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Audit Report 09.30.1998 GENERAL PURPOSE FINANCIAL STATEMENTS AND ACCOMPANYING INFORMATION CITY OF OKEECHOBEE, FLORIDA SEPTEMBER 30, 1998 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA CITY COUNCIL AND ADMINISTRATIVE PERSONNEL Noel A. Chandler Councilmember Lowry Markham Councilmember Robert 1. Bradshaw City Administrator General Services Director Bonnie S. Thomas, CMC City Clerk Lola Parker Finance Coordinator John Cook City Attorney September 30, 1998 CITY COUNCIL James E. Kirk Mayor, Chairnlan ADMINISTRATION Dowling R. Watford, Jr. Councilmember Robert Oliver Councilmember Louis Keith Tomey II Chief of Fire Rehmund Farrenkopf Chief of Police Charles Elders Director of Public Works Ei .J,D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA September 30,1998 TABLE OF CONTENTS PAGE Independent Auditors' Report...,. ,..... ,....,.,........,... ,...... ,..,...,.,... ,.......... ..............,.,. ,..........,.....................,. ,......,. ,.... 1-2 General Purpose Financial Statements: . Combined Balance Sheets - All Fund Types and Account Groups .............................................................,........3 Combined Statement of Revenue, Expenditures and Changes in Fund Balances _ All Governmental Fund Types.....,.,....,.............,.,.,...,.........,................,.,...,."...........,..............................,........,.. 4 Statement of Revenue, Expenditures and Changes in Fund Balances _ Budget and Actual- Governmental Funds.........,...,.,...,........................,...,.,......,.....,..............,.....,....,......,........,.5 Statement of Changes in Plan Net Assets - Fiduciary Fund Type _ Employee Pension Trust Funds......,........................,.,.,...................,..........,.,..............................,........................ 6 Notes to Combined Financial Statements .......................................................................................................7-18 Accompanying Information: General Fund - Schedule of Revenue - Budget and Actual.............................................................................................. 19-20 Schedule of Expenditures - Budget and Actual.............................................................................................21 Employee Pension Trust Funds - Combining Statements of Plan Net Assets .......................,...,.,.,....................,..............,.,..............................22 Combining Statements of Changes in Plan Net Assets .................................................................................23 Required Supplementary Information,...,.,......,.....................,.,.,..................,.,..............,.....,..,..........,........... 24 Schedule of Expenditures of Federal and State Financial Awards .....................................................................25 Unaudited Information: Summary of Insurance Coverage - Unaudited ,.,..............................,...............,....,.,..........,..........,........,...........26 Schedule of Assessed Values, Tax Levies and Rates - Unaudited......................................................................27 Schedule of Certain Revenue _ Unaudited ......,.,.,.,............................,.,..........................................,........,....,...,.28 Other Reports: Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards...............,.,..........,.....................,.,..............,.......,............,......................... 29-30 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133 .....................................31-32 Schedule of Findings and Questioned Costs ................................................................................................. 33-35 Management Letter....,...,.,..,..,....,.,.........,......,...,.,.,..........,..... ..............,.,..............,.,.,..........,...."....,..........., 36-37 Ei .J,D. GILBERT & COMPANY ~.D. GILBERT & COMPANY CERTIFIED PUBLIC ACCOUNTANTS 600 West Hillsboro Blvd.. Suite 510, Oeertield Beach, Florida 33441 . (954) 419-1000 . Fax (954) 419-1040 1560-3 Capital Circle N.W., Tallahassee, Florida 32303 . Toll Free (888) 419-2727 . E-Mail cpas@jdgilbert.com Independent Auditors' Report We have audited the accompanying general purpose financial statements of the City ofOkeechobee, Florida (City) as of September 30, 1998, 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 ofthe other auditors. Except as discussed in the following paragraphs, 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 Note 5 to the general purpose financial statements, the City has not maintained adequate detailed fixed asset records to support the cost of the fixed assets included in the general fixed asset account group with respect to the stated cost of assets acquired prior to October 1, 1981 and land disposed September 28, 1995. 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 for fixed assets acquired prior to October 31, 1981 and on the disposition of the utility operations in 1995. It is not practicable to determine the effects on the general purpose financial statements of this departure from generally accepted accounting principles. Governmental Accounting Standards Board Technical bulletin 98-1, Disclosures about Year 2000 Issues, requires disclosure of certain matters regarding the Year 2000 Issue. Because of the unprecedented nature of the Year 2000 Issue, its effects and the success of related remediation efforts will not be fully determinable until the year 2000 and thereafter. Accordingly, insufficient audit evidence exists to support City of Okeechobee, Florida's disclosures with respect to the Year 2000 Issue made in Note 12. Further, we do not provide assurance that the City is or will be year 2000 ready, that the City's year 2000 remediation efforts will be successful in whole or in part or that parties with which the City does business will be year 2000 ready, In our opinion, based on our audit and the report of other auditors, except for the effects ofthe departure from generally accepted accounting principles in the general fixed asset account group and except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to examine evidence regarding year 2000 disclosures, as discussed in the preceding paragraphs, the general purpose fmancial statements referred to above present fairly, in all material respects, the financial position of the City of Okeechobee, Florida as of September 30, 1998 and the results of its operations for the year then ended in confornlity with generally accepted accounting principles. In accordance with Government A uditing Standards, we have also issued our report dated April 8, 1999 on our consideration ofthe City of Okeechobee's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. 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, including the schedule of expenditures of federal awards as required by the U.S. Office of Management and Budget Circular A-133, "Audits of States, Local Arnerican Institute of Certified Public Accountants . Florida Institute of Certified Public Accountants Governments, and Non-Profit Organizations", 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, is fairly stated in all material respects in relation to the general purpose financial statements taken as whole. c;-.J9.