 2010.
Under existing Ohio statutes all investment earnings are assigned to the general fund unless statutorily
required to be credited to a specific fund. During fiscal 2010, interest revenue credited to the general
fund amounted to $37,458, which includes $21,996 assigned from other City funds.
The City has segregated bank accounts for monies held separate from the City's central bank account.
These interest bearing depository accounts are presented in the financial statements as "Cash and Cash
Equivalents in Segregated Accounts" since they are not required to be deposited into the City treasury.
For purpose of presentation on the financial statements, investments of the cash management pool and
investments with original maturities of three months or less at the time they are purchased by the City
are considered to be cash equivalents. Investments with an initial maturity of more than three months
are reported as investments.
An analysis of the City's investment account at year-end is provided in Note 4.
H. Inventories of Materials and Supplies
On government-wide and fund financial statements, inventories are presented at the lower of cost or
market on a first-in, first-out basis and are expensed when used. Inventories are accounted for using
the consumption method.
On the fund financial statements, reported material and supplies inventory is equally offset by a fund
balance reserve in the governmental funds which indicates that it does not constitute available
spendable resources even though it is a component of net current assets.
Inventory consists of expendable supplies held for consumption.
I. Capital Assets
These assets generally result from expenditures in the governmental funds. These assets are reported
in the governmental activities column of the government-wide statement of net assets but are not
reported in the governmental fund financial statements.
All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and
retirements during the year. Donated capital assets are recorded at their fair market values as of the
date received. The City maintains a capitalization threshold of $5,000. The City's infrastructure
consists of roads, bridges, curbs and gutters, streets and sidewalks, drainage systems and lighting
systems. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to
the value of the asset or materially extend an asset's life are not.
30
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
All reported capital assets are depreciated except for land and construction in progress. Improvements
are depreciated over the remaining useful lives of the related capital assets. Useful lives for
infrastructure were estimated based on the City's historical records of necessary improvements and
replacement. Depreciation is computed using the straight-line method over the following useful lives:
Governmental
Activities
Description Estimated Lives
Land improvements 25 - 75 years
Buildings and improvements 15 - 50 years
Machinery and Equipment 5 - 30 years
Licensed Vehicles 3 - 25 years
Infrastructure 10 - 60 years
J. Compensated Absences
Vacation benefits are accrued as a liability as the benefits are earned if the employees' rights to receive
compensation are attributable to services already rendered and it is probable that the City will
compensate the employees for the benefits through paid time off or some other means. The City
records a liability for accumulated unused vacation time when earned for all employees with more than
one year of service.
Sick leave benefits are accrued as a liability using the vesting method. The liability includes
employees currently eligible to receive termination benefits and those the City has identified as
probable of receiving benefits in the future. The amount is based on accumulated sick leave and the
employees' wage rates at fiscal year end, taking into consideration any limits specified in the City's
termination policy. The City records a liability for accumulated unused sick leave for all employees
hired before December 31, 1995.
The entire compensated absence liability is reported on the government-wide financial statements.
On governmental fund financial statements, compensated absences are recognized as liabilities and
expenditures to the extent payments come due each period upon the occurrence of employee
resignations and retirements. These amounts are recorded in the account "compensated absences
payable" in the fund from which the employees who have accumulated leave are paid. The noncurrent
portion of the liability is not reported. The City had compensated absences payable of $81,504 in
2010.
K. Accrued Liabilities and Long-Term Obligations
All payables, accrued liabilities and long-term obligations are reported in the government-wide
financial statements.
In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely
manner and in full from current financial resources are reported as obligations of the funds. However,
claims and judgments and compensated absences that will be paid from governmental funds are
reported as a liability in the governmental fund financial statements only to the extent that they are due
for payment during the current year.
31
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
L. Interfund Balances
On fund financial statements, receivables and payables resulting from goods and services provided
between funds are classified as "due to/from other funds." These amounts are eliminated in the
governmental column of the statement of net assets.
M. Interfund Activity
Exchange transactions between funds are reported as revenues in the seller funds and as
expenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another
without a requirement for repayment are reported as Interfund transfers. Interfund transfers are
reported as other financing sources/uses in governmental funds. Repayments from funds responsible
for particular expenditures/expenses to the funds that initially paid for them are not presented on the
BFS.
N. Fund Balance Reserves and Designations
Reserved or designated fund balances indicate that portion of fund equity which is not available for
current appropriation or use. The unreserved and undesignated portions of fund equity reflected in the
governmental funds are available for use within the specific purposes of the funds.
The City reports a reservation of fund balance for amounts representing encumbrances outstanding,
prepayments, unclaimed monies, debt service and materials and supplies inventory, in the
governmental fund financial statements.
O. Estimates
The preparation of the BFS in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the BFS and accompanying notes. Actual results may
differ from those estimates.
P. Net Assets
Net assets represent the difference between assets and liabilities. Net assets invested in capital assets,
net of related debt consists of capital assets, net of accumulated depreciation, reduced by the
outstanding balances of any borrowing used for the acquisition, construction or improvement of those
assets. Net assets are reported as restricted when there are limitations imposed on their use either
through the enabling legislation or through external restrictions imposed by creditors, grantors or laws
or regulations of other governments. Net assets restricted for other purposes include unclaimed
monies. The City applies restricted resources first when an expense is incurred for purposes for which
both restricted and unrestricted net assets are available.
