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Audit Report 09.30.1993 GENERAL PURPOSE FINANCIAL STATEMENTS AND ACCOMPANYING INFORMATION CITY OF OKEECHOBEE, FLORIDA SEPTEMBER 30, 1993 • C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA CITY COUNCIL AND ADMINISTRATIVE PERSONNEL September 30, 1993 CITY COUNCIL James E . Kirk Mayor, Chairman Danny P . Entry Dowling R. Watford, Jr. Councilmember Councilmember Mike G. O' Connor Jerry E . Walker Councilmember Councilmember ADMINISTRATION John J. Drago John Cook City Administrator City Attorney Interim Public Utilities Director General Services Director Louis Keith Tomey II Chief of Fire Bonnie S . Thomas, CMC City Clerk Larry Mobley Chief of Police Lola Parker Finance Director Charles Elders Director of Public Works C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA September 30, 1993 TABLE OF CONTENTS PAGE Independent Auditors' Report 1-2 General Purpose Financial Statements : Combined Balance Sheets - All Fund Types and Account Groups 3 Combined Statements of Revenue, Expenditures and Changes in Fund Balances - All Governmental Fund Types 4 Combined Statements of Revenue, Expenditures and Changes in Fund Balances - Budget and Actual - Governmental Funds 5 Combined Statements of Revenue, Expenses and Changes in Fund Equity - Proprietary Fund and Similar Trust Funds . 6-7 Statement of Cash Flows - Proprietary Fund 8-9 Notes to Combined Financial Statements 10-30 Accompanying Information: General Fund - Schedule of Revenue - Budget and Actual 31-32 Schedule of Expenditures - Budget and Actual 33 Debt Service Fund - Statement of Revenue and Expenditures - Budget and Actual 34 Employee Pension Trust Funds - Combining Balance Sheets 35 Combining Statements of Revenue, Expenses and Changes in Fund Balances 36 Historical Information (Unaudited) 37 Unaudited Information: Summary of Insurance Coverage - Unaudited 38 Schedule of Assessed Values, Tax Levies and Rates - Unaudited 39 Schedule of Certain Revenue - Unaudited 40 Schedule of Federal and State Financial Assistance . . . 41 Other Reports : Independent Auditors' Report on Compliance with Laws and Regulations 42 Single Audit Report on Compliance with General Requirements Applicable to Federal Financial Assistance Programs 43 Single Audit Report on Compliance with Specific Requirements Applicable to Major Federal Financial Assistance Programs 44-45 Single Audit Combined Report on the Internal Control Structure 46-49 Management Letter 50-51 J.D. GILBERT & COMPANY J. D. GILBERT S. COMPANY CERTIFIED PUBLIC ACCOUNTANTS Independent Auditors' Report We have audited the accompanying general purpose financial statements of the City of Okeechobee, Florida (City) as of September 30 , 1993 , and for the year then ended, as listed in the table of contents . These general purpose financial statements are the responsibility of the City' s management . Our responsibility is to express an opinion on these general purpose financial statements based on our audit . We did not audit the financial statements of the Employee Pension Trust, which represent the amounts shown as the Fiduciary Fund Types . Those financial statements were audited • by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Fiduciary Fund Types - Employee Pension Trust, is based solely on the report of the other auditors . We conducted our audit in accordance with generally accepted auditing standards and 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 general purpose financial statements are free of material misstatement . An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements . An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit and the report of other auditors provide a reasonable basis for our opinion. As disclosed in Notes 5 and 6 to the general purpose financial statements, the City has not maintained adequate detailed fixed asset records to support the cost of the water and sewer utility plant in service in the proprietary fund and fixed assets included in the general fixed asset account group with respect to the stated cost of assets acquired prior to October 1, 1981 . Depreciation expense and accumulated depreciation in the proprietary fund have been computed based on these recorded costs . Due to the inadequate records, we were unable to satisfy ourselves, in accordance with generally accepted auditing standards, as to the propriety of the recorded cost, accumulated depreciation and depreciation expense for fixed assets acquired prior to October 31, 1981 . It is not practicable to determine the effects on the general purpose financial statements of this departure from generally accepted accounting principles . • 1 251 East Sample Road• Pompano Beach, Florida 33064•(3057 781 -1 250• FAX(305]785-6826 A In our opinion, based on our audit and the report of other auditors, except for the effects of the departure from generally accepted accounting principles in the proprietary fund and general fixed asset account group, as discussed in the preceding paragraph, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Okeechobee, Florida as of September 30 , 1993 and the results of its operations and the cash flows of its proprietary fund type for the year then ended in conformity with generally accepted accounting principles . Our audit was made for the purpose of forming an opinion on the general purpose financial statements taken as a whole . The accompanying information listed in the table of contents is presented for purposes of additional analysis and is not a required part of the general purpose financial statements of the City. Such information, except for the portion marked "unaudited" , on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, based upon our audit and the report of the other auditors, except for the effects on the proprietary fund and general fixed asset account group of not maintaining adequate detailed fixed asset records as discussed in the third paragraph above, is fairly stated in all material respects in relation to the general purpose financial statements taken as whole . J. . Gilbert & Company, is March 1, 1994 • J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA COMBINED BALANCE SHEETS - . ALL FUND TYPES AND ACCOUNT GROUPS September 30, 1993 Proprietary Fiduciary Governmental Fund Types Fund Types Fund Types Account Groups Employee General General Total Debt Pension Fixed Long-Term (Memorandum General Service Enterprise Trust Assets Debt Only) ASSETS Cash $634,234 $125,258 $1,479,981 $21,743 - - $2,261,216 Investments - - - 3,112,451 - - 3,112,451 _ Receivables: Taxes 89,434 57 - - - - 89,491 Accounts less Allowance of$46,560 11,121 - 284,292 - - - 295,413 Due from Other Government Agencies 88,389 - 13,320 - - - 101,709 Due from Other Funds 18,770 - 1,690 - - - 20,460 Inventory 2,887 - - - - - 2,887 Restricted Assets- Cash 6,502 - 1,721,453 - - - 1,727,955 Investments - - 4,628,026 - - - 4,628,026 Due from Other Government Agencies - - 70,908 - - - 70,908 Accrued Interest - - 6,774 - - - 6,774 Fixed Assets - - 15,337,973 - 2,053,576 - 17,391,549 Unamortized Bond Expenses - - 466,266 - - - 466,266 Amount Available in Debt Service Fund - - - - - 102,843 102,843 Amount to be Provided for Retirement ' of General Long-Term Debt - - - - - 1,010,882 1,010,882 TOTAL ASSETS $851,337 $125,315 $24,010,683 $3,134,194 $2,053,576 $1,113,725 $31,288,830 - LIABILITIES Accounts Payable 11,352 - 124,613 9,049 - - $145,014 Accrued Liabilities 25,532 - 41,803 - - 115,062 182,397 Accrued Interest 58,562 - - - - - 58,562 Payable from Restricted Assets: Accounts Payable - - 745,263 - - - 745,263 Customer Deposits - - 356,768 - - - 356,768 Retainage Payable - - 100,308 - - - 100,308 Accrued Interest on Bonds Payable - - 254,686 - - - 254,686 Matured Bonds and Interest Coupons - 2,012 - - - - 2,012 Due to Other Funds - 20,460 - - - - 20,460 Deferred Revenue 24,287 - - - - - 24,287 Long-Term Debt - - 14,657,138 - - 998,663 15,655,801 TOTAL LIABILITIES $119,733 $22,472 $16,280,579 $9,049 - $1,113,725 $17,545,558 FUND EQUITY Contributed Capital - - 5,634,485 - - - $5,634,485 • Investment in General Fixed Assets - - - - 2,053,576 - 2,053,576 Retained Earnings: Reserved for Revenue Bond _ Retirement - - 635,937 - - - 635,937 Unreserved - - 1,459,682 - - - 1,459,682 Fund Balances: Reserved for: Employees'Retirement - - - 3,125,145 - - 3,125,145 Debt Service - 102,843 - - - - 102,843 Inventory 2,887 - - - - - 2,887 Encumbrances 3,945 - - - - - 3,945 Unreserved 724,772 - - - - - 724,772 TOTAL FUND EQUITY 731,604 102,843 7,730,104 3,125,145 2,053,576 - $13,743,272 TOTAL LIABILITIES AND FUND EQUITY $851,337 $125,315 $24,010,683 $3,134,194 $2,053,576 $1,113,725 $31,288,830 The Notes to Combined Financial Statements are an Integral Part of this Statement 3 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA COMBINED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FUND TYPES Year Ended September 30, 1993 TOTALS DEBT (MEMORANDUM GENERAL SERVICE ONLY) Revenues Taxes $1, 178 , 822 $59, 213 $1, 238 , 035 Intergovernmental 922, 104 - 922 , 104 Charges for Services 198, 590 - 198, 590 Licenses and Permits 36, 973 - 36, 973 Fines and Forfeitures 28, 654 - 28, 654 Interest Income 24 , 439 1, 312 25, 751 Miscellaneous 46 , 731 - 46 , 731 Total Revenue 2 , 436, 313 60, 525 2 , 496 , 838 Expenditures Current : Public Safety 1, 110, 198 - 1, 110, 198 General Government 351, 654 - 351, 654 Transportation 723 , 889 - 723 , 889 Physical Environment 168, 720 - 168 , 720 Health and Human Services 43 , 771 - 43 , 771 Debt Service : Principal 112, 532 30, 000 142, 532 Interest 75, 889 8, 894 84 , 783 Professional Fees - 500 500 Total Expenditures 2 , 586, 653 39, 394 2 , 626 , 047 Excess of Revenue Over Expenditures (Expenditures Over Revenue) (150 , 340) 21, 131 (129, 209) Fund Balances Beginning of Year 881, 944 81, 712 963 , 656 Fund Balances End of Year $ 731, 604 $102 , 843 $ 834 , 447 The Notes to Combined Financial Statements are an Integral Part of this Statement 4 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA - COMBINED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GOVERNMENTAL FUND TYPES Year Ended September 30, 1993 Totals General Fund Debt Service Fund (Memorandum only) Actual(on Variance Variance Actual(on Variance- Budgetary Favorable Favorable Budgetary Favorable Budget Basis) (Unfavorable) Budget Actual (Unfavorable) Budget Basis) (Unfavorable) REVENUE Taxes $1,139,250 $1,178,822 $39,572 $51,200 $59,213 $8,013 $1,190,450 $1,238,035 $47,585 Intergovern- - mental 817,000 922,104 105,104 - - - 817,000 922,104 105,104 Charges for services 196,540 198,590 2,050 - - - 