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HomeMy WebLinkAboutItem 4.03 1988-89 Audit Report CITY OF DUBLIN AGENDA STATEMENT MEETING DATE: January 22 , 1990 SUBJECT :1988-89 Audit Report EXHIBITS ATTACHED :The June 30, 1989 audit report plus Internal Control Recommendations. RECOMMENDATIIX.Review, accept and file the audit report, the auditors recommendations on internal control and managements responses to same. FINANCE STATEMENT :Attached items. DESCRIPTION :The City received its annual audit report for the period ending June 30, 1989 and once again the independent auditors were able to provide the City with a "clean audit opinion" , which is tantamount to the best rating that can be provided. The City Council's audit committee met with the City's auditors and subsequently met with the City Manager and Finance Director to discuss that audit and the auditor's "Recommendations for Improvements in Internal Control" . One of the primary requirements in any audit is the determination of the reliability of the City's, operating plans, policies and organizational structure which are set in place by management. When properly executed, those plans, policies and the structure safeguard the City's assets, ensure the reliability of its accounting data, promote efficiency and ensure compliance. The results of the determination of reliability is presented by the auditors in their "Recommendations for Improvements in Internal Control" (RIIC) . The Council's audit Committee and Staff reviewed the auditors RIIC and responded to each in the following manner: 1. The auditors recommended that another staff person outside of the Finance Department review the results of each investment transaction to assure that the bank's wire transfers are accurately concluded. ---------------------------------------------------------------------- COPIES TO: ITEM NO. �, ) P l:,i'S y..m'.= 1,.r ayq,y' ry,�,., 4:Y E J� rwxt u.;,..-'rT• ab ';[� Y,t,1 .i'6.;xY gY«fi;'S`.t 9Y .1yt.';'*''� xy y t ;i, !° 'hti;' Y:f�`*,:j:.q 'lCi. y+• 'yl' q" .� ,,•T."7 �Y 3-t 1` Jf 1T.. *'t115}.fit SFa'f" '!�.�"U'��... ..pEv4 F�, yT. '415 fx.. J�rll '.'},.'3f, .d '4�1.I��t.'✓ ''4},,G+p�(•'T "*. :k k;• ° .n b�•¢¢ �Y,'r f� 44 .?,}'c..l".t�r g� ': '� � "1�:.r�t,, st �t-�'" C,,,a I �"•',.lN'+' rS?;`� r.,,w". �' .�a�r? 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'1 r"' "�� t"'.{ `vxti''v b• uy p a C � Q i 4 z~ 4 �,rl v'r e.4•r�� ,,w< Y �k'e� �• a 5w�' ^7' t k!, x t dp ,%;y 4�r' r• .r .a,. F'�'"�'^•t��l t 1 7V to {1S{j Y'. � C i f � Y •f '1 fit:3 5•�, �i�w���1� ,b^�S'�` � �' �r1 w ar y��{My �{F��;+trr ��� r�,a?.`� � �gt•e 1V ;ire fir. kr..F �' di -,ski S r � ?dy +�h. � S' �J�� � ' r ,•v � ° , j • r rw� �yy �� r.� et <r � / t k ,i'y .4�•`�ht t}� 'Rr' M A ?� tr,l° A' �' t Q lig CITY OF DUBLIN FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1989 TABLE OF CONTENTS Page Auditor's Opinion . . . . . . . . . . . . . . . . . . . . . . 1 General Purpose Financial Statements Combined Balance Sheet - All Fund Types and Account Groups . . . . . . . . . . . . . . . . . . . . . 2 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types . . . . . . . . . . . . . . . . . . . . . . . 3 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - Budget (GAAP Basis) and Actual - General, Special Revenue and Capital Projects Fund Types. . . . . . . . . . . . . . . . . . . 4 Combined Statement of Revenues, Expenses and Changes in Retained Earnings - All Proprietary Fund Types . . . . . . . . . . . . . . . . . . . . . . . 5 Combined Statement of Changes in Financial Position - All Proprietary Fund Types . . . . . . . . . . . . . . . 6 Notes to Financial Statements . . . . . . . . . . . . . . 7 Supplemental Information Special Revenue Funds Combining Balance Sheet . . . . . . . . . . . . . . . . 25 Combining Statement of Revenues, Expenditures and Changes in Fund Balance. . . . . . . . . . . . . . . 26 Capital Projects Funds Combining Balance Sheet . . . . . . . . . . . . . . . . . 27 Combining Statement of Revenues, Expenditures and Changes in Fund Balances . . . . . . . . . . . . . . . . 28 Agency Fund Statement of Changes in Assets and Liabilities . . . . . 29 AZE & ASSOCIATES ACCOUNTANCY CORPORATION Creekside Oaks 1470 Maria Lane - Suite 200 Walnut Creek, California 94596 AUDITOR'S OPINION (415) 930-0902 • (916) 972-7333 To the City Council City of Dublin, California We have audited the general purpose financial statements of the City of Dublin as of and for the years ended June 30, 1989 and 1988 as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit includes examining on a test basis evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such general purpose financial statements present fairly in all material respects the financial position of the City of Dublin at June 30, 1989 and 1988 and the results of its operations and changes in financial position of its proprietary fund types for the years then ended, in conformity with generally accepted accounting principles. As discussed in Note 2 to the financial statements, the City changed its method of accounting for special assessment Agency funds and for Proprietary fund contributed capital. Our audits were made for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The accompanying supplementary information which is also listed in the table of contents is presented for the purpose of additional analysis and is not a required part of the general purpose financial statements. Such supplementary information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the general purpose financial statements taken as a whole. September 29, 1989 1 CITY OF DUBLIN COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS JUNE 30, 1989 WITH COMPARATIVE AMOUNTS AS OF JUNE 30,1988 GOVERNMENTAL FUND TYPES PROPRIETARY FUND TYPES Special Capital Internal General Revenue Projects Service Enterprise ASSETS Cash and investments(Note 4) $12,373,135 51,589,444 $102,552 $250,294 S4,521,183 Receivables: Accounts 242,285 2,214 Accrued interest 182,039 64,986 Due from other governments 213,652 48,000 Due from other funds (Note 8) 127,073 Prepaid expenses 16,554 8,616 Machinery and equipment(net of accumulated depreciation)(Note 7) 114,520 Construction in progress(Note 7) 20,225,655 Total Assets $13,154,738 $1,639,658 S102,552 5373,430 $24,311,824 LIABILITIES AND FUND EQUITIES Liabilities: Accounts payable $1,164,631 S283,913 $3,087 $479,459 Accrued wages 48,687 Accrued vacation 66,662 Deposits 479,264 577,346 Due to other funds(Note 8) 60,209 66,864 Due to others 19,010 Deferred revenues 26,000 Interest payable 541,583 Certificates of participation(Note 5) 16,870,157 Total Liabilities 1,778,254 370,122 144,210 3,087 17,891,199 Fund Equities: Investments in general fixed assets Contributed capital(Notes 2 and 3) 94,278 5,103,123 Retained earnings: - Unreserved(Note 2) 276,065 1,817,502 Fund balances: Designated for authorized expenditures 11,376,484 1,319,498 25,206 Undesignated (49,962) (66,864) Total Fund Equities 11,376,484 1,269,536 (41,658) 370,343 6,920,625 Total Liabilities and Fund Equities 513,154,738 $1,639,658 5102,552 5373,430 S24,811,824 See accompanying notes to financial statements *Reclassified for comparison purposes. 