Q. Prepaid Items
Prepayments made to vendors for services that will benefit future periods beyond December 31, 2010
are recorded as prepaid items using the consumption method by recording a current asset for the
prepaid amount and reflecting the expenditure/expense in the year in which it was consumed.
32
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 3 -ACCOUNTABILITY AND COMPLIANCE
Change in Accounting Principles
For fiscal year 2010, the City has implemented GASB Statement No. 51, "Accounting and Financial
Reporting for Intangible Assets", GASB Statement No. 53, "Accounting and Financial Reporting for
Derivative Instruments", and GASB Statement No. 58, "Accountingand Financial Reporting for Chanter 9
Bankruptcies".
GASB Statement No. 51 addresses accounting and financial reporting standards for intangible assets, which
are assets that lack physical substance, are nonfinancial in nature, and have an initial useful life extending
beyond a single reporting period. Examples of intangible assets include easements, water rights, computer
software, patents, and trademarks. GASB Statement No. 51 improves the quality of financial reporting by
creating consistency in the recognition, initial measurement, and amortization of intangible assets. The
implementation of GASB Statement No. 51 did not have an effect on the financial statements of the City.
GASB Statement No. 53 addresses the recognition, measurement, and disclosure of information regarding
derivative instruments entered into by state and local governments. Derivative instruments are financial
arrangements used by governments to manage specific risks or to make investments. Common types of
derivative instruments include interest rate and commodity swaps, interest rate locks, options, swaptions,
forward contracts, and futures contracts. The implementation of GASB Statement No. 53 did not have an
effect on the financial statements of the City.
GASB Statement No. 58 establishes accounting and financial reporting guidance for governments that have
petitioned for protection from creditors by filing for bankruptcy under Chapter 9 of the United States
Bankruptcy Code. GASB Statement No. 58 requires governments to remeasure liabilities that are adjusted
in bankruptcy when the bankruptcy court confirms a new payment plan. The implementation of GASB
Statement No. 58 did not have an effect on the financial statements of the City.
NOTE 4 -EQUITY IN POOLED CASH AND CASH EQUIVALENTS
State statutes classify monies held by the City into three categories:
Active deposits are public deposits necessary to meet current demands on the treasury. Such monies must
be maintained either as cash in the City Treasury, in commercial accounts payable or withdrawable on
demand, including negotiable order of withdrawal (NOW) accounts, or in money market deposit accounts.
Inactive deposits are public deposits that Council has identified as not required for use within the current
five year period of designation of depositories. Inactive deposits must be evidenced by certificates of
deposit maturing not later than the end of the current period of designation of depositories, or by savings or
deposit accounts including, but not limited to, passbook accounts.
Interim deposits are deposits of interim monies. Interim monies are those monies which are not needed for
immediate use but which will be needed before the end of the current period of designation of depositories.
Interim deposits must be evidenced by time certificates of deposit maturing not more than one year from
the date of deposit or by savings or deposit accounts including, but not limited to, passbook accounts.
33
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 4 -EQUITY IN POOLED CASH AND CASH EQUIVALENTS - (Continued)
Interim monies may be deposited or invested in the following:
1. United States Treasury Notes, Bills, Bonds, or any other obligation or security issued by the United
States Treasury or any other obligation guaranteed as to principal or interest by the United States;
2. Bonds, notes, debentures, or any other obligations or securities issued by any federal government
agency or instrumentality, including but not limited to, the Federal National Mortgage Association,
Federal Home Loan Bank, Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation,
Government National Mortgage Association, and Student Loan Marketing Association. All federal
agency securities shall be direct issuances of federal government agencies or instrumentalities;
3. Written repurchase agreements in the securities listed above provided that the market value of the
securities subject to the repurchase agreement must exceed the principal value of the agreement by at
least two percent and be marked to market daily, and that the term of the agreement must not exceed
thirty days;
4. Bonds and other obligations of the State of Ohio;
5. No-load money market mutual funds consisting exclusively of obligations described in items (1) or (2)
above and repurchase agreements secured by such obligations, provided that investments in securities
described in this division are made only through eligible institutions;
6. The State Treasury Asset Reserve of Ohio investment pool (STAR Ohio);
7. High grade commercial paper for a period not to exceed 180 days in an amount not to exceed twenty-
five percent of the City's interim monies available for investment; and
8. Bankers acceptances for a period not to exceed 180 days and in an amount not to exceed twenty-five
percent of the City's interim monies available for investment.
The City may also invest any monies not required to be used for a period of six months or more in the
following:
1. Bonds of the State of Ohio;
2. Bonds of any municipal corporation, village, county, township, or other political subdivision of this
State, as to which there is no default of principal, interest or coupons;
3. Obligations of the City.
Protection of the City's deposits is provided by the Federal Deposit Insurance Corporation (FDIC), by
eligible securities pledged by the financial institution as security for repayment, by surety company bonds
deposited with the finance director by the financial institution or by a single collateral pool established by
the financial institution to secure the repayment of all public moneys deposited with the institution.
