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Audit Report - 2002-2003CITY OF ATLANTIC BEACH, FLORIDA FINANCIAL STATEMENTS SEPTEMBER 30, 2003 CITY OF ATLANTIC BEACH, FLORIDA FINANCIAL STATEMENTS SEPTEMBER 30, 2003 TABLE OF CONTENTS Page Number(s) Independent Auditors' Report 1 - 2 Management's Discussion and Analysis 3 - 16 Basic Financial Statements Government-wide Financial Statements Statement of Net Assets 18 Statement of Activities 19 Fund Financial Statements Balance Sheet -Governmental Funds 20 Reconciliation of the Balance Sheet -Governmental Funds to the Statement of Net Assets 21 Statement of Revenues, Expenditures and Changes in Fund Balances -Governmental Funds 22 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances -Governmental Funds to the Statement of Activities 23 Statement of Net Assets -Proprietary Funds 24 Statement of Revenues, Expenses and Changes in Fund Net Assets -Proprietary Funds 25 Statement of Cash Flows -Proprietary Funds 26 - 27 Statement of Fiduciary Net Assets -Fiduciary Funds 28 Statement of Changes in Fiduciary Net Assets -Fiduciary Funds 29 Notes to Financial Statements 30 - 47 Required Supplementary Information Schedules of Pension Funding Progress 49 Schedules of Contributions from Employer and Other Contributing Entities 50 Schedule of Revenues, Expenditures and Changes in Fund Balance -Budget and Actual -General Fund 51 Notes to Schedule of Revenues, Expenditures and Changes in Fund Balance -Budget 52 and Actual -General Fund Supplementary Information Combining Balance Sheet - Nonmajor Governmental Funds 54 - 55 Combining Statement of Revenues, Expenditures and Change in Fund Balances - Nonmajor Governmental Funds 56 - 57 Single Audit Schedule of Expenditures of Federal Awards 58 Notes to the Schedule of Expenditures of Federal Awards 59 Schedule of Findings and Questioned Costs 60 Independent Auditors' Report on Compliance and Internal Control over Compliance Applicable to Each Major Federal Awards Program 61 - 62 Independent Auditors' Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Basic Financial Statements Performed in Accordance with GovernmentAuditing Standards 63 Management Letter of Independent Auditors Required by Chapter 10.550, Rules of the Auditor General 65 - 66 -~- 'T'HIS PAGE INTENTIONALLY LEFT BLANK. JAMES MOORS ~ CO., P.L. CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS INDEPENDENT AUDITORS' REPORT To the Honorable Mayor, City Commissioners, and City Manager of the City of Atlantic Beach, Florida, We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Atlantic Beach, Florida, as of and for the year ended September 30, 2003, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Atlantic Beach, Florida's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the basic financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As described in Note 14 to the basic financial statements, the City of Atlantic Beach, Florida, adopted Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements -and Management's Discussion and Analysis -for State and Local Governments, GASB Statement No. 37, Basic Financial Statements -and Management's Discussion and Analysis -for State acid Local Governments: Ont~tibus, GASB Statement No. 38, Certain Financial Statement Note Disclosures and GASB Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Fi~rancial Statements. This results in a change in the format and content of the basic financial statements. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Atlantic Beach, Florida, as of September 30, 2003, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 1n accordance with Government Auditing Standards, we have also issued a report dated December 5, 2003, on our consideration of the City of Atlantic Beach, Florida's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Govermment Auditing Standards and should be read in conjunction with this report in considering the results of our audit. -1- The management's discussion and analysis and the required supplementary information as listed in the table of contents, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City of Atlantic Beach, Florida's, basic financial statements. The combining fund statements listed in the table of contents are presented for purposes of additional analysis and are not a required pari of the basic financial statements of the City of Atlantic Beach, Florida. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required b}~ the United States Office of Management and Budget Circular A-133, Audits of States, Locul Governments, and Non-Profit O~blunizations, and is not a required part of the basic financial statements of the City of Atlantic Beach, Florida. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. Daytona Beach, Florida December 5, 2003 ~~. -~- CITY OF ATLANTIC BEACH 800 SEMINOLE ROAD ATLANTIC BEACH, FLORIDA 32233-5445 TELEPHONE: (904) 247-SS00 FAX: (904) 247-5877 SUNCOM: 852-5800 http://ci.atlantic-bcach.fl.us CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENTS' DISCUSSION & ANALYSIS As management of the City of Atlantic Beach, we offer readers of the City of Atlantic Beach's financial statements this narrative overview and analysis of the financial activities of the City of Atlantic Beach for the fiscal year ended September 30, 2003. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Atlantic Beach's basic financial statements. The City of Atlantic Beach's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Please note, the City presents prior comparative financial information when available; however, summary comparative data is not included in this discussion and analysis. Comparative data will be presented in future years as this information becomes available. Government-wide financial statements-The government-wide financial statements are designed to provide readers with a broad overview of the City of Atlantic Beach's finances, in a manner similar to a private-sector business. T'he statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal penods (e.g., uncollected franchise fees, special assessments or earned personal leave, etc.). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes, licenses and permits, and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, transportation and parks and recreation. The business-type activities of the City include the utility comprised of the water and sewer systems, the stormwater utility and the sanitation enterprise. The government-wide financial statements can be found on pages 18 - 19 of this report. Fund financial statements-A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Atlantic Beach, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. -3- Governmental funds-Governmental funds arc used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a City's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Atlantic Beach maintains sixteen individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund that is considered to be a major fund. Data from the other fifteen governmental funds arc combined into a single, aggregated presentation. The City of Atlantic Beach adopts an annual appropriated budget (or all funds. A General Fund budgetary comparison schedule has been provided to demonstrate compliance with this budget. Proprietary funds-Until this year, the City of Atlantic Beach maintained two types of proprietary funds. The enterprise type funds to account for the activities of the water, sewer, stormwater and sanitation activities and the internal service type funds to account for those funds whose activities were servicing primarily other City departments. The City has now consolidated all of the internal service funds into the General Fund and now charges only the enterprise funds for the services provided. Enterprise funds arc used to report the same functions presented as business-type activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information of the utility, stormwater and sanitation activities, which arc considered to be major funds of the City of Atlantic Beach. The basic proprietary fund financial statements can be found on pages 24 - 27 of this report. Fiduciary funds-Fiduciary funds are used to account for resources held for the benefit of parties outside the City. The only fiduciary funds the City of Atlantic Beach maintains now are the police and general employee pension funds. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements, which include the pension trust funds, can be found on pages 28 - 29 of this report. Notes to the financial statements-The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 30 - 47 of this report. Other information-In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City of Atlantic Beach's schedule of contributions and it's progress in funding its obligation to provide pension benefits to its employees, and a budgetary comparison schedule for the General Fund. Required supplementary information can be found on pages 49 - 52 of this report. Combining statements-Referred to earlier in connection with nonmajor governmental funds, arc presented immediately following the required supplementary information. Combining fund statements can be found on pages 54 - 57 of this report. -4- Financial Hi~l~liehts: Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a City's financial position. In the case of the City of Atlantic Beach, assets exceed liabilities by $34,903,612 at the close of the most recent fiscal year. By far the largest portion of the City's net assets, $22,402,820, reflects its investment in capital assets (e.g. land, buildings, improvements other than buildings, equipment), less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. City of Atlantic Beach's Net Assets September 30, 2003 (In Thousands) Governmental Activities Current and other assets Capital assets Total Assets Long-term liabilities outstanding Other liabilities Tota] Liabilities $ 8,184 8,078 16,262 Net Assets Business- type Activities $ 8,688 35,641 44,329 Total $ 16,872 43,719 60,591 1,025 20,648 21,673 573 3,441 4,014 1,598 24,089 25,687 Invested in capital assets, net of related debt 7,448 14,955 22,403 Restricted 1,777 895 2,672 Unrestricted 5,439 4,390 9,829 Total Net Assets $ 14,664 $ 20,240 $ 34,904 A portion of the. City's net assets, $2,672,774, represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets $9,828, 018 may be used to meet the government's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. During the current fiscal year, the City of Atlantic Beach's net assets increased by $657,494. This is an amount that represents the net of a large increase in the net assets as a result of the governmental activities offset by a decrease in net assets resulting from the business type activities. -5- It should be noted that the City of Atlantic Beach's total bonded debt decreased by $1,000,172 (4.4%,) during the current fiscal year. The decrease was made up of the scheduled principal retirement of the Utility System Revenue Bonds, series 1996 of 5487,723, the early retirement of the SunTrust 1995 Revenue Note payable associated with governmental activities in the amount of 5468,257 and the scheduled principal payments of the 1999 SunTrust refunding revenue bonds of 544,192. The operations of the City are funded using pooled cash shared and allocated by both the governmental fund types and the business fund types. In line with other cities using pooled cash investments, the City's rate of return on investments in pooled cash went from 2.08% last year to only l .52°/<, in the current year. This represents a 27% decrease in rate of return. "hhe following is a summary of activities for the City during the fiscal year ended September 30, 2003: City of Atlantic t;3each's Change in Net Assets (In Thousands) Revenues: Program revenues: Charges for services Operating grants & contributions Capital grants & contributions Genera] Revenues: Property taxes Sales Taxes Franchise and utility taxes Intergovernmental revenue Interest revenue Miscellaneous Total Revenues Expenses: General Government Public Safety Transportation Culture & Recreation Interest on long-term debt Utility Storm Water Sanitation Total Expenses Increase (decrease) in net assets Before transfers Transfers Increase in net assets Net assets October 1, 2002 Net assets September 30, 2003 I?;USIIICSS- Governmcntal type Activities Activities Total 5 1,144 5 7,133 5 613 60 1,011 713 ~,s2s - 1,263 - ],514 - 346 - 95 87 4l 277 _ 5 5,558 5 5,270 5 573 4,16S 1,393 l ,003 33 5,277 673 1,724 2,s2s 1,263 1,514 346 155 zis: ir, r~r - 873 - 416s - 1393 - 1003 - 33 6,685 6685 988 988 1,027 1027 8,70 ] 16,171 7,470 1,085 (431) 657 279 (279) - 1,367 (710) G57 13,297 20,950 34,247 5 14,664 5 20,240 5 34,904 -6- Operating Revenues and Expenses by Function -Governmental Activities a,soo,ooo a,ooo,ooo s,soo,ooo s,ooo,ooo 2,500,000 2,000,000 1,500,000 7,000,000 500,000 0 i General Public Satety Public Works Culture 8 Intereston lon0• Government Recreation term debt t3Expenses Operating Program Revenues Revenues by Source -Governmental Activities Msoellaneous 0% Interest Revenue 1% Franchise & lJtiliiy Taxes • 18% Sales Taxes 15% Intergovemrtrnhal Revenue 4% Charges for Services 13% Property Taxes 30% Operating Grants & Contributions 7% Capital Grants & Contributions 12% '] Governmental activities-C'overnmcntal activities increased the City of Atlantic Beach's net assets by $1,367,104. The most significant reasons for this large increase arc that the City received $502,361 in local option gas taxes and $583,616 of discretionary sales taxes, most of which were used to acquire capital assets. In addition to these proceeds, the City also received grant funds, interest and other miscellaneous revenues, some of which were also used to increase net assets. Business-tune activities-Business-type activities decreased the City or Atlantic Beach's net assets by $709,610. Key elements of this decrease are as follows: The business type activities resulted in an operating loss of $219,630. `Phis is primarily the result of the $467,746 operating loss of the stormwater utility. 