2 _ FIDUCIARY ACCOUNT TOTALS FUND TYPE GROUPS (Memorandum Only) Agency General Fixed Fund Assets 1989 1988 $554,390 S19,390,998 $21,331,793 244,499 52,381 247,025 220,705 261,652 183,625 127,073 2,236,350 25,170 20,326 S198,125 312,645 333,335 20,225,655 12,824,412 S554,390 S198,125 S40,834,717 537,202,927 $1,931,090 $1,088,597 48,687 33,997 66,662 52,260 556,610 527,302 127,073 2,236,350 $554,390 573,400 543,500 26,000 26,000 541,583 433,273 16,870,157 16,852,820 554,390 20,741,262• 21,794,099 S198,125 198,125 179,451 5,197,401 4,040,304 -- 2,093,567 2,249,290 12,721,188 8,939,783 (116,826) 198,125 20,093,455 15,408,828 $554,390 $198,125 S40,834,717 $37,202,927 CITY OF DUBLIN COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 1989 WITH COMPARATIVE AMOUNTS FOR THE YEAR ENDED JUNE 30, 1988 TOTALS GOVERNMENTAL FUND TYPES (Memorandum Only) Special Capital General Revenue Projects 1989 1988* REVENUES Taxes $9,217,246 $88,416 $9,305,662 $6,179,005 Licenses and permits 292,189 292,189 532,696 Intergovernmental 870,002 1,697,701 2,567,703 1,660,205 Charges for services 738,314 738,314 466,673 Use of money and property 1,017,307 157,558 $8,982 1,183,847 1,074,160 Fines and forfeits 16,198 88,443 104,641 94,584 Other revenue 45,945 4,238 18,434 68,617 593,069 Special assessment 262,197 262,197 246,915 Total Revenue 12,197,201 2,298,553 27,416 14,523,170 10,847,307 EXPENDITURES General government 1,283,723 2,478 1,286,201 2,308,376 Public safety 3,760,886 225,211 3,986,097 2,039,119 Highways and streets 476,683 464,593 941,276 813,482 Health and welfare 19,801 19,801 8,520 Community development 1,321,404 15,466 1,336,870 1,091,901 Culture and leisure 994,013 12,724 1,006,737 516,102 Capital outlay 1,536,099 1,661,971 16,328 3,214,398 2,914,458 Total Expenditures 9,392,609 2,382,443 16,328 11,791,380 9,691,958 EXCESS OF REVENUE OVER (UNDER)EXPENDITURES 2,804,592 (83,890) 11,088 2,731,790 1,155,349 OTHER FINANCING SOURCES Operating transfers in(Notes 2 and 9) 79,490 50,000 129,490 3,383,215 Operating transfers out(Notes 2 and 9) (123,650) (123,650) (5,195,285) Total Other Financing Sources(Uses) 79,490 (123,650) 50,000 5,840 (1,812,070) EXCESS OF REVENUES AND OTHER FINANCING SOURCES OVER(UNDER) EXPENDITURES AND OTHER FINANCING USES 2,884,082 (207,540) 61,088 2,737,630 (656,721) Fund balance, beginning of year, as reported 6,049,405 1,477,076 1,413,302 8,939,783 8,690,469 Residual equity transfers in(Notes 2 and 3) 4,650,769 4,650,769 906,035 Residual equity transfers(out) (Note 3) (2,207,772) (1,516,048) (3,723,820) Fund balance(deficit)beginning of year,as restated 8,492,402 1,477,076 (102,746) 9,866,732 9,596,504 Fund balance, end of year $11,376,484 $1,269,536 ($41,658) $12,604,362 $8,939,783 See accompanying notes to financial statements *Reclassified for comparison purposes. 3 CITY OF Dl IN COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL, SPECIAL REVENUE AND CAPITAL PROJECTS FUND TYPES FOR THE YEAR ENDED JUNE 30, 1989 General Fund Special Revenue Funds Variance Variance Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) REVENUES Taxes $8,399,690 $9,217,246 $817,556 $83,000 $88,416 $5,416 Licenses and permits 355,250 292,189 (63,061) Intergovernmental 790,600 870,002 79,402 1,555,700 1,697,701 142,001 Charges for services 810,300 738,314 (71,986) Use of money and property 747,500 1,017,307 269,807 50,200 157,558 107,358 Fines and forfeits 20,000 16,198 (3,802) 85,000 88,443 3,443 Other revenue 4,000 45,945 41,945 293,000 4,238 (288,762) Special assessment 245,900 262,197 16,297 Total Revenue 11,127,340 12,197,201 1,069,861 2,312,800 2,298,553 (14,247) EXPENDITURES General government 2,935,725 1,283,723 1,652,002 2,478 (2,478) Public safety 3,817,114 3,760,886 56,228 257,100 225,211 31,839 Highways and streets 518,360 476,683 41,677 626,084 464,593 161,491 Health and welfare 20,500 19,801 699 Community development 1,378,895 1,321,404 57,491 29,066 15,466 13,600 Culture and leisure 1,053,205 994,013 59,192 13,600 12,724 876 Capital outlay 2,485,694 1,536,099 949,595 1,800,347 1,661,971 138,376 Total Expenditures 12,209,493 7392,609 2,816,884 2,726,197 2,382,443 343,754 EXCESS OF REVENUES OVER (UNDER)EXPENDITURES (1,082,153) 2,804,592 3,886,745 (413,397) (83,890) 329,507 OTHER FINANCING SOURCES Operating transfers in(Note 9) 79,490 $79,490 Operating transfers out(Note 9) (123,650) (123,650) Total Other Financing Sources(Uses) 79,490 79,490 (123,650) (123,650) EXCESS OF REVENUES AND OTHER FINANCING SOURCES OVER(UNDER)EXPENDITURES AND OTHER FINANCING USES (1,082,153) 2,884,082 3,966,235 (413,397) (207,540) 205,857 Fund balance(deficit), beginning of year as reported 6,049,405 6,049,405 1,477,076 1,477,076 Residual equity transfers in(Notes 2 and 3) 4,650,769 4,650,769 Residual equity transfers(out) (Note 3) (2,207,772) (2,207,772) Fund balance(deficit)beginning of year, as restated 6,049,405 8,492,402 2,442,997 1,477,076 1,477,076 Fund balance, end of year $4,967,252 $11,376,484 $6,409,232 $1,063,679 $1,269,536 $205,857 See accompanying notes to financial statements 4 CITY OF DUBLIN COMBINED STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS ALL PROPRIETARY FUND TYPES FOR THE YEAR ENDED JUNE 30, 1989 WITH COMPARATIVE AMOUNTS FOR THE YEAR ENDED JUNE 30, 1988 Internal Enterprise TOTALS Service Fund Fund (Memorandum Only) Dublin Equipment Information Replacement Inc. 1989 1988* Revenues Interest income $19,640 $336,539 $356,179 $305,866 Rent income 133,059 133,059 1,252,242 Equipment usage 122,846 122,846 119,131 Miscellaneous 41,724 41,724 13,450 Total Revenues 142,486 511,322 653,808 1,690,689 Expenses Interest payments 654,246 654,246 413,603 Depreciation 70,334 70,334 60,774 Miscellaneous 45,783 33,328 79,111 73,959 Total Expenses 116,117 687,574 803,691 548,336 Operating income 26,369 (176,252) (149.883) 1,142,353 Other financial sources(uses): Operating transfer in 67,971 Operating transfer out(Note 9) (5,840) (5,840) Effect of advance refunding of debt (1,024,596) Total Other Financial Sources(Uses) (5,840) (5,840) (956,625) Net Income 26,369 (182,092) (155,723) 185,723 Retained earnings, beginning of year 313,005 5,976,589 6,289,594 2,063,562 Restatement(Note 2) (63,309) (3,976,995) (4,040,304) Retained earnings,beginning of year as restated 249,696 1,999,594 2,249,290 2,063,562 Retained earnings, end of year $276,065 $1,817,502 $2,093,567 $2,249,290 See accompanying notes to financial statements. *Reclassified for comparison purposes. 5 ' CITY OF DUBLIN COMBINED STATEMENT OF CHANGES IN FINANCIAL POSITION ALL PROPRIETARY FUND TYPES FOR THE YEAR ENDED JUNE 30, 1989 WITH COMPARATIVE AMOUNTS FOR THE YEAR ENDED JUNE 30, 1988 Internal Enterprise TOTALS Service Fund Fund (Memorandum Only) Dublin Equipment Information Replacement Inc. 1989 1988 Sources of working capital Operations: Net income(loss) $26,369 ($182,092) ($155,723) $117,757 Add back depreciation and amortization not requiring outlay of working capital 70,334 17,337 87,671 60,774 Total Working Capital Provided by(Used For)Operations 96,703 (164,755) '(68,052) 178,531 Proceeds from issue of Refunding Certificates of Participation 16,852,820 Contributed capital(Note 2) 30,970 1,126,128 1,157,098 906.035 Total Sources of Working Capital 127,673 961,373 1,089,046 17,937,386 Uses of working capital Increase in construction in—progress 7,401,243 7,401,243 4,691,974 Acquisition of fixed assets 30,970 30,970 67,971 Advance refunding of certificates of participation 11,615,000 Principal payment 180,000 Total uses of Working Capital 30,970 7,401,243 7,432,213 16,554,945 Net Increase(Decrease)in Working Capital $96,703 ($6,439,870) ($6,343,167) $1,382,441 Changes in components of working capital Cash $97,108 ($6,398,572) ($6,301,464) $2,246,907 Account receivable (3,228) (3,228) 3,228 Interest receivable 14,487 14,487 50,499 Accounts payable (405) 55,753 55,348 (484,920) Interest payable (108,310) (108,310) (433,273) Net Increase(Decrease)in Working Capital $96,703 ($6,439,870) ($6,343,167) $1,382,441 See accompanying notes to financial statements * Reclassified for comparison purposes. 6 ' CITY OF DUBLIN Notes to Financial Statements June 30, 1.989 Note 1 - Summary of Significant Accounting Policies The City of Dublin was incorporated February 1, 1982 under the - Municipal Organization Act of 1977. The City operates under a Council-Manager form of government and provides services to residents primarily by contracting with other governmental agencies and private contractors. The accounting policies of the City of Dublin conform to generally accepted accounting principles as applicable to governments. The following is a summary of the more significant policies: A. Principles of Combination The financial statements of the City of Dublin include the financial activities of the City as well as separate legal entities which are controlled by or dependent on the City. Determination of "controlled by or dependent on" is based on the National Council on Governmental Accounting Statement 3 "Defining the Governmental Reporting Entity" . This statement deals with existence as an organized entity, governmental character, and autonomy. The financial statements include the financial activities of the following separate legal entity: The Dublin Information, Inc. (DII) is a separate legal entity established to assist in providing financing to the City. See Note 5. The DII meets the criterion of ability to significantly influence operations and accountability for fiscal matters for inclusion in the City's reporting entity. The financial activities of the DII have been included in the Dublin Information, Inc. Enterprise Fund. The financial statements exclude the activities of the Dublin Housing Authority, the Dublin San Ramon Services District and the Dougherty Regional Fire Authority. Each of the above agencies are managed and operated independently of the City, and they do not meet the criterion of ability to significantly influence operations and accountability for fiscal matters. Therefore these agencies have not been included in the City of Dublin financial statements. B. Fund Accounting The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as appropriate. 