34
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 4 -EQUITY IN POOLED CASH AND CASH EQUIVALENTS - (Continued)
Investments in stripped principal or interest obligations, reverse repurchase agreements and derivatives are
prohibited. The issuance of taxable notes for the purpose of arbitrage, the use of leverage and short selling
are also prohibited. An investment must mature within five years from the date of purchase unless matched
to a specific obligation or debt of the City, and must be purchased with the expectation that it will be held
to maturity. Investments may only be made through specified dealers and institutions. Payment for
investments may be made only upon delivery of the securities representing the investments to the finance
director or qualified trustee or, if the securities are not represented by a certificate, upon receipt of
confirmation of transfer from the custodian.
A. Cash on Hand
At year-end, the City had $1,550 in un-deposited cash on hand which is included on the financial
statements of the City as part of "equity in pooled cash and cash equivalents".
B. Cash in Segregated Accounts
At December 31, 2010, the City had $14,318 in bank accounts outside of the City Treasury related to
Mayor's Court operations and income tax refunds. These amounts are included on the financial
statements as "cash and cash equivalents in segregated accounts" and are included in deposits with
financial institutions below.
C. Deposits with Financial Institutions
At December 31, 2010, the carrying amount of the City's deposits was$12,730,010. As of December
31, 2010, $12,131,193 of the City's bank balance of $12,881,193 was exposed to custodial risk as
discussed below, while $750,000 was covered by Federal Deposit Insurance Corporation.
Custodial credit risk is the risk that, in the event of bank failure, the City will not be able to recover
deposits or collateral securities that are in the possession of an outside party. As permitted by Ohio
Revised Code, the City's deposits are collateralized by a pool of eligible securities deposited with
Federal Reserve Banks, or at member banks of the Federal Reserve System, in the name of the
depository bank and pledged as a pool of collateral against all public deposits held by the depository.
The City has no deposit policy for custodial credit risk beyond the requirements of the State statute.
Although the securities were held by the pledging institutions' trust department and all statutory
requirements for the deposit of money had been followed, noncompliance with federal requirements
could potentially subject the City to a successful claim by the FDIC.
D. Investments
The City had no investments at December 31, 2010.
35
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 4 -EQUITY IN POOLED CASH AND CASH EQUIVALENTS - (Continued)
E. Reconciliation of Cash and Investment to the Statement of Net Assets
The following is a reconciliation of cash and investments as reported in the footnote above to cash
ands investments as reported on the statement of net assets as of December 31, 2010:
Cash and Investments ner footnote
Carrying amount of deposits $ 12,730,010
Cash on hand 1,550
Total $ 12,731,560
Cash and investments ner Statement of Net Assets
Govemmental activities $ 12,698,560
Agency funds 33,000
Total $ 12,731,560
NOTE 5 - INTERFUND TRANSACTIONS
A. Interfund transfers for the year ended December 31, 2010 consisted of the following, as reported in the
fund financial statements:
Transfers from
Transfers to General
Nonmajor
Governmental funds $ 384,473
$ 384,473
Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to
the fund that statute or budget requires to expend them, (2) move receipts restricted to debt service
from the funds collecting the receipts to the debt service fund as debt service payments become due,
and (3) use unrestricted revenues collected in the general fund to finance various programs accounted
for in other funds in accordance with budgetary authorizations. Transfers between governmental funds
made in compliance with ORC Sections 5705.14-16, are eliminated for reporting on the government-
wide statement of activities.
B. Due from/to other funds consisted of the following at December 31, 2010, as reported in the
governmental fund financial statements:
Receivable Fund Payable Fund Amount
Nonmajor governmental funds General fund $ 33
Amounts due from/to other funds represent Mayor's Court fines collected by the court and due to the
DUI Enforcement and Education fund.
Amounts due from/to other funds between governmental funds are eliminated on the government-wide
financial statements.
36
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 6 -PROPERTY TAXES
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 1 of that preceding year, the lien date.
Assessed values are established by the County Auditor at 35 percent of appraised market value. All
property is required to be revaluated every six years. Real property taxes are payable annually or semi-
annually. If paid annually, payment is due December 31; if paid semi-annually, the first payment is
due December 31, with the remainder payable by June 20. Under certain circumstances, State statute
permits later payment dates to be established.
Public utility real and tangible personal property taxes collected in one calendar year are levied in the
preceding calendar year on assessed values determined as of December 31 of the second year
preceding the tax collection year, the lien date. Public utility tangible personal property is assessed at
varying percentages of true value; public utility real property is assessed at 35 percent of true value.
2010 public utility properly taxes became a lien December 31, 2009, are levied after October 1, 2010,
and are collected in 2011 with real property taxes. Public utility property taxes are payable on the
same dates as real property taxes described previously.