1'he City has over the last few years begun to allocate all expenses associated with the stormwater system including salary for maintenance from the general fund to the utility. The fees arc insufficient to cover operations and the deficit is funded with transfers from the Gas Tax and General funds. o One of the largest contributors to the overall decrease in net assets is depreciation on existing assets. Depreciation for the current year was $1,636,788. Charges for services for business-type activities remained relatively constant from the previous fiscal year. The overall increase in charges for services for the business type activities was 3`%. This was primarily due to the $1.00 per equivalent residential unit, (ERU), per month, increase in the stormwater utility rate. The sanitation utility generated a small increase over last year while the water and sewer utilities had substantively no increase from the previous year. o While both the stormwater and sanitation charges for services came in over projections by a small margin, the water and sewer revenues did not achieve their projected targets. Water and sewer charges for services fell $233,801 below expectations. Capital contributions are also a major revenue source for the Water and Sewer Fund during the current fiscal year, producing $712,682 in revenue. This increase is the direct result of utility impact fees and grant proceeds. Impact fees must be used for utility system capital expansion. Operating Expenses and Program Revenues -Business Activities 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 OExpenses ^Operating Program Revenues Interest revenue decreased in the business-type activities by $104,795 (-46%). 'I'hc decrease is consistent with the market interest rate decline and lower cash balances. -~- Utility Storm Water Sanitation Revenue by Source -Business-type Activities 89' 1% ~°/a ®Charges for Services ^ Interest Revenue ^ Capital Grants & Contributions Financial Analysis of the City's Funds-As noted earlier, the City of Atlantic Beach uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds-The focus of the City's governmental funds is to provide information on near- term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a City's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $7,617,640, a decrease of $192,400 in comparison with the prior year. Approximately 77% of this total amount, $5,834,952, constitutes unreserved General Fund balance. Another $1,703,298 (22%) is unrestricted mostly in Special Revenue Funds with a small amount of that in capital project funds. The remainder of the governmental fund balance $79,390, is reserved to indicate that it is not available for spending because it has already been committed to pay debt service, or that it exists in the form of inventory. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unreserved fund balance of the General Fund was $5,834,952. Unreserved fund balance represents 67% of total General Fund expenditures and transfers out. The fund balance of the City's General Fund increased by $299,278 during the current fiscal year. Key factors in this change are as follows: Properly taxes of $2,525,955 increased by $262,698 (11.6%) during the year. This increase is based on an increase in the taxable property value of approximately $56.3 million, of which $12 million of that increase is the result of new construction. The operating property tax millage for the fiscal year was 3.1721 mills compared with 3.0323 for the prior fiscal year. Property Tax proceeds account for approximately 30% of the general fund revenues. Franchise and utility service taxes of $1,516,283 decreased by $127,824 (-8%) from prior year.• The decrease can be attributed to a change in the communications service tax rate from the City adopted state recommended revenue neutral rate that was initially adopted during the -9- evaluation period to the state maximum rate of 5.22%. Phis reduction was planned for and the revenue reduction of $153,583 was anticipated. The other franchise and utility tax revenues were slightly up from last year. State Sales Tax of $1,262,468 increased by only $11,363 (1%) from prior year receipts. "1'hc state revenue analysts anticipated this small increase and the City budgeted accordingly. Building permits, application review fees and construction inspection fees totaled $345,671 and increased by $143,962 (71%) from prior year receipts. This is the result of increased volume in new construction and remodeling projects, stricter enforcement for permitting requirements as well as new fees for plan reviews and substantial increases in the permit tees. The increase in volume is most likely generated from the record low interest rates. In the current year, the City moved all of the revenues and expenses related to the now eliminated internal service funds to the General Fund. The activities previously reported in the internal service fund included City Manager, Finance and Administration, 1-fuman Resources, Public Works Administration and Fleet Maintenance. Charges for services included in the General Fund revenues of $1,306,099 represent an allocation of costs associated with the business type activities. The expenses of City Manager, Finance and I-luman Resources arc now represented as divisions of the General Fund Administration Department. "fhe Public Works Administration and Fleet Maintenance are also new divisions under the Public Works Department of the General Fund. In the General Fund alone, interest earnings decreased by $33,193 (31 %). `The decrease in interest revenue is reflected throughout the City's portfolio and the direct result of the economy's interest rate decline. For the most part, the increase in expenses