~/~ April 8, 1999 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA COMBINED BALANCE SHEETS - ALL FUND TYPES AND ACCOUNT GROUPS September 30, 1998 Governmental Fiduciary Fund Types Fund Types Account Groups Employee General General Total Pension Fixed Long-Term (Memorandum General Trust Assets Debt Only) ASSETS Cash $ 2,217,115 $ 40,865 $ 2,257,980 Investments 2,500,000 7,691,678 10,191,678 Receivables: Taxes 114,872 114,872 Accounts less Allowance of$5,861 10,385 10,385 Due from Other Government Agencies 155,699 155,699 Due from Other Funds 9,614 9,614 Inventory 1,036 1,036 Restricted Assets-Cash 2,747 2,747 Fixed Assets 2,258,220 2,258,220 Amount Available in Debt Service Reserve 41,344 41,344 Amount to be Provided for Retirement of General Long-Term Debt 1,446,244 1,446,244 TOTAL ASSETS $ 5,001,854 $ 7,742,157 $ 2,258,220 $ 1,487,588 $ 16,489,819 LIABILITIES Accounts Payable $ 201,533 $ 22,500 $ $ $ 224,033 Accrued Liabilities 31,214 183,655 214,869 Accrued Interest 26,355 26,355 Matured Bonds and Interest Coupons 2,012 2,012 Due to Other Funds 9,614 9,614 Deferred Revenue 20,720 20,720 Long-Term Debt 1,303,933 1,303,933 TOTAL LIABILITIES 291,448 22,500 1,487,588 1,80 I ,536 FUND EQUITY Investment in General Fixed Assets 2,258,220 2,258,220 Net Assets Held in Trust 7,719,657 7,719,657 Fund Balances: Reserved for: Debt Service 41,344 41,344 Public Facilities 826,246 826,246 Emergency and Disaster Relief 486,441 486,441 Inventory 1,036 1,036 Encumbrances 98,522 98,522 Unreserved 3,256,817 3,256,817 TOTAL FUND EQUITY 4,710,406 7,719,657 2,258,220 14,688,283 TOTAL LIABILITIES AND FUND EQUITY $ 5,001,854 $ 7,742,157 $ 2,258,220 $ 1,487,588 $ 16,489,819 The Notes to Combined Financial Statements are an Integral Part of this Statement 3 Ei .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 30,1998 Revenue Taxes Intergovernmental Charges for Services Licenses and Permits Fines and Forfeitures Interest Income Grants Miscellaneous Total Revenue Expenditures Current: Public Safety General Government Transportaiton Physical Environment Economic Environment Debt Service: Principal Interest Total Expenditures Excess of Expenditures over Revenue and Other Sources Fund Balances, beginning of year Fund Balances, end of year The Notes to Combined Financial Statements are an Integral Part of this Statement 4 GENERAL $ 1,627,129 1,278,007 238,001 109,403 25,471 256,060 521,818 35,309 4,091,198 1,661,067 549,601 1,296,902 184,812 503,135 168,785 72,552 4,436,854 (345,656) 5,056,062 $ 4,710,406 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GOVERNMENTAL FUND TYPES Year Ended September 30,1998 General Fund Actual (on Variance Budgetary Favorable Budget Basis) (Unfavorable) REVENUE Taxes $ 1,561,900 $ 1,627,129 $ 65,229 Taxes Intergovernmental 1,121,500 1,278,007 156,507 Charges for Services 238,930 238,001 (929) Licenses and Permits 70,000 109,403 39,403 Fines and Forfeitures 29,000 25,471 (3,529) Interest Income 210,425 256,060 45,635 Grants 511,018 521,818 10,800 Miscellaneous 15,700 35,309 19,609 TOTAL REVENUE 3,758,473 4,091,198 332,725 EXPENDITURES Public Safety 1,769,829 1,661,759 108,070 General Government 585,114 549,262 35,852 Transportaiton 1,238,837 1,187,082 51,755 Physical Environment 194,000 184,812 9,188 Economic Environment 494,750 503,135 (8,385) Health and Human Services 5,625 5,625 Debt Service 239,365 237,563 1,802 TOTAL EXPENDITURES 4,527,520 4,323,613 203,907 EXCESS OF EXPENDITURES OVER REVENUE $ (769,047) (232,415) $ 536,632 FUND BALANCES Beginning of Year 5,056,062 Adjustment to conform to generally accepted accounting principles: Adjustment for Encumbrances (109,466) Adjustment for Interest (3,775) End of Year $ 4,710,406 The Notes to Combined Financial Statements are an Integral Part of this Statement 5 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA STATEMENT OF CHANGES IN PLAN NET ASSETS- FIDUCIARY FUND TYPE - EMPLOYEE PENSION TRUST FUNDS Year Ended September 30,1998 Additions: Contributions: State Contribution $ 158,022 Employer Contributions 39,958 Employee Contributions 124,442 Total Contributions 322,422 Investment Income: Net Appreciatoin in Fair Value ofInvestments 569,737 Interest and Dividends 249,305 819,042 Less: Investment Expenses (56,552) Investment Income, net 762,490 Total Additions 1,084,912 Deductions: Benefits Paid to Participants 103,545 Refunds on Termination 45,925 Administrative Expenses 37,599 Total Deductions 187,069 Net Increase 897,843 Net Assets Held in Trust for Pension Benefits: Beginning of Year 6,821,814 End of Year $ 7,719,657 The Notes to Combined Financial Statements are an )ntegral Part of this Statement 6 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS September 30,1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City ofOkeechobee (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 fmancial statements are presented below. The City of Okeechobee Pension Trust Funds The three retirement plans included in the financial statements are the General Employees' Pension Trust Fund, the Municipal Police Officers' Pension Trust Fund and the Municipal Firefighters' 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. The plans require participation by all employees in the respective governing authorities. Additionally, the organizations exist for the benefit of the employees of the City. The separate financial statements of the pension plans can be obtained from the City. B. BASIS OF PRESENT A TION - 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 govemmental functions of the City are fmanced, 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: 7 Ei .J.D. GILBERT & COMPANY CITY OF OKE,ECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30,1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) General Fund - The general fund is the general operating fund of the City. It is used to account for all fmancial resources except those required to be accounted for in another fund, 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 used to account for net assets held in trust for pension benefits. Because ofthe long-term nature of defined benefit plans, financial statements alone cannot provide sufficient information to accomplish the financial reporting objective. Therefore, historical trend information is included as supplementary information. 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. No depreciation is recorded on general fixed assets. General Long- Term Debt Account Group - This account group is used to account for long-term debt to be financed from governmental fund type:s. 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 fmancial position or results of operations 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. 8 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30, 1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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". 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 fmancial resources during a period. Special reporting treatment is also applied to governmental fund inventories to indicate that they do not represent "expendable available fmancial resources", even though they are a component of net current assets. Such amounts are offset by fund balance reserve accounts. Pension Trust Funds Pension trust funds are accounted for on the accrual basis of accounting. Therefore, revenues are recognized when earned and expenses are recognized when incurred. 