196,540 198,590 2,050 Licenses and permits 38,500 36,973 (1,527) - - - 38,500 36,973 (1,527) Fines and forfeitures 35,800 28,654 (7,146) - - - 35,800 28,654 (7,146) Interest Income 18,080 24,439 6,359 2,000 1,312 (688) 20,080 25,751 5,671 Miscellaneous 61,125 46,731 (14,394) - - - 61,125 46,731 (14,394) TOTAL REVENUE 2,306,295 2,436,313 130,018 53,200 60,525 7,325 2,359,495 2,496,838 137,343 EXPENDITURES ' Public safety 1,145,045 1,114,005 31,040 - - - 1,145,045 1,114,005 31,040 General government 374,095 349,584 24,511 - - - 374,095 349,584 24,511 Transporta- tion 665,850 668,918 (3,068) - - - 665,850 668,918 (3,068) - Physical environment 186,900 168,720 18,180 - - - 186,900 168,720 18,180 Health and human services 42,625 43,771 (1,146) - - - 42,625 43,771 (1,146) Debt service 195,753 188,421 7,332 39,394 39,394 - 235,147 227,815 7,332 TOTAL EXPENDITURES 2,610,268 2,533,419 76,849 39,394 39,394 - 2,649,662 2,572,813 76,849 EXCESS OF REVENUE OVER (UNDER) EXPENDITURES ($303,973) (97,106) $206,867 $13,806 21,131 $7,325 ($290,167) (75,975) 214,192 FUND BALANCES Beginning of . year 881,944 81,712 963,656 Adjustment to conform to generally accepted accounting principles: Adjustment for encumbrances (53,234) (53,234) End of year $731,604 $102,843 $834,447 The Notes to Combined Financial Statements are an Integral Part of this Statement 5 . C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA - COMBINED STATEMENT OF REVENUE, EXPENDITURES AND - CHANGES IN RETAINED EARNINGS/FUND BALANCES - PROPRIETARY FUND AND SIMILAR TRUST FUNDS Year Ended September 30, 1993 Proprietary Fiduciary Fund Type Fund Type Employee Totals Pension (Memorandum _ Enterprise Trust Only) Operating Revenues : Charges for Services $2 , 692 , 525 $ - $2 , 692 , 525 Contributions - 156 , 203 156, 203 Investment Income - 242, 213 242 , 213 Total Operating Revenues 2 , 692, 525 398 , 416 3 , 090, 941 Operating Expenses : Personal Services 628 , 456 - 628, 456 ' Professional Services 236, 799 49, 691 286, 490 Materials and Operating Supplies 330, 055 - 330, 055 Utilities 155, 621 - 155, 621 Insurance 61, 846 - 61, 846 Repairs and Maintenance 170 , 778 - 170, 778 Administrative Supplies and Expense 31, 719 39 31, 758 Bad Debts 4, 277 - 4 , 277 Depreciation 486, 656 - 486 , 656 Benefit Payments - 48, 414 48, 414 Contribution Refunds - 17, 823 17, 823 General Fund Administrative Charge 100, 000 - 100 , 000 Total Operating Expenses 2, 206, 207 115 , 967 2 , 322 , 174 - Operating Income 486, 318 282 , 449 768 , 767 The Notes to Combined Financial Statements are an Integral Part of this Statement 6 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA COMBINED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN RETAINED EARNINGS/FUND BALANCES - PROPRIETARY FUND AND SIMILAR TRUST FUNDS (CONTINUED) Year Ended September 30, 1993 Proprietary Fiduciary Fund Type Fund Type Employee Totals Pension (Memorandum Enterprise Trust Only) Nonoperating Revenues (Expenses) : System Capacity Fees $ 85, 583 $ - $ 85, 583 Connection Fees 64, 595 - 64, 595 Interest Revenue 153 , 469 - 153 , 469 Interest Expense, net of interest capitalized of $45 , 000 (972 , 313) - (972 , 313) ' Other Fiscal Charges (1, 282) - (1, 282) Miscellaneous 3 , 685 - 3 , 685 Nonoperating Expenses, net (666 , 263) - (666 , 263) . Net Income (Loss) (179, 945) 282, 449 102 , 504 Fund Equity, Beginning of Year 7, 391, 821 2 , 842 , 696 10, 234, 517 7, 211, 876 3 , 125 , 145 10 , 337, 021 Capital Contribution 518 , 228 - 518 , 228 Fund Equity, End of Year $7, 730 , 104 $3 , 125, 145 $10, 855, 249 The Notes to Combined Financial Statements are an Integral Part of this Statement 7 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA STATEMENT OF CASH FLOWS - PROPRIETARY FUND TYPE Year Ended September 30, 1993 Increase (Decrease) in Cash and Restricted Cash Proprietary Fund Type Enterprise Cash Flows from Operating Activities Cash received from customers $2 , 868, 062 Cash payments for goods and services (989, 583) Cash payments for employee services (623 , 511) Other operating cash received 1, 579 Net Cash Provided by Operating Activities 1, 256 , 547 Cash Flows from Noncapital Financing Activities Net cash repaid on interfund borrowing 941 Net Cash Provided by Noncapital Financing Activities 941 Cash Flows from Capital and Related Financing Activities Acquisition and construction of capital assets (1, 605, 942) Principal payments on revenue bond maturities (170, 000) Interest paid on revenue bonds (884 , 398) Grant Proceeds 447, 320 Proceeds from issuance of $5, 495, 000 revenue bonds 5 , 181, 502 Net Cash Provided by Capital and Related Financing Activities 2 , 968 , 482 Cash Flows from Investing Activities Purchase of Investments (5, 702, 904) Sale of Investments 1, 074 , 878 Maturity of Certificates of Deposit 1, 913 , 987 Interest and dividends on cash, time deposits and investments 146 , 695 Net Cash Used in Investing Activities (2 , 567, 344) ' Net Increase in Cash and Restricted Cash 1, 658, 626 Cash and Restricted Cash at Beginning of Year 1, 542 , 808 Cash and Restricted Cash at End of Year $3 , 201, 434 The Notes to the Combined Financial Statements are an Integral Part of this Statement 8 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA STATEMENT OF CASH FLOWS - PROPRIETARY FUND TYPE (CONTINUED) Year Ended September 30, 1993 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Proprietary Fund Type Enterprise Operating Income $ 486 , 318 Adjustments to reconcile operating income to net cash provided by operating activities : System capacity and connection fees 150 , 178 Other nonoperating revenues, net 296 Depreciation 486, 656 Changes in Assets and Liabilities : Decrease in Accounts Receivable 11, 343 Increase in Accounts Payable 98, 524 Increase in Other Liabilities 23 , 232 Net Cash Provided by Operating Activities $1, 256 , 547 Schedule of Non-Cash Capital and Related Financing Activities Additions to Capital Assets through increase in Accounts Payable and Retainage Payable $719, 659 Additions to Contributed Capital through increase in Receivable from other Government Agencies $ 70, 908 Acquisition of Debt Issuance Costs from Bond Proceeds $207, 368 Amortization of Debt Issuance and Bond Discounts $ 37, 852 The Notes to the Combined Financial Statements are an Integral Part of this Statement 9 C J.D. GILBERT & COMPANY ■ CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS September 30, 1993 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Okeechobee (the City) was originally incorporated in 1915 and its present charter was adopted in 1919 under Chapter 8318 of Special Acts of 1919 . The City operates under the council form of government and provides the following services as authorized by its charter: public safety, public works and culture and recreation. The accounting policies of the City conform to generally accepted accounting principles as applicable to governmental units . The following is a summary of the more significant policies : A. SCOPE OF REPORTING ENTITY The accompanying financial statements include all organizations, activities and functions over which the City maintains direct manifestations of oversight responsibility, and those organizations where other circumstances or relationships require their inclusion to conform with generally accepted accounting principles . These circumstances include special financing relationships and consideration of the scope of public services provided by a particular organization or agency. This report includes all funds and account groups of the City. The specific organizations and agencies included in the accompanying financial statements, and a summary description of how the specific elements of oversight responsibility, and other criteria, were considered in the determination of whether or not to include the organization in the financial statements are presented below. The City of Okeechobee Pension Trust Funds The three retirement plans included in the financial statements are the General Employee' s Pension Trust Fund, the Police Officer' s Pension Trust Fund and the Fire Fighters Pension Trust Fund. All are governed by a separate Board of Trustees, as appointed by the City Council, subject to the requirements of local ordinances and by applicable provisions of Florida law. . 10 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The plans require participation by all employees in the respective governing authorities with the exception of the City Administrator who maintains a preexisting pension trust fund. Additionally, the organizations exist for the benefit of the employees of the City. B. BASIS OF PRESENTATION - FUND ACCOUNTING AND ACCOUNT GROUPS 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/expenses . 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 summarized by type in the combined financial statements . The following fund types and account groups are used by the City: • Governmental Fund Types Governmental funds are those through which most governmental functions of the City are financed. The acquisition, use and balances of the City' s expendable financial resources and related liabilities are accounted for through governmental funds . The measurement focus is upon determination of changes in financial resources, rather than upon net income determination. The following are the City' s governmental fund types : 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. Debt Service Fund - The debt service fund is used to account for the accumulation of resources for, and the payment of, principal, interest and certain related costs of general long-term debt . • 11 J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Proprietary Fund Type The proprietary fund is used to account for the City' s ongoing organizations and activities which are similar to those often found in the private sector. The measurement focus is upon determination of net income . The following is the City' s proprietary fund type : Enterprise Fund - The enterprise fund is used to account for operations that are financed and operated in a manner similar to a private business enterprise where the intent of the governing body is that the costs (i.e. , expenses, including depreciation) of providing water and sewer services to the general public on a continuing basis be financed or recovered primarily through user charges . Fiduciary Fund Type Fiduciary funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governmental units or other funds . The following is the City' s fiduciary fund type : Employee Pension Trust Fund - Pension trust funds are accounted for essentially the same as the proprietary fund since a primary focus is on capital maintenance . Account Groups Account groups are used to establish accounting control and accountability for the City' s general fixed assets and general • long-term debt . The two account groups are not "funds" . They are not involved with measurement of results of operations . The following are the City' s account groups : General Fixed Assets Account Group - The account group is established to account for all fixed assets of the City used for general purposes (i.e. , excludes fixed assets used for proprietary fund purposes) . No depreciation is recorded on general fixed assets . 