closely paralleled growth and demand for services except for personal service expenditures. Specifically, the cost for personal services within the various departments across the City increased significantly due to wage increases and rising health care costs. Total personal services expenditures in the departments within the General Fund increased by $348,138 (7.1%) from the prior year. Non-major Governmental Funds consisting of special revenue funds, debt service funds, and capital project funds have a combined fund balance of $1,777,274. Of this fund balance, $73,976 is reserved for future debt service payments. The net decrease in fund balance during the current year in non-major governmental funds was $491,678. Utilization of fund equity for advances to other funds, prepayment of long term debt mentioned above and acquisition of capital assets arc the reasons i'or this decrease. Proprietary funds-The City of Atlantic Beach's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net assets of the Water and Sewer fund at the end of the year amounted to $4,389,553. "1'hc total decrease in net assets was $709,610. Other factors concerning the financial position of these funds have already been addressed in the discussion of the City's business-type activities. - ]0- General Fund Bud~etary Hi~hli~hts Over the course of the year, the City revised its General Fund budget only twice. The additional appropriations were necessary to ensure that the actual charges would not exceed appropriations for the respective programs. The difference between the original budget and the final amended budget was $71,478. The increase in appropriations and can briefly summarized as follows: $10,000 Funding for non-contract fleet maintenance due to unexpected repairs of city vehicles. $10,500 Increase in the Streets Maintenance for the costs associated with the Howell Park Well abandonment. $ 8,956 Increase in the transfer to the Stormwater Utility Fund for $8,956 for a change order to the stormwater master plan update project. $42,022 For the Hopkins Creek Drainage project design. $71 Total Increase Having made those adjustments, the actual revenues and expenditures resulted in positive variances. In total, actual revenues exceeded budgeted revenues by $184,471. The primary reasons for this are as follows: The communications services tax revenues were budgeted to be only $425,000 and were actually $581,897. This $156,897 variance is due to the budget amount reflecting a conservative estimate of reduced revenues based on a rate reduction. The rate reduction did not have as much of an affect on the revenues as expected. Building permit fees were budgeted based on historical trends at $109,800 and what was actually received was $280,404. Low interest rates is most likely the reason for increased building permits and in addition to that, the Building Department doubled the fees and added some new inspection fees to the program. The program revenues for the Building Department resulted with a $170,604 positive variance. Offsetting the large variances was a negative variance in the local government half-cent sales tax revenues. This was budgeted at $1,404,932 and actual receipts were only $1,262,467. The negative variance of $142,464 was not anticipated, however, the 2003/2004 budget is much more conservative as a result. The expenditures of the general fund also resulted a positive variance of $479,094. Across the board, conservative budgeting left small amounts in every program at the end of the year. A few items that were significant were as follows: The overall personnel expense category was $147,050 under budget. The primary reason for this was the vacant positions throughout the general fund and especially in those in the Police Department. Another large variance that occurred in the public safety was in the Fire Control program. The budget for the contract with Jacksonville was overstated by $63,567. -11- The budgeted transfer to the City's Pension funds of 530,000 was not made leaving a positive variance for transfers. Instead, the expenditures for administration of the pension funds were paid for by the general fund directly. Although the City budgeted a decrease in fund balance of $394,287, the fund balance actually increased 5299,278 due to positive variances in revenues, expenditures and transfers totaling 5693,~G5. Capital Asset and Debt Administration Capital Assets-The City of Atlantic Beach's investment in capital assets for its governmental and business-type activities as of September 30, 2003 amounted to $43,718,955 (net of accumulated depreciation). This net investment in capital assets includes land, buildings, improvements other than buildings, and equipment, less accumulated depreciation on those assets, and construction in progress. "I'he total increase in the net investment in capital assets for the current f seal year was 54,996,283. Of this total, $1,089,581 relates to governmental activities and 53,906,702 relates to business-type activities. The detail for capita] asset activities can be found in Note G to the accompanying financial statements. Activity related to additions, deletions and construction in progress arc described in more detail below. Governmental Capital Asset Activities Governmental capital asset additions this fiscal year totaled 51,587,189 I3uildintt improvements: The Adele Grage Community Center renovations were completed for 5485,361, and the center re-opened in January 2003. Park improvements: A fishing pier was constructed for 5111,743 in the Citiy's park on Dutton Island. This park improvement vas funded 50% by a Florida Inland Navigation District grant. Improvements to Rose Park, including site clearing, fencing, shelters and playground equipment, accounted for $49,898. Infrastructure improvements: Infrastructure assets improving drainage on Dewees and Coquina Streets were constructed during the fiscal year for 5134,394. Paving and drainage improvements on Jordan Street totaling 5116,302 were funded through the Community Development I31ock grant. The extension of Church Road for 5152,180 was 50`% funded by the City of Jacksonville. Sidewalks were replaced in multiple locations throughout the City for 549,190. Machinery and equipment: The additions to this category of assets totaled $395,185. A ne~~~ radio communication system compatible with the City of Jacksonville; six new vehicles used for governmental activities; and, computer-related equipment for the Polio Department -ten ne~ti~ laptop computers to be used by the patrolmen, a new server, and a new report management system -were the