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, 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 trust funds because effective budgetary control is achieved by alternate measures. 9 Ei .J.D, GILBERT & COMPANY .. CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30,1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 investments. G. INVESTMENTS The governmental fund investments consist of nonnegotiable certificates of deposit which are valued at cost. The fiduciary fund investments are reported at fair value. Short-term investments are reported at cost which approximates market value. Securities traded on a national exchange are valued at the last reported sales price. Interest income is recognized when earned. Gains and losses from the sale or exchange of investments are recognized on the transaction date. The fiduciary funds had no investments in, loans to, or leases with parties related to the pension plans as of or for the year ended September 30, 1998. H. 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. I. 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 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. 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. 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 50% of the unused sick leave balance. 10 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30,1998 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The amount of vacation leave expected to be paid from current financial resources of the general fund is 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 $183,655 has been recorded in the General Long-Term Debt Group of accounts, representing the City's commitmentto fund such costs from future operations for the general fund. 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 ofthe annual 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 Accrued Interest Encumbrances - September 30, 1998 Less prior year encumbrances paid Adjustment for encumbrances $4,436,854 (3,775) $ 97,485 1206.951) (109,466) Expenditures on Budgetary Basis $4.323.613 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, 1998 totaling $2,749,948 which are included in cash and investments in the accompanying combined balance sheets in the amount of $2,851,170. At September 30, 1998, the City has $1,909,408 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 Capital Management, Inc. Cash equivalent investments, consisting of money market accounts, are stated at cost which approximates market value. 1) Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30,1998 NOTE 3 - CASH AND INVESTMENTS (Continued) 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 which are insured by the Federal Deposit Insurance Corporation, 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. The following is a list of the City's investments by categories of risks established by Governmental Accounting Standards Board Statement No.3: Historical Cost Market Value Category 3: Pension trust funds: Municipal police officers' pension trust fund: Cash equivalents Government and agency securities Corporate bonds Corporate stocks Accrued income Total Investments $ 22,943 $ 22,943 838,657 869,760 323,227 331,858 995,370 2,022,428 18,687 18,687 2,198,884 3,265,676 6,211 6,211 309,977 321,642 105,991 109,353 389,379 741,261 6,780 6,780 818,338 1, 185,247 23,258 23,258 821,463 851,329 332,672 342,922 1,018,528 2,007,099 16.147 16,147 2,212,068 3,240,755 $5,229.290 $7,691.678 Municipal firefighters' pension trust fund: Cash equivalents Government and agency securities Corporate bonds Corporate stocks Accrued income Municipal general employees' pension trust fund: Cash Equivalents Government and agency securities Corporate bonds Corporate stocks Cash and accrued income 12 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30,1998 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 1997-98 levy was based was $159,112,521. 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, 1998 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 1997-98 fiscal year was 4.94 mills. NOTE 5 - CHANGES IN GENERAL FIXED ASSETS A summary of changes in general fixed assets follows: Balance October 1 , 1997 Additions Retirements Land and improvements $ 805,358 $ $ Buildings and improvements 414,741 Furnishings and equipment 1,007,504 45,117 14,500 Rolling stock 332,095 Totals $2,559,698 $45,1 17 $14,500 Other Reductions Balance September 30, 1998 $ $ 805,358 414,741 1,038,121 332,095 $332,095 $2,258,220 The City has not maintained adequate detailed fixed asset records to support the cost of general fixed assets acquired prior to October 1, 1981, Additionally, the water towers and old sewer plants that were sold to the Okeechobee Utility Authority on September 28, 1995 were located on land previously owned by the City and included in land and improvements above. The cost ofthe land sold was not removed from the general fixed asset group. At September 30, 1998, the value assigned to general fixed assets acquired prior to October 1, 1981 was $835,600. NOTE 6 - LONG-TERM DEBT Long-term debt as of September 30, 1998 is summarized as follows: Notes Payable: 5.25% gas tax revenue note to a bank, payment of $99,682, including interest, due semi-annually through December 30, 2004; collateralized by and payable from a pledge of the City's share of the local option gas tax, municipal tax on motor fuels and motor fuel rebate $1,085,756 5.527% note to a bank, payment of $40,000, including interest, due annually through October 1,2003 with final payment due October 2004 of $27,171; collateralized by annually budgeted non-ad valorem revenues 218,177 $1,303,933 13 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30,1998 NOTE 6 - LONG-TERM DEBT (Continued) A summary of changes in all long-term debt for the year ended September 30, 1998 is as follows: Balance at September 30, 1997 Proceeds Payments Net Change in Accrued Liabilities Accrued Liabilities $169,335 GENERAL LONG-TERM DEBT Municipal Gas Tax Promissory Revenue ~~ Note $250,000 $1,222,718 Notes Total $1,472,718 (31,823) (136,962) (168,785) 14,320 Balance at September 30, 1998 $183,655 $218,177 $1,085.756 $L303,933 At September 30, 1998, the annual principal requirements and the annual requirements to amortize all debt outstanding, (including interest payments aggregating $259,110) for the next five years and thereafter are as follows: Municipal Promissory Note Gas Tax Revenue Note Aggregate Principal Principal Principal Year Ending and and and September 30. Principal Interest Principal Interest Principal Interest 1999 $ 27,934 $ 40,000 $ 144,221 $ 199,365 $ 172,155 $ 239,365 2000 29,464 40,000 151,767 199,365 181,231 239,365 2001 3 1 , 1 07 40,000 159,963 199,365 191,070 239,365 2002 32,827 40,000 168,472 199,365 201,299 239,365 2003 34,641 40,000 177,433 199,365 212,074 239,365 Thereafter 62.204 67,171 283.900 299.047 346,104 366.218 $218,177 $267,171 $1.085.756 $1,295.872 $L303.933 $1.563.043 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 were defeased on September 28, 1995 upon the transfer of the water and sewer system to the Okeechobee Utility Authority. Monies were deposited in an irrevocable trust to provide for all future debt service payments on these bonds. Accordingly, trust assets and liabilities for the defeased bonds are not included in the City's financial statements. NOTE 7 - INTERFUND RECEIVABLES AND PAY ABLES The following is a summary of amounts due from and due to other funds: Due from Due to Other Funds Other Funds General fund $ $9,614 Fiduciary fund 9,614 - - Total all Funds $9,614 $9,614 14 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30,1998 NOTE 8 - PENSION PLANS The City has three pension plans covering substantially all the City's regular employees. The City of Okeechobee, Florida Municipal Police Officers' and Municipal Firefighters' plans are under a single employer public employee retirement system. The City of Okeechobee, Florida and Okeechobee Utility Authority General Employees' Pension Trust is under a cost sharing multiple employer public employee retirement system and also covers substantially all of the employees of the Okeechobee Utility Authority. 