7 CITY OF DUBLIN votes to Financial Statements Note 1 - Summary of Significant Accounting Policies (Continued) Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped, in the financial statements in this report, into seven generic fund types and three broad fund categories as follows: GOVERNMENTAL FUNDS General Fund-- The General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. Special Revenue Funds-- Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specific purposes. Capital Projects Funds-- Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by Proprietary Funds) . Debt Service Funds-- Debt Service Funds are established to account for the accumulation of resources for, and the payment of, interest and principal on long-term debt. PROPRIETARY FUNDS Enterprise Funds - Enterprise Funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the costs and expenses, including depreciation, of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Internal Service Funds -- Internal Service Funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the City, or to other governments, on a cost-reimbursement basis. FIDUCIARY FUNDS Agency Funds-- Agency Funds are used to account for assets held by the City as an agent for individuals, private organizations, other governments and/or other funds, in accordance with the conditions of the agreements. Agency funds are purely custodial and thus do not involve measurement of results of operations. 8 CITY OF DUBLIN Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies (Continued) C. Fixed Assets and Long-Term Liabilities The accounting and reporting treatment applied to the fixed asset-8 and long-term liabilities associated with a fund are determined by its measurement focus. All governmental funds and Expendable Trust Funds are accounted for on a spending or "financial flow" measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. Their reported fund balance (net current assets) is considered a measure of "available spendable resources" . Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Fixed assets used in governmental fund type operations (general fixed assets) are accounted for in the General Fixed Assets Account Group, rather than in governmental funds. No depreciation has been provided on general fixed assets. The City has elected not to capitalize its infrastructure which would consist of nonenterprise expenditures relating to roads, bridges, curbs, gutters, streets, sidewalks, drainage systems, and lighting systems. All fixed assets are valued at historical cost or estimated.historical cost if actual historical cost is not available. Donated fixed assets are valued at their estimated fair value on the date donated. The account group is not a "fund" . It is concerned only with the measurement of financial position. It is not involved with measurement of results of operations. Because of their spending measurement focus, expenditure recognition for governmental fund types is limited to exclude amounts represented by noncurrent liabilities. Since they do not affect net current assets, such long-term amounts are not recognized as governmental fund type expenditures or fund liabilities. All proprietary funds are accounted for on a cost of services or "capital maintenance" measurement focus, which means that all assets and all liabilities associated with their activity are included on their balance sheets. Their reported fund equity is segregated into contributed capital and retained earnings components. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in total assets. Depreciation of all exhaustible fixed assets used by proprietary funds is charged as an expense against their operations. Accumulated depreciation is reported on proprietary fund balance sheets. 9 CITY OF DUBLIN votes to Financial Statements Note 1 - Summary of Significant Accounting Policies (Continued) Depreciation has been provided over the estimated useful lives of the assets using the straight line method. The estimated useful lives are three to five years. D. Basis of Accounting Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. All governmental funds and Expendable Trust Funds are accounted for using the modified accrual basis of accounting. Their revenues are recognized when they become measurable and available as net current assets. Sales taxes are considered "measurable" when in the hands of intermediary collecting governments and are recognized as revenue at that time. Anticipated refunds of such taxes are recorded as liabilities and reduction of revenue when they are measurable and their validity seems certain. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. An exception to this general rule is principal and interest on general long-term debt which is recognized when due. All Proprietary Funds are accounted for using the accrual basis of accounting. Their revenues are recognized when they are earned, and their expenses are recognized when they are incurred. E. Budgets and Budgetary Accounting The City follows these procedures in establishing the budgetary data reflected in the financial statements; 1. Prior to June 30, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayer comments. 3. Prior to July 1, the budget is legally enacted through passage of a resolution. 4. The City Manager is authorized to transfer budgeted amounts within an activity, within any fund; however, any revisions that alter the total expenditures of any activity must be approved by the City Council. 10 CITY OF DUBLIN Notes to Financial Statement, Note 1 - Summary of Significant Accounting Policies (Continued) 5. Formal budgetary integration is employed as a management control device during the year for the General Fund, Special Revenue and Capital Projects Funds. Formal budgetary integration is not employed for Debt Service Funds because effective budgetary control is alternatively achieved through general obligation bond indenture provisions. 6. Budgets for the General, Special Revenue and Capital Projects Funds are adopted on a basis consistent with generally accepted accounting principles (GAAP) . Budgeted amounts are as originally adopted, or as amended by the City Council. Individual amendments were not material in relation to the original appropriations which were amended. F. Appropriation Lapses In all funds unexpended appropriations lapse at year end. G. Cash and Investments ' The City pools idle cash from all funds except for the Cash and Investments with Fiscal Agent for the purpose of increasing income through investment activities. Investments are carried at cost which approximates market 7. value. Interest income on investments is allocated on the basis of average month-end cash and investment balances in each fund. H. Property Tax Alameda County assesses properties and bills for and collects property taxes as follows: Secured Unsecured Valuation dates March 1 March 1 Lien/levy dates March 1 March 1 Due dates 50% on November 1 July 1 50% on February 1 Delinquent as of December 10 (for November) August 31 April 10 (for February) The term "unsecured" refers to taxes on personal property other than real estate, land and buildings. These taxes are secured by liens on the property being taxed. Property taxes levied are recorded as revenue and receivables, net of estimated uncollectibles, in the fiscal year of levy. 11 CITY OF DUBLIN Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies (Continued) I. Accumulated Unpaid Vacation, Sick Pay, and Other Employee Benefit Accounts. ` The City accounts for compensated absences (unpaid vacation and sick leave) in accordance with NCGA Statement No. 4. In governmental funds, compensated absences are recorded as expenditures in the year paid, as it is the City's policy to liquidate any unpaid vacation or sick leave at June 30 from currently available expendable resources rather than future resources. Accordingly, the entire unpaid liability for the governmental funds is recorded in the General Fund. In prior