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Finance - Annual Audit - 09/30/2013CITY OF EAGLE FINANCIAL STATEMENTS Year Ended September 30, 2013 CITY OF EAGLE Table of Contents PAGE (S) FINANCIAL SECTION Independent Auditor's Report............................................................. 1-3 BASIC FINANCIAL STATEMENTS Government -Wide Financial Statements Statement of Net Position......................................................... 4 Statement of Activities............................................................. 5 Fund Financial Statements Balance Sheet — Governmental Funds ............................................ 6-8 Statement of Revenues, Expenditures, and Changes in Fund Balances — Governmental Funds........................................................... 9-11 Statement of Net Position — Proprietary Fund .................................. 12 Statement of Revenues, Expenses, and Changes in Net Position — Proprietary Fund................................................................ 13 Statement of Cash Flows — Proprietary Fund ................................... 14 Notes to Financial Statements..................................................... 15-24 REOUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule — General and Major Special Revenue 25-26 Funds........................................................................................................... . SUPPLEMENTARY INFORMATION Combining Balance Sheet — Nonmajor Governmental Funds ........................... 27 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances — Nonmajor Governmental Funds ......................................... 28 CITY OF EAGLE Table of Contents PAGE (S) OTHER REPORTS AND SCHEDULES Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards... 29-30 Schedule of Findings and Responses....................................................... 31 IF FINANCIAL SECTION Audits Quest CPAs, P.C. Taxes Special Services ��^Lr�Sa.,ariw�C�ari.t�Yn.a,l.r.r� Independent Auditor's Report Honorable Mayor and City Council City of Eagle Report on the Financial Statements P.O. Box 100 Payette, Idaho 83661 www.gcpas.com info@qcpas.com P:208-642-1417 F:208-642-1582 We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Eagle (the City) as of and for the year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility 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 Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City as of September 30, 2013, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the budgetary comparison information listed as required supplementary information in the table of contents be presented to supplement the basic financial statements. Such information, although not required to be a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, and 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 assurance. Management has omitted the management's discussion and analysis information that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, and historical context. Our opinion on the basic financial statements is not affected by this missing information. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying combining fund 2 financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 31, 2013, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. (toast CPAs, P.C. Payette, Idaho December 31, 2013 S ASIC 0:SOCIA4, sz SS � CITY OF EAGLE Statement of Net Position September 30, 2013 Assets Current Assets Cash Receivables: Taxes Intergovernmental Accounts Total Current Assets Noncurrent Assets Restricted Cash Nondepreciable Capital Assets Depreciable Net Capital Assets Total Noncurrent Assets Total Assets Liabilities Current Liabilities Accounts Payable & Accrued Expenses Deposits Payable Accrued Interest Long -Term Debt & Obligations, Current Total Current Liabilities Noncurrent Liabilities Long -Term Debt & Obligations, Noncurrent Total Noncurrent Liabilities Total Liabilities Net Position Net Investment in Capital Assets Restricted - Special Programs Restricted - Debt Service Restricted - Capital Projects Unrestricted Total Net Position Total Liabilities and Net Position Governmental Business -Type Activities Activities Total $4,793,748 $701,199 $5,494,947 73,219 73,219 427,736 427,736 369,552 53,279 422,831 5,664,255 754,478 6,418,733 209,450 209,450 2,345,187 93,250 2,438,437 9,039,399 4,325,156 13,364,555 11,384,586 4,627,856 16,012,442 $17,048,841 $5,382,334 $22,431,175 $260,563 $40,768 $301,331 536,851 27,450 564,301 3,417 34,122 37,539 343,630 112,817 456,447 1,144,461 215,157 1,359,618 1,673,206 2,411,898 4,085,104 1,673,206 2,411,898 4,085,104 2,817,667 2,627,055 5,444,722 9,3 64,3 33 1,859,569 11,223,902 489,503 489,503 26,834 182,000 208,834 917,786 917,786 3,432,718 713,710 4,146,428 14,231,174 2,755,279 16,986,453 $17,048,841 $5,382,334 $22,431,175 See Accompanying Notes 4 Functions/Programs Governmental Activities Current Expenditures General Government Public Safety Parks & Streets Culture & Recreation Debt Service - Interest Capital Assets Total Governmental Activities Business -Type Activities Water Services Total Business -Type Activities Total CITY OF EAGLE Statement of Activities Year Ended September 30, 2013 Program Revenues Operating Capital Charges For Grants And Grants And Net (Expense) Expenses Services Contributions Contributions Revenue $2,195,449 $830,904 $86,573 $515,688 ($762,284) 1,549,182 586,314 (962,868) 670,439 253,739 (416,700) 912,492 