House Bill No. 66 was signed into law on June 30, 2005. House Bill No. 66 phases out the tax on
tangible personal property of general businesses, telephone and telecommunications companies, and
railroads. The tax on general business and railroad property was eliminated in calendar year 2009, and
the tax on telephone and telecommunications property will be eliminated by calendar year 2011. The tax
is phased out by reducing the assessment rate on the property each year. The bill replaces the revenue
lost by the City due to the phasing out of the tax. In calendar years 2008-2010, the City was fully
reimbursed for the lost revenue. In calendar years 2011-2017, the reimbursements will be phased out.
The County Fiscal Officer collects property taxes on behalf of all taxing districts in the County,
including the City of Fairlawn. The County Fiscal Officer periodically remits to the City its portion of
the taxes collected. Property taxes receivable represents real and tangible personal property taxes,
public utility taxes and outstanding delinquencies which are measurable as of December 31, 2010 and
for which there is an enforceable legal claim. In the governmental funds, the current portion receivable
has been offset by unearned revenue since the current taxes were not levied to finance 2010 operations
and the collection of delinquent taxes has been offset by deferred revenue since the collection of the
taxes during the available period is not subject to reasonable estimation. On a full accrual basis,
collectible delinquent property taxes have been recorded as a receivable and revenue while on a
modified accrual basis the revenue is deferred.
The full tax rate for all City operations for the year ended December 31, 2010 was $2.70 per $1,000 of
assessed value. The assessed values of real and tangible personal property upon which 2010 property
tax receipts were based are as follows:
Categ_orv
Residential
Commercial
Total real estate
Public utility property
Grand total
Assessed Value
$ 176,233,500
162,604,250
338,837,750
3,033,955
$ 341,871,705
37
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 7 -LOCAL INCOME TAX
The City levies a municipal income tax of 2 percent on gross salaries, wages, and other personal service
compensation earned by residents of the City and on the earnings of nonresidents working within the City.
This tax also applies to the net income of business operations within the City. Residents of the City are
granted a credit of up to 2 percent for taxes paid to other municipalities.
Employers within the City are required to withhold income tax on employee compensation and remit the
tax to the City either monthly or quarterly, as required. Corporations and other individual taxpayers are
required to pay their estimated tax quarterly and file a declaration annually. The general fund receives 75
percent and the capital improvement fund receives 25 percent of income tax proceeds.
NOTE 8 -RECEIVABLES
Receivables at December 31, 2010, consisted of taxes, accounts (billings for user charged services),
accrued interest, special assessments, and intergovernmental receivables arising from grants, entitlements,
and shared revenue. All intergovernmental receivables have been classified as "due from other
governments" on the financial statements. Receivables have been recorded to the extent that they are
measurable at December 31, 2010.
A summary of the principal items of receivables reported on the statement of net assets follows:
Governmental Activities:
Income taxes $ 1,716,010
Real and other taxes 909,169
Accounts 63,823
Accrued interest 6,060
Special assessments 907,174
Due from other govemments 999,781
Total $ 4,602,017
Receivables have been disaggregated on the face of the BFS. The only receivable not expected to be
collected within the subsequent year are the special assessments which are collected over the life of the
assessment. Delinquent special assessments due to the City were $14,037 as of December 31, 2010.
38
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 9 -CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2010 was as follows:
Balance Balance
Governmental Activities: 12/31/09 Additions Disposals 12/31/10
Capital assets, not being d~reciated.•
Land $ 3,224,888 $ 9,750 $ (5,000) $ 3,229,638
Construction in progress 981,107 - (981,107) -
Total capital assets, not being depreciated 4,205,995 9,750 (986,107) 3,229,638
Capital assets, being depreciated.•
Buildings and Improvements 14,084,223 - - 14,084,223
Land Improvements 1,548,946 1,055,266 - 2,604,212
Machinery and Equipment 3,623,160 210,540 (116,685) 3,717,015
Licensed Vehicles 3,008,230 246,928 (193,503) 3,061,655
Infrastructure 75,710,143 445,884 (56,897) 76,099,130
Total capital assets, being depreciated 97,974,702 1,958,618 (367,085) 99,566,235
Less: accumulated depreciat~n:
Buildings and Improvements (3,064,002) (272,897) - (3,336,899)
Land Improvements (703,664) (76,675) - (780,339)
Machinery and Equipment (1,662,174) (226,010) 92,499 (1,795,685)
Licensed Vehicles (1,504,870) (204,854) 175,219 (1,534,505)
Infrastructure (29,159,671) (1,465,281) 16,323 (30,608 629)
Total accumulated depreciation (36,094,381) (2,245,717) 284,041 (38 056 057)
Total capital assets, being
depreciated, net 61,880,321 (287,099) (83,044) 61,510,178
Governmental activities capital assets, net $66,086,316 $ (277,349) $ (1,069,151) $64,739 816
39
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 9 -CAPITAL ASSETS - (Continued)
Depreciation expense was charged to functions/programs of the City as follows:
Governmental activities:
General government $ 45,195
Basic utility services 586,142
Security of persons and property 359,619
Transportation 1,169,376
Community environment 2,232
Leisure time activity _ 83,153
Total depreciation expense -governmental activities $ 2,245,717
NOTE 10 -LONG-TERM OBLIGATIONS
A. During the fiscal year 2010, the following changes occurred in governmental activities long-term
obligations:
Gover~unental Activities•
General obligation bonds
Interest Balance Balance Due in
Rate 12/31/09 Additions Reductions 12/31/10 One Year
280-5.75% $ 6,785,000 $ - $(625,000) $ 6,160,000 $ 655,000
Special assessme[rt bond 4.80-7.00% 360,000 - (175,000) 185,000 185,000
OPWCIoans 6.00% 386,852 - (68,503) 318,349 72,675
Compensa~d absences 1,322,595 103,562 (8,410) 1,417,747 607,900
Total $ 8,854,447 $103,562 $(870913) $ 8,081,096 $1,520,575
The general obligation bonds will be paid from income taxes receipted into the capital improvement
fund. The special assessment bond and OPWC loans will be paid from the proceeds of special
assessments levied against the benefited property owners. In the event that a property owner fails to
pay the assessment, payment will be made by the City. Compensated absences reported in the "long-
term liabilities" account will be paid from the fund from which the employees' salaries are paid; the
General Fund and the Children/Adolescent Fund, a nonmajor governmental fund.