primary assets acquired during the fiscal year ended September 3U, 2003. A variety of facility, park, and infrastructure improvements accounted for the remaining 592,936 of governmental capital asset additions as of September 30, 2003. -12- Governmental capital asset deletions this fiscal year totaled $357,724. Items sold at auction, including vehicles and a tractor; obsolete computer equipment and an imaging system; removal of assets associated with the Adele Grage Center prior to renovation; and, GASB 34-related reclassifications and write-offs of impaired assets account for the assets removed from the City's records. Construction in progress at the close of the fiscal year pertaining to governmental improvements reached $725,730. Park improvements: The boardwalk, trails, and pavilions added to complement the pier and other improvements to the Dutton Island Park totaled $118,187. Infrastructure improvements: Infrastructure related to the Core City improvement project accounted for $573,908. Outstanding commitments to complete the governmental portion of this project amounted to $78,436 at September 30, 2003. In addition, the City committed $126,845 to provide additional infrastructure, landscaping and irrigation to Town Center. The remaining $33,635 of construction in progress represents miscellaneous governmental improvements. Business-type Capital Asset Activities Business-type capital asset additions this fiscal year totaled $G60,223. Stormwater improvements: A significant project completed during this fiscal year was an update to the Stormwater Master Plan for $105,440. Drainage improvements constructed at various locations throughout the City, previously recorded as governmental assets but transferred to the Stormwater Fund during GASB34 reclassification (see capital asset reconciling item on Page 14 of the accompanying financial statements), added $113,089 to the business-type capital assets during this fiscal year. Utility improvements: Various phases of ongoing water and sewer projects were completed during the fiscal year. One of the larger projects included replacement of the force main at Lift Station B for $120,685. Ground storage and diesel fuel tanks were replaced for $122,892. Piping modifications, air main and valve improvements at Wastewater Treatment Plant No. 1 amounted to $90,793. Machinery and equipment: The additions to this category of assets totaled $80,590. Radios associated with the new communications system and aheavy-duty truck and trailer, to be used for stormwater-related activities, represented the primary assets acquired. A variety of utility and stormwater improvements accounted for the remaining $26,734 of business-type capital asset additions as of September 30, 2003. Business-type capital asset deletions this fiscal year totaled $196,124. Items sold at auction; obsolete computer equipment; and, a GASB 34-related write-off of the impaired pre-1995 Stormwater Master Plan account for the assets removed from the City's records. Construction in progress at the close of the fiscal year pertaining to business-type improvements reached $8,027,392. -13- stormwatcr improvements: The Core City project accounted for 55,968,507 of the construction in progress balance at the close of the fiscal year. This project includes stormwatcr system, utility system and general government infrastructure assets. Utility and stormwatcr commitments to complete this project amount to $152,947 and $252,916, respectively. Utility improvements: Construction in progress related to utility relocations required to facilitate construction of the Wonderwood Connector totaled $656,549. A new sludge holding tank being built at Wastewater Treatment Plant No. 2 had an accumulated value of $506,741 at the end of the fiscal year. A 300,000 gallon elevated water tank worth $65,000 was contributed to the City and relocated from Kissimmee, Florida. Construction in progress related to this project totaled 5280,540, which included the donated value. Commitments to relocate, instal] and coat the tank total 5251,830. A water main replacement on Ocean Boulevard from Ahern to 8"' Street was being constructed. The balance in construction in progress at the end of the fiscal year was 5260,457. Installation of a SCADA system at various locations throughout the City, which will provide for off-site monitoring of the plants, totaled 5132,300. Costs associated with the City's bid to acquire the Navy's water and sewer facilities ut the Mayport Naval Station amounted to $117,872 at the end of the fiscal year. The remaining 5104,426 of construction in progress represents miscellaneous stormwatcr and utility improvements. CITY OF ATLANTIC I3EAC13'S CAI'IT'AL ASSETS (Net of llepreciation) (ln "fhousands) 13usiness- Goverumcntal type Activities Activities Total Land 5 1,604 5 7~0 5 2,354 Buildings and improvements other than buildings 4,748 26,506 31,24 Equipment 1,000 358 1,35 8 Construction in progress 72~ 8.027 8,72 l T t 5 8,077 5 35,64] 5 43,718 o a Additional information on the City of Atlantic Beach's capital assets can be found in Note 6 on pages 39 - 40 oi~this report. -14- I.on~-term debt At the end of the 2003 fiscal year, the City of Atlantic Beach had total bonded debt outstanding of $21,697,866. Of this amount, $1,404,178 comprises debt backed by the utility services taxes. The remaining $20,293,688 of the City of Atlantic Beach's debt represents the utility revenue bonds secured by the revenues of the water and sewer utility systems. CITY OF ATLANTIC BEACH'S OUTSTANDING DEBT Revenue Bonds Business- Utility System Revenue Bonds, Series 1996 SunTrust Revenue Refunding Bonds, Series 1999 Total Governmental type Activities Activities Total $ - $ 20,293,688 $ 20,293,688 629,918 774,260 1,404,178 $ 629,918 $ 21,067,948 $ 21,697,866 The City's total debt decreased by $1,000,172 (4.4%) during the current fiscal year. During the fiscal year, the government paid off the outstanding balance of the SunTrust Revenue Note, Series 1995 to take advantage of savings on interest rates. The Utility Revenue System Revenue Bonds Series 1996 carries an insured "AAA" rating and an underlying rating of "Aaa" from Moody's. Under Florida statues, no debt limit margin is placed on local governments. Additional information on the City's long-term debt can be found in Note 7 on pages 41- 42 of this report. Economic Factors and Next Year's Budgets and Rates Taxable property values in The City of Atlantic Beach continue to grow. The 2003 taxable value is 99.6 million more than the previous year bringing the total value to $929,633,312 and representing a 