345,348 (567,144) 49,021 18,553 (30,468) 852,914 322,800 (530,114) 6,229,497 2,357,657 86,573 515,688 (3,269,579) 807,472 807,472 $7,036,969 Changes in Net Position Net (Expense) Revenue General Revenues Taxes Franchise Fees Intergovernmental Interest Miscellaneous Transfers Total Change in Net Position Net Position - Beginning - As Previously Stated Restatement - See Note G Net Position - Beginning - As Restated Net Position - Ending 685,615 685,615 0 $3,043,272 $86,573 Governmental Business -Type Activities Activities ($3,269,579) ($121,857) 2,186,255 621,671 1,548,201 17,918 1,806 78,345 15,408 4,452,390 17,214 1,182,811 (104,643) 12,858,523 2,859,922 189,840 13,048,363 2,859,922 $14,231,174 $2,755,279 0 $515,688 Total ($3,391,436) 2,186,255 621,671 1,548,201 19,724 93,753 0 4,469,604 1,078,168 15,718,445 189,840 15,908,285 $16,986,453 (121,857) (121,857) ($3,391,436) Component Unit 189,840 (189,840) 0 $0 See Accompanying Notes 5 CITY OF EAGLE Balance Sheet - Governmental Funds September 30, 2013 Assets Cash Receivables: Taxes Intergovernmental Accounts Due From Other Funds Total Assets Liabilities Accounts Payable & Accrued Expenses Due To Other Funds Deposits Payable Total Liabilities Deferred Inflows of Resources Unavailable Tax & Fee Revenues Total Deferred Inflows of Resources Fund Balances Restricted - Special Programs Restricted - Debt Service Restricted - Capital Projects Unassigned Total Fund Balances Total Liabilities and Deferred Inflows of Resources and Fund Balances General Fund $3,371,815 38,538 427,736 336,477 $4,174,566 $222,110 536,851 758,961 34,894 34,894 35,367 3,345,344 3,380,711 $4,174,566 Library Fund $233,613 24,337 30,989 $288,939 $32,002 32,002 44,665 44,665 212,272 212,272 $288,939 Debt Service Fund $25,995 7,522 Page 1 of 3 Park Fund $917,786 $33,517 $917,786 $0 $0 6,683 6,683 0 26,834 917,786 26,834 917,786 $33,517 $917,786 See Accompanying Notes 6 CITY OF EAGLE Page 2 of 3 Balance Sheet - Governmental Funds September 30, 2013 Other Total Governmental Governmental Funds Funds Assets Cash $244,539 $4,793,748 Receivables: Taxes 2,822 73,219 Intergovernmental 0 427,736 Accounts 2,086 369,552 Due From Other Funds 0 0 Total Assets $249,447 $5,664,255 Liabilities Accounts Payable & Accrued Expenses $6,451 $260,563 Due To Other Funds 0 0 Deposits Payable 0 536,851 Total Liabilities 6,451 797,414 Deferred Inflows of Resources 0 0 Unavailable Tax & Fee Revenues 1,132 87,374 Total Deferred Inflows of Resources 1,132 87,374 Fund Balances Restricted - Special Programs 241,864 489,503 Restricted - Debt Service 0 26,834 Restricted - Capital Projects 0 917,786 Unassigned 0 3,345,344 Total Fund Balances 241,864 4,779,467 Total Liabilities and Deferred Inflows of Resources and Fund Balances $249,447 $5,664,255 See Accompanying Notes 7 CITY OF EAGLE Page 3 of 3 Balance Sheet - Governmental Funds September 30, 2013 Reconciliation of Total Governmental Fund Balances to Net Position of Governmental Activities Total Governmental Fund Balances $4,779,467 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. 11,384,586 Certain receivables are not available to pay for current period expenditures and therefore are deferred in the funds. 87,374 Certain liabilities, including accrued interest, are not due and payable in the current period and therefore are not reported in the funds. (2,020,253) Net Position of Governmental Activities $14,231,174 See Accompanying Notes 9 CITY OF EAGLE Page 1 of 3 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Year Ended September 30, 2013 Debt General Library Service Park Fund Fund Fund Fund Revenues Taxes $1,007,645 $769,068 $222,892 Franchise Fees 621,671 Intergovernmental 1,533,132 15,069 Charges for Services 68,577 549 Licenses, Permits, & Fees 1,808,319 33,558 $376,022 Fines & Court Fees 70,632 Interest 5,284 515 198 1,630 Miscellaneous 599,547 2,314 Total Revenues 5,714,807 821,073 223,090 377,652 Expenditures Current Expenditures General Government 4,651,694 Public Safety 1,549,182 Parks & Streets 635,572 34,867 Culture & Recreation 70,031 842,461 Debt Service - Principal 175,000 Debt Service - Interest 49,750 Total Expenditures 6,906,479 842,461 224,750 34,867 Excess (Deficiency) of Revenues Over Expenditures (1,191,672) (21,388) (1,660) 342,785 Other Financing Sources (Uses) Proceeds from Bond Issuance 1,118,788 Owner Contributions Transfers In Transfers Out Total Other Financing Sources (Uses) 1,118,788 0 0 0 Net Change in Fund Balances (72,884) (21,388) (1,660) 342,785 Fund Balances - Beginning - As Previously Stated 4,028,596 233,660 28,494 0 Restatement - See Note G (575,001) 575,001 Fund Balances - Beginning - As Restated 3,453,595 233,660 28,494 575,001 Fund Balances - Ending $3,380,711 $212,272 $26,834 $917,786 See Accompanying Notes 9 CITY OF EAGLE Page 2 of 3 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Year Ended September 30, 2013 Other Total Governmental Governmental Funds Funds Revenues Taxes $199,726 $2,199,331 Franchise Fees 0 621,671 Intergovernmental 0 1,548,201 Charges for Services 0 69,126 Licenses, Permits, & Fees 0 2,217,899 Fines & Court Fees 0 70,632 Interest 0 7,627 Miscellaneous 0 601,861 Total Revenues 199,726 7,336,348 Expenditures Current Expenditures General Government 226,447 4,878,141 Public Safety 0 1,549,182 Parks & Streets 0 670,439 Culture & Recreation 0 912,492 Debt Service - Principal 0 175,000 Debt Service - Interest 0 49,750 Total Expenditures 226,447 8,235,004 Excess (Deficiency) of Revenues