years this liability was recorded as a reservation to fund balance. J. New Funds During the year the City established the following funds: The Community Parklands Act Special Revenue Fund was established to account for grants and expenditures related to the Community Parklands Act. The Dublin Capital Projects Fund was established to account for the City's long term capital projects. K. Total Columns on Combined Statements - Overview Total columns on the Combined Statements - Overview are captioned Memorandum Only to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or changes in financial position in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. Note 2 - Restatements Contributed Capital Restatements Effective July 1, 1987 the City changed its method of accounting for assets purchased by the General Fund and contributed to the Internal Service Fund. These contributions are now accounted for as residual equity transfers from the General Fund and as contributed capital instead of increase in the retained earnings of the Internal Service Fund; $63,309 in such contributions has accordingly been reclassified from Internal Service Fund retained earnings to contributed capital as of June 30, 1988. Effective July 1, 1987 the City also changed its method of accounting for General Fund cash contributions to its Enterprise Fund. These contributions are now accounted for as residual equity transfers from the General Fund and contributed capital instead of increases in the Enterprise Fund retained earnings; $3,976,995 in such contributions has accordingly been reclassified from Enterprise Fund retained earnings to contributed capital as of June 30, 1988. 12 CITY OF DUBLIN Notes to Financial Statements Note 2 - Restatements (Continued) Of the above amounts, $906,035 accounted for as Operating Transfers in the June 30, 1988 financial statements has been reclassified as Residual Equity Transfers. San Ramon Specific Improvement Plan Agency Fund Restatement Effective July 1, 1987 the San Ramon Specific Improvement Plan Agency Fund special assessment receivable and related deferred revenue have been removed from the balance sheet to reflect the fact that the City acts only as collections agent for this Fund. The effect of this change was to eliminate both the special assessment receivable and the related deferred revenue balance of $715,000- previously reported as of June 30, 1988. Capital Projects As discussed in Note 3 below, Capital Projects Funds with balances of $1,516,048 were discontinued as of July 1, 1988. For financial statement presentation purposes, these Capital Projects Fund balances have been restated as of June 30, 1988 as follows: Capital Projects Fund Balances as reported $1,413,302 Deduct balances of funds discontinued 1.515,048 Capital Projects Fund Balances as restated 102,746) Note 3 - Residual Equity Transfers Residual Equity Transfers comprise: Transfers In Out General Fund $4,650,769 $2,207,772 Capital Projects Funds 1,516,048 Internal Service Fund 30,969 Enterprise Fund 1,126,128 Effective July 1, 1988 the City discontinued the Capital Project Funds listed below. Fund balances of $1,516,048 associated with these discontinued Funds have been transferred to the General Fund and accounted for as a Residual Equity Transfer, as follows: Fund Balance Discontinued Funds Transferred General Improvements Data Processing System $ (1,227) Cable TV Equipment and Facility -0- Word Processing Equipment (15,819) 13 CITY OF DUBLIN Notes to Financial Statement:. Note 3 - Residual Equity Transfers (Continued) Fund Balance - Discontinued Funds Transferred City Base Maps 183 Dublin San Ramon Services District Study 2,507 General Copier Equipment 129 Dublin Storage Yard 38 Community Improvements Major Arterial Soundwalls -0- Bus Shelters 30,315 City Entrance Signs 22,928 Sidewalk Safety and Bus Stop Pad (29 ,444) Arroyo Vista Soundwall (2,013) Downtown Improvement Plan (6,965) Dougherty Road East Side Fencing -0- Community TV Grant 45,950 Civic Center 557,428 Village Sidewalk Landscape 2,960 Village Parkway Wall 2,490 Silvergate Drive Median Landscape 1,237 Village Parkway (Amador Valley Boulevard to Kimball Road) Landscape 51,166 Arroyo Vista Sidewalks (19,964) Park Improvements Shannon Center Renovation (1,140) Dolan Park (77,052) Stagecoach Park 31,832 Senior Citizen Center (2,963) Dougherty Hills Park (12,083) Park Development Plan Street Improvements Annual Street Overlay (96,751) San Ramon Road Phase II (693,570) _ San Ramon Road Phase III (46,119) Traffic Signal Interconnect 34,966 Traffic Signal Emergency Preemption (6,978) Amador Valley Boulevard Rehabilitation/Landscape 587,461 San Ramon Road Phase IV (29) Dublin Boulevard Northwest Clark Avenue 7,619 Traffic Signals Addition (2,497) Fuel Efficiency/Traffic Signal Study -0- Amador Plaza To Regional Street Connection Road Study (81) 14 CITY OF DUBLIN Notes to Financial Statements Note 3 - Residual Equity Transfers (Continued) Fund Balance Discontinued Funds Transferred - Dougherty Road Bike Path -0- Dublin Boulevard/Village Parkway -- Turn Lane (310) Dublin Boulevard/Regional Street Third Lane (2,938) Amador Valley Boulevard Signal Extension 73,874 Dublin Road/Dougherty Road Intersection Modification 20,143 Street Name Approach 1,701 Stagecoach Road/Amador Valley Boulevard Traffic Signal 12,690 Amador Valley Boulevard Street Rehabilitation 96,367 Sewage Facility Expansion 758,722 Dublin Boulevard Underground Utility 130,790 Downtown Street Lighting Additions 171,789 Alcosta Road/San Ramon Road Traffic Signal 17,071 Dublin Boulevard/Sierra Road Traffic Signal (138,599) Dublin Boulevard Extension Specific Plan 2,784 Dublin Boulevard West of San Ramon Road Improvement 10,739 Dougherty Road Widening (14,569) Amador Valley Boulevard/Amador Plaza Road Traffic Signal 9,821 Village Parkway/Lewis Street Traffic Signal 2,428 Street Name Identification and Signal Replacement 647 Major Arterial Fence Replacement -0- Dublin Boulevard Plan Line (1,616) Total fund balances transferred $1,516,048 During the year ended June 30, 1989 the City's General Fund contributed $1,157,097 of assets to the Internal Service and Enterprise funds; these contributions have been reported as Residual Equity Transfers from the General Fund to the Internal Service and Enterprise funds. Residual Equity Transfers into Internal Service and Enterprise funds are reported as contributed capital by these funds. 15 CITY OF DUBLIN Notes to Financial Statement_ Note 3 - Residual Equity Transfers (Continued) Dougherty Regional Fire Authority Effective July 1, 1988, the Dublin San Ramon Services District (DSRSD) transferred all fire suppression and prevention and park and recreation services to the Cities of Dublin and San Ramon. This transfer included all related assets, liabilities and fund balances. During the year ended June 30, 1989 the General Fund received $3,134,721 in DSRSD fund balances relating to these services and accounted for them as a Residual Equity Transfer In. Effective with the transfer, the Cities of Dublin and San Ramon established the Dougherty Regional Fire Authority (DRFA) , a joint powers agreement, and transferred all fire suppression and prevention services and the related fund balances to DRFA. Of the fund balances received from DSRSD, $1,050,675 related to fire suppression and prevention. This amount was transferred to DRFA and accounted for as a Residual Equity Transfer Out by the General Fund. Because of the transfer of services the City is entitled to receive associated property tax allocations. The City has retained responsibility for park and recreation services and pays for those services out of the general fund revenue base. Note 4 - Cash and Investments Cash and investments comprise: June 30, 1989 1988 Cash in banks $ 71,371 $ 888,541 Non-negotiable certificates of deposit 10,941,878 9,257,435 Local Agency Investment Fund 6,222,000 8,122,000 Cash & investment with fiscal agent 2.155.749 3,063 .817 Total cash & investments $19,390,998 $21,331,793 All pooled cash and non-negotiable certificates of deposit are entirely insured or collateralized. The California Government Code requires California banks and savings and loan associations to secure a City's deposits by pledging government securities as collateral. The market value of pledged securities must equal at least 110% of a City's deposits. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of a City's total deposits. 