12 J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) General Long-Term Debt Account Group - This account group is used to account for long-term debt to be financed from governmental fund types . Total Columns on Combined Statements • Total columns on the combined financial statements are captioned "Memorandum Only" to indicate they are presented only to facilitate financial analysis . Data in these columns do not present financial position, results of operations or cash flows 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. C. BASIS OF ACCOUNTING AND MEASUREMENT FOCUS Basis of accounting refers to the timing of the recognition of revenues and expenditures (or expenses) in the accounts and in the financial statements . The basis of accounting is independent of the measurement focus, which refers to objectives in recording of financial resources and expenditures or expenses . Governmental Fund Types Governmental funds are accounted for using the modified accrual basis of accounting. Therefore, revenues are generally recognized when they become measurable and available as current assets . Expenditures are generally recognized when the related fund liability is incurred. Exceptions to this general rule include accumulated unpaid compensated absences and unmatured principal and interest on general long-term debt; these expenditures are recognized when due or when - expected to be paid with expendable available financial - resources . The measurement focus is on current financial resources . The accounting and reporting treatment applied to fixed assets and long-term liabilities associated with a fund is determined by its measurement focus . This means that only current assets and current liabilities are generally included on governmental fund balance sheets . Their reported governmental fund balance (net current assets) is considered a measure of "expendable • available financial resources" . 13 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 current financial resources during a period. • Special reporting treatment is also applied to governmental fund inventories to indicate that they do not represent "expendable available financial resources" , even though they are a component of net current assets . Such amounts are offset by fund balance reserve accounts . Proprietary and Pension Trust Funds Proprietary funds and pension trust funds are accounted for on the accrual basis of accounting. Therefore, revenues are recognized when earned and expenses are recognized when incurred. Estimated unbilled water and sewer utility service revenues are recorded as receivables at September 30 in the proprietary fund. The measurement focus is on the flow of economic resources . Therefore, all assets and liabilities associated with the operation of these funds are included on the balance sheet . D. BUDGET AND BUDGETARY ACCOUNTING The City enacts by ordinance, an annual budget for the revenues and expenditures of the governmental funds . The budget is prepared on a basis consistent with generally accepted accounting principles except encumbrances are presented as expenditures . The City follows these procedures in establishing the budgetary data included in the financial statements : 1 . The City Administrator submits to the City Council a proposed operating budget for the fiscal year commencing on October 1st . The operating budget includes proposed expenditures and means of financing them. 2 . Public hearings are conducted to obtain taxpayer comments . 3 . The budget is legally enacted through the passage of an ordinance by City Council on or before the fifteenth day of September of the fiscal year currently ending. 14 J.D. GILBERT s. COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 4 . The level of budgetary control is the department . The City Administrator is authorized to transfer budgeted amounts within departments of any fund; revisions to budgeted totals of any department require approval of the City Council . Unencumbered appropriations lapse at year end. The reported budgetary data represents the final approved budget after amendments adopted by the City Council . Formal budget integration is not employed for proprietary or trust funds because effective budgetary control is achieved by alternate measures . E. ENCUMBRANCES The governmental funds use encumbrance accounting under which purchase orders, contracts and other commitments related to unperformed contracts for goods and services which will require expenditure of funds are recorded at year end as a reserve of fund balance . They do not constitute expenditures or liabilities, but are recorded to reserve that portion of the applicable appropriation. F. CASH AND TIME DEPOSITS Cash accounts for the City are maintained in interest-bearing accounts which may include local government surplus funds trust fund and certificates of deposit with maturity dates of three months or less . These deposits are carried on the balance sheet under the caption "cash" . Certificates of Deposit purchased with initial maturities of greater than three months are included in time deposits . G. INVENTORY Inventory consists of motor fuels which is stated at cost determined on the first-in, first out method. Inventory is considered an expenditure or expense when used. H. FIXED ASSETS Fixed assets used in governmental funds are recorded as expenditures in the governmental fund and capitalized at cost in the General Fixed Assets Account Group. Assets contributed 15 J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) to the City are recorded at their estimated fair value on the date donated. Public domain general fixed assets ( "infrastructure" , including unimproved land, roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems) are not capitalized. No depreciation has been provided on governmental fund fixed assets . Fixed assets used in the enterprise fund are capitalized at cost, which includes ancillary charges necessary for asset - acquisition. The City capitalizes net interest costs and interest earned as part of the cost of constructing various water and sewer projects, when material . Depreciation is provided in amounts sufficient to relate the cost of the depreciable assets to operations over their estimated service lives on the straight-line basis . I. ALLOCATION OF ADMINISTRATIVE CHARGES Certain administrative expenses are incurred by the City' s general fund on behalf of the City' s enterprise fund. The general fund charges for these services based upon management - estimates . Reimbursement for these services is recorded as an operating expense of the enterprise fund and as a reduction of general government expenditures of the general fund. For the year ended September 30, 1993 , these charges aggregated $100, 000 . The enterprise fund' s maintenance facility, water towers, and water and sewer plants, except for the new sewer plant, are located on city-owned real estate which is not recorded in the enterprise fund. Additionally, the enterprise fund' s administrative staff offices are located in City Hall . No interfund charges have been recorded for rental of either the - land or the office space . The general fund also does not receive any franchise fee from the enterprise fund for the - operation of the utility plant; such franchise fee if charged, would be based upon revenue of the water and sewer operation. J. COMPENSATED ABSENCES Full-time and permanent employees accrue a paid vacation ranging from 6 days after 6 months or continuous service up to 20 days after 15 years of service . Unused vacation may be accumulated up to a maximum of 30 days . 16 C J.D. GILBERT &. COMPANY CITY OF OKEECIIOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Sick leave for employees is accumulated at the rate of 12 days per year. Payment for unused sick leave upon termination of employment may be made for employees with 10 years or more of continuous service at a rate of 25% of the unused sick leave balance . The amount of vacation leave for the proprietary fund and the amount of vacation leave expected to be paid from current financial resources of the general fund are included with accrued liabilities . The vested portion of sick leave and the remaining balance of vacation leave for the general fund is included under long-term debt . A long-term liability of $115 , 062 has been recorded in the General Long-Term Debt Group of accounts, representing the City' s commitment to fund such costs from future operations for the general fund. A liability of $31, 357 is reflected within the enterprise fund • for accrued vacation and sick leave . K. AMORTIZATION OF BOND EXPENSE The cost of issuance of bonds is being amortized, on the straight-line method, over the life of the bonds . NOTE 2 - COMPARISON OF BUDGET TO ACTUAL RESULTS The actual results of operations are presented in accordance with generally accepted accounting principles which differ in certain respects from those practices used in the preparation of the 1992- 93 budget . For purposes of preparing the combined statements of revenue, expenditures and changes in fund balances - budget and actual - governmental funds, the actual results of operations have been adjusted to a basis consistent with the City' s budgeted revenues and expenditures, formulated on the encumbrance system of • accounting. The adjustments for encumbrances shown on the combined statements of revenue, expenditures and changes in fund balances - budget and actual - governmental funds is as follows : GENERAL FUND Actual expenditures $2 , 586 , 653 Encumbrances - September 30 , 1993 3 , 944 Less prior year encumbrances paid (57, 178) Adjustment for encumbrances (53 , 234) • Expenditures on Budgetary Basis $2 , 533 , 419 17 J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA - NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 3 - CASH AND INVESTMENTS Florida Statutes require state and local governmental units to deposit monies with a financial