Over Expenditures (26,721) (898,656) Other Financing Sources (Uses) Proceeds from Bond Issuance 0 1,118,788 Owner Contributions 85,973 85,973 Transfers In 0 0 Transfers Out 0 0 Total Other Financing Sources (Uses) 85,973 1,204,761 Net Change in Fund Balances 59,252 306,105 Fund Balances - Beginning - As Previously Stated 0 4,290,750 Restatement - See Note G 182,612 182,612 Fund Balances - Beginning - As Restated 182,612 4,473,362 Fund Balances - Ending $241,864 $4,779,467 See Accompanying Notes to CITY OF EAGLE Page 3 of 3 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Year Ended September 30, 2013 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds to the Statement of Activities Net Change in Fund Balances - Total Governmental Funds $306,105 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 is allocated over their estimated useful lives as depreciation expense. This is the excess of capital outlays over (under) depreciation expense in the current period. 1,845,571 Revenues in the statement of activities that do not provide current financial resources are deferred in the funds. (20,304) Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term debt in the statement of net position. 185,291 In the statement of activities, interest is accrued on long-term debt, but the expenditure is reported when due in the governmental funds. 729 Proceeds of debt is a financing source in the governmental funds, but it increases long-term debt in the statement of net position. (1,118,788) In the statement of activities, compensated absences are accrued when earned, but the expenditure is reported when due in the governmental funds. (15,793) Change in Net Position of Governmental Activities $1,182,811 See Accompanying Notes CITY OF EAGLE Statement of Net Position - Proprietary Fund September 30, 2013 Assets Current Assets Cash Receivables: Accounts Total Current Assets Noncurrent Assets Restricted Cash Nondepreciable Capital Assets Depreciable Net Capital Assets Total Noncurrent Assets Total Assets Liabilities Current Liabilities Accounts Payable & Accrued Expenses Deposits Payable Accrued Interest Long -Term Debt & Obligations, Current Total Current Liabilities Noncurrent Liabilities Long -Term Debt & Obligations, Noncurrent Total Noncurrent Liabilities Total Liabilities Net Position Net Investment in Capital Assets Restricted - Debt Service Unrestricted Total Net Position Total Liabilities and Net Position Water Fund $701,199 53,279 754,478 209,450 93,250 4,325,156 4,627,856 $5,382,334 $40,768 27,450 34,122 112,817 215,157 2,411,898 2,411,898 2,627,055 1,859,569 182,000 713,710 2,755,279 $5,382,334 See Accompanying Notes 12 CITY OF EAGLE Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Fund Year Ended September 30, 2013 Water Fund Operating Revenues Charges for Services $551,129 Miscellaneous 10,953 Total Operating Revenues 562,082 Operating Expenses Personnel 215,998 Operations & Maintenance 196,034 Depreciation 309,264 Total Operating Expenses 721,296 Operating Income (Loss) (159,214) Nonoperating Revenues (Expenses) Interest Income 1,806 Interest Expense (86,176) STL, Hook -Up, & Reconnect Fees 134,486 Other Income (Expense) 4,455 Total Nonoperating Revenue (Expenses) 54,571 Income (Loss) Before Contributions & Transfers (104,643) Transfers In Transfers Out Change in Net Position (104,643) Net Position - Beginning 2,859,922 Net Position - Ending $2,755,279 See Accompanying Notes 13 CITY OF EAGLE Statement of Cash Flows - Proprietary Fund Year Ended September 30, 2013 Water Fund Cash Flows From Operations Receipts from Customers $566,417 Payments for Personnel (215,998) Payments for Goods & Services (171,889) Cash Provided (Used) By Operations 178,530 Cash Flows From Noncapital Financing Receipts from Nonoperating Sources 138,941 Transfers to (From) Other Funds Cash Provided (Used) By Noncapital Financing 138,941 Cash Flows From Capital & Related Financing Purchase of Capital Assets (94,121) Interest Paid on Debt (104,712) Principal Paid on Debt (77,124) Increases (Decreases) in Other Long -Term Obligations (2,873) Cash Provided (Used) By Capital & Related Financing (278,830) Cash Flows From Investments Interest Income 1,806 Cash Provided (Used) By Investments 1,806 Change in Cash 40,447 Cash - Beginning 870,202 Cash - Ending $910,649 Reconciliation of Operating Income (Loss) to Cash Provided (Used) By Operations Operating Income (Loss) ($159,214) Adjustments to Reconcile Operating Income (Loss) to Cash Provided (Used) by Operations: Depreciation 309,264 Changes in Assets & Liabilities: Receivables (281) Accounts Payable & Accrued Expenses 24,145 Deposits Payable 4,616 Cash Provided (Used) By Operations $178,530 See Accompanying Notes 14 CITY OF EAGLE Notes to Financial Statements A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entitv — The City of Eagle (the City) provides basic municipal services and operates under a mayor -council form of government. These financial statements are prepared in accordance with generally accepted accounting principles (GAAP) as applied to cities. The governmental accounting standards board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (statements and interpretations). The more significant accounting policies established in GAAP and used by the City are discussed below. As required by GAAP, these financial statements present the City and its two component units, entities for which the City is considered to be financial accountable. A component unit