40
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 10 -LONG-TERM OBLIGATIONS - (Continued)
B. Principal and interest requirements to retire long-term obligations outstanding at December 31, 2010
are follows:
General Obligation Bonds Special Assessment Bond
Year Principal Interest Total Principal Interest Total
2011 $ 655,000 $ 275,030 $ 930,030 $ 185,000 $ 12,950 $ 197,950
2012 680,000 245,845 925,845 - - -
2013 710,000 214,943 924,943 - - -
2014 505,000 182,173 687,173 - - -
2015 530,000 161,007 691,007 - - -
2016 - 2020 2,375,000 451,950 2,826,950 - - -
2021 - 2022 705,000 50,055 755,055 - - -
Total $ 6,160,000 $1,581,003 $ 7,741,003 $ 185,000 $ 12,950 $ 197,950
OPWC Loans
Year Principal Interest Total
2011 $ 72,675 $ 18,027 $ 90,702
2012 77,101 13,601 90,702
2013 81,796 8,906 90,702
2014 8 6,777 3 ,924 90, 701
Total $ 318,349 $ 44,458 $ 362,807
NOTE 11 -OTHER EMPLOYEE BENEFITS
A. Compensated Absence
The criteria for determining vested vacation and sick leave components are derived from negotiated
agreements and state laws. Employees earn ten to thirty days of vacation per year, depending upon
length of service. Vacation accumulation is typically limited to one year. Employees may carry over
vacation earned for three years prior to their retirement date. All accumulated unused vacation time is
paid upon termination of employment.
Employees earn sick leave at the rate of 1.25 days per month of service. Upon retirement, employees
hired before 1995 are eligible to receive payment for accumulated unused sick days. The exact terms
vary in accordance with the negotiated collective bargaining agreement in effect. In most cases, the
sick leave termination payment is limited to 90 days. Employees with a hire date subsequent to 1995
are not eligible to receive termination payments for sick leave. As of December 31, 2010 the total
liability for unpaid compensated absences was $1,417,747.
41
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE i l -OTHER EMPLOYEE BENEFITS - (Continued)
B. Health Care Benefits
The City provides life insurance and accidental death and dismemberment insurance to most
employees. The City has elected to provide employees' medical/surgical benefits through Medical
Mutual of Ohio. The employees share the cost of the monthly premium. Dental insurance is provided
by the City through MetLife Insurance.
NOTE 12 -RISK MANAGEMENT
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets;
errors and omissions; injuries to employees; and natural disasters. During 2010, the City contracted with
Wichert Insurance Service, Inc. for property and general liability insurance, including boiler and
machinery. Police and professional liability policies are provided by Scottsdale Indemnity Company with a
$1,000,000 limit and a $10,000 deductible. A commercial umbrella policy through Selective Insurance
Company provides additional general liability and auto liability insurance up to an $11,000,000 limit.
Vehicles are covered by Westfield Insurance Company and hold a $1,000 deductible for collision.
Automobile liability coverage has no limit for collision, a $500,000 limit for uninsured/underinsured
motorist and a $1,000,000 limit for bodily injury, Settled claims have not exceeded this commercial
coverage in any of the past three years.
There has not been a significant reduction in coverage from the prior year.
Volunteer Fireman's Insurance Services covers Firemen and EMT professional liability with a limit of
$1,000,000 and no deductible.
The City participates in the Ohio Municipal League (OML) public entity insurance purchasing pool for
workers' compensation. The Group Rating Plan is administered by Gates McDonald Company. The OML
Group Rating Plan is intended to achieve lower workers' compensation premium rates for the participants,
and result in the establishment of a safer working environment. There are no additional contributions
required by a participant other than their annual fee. The City pays the State Workers' Compensation
system a premium based on a rate per $100 of salaries. This rate is calculated based on accident history
and administrative costs.
NOTE 13 -PENSION PLANS
A. Ohio Public Employees Retirement System
Plan Description -The City participates in the Ohio Public Employees Retirement System (OPERS).