institution classified as a "Qualified Public Depository" , which is a multiple financial institution pool whereby groups of securities pledged by the ' various financial institutions provide common collateral for their deposits of public funds . This pool is additional insurance to the federal depository insurance and allows for additional assessments against the member institutions, providing full insurance for public deposits . The City had deposits with qualifying - institutions at September 30, 1993 totalling $3 , 989 , 171 which are included in cash in the accompanying combining balance sheets . At September 30, 1993 , the City has $2 , 984 , 311 invested in the Florida State Board of Administration Local Government Surplus Funds Trust Fund investment pool . These funds are recorded at cost which approximates market value, and are included in cash in the accompanying balance sheet . The investments of the fiduciary fund type are managed by Invesco Mim, Inc . Investments, consisting of money market accounts, are stated at cost which approximates market value . The investment guidelines, as established by local ordinance and Florida Statutes, allow surplus funds to be invested in the local government surplus funds trust fund, obligations of the U.S . government or agencies thereof, banking institutions within the state and other such institutions within the guidelines of the state statutes, commercial paper with certain ratings, pre-refunded municipal obligations, banker' s acceptances maturing within one year, investment agreements, direct and general long-term obligations of any state with proper credit rating and full faith and credit pledge, municipal obligations with proper credit rating • and repurchase agreements with maturities of 30 days or less with organizations with certain stipulations and requirements . The City' s investments are categorized by type to give an indication of the level of credit risk assumed by the City at year end. Category 1 includes investments that are insured or registered or for which the securities are held by the City or its agent in the City' s name . Category 2 includes uninsured and unregistered investments for which the securities are held by the City' s custodian in the City' s name . Category 3 includes uninsured and unregistered investments for which the securities are held by the counterparty' s trust department or agent, but not in the City' s name . 18 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA - NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 3 - CASH AND INVESTMENTS (Continued) The following is a list of the City' s investments by categories of risks established by Governmental Accounting Standards Board Statement No. 3 : Book Market Value Value - Category 1 : Enterprise Fund- U. S . Government Securities $4 , 598 , 522 $4 , 737, 492 Category 3 : . Enterprise Fund- Money Market Fund 29, 504 29, 504 Pension trust funds : Police officers' pension trust fund: - Cash equivalents 88 , 097 88, 097 Government and agency securities 812 , 495 873 , 969 Corporate stocks 289, 389 373 , 135 Cash and accrued income 10 , 173 10 , 173 - 1, 200, 154 1, 345, 374 Fire fighters' pension trust fund: Cash equivalents 30 , 747 30, 747 Government and agency securities 279, 674 300 , 393 Corporate stocks 100, 251 131, 110 Cash and accrued income 3 , 370 3 , 370 414 , 042 465, 620 • - General employees' pension trust fund: Cash equivalents 10, 038 10, 038 Government and agency securities 1, 093 , 408 1, 134 , 651 Corporate stocks 366 , 820 481, 057 Cash and accrued income 27, 989 27, 989 1, 498, 255 1, 653 , 735 Total Investments $7, 740 , 477 $8 , 231, 725 19 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 4 - PROPERTY TAXES The City' s property tax is levied annually on the real and personal property located in the City on January 1st of the prior year. The assessed value on which the 1992-93 levy was based was $133 , 227, 951 . The assessed values are established by the Okeechobee County Property Appraiser. Tax collections by the Okeechobee County Tax Collector begin normally in November of each year with a due date of March 31 of the following year. Tax collections for the year ended September 30, 1993 were 96% of the total tax levied. The City is permitted by state law to levy taxes up to 10 mills of assessed valuation for the general fund. The tax rate for the 1992-93 fiscal year was 4 . 15 mills . • NOTE 5 - FIXED ASSETS - PROPRIETARY FUND - The carrying value of fixed assets recorded in the proprietary fund as of September 30, 1993 is summarized as follows : Utility Plant Construction In Service In Progress Total Balance September 30 , 1992 $16, 139, 879 $ 907, 116 $17, 046, 995 Additions 591, 532 1, 784, 313 2 , 375, 845 Disposals (41, 267) - (41, 267) Transfers 561, 973 _ (561, 973) - 17, 252 , 117 2 , 129, 456 19, 381, 573 Less Accumulated Depreciation 4 , 043 , 600 - 4 , 043 , 600 Balance September 30, 1993 $13 , 208, 517 $2, 129, 456 $15, 337, 973 Included in the proprietary fund construction in progress is $158 , 968 which represents engineering fees and construction costs for the expansion to the wastewater treatment system; $1, 925, 488 of engineering fees and other costs and $45, 000 of capitalized interest related to the water plant expansion project . 20 C J.D. GILBERT & COMPANY • CITY OF OKEECHOBEE, FLORIDA lei-. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 5 - FIXED ASSETS - PROPRIETARY FUND (Continued) The City has not maintained adequate detailed fixed asset records to support the cost of the water and sewer utility plant in service for assets acquired prior to October 1, 1981 . At September 30, 1993 , the cost of assets acquired prior to October 1, 1981 was $4 , 032 , 978 (less $2 , 118, 127 of accumulated depreciation) . Depreciation expense recorded for these assets was $103 , 505 in 1993 . NOTE 6 - CHANGES IN GENERAL FIXED ASSETS A summary of changes in general fixed assets follows : Balance Balance October 1, 1992 Additions Retirements September 30, 1993 Land and improvements $ 805,358 $ $ $ 805,358 Buildings and improvements 402,703 - - 402,703 Furnishings and equipment 461,201 55,449 3,230 513,420 Rolling stock 332,095 - 332,095 Totals $2,001,357 $55,449 $3,230 $2,053,576 The City has not maintained adequate detailed fixed asset records to support the cost of general fixed assets acquired prior to October 1, 1981 . At September 30, 1993 , the value assigned to general fixed assets acquired prior to October 1, 1981 was $852 , 904 . NOTE 7 - LONG-TERM DEBT Long-term debt as of September 30, 1993 is summarized as follows : GENERAL LONG-TERM DEBT . General Obligation Bonds : $480 , 500 original issue General Obligation Bonds, due in remaining annual installments of $30, 000 to $35, 000 through July 1, 1996 ; interest rates ranging from 6 . 75% to 6 . 8750 $ 100, 000 21 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 7 - LONG-TERM DEBT (Continued) Notes Payable : 8 . 23% capital improvement notes to a bank, payment of $195, 753 , including interest, due annually through December 15, 1998 ; collateralized by and payable from a pledge of the City' s share of a state revenue sharing gasoline tax 898 , 663 Total General Long-Term Debt $ 998, 663 PROPRIETARY FUND LONG-TERM DEBT Revenue Bonds : $5 , 000 , 000 original issue Water and Sewer Refunding and Improvement Revenue Bonds, Series 1987, due in remaining annual principal installments ranging from $75, 000 to $405, 000 through January 1, 2017 ; interest ranging from 5 . 75% to 7 . 875% (issue included $1, 235, 000 of Serial Bonds and $3 , 765, 000 of Term Bonds) ; net of unamortized discount of $80, 650 $ 4 , 589, 350 $4 , 830 , 000 original issue Water and Sewer Improvement Revenue Bonds, Series 1989, due in remaining annual principal installments ranging from $100 , 000 to $370, 000 through January 1, 2015; interest ranging from 6% to 7 . 125% (issue included $1, 535, 000 of Serial Bonds and $3 , 295 , 000 of Term Bonds) ; net of unamortized discount of $45 , 047 4 , 659, 953 $5 , 495, 000 original issue Water and Sewer Improvement Revenue Bonds, Series 1992A, due in annual principal installments ranging from $125 , 000 to $430 , 000 from January 1, 1995 through 2017; interest ranging from 3 . 9% to 6 . 5% (issue included $995, 000 of Serial Bonds and $4 , 500, 000 of Term Bonds) ; net of unamortized discount of $87, 165 5, 407, 835 Total Proprietary Fund Long-Term Debt $14 , 657, 138 22 elan GILBERT & COMPANY • CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 7 - LONG-TERM DEBT (Continued) The Water and Sewer Refunding and Improvement Revenue Bonds, Series 1987, the Water and Sewer Improvement Revenue Bonds, Series 1989, and the Water and Sewer Improvement Revenue Bonds, Series 1992A are collateralized by a pledge of the net revenues of the water and sewer system, certain public service taxes, certain franchise revenues and certain state revenue sharing funds . The bond _ covenants state, among other things, that various funds are required to be established and maintained for purposes of a sinking fund, reserve fund and various other accounts and that the City may lease, sell or encumber the utility system assets as a whole (upon approval of the bond insurer and the registered owners of two- thirds or more of the principal amount of the 1987 and 1989 bonds) only to a government authority or agency which the City may create to act on its behalf . Additional covenants contain provisions which restrict the issuance of additional revenue bonds unless the pledged revenues are equal _ to or greater than 125% of maximum bond service requirement coming due in any subsequent year and the net revenues, as adjusted, are not less than 80% of the maximum bond service requirement coming due in any subsequent year on present outstanding bonds and additional bonds issued. The 1987, 1989 and 1992 Water and Sewer Refunding and Improvement Revenue Bonds ordinances require, among other things, deposits on a monthly basis of amounts necessary to provide for semiannual interest and annual principal requirements . The sinking and reserve funds on deposit at September 30, 1993 are as follows : 1987 1989 1992 Revenue Revenue Revenue Bonds Bonds Bonds Sinking Fund $146 , 065 $156 , 204 $323 , 261 Reserve Fund - - 468, 648 Totals $146, 065 $156 , 204 $791, 909 23 • C J.D. GILBERT & COMPANY - CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) . September 30, 1993 NOTE 7 - LONG-TERM DEBT (Continued) A summary of changes in all long-term debt for the year ended September 30, 1993 is as follows: PROPRIETARY FUND GENERAL LONG-TERM