is included in the City's reporting entity if it is both fiscally dependent on the City (the primary government) and there is the potential for the component unit to provide specific financial benefits to, or impose specific financial burdens on the primary government. Because of the closeness of their relationship with the primary government (the City), some component units are blended as though they are part of the primary government and are reported as special revenue funds. Blended component units include the Eagle Urban Renewal Agency (EURA) and Spring Valley Community Infrastructure District No. 1 (SVCID). The City's mayor appoints and the City council approves the EURA's board of commissioners and the EURA board has operational responsibility for the EURA. The SVCID board of directors, comprised of three City council members, is appointed by the City council. SVCID's operational responsibilities are performed by the SVCID board and City staff. Separate financial statements for the EURA and SVCID are issued and available from the City. Basic Financial Statements - Government -Wide Statements — The City's basic financial statements include both government -wide (reporting the City as a whole) and fund financial statements (reporting the City's major funds). Both government -wide and fund financial statements categorize primary activities as either governmental or business -type. In the government -wide statement of net position, both the governmental and business -type activities columns (a) are presented on a consolidated basis by column, (b) and are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The government -wide statement of activities reports both the gross and net cost of each of the City's functions and business -type activities. The functions are also supported by general government revenues as reported in the statement of activities. The statement of activities reduces gross expenses (including depreciation when recorded) by related program revenues and operating and capital grants. Program revenues must be directly associated with the function. Internal activity between funds is eliminated in the government -wide statement of activities. Operating grants include operating -specific and discretionary (either operating or capital) grants while the capital grants column reports capital -specific grants. The net costs (by function or business -type activity) are normally covered by general revenues. 15 CITY OF EAGLE Notes to Financial Statements The City's sole activity is providing basic municipal services, and substantially all expenses are directly related to this activity. Accordingly, there is no allocation of indirect costs. The government -wide focus is more on the sustainability of the City as an entity and the change in the City's net position resulting from the current year's activities. Fiduciary funds, when present, are not included in the government -wide statements. Basic Financial Statements - Fund Financial Statements — The financial transactions of the City are reported in individual funds in the fund financial statements. Each fund is accounted for by providing a separate set of self -balancing accounts that comprises its assets, liabilities, fund equity, revenues and expenditures/expenses. The emphasis in fund financial statements is on the major funds. Nonmajor funds by category are summarized into a single column. Generally accepted accounting principles set forth minimum criteria (percentage of assets, liabilities, revenues, and expenditures/expenses of the funds) for the determination of major funds. The focus of governmental fund measurement (in the fund statements) is upon determination of financial position and changes in financial position (sources, uses, and balances of financial resources) rather than upon net income. The activities reported in governmental funds are reported as governmental activities in the government -wide financial statements. Major governmental funds of the City include: General Fund — The general fund is the City's primary operating fund. 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 that are legally restricted to expenditures for specified purposes. Major special revenue funds include the library fund, which accounts for the revenues earned and expenses incurred in providing library services. Debt Service Fund — The debt service fund is used to account for the accumulation of funds for the periodic payment of principal and interest on long term debt. Capital Projects Fund — Capital projects funds are used to account for the acquisition and betterment of major capital assets. Major capital project funds include the park fund, used to account for the maintenance and betterment of parks and related facilities. The focus of proprietary fund measurement is upon determination of operating income, changes in net position, financial position, and cash flows. The generally accepted accounting principles applicable are those similar to businesses in the private sector. Enterprise funds are required to be used to account for operations for which a fee is charged to external users for goods or services and the activity is financed with debt that is solely secured by a pledge of the net revenues. The activities reported in enterprise funds are reported as business -type activities in the government - wide financial statements. Major enterprise funds of the City include: 16 CITY OF EAGLE Notes to Financial Statements Water Fund — The water fund accounts for the revenues earned and expenses incurred in providing water services. Basis of Accounting, — Basis of accounting refers to the point at which revenues or expenditures/expenses are recognized in the accounts and reported in the financial statements. It relates to the timing of the measurements made regardless of the measurement focus applied. Both governmental and business -type activities in the government -wide financial statements and proprietary and fiduciary fund financial statements are reported on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred. The governmental funds financial statements are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual (when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or within thirty days after year end. Expenditures are recorded when the related fund liability is incurred. Exceptions to this general rule include principal and interest on long- term debt which, if any, are recognized when due and payable. The City may report deferred inflows of resources on its financial statements. For the fund financial statements, deferred inflows of resources arise when assets (i.e. receivables) are recorded before the related revenues are available (i.e. before both the "measurable" and "available" criteria for revenue recognition in the current period are met). In subsequent periods, when both revenue recognition criteria are met, the revenue is recognized. Cash — The cash balances of the City's funds are pooled for investment purposes. The individual funds' portions of the pooled cash are reported in each fund as cash. Interest earned on pooled cash is allocated to the various funds in proportion to each fund's respective investment balance. For purposes of the statement of cash flows, the City considers all investments (including restricted cash) available for immediate withdrawal or with maturities of three months or less to be cash and cash equivalents (referred to as cash). Receivables — Receivables are reported net of any estimated uncollectible amounts. Inventories — Material supplies on hand at year end are stated at cost using the first -in, first -out method. Capital Assets and Depreciation — Significant capital asset acquisitions with an original cost of $5,000 or more are recorded at cost if purchased or fair value if contributed. Minor repairs and maintenance are expensed as incurred. Depreciation over the estimated useful lives of all depreciable assets is recorded using the straight line method. The City is classified as a Phase III government under GASB 34 and as such, had the option of not capitalizing infrastructure assets acquired prior to October 1, 2003. The City did not exercise this option. 17 CITY OF EAGLE Notes to Financial Statements Comnensated Absences and Post -Retirement Benefits — The City provides certain compensated absences to its employees. The estimated amount of compensation for future amounts is recorded as a liability in the accompanying financial statements. Government accounting standards board statement 45 requires employers to accrue future estimated post - retirement benefits on the employer's government -wide financial statements when such benefits are deemed material to the employer. The future estimated post -retirement benefits are deemed immaterial to the City, and accordingly, are not reflected on the government -wide financial statements. Net Position — Net position is assets plus deferred outflows of resources (when they exist) less liabilities less deferred inflows of resources (when they exist). The net investment in capital assets component of net position consists of capital assets, net of accumulated depreciation, reduced by any outstanding debt that are attributable to the acquisition, improvement, or construction of those assets and adjusted for any related deferred outflows or inflows of resources (when they exist). Restricted net position consists of restricted assets reduced by liabilities and deferred inflows of resources (when they exist) related to those assets. Restricted assets are assets that are subject to constraints on their use by creditors, grantors, contributors, legislation, and other parties. Fund Balance Classifications — Restrictions of the fund balance indicate portions that are legally or contractually segregated for a specific future use. Nonspendable portions of the fund balance are those amounts that are not expected to be converted into cash. Committed portions represent amounts that can only be used for specific purposes pursuant to formal action (i.e. board approval) of the reporting entity's governing body. Assigned portions represent amounts that are constrained by the government's intent to be used for a specific purpose. Remaining fund balances are reported as unassigned. When expenditures are incurred that qualify for either restricted or unrestricted resources, the City first utilizes restricted resources. When expenditures are incurred that qualify for either committed or assigned or unassigned resources, the City first utilizes committed resources then assigned resources before using unassigned resources. Pronerty Taxes — The City is responsible for levying property taxes, but the taxes are collected by the respective county. Taxes are levied by the second Monday in September for each calendar year. Taxes are due in two installments — December 20th and June 20th. A lien is filed on real property three years from the date of delinquency. Owner Contributions — Initial operating expenditures of the Spring Valley Community Infrastructure District No. 1 (SVCID), one of the City's component units, are paid through property owner contributions. ContinLyent Liabilities — Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the City expects such amounts, if any, to be immaterial. 