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 $15,766 (the Utility Authority contributed $24,192) based on a covered payroll and a total payroll as follows: Police Firefighters General - City General - Utility Authority Covered Payroll $601,783 261,670 519,481 834,191 Total Payroll $601,783 315,972 569,623 974,594 Covered Payroll as Percent of Total Payroll 100.0% 82,8% 91.2% 85.6% The City and the Utility Authority fund the General pension plan at the rate of2.9% of covered payroll for participants. The City funds the Police and Fire pension plans for any contribution deficit determined by actuarial valuation for the Police and Firefighters' plans beyond the contributions by employees and the State Insurance premium tax contribution. Employee contributions are at a rate of 6% of payroll (5% for police and firefighters). 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 60 (age 65 for general) and 10 years of service (5 years for general), or at 30 years of service (25 for police) regardless of age. The benefit is calculated at 3,0% for police, 2.7% for firefighters, and 2% for general, 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. 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. Early retirement is provided for at age 55 and 10 years of participation. Death and disability benefits are also available through the plans. Upon termination of employment with less than 10 years of service (5 years for general) the plan refunds accumulated employee contributions. After 10 years of service (5 years for general) 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 contributions for the year ended September 30, 1998 were as follows: Police Firefighters General $48,452 5,622 6,759 15 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30,1998 NOTE 8 - PENSION PLANS (Continued) The employer and employee actual contributions for the year ended September 30, 1998 were as follows: Emplover Emplovee City $15,766 $ 74,422 Utility Authority 24,192 50,020 Totals $39,958 $124,442 The plans covering the City's firefighters and police officers are also funded by the State of Florida from a tax on fire insurance and casualty insurance premiums collected. State contributions to the firefighters and police officers plans totaled $69,803 and $88,219, respectively, during the year ended September 30, 1998. Contributions were made in accordance with applicable Florida Statutes and meet the actuarially determined contribution requirements. These amounts have been included in intergovernmental revenues and current expenditures in the governmental fund type. At September 30, 1998, the Plans included the following: Police Firefighters General Terminated members entitled to, but not receiving benefits Retirees currently receiving benefits Total active current employees (vested) (not vested) 1 4 19(5)(14) 10(3)(7) 2 5 62(28)(36) There were no changes in benefits or actuarial assumptions and methods since the previous actuarial valuation. Principal actuarial assumptions used in the most recent actuarial valuation are summarized as follows: 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 firefighters, 65 for all other employees; or immediately, if over assumed retirement age. Salary increases - 6% for police and general; 7% for firefighters, until the assumed retirement age. Funding method - Aggregate actuarial cost method, Administrative expense (other than investment management fees) - $12,000 for Police, $10,000 for Firefighters and $11,000 for General. At the end of 1998, the funds had assets in excess of the actuarial accrued liabilities, therefore, the disclosure regarding the amortization method used for any unfunded actuarial liabilities is not applicable. Detailed information regarding funding is contained in the supplementary information accompanying the financial statements. Three year historical information is disclosed in the accompanying supplementary information. 16 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30,1998 NOTE 9 - GRANTS AND CONTRACTS Communitv Development Block Grant In September 1994, the City was awarded a $575,000 Community DevelopmentBlock Grant (CDBG) (contract number 95DB-65-07-57-02-C37)for rehabilitation of commercial buildings in the City, In the year ended September 30, 1998, the City disbursed the remaining $503,135 of this grant. Florida Department of Communitv Affairs The City was granted a state of Florida contract (#98-DR-l G-07-57-02-005) in the amount of $14,069. The grant agreement called for reimbursement for work done in connection with the City's comprehensive plan. Local Law Enforcement Block Grants During the year ended September 30, 1998, the City was awarded a Local Law Enforcement Block Grant (98-C5-8W- 07-57-02-046) of$8,036 for police road control equipment. The City expended the monies in 1998. During the year ended September 30, 1997, the City was awarded a Local Law Enforcement Block Grant (97-CJ-6U-07- 57-02-022) totaling $6,398 for purchase, installation and training of a computer reporting system for police officers. The City expended the monies in 1998. Land Development Ree:ulation In 1997, the City entered into a highway maintenance agreement (contract #BA-920) with the State of Florida Department of Transportation for an annual amount of $28,880. The contract is renewable annually. In 1998, $28,880 was recorded as reimbursement for expenditures incurred by the City relating to the project under this contract. Hospice During the year ended September 30, 1997, the City was awarded a Community Services Block Grant (97SB- 7M -07 -57- 02-061) totaling $5,864 for local community health and human services assistance. Hospice of the Treasure Coast- Okeechobee Branch was the subgrantee. The City received $977 under this grant during the year ended September 30, 1998 and, upon presentation of invoices by Hospice, disbursed the funds. The contract was not renewed. NOTE 10 - COMMITMENTS AND CONTINGENCIES The City has contracts for engineering and maintenance projects at September 30, 1998 in the normal course of business. The City has purchased commercial insurance to cover significant losses. For insured programs, there have been no significant reductions in benefits. Settlement amounts have not exceeded coverage for the current year or the three prior years. In 1998, the City executed a three year lease for police and other City vehicles, Payments under the lease are due in quarterly installments of$15,000 through the fourth payment and $46,113 thereafter. The lease provides for termination at any quarterly payment date. The City disposed of the vehicles and terminated the lease in February 1999. Rent expense under this and a previous lease was $79,067 in 1998. NOTE 11 - DISPOSITION OF UTILITY In November 1994, the City entered into an interlocal agreement with Okeechobee County, Florida (the County) creating the Okeechobee Utility Authority (OUA). The OUA was established for the purpose of acquiring, owning, operating and maintaining a regional water and wastewater system for Okeechobee County and areas in the service area of the Okeechobee Beach Water Association. 