12% increase. The City's utility service jurisdiction grew less than 1% in the number of accounts during the current year. Total number of active accounts went from approximately 7,869 to 7,935. The St. Johns Water Management District has instructed the City to begin the process of adopting water conserving rates. The City is now in the process of developing those rates and expects to have a rate restructure this year. The conservation rates being developed would include an inclining block structure. Addressing the Water Management's concerns is a part of the process of renewing the City's consumptive use permit for drawing water from the aquifer. The average rate of return for the pooled short-term investments has declined 26% from the prior year. The interest rates from the State Board Administration went from 2.08% to 1.52%. The City receives allocations of revenues collected by the state and county for sales taxes; local option gas taxes state revenue sharing, convention development taxes and discretionary sales taxes. All of these sources are forecasted by the Florida Legislative Committee on Intergovernmental Relations and have been consistent with their predictions. These revenue -15- overall for the last few years. The sum total of these revenue sources grew by only 2% from the previous year. Housing starts of single-family homes and duplexes combined for this fiscal year were 115, compared to the previous year of S 1. This represents an increase of 34 units or 42%. All of these factors were considered in preparing the City of Atlantic Beach's budget for the 2003/2004 fiscal year. Some budgetary highlights for next year are as follows: a During t1~e current fiscal year, unreserved fund balance in the General Fund increased to $5,834,952 plus an additional $5,414 reserved for inventory, totaling $5,840,366. [n the 2003/2004 fiscal year budget the City of Atlantic Beach has appropriated $707,000 of expenditures in excess of budgeted revenues to be transferred to the stormwater utility for purposes of acquiring property for a major stormwater project. o The property tax millage rate for the 2003/2004 budget was adopted at 3.0394. o Water and sewer service rates were increased by ].5 percent for all customers for the 2003/2004 budget year. These rate increases were necessary to address the increasing operational costs of the utility system. The rates were last increased October 1, 2001. Requests for information This financial report is designed to provide a general overview of the City of Atlantic Beach's finances for all those with an interest in the City's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Atlantic Beach, 800 Seminole Road, Atlantic Beach, Florida, 32233. Jim Ha on City anager s ~~ ~~ ~~~ Nelson Van Liere, CPA Finance Director -16- BASIC FINANCIAL STATEMENTS These basic financial statements contain Government-wide Financial Statements, Fund Financial Statements and Notes to Financial Statements. -17- CITI' OF ATLANTIC BEACH, FLORIDA, FLORIDA STATED1EN"r OF NET ASSETS SI;I'"1'i:hiBER 30, 2003 ASSETS Equity in pooled cash and cash equivalents Receivables - ncl Duc from other governntenu brvcntorics Special assessments -current Note rcccivablc -current Restricted assets: Equity in pooled cash and cash equivalents Capital assets: Land Buildings Improvements other than buildings Equipment Accumulated depreciation Construction in progress Special assessments -noncurrent Note rcccivablc -noncurrent Other noncurrent assets Unamortized loan costs Total assets LIABILITIES Accounts payable and other current liabilities Dcfctted revenue Deposits Accrued intcrest payable Payable from restricted assets: Accounts payable Current maturities o1'bonds payable Accmed intcrest payable Customer deposits Noncurrent liabilities: Duc within one year Duc in more than one year Total liabilities NET ASSETS Invested in capiutl assets, net of related debt Restricted for Renewal and replacement Debt service Road and street expenditures Tourism and recreation Trcc replacement Public safety f'olicc training Capital projects Unrestriclcd Towl net assets Govcrumental Business-type Activities Activilies '1'utal S 7,264,747 S 4,003,724 S 11,268,471 15,188 488,665 503,856 896,373 9,720 906,093 5,414 SO,SG7 55,981 1,964 S],G75 83,639 - 10,362 10,362 - 3,x32,298 3,432,295 1,604,311 749,x9) 2,353,810 3,590,418 4,332,715 7,923,133 2,312,398 37,337,911 39,650,309 2,355,314 1,199,800 3,55,114 (2,510,279) (16,006,255) (18,516,534) 725,730 8,027,392 8,753,122 - 174,285 174,2$5 - 36,268 36,268 - 15,800 18,800 - 381,732 381,732 1 6,261,575 44,329,1 G 1 60,590,739 522,489 I ,204,654 I, 727,143 40,893 127,506 168,399 700 - 700 5,842 - S,842 - 489.202 489,202 - 541,91a 541,914 - 603,920 603,920 - 473,571 473,571 440,573 122,461 563,034 584,368 20,526,034 21,110,402 1,597,865 24,089,262 25,687,127 7,447,974 Ia,95a,546 22,402,820 - S95,500 59,500 73,976 - 73,976 1,531,597 - 1,531,597 89,686 - 59,686 25.466 - 25,466 102 - 102 19,633 - 19,633 36,81a - 36,814 5,438,465 4,389,53 9,828,018 S 14,663,713 S 20,239,899 S 34,903,612 "fhc accompanying notes to financial statements arc an integral part of th(s statement. -1S- .t A M FC o O N ~. M h O ~ q O>w k.~jG~. ~.: Q' W w `~ aoW w H A Uww ~+W a' aHw ~ < ~, a~rw+ w E: O p; O k. U II '[7 C ~ "' C d u y ° ~ E d da E a d d w ~' u a C ~ d .~ C V ,_ a 7 K ° E n w,.c 'v uL7 `~ ~ C d E E~ d d O .0 C C O A N ~ .G "' O ~ c •~ V .ed. ~ ~U e °J c d O a E~,"'c a ~~~ G ~, L ~ ~ U 0. L V w u 2° C ~ d t~ U ~o~~ M00 O\N ~ O O .~.i ~ .M.. ~ r u .,.i ~ di w .n o n v o0 N ~ W O M 00 P N O ~--~ N K Hl N O v D\ v ~ '~' v v v O V O M ~ ~ i 'S ~O l~ N w =~'"~°o M`p O~ ~~o 69 ~O OOMv ~ ~ ~ ~ ~ OOi W V rn Vi 00 O\ .••• N 00 O t~ M n O '?~~D Oo e~i 1~ N N r1 t~ ~O D\ O M 00 ~ M O ~_~ ~, ~~~ ~O O N ~O ~/l N t~ N N N ~ ~ h N N ~~o~~~ o [f ~ O 'V N t ~ ~O N ~ tt ff b ^ ~ ~ ~ . O v a ~ '~t N • • Vt N ~ M ~-+ M ^' vl N ..:.~ ~p r r ~ n n b V '~t ~ ~ ~ ~ '7 00 ~ o0 ~ r r ~ ~ v ~ v N N M- N 00 O~ N ~O 1~ M 1~ y~ N ~D O 1~ 00 n C ~ V O 'V N 1~ N f+'^'S ~ O N ~D ~, 'R Q+ V 1~ ~ I~ V1 N V'' M N O 'C N .•• ~ b M O\ M N M fh+l ~ ' ~ h 1~ N_ '~ b O M M I~ v M ~ ~ vMi' vO`~i v N O O V'1 M N vi -- 00 DO 00 00 ~ b ro0 00 DO N C o: v" oo r ~D 00 00 N 'Q ~O D\ O n ~c -= ~ I. M ~°o ~ ~~ ~. N 'V' t M M vi V~1 00 0i O~ O~+ N N N va o. y ~°c r ~ ~ N ~O w ~ N .M~ N ~ C .0 v ~. °L' ~, o m v pq ~ 7 ~n C e+ ~ ,~ u 7 ~n u '^ C O M M C~ H N~; v ~ ~ ~ C O O r >. K vi 61 ~" b Lv C P u O ~ ~ ofoN- " E 00 ~D ~ OL ~ C ~ v .'n ~-+ 00 •MI .n ~ ~av~wSS.~ ~ o ,L v ~ ~, ~ ~r u z z N v H u E c O ii v ,+ • ,~ ~ , c c 0 0 u H v •u E , 0 G e.