18 CITY OF EAGLE Notes to Financial Statements Interfund Activitv — Interfund activity is reported either as loans, services provided, reimbursements, or transfers. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Concentrations of Credit Risk — The City maintains its cash at insured financial institutions. Periodically, balances may exceed federally insured limits. Balances not covered by FDIC are collateralized whenever possible. Risk Manaeement — The City is exposed to various risks related to its operations. Insurance is utilized to the extent practical to minimize these risks. Subsequent Events — Subsequent events were evaluated through the date of the auditor's report, which is the date the financial statements were available to be issued. B. CASH Cash consists of the following at year end: Cash - Deposits Total $5,704,397 $5,704,397 Deposits — At year end, the carrying amounts of the City's deposits were $5,704,397 and the bank balances were $5,891,298. Of the bank balances, $494,539 was insured and the balance was collateralized. Investments — State statutes authorize government entities to invest in certain bonds, notes, accounts, investment pools, and other obligations of the state, U.S. Treasury, and U.S. corporations pursuant to Idaho Code 67-1210 and 67-1210A. These statutes are designed to help minimize the custodial risk that deposits may not be returned in the event of the failure of the issuer or other counterparty, interest rate risk resulting from fair value losses arising from rising interest rates, or credit risks that an issuer or other counterparty will not fulfill its obligations. The City's investment policy complies with state statutes. Restricted Cash — Restricted cash at year end is cash set aside because its use is limited by City ordinance and by City council. In the water fund, the customer deposit account is used to report resources received from users of the water system, to be returned to the customer when leaving 19 CITY OF EAGLE Notes to Financial Statements the system provided that all utility bills are paid current. Per loan covenant, the City is required to restrict one year of debt service costs in its water fund. Management is not aware of any violations of this covenant. C. CAPITAL ASSETS A summary of capital assets for the year is as follows Beginning Governmental Activities Balance Nondepreciable Capital Assets Land Artwork/Collectibles Construction in Progress Total Depreciable Capital Assets Buildings Improvements Equipment Subtotal Accumulated Depreciation Buildings Improvements Equipment Subtotal Total Net Capital Assets $1,701,708 132,917 16,582 1,851,207 3,100,736 6,967,047 3,739,493 13,807,276 925,091 2,514,167 2,680,210 6,119,468 7,687,808 $9,539,015 Increases Decreases $493,980 $493,980 1,922,057 52,457 229,991 2,204,505 125,360 346,114 381,440 852,914 1,351,591 $1,845,571 Depreciation expense of $852,914 was charged to the capital assets program. $0 Ending Balance $2,195,688 132,917 16,582 2,345,187 5,022,793 7,019,504 3,969,484 0 16,011,781 1,050,451 2,860,281 3,061,650 0 6,972,382 0 9,039,399 $0 $11,384,586 20 CITY OF EAGLE Notes to Financial Statements Beginning Business -Type Activities Balance Nondepreciable Capital Assets Land $93,250 Construction in Progress 0 Total 93,250 Depreciable Capital Assets Buildings 559,285 Water System 4,787,746 Equipment 470,378 Subtotal 5,817,409 Accumulated Depreciation Buildings 60,594 Water System 1,005,141 Equipment 211,375 Subtotal 1,277,110 Total 4,540,299 Net Capital Assets $4,633,549 Ending Increases Decreases Balance $93,250 0 $0 $0 93,250 559,285 4,787,746 94,121 564,499 94,121 0 5,911,530 13,982 74,576 239,387 1,244,528 55,895 267,270 309,264 0 1,586,374 (215,143) 0 4,325,156 ($215,143) $0 $4,418,406 Depreciation expense of $309,264 was charged to the water services program. D. OPERATING LEASE The City leased its city hall facilities under an operating lease agreement until the facilities were purchased by the City in August 2013. Lease payments for the year amounted to $143,543. 21 CITY OF EAGLE Notes to Financial Statements E. LONG-TERM DEBT AND OBLIGATIONS Bonded Debt — At year end, the City's bonded debt was as follows: Governmental Activities: Outstanding 2013 - $985,000 - general obligation bonds for capital assets due in annual principal installments and semiannual interest payments with interest at 2.00% - 5.00% through 2025/26, secured by future taxes, paid through the debt service fund $985,000 2006 - $1,935,000 - general obligation bonds for capital assets due in annual principal installments and semiannual interest payments with interest at 4.00% - 5.00% through 2016/17, secured by future taxes, paid through the debt service fund 820,000 Total $1,805,000 Maturities on the bonds — governmental activities — are estimated as follows: Year Ended Principal Interest 9/30/14 $245,000 $88,269 9/30/15 260,000 74,600 9/30/16 275,000 62,200 9/30/17 285,000 49,100 9/30/18 70,000 34,850 9/30/19-23 385,000 129,250 9/30/24-26 285,000 29,000 Total $1,805,000 $467,269 At a special election on May 21, 2013, the qualified electors of the Spring Valley