16 CITY OF DUBLIN Notes to Financial Statemc Note 4 - Cash and Investments (Continued) The City may waive collateral requirements for deposits which are fully insured up to $100,000 by the Federal Deposit Insurance Corporation (FDIC) or Federal Savings and Loann Insurance Corporation (FSLIC) . Under provision of the City's Investment Policy, and in accordance with Section 53601 of the California Government Code, the City may invest in the following types of investments: Securities of the U.S. Government, or its agencies Negotiable Certificates of Deposits Bankers Acceptances Local Agency Investment Fund (State Pool) Deposits Passbook Savings Account Demand Deposits Repurchase Agreements The City has monies held by trustees or fiscal agents pledged to the payment or security of certain bonds, and certificates of participation. The California Government Code provides these monies, in the absence of specific statutory provisions governing the issuance of bonds, or certificates, may be invested in accordance with the ordinance, resolutions or indentures which are generally more restrictive than the City's general investment policy. In no instance have additional types of investments, not permitted by the City's general investment policy, been authorized. Note 5 - Certificates of Participation 1988 Refunding Certificates of Participation Interest Rate 5.75% - 7.875% Maturity Date 2-1-10 Original Issue $17,230,000 Balance as of July 1, 1987 Issuance of Refunding Certificates of Participation $17,230,000 Deduct: Bond discount, net of amortization (377,180) Balance as of June 30, 1988 $16,852,820 Add: Amortization of bond discount 17.337 Balance as of June 30, 1989 $16,870,157 17 CITY OF DUBLIN !s to Financial Statements Note 5 - Certificates of Participation (Continued) In order to finance the construction of the Dublin Civic Center building, the City on March 1, 1988 signed a non-cancellable twenty-two year lease with Dublin Information Inc. (DII) , a non-profit _,. corporation which used the lease as collateral for the issuance of- the 1988 Certificates of Participation. The lease provides for semi-annual payments which are sufficient to pay principal and interest due on the 1988 Refunding Certificates of Participation. Ownership of the Civic Center Building reverts to the City at the end of the lease. Since the lease is in essence a financing arrangement with ownership of the financed assets reverting to the City, the assets and the related debt evidenced by the 1988 Refunding Certificates of Participation have been included in the City's financial statements. The refunding Certificates of Participation will be repaid from general fund revenues. Shown below are the annual debt service requirements for the 1988 Refunding Certificates of Participation, including interest: For the Year ending June 30 Total 1990 $ 1,299,820 1991 1,719,820 1992 1,720,670 1993 1,718,970 1994 1,719,973 thereafter 27.485,647 $35,664,900 On March 8, 1988, the City issued $17,230,000 of Refunding Certificates of Participation with interest rates of 5.75% - 7.875%. Of the proceeds, $10,100,610 was used to advance refund $11,615,000 of outstanding 1985 Certificates of Participation with interest rates of 7.25% - 9.25%. These proceeds, plus an additional $2,538,986 of 1985 Certificates of Participation reserve fund monies were used to purchase U.S. government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the 1985 Certificates of Participation. As a result, the 1985 Certificates of Participation are considered to be defeased and the liability for those obligations has been removed from the Dublin Information, Inc. Enterprise Fund. As of June 30, 1989 $11,420,000 of the 1985 Certificates of Participation remained unpaid. 18 CITY OF DUBLIN Is, s to the Financial Statements Note 6 - Pension Plan A. Plan Description The City contributes to the California Public Employees Retirement System (PERS) , an agent multiple-employer public employee retirement system that acts as a common investment and administrative agent for participating members in California. All qualified permanent and probationary employees are eligible to participate in PERS. Benefits vest after five years of service and are payable monthly for life upon retirement. Employees who retire at age 60 with 5 years of credited service receive a benefit equal to 10% of their average monthly salary for their last three years of employment up to a maximum of 2% of their annual salary. A credited service year is one year of full time employment. PERS requires City employees to contribute 7% of their annual salary and the City pays the remainder. These benefit provisions and all other requirements are established by state statute and city ordinance. Contributions necessary to fund PERS on an actuarial basis are determined by PERS and its Board of Administration. B. Funding Status and Progress The amount shown below as the "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases and step-rate benefits estimated to be payable in the future as a result of employee service 'to date. The measure is intended to help users assess the funding status of PERS on a going-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due and make comparisons among employers. The measure is the actuarial present value of credited projected benefits and is independent of the funding method used to determine contributions to the PERS. The pension benefit obligation was computed as part of an actuarial valuation performed as of June- 30, 1987. Significant actuarial assumptions used in the valuation include (a) a rate of return on the investment of present and future assets of 8.5% a year compounded annually, (b) projected salary increases of 5.75% a year compounded annually, attributable to inflation, plus additional projected salary increases attributable to seniority/merit, and (d) postretirement benefit increases adjusted 2% annually after the fist two years of retirement. 19 CITY OF DUBLIN r s to the Financial Statements Note 6 - Pension Plan (Continued) Total over-funded pension benefit obligation applicable to the City's employees at June 30, 1988, was as follows: 1988 Pension benefit obligation: Retirees and beneficiaries currently receiving benefits and terminated employees not yet receiving benefits $ 1,855 Current employees: Accumulated employee contributions including allocated investment earnings 150,055 Employer-financed vested 137,566 Employer-financed nonvested 32.353 Total pension benefit obligation 321.829 Net assets available for benefits, at cost . . (market value is $375,126) 331.676 Overfunded pension benefit obligation $ 9,847 C. Actuarially Determined Contribution Requirements and Contribution Made PERS uses the Entry Age Normal Actuarial Cost Method which is a projected benefit cost method. That is, it takes into account those benefits that are expected to be earned in the future as well as those already accrued. According to this cost method, the normal cost for an employee is the level amount which would fund the projected benefit if it were paid annually from date of employment until retirement. PERS uses a modification of the Entry Age Cost Method in which the employer's total normal cost is expressed as a level percentage of payroll. PERS also uses the level percentage of payroll method to amortize any unfunded actuarial liabilities. The amortization period of the unfunded actuarial liability ends on June 30, 2011. The significant actuarial assumptions used to compute the actuarially determined contribution requirement are the same as those used to compute the pension benefit obligation, as previously described. 