DEBT WATER AND SEWER REVENUE BONDS GENERAL OBLIGATION NOTES 1987 1989 1992 BONDS PAYABLE TOTAL SERIES SERIES SERIES TOTAL Balance at September 30, $130,000 $1,011,195 $1,141,195 $4,745,000 $4,800,000 - $9,545,000 1992 • Proceeds - - - - - $5,495,000 5,495,000 Payments 30,000 112,532 142,532 75,000 95,000 - 170,000 100,000 898,663 998,663 4,670,000 4,705,000 5,495,000 14,870,000 Less unamortized bond discount - - - 80,650 45,047 87,165 212,862 Balance at September 30, 1993 $100,000 $898,663 $998,663 $4,589,350 $4,659,953 $5,407,835 $14,657,138 • Annual principal require- ments for the next five years and thereafter are as follows: - Year ending- 1994 $30,000 $121,793 $151,793 $75,000 $100,000 - $175,000 1995 35,000 131,817 166,817 80,000 105,000 $125,000 310,000 1996 35,000 142,665 177,665 85,000 115,000 130,000 330,000 1997 - 154,406 154,406 95,000 120,000 135,000 350,000 1998 - 167,114 167,114 100,000 130,000 140,000 370,000 Thereafter - 180,868 180,868 4,235,000 4,135,000 4,965,000 13,335,000 TOTALS $100,000 $898,663 $998,663 $4,670,000 $4,705,000 $5,495,000 $14,870,000 The annual requirements to amortize all debt outstanding as of September 30,1993,including interest payments aggregating$16,607,320 are as follows: PROPRIETARY FUND GENERAL LONG-TERM DEBT WATER AND SEWER REVENUE BONDS GENERAL TOTAL OBLIGATION NOTES 1987 1989 1992 LONG-TERM BONDS PAYABLE TOTAL SERIES SERIES SERIES TOTAL DEBT Year Ending- 1994 $36,831 $195,753 $232,584 $431,934 $421,765 $334,670 $1,188,369 $1,420,953 • 1995 39,769 195,753 235,522 432,049 420,486 457,233 1,309,768 1,545,290 1996 37,362 195,753 233,115 431,683 423,692 457,065 1,312,440 1,545,555 1997 - 195,753 195,753 435,649 421,348 456,264 1,313,261 1,509,014 1998 - 195,753 195,753 433,918 423,440 454,798 1,312,156 1,507,909 Thereafter - 195,753 195,753 8,122,166 7,080,205 8,549,875 23,752,246 23,947,999 TOTALS $113,962 $1,174,518 $1,288,480 $10,287,399 $9,190,936 $10,709,905 $30,188,240 $31,476,720 The annual changes in general long-term debt accrued vacation and medical leave benefits as of September 30,1993 are as follows: OCTOBER 1, 1992 INCREASE SEPTEMBER 30,1993 • $93,124 $21,938 $115,062 24 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 8 - PRIOR YEAR DEFEASANCE OF DEBT In 1987, the City defeased the 1983 Series A Water and Sewer Revenue Bonds by depositing sufficient funds in an irrevocable trust to provide for all future debt service payments on the old bonds . Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City' s financial statements. At September 30, 1993 , $770, 000 of bonds outstanding are considered defeased. NOTE 9 - INTERFUND RECEIVABLES AND PAYABLES The following is a summary of amounts due from and due to other funds : Due from Due to Other Funds Other Funds General fund $18 , 770 $ - Debt service fund - 20 , 460 Proprietary fund 1, 690 - Total all Funds $20, 460 $20, 460 NOTE 10 - CONTRIBUTED CAPITAL The source and additions to contributed capital are as follows : Balance Balance October 1, September 30, 1992 Additions 1993 Connection fees $ 421, 758 $ - $ 421, 758 Developers 338 , 761 - 338, 761 Federal Grant 996, 853 518, 228 1, 515, 081 Local Public Works Grant 417, 740 - 417, 740 Federal Revenue Sharing Funds 619, 572 - 619 , 572 General Fund 100, 000 - 100 , 000 Okeechobee Beach Water Association 275, 000 - 275 , 000 Environmental Protection Agency Grant 1, 946, 573 - 1, 946, 573 Totals $5, 116 , 257 $518 , 228 $5 , 634 , 485 25 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 11 - SEGMENT INFORMATION The City maintains one enterprise fund, a water and sewer operation. Working capital at September 30, 1993 for this fund was $1, 081, 100 . NOTE 12 - PENSION PLANS - The City has three pension plans, under a single employer public employee retirement system, covering substantially all the City' s regular employees . The plans were established by the City in accordance with the City charter and state statutes . Total pension contribution by the City for the year was $9, 402 based on a covered payroll and a total payroll as follows : Covered Payroll as Covered Total Percent of Payroll Payroll Total Payroll - General $864, 584 $1, 030, 325 83 . 9% Police 408 , 946 416 , 382 98 . 2% Fire 198, 420 218, 829 90 . 7% The City funds the pension plans at the rate of 1% of covered payroll for General plan participants and any contribution deficit determined by actuarial valuation for the Police and Fire plans beyond the contributions by employees and the State Insurance premium tax contribution. All regular employees working over 20 hours per week are eligible to participate on the date of employment following attainment of age 18 . Participation is mandatory. Normal retirement is provided for at age 65 (60 for fire and police) and 5 years of service (10 years for fire and police) , or at 30 years of service regardless of age . The benefit is calculated at 1 . 75% (2 . 7% for fire and 3 . 0% for police) of average monthly earnings times years of continuous service with the City. Benefits are payable by monthly annuity for 10 years certain and life thereafter with other options available . Effective April 20, 1993 , the plans benefits were changed as follows : General Employees' benefit increased from 1 . 6% to 1 . 75%, Police Officers' benefit increased from 2 . 0% to 3 . 0%, Firefighters' benefit increased from 2 . 0% to 2 . 7% . Also, the Police Officers' benefits are based on total compensation, normal retirement is available at 25 years of service, regardless of age, and the disability benefits are 42% and - 25% of average final compensation for service and nonservice connected disabilities, respectively. 26 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) . September 30, 1993 NOTE 12 - PENSION PLANS (Continued) Early retirement is provided for at age 60 (age 55 for fire and police) and 10 years of participation. Death and disability benefits are also available through the plans . Upon termination of employment with less than 5 years of service (10 years for fire and police) the plan refunds accumulated employee contributions . After - 5 years of service (10 years for fire and police) the pension benefit is accrued to date of termination and payable at normal retirement age if employee contributions are left in the fund. The significant actuarial assumptions used to compute the actuarially determined contribution requirement are the same as those used to compute the pension benefit obligation. The actuarially determined pension contribution for the year ended September 30 , 1993 , which consisted entirely of normal cost, was as follows : - General - overfunded Police - overfunded Fire $5, 003 The City and employees contributions by fund for the year ended September 30, 1993 were as follows : City Employees General fund $4, 931 $50, 032 Proprietary fund 4 , 471 22 , 355 Totals $9, 402 $72 , 387 The plans covering the City' s fire fighters and police officers are also funded by the State of Florida from a tax on fire insurance . premiums collected. State contributions to the fire fighters and police officers plans totalled $20, 853 and $53 , 561, respectively, during the year ended September 30, 1993 . - The pension benefit obligation shown below is a standardized disclosure measurement established by the Governmental Accounting Standards Board (GASB) Statement number 5 that, with some exceptions, must be covered by a Public Employee Retirement System. The standardized measurement is the actuarial present value of credited projected benefits . This pension valuation method reflects the present value of pension benefits, adjusted for the effects of projected salary increases an step-rate benefits, - estimated to be payable in the future as a result of employee • service to date . 27 C J.D. GILBERT & COMPANY • CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 12 - PENSION PLANS (Continued) The standardized measure of the pension benefit obligation and the net assets available for benefits at September 30 , 1993 (the most recent valuation date) is as follows : Police Fire General Value No. Value No. Value No. Pension benefit obligation: Retirees and beneficiaries currently receiving benefits and terminated employees entitled to benefits but not yet receiving them $ - - $ 7, 923 1 $ 299, 898 2 Current employees: Accumulated employee contributions including allocated investment income 193, 923 53,901 406,247 Employer-financed vested 597, 131 8 63,416 1 366, 826 27 Employer-financed nonvested 94,248 8 59,230 9 29, 518 24 Total pension benefit obligation 885, 302 16 184,470 10 1,102,489 51 Net assets available for benefits (at cost which approximates market-see market value information at Note 3) 1,203,649 416,372 1,505,124 Assets in excess of pension benefit obligation $ 318,347 $231, 902 $ 402,635 There were no changes in actuarial assumptions and methods since the previous actuarial valuation. Principal actuarial assumptions used in the most recent actuarial valuation are summarized as follows : 28 C J.D. GILBERT &. COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) . September 30, 1993 NOTE 12 - PENSION PLANS (Continued) Mortality - The 1983 Group Annuity Mortality Table . Interest - 8% per year compounded annually, after paying investment management fees . Retirement age - 60 for police officers and fire fighters, 65 for all other employees, immediately if over assumed retirement age . Salary increases - 6% for police and general ; 7% for fire fighters, until the assumed retirement age . Funding method - Aggregate actuarial cost method. Administrative expense (other than investment management fees) - $9, 000 for each group. . Three year historical information is disclosed in the accompanying supplementary information. • NOTE 13 - GRANTS AND CONTRACTS Hospice During the year ended September 30, 1993 , the City was awarded a Community Services Block Grant (93SB-1N-07-57-02-076) totalling $5 , 786 for local community health and human services assistance . Hospice of the Treasure Coast-Okeechobee Branch was the subgrantee . The City received $7, 583 under this and a previous grant during the year ended September 30, 1993 and, upon presentation of invoices by Hospice, disbursed the funds . Land Development Regulation . The City entered into a highway maintenance agreement (contract #B- 7236) with the State of Florida Department of Transportation in the amount of $15, 218 . In 1993 , $11, 413 was recorded as reimbursement • for expenditures incurred by the City relating to the project . Farmers Home Administration During 1993 , no Farmers Home Administration grant funds were received in connection with completing construction of the City' s wastewater treatment and collection system. This grant is dated September 17, 1985, in the original amount of $1, 000, 000; of this amount $118, 052 is undisbursed. 