OPERS administers three separate pension plans. The Traditional Pension Plan is acost-sharing,
multiple-employer defined benefit pension plan. The Member-Directed Plan is a defined contribution
plan in which the member invests both member and employer contributions (employer contributions
vest over five years at 20 percent per year). Under the Member-Directed Plan, members accumulate
retirement assets equal to the value of the member and vested employer contributions plus any
investment earnings. The Combined Plan is acost-sharing, multiple-employer defined benefit pension
plan that has elements of both a defined benefit and a defined contribution plan. Under the Combined
Plan, employer contributions are invested by the retirement system to provide a formula retirement
benefit similar to the Traditional Pension Plan benefit. Member contributions, whose investment is
self-directed by the member, accumulate retirement assets in a manner similar to the Member Directed
Plan.
42
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 13 -PENSION PLANS - (Continued)
OPERS provides retirement, disability, survivor and death benefits and annual cost of living
adjustments to members of the Traditional Pension and the Combined Plans. Members of the
Member-Directed Plan do not qualify for ancillary benefits. Authority to establish and amend benefits
is provided by Chapter 145 of the Ohio Revised Code. OPERS issues astand-alone financial report
that may be obtained by writing to OPERS, Attention: Finance Director, 277 E. Town St., Columbus,
OH 43215-4642 or by calling (614) 222-5601 or (800) 222-7377.
Funding Policy -The Ohio Revised Code provides statutory authority for member and employer
contributions. For 2010, member and contribution rates were consistent across all three plans. While
members in the State and local divisions may participate in all three plans, law enforcement and public
safety divisions exist only within the Traditional Plan. The 2010 member contribution rates were
10.00 percent for members in the State and local classifications. The City's contribution rate for 2010
was 14.00 percent.
The City's contribution rate for pension benefits for members in the Traditional Plan for 2010 was 8.50
percent from January 1 through February 28, 2010 and 9.00 percent from March 1 through December
31, 2010. The City's contribution rate for pension benefits for members in the Combined Plan for
2010 was 9.27 percent from January 1 through February 28, 2010 and 9.77 percent from March 1
through December 31, 2010. The City's required contributions for pension obligations to the
Traditional Pension and Combined Plans for the years ended December 31, 2010, 2009, and 2008 were
$260,137, $246,865, and $197,378, respectively; 91.77 percent has been contributed for 2010 and 100
percent for 2009 and 2008.
B. Ohio Police and Fire Pension Fund
Plan Description -The City contributes to the Ohio Police and Fire Pension Fund (OP&F), a cost-
sharing multiple-employer defined benefit pension plan. OP&F provides retirement and disability
benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries.
Benefit provisions are established by the Ohio State Legislature and are codified in Chapter 742 of the
Ohio Revised Code. OP&F issues a publicly available financial report that includes financial
statements and required supplementary information for the plan. That report may be obtained by
writing to the Ohio Police and Fire Pension Fund, 140 East Town Street, Columbus, Ohio 43215-5164.
Funding Policy -Plan members are required to contribute 10 percent of their annual covered salary
while the City is required to contribute 19.50 and 24.00 percent for police officers and firefighters,
respectively. Contribution rates are established by State statute. For 2010, the portion of the City's
contributions to fiznd pension obligations was 12.75 percent for police officers and 17.25 percent for
firefighters. The City's required contributions for pension obligations to OP&F for police officers and
firefighters were $197,356 and $183,840 for the year ended December 31, 2010, $205,137 and
$180,975 for the year ended December 31, 2009, and $195,027 and $168,470 for the year ended
December 31, 2008. The full amount has been contributed for 2009 and 2008. 72.10 percent has been
contributed for police and firefighters for 2010.
43
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 14 -POST RETIREMENT BENEFIT PLANS
A. Ohio Public Employees Retirement System
Plan Description - OPERS maintains a cost-sharing multiple employer defined benefit post-
employment health care plan, which includes a medical plan, prescription drug program and Medicare
Part B premium reimbursement, to qualifying members of both the Traditional Pension and the
Combined Plans. Members of the Member-Directed Plan do not qualify for ancillary benefits,
including post-employment health care coverage.
To qualify for post-employment health care coverage, age-and-service retirees under the Traditional
Pension and Combined Plans must have ten years or more of qualifying Ohio service credit. The Ohio
Revised Code permits, but does not mandate, OPERS to provide OPEB benefits to its eligible
members and beneficiaries. Authority to establish and amend benefits is provided in Chapter 145 of
the Ohio Revised Code.
Disclosures for the health care plan are presented separately in the OPERS financial report which may
be obtained by writing to OPERS, Attention: Finance Director, 277 E. Town St., Columbus, OH
43215-4642 or by calling (614) 222-5601 or (800) 222-7377.
Funding Policy -The post-employment health care plan was established under, and is administered in
accordance with, Internal Revenue Code Section 401(h). State statute requires that public employers
fund post-employment health care through contributions to OPERS. A portion of each employer's
contributions to the Traditional or Combined Plans is set aside for the funding of post-employment
health care.
Employer contribution rates are expressed as a percentage of the covered payroll of active employees.