20 CITY OF DUBLIN Notes to Financial Statements Note 6 - Pension Plan (Continued) Contributions to PERS are made in accordance with actuarially determined requirements computed through an actuarial valuation performed as of year end. The PERS contributions which were entirely paid by the City consisted of '- the following for fiscal year ended June 30, 1989 and 1988: 1989 1988 _ Percent Percent of Covered of Covered Amount Payroll Amount Pavroll Covered payroll JnZ,304 JL5 3 811 Total payroll 832 304 653 811 Normal cost, including employee contributions $103,206 12.4% $ 84,342 12.9% Amortized unfunded actuarial accrued liability 832 .1% 1.308 .2% Total jjgL038 12.5% 85 650 13 .1% City contributions 45,777 5.5% $ 39,883 6.1% Employee contributions 58.261 7.0% 45.767 7 .0% Total IIQL038 12.5% LIL,650 13.1% D. Trend Information Trend information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due. Systemwide ten-year trend information may be found in the California Public Employees' Retirement System Annual Reports. For the fiscal year, 1987-88 and 1986-87, net assets available for benefits funded 116% and 103% respectively, of the pension plan's total pension benefit obligation and the overfunded pension benefit obligation represented 4.7% and 1.2% respectively, of covered payroll. For the fiscal year 1987-88, the City's PERS contributions, made in accordance with actuarially determined requirements, were 36% of covered payroll. Other trend information required by Governmental Accounting Standard No.5 was not available from PERS. 21 CITY OF DUBLIN Notes to Financial Statements Note 7 - Fixed Assets Fixed assets at June 30, 1989 consist of the following: Internal General " Enterprise Service Fixed Funds Fund Assets Machinery & equipment $323,718 $198,125 Construction in progress $20,225,655 Total 323.718 198.125 Less: accumulated depreciation 209.198 Net $20,225,655 $114,520 IL28,125 Additions to general fixed assets in the year ended June 30, 1989 comprised $18,674 of machinery and equipment. Construction in progress consists of costs incurred on the Dublin Information, Inc. Civic Center Project. Details of changes in construction in progress are shown below: Balance as of Balance as of June 30, 1988 Additions June 30, 1989 Land $ 6,700,576 $ 6,700,576 Construction 2,829,029 $6,429,140 9,258,169 Engineering and architecture 583,445 357,106 940,551 Legal 67,500 67,500 Other 95.084 61,280 156.364 Subtotal 10,275.634 6.847.526 17,123.160 Financing costs: Interest expense 2,297,258 673,417 2,970,675 Underwriters discount 394,944 394,944 Interest income (143,424) (119,700) (263,124) Subtotal 2,548.778 553.717 3.102,495 $12,824,412 $7,401,243 $20,225,655 Financing costs have been capitalized as part of Construction in Progress as required under Financial Accounting Standards Board Statements #34 and #62, which requires that all financing costs incurred to acquire or prepare assets for their intended use be added to the cost of the related assets. 22 CITY OF DUBLIN Notes to Financial Statemen'k, Note 8 - Interfund Receivables and Payables Interfund receivables and payables consisted of the following at June 30, 1989: Due from Due to _ General Fund $127,073 Special Revenue Funds $ 60,209 Capital Projects Funds 66.864 Totals 1112,0 73 11n,073 Note 9 - Interfund Operating Transfers Interfund operating transfers for the 1988-89 fiscal year were as follows: Operating transfers Operating transfers Fund type in out General Fund $ 79,490 Special Revenue Funds $123,650 Enterprise Funds 5,840 Capital Projects 50.000 Total $129,490 $129 ,490 Note 10 - Contingent Liabilities The City participates in several federal and State grant programs. These programs have been audited by the City's independent accountants in accordance with the provisions of the federal Single Audit Act of 1984 and applicable State requirements. No cost disallowances were proposed as a result of these audits; however, these programs are still subject to further examination by the grantors and the amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time. The City expects such amounts, if any, to be immaterial. The City has included the San Ramon Specific Plan Improvement District as an Agency Fund. Although the City administers the accounting and bookkeeping functions of the District, the City has no legal or moral commitment. to repay this District's $660,000 in outstanding debt. Note 11 - Joint Powers Agencies The Cities of Dublin and San Ramon established the Dougherty Regional Fire Authority (DRFA) to provide fire suppression and prevention_ services. The DRFA is controlled by a combined six member board consisting of three members from each City Council. The combined board designates management and employees of the DRFA. 23 CITY OF DUBLIN ces to Financial Statements Note 11 - Joint Powers Agencies (Continued) The DRFA annually estimates its annual operating and capital budgets. Each City pays its share of the annual operating and capital budgets based on the percentage of assessed valuation in each City as it _ relates to the total assessed valuation of property served by the DRFA. The DRFA is a legally separate entity which is responsible for its own fiscal affairs, the City is not responsible for obligations of the DRFA. City management believes DRFA operations are separate and should not be included in these financial statements. No audited financial information for DRFA was available as of the issuance of these financial statements. Note 12 - Deficit Fund Balances The following funds had deficit fund balances as of June 30, 1989: Kolb Park Capital Projects Fund $66,864 Community Development Block Grant Special Revenue Fund 34,660 Transportation Development Act Special Revenue Fund 13,847 Dublin Boulevard Extension Special Revenue Fund 1,455 These deficits will be eliminated through general fund transfers or future revenues. 24 CITY OF DUBLIN SPECIAL REVENUE FUNDS COMBINING BALANCE SHEET JUNE 30, 1989 WITH COMPARATIVE AMOUNTS AS OF JUNE 30, 1988 Transportation Special Federal Community Traffic State Development Criminal Aid Development Park Safety Gas Tax Act Activity Urban Block Grant Dedication ASSETS Cash and investments $31,341 $164,083 S26,634 $24,465 S1,121,824 Accounts receivable Due to others Total Assets $31,341 5164,083 $26,634 524,465 51,121,824 LIABILITIES AND FUND EQIITIES Liabilities: Accounts payable 511,147 S14,461 515,917 S216,033 Due to other funds $13,847 S8,660 Deferred revenue 26,000 Deposit Total Liabilities 11,147 14,461 13,847 15,917 34,660 216,033 Fund Equities: Designated for authorized expenditures 20,194 149,622 S26,634 8,548 905,791 Unreserved fund balance (13,847) (34,660) Total Fund Balance 20,194 149,622 (13,847) 26,634 8,548 (34,660) 905,791 Total Liabilities and Fund Balance 531,341 5164,083 526,634 S24,465 S1,121,824 25 Dougherty Stagecoach Landscape Street Landscape And Lighting Dublin Community TOTALS State Park Sales Tax Lighting Assessment Assessment Boulevard Parkland Bond Act Measure B Assessment District District Extension Bond 1989 1988 $4,587 $95,854 $15,840 $104,771 $45 $1,589,444 $1,670,123 1,197 824 193 2,214 3,191 $48,000 48,000 $4,587 $97,051 $16,664 $104,964 $45 $48,000 $1,639,658 $1,673,314 $14,795 $5,379 $6,181 $283,913 $46,656 $3,225 $1,500 $32,977 60,209 121,382 26,000 26,000 2,200. 3,225 14,795 5,379 6,181 1,500 32,977 370,122 196,238 1,362 82,256 11,285 98,783 15,023 1,319,498 1,477,076 (1,455) (49,962) 1,362 82,256 11,285 98,783 (1,455) 15,023 1,269,536 1,477,076 $4,587 $97,051 $16,664 $104,964 $45 $48,000 $1,639,658 $1,673,314 CITY OF DUBLIN SPECIAL REVENUE FUNDS COMBINING STATEMENT 01 -VENUES, EXPENDITURES AND CHA_ -S IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 1989 WITH COMPARATIVE AMOUNTS FOR THE YEAR ENDED JUNE 30, 1988 Transportation Special Federal Community Traffic State Development Criminal Aid Urban Development Park Safety Gas Tax Act Activity Highway Fund Block Grant Dedication REVENUES _ Taxes Sales and use taxes Intergovernmental FAU grant $950,166 $104,060 Gasoline tax $311,225 TDA Act funds $160,600 State park bond State senior citizen bond State parkland grant Fines and forfeits Vehicle code fines $88,443 Use of money and property Interest 4,616 19,051 $2,557 $110,057 All other Park dedication fees and flood grant Nondepartmental special assessments Miscellaneous 4,238 Total Revenues 93,059 330,276 160,600 6,795 950,166 104,060 110,057 EXPENDITURES General governcnant Service and supplies 2,478 Public safety Service and supplies 33,141 6,065 Contract services 49,01 Highways and streets Service and supplies 41,071 Contract services 376,325 Community developement Service and supplies 825 Contract services 2,747 3,000 Culture and leisure Service and supplies Contract services Capital outlay Service and supplies 60,289 809,367 104,060 330,319 Contract services 458 132,251 13,154 Total Expenditures 127,185 379,325 63,225 6,065 941,618 104,060 343,473 EXCESS OF REVENUES OVER (UNDER)EXPENDITURES (34,126) (49,049) 97,375 730 8,548 (233,416) OTHER FINANCING SOURCES(USES) Operating transfers in Operating transfers(out) Total Other Financing Sources(Uses) EXCESS OF REVENUES AND OTHER FINANCING SOURCES OVER(UNDER) EXPENDITURES AND OTHER FINANCING USES (34,126) (49,049) 