29 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1993 NOTE 13 - GRANTS AND CONTRACTS (Continued) Community Development Block Grant The City has been awarded a $575, 000 Community Development Block Grant through the State of Florida Department of Community Affairs . At September 30, 1993 , the City had received draws of $491, 065 on this grant, and has recorded a receivable for $70, 908 under this grant . NOTE 14 - COMMITMENTS AND CONTINGENCIES During 1993 , the City had rent expenditures of $28, 500 under an operating lease agreement executed August 2 , 1993 for public safety and other vehicles . Lease commitments under this agreement aggregate $42 , 750 for 1994 ; $57, 000 for 1995, $57, 000 for 1996 , and $59 , 888 for 1997 . Rent expenditures for the year ended September 30 , 1993 , under a prior operating lease for vehicles aggregated $26, 401 . The City' s waste water treatment plant is located on 407 acres of land in Okeechobee County. The land is leased from the Board of Trustees of the Internal Improvement Trust Fund of the State of Florida under a 50 year lease agreement dated December 23 , 1983 . The City had contracts for engineering and construction projects in process at September 30, 1993 that occurred for water plant expansion and in the normal course of business amounting to approximately $2, 600, 000 . The City is named as a defendant in a lawsuit brought by a private water provider to establish certain rights and obligations to a service territory, together with other issues . There are no claims for damages in the case . • 30 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA GENERAL FUND SCHEDULE OF REVENUE - BUDGET AND ACTUAL Year Ended September 30, 1992 Variance Favorable Budget Actual (Unfavorable) TAXES Ad valorem taxes $ 545, 000 $ 527, 915 $ (17, 085) Franchise fees 275 , 600 278, 668 3 , 068 Utility service taxes 317, 150 370 , 882 53 , 732 Public service taxes 1, 500 1, 357 (143) 1, 139, 250 1, 178 , 822 39, 572 - INTERGOVERNMENTAL State shared revenue : Cigarette tax - Two Cent 80 , 000 82 , 312 2 , 312 Revenue sharing 170, 000 176, 013 6, 013 One-half cent sales tax 160, 000 187, 684 27, 684 Mobile home licenses 2, 000 2 , 720 720 Alcoholic beverage licenses 800 1, 902 1, 102 Gasoline tax refund 1, 500 1, 573 73 Local option gasoline tax 290 , 700 322 , 473 32, 473 Local Alternate Fuel . User Fee 200 788 588 Fire fighters supplement - 250 250 704 , 500 775, 715 71, 215 Shared revenue from other local units : County occupational licenses 4, 500 6, 389 1, 889 City share of 5 and 6 cent gas tax 108 , 000 140, 000 32 , 000 112 , 500 146 , 389 33 , 889 817, 000 922 , 104 105 , 104 • CHARGES FOR SERVICES Sanitation fees 180, 940 185, 881 4, 941 Highway maintenance contract 15 , 000 11 , 413 (3 , 587) Miscellaneous 600 1, 296 696 196 , 540 198, 590 2 , 050 • _ 31 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA • GENERAL FUND SCHEDULE OF REVENUE - BUDGET AND ACTUAL (CONTINUED) Year Ended September 30, 1993 Variance Favorable Budget Actual (Unfavorable) LICENSES AND PERMITS Occupational licenses and Regulatory fees 38 , 500 36 , 973 (1, 527) FINES AND FORFEITURES Court fines 35, 000 23 , 638 (11, 362) Confiscated Property - 3 , 760 3 , 760 Police education 600 366 (234) Code enforcement fines 200 890 690 35, 800 28 , 654 (7, 146) INTEREST INCOME 18 , 080 24 , 439 6, 359 MISCELLANEOUS Comprehensive Planning Grant - 7, 500 7, 500 Hospice Grant 5, 625 7, 583 1, 958 Miscellaneous Improvements 5, 000 2 , 987 (2 , 013) Sale of assets 35, 000 4 , 699 (30, 301) Rents and royalties 100 490 390 Refunds of prior year expenditures 100 608 508 Miscellaneous and other 15, 300 22 , 864 7, 564 61, 125 46 , 731 (14 , 394) Total Revenue $2 , 306, 295 $2 , 436, 313 $130, 018 • • 32 J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA GENERAL FUND SCHEDULE OF EXPENDITURES - BUDGET AND ACTUAL Year Ended September 30, 1993 ENCUMBRANCES ACTUAL ON VARIANCE BUDGETARY FAVORABLE BUDGET ACTUAL 1992 1993 BASIS (UNFAVORABLE) PUBLIC SAFETY Law enforcement` Personal services $628,900 $610,813 - - $610,813 $18,087 Operating expenses 165,430 167,717 47 - 167,670 (2,240) Capital outlay - 1,854 - - 1,854 (1,854) 794,330 780,384 47 - 780,337 13,993 Fire control: • Personal services 279,515 270,440 - - 270,440 9,075 Operating expenses 71,200 59,374 46 3,900 63,228 7,972 350,715 329,814 46 3,900 333,668 17,047 • Total Public Safety 1,145,045 1,110,198 93 3,900 1,114,005 31,040 GENERAL GOVERNMENT Legislative: Personal services 41,925 42,122 - - 42,122 (197) Operating expenses 11,000 11,015 - - 11,015 (15) Allocation of administrative charges (18,000) (18,000) - - (18,000) 0 34,925 35,137 - - 35,137 (212) Executive-city administrator: Personal services 69,860 69,331 - - 69,331 529 Operating expenses 16,000 9,477 - - 9,477 6,523 Allocation of administrative charges (29,000) (29,000) - - (29,000) 0 • 56,860 49,808 - - 49,808 7,052 Executive-city clerk: Personal services 54,120 53,729 - - 53,729 391 Operating expenses 12,150 15,618 2,000 - 13,618 (1,468) Allocation of administrative charges (12,000) (12,000) - - (12,000) 0 54,270 57,347 2,000 - 55,347 (1,077) Financial and Administrative: Personal services 60,950 64,570 - - 64,570 (3,620) Operating expenses 25,400 20,174 - - 20,174 5,226 Allocation of administrative charges (20,000) (20,000) - - (20,000) 0 66,350 64,744 - - 64,744 1,606 General services: Personal services 79,440 76,210 - - 76,210 3,230 Operating expenses 83,250 64,175 114 44 64,105 19,145 Allocation of administrative charges (21,000) (21,000) - - (21,000) 0 141,690 119,385 114 44 119,315 22,375 Judicial: Operating expenses 20,000 25,233 - - 25,233 (5,233) Total General Government 374,095 351,654 2,114 44 349,584 24,511 TRANSPORTATION Road and street facilities: Personal services 212,300 205,350 - - 205,350 6,950 Operating expenses 203,550 169,629 1,376 - 168,253 35,297 Capital outlay 250,000 348,910 53,595 - 295,315 (45,315) ' Total Transportation 665,850 723,889 54,971 668,918 (3,068) PHYSICAL ENVIRONMENT Garbage/solid waste control services: Operating expenses 186,900 168,720 - - 168,720 18,180 HEALTH AND HUMAN SERVICES Operating expenses 42,625 43,771 - - 43,771 (1,146) DEBT SERVICE Principal 112,532 112,532 - - 112,532 0 Interest 83,221 75,889 - - 75,889 7,332 Total Debt Service 195,753 188,421 - - 188,421 7,332 TOTAL EXPENDITURES $2,610,268 $2,586,653 $57,178 $3,944 $2,533,419 $76,849 33 • C J.D. GILBERT & COMPANY ' CITY OF OKEECHOBEE, FLORIDA DEBT SERVICE FUND . STATEMENT OF REVENUE AND EXPENDITURES - BUDGET AND ACTUAL Year Ended September 30, 1993 Variance Favorable Budget Actual (Unfavorable) REVENUE Ad valorem taxes $51, 200 $59, 213 $8, 013 Interest income 2 , 000 1, 312 (688) Total Revenue 53 , 200 60, 525 7 , 325 EXPENDITURES Bond principal retirements 30, 000 30 , 000 - Bond interest expense 8 , 894 8 , 894 - Professional fees 500 500 - Total Expenditures 39, 394 39 , 394 - Excess of Revenue Over Expenditures $13 , 806 $21, 131 $7, 325 34 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA EMPLOYEE PENSION TRUST FUNDS COMBINING BALANCE SHEETS September 30, 1993 Police Fire General Officers' Fighters Employees' Pension Pension Pension Trust Trust Trust Fund Fund Fund Total . ASSETS Cash $ 6, 868 $ 4 , 054 $ 10, 821 $ 21, 743 Investments 1, 200, 154 414 , 042 1, 498, 255 3 , 112, 451 $1, 207, 022 $418 , 096 $1, 509, 076 $3 , 134 , 194 LIABILITIES Accounts payable $ 3 , 373 $ 1, 724 $ 3 , 952 $ 9, 049 FUND BALANCES . Reserved for employees' retirement 1, 203 , 649 416 , 372 1 , 505 , 124 3 , 125 , 145 ' Total Liabilities and Fund Balances $1, 207, 022 $418, 096 $1, 509, 076 $3 , 134 , 194 35 • C J.O. GILBERT & COMPANY ' CITY OF OKEECHOBEE, FLORIDA • EMPLOYEE PENSION TRUST FUNDS COMBINING STATEMENTS OF REVENUE, EXPENSES AND CHANGES IN FUND BALANCES Year Ended September 30, 1993 Police Fire General Officers' Fighters Employees' Pension Pension Pension Trust Trust Trust Fund Fund Fund Total OPERATING REVENUE State tax on insurance premiums $ 53 , 561 $ 20, 853 $ - $ 74, 414 Employer' s contributions - 537 8, 865 9, 402 Employees' contributions 18 , 181 9, 922 44 , 284 72 , 387 Investment income 73 , 261 25, 327 93 , 991 192 , 579 Gain on sale of securities 3 , 485 1, 655 44 , 494 49, 634 Total Operating Revenue 148 , 488 58 , 294 191, 634 398 , 416 OPERATING EXPENSES Employees' contribution refunds and interest 3 , 160 6 , 215 8 , 448 17, 823 Retirement benefits - - 48 , 414 48 , 414 Professional services 17, 493 11, 744 20, 454 49, 691 Administrative expense 13 13 13 39 Total Operating Expenses 20 , 666 17, 972 77, 329 115, 967 Net Income 127, 822 40 , 322 114 , 305 282 , 449 FUND BALANCES Beginning of year 1, 075, 827 376, 050 1, 390 , 819 2 , 842 , 696 End of year $1, 203 , 649 $416, 372 $1, 505, 124 $3 , 125, 145 36• C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE EMPLOYEE PENSION TRUST FUNDS HISTORICAL INFORMATION September 30, 1993, 1992 and 1991 (Unaudited) For the years ended September 30, 1993, 1992 and 1991, the pension benefit obligation and net assets available for benefits and net assets available for benefits expressed as percentages of the pension benefit obligation, were as follows: 1993 Police Fire General Net assets available for benefits as a percentage of pension benefit obligation 136% 226% 137% Assets in excess of pension benefit obligation as a percentage of covered payroll 78% 117% 47% Contributions as an approximate percent of annual covered payroll: Employer - <1% 1% Employee 5% 5% 5% 1992 Police Fire General • Net assets available for benefits as a percentage of pension benefit obligation 243% 298% 142% Assets in excess of pension benefit obligation as a percentage of covered payroll 181% 127% 47% Contributions as an approximate percent of annual covered payroll: Employer - <1% 6% Employee 5% 5% 5% 1991 Police Fire General Net assets available for benefits as a percentage of pension benefit obligation 241% 331% 139% Assets in excess of pension benefit obligation as a percentage of covered payroll 157% 125% 40% Contributions as an approximate percent of annual covered payroll: Employer - <1% 6% Employee 5% 5% 5% Historical information from 1987 through 1993 is presented in a separately issued report for the pension employees retirement system(PERS). As the valuation for the year ended September 30,1987 was the first year using the valuation method described herein,ten-year trend information is not available. • 37 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA SUMMARY OF INSURANCE COVERAGE - UNAUDITED Year Ended September 30, 1993 DESCRIPTION COVERAGE COMMERCIAL PACKAGE Buildings and contents (90% coinsurance - $250 deductible) $3 , 465, 608 Scheduled Property Floater ($250 deductible) $362 , 119 Public Employees Faithful Performance Blanket ($250 deductible) $20 , 000 General Liability Limit $2 , 000 , 000 • LAW ENFORCEMENT LIABILITY Bodily injury, personal injury, property damage ($5 , 000 deductible) $1, 000, 000 WORKERS COMPENSATION AND EMPLOYER' S LIABILITY $1, 000, 000 VEHICULAR EQUIPMENT Bodily injury and property damage $2 , 000, 000 Collision ($250 deductible) Comprehensive ($250 deductible) Uninsured Motorist $350 , 000 PUBLIC OFFICIAL LIABILITY ($5, 000 Deductible) $1, 000, 000 THIRD PARTY POLLUTION LIABILITY COVERAGE ($500 deductible) $1, 000, 000 38 'MUD. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA SCHEDULE OF ASSESSED VALUES, TAX LEVIES AND RATES - UNAUDITED . 1984 - 1993 ASSESSED VALUES FISCAL REAL PERSONAL HOMESTEAD YEAR PROPERTY PROPERTY TOTAL EXEMPTION 1993 $109 , 479 , 471 $23 , 748, 480 $133 , 227, 951 $25 , 288 , 396 1992 112 , 820 , 753 22 , 702 , 940 135, 523 , 693 24 , 745, 181 1991 106 , 606 , 185 21, 489, 024 128, 095, 209 24 , 718 , 577 1990 100, 715, 930 19, 081, 124 119, 797, 054 24 , 017, 296 1989 92 , 069, 710 17, 714 , 646 109, 784 , 356 23 , 841, 771 • 1988 90, 523 , 355 17, 276, 363 107, 799, 718 22 , 969, 436 1987 85, 234 , 122 15, 026, 483 100, 260, 605 21, 793 , 353 1986 70 , 533 , 985 14 , 573 , 190 85, 107, 175 20 , 715, 053 1985 59, 835 , 384 14 , 042 , 767 73 , 878 , 151 19 , 504 , 959 1984 57, 820 , 098 13 , 060 , 620 70 , 880 , 718 19, 007, 098 TAX LEVIES AND APPLICABLE RATES LEVIES RATES DEBT GENERAL • FISCAL DEBT GENERAL SERVICE GOVERNMENT YEAR SERVICE GOVERNMENT MILLS MILLS 1993 $61, 821 $552 , 896 . 390 4 . 150 1992 62 , 523 562 , 423 . 390 4 . 150 1991 59, 597 531, 595 . 390 4 . 150 1990 56, 753 504 , 594 . 390 4 . 150 1989 52 , 114 455, 605 . 390 4 . 150 1988 39, 231 447, 369 . 300 4 . 150 1987 18, 308 416 , 082 . 150 4 . 150 1986 15, 873 361, 791 . 150 4 . 251 1985 14 , 008 314, 056 . 150 4 . 251 1984 13 , 483 307, 480 . 150 4 . 338 39 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA SCHEDULE OF CERTAIN REVENUE - UNAUDITED 1984 - 1993 GENERAL FUND STATE REVENUE SHARING OCCUPATIONAL UTILITY FINES AND FRANCHISE YEAR (NOTE) LICENSES TAXES FORFEITURES FEE PERMITS INTEREST 1993 $446,009 $36,973 $370,882 $28,654 $278,668 - $24,438 1992 425,807 45,002 292,615 44,615 272,414 - 29,246 1991 422,873 34,565 287,490 45,107 289,239 - 32,541 1990 443,090 33,345 278,192 37,829 272,199 - 45,772 1989 439,634 31,828 275,071 46,911 251,532 - 41,761 ` 1988 411,522 38,367 258,229 67,802 234,877 - 27,314 1987 409,809 44,888 219,661 49,071 214,036 - 21,618 1986 398,901 41,498 207,756 29,731 206,335 - 30,978 1985 349,607 38,484 196,168 28,092 208,614 16,268 31,791 1984 346,742 42,119 133,768 22,764 185,428 25,508 34,363 PROPRIETARY FUND WATER AND SEWER IMPACT DELINQUENT INTEREST ON HYDRANT YEAR CHARGES FEES CHARGES MISCELLANEOUS INVESTMENTS TAP FEES RENTAL 1993 $2,583,642 $85,583 $41,674 $55,476 $209,247 $64,595 $13,320 1992 2,511,531 197,767 56,280 44,771 131,433 99,782 13,200 1991 2,268,283 62,200 58,313 49,346 268,588 30,126 13,200 1990 2,116,074 416,792 73,334 50,929 305,306 157,265 12,240 1989 1,580,078 212,077 37,945 68,723 61,811 35,211 12,360 1988 1,632,157 90,640 25,588 50,823 71,998 37,679 9,960 1987 1,386,432 111,964 31,119 31,401 62,864 40,078 9,480 1986 1,341,837 260,382 30,417 21,141 103,288 44,888 9,360 1985 1,130,500 212,012 20,671 8,583 233,511 110,181 7,320 1984 971,227 29,012 14,146 9,663 110,181 20,112 7,320 NOTE -INCLUDES ADDITIONAL TWO CENT CIGAREIIL TAX AND ONE-HALF CENT SALES TAX 40 C J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA SCHEDULE OF FEDERAL AND STATE FINANCIAL ASSISTANCE Year Ended September 30, 1993 CASH CASH OCTOBER 1, SEPTEMBER 30, FEDERAL OR STATE 1992 1993 GRANTOR/ FEDERAL AWARD BEGINNING ENDING PROGRAM TITLE CFDA NO. AMOUNT BALANCE RECEIPTS DISBURSEMENTS BALANCE U.S. DEPARTMENT OF AGRICULTURE Farmers Home Administration 10.418 $1,000,000 $ - $ - $ - $ - U.S.DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Passed through State Department of Community Affairs 14.219 $575,000 $4,990 $447,320 $447,310 $5,000 #91 DB-57-07-57-02-N12 (Major Program) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Passed through State Department of Community Affairs 13.792 $5,786 $ - $4,820 $4,820 $ - #93SB-1 N-07-57-02-076 FLORIDA DEPARTMENT OF COMMUNITY AFFAIRS Resource Planning and Management #92CA-49-07-57-02-660 $ - $7,500 $7,500 $ - 41 C J.D. GILBERT & COMPANY �J. D. GILBERT & COMPANY CERTIFIED PUBLIC ACCOUNTANTS Independent Auditors' Report on Compliance with Laws and Regulations The Honorable Mayor and Members of the City Council City of Okeechobee, Florida We have audited the combined financial statements of the City of Okeechobee, Florida (City) as of and for the year ended September 30 , 1993 and have issued our report thereon dated March, 1994 . We did not audit the financial statements of the Employee Benefit Trust, which are included in the combined financial statements as the Fiduciary Fund type . Our audit report was qualified because the City has not maintained adequate detailed fixed asset records in support of the recorded costs of the water and sewer utility plant in service in the proprietary fund or the amounts included in the general fixed asset group of accounts . We conducted our audit in accordance with generally accepted auditing standards and 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 combined financial statements are free of material misstatement . Compliance with laws, regulations, contracts and grants applicable to the City is the responsibility of the City' s management . As part of obtaining reasonable assurance about whether the combined financial statements are free of material misstatement, we performed tests of the City' s compliance with certain provisions of laws, regulations, contracts and grants . However, our objective was not to provide an opinion on overall compliance with such provisions . Accordingly, we do not express such an opinion. The results of our tests indicate that, with respect to the items tested, the City complied, in all material respects, with the provisions referred to in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the City had not complied, in all material respects, with those provisions . This report is intended for the information of the Mayor and City Council, management, and the Department of Community Affairs and the Auditor General of the State of Florida. This restriction is not intended to limit the distribution of this report, which is a matter of public record. J.D. Gilbert & Company, CI, March 1, 1994 42 1 251 East Sample Road• Pompano Beach, Florida 33064•(305)781 -1 250• FAX(305]785-6826 °MIJ. D. GILBERT & COMPANY CERTIFIED PUBLIC ACCOUNTANTS Single Audit Report on Compliance with the General Requirements Applicable to Federal Financial Assistance Programs To the Honorable Mayor and City Council City of Okeechobee, Florida We have audited the combined financial statements of the City of Okeechobee, Florida, as of and for the year ended September 30, 1993 , and have issued our report thereon dated March 1, 1994 . We have applied procedures to test the City of Okeechobee, Florida' s compliance with the following requirements applicable to its federal financial assistance programs, which are identified in the Schedule of Federal Financial Assistance, for the year ended September 30, 1993 : political activity, Davis-Bacon Act, civil rights, cash management, federal financial reports, allowable costs/cost principles, and administrative requirements . Our procedures were limited to the applicable procedures described in the Office of Management and Budget' s Compliance Supplement for Single Audits of State and Local Governments . Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the City of • Okeechobee, Florida' s compliance with the requirements listed in the preceding paragraph. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the second paragraph of this report . With respect to items not tested, nothing came to our attention that caused us to believe that the City of Okeechobee, Florida, had not complied, in all material respects, with those requirements . This report is intended for the information of the audit committee, management, and the Department of Community Affairs and the Auditor General of the State of Florida. However, this report is a matter of public record and its distribution is not limited. (.711n"lp J.D. Gilbert & Company, CPAs March 1, 1994 43 1 251 East Sample Road• Pompano Beach, Florida 33064•C305)781 -1250• FAX C305)785-6826 J. D. GILBERT & COMPANY • CERTIFIED PUBLIC ACCOUNTANTS Single Audit Report on Compliance with Specific Requirements Applicable to Maior Federal Financial Assistance Programs To the City Council City of Okeechobee, Florida We have audited the financial statements of the City of Okeechobee, Florida, as of and for the year ended September 30, 1993 , and have issued our report thereon dated March 1, 1994 . We have also audited the City of Okeechobee, Florida' s compliance with the requirements governing types of services • allowed or unallowed; reporting; and special tests and provisions that are applicable to its major federal financial assistance program, which is identified in the accompanying Schedule of Financial Assistance, for the year ended September 30, 1993 . The management of the City of Okeechobee, Florida, is responsible for the City of Okeechobee, Florida' s compliance with those requirements . Our responsibility is to express an opinion on compliance with those requirements based on our audit . We conducted our audit of compliance with those requirements in accordance with generally accepted auditing standards; Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget Circular A- 128 , Audits of State and Local Governments . Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the City of Okeechobee, Florida' s compliance with those requirements . We believe that our audit provides a reasonable basis for our opinion. In our opinion, the City of Okeechobee, Florida, complied, in all material respects, with the requirements governing types of services allowed or unallowed; reporting; and special tests and provisions that are applicable to its major federal financial assistance program for the year ended September 30 , 1993 . 