17 Ei .J.D, GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) September 30,1998 NOTE 11 - DISPOSITION OF UTILITY (Continued) On September 28, 1995, the City transferred its water and sewer utility plant and related equipment, accounts receivable, customer deposits and prepayments, and monies on deposit in the bond sinking and reserve funds to the OUA in exchange for $3,000,000. The City also transferred certain real property that was not recorded in the fixed assets of the proprietary fund. Certain other real property relating to the water and sewer utility operations was not transferred, but perpetual easements were granted to the OUA. The City has not maintained adequate detailed fixed asset records to support the cost of assets disposed from the general fixed asset group; therefore, any effect on the fixed asset account group of this transfer cannot be determined. NOTE 12 - YEAR 2000 ISSUES (Unaudited) In order to address the Year 2000 (Y2K) computer issues, the City has done the following: A Y2K committee has been organized, consisting of representatives from all City departments. A contingency plan for all individual City departments is under discussion. The Department of Transportation and Signal Group have been contacted regarding Y2K compliance of traffic lights. The City is currently awaiting letters of compliance. All City owned gas pumps have been checked and are Y2K compliant. Computer systems at City Hall have been checked and certified for Y2K compliance by Information Management Systems (IMS). Computer systems at the Fire and Police Departments have been checked and certified for Y2K compliance by Innovative Computer Systems (ICS). The telephone systems in all departments are Y2K compliant. City Police and Fire vehicles and equipment are Y2K compliant. The City is currently contacting other government agencies and service providers to ensure Y2K compliance. 18 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA GENERAL FUND SCHEDULE OF REVENUE - BUDGET AND ACTUAL Year Ended September 30,1998 Variance Favorable Budget Actual (Unfavorable) TAXES Ad valorem taxes $ 752,900 $ 760,645 $ 7,745 Franchise fees 292,000 291,073 (927) Utility service taxes 393,000 413,247 20,247 Public service taxes 1,000 4,142 3,142 Insurance premium taxes 123,000 158,022 35,022 1,561,900 1,627,129 65,229 INTERGOVERNMENTAL State shared revenue: Cigarette tax - .02 82,000 79,999 (2,001) Revenue sharing 170,000 176,007 6,007 One-half cent sales tax 210,000 224,816 14,816 One-cent sales surtax 320,000 378,488 58,488 Mobile home licenses 3,000 4,369 1,369 Alcoholic beverage licenses 1,200 2,198 998 Gasoline tax refund 2,500 2,117 (383) Local option gasoline tax 325,000 400,242 75,242 Local alternate fuel user fee 200 270 70 Firefighters supplement 600 900 300 1,114,500 1,269,406 154,906 Shared revenue from other local units: County occupational licenses 7,000 8,601 1,601 1,121,500 1,278,007 156,507 CHARGES FOR SERVICES Sanitation fees 205,100 204,255 (845) Highway maintenance contract 28,880 28,880 Railroad maintenance contract 4,600 4,600 Miscellaneous 350 266 (84) 238,930 238,001 (929) 19 Ei .J,D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA GENERAL FUND SCHEDULE OF REVENUE - BUDGET AND ACTUAL (CONTINUED) Year Ended September 30,1998 Variance Favorable Budget Actual (Unfavorable) LICENSES AND PERMITS Occupational licenses and regulatory fees 43,000 48,926 5,926 Building permits and fees 27,000 60,477 33,477 70,000 109,403 39,403 INTERGOVERNMENTAL Court fines 27,000 19,176 (7,824) Radio communication 1,000 4,913 3,913 Police education 300 227 (73) Code enforcement fines 200 850 650 Investigation cost reimbursement 500 305 (195) 29,000 25,471 (3,529) INTEREST INCOME 210,425 256,060 45,635 GRANTS CDBG 490,918 499,713 8,795 Comprehensive Plan Grant 14,500 14,069 (431 ) Public Safety Grant 8,036 8,036 Hospice Grant 5,600 (5,600) 51I,oI8 521,818 10,800 MISCELLANEOUS Sale of assets 10,000 23,765 13,765 Police Accident Reports 400 522 122 Refunds of prior year expenditures 200 6,576 6,376 Miscellaneous and other 5,100 4,446 (654) 15,700 35,309 19,609 Total Revenue $ 3,758,473 $ 4,091,198 $ 332,725 20 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA GENERAL FUND SCHEDULE OF EXPENDITURES - BUDGET AND ACTUAL September 30,1998 ENCUMBRANCES AND INTEREST ACTUAL ON VARIANCE BUDGETARY FAVORABLE BUDGET ACTUAL 1997 1998 BASIS (UNFAVORABLE) PUBLIC SAFETY Law enforcement: Personal services 981,816 923,746 923,746 58,070 Operating expenses 177,925 191,028 191,028 (13,103) Capital outlay 5,800 5,868 5,868 (68) Grants and aids 16,188 16,188 (16,188) 1,165,541 1,136,830 1,136,830 28,711 Fire control: Personal services 433,988 463,467 463,467 (29,479) Operating expenses 62,300 51,027 51,027 11,273 Capital outlay 14,500 9,771 229 921 10,463 4,037 510,788 524,265 229 921 524,957 (14,169) Emergency and disaster relief: Capital outlay 93,500 (28) (28) 93,528 Total Public Safety 1,769,829 1,661,067 229 921 1,661,759 108,070 GENERAL GOVERNMENT Legislative: Personal services 41,762 45,449 45,449 (3,687) Operating expenses 31,500 23,404 23,404 8,096 73,262 68,853 68,853 4,409 Executive - city administrator: Personal services 54,394 58,716 58,716 (4,322) Operating expenses 10,700 16,465 16,465 (5,765) Capital outlay 2,000 450 450 1,550 67,094 75,631 75,631 (8,537) Executive - city clerk: Personal serivces 67,854 68,097 68,097 (243) Operating expenses 16,050 7,294 7,294 8,756 Capital outlay 15,500 15,424 15,424 76 99,404 90,815 90,815 8,589 Financial and administrative: Personal services 69,962 68,645 68,645 1,317 Operating expenses 30,400 34,565 34,565 (4,165) 100,362 103,210 103,210 (2,848) General services: Personal services 57,517 56,929 56,929 588 Operating expenses 144,775 122,423 338 122,085 22,690 Dapital outlay 12,000 9,740 9,740 2,260 214,292 189,092 338 188,754 25,538 Judicial : Operating expenses 30,700 22,000 22,000 8,700 Total General Government 585,114 549,601 338 549,263 35,851 TRANSPORTATION Road and street facilities: Personal services 272,587 264,273 264,273 8,314 Operating expenses 333,250 280,164 4,046 8,945 285,063 48,187 Capital outlay 633,000 752,465 202,338 87,619 637,746 (4,746) Total Transportation 1,238,837 1,296,902 206,384 96,564 1,187,082 51,755 PlNSICAL ENVIRONMENT Garbage/solid waste control services: Operating expenses 194,000 184,812 184,812 9,188 ECONOMIC ENVIRONMENT CDB Grant 494,750 503,135 503,135 (8,385) HEALTH AND HUMAN SERVICES Operating expenses 5,625 5,625 DEBT SERVICE Principal 168,646 168,785 168,785 (139) Interest 70,719 72,552 (8,291) (12,066) 68,777 1,942 Total Debt Service 239,365 241,337 (8,291) (12,066) 237,562 1,803 TOTAL EXPENDITURES $ 4,527,520 $ 4,436,854 $ 198,660 $ 85,419 4,323,613 203,907 21 Ei .J.D, GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA EMPLOYEE PENSION TRUST FUNDS COMBINING STATEMENTS OF PLAN NET ASSETS Year Ended September 30,1998 Municipal Municipal Police Fire- General Officers' Fighters' Employees' Pension Pension Pension Trust Fund Trust Fund Trust Fund Total ASSETS Cash $ 19,841 $ 2,816 $ 18,208 $ 40,865 Contributions Receivable 2,233 1,150 6,231 9,614 Investments (at fair value): Cash Equivalents 22,943 6,211 23,258 52,412 Government and Agency Securities 869,760 321,642 851,329 2,042,731 Corporate Bonds 331,858 109,353 342,922 784,133 Corporate Stocks 2,022,428 741,261 2,007,099 4,770,788 Accrued Income 18,687 6,780 16,147 41,614 Total Investments 3,265,676 1,185,247 3,240,755 7,691,678 Total Assets 3,287,750 1,189,213 3,265,194 7,742,157 LIABILITIES Accounts Payable 8,835 4,979 8,686 22,500 Net Assets Held in Trust for Pension Benefits $ 3,278,915 $ 1,184,234 $ 3,256,508 7,719,657 22 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA EMPLOYEE PENSION TRUST FUNDS COMBINING STATEMENTS OF CHANGE IN PLAN NET ASSETS Year Ended September 30,1998 Municipal Municipal Police Fire- General Officers' Fighters' Employees' Pension Pension Pension Trust Fund Trust Fund Trust Fund Total ADDITIONS Contributions: State Contribution $ 88,219 $ 69,803 $ $ 158,022 Employer Contributions 600 39,358 39,958 Employee Contributions 30,177 13,086 81,179 124,442 Total Contributions 118,396 83,489 120,537 322,422 Investment Income: Net Appreciation in Fair Value of Investments 252,123 84,717 232,897 569,737 Interest and Dividends 106,552 37,553 105,200 249,305 358,675 122,270 338,097 819,042 Less: Investment Expense (23,857) (8,671) (24,024) (56,552) Investment Income, net 334,818 113,599 314,073 762,490 Total Additions 453,214 197,088 434,610 1,084,912 DEDUCTIONS Refunds on Termination 942 44,983 45,925 Benefits Paid to Participants 59,883 43,662 103,545 Administrative Expenses 15,209 8,796 13,594 37,599 Total Deductions 76,034 8,796 102,239 187,069 Net Increase 377,180 188,292 332,371 897,843 NET ASSETS HELD IN TRUST FOR PENSION BENEFITS Beginning of year 2,901,735 995,942 2,924,137 6,821,814 End of year $ 3,278,915 $ 1,184,234 $ 3,256,508 $ 7,719,657 23 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA EMPLOYEE PENSION TRUST FUNDS REQUIRED SUPPLEMENTARY IN FORMA TION SCHEDULE OF FUNDING PROGRESS September 30, 1998, 1997 and 1996 Municipal Police Municipal General Officers' Firefighters' Employees' Pension Pension Pension Trust Fund Trust Fund Trust Fund Actuarial Valuation Date 1998 1998 1998 Actuarial Value of Plan Assets $ 2,745,519 $ 1,000,779 $ 2,742,164 Actuarial Accrued Liability (AAL) - Entry Age 2,184,269 451,048 2,190,008 Total Overfunded AAL $ 561,250 $ 549,731 $ 552,156 Actuarial Value of Assets as a Percentage of the AAL (Percent Funded) 125.7% 221.9% 125.2% Annual Covered Payroll $ 601,783 $ 261,670 $ 1,497,882 Ratio of Overfunded AAL to Annual Covered Payroll (as a percentage) 93.3% 210.1% 36.9% Actuarial Valuation Date 1997 1997 1997 Actuarial Value of Plan Assets $ 2,439,616 $ 838,725 $ 2,480,734 Actuarial Accrued Liability (AAL) - Entry Age 1,868,179 379,372 1,954,304 Total Overfunded AAL $ 571,437 $ 459,353 $ 526,430 Actuarial Value of Assets as a Percentage of the AAL (Percent Funded) 130.6% 221.1 % 126.9% Annual Covered Payroll $ 628,661 $ 249,710 $ 1,262,308 Ratio of Overfunded AAL to Annual Covered Payroll (as a percentage) 90.9% 184.0% 41. 7% Actuarial Valuation Date 1996 1996 1996 Actuarial Value of Plan Assets $ 1,965,251 $ 668,171 $ 2,480,734 Actuarial Accrued Liability (AAL) - Entry Age 1,576,026 314,838 1,954,304 Total Overfunded AAL $ 389,225 $ 353,333 $ 526,430 Actuarial Value of Assets as a Percentage of the AAL (Percent Funded) 124.7% 212.2% 126.9% Annual Covered Payroll $ 537,200 $ 240,042 $ 1,166,903 Ratio of Overfunded AAL to Annual Covered Payroll (as a percentage) 72.5% 147.2% 28.6% 24 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE FINANCIAL AWARDS Year Ended Spetember 30,1998 Cash Cash (Receivable) October I, September 30, Federal or State 1997 1998 Grantor/ Federal A ward Beginning Ending Program Title CFDA No. Amount Balance Receipts Expenditures Balance U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Passed through State Department of Community Affairs Community Development Block Grant #95DB-65-07-57-02-C37, (major program) 14.219 $ 575,000 $ 3,422 $ 499,713 $ 503,135 $ U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Passed through State Department of Community Affairs Community Services Block Grant #97SB- 7M-07 -57-02-061 13.792 $ 5,864 $ $ 977 $ 977 $ U.S. DEPARTMENT OF JUSTICE Passed through State Department of Community Affairs Local Law Enforcement Block Grant #97CJ-6U -07 -57 -02-022 16.592 $ 6,398 $ 6,398 $ $ 6,398 $ #98CJ-8W -07-57-02-046 $ 8,036 $ 8/036 $ 8,036 $ FLORIDA DEPARTMENT OF COMMUNITY AFFAIRS #98DR-l G-07-57-02-005 NA $ 14,069 $ $ 3,518 $ 14,069 $ (10,551) NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE A WARDS NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES The Schedule of expenditures offederal and state awards is a summary of the activity in the City's federal award programs presented on the accrual basis of accounting in accordance with generally accepted accounting principles. NOTE 2 - COMMUNITY DEVELOPMENT BLOCK GRANT In accordance with the terms of the grant, the City has expended matching contributions totaling $115,000 during the year ended September 30, 1998. 25 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA SUMMARY OF INSURANCE COVERAGE - UNAUDITED Year Ended September 30, 1998 DESCRIPTION COVERAGE COMMERCIAL PACKAGE Buildings and contents (90% coinsurance - $250 deductible) $ 999,400 Scheduled Property Floater ($250 deductible) $ 355,100 Inland Marine Equipment $ 307,338 Time Element $ 100,000 Commercial Crime $ 10,000 Public Employees Faithful Performance Blanket $ 20,000 Public Employee Honesty Blanket $ 25,000 General Liability Limit $ 2,000,000 Aggregate Liability Limit $ 6,000,000 LA W ENFORCEMENT OFFICERS' LIABILITY Bodily Injury, Personal Injury, Property Damage ($2.500 deductible) $ 2,000,000 WORKERS' COMPENSATION AND EMPLOYER'S LIABILITY $ 1,000,000 VEHICULAR EQUIPMENT Bodily Injury and Property Damage $ 2,000,000 Collison ($250 deductible) Comprehensive ($250 deductible) PUBLIC OFFICIAL LIABILITY ($2,500 deductible) $ 2,000,000 THIRD PARTY POLLUTION LIABILITY COVERAGE ($500 deductible) $ 1,000,000 26 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA SCHEDULE OF ASSESSED VALVES, TAX LEVIES AND RATES - UNAUDITED 1999 - 1998 FISCAL REAL PERSONAL HOMESTEAD YEAR PROPERTY PROPERTY TOTAL EXEMPTION 1998 $ 124,144,705 $ 34,967,816 $ 159,112,521 $ 27,195,529 1997 124,437,676 31,912,944 156,350,620 27,180,431 1996 121,623,003 27,473,00] 149,096,004 26,195,730 1995 112,605,782 27,593,835 140,199,617 26, I 08,828 1994 112,759,343 23,222,652 135,981,995 25,365,390 1993 109,479,471 23,748,480 133,227,951 25,288,396 ]992 112,820,753 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 TAX LEVIES AND APPLICABLE RATES LEVIES RATES DEBT GENERAL FISCAL DEBT GENERAL SERVICE GOVERNMENT YEAR SERVICE GOVERNMENT MILLS MILLS 1998 $ $ 785,999 .000 4.940 1997 616,021 .000 3.940 1996 46,604 602,080 .260 3.940 1995 23,470 675,914 .170 4.940 1994 48,006 664,734 .300 4.940 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 27 Ei .J,D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA SCHEDULE OF