97,375 730 8,548 (233,416) Fund balance beginning of the year 54,320 198,671 (111,222) 25,904 (34,660) 1,139,207 Fund balance end of the year $20,194 $149,622 ($13,847) $26,634 $8,548 ($34,660) $905,791 26 Dougherty Street Stagecoach Landscape Lighting Landscape &Lighting Dublin Community TOTALS State Park Sales Tax Assessment Asssessment Assessment Senior Boulevard Parkland Bond Act Measure B District District District Citizen Extension Act 1989 1988 $88,416 $88,416 $83,401 1,054,226 615,131 311,225 301,048 160,600 12,436 $50,000 50,000 15,202 $73,650 73,650 $48,000 48,000 88,443 75,770 4,587 $7,638 $1,201 $7,847 $4 157,558 100,360 282,063 153,973 61,282 46,942 262,197 246,915 4,238 41,441 50,000 93,003 161,611 62,483 54,789 73,650 4 48,000 2,298,553 1,773,767 2,478 132,833 172,039 152,455 3,771 53,172 37,863 6,897 1,246 49,214 29,289 9.765 415,379 364,588 825 6,551 992 1,351 14,641 15,133 920 920 11,804 11,804 17,065 160,516 31,772 1,496,323 18,580 1,205 165,648 179,096 143,155 49,902 12,362 32,977 2,382,443 587,104 50,000 (86,093) 18,456 12,581 42,427 73,650 4 15,023 (83,890) 1,186,663 955 (50,000) (73,650) (123,650) (1,538,949) (50,000) (73,650) (123,650) (1,537,994) (86,093) 18,456 12,581 42,427 4 15,023 (207,540) (351,331) 87,455 63,800 (1,296) 56,356 (1,459) 1,477,076 1,828,407 $1,362 $82,256 $11,285 $98,783 ($1,455) $15,023 $1,269,536 $1,477,076 CITY OF DUBLIN CAPITAL PROJECTS FUNDS COMBINING BALANCE SHEET JUNE 30, 1989 WITH COMPARATIVE AMOUNTS AS OF JUNE 30, 1988 TCSTALS Capital Improvements Kolb Park Alamo Creek 1989 1988 ASSETS Cash $85,261 $17,291 $102,552 $1,577,797 Accounts receivable 12,264 Due from other funds 2,093,695 Total Assets $85,261 $17,291 $102,552 $3,683,756 LIABILITIES AND FUND BALANCE LIABILITIES: Account payable $155,486 Due to other funds $66,864 $66,864 2,114,968 Deposit $77,346 77,346 Total Liabilities 77,346 66,864 144,210 2,270,454 FUND BALANCES Designated for authorized projects 7,915 $17,291 25,206 1,413,302 Undesignated (66,864) (66,864) Total Fund Balance 7,915 (66,864) 17,291 (41,658) 1,413,302 Total Liabilities and Fund Balances $85,261 $17,291 $102,552 $3,683,756 27 CITY OF DUBLIN CAPITAL PROJECTS FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 1989 WITH COMPARATIVE AMOUNTS FOR THE YEAR ENDED JUNE 30, 1988 TOTAL Capital Improvements Kolb Park Alamo Creek 1989 1988 REVENUES Use of money and property $7,915 $1,067 $8,982 Other revenue 4,000 14,434 18,434 $227,372 Total Revenues 11,915 15,501 27,416 227,372 EXPENDITURES Capital projects Land, equipment and other facilities $4,000 4,000 2,152,013 Contractual services 12,328 12,328 708,880 Total Expenditures 4,000 12,328 16,328 2,860,893 EXCESS OF REVENUE OVER (UNDER)EXPENDITURES 7,915 3,173 11,088 (2,633,521) OTHER FINANCING SOURCES(USES) Operating transfer in $50,000 50,000 7,288,295 Operating transfer out (62,715) EXCESS OF REVENUES AND OTHER FINANCING SOURCES OVER(UNDER) EXPENDITURES AND OTHER FINANCING USES 7,915 50,000 3,173 61,088 1,592,059 Fund balance,beginning of year 1,413,302 (178,757) Residual equity transfers (1,516,048) Fund balance beginning of year,as restated (116,864) 14,118 (102,746) (178,757) Fund balance end of year $7,915 ($66,864) $17,291 ($41,658) $1,413,302 28 4 TOTALS Capital Projects Funds (Memorandum Only) Variance Variance Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) $8,482,690 $9,305,662 $822,972 355,250 292,189 (63,061) 2,346,300 2,567,703 221,403 810,300 738,314 (71,986) $8,982 $8,982 797,700 1,183,847 386,147 105,000 104,641 (359) $15,665 18,434 2,769 312,665 68,617 (244,048) 245,900 262,197 16,297 15,665 27,416 11,751 13,455,805 14,523,170 1,067,365 2,935,725 1,286,201 1,649,524 4,074,214 3,986,097 88,117 1,144,444 941,276 203,168 20,500 19,801 699 1,407,961 1,336,870 71,091 1,066,805 1,006,737 60,068 15,665 16,328 (663) 4,301,706 3,214,398 1,087,308 15,665 16,328 (663) 14,951,355 11,791,380 3,159,975 11,088 11,088 (1,495,550) 2,731,790 4,227,340 50,000 $50,000 129,490 129,490 (123,650) (123,650) 50,000 50,000 5,840 5,840 61,088 61,088 (1,495,550) 2,737,630 4,233,180 1,413,302 1,413,302 8,939,783 8,939,783 4,650,769 4,650,769 (1,516,048) (1,516,048) (3,723,820) (3,723,820) 1,413,302 (102,746) (1,516,048) 8,939,783 9,866,732 926,949 $1,413,302 ($41,658) ($1,454,960) 7,444,233 12,604,362 5,160,129 f_ I' CITY OF DUBLIN SAN RAMON ROAD SPECIFIC IMPROVEMENT PLAN AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 1989 r-: Balance Balance July 1, 1988 Additions Reductions June 30, 1989 ASSETS Restricted cash and investments $543,500 $10,890 $554,390 Total Assets $543,500 $10,890 $554,390 LIABILITIES Due to others $543,500 $10,890 $554,390 Total Liabilities $543,500 $10,890 $554,390 29 l �4e , t;,,�'L,,441vt�: *`'•�,1f. !': .�;"°fir:". 4 .�:.�. 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(i\ { � !! 2 � �� t !t �` Th'J>i'`.V\.�i.�'3".y 3�{a.4Yatt�R�rf��• r..1-:� .�, ��'r.. ..a:': r.a qt -\•"41• :,1.: tt' t. - .. .. .. .. MAZE & ASSOCIATES ACCOUNTANCY CORPORATION Creekside Oaks 1470 Maria Lane - Suite 200 Walnut Creek, California 94596 The Honorable Mayor and (415) 930-0902 • (916) 972-7333 City Council City of Dublin Dublin, California We have audited the general purpose financial statements of the City of Dublin for the year ended June 30, 1989, and have issued our report thereon dated September 29, 1989. As part of our audit, we made a study and evaluation of the system of internal accounting control to the extent we considered necessary to evaluate the system as required by generally accepted auditing standards . The purpose of our study and evaluation was to determine the nature, timing, and extent of the auditing procedures necessary for expressing an opinion on the financial statements. In addition to our study and evaluation made as a part of the audit, City management has requested that we address whether the City staff assignments do or do not compromise an employee with regards to segregation of duties, which we have done as part of RECOMMENDATION 1 - A PERSON OUTSIDE THE FINANCE DEPARTMENT SHOULD AUTHORIZE WIRE TRANSFERS . Our study and evaluation was more limited than would be necessary to express an opinion on the system of internal accounting control taken as a whole. As part of our normal audit, we selected and tested several cash receipts transactions from the Recreation and Community Development Departments. For the transactions tested, cash receipts controls were operating effectively and the transactions were recorded properly. Nothing came to our attention to indicate controls were not operating effectively. Management is responsible for establishing and maintaining a system of internal accounting control. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of a system are to provide management with reasonable, but not absolute assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any system of internal accounting control, errors or irregularities may nevertheless occur and not be detected. Also, = projections of any evaluation of the system to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the degree of compliance with the procedures may deteriorate. Our study and evaluation made for the limited purpose described in the first paragraph would not necessarily disclose all material weaknesses in the system. Accordingly, we do not express an opinion on the system of internal accounting control of the City of Dublin taken at whole. Our study and evaluation disclosed no condition that we believe to be a material weakness. However, our audit disclosed the following areas in which internal controls could be strengthened: CITY OF DUBLIN MANAGEMENT RECOMMENDATIONS RECOMMENDATION 1 - A PERSON OUTSIDE THE FINANCE DEPARTMENT SHOULD AUTHORIZE WIRE TRANSFERS City Management requested a review of staffing assignments which might compromise an employee with regard to the segregation of duties. Our review of staffing assignments constituted an expansion of our normal review of internal accounting controls and procedures and included interviews of employees in the Finance, Community Development, City Manager's and City Clerk's Departments. Employees were interviewed to determine the functions they performed and these interviews were summarized into systems descriptions for the cash receipts, cash disbursments, payroll, investments, financial reporting and budgeting systems. The employees' understanding of their tasks was reviewed for consistency and accuracy. The tasks and