44 1 251 East Sample Road• Pompano Beach, Florida 33064•(305)781 -1250• FAX(305)785-6826 This report is intended for the information of the audit al. committee, management, and the Department of Community Affairs and the Auditor General of the State of Florida . However, this report is a matter of public record and its distribution is not limited. -:-:::6-Dj4-(2-(242-A (1. 1 J.D. Gilbert & Company, CPA March 1, 1994 r 45 C J.D. GILBERT & COMPANY �J. D. GILBERT & COMPANY CERTIFIED PUBLIC ACCOUNTANTS Single Audit Combined Report on the Internal Control Structure The Honorable Mayor and Members of the City Council City of Okeechobee, Florida We have audited the combined financial statements of the City of Okeechobee, Florida (City) , as of and for the year ended September 30, 1993 , and have issued our report thereon dated March, 1994 . We did not audit the financial statements of the Employee Benefit Trust, which are included in the combined financial statements as the Fiduciary Fund Types . Our audit report was qualified because the City has not maintained adequate detailed fixed asset records in support of the recorded costs of the water • and sewer utility plant in service in the proprietary fund or the amounts included in the general fixed asset group of accounts . We conducted our audits in accordance with generally accepted auditing standards; Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Circular A-128 , Audits of State and Local Governments. Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement and about whether the City compiled with laws and regulations, noncompliance with which would be material to a major federal financial assistance program. In planning and performing our audit for the year ended September 30 , 1993 , we considered the City' s internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the City' s combined financial statements and on the compliance of the City with requirements applicable to its major federal financial assistance program and not to provide assurance on the internal control structure . The management of the City is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures . The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management' s authorization and recorded properly to permit the preparation of combined financial statements in accordance with generally accepted 46 1 251 East Sample Road• Pompano Beach, Florida 33084•(305)7E31 -1250• FAX(305)785-6826 The Honorable Mayor and Members of the City Council . March 1, 1994 accounting principles, and that federal financial assistance programs are managed in compliance with applicable laws and regulations . Because of inherent limitations in any internal control structure, errors, irregularities, or instances of noncompliance may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate . For the purpose of this report, we have classified the significant internal control structure policies and procedures in the following categories : Activity Cycles : • Revenue/receipts • Purchases/disbursements • Payroll/personnel General Requirements : • Political activity • Civil rights • Davis-Bacon Act • Federal financial reports . Specific Requirements • Type of services • Matching • Special Reporting Requirements • Special Tests and Provisions For all of the internal control structure categories listed above, we obtained an understanding of the design of relevant policies and procedures and determined whether they have been placed in operation, and we assessed control risk. • During the year ended September 30 , 1993 , the City expended • 98% of its federal financial assistance under a major federal financial assistance program with the U. S . Department of Housing and Urban Development . We performed tests of controls, as required by OMB Circular A- 128 , to evaluate the effectiveness of the design and operation of internal control structure policies and procedures that we considered relevant to preventing or detecting material noncompliance with specific requirements, general requirements, and 47 C J.D. GILBERT & COMPANY The Honorable Mayor and - Members of the City Council March 1, 1994 requirements governing claims for advances and reimbursements that are applicable to the aforementioned major federal financial assistance program. Our procedures were less in scope than would be necessary to render an opinion on these internal control structure policies and procedures . Accordingly, we do not express such an opinion. We noted certain matters involving the internal control structure and its operation that we consider to be a reportable condition under standards established by the American Institute of f Certified Public Accountants . Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control - structure that, in our judgment, could adversely affect the City' s ability to record process, summarize, and report financial data consistent with the assertions of management in the combined financial statements or to administer federal financial assistance programs in accordance with applicable laws and regulations . A material weakness is a reportable condition in which the design or operation of one or more of the internal control _ structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the combined financial statements being audited or that noncompliance with laws and regulations that would • be material to a federal financial assistance program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions . Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses as defined above . However, we noted the following matter involving the internal control structure and its operation that we consider to be a material weakness as • defined above . These conditions were considered in determining the ' nature, timing, and extent of procedures to be performed in our audit of the combined financial statements of the City, and of its compliance with requirements applicable to its federal financial assistance programs for the year ended September 30 , 1993 and this report does not affect our report thereon dated March 1, 1994 . 48 Si J.D. GILBERT & COMPANY The Honorable Mayor and Members of the City Council March 1, 1994 Fixed Asset Records and Controls The City has not maintained adequate detailed fixed asset records in support of the recorded costs of the water and sewer utility plant in service or the amounts included in the general fixed assets group of accounts . We were unable to obtain sufficient supporting documentation to form an opinion with respect to the stated costs of property items acquired in years prior to October 1, 1981 nor the related accumulated depreciation applicable to the water and sewer utility plant in service at September 30, 1993 and the depreciation expense for the year then ended. The City has contracted with a firm to evaluate the historic cost or donated value of all existing physical assets of the City. The project is not yet completed. Once complete records are established the City should ensure that additional acquisitions and disposals are • properly recorded and accounted for. Additionally, a physical inventory of fixed assets should be performed at least every two years . We also noted other matters involving the internal control structure and its operation that we have reported to the management of the City in a separate letter dated March 1, 1994 . This report is intended for the information of the Mayor and City Council, management, and the Department of Community Affairs and the Auditor General for the State of Florida. This restriction is not intended to limit the distribution of this report, which is a matter of public record. C"IN9 J.D. Gilbert & Company, CPAs March 1, 1994 49 C J.O. GILBERT &. COMPANY Ciii J. D. GILBERT & COMPANY CERTIFIED PUBLIC ACCOUNTANTS Management Letter The Honorable Mayor and Members of the City Council City of Okeechobee, Florida We have audited the combined financial statements of the City of Okeechobee, Florida (City) for the year ended September 30, ' 1993 , and have issued our report thereon dated March 1, 1994 . We did not audit the financial statements of the Employee Benefit Trust included in the combined financial statements . The following comments are submitted in accordance with the Rules of the Auditor General of the State of Florida, Chapter 10 . 550 . Additional - comments on the internal control structure appear in a separate letter report . Recommendations for Improvement Cash Disbursements - In our review of cash disbursements, we noted several breaks in the sequence of issuing checks . To ensure proper accountability for cash disbursements, checks should be • issued in numerical sequence, and all missing checks should be accounted for. Prior Year Irregularities There were no irregularities reported in the preceding financial audit to correct . Status of Prior Year Recommendations Rules of the Auditor General - As noted in the "Single Audit Combined Report on Internal Control Structure" , the City is still in the process of improving controls over fixed assets . Purchase Orders - The City has established policies and procedures regarding purchase orders with which City personnel strive to comply. r. Cash Accounts - The City has updated the computer-generated general ledger to properly identify the funds included in various cash account balances . - 50 • 1 251 East Sample Road• Pompano Beach, Florida 33084•(305)781 -1 250• FAX(305)785-8826 Consideration of Financial Emergency The City is not, nor at any time during the year ended September 30, 1993 was, in a state of financial emergency as a consequence of conditions described in Chapter 218 . 503 , Florida Statutes . Violations of Laws, Rules and Regulations We did not become aware of any violations of laws, rules, and regulations during the course of our audit . Illegal or Improper Expenditures We did not become aware of any illegal or improper expenditures during the course of our examination. Florida Department of Banking and Finance Annual Financial Report The annual financial report to be filed with the Florida Department of Banking and Finance pursuant to Section 218 . 32 (1) (b) Florida Statutes is in agreement with the audited financial statements and is expected to be filed on a timely basis . * * * This letter is intended solely for the use of the Mayor and • City Council, management and the Auditor General of the State of Florida . This restriction is not intended to limit the • distribution of this letter, which is a matter of public record. D. Gilbert & Company, CPAs March 1, 1994 • 51 • J.D. GILBERT & COMPANY