CERTAIN REVENUE - UNAUDITED 1999 -1998 GENERAL FUND State Revenue Sharing Occupational Utility Fines and Franchise Year (Note) Licenses Taxes Forfeitures Fees Interest 1998 $ 480,821 $ 48,926 $ 413,247 $ 25,471 $ 291,073 $ 256,060 1997 469,287 47,914 395,437 38,782 323,254 267,825 1996 461,371 52,714 416,880 35,376 304,600 261,338 1995 449,994 40,366 398,522 33,691 285,257 82,613 1994 442,009 40,517 388,291 22,456 281,300 44,998 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 NOTE - INCLUDES ADDITIONAL TWO CENT CIGARETTE TAX AND HALF-CENT SALES TAX 28 Ei .J.D. GILBERT & COMPANY ~.D. GILBERT & COMPANY CERTIFIED PUBLIC ACCOUNTANTS 600 West Hillsboro Blvd.. Suite 510, Oeerfield Beach, Florida 33441 . (954) 419-1000 . Fax (9541 419-1040 1560-3 Capital Circle N.W., Tallahassee, Florida 32303 . Toll Free (888) 419-2727 . E-Mail cpas@jdgilbert.com REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Honorable Mayor and Members of the City Council City of Okeechobee, Florida We have audited the fmancial statements of the City of Okeechobee, Florida (City) as of and for the year ended September 30, 1998, and have issued our report thereon dated April 8, 1999, which was qualified as discussed therein. Except as discussed in our auditors' report, we conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, Compliance 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 grants, noncompliance with which could have a direct and material effect on the determination of fmancial 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 that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affectthe City's ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. Reportable conditions are described in the accompanying schedule of findings and questioned costs as items 98-1 through 98-5. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited 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 over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, of the reportable conditions described above, we consider items 98-1 and 98-2 to be material weaknesses. We also noted other matters involving the internal control over financial reporting that we have reported to management of the City of Okeechobee, Florida in a separate letter dated April 8, 1999. 29 Arnerican Institute of Certified Public Accountants . Florida Institute of Certified Public Accountants This report is intended for the information of the audit committee, management and federal awarding agencies, pass- through entities and the Auditor General of the State of Florida. However, this report is a matter of public record and its distribution is not limited. ~f).~/~ April 8, 1999 # 30 Ei .J.D. GILBERT & COMPANY ~.D. GILBERT & COMPANY CERTIFIED PUBLIC ACCOUNTANTS 600 West Hillsboro Blvd., Suite 510, Oeerfield Beach, Florida 33441 . (9541419-1000 . Fax (9541 419-1040 1560-3 Capital Circle N.W., Tallahassee, Florida 32303 . Toll Free (8881 419-2727 . E-Mail cpas@jdgilbert.com REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 The Honorable Mayor and Members ofthe City Council City of Okeechobee, Florida Compliance We have audited the compliance of the City of Okeechobee, Florida (City) with the types of compliance requirements described in the U S. Office of Management and Budget (OMB) Circular A-/33 Compliance Supplement that are applicable to its major federal program for the year ended September 30, 1998. The City's major federal program is identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to its major federal program is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with generally accepted auditing standards; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City's compliance with those requirements, In our opinion, the City complied, in all material respects, with the requirements referred to above that are applicable to its major federal program for the year ended September 30, 1998. Internal Control Over Compliance The management of the City is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the City's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses, A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions, We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. 31 Arnerican Institute of Certified Public Accountants . Florida Institute of Certified Public Accountants This report is intended for the information of the audit committee, management and federal awarding agencies, pass- through entities and the Auditor General of the State of Florida, However, this report is a matter of public record and its distribution is not limited. ~;.9~</~ April 8, 1999 . 32 Ei .J.D. GILBERT & COMPANY CITY OF OKEECHOBEE, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended September 30,1998 SECTION 1- SUMMARY OF AUDITORS' RESULTS Financial Statements Type of auditor's report issued: qualified Internal control over financial reporting: Material weakness(es) identified? Reportable condition(s) identified not considered to be material weaknesses? lyes_no -K.Yes_none reported Noncompliance material to financial statements noted? _yeslno Federal Awards Internal Control over major programs: Material weakness( es) identified? Reportable condition(s) identified not considered to be material weaknesses? -yeslno -yeslnone reported Type of auditor's report issued on compliance for major programs: unqualified Any audit findings disclosed that are required to be reported in accordance with Circular A-I33, Section .51 O(a)? _yeslno Identification of major program: CFDA Number 14.219 Name of Federal Program or Cluster H.D.D. Community Development Block Grant Dollar threshold used to distinguish between Type A and Type B programs: $ 300.000 Auditee qualified as low-risk auditee? _yeslno 33 Ei .J.D. GILBERT & COMPANY SECTION II - FINANCIAL STATEMENT FINDINGS 98-1 Fixed Asset Group Condition: The City has not maintained adequate detailed fixed asset records in support of the recorded costs of the assets included in the general fixed assets group of accounts. The City contracted with a fIrm to evaluate the historic cost or donated value of all existing physical assets of the City. The project was not completed. Context: 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. We also could not obtain sufficient supporting documentation to form an opinion as to the cost of assets removed upon disposition of the water and sewer utility or the value of any assets transferred to the general fund on September 28, 1995. . Recommendation: The City should request that the evaluation of the physical assets be completed. The information developed should be used to evaluate the recorded values. Where the records are missing, the City should consider utilizing insurance values or other estimates to develop a reasonable record of all assets of the fixed asset group. Management:S response: See separate letter of response. 