Community Infrastructure District No. 1 (SVCID), one of the City's component units, approved the issuance of general obligation bonds of SVCID in an amount not to exceed $250,000,000 and revenue bonds of SVCID in an amount not to exceed $75,000,000. These bonds did not fund during the 2012/13 year. 22 CITY OF EAGLE Notes to Financial Statements Business -Type Activities: Water Revenue Loan - At year end, the City's water revenue loan was as follows: Water revenue loan - DEQ, due in semiannual payments of $90,918 with interest at 3.25% through 2031/32, secured by future user fees, paid through the water fund $2,512,876 Total $2,512,876 Maturities on the water revenue loan - business -type activities - are estimated as follows: Year Ended Principal Interest 9/30/14 $100,978 $80,858 9/30/15 104,286 77,550 9/30/16 107,502 74,334 9/30/17 111,225 70,611 9/30/18 114,869 66,967 9/30/19-23 633,152 276,028 9/30/24-28 743,884 165,296 9/30/29-32 596,980 39,446 Total $2,512,876 $851,090 Changes in long-term debt and obligations are as follows: Description Governmental Act. 2013 G.O. Bonds 2006 G.O. Bonds Bond Premium Comp. Absences Subtotal Business -Type Act. Water Revenue Loan Comp. Absences Subtotal Total Beginning Ending Due Within Balance Increases Decreases Balance One Year $0 $985,000 $985,000 $55,000 995,000 $175,000 820,000 190,000 0 133,788 10,291 123,497 10,291 72,546 15,793 88,339 88,339 1,067,546 $1,134,581 185,291 2,016,836 343,630 2,590,000 77,124 2,512,876 100,978 14,712 2,873 11,839 11,839 2,604,712 0 79,997 2,524,715 112,817 $3,672,258 1,134,581 $265,288 $4,541,551 $456,447 Interest and related costs during the year amounted to $49,021 and $86,176 and were charged to the debt service - interest and water services programs, respectively. 23 CITY OF EAGLE Notes to Financial Statements F. RETIREMENT PLAN Public Employee Retirement System of Idaho (PERSI) - The PERSI Base Plan, a cost sharing multiple -employer public retirement system, was created by the Idaho State Legislature. It is a defined benefit plan requiring that both the member and the employer contribute. The Plan provides benefits based on members' years of service, age, and compensation. In addition, benefits are provided for disability, death, and survivors of eligible members or beneficiaries. The authority to establish and amend benefit provisions is established in Idaho Code. Designed as a mandatory system for eligible state and school city employees, the legislation provided for other political subdivisions to participate by contractual agreement with PERSI. After 5 years of credited service, members become fully vested in retirement benefits earned to date. Members are eligible for retirement benefits upon attainment of the ages specified for their employment classification. For each month of credited service, the annual service retirement allowance is 2.0% (2.3% police/firefighter) of the average monthly salary for the highest consecutive 42 months. PERSI issues publicly available standalone financial reports that include audited financial statements and required supplementary information. These reports may be obtained from PERSI's website www.persi.idaho.gov. The actuarially determined contribution requirements of the City and its employees are established and may be amended by the PERSI Board of Trustees. At September 30, 2013, the required contribution rate as a percentage of covered payrolls for members was 6.79% for general members and 8.36% for police/firefighter members. The employer rate as a percentage of covered payroll was 11.32% for general members and 11.66% for police/firefighter members. The City's employer contributions required and paid were $136,260, $132,889, and $130,444, for the three years ended September 30, 2013, 2012, and 2011 respectively. G. RESTATED NET POSITION AND FUND BALANCES Newly issued government accounting standards board statement (GASB) 61 requires that certain component units be blended with the primary government. Previous to this requirement, these component units were required to be presented as discretely presented component units. To implement GASB 61, net position, fund balances, and related disclosures have been restated to blend one of the City's component units, the Eagle Urban Renewal Agency (EURA), with the City (the primary government). In addition, a certain portion of the general fund balance (previously reported as restricted for capital projects) has been reclassified into a separate capital project fund. 24 REQUIRED SUPPLEMENTARY INFORMATION CITY OF EAGLE Page 1 of 2 Budgetary Comparison Schedule - General and Major Special Revenue Funds Year Ended September 30, 2013 General Fund Revenues Taxes Franchise Fees Intergovernmental Charges for Services Licenses, Permits, & Fees Fines & Court Fees Interest Miscellaneous Total Revenues Expenditures Current Expenditures General Government Public Safety Parks & Streets Culture & Recreation Debt Service - Principal Debt Service - Interest Total Expenditures Excess (Deficiency) of Revenues Over Expenditures Other Financing Sources (Uses) Proceeds from Bond Issuance Owner Contributions Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending Final Budget Budgeted Amounts Variance (GAAP Basis) Actual Positive Original Final Amounts (Negative) $984,050 $984,050 $1,007,645 $23,595 588,200 588,200 621,671 33,471 1,447,599 1,447,599 1,533,132 85,533 650 650 68,577 67,927 579,069 579,069 1,808,319 1,229,250 81,100 81,100 70,632 (10,468) 4,000 4,000 5,284 1,284 525,597 525,597 599,547 73,950 4,210,265 4,210,265 5,714,807 1,504,542 4,071,788 4,294,435 4,651,694 (357,259) 1,549,182 1,549,182 1,549,182 0 773,908 773,908 635,572 138,336 94,095 94,095 70,031 24,064 0 0 0 0 0 0 0 0 6,488,973 6,711,620 6,906,479 (194,859) (2,278,708) (2,501,355) (1,191,672) 1,309,683 0 0 1,118,788 1,118,788 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,118,788 1,118,788 (2,278,708) (2,501,355) (72,884) 2,428,471 2,278,708 2,501,355 3,453,595 952,240 $0 $0 $3,380,711 $3,380,711 *Total expenditures (over) under appropriations are: ($194,859) See Auditor's Report 25 CITY OF EAGLE Page 2 of 2 Budgetary Comparison Schedule - General and Major Special Revenue Funds Year Ended September 30, 2013 Library Fund Revenues Taxes Franchise Fees Intergovernmental Charges for Services Licenses, Permits, & Fees Fines & Court Fees Interest Miscellaneous Total Revenues Expenditures Current Expenditures General Government Public Safety Parks & Streets Culture & Recreation Debt Service - Principal Debt Service - Interest Total Expenditures Excess (Deficiency) of Revenues Over Expenditures Other Financing Sources (Uses) Proceeds from Bond Issuance Owner Contributions Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending Final Budget Budgeted Amounts Variance (GAAP Basis) Actual Positive Original Final Amounts (Negative) $749,482 $749,482 $769,068 $19,586 0 0 0 0 13,248 13,248 15,069 1,821 500 500 549 49 40,800 40,800 33,558 (7,242) 0 0 0 0 1,500 1,500 515 (985) 39,052 39,052 2,314 (36,738) 844,582 844,582 821,073 (23,509) 0 0 0 0 0 0 0 0 0 0 0 0 1,118,277 1,118,277 842,461 275,816 0 0 0 0 0 0 0 0 1,118,277 1,118,277 842,461 275,816 (273,695) (273,695) (21,388) 252,307 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (273,695) (273,695) (21,388) 252,307 273,695 273,695 233,660 (40,035) $0 $0 $212,272 $212,272 *Total expenditures (over) under appropriations are: $275,816 See Auditor's Report 26 SUPPLEMENTARY INFORMATION CITY OF EAGLE Combining Balance Sheet - Nonmajor Governmental Funds September 30, 2013 Assets Cash Receivables: Taxes Intergovernmental Accounts Due From Other Funds Total Assets Liabilities Accounts Payable & Accrued Expenses Due To Other Funds Deposits Payable Total Liabilities Deferred Inflows of Resources Unavailable Tax & Fee Revenues Total Deferred Inflows of Resources Fund Balances Restricted - Special Programs Restricted - Debt Service Restricted - Capital Projects Unassigned Total Fund Balances Total Liabilities and Deferred Inflows of Resources and Fund Balances Special Revenue Funds Eagle Urban Spring Valley Renewal Agency CID No. 1 $236,625 $7,914 2,822 2,086 $239,447 $10,000 $2,490 $3,961 2,490 3,961 1,132 1,132 0 235,825 6,039 235,825 6,039 $239,447 $10,000 Total $244,539 2,822 0 2,086 0 $249,447 $6,451 0 0 $6,451 0 1,132 1,132 241,864 0 0 0 241,864 $249,447 See Auditor's Report 27 CITY OF EAGLE Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds Year Ended September 30, 2013 Revenues Taxes Franchise Fees Intergovernmental Charges for Services Licenses, Permits, & Fees Fines & Court Fees Interest Miscellaneous Total Revenues Expenditures Current Expenditures General Government Public Safety Parks & Streets Culture & Recreation Debt Service - Principal Debt Service - Interest Total Expenditures Excess (Deficiency) of Revenues Over Expenditures Other Financing Sources (Uses) Proceeds from Bond Issuance Owner Contributions Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning - As Previously Stated Restatement - See Note G Fund Balances - Beginning - As Restated Fund Balances - Ending Special Revenue Funds Eagle Urban Spring Valley Renewal Agency CID No.1 $199,726 199,726 $0 146,513 79,934 146,513 79,934 53,213 (79,934) 85,973 0 85,973 53,213 6,039 0 182,612 182,612 0 $235,825 $6,039 Total $199,726 0 0 0 0 0 0 0 199,726 226,447 0 0 0 0 0 226,447 (26,721) 0 85,973 0 0 85,973 59,252 0 182,612 182,612 $241,864 See Auditor's Report 28 4TgER �ppgT S AND SC�DU-ES P.O. Box 100 Payette, Idaho 83661 Quest CPAs, P.C. W�'gcpas.com Audits info@gcpas.com Taxes P:208-642-1417 Special Services ���.iwrr5_�aarbYa►�iariir:�6u�5����� F• 208-642-1582 Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Statements Performed in Accordance With Government Auditing Standards Honorable Mayor and City Council City of Eagle We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Eagle (the City), as of and for the year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated December 31, 2013. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 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 that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we 29 consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. Accordingly, this communication is not suitable for any other purpose. Quest 0PAs, P.O. Payette, Idaho December 31, 2013 30 CITY OF EAGLE Schedule of Findings and Responses Year Ended September 30, 2013 A. SUMMARY OF AUDITOR'S RESULTS The auditor's report expresses an unqualified opinion on the financial statements of the City. 2. No significant deficiencies disclosed during the audit of the financial statements are reported in the Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards. 3. No instances of noncompliance material to the financial statements of the City, which would be required to be reported in accordance Government Auditing Standards, were disclosed during the audit. B. FINDINGS - FINANCIAL STATEMENT AUDIT None. 31