procedures described by the employees were evaluated by selecting a sample of transactions, auditing supporting documents and tracing each transaction selected to the general ledger. For the items tested, the internal accounting controls and procedures were found to be operating as described and the transactions were recorded properly. However, our work indicated the concentration of duties described below. a The Finance Director has been assigned duties which could be segregated and thereby strengthen internal control. The Finance Director assignments are divided into the following three categories: • Accounting controls * EDP management and controls • Cash management (Treasurer) Although the assignments of all of these functions to one employee is not unusual for a city this size, we were asked to point out areas where internal controls could be strengthened. If the City wishes to strengthen its internal controls, it should assign someone outside the finance department the responsibility of authorizing banks to make wire transfers . The current procedures provide for the Finance Director to authorize most wire transfers between banks. Although the City Manager approves these transfers prior to initiation, it is usually the Finance Director who deals solely with the bank. The City should consider the cost of implementation of this recommendation compared with the benefits received in order to determine the feasibility. RECOMMENDATION 2 - CASH TRANSFERRED FROM GOVERNMENTAL FUNDS TO THE ENTERPRISE FUND SHOULD BE EVALUATED AND RECORDED AS CONTRIBUTED CAPITAL IN THE ENTERPRISE FUND WHEN APPROPRIATE During the year ended June 30, 1989 the General Fund transferred over $1 million to the Enterprise fund. These funds were to be used to finance the construction of the Civic Center. Such transfers do not represent payments for use of the Civic Center and should be recorded as Contributed Capital. Contributed Capital represents funds contributed to a proprietary fund which are to be used for non-operating purposes such as the construction or acquisition of fixed assets. CITY OF DUBLIN KMAGEMENT RECOMMENDATIONS RECOMMENDATION 3- THE INTERNAL SERVICE FUND SHOULD OPERATE ON A BREAK-EVEN BASIS As of June 30, 1989 the Vehicle Replacement Internal Service Fund had retained earnings of over $270,000. Generally accepted accounting principles define an Internal Service Fund as a fund used" . . . to account for . . . services provided by one department . . . to other departments on a cost-reimbursement basis" . As such, profits accumulated ought to be reduced in subsequent years by reducing charges to other departments. If the City is attempting to charge vehicle users for replacement value of vehicles, generally accepted accounting principles require that amounts which are charged in excess of cost be recorded as contributed capital. �Sf RECOMMENDATION 4 - AMOUNTS RELATING TO PRIOR PERIODS SHOULD GENERALLY NOT BE i RECORDED AGAINST FUND BALANCE During the year the City recorded several entries against beginning fund balance for amounts relating to prior years. Some of these entries were -for less than $5,000. Under the clean surplus theory of generally accepted accounting principles, adjustments to beginning fund balance are expressly limited to only specific types of entries, which must be material in amount. Such entries are extremely rare. RECOMMENDATION 5 - ALL CASH WITH FISCAL AGENT ACTIVITY SHOULD ACCOUNTED FOR ON A CURRENT BASIS As of September 1989, the Fiscal Agent trustee statements for June 1989 were missing. We understand the City was in the process of changing Agents and that significant errors had been made by the prior Agent. The City should request regular, timely statements from its new Agent. These statements should be reviewed for accuracy and completeness and all activity should be recorded by the Finance Department as the statements are r received, instead of after year end. We wish to express our appreciation for the courtesy and cooperation extended to us by Phil Molina and his staff during our audit. September 29, 1989 There are three staff persons that are already involved in each investment transaction: City Treasurer, City Manager, and an Account Technician. Each staff person reviews the work of the other. There is little additional safe guard that could be achieved for the amount of additional staff time needed to re-verify each transaction. Staff, therefore, advises that no changes be made to the current system of checks and balances. The auditors have already indicated that no real changes need to be done if the cost/benefit of any change does not result in an overall advantage to the City. 2 . The second recommendation from the auditors is to reclassify particular cash transfers that go from one fund to another as "Contributed Capital" rather than "Transfers In/Out" . The staff and the Council's audit committee prefer to continue using the "Transfers In/Out" account during the year because this account appears on the budgeted portion of the financial statements and is, consequently, subject to Council review. At year end, however, the books will be adjusted to reclassify these transactions as "Contributed Capital" , which does not appear on the income statements. 3 . The auditors feel that the City's Internal Service Fund should operate on a break-even basis. According to GAAFR (Governmental Accounting Auditing, and Financial Reporting standards) , " Internal Service Funds are not designed to produce any significant profit in the long run. " This means that the . retained earnings of the ISF fund should not be continually growing. Until this current year, the City has not used accumulated cash from the ISF fund to acquired assets. This fact changed this year, when the City acquired new Police vehicles. With the acquisition of these new vehicles, the retained earnings account will decrease by the amount of the cost of the new replacement vehicles. page * 2 Also according to GAAFR, charges for equipment usage " . . .are treated as operating revenues [to the ISF] . . .and as current operating expenditures [to the General Fund] . . . . " Staff proposed that no change be initiated this year and that a long term view be taken of the method used to determine annual equipment charges. 4 . Every business has financial transactions occurring during one year that are properly accounted for in a prior year. According to Financial Accounting Standards Board Opinion # 16 a correction of an error in a prior-period statement should be reflected as a "prior period adjustment" . The City of Dublin is similar to other entities in that it has some prior period adjustments. The City's Auditors feel that when such a transaction is immaterial the amounts should be posted to the current years income statement instead of posting it as a prior period adjustment. The audit committee feels that for purposes of municipal accountability, it is more appropriate to account for these `unique and infrequent' prior periods adjustment as FASB #16 requires regardless of their materiality. By posting these transaction in this manner the current operating budget (both revenues and expenditures) properly reflects the current year's activities and are not diluted with `prior period adjustments' . At year end, however, the auditors may reclassify these transactions. 5. The City's Fiscal agent at the start of the prior fiscal year was The Bank of California. At the end of the year the fiscal agent was Bankers Trust. During the first part of the year the fiscal agent did not properly account for the usage of the City's reserves. The Bank did not decrease the City's reserves by the amount that was used to make one debt service payment. This error was to the advantage of the City. Upon noting the problem, the Finance Director met a number of times with representatives from the two fiscal agents and corrected the problem. The error was page * 3 * i • 1 corrected in time to be verified by the auditors, but not before the books for the auditing period were closed (The books reflected the correct amount which could not be verified by the auditors until the fiscal agent corrected their accounts. ) . The staff and audit committee accepted the recommendation of the auditors. RECOMMENDATION: Staff recommends that the City Council accept, approve and file the June 30, 1989 audit and management letter along with staff's response to the management letter. page * 4