98-2 General Lede:er . Condition: The City has not performed appropriate reconciliation and balancing activities for general ledger balances, During the year, the City implemented an in-house general ledger accounting system, In previous years, the City had utilized a bookkeeping service. The implementation of this system did not include establishment of proper reconciling and balancing procedures, which resulted in errors in the accounting records that were not detected in the normal course of business, Context: The general ledger was out of balance several times throughoutthe year, certain transactions were not properly recorded and certain balance sheet accounts were not reconciled to supporting detail. All errors detected in the audit of the financial statements were corrected in all material respects. Recommendation: The City needs to establish specific daily and monthly balancing and reconciliation procedures. This should include all balance sheet accounts and transaction processing, All such procedures should be documented and properly filed. Mimagement:S response: See separate letter of response. 98-3 Payroll Processine: Condition: The City did not reconcile its annual payroll expenses to the year end federal payroll reporting. Had such reconciliation been performed, errors made in processing weekly payrolls would have been detected. Context: In processing payroll, certain errors occurred during the year due to computer software peculiarities. These errors were not properly corrected in the normal course of business. Specifically, there was one payroll which was not entered and another where the payroll was not applied to the proper accounts. These errors were corrected during the audit of the financial statements. Recommendation: Payroll processing should be balanced on a weekly basis, All payroll related accounts (e.g., withholding liabilities) should be verified on a weekly basis. Annually, the recorded payroll expenses should be reconciled to the federal reporting forms 941 and W-2. Management:S response: See separate letter of response. 34 Ei .J.D. GILBERT & COMPANY 98-4 Accountinl! Records Condition: The City has not retained appropriate copies of and support for general ledger postings and monthly reports in an organized manner. The City processes all accounting transactions, which include such items as cash receipts, cash disbursements, payroll processing, and general journal entries, Context: We encountered difficulties in verifying transactions processed and correcting errors during the year because the complete record of and support for certain transactions could not be located. Recommendation: Reports should be generated documenting all transaction postings. These should be appropriately filed along with any support necessary to explain the nature of any non routine adjustment. Additionally, complete general ledger transaction histories should be prepared annually for all funds of the City. The City should establish appropriate filing procedures for all reports. Management j' response: See separate letter of response. . 98-5 Purchase Orders Condition: Purchase orders are utilized by departments for all significant acquisitions. Sometimes when partial completion is performed, a new purchase order for the partial amount is prepared for forwarding to the finance department. This causes difficulties in establishing the appropriate encumbered amount of partially completed purchase orders, Additionally, the finance department does not receive records of open purchase orders for timely recording in the general ledger of the City. Context: Certain encumbrances were not recorded in the normal course of business. To ensure budget accountability, outstanding amounts of purchase orders should be readily determinable. ... Recommendation: To property maintain purchase order records, the original purchase order should be marked for partial completion. A copy of this purchase order, not a new purchase order, should be forwarded to the finance department with the related invoice. Open purchase orders should be scheduled as necessary so that the accounting records can be maintained on a current basis. Managements response: See separate letter of response. SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters are reported. 35 ~ Gi .J.D. GILBERT & COMPANY ~.D. GILBERT & COMPANY CERTIFIED PUBLIC ACCOUNTANTS 600 West Hillsboro Blvd., Suite 510, Oeerfield Beach, Florida 33441 . [9541419-1000 . Fax [9541 419-1040 1560-3 Capital Circle N.W.. Tallahassee, Florida 32303 . Toll Free (8881 419-2727 . E-Mail cpas@jdgilbert.com Manae:ement Letter The Honorable Mayor and Members of the City Council City of Okeechobee, Florida . We have audited the combined fmancial statements of the City of Okeechobee, Florida (City) for the year ended September 30, 1998, and have issued our report thereon dated April 8, 1999. 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, Prior Year Irref!ularities There were no irregularities reported in the preceding fmancial audit to correct. Status of Prior Year Recommendations As noted in the "Schedule of Findings and Questioned Costs", the City is still in the process of improving controls over fixed assets. , The City has addressed those items included in "recommendations for improvement" of the prior year's management letter, except to the extent repeated herein. Consideration of Financial Emerf!encv The City is not, nor at any time during the year ended September 30, 1998 was, in a state of financial emergency as a consequence of conditions described in Chapter 218.503, Florida Statutes. Florida Department of Bankinf! 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. Recommendations for Improvement Accounts Receivable - Garbage - We noted that the finance department does not receive a complete aged accounts receivable trial balance from the Okeechobee Utility Authority (OUA) for the City's garbage billings. While the OUA prepares the billings for the City, it is the City that is ultimately responsible for the accuracy of the billings and collection procedures. To maintain proper accountability, the City should obtain a complete aged accounts receivable listing from the OUA on a quarterly basis. The City should also periodically review the billing procedures and detail billing reports generated by the OUA. City Use of Credit Card - We noted that the City employees use a bank credit card for certain expenses related to City business. The City employees using the card do not always submit supporting documentation promptly, therefore, the bills have not been paid in a timely fashion. This has resulted in unnecessary finance charges to be incurred. The charge card should be used only where a City check or vendor billing is not accepted. The City should take the necessary steps to ensure that all expense reports and credit card receipts are filed promptly and that all credit card bills are paid by the due date. 36 , Arnerican Institute of Certified Public Accountants . Florida Institute of Certified Public Accountants Cash Receipts - We noted that the City received significant funds prior to the balance sheet date that were not deposited in the bank account until October 2, 1998, When significant funds are on hand, a deposit should be made promptly. This delay resulted in certain receipts being classified as accounts receivable in the accounting records, This error was corrected in the audit of the financial statements by recording of deposits in transit. Violations of Laws. Rules and Rel!ulations We did not become aware of any violations of laws, rules, and regulations during the course of our audit. Illel!al or Improper Expenditures We did not become aware of any illegal or improper expenditures during the course of our examination. *** . 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, ~~.~-I~ April 8, 1999 ~ . 37 ! . Ei .J.D. GILBERT & COMPANY