~-. ~ o c W n ~ ~ E ~ ~ c ~ ~ Q ~ ~ a ~ d ,n o N n ~ • A c o r c ,o -~ u c oo v= o c ~ a 'C o P. C7 0 E- 0 C] 0 F 0 F- °: CITY OF ATLANTIC BEACH, FLORIDA, FLORIDA BALANCE SHEET' - GOVERNMENTAL FUNDS SEPTEMBER 30, 2003 ASSETS Equity in pooled cash and cash equivalents Receivables, net Due from other funds Due from other governments ]nventories Special assessment receivable -current Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable a~td accrued liabilities Due to other funds Deposits Deferred revenue Total liabilities Fund balances: Reserved for: Debt service Other Unreserved, reported in: Genera] fund Special revenue funds Capital projects fund Total fund balances Total liabilities and fund balances Nonmajor "Total Goacrnmeutal Governmental S 6,667,626 S 1,607,121 S 7,264,747 15,188 - 15,188 32,917 - 32,917 569,2 ] 0 327, l G3 S9G,373 5,414 - 5,414 1,964 - 1,964 S 6,282,319 $ 1,934,284 S 8,2 ] 6,603 S 398,396 $ 124,093 S 622,489 - 32,917 32,9 ] 7 700 - 700 42,857 - 42,857 44l ,953 157,010 598,963 - 73,976 5,414 - 5,834,952 - - 1,666,484 - 36,814 5,840,366 1,777,274 73,976 6,414 5,834,952 ] ,666,484 36,814 7, 617, 640 S 6,282,319 S 1,934,284 S 8,2 ] 6,603 The accompanying notes to financial statements arc an integral part of this statement. -20- CITY OF ATLANTIC BEACH, FLORIDA, FLORIDA RECONCILIATION OF BALANCE SHEET -GOVERNMENTAL FUNDS TO THE TO THE STATEMENT OF NET ASSETS SEPTEMBER 30, 2003 Fund balances -total governmental funds ~ 7,617,640 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore are not reported in the funds. Total capital assets 10,588,171 Less: Accumulated depreciation 2,510,279 8,077,892 Because special assessment revenues will not be collected for several months after the close of the City's fiscal year, they are not considered as "available" revenue in the governmental funds, and therefore, reported as deferred revenues. In the statement of net assets, which is presented on the accrual basis, no deferral is reported since the revenue is fully recognized in the statement of activities. 1,964 Long-term liabilities are not due and payable in the current period and accordingly are not reported as fund liabilities. Interest on long-term debt is not accrued in the governmental funds, but rather is recognized as an expenditure when due. All liabilities, both current and long-term, are reported in the statement of net assets. Long-term liabilities at year end consist of: Revenue bonds payable 629,918 Compensated absences 395,023 Accrued interest payable 8,842 (1,033,783) Net assets of governmental activities $ 14,663,713 The accompanying notes to financial statements are an integral part of this statement. -21 - CITT OF ATLANTIC BEACH, FLORIDA, FLORIDA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNllS FOR Tf-IE YEAR ENDED SEPTEMBER 30, ?003 Revenues Taxes Licenses and permits State-shared revenues Other intergovernmental revenues Charges for services Pines and forfeitures Interest income Miscellaneous revenues "Dotal revenues Expenditures Current: General government Public safety 't'ransportation Parks and recreation llebt service: Principal Interest and other Capital outlay Total expenditures Excess (deficiency) of revenues over cspcnditures Other financinb sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year, as restated 1' and balances, end of year Nonmajor 'l'ocal Governmental Governmental General Fwids Funds $ 4,042,231 S 1,165,157 S 5,207,388 44l ,808 - 441,80S 1,573,121 - 1,573,121 416,539 430,367 S46,I06 1,431,004 - 1,431,UU4 145,003 - 145,003 72,367 25,393 97,760 97,731 36,842 134,573 8,2 ] 9,804 ] ,657,759 9,877,563 2,083,773 52,752 2,136,525 3,930,290 52,971 3,983,261 l ,271,281 186,792 1,458,073 905,037 - 905,037 - 512,449 ~ 12,449 - 33,729 33,729 - 1,433,451 1,433,45] 8,190,38 l 2,272,144 10,462,525 29,423 (614,385) (584,962) 745,433 530,771 1,276,204 (475,578) (408,064) (883,642) 269,855 122,707 392,Sfi2 299,278 (491,678) (]92,400) 5,541,088 2,268,952 7,810,040 S 5,840,366 S 1,777,274 S 7,617,640 The accompanying notes to financial statements are an integral part of this statement. ~~ CITY OF ATLANTIC BEACH, FLORIDA, FLORIDA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2003 Net change in fund balances -total governmental funds Amounts reported for governmental activities in the statement of activities are different because: Govemmental funds report capital purchases as expenditures. However, in the statement of activities, the cost of those assets is depreciated over their estimated useful lives and reported as depreciation expense. Expenditures for capital assets 1,730,351 Less: Current year depreciation ~ 452,823 Less: Transfer of capital asset to proprietary funds 113,089 In the statement of activities, only the loss on the sale/disposal of capital assets is reported. However, in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balance by the cost of the capital assets sold/disposed. Because special assessment revenues will not be collected for several months after the close of the City's fiscal year end, they are not considered as "available" revenues in the governmental funds. In the statement of activities, presented on the accrual basis, these revenues are recognized. Repayment of long-term debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Debt interest expense Compensated absences Change in net assets - govemmental activities 1,164,439 (74,857) (14,084) 512,449 G21 (29,064) (28,443) $ (192,400) $ 1,367,104 The accompanying notes to financial statements are an integral part of this statement. - 23 - CITY OF ATLANTIC BEACII, hLOF21llA, FLORIDA STATEMENT Or NE'I'ASSETS - PROPRIETARY FUNDS SEPTEA9BER 30, 2003 )3usiness-Type Activities-Enterprise Funds Utility Storn»vatcr Sanitation 'T'otal r1 SS ETS Current assets: Equity in pooled cash and cash cquivalcnts S 2,988,333 S 342,855 S 672,536 S 4,003,724 Accounts rcccivablc -net 412,452 17,309 58,907 488,CiG8 Inventories 9,720 - - 9,720 Duc from other governments 34,65() 15,9 ] 7 - 50,567 Special assessments -current 81,675 - - 81,675 Note rcccivablc -current 10,362 - - 10,362 Restricted assets: Equity in pooled cash and cash cquivalcnts 2,401,251 1,031,047 - 3,432,298 Capital assets: Land 749,499 - 749,499 Buildings 4,332,715 - - 4,332,715 Improvements other than buildings 35,243,466 2,094,445 - 37,337,91 1 Equipment 993,461 19U,G30 15,709 1,199,500 Accumulated depreciation (15,698,952) (294,694) (12,609) (1 6,006,255) Construction in progress 5,204,387 2,823,005 - 8,027,3>2 Special assessments -noncurrent 174,285 - - 174,285 Note rcccivablc -noncurrent 3(,268 - - 36,268 Other noncurrent assets 18,800 - - 18,800 Unamoritzcd