In 2010, local government employers contributed 14 percent of covered payroll (17.63 percent for
public safety and law enforcement). Each year the OPERS Retirement Board determines the portion of
the employer contribution rate that will be set aside for the funding of the post-employment health care
benefits. The portion of employer contributions allocated to fund post-employment health care for
members in the Traditional Plan for 2010 was 5.50 percent from January 1 through February 28, 2010
and 5.00 percent from March 1 through December 31, 2010. The portion of employer contributions
allocated to fund post-employment health care for members in the Combined Plan for 2010 was 4.73
percent from January 1 through February 28, 2010 and 4.23 percent from March 1 through December
31, 2010.
The OPERS Retirement Board is also authorized to establish rules for the payment of a portion of the
health care benefits provided by the retiree or their surviving beneficiaries. Payment amounts vary
depending on the number of covered dependents and the coverage selected. Active members do not
make contributions to the post-employment health care plan.
The City's contributions allocated to fund post-employment health care benefits for the years ended
December 31, 2010, 2009, and 2008 were $147,430, $176,702, and $197,378, respectively; 91.77
percent has been contributed for 2010 and 100 percent has been contributed for 2009 and 2008.
The Health Care Preservation Plan (HCPP) adopted by the OPERS Retirement Board on September 9,
2004, was effective January 1, 2007. Member and employer contribution rates for state and local
employers increased on January 1 of each year from 2006 to 2008. The rate increase allowed
additional funds to be allocated to the health care plan.
44
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 14 -POST RETIREMENT BENEFIT PLANS - (Continued)
B. Ohio Police & Fire Pension Fund
Plan Description -The City contributes to the OP&F Pension Fund sponsored health care program, a
cost-sharing multiple-employer defined post-employment health care plan administered by OP&F.
OP&F provides healthcare benefits including coverage for medical, prescription drugs, dental, vision,
Medicare Part B Premium and long term care to retirees, qualifying benefit recipients and their eligible
dependents.
OP&F provides access to post-employment health care coverage to any person who receives or is
eligible to receive a monthly service, disability or survivor benefit check or is a spouse or eligible
dependent child of such person.
The Ohio Revised Code allows, but does not mandate OP&F to provide OPEB benefits. Authority for
the OP&F Board of Trustees to provide health care coverage to eligible participants and to establish
and amend benefits is codified in Chapter 742 of the Ohio Revised Code.
OP&F issues a publicly available financial report that includes financial statements and required
supplementary information for the plan. That report may be obtained by writing to the OP&F, 140
East Town Street, Columbus, Ohio 432 1 5-5 1 64.
Funding Policy -The Ohio Revised Code provides for contribution requirements of the participating
employers and of plan members to the OP&F (defined benefit pension plan). Participating employers
are required to contribute to the pension plan at rates expressed as a percentage of the payroll of active
pension plan members, currently, 19.50% and 24.00% of covered payroll for police and fire
employers, respectively. The Ohio Revised Code states that the employer contribution may not exceed
19.50 percent of covered payroll for police employer units and 24 percent of covered payroll for fire
employer units. Active members do not make contributions to the OPEB Plan.
OP&F maintains funds for health care in two separate accounts. One for health care benefits under an
IRS Code Section 115 trust and one for Medicare Part B reimbursements administered as an Internal
Revenue Code 401(h) account, both of which are within the defined benefit pension plan, under the
authority granted by the Ohio Revised Code to the OP&F Board of Trustees,
The Board of Trustees is authorized to allocate a portion of the total employer contributions made into
the pension plan into the Section 115 trust and the Section 401(h) account as the employer contribution
for retiree health care beneftts. For the year ended December 31, 2010, the employer contribution
allocated to the health care plan was 6.75% of covered payroll. The amount of employer contributions
allocated to the health care plan each year is subject to the Trustees' primary responsibility to ensure
that the pension benefits are adequately funded and is limited by the provisions of Sections 1 I S and
401(h).
The OP&F Board of Trustees also is authorized to establish requirements for contributions to the
health care plan by retirees and their eligible dependents, or their surviving beneficiaries. Payment
amounts vary depending on the number of covered dependents and the coverage selected.
The City's contributions to OP&F which were allocated to fund post-employment health care benefits
for police officers and firefighters were $104,472 and $71,937 for the year ended December 31, 2010,
$108,602 and $70,816 for the year ended December 31, 2009, and $103,249 and $65,923, for the year
ended December 31, 2008. The full amount has been contributed for 2009 and 2008. 71.40 percent
has been contributed for police and 72.92 percent has been contributed for firefighters for 2010.
45
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 15 -BUDGETARY BASIS OF ACCOUNTING
While the City is reporting financial position, results of operations and changes in fund balance on the basis
of generally accepted accounting principles (GAAP), the 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 the general fund is presented on the budgetary basis to provide a
meaningful comparison of actual results with the budget. The major differences between the budget basis
and GAAP basis are as follows:
1. Revenues are recorded when received in cash (budget) as opposed to when susceptible to accrual
(GAAP).
2. Expenditures/expenses are recorded when paid in cash (budget) as opposed to when the liability is
incurred (GAAP).
3. Encumbrances are treated as expenditures (budget) rather than as a reservation of fund balance
(GAAP).
4. Unreported cash represents amounts received but not included as revenue on the budget basis operating
statements. These amounts are included as revenue on the GAAP basis operating statement.
The following table summarizes the adjustments necessary to reconcile the GAAP basis statements (as
reported in the fund financial statements) to the budgetary basis statements for all governmental funds for
which a budgetary basis statement is presented.
Net Change in Fund Balance
General
Budget basis $ 1,140,651
Net adjustment for revenue accruals 173,307
Net adjustment for expenditure accruals 982,477
Adjustment for encumbrances 559,776
GAAP basis $ 2,856,211
NOTE 16 -CONTINGENCIES
A. Grants
The City receives significant financial assistance from numerous federal and state agencies in the form
of grants. The disbursement of funds received under these programs generally requires compliance
with the terms and conditions specified in the grant agreements and is subject to audit by the grantor
agencies. Any disallowed claims resulting from such audits could become a liability of the general
fund or other applicable funds. However, in the opinion of management, any such disallowed claims
will not have a material effect on any of the financial statements of the individual fund types included
herein or on the overall financial position of the City at December 31, 2010.
46
CITY OF FAIRLAWN, OHIO
NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010
NOTE 16 -CONTINGENCIES - (Continued)
B. Litigation
The City is party to legal proceedings. The City management is of the opinion that the ultimate
disposition of these legal claims and legal proceedings will not have a material effect, if any, on the
financial condition of the City.
NOTE 17 -CONTRACTUAL COMMITMENTS
As of December 31, 2010, the City had various contractual commitments; for road maintenance and
improvements of $60,022; sewer cleaning and improvements of $278,905; traffic control of $15,202;
consulting services of $36,993; and park equipment and improvements of $35,302.
47
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48
. ~ ~-
- -` ~ ~. • Dave Yost • Auditor of State
,~~Y~. ' .
INDEPENDENT ACCOUNTANTS' REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
REQUIRED BY GOVERNMENT AUDITING STANDARDS
City of Fairlawn
Summit County
3487 South Smith Road
Fairlawn, Ohio 44333-3007
To the Honorable Mayor and Members of City Council:
We have audited the financial statements of the governmental activities, each major fund, and the
aggregate remaining fund information of the City of Fairlawn, Summit County, Ohio, (the City) as of and
for the year ended December 31, 2010, which collectively comprise the City's basic financial statements
and have issued our report thereon dated June 17, 2011. We conducted our audit in accordance with
auditing standards generally accepted in the United States of America and the standards applicable to
financial audits contained in the Comptroller General of the United States' Government Auditing
Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the City's internal control over financial reporting as
a basis for designing our audit procedures for the purpose of expressing our opinion on the financial
statements, but not for the purpose of opining on the effectiveness of the City's internal control over
financial reporting. Accordingly, we have not opined on the effectiveness of the City's internal control
over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, when performing their assigned functions, to prevent, or detect and timely
correct misstatements. A material weakness is a deficiency, or combination of internal control
deficiencies resulting in more than a reasonable possibility that a material misstatement of the City's
financial statements will not be prevented, or detected and timely corrected.
Our consideration of internal control over financial reporting was for the limited purpose described in the
first paragraph of this section and was not designed to identify all deficiencies in internal control over
financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not
identify any deficiencies in internal control over financial reporting that we consider material weaknesses,
as defined above.
Compliance and Other Matters
As part of reasonably assuring whether the City's financial statements are free of material misstatement,
we tested its compliance with certain provisions of laws, regulations, contracts, and grant agreements,
noncompliance with which could directly and materially affect the determination of financial statement
amounts. However, providing an opinion on compliance with those provisions was not an objective of our
audit and accordingly, we do not express an opinion. The results of our tests disclosed no instances of
noncompliance or other matters we must report under Government Auditing Standards.
101 Central Plaza South, 700 Chase Tower, Canton, Ohio 44702-1509
Phone: 330-438-0617 or800-443-9272 Fax: 330-471-0001
www.auditor.state.oh.us
49
City of Fairlawn
Summit County
Independent Accountants' Report on Internal Control Over
Financial Reporting and on Compliance and Other Matters
Required by Government Auditing Standards
Page 2
We did note a certain matter not requiring inclusion in this report that we reported to the City's
management in a separate letter dated June 17, 2011.
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.
Dave Yost
Auditor of State
June 17, 2011
50
;F Dave Yost • Auditor of State
CITY OF FAIRLAWN
SUMMIT COUNTY
CLERK'S CERTIFICATION
This is a true and correct copy of the report which is required to be filed in the Office of the
Auditor of State pursuant to Section 117.26, Revised Code, and which is filed in Columbus, Ohio.
w ~~
CLERK OF THE BUREAU
CERTIFIED
JULY 14, 2011
88 East Broad Street, Fifth Floor, Columbus, Ohio 43215-3506
Phone: 614-466-4514 or 800-282-0370 Fax: 614-466-4490
www.auditor.state.oh.us