loan costs 321,453 GU,279 - 381,732 Total assets 37,313,825 6,280,793 734,543 44,329,161 LIABILITIES Current liabilities payable from current assets: Accounts payable and accrued liabilities 597,706 535,254 71,694 1,204,654 Deferred revenue 72,635 1 1,981 42,890 127,506 Current liabilities payable from restricted assets: Accounts payable 336,948 152,254 - 489,202 Current maturities of bonds payable 441,082 100,832 - 541,914 Accrued interest payable 487,851 1 16,069 - 603,920 Customer deposits 473,571 - - 473,571 Noncurrent liabilities: Uuc within one year 122,461 - - ] 22,461 Duc in more than one year 16,937,899 3,588,]35 - 20,526,034 Totalliabilitics 19,470,153 4,504,525 114,584 24,089,262 NE'T' ASSETS Invested in capital assets, net of related debt 13,767,048 1,184,698 3,100 14,954,846 Restricted for renewal and replacement CiG1,799 233,701 - 895,500 Unrestricted 3,414,825 357,869 G 16,859 4,389,553 Total net assets S 17,843,672 S 1,776,268 S 619,959 S 20,239,899 "fhe accompanying notes to financial statements are an integral part of this statement. -24- CITY OF ATLANTIC BEACH, FLORIDA, FLORIDA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS - PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2003 Business-Type Activities - Enterprise Funds Utility Stormwater Sanitation Totals Operating revenues Charges for services: Customer charges $ 5,465,381. $ 370,455 $ 1,250,113 $ 7,085,949 Miscellaneous revenues 337,224 - - 337,224 Total operating revenues 5,802,605 370,455 1,250,113 7,423,173 Operating expenses Personal services 1,342,843 193,909 4,255 1,541,007 Contractual services 842,425 114,543 875,426 1,832,394 Supplies 311,419 34,201 - 345,620 Repairs and maintenance 108,994 30,094 - 139,088 Heat, light and power 469,732 - - 469,732 Depreciation 1,533,154 102,029 1,605 1,636,788 Other expenses 1,168,547 363,425 146,202 1,678,174 Total operating expenses 5,777,114 838,201 1,027,488 7,642,803 Operating income (loss) 25,491 (467,746) 222,625 (219,630) Nonoperating revenues (expenses) Connection charges 47,179 - - 47,179 Other intergovernmental revenues 26,339 - - 26,339 Interest income 71,967 6,464 9,032 87,463 Interest expense (890,936) (146,929) - (1,037,865) Amortization of loan costs (16,818) (3,148) - (19,966) Total nonaperating revenues (expenses) (762,269) (143,613) 9,032 (896,850) Income (loss) before contributions and transfers Capital contributions and grants Transfers in Transfers out Change in net assets Nct assets, beginning of year Net assets, end of year (736,778) (611,359) 231,657 (1,116,480) 319,040 367,303 - 357,067 (424,360) - - 686,343 - 357,067 (212,180) (636,540) (842,098) 113,011 18,685,770 1,663,257 19,477 (709,610) 600,482 20,949,509 $ 17,843,672 $ 1,776,268 $ 619,959 $ 20,239,899 The accompanying notes to financial statements are an integral part of this statement. -25- CITY OF' ATLANTIC BEACH, hLORIDA, FLORIDA STATEMEN'[' OF CASH FLO~~'S - PROPI2IETARY FUNDS FOR'I'1IE YEAR ENDED SGP7'EAII3EI2 30, 2003 Cash flows from operating activities Casli received from customers Cash paid to suppliers Cash paid to employees Net cash provided by operating activities Caste flows from noncapital financing activities Connection charbes Interbovernmental revenues Transfers in Transfers out Net cash provided by (used in) noncapital financing activities Cash flows from capital and related financing activities Collections on note receivable Collections on special assessments Capital contributions nixed asset additions Principal payments on bonds payable Interest paid Net cash used in capital and related financing activities Cash flows from investing activities Interest received Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, bebinning of year Cash and cash equivalents, end of year Business-Type Activities -Enterprise Funds Utility Storrs»vatcr Sanitation 'Totals S 5,862,266 (2,379,536) (1,324,404) 2,158,326 47,179 (9,116) (424,360) S 427,423 S I ,251,787 S 7,54 ] ,476 (283,449) (1,020,348) (3,683,333) (193,909) (4,255) (1,522,568) (49,935) 227,184 2,335,575 243,978 - - (212,180) 243,978 (212,180) 10,362 - 55,22 I - 319,040 351,386 (3,305,939) (1,922,157) (396,759) (90,964) (865,427) (149,075) (4,183,502) (1,810,810) 47, ] 79 (9,116) 243,978 (636,540) 10,362 55,21 670,426 (5,228,096) (487,723) (1,014,502) - t.,,»-,,., ~..~ 71,967 6,464 9,032 87,463 (2,339,506) (1,610,303) 24,036 (3,925,773) 7,729,090 2,984,205 648,500 1 1,361,795 S 5,389,584 S 1,373,902 ~ 672,536 S 7,436,022 The accompanying notes to financial statements are an integral part of'this statement. _ 2Ci _ (Continued) CITY OF ATLANTIC BEACH, FLORIDA, FLORIDA STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2003 (Continued) • Business-tvpe Activities -Enterprise Funds Utility Storm~vatcr Sanitation Totals Reconciliation of operating income to net cash provided by operating activities Operating income (loss) $ 25,491 $ (467,746) $ 222,625 $ (219,630) Adjustments to reconcile operating income to net cash provided by (used in) operating activities: Depreciation 1,533,154 102,029 1,605 1,636,788 Loss on disposal of capital assets 10,363 183,691 - 194,054 Change in assets and liabilities: Accounts receivable (9,094) 44,987 (41,216) (5,323) Inventory 33,378 - - 33,378 Accounts payable and accrued liabilities 477,836 75,123 1,280 554,239 Customer deposits 22,459 - - 22,459 Accrued compensated absences 18,445 - - 18,445 Deferred revenue 46,294 11,981 42,890 101,165 Net cash provided by operating activities $ 2,158,326 $ (49,935) $ 227,184 $ 2,335,575 Reconciliation of cash and cash equivalents to balance sheet Equity in pooled cash and cash equivalents in current assets $ 2,988,333 $ 342,855 $ 672,536 $ 4,003,724 Restricted equity in pooled cash and cash equivalents 2,401,251 1,031,047 - 3,432,298 Total cash and cash equivalents $ 5,389,584 $ 1,373,902 $ 672,536 $ 7,436,022 Noncasl~ activity Net capitalized interest expense $ 65,405 $ 90,916 $ - $ 156,321 Transfer of asset from governmental activities $ - $ 113,089 $ - $ 113,089 Amounts payable on construction in progress $ - $ 396,601 $ - $ 396,601 The accompanying notes to financial statements are an integral part of this statement. -27- CITY OF ATLANTIC BEACH, FLORIDA, FLORIDA STATEMENT OF FIDUCIARY NET ASSETS - FIDUCIARY FUNDS SEPTEI•413ER 30, 2003 Pension Trust Funds ASSETS Cash and cash equivalents with trustee S 41,905 Investments with trustee 9,429,797 Total assets 9,471,705 LIABILITIES Accounts payable and accrued liabilities 20,647 NET ASSETS I-Ield in Trust for Pension Benefits 9,451,08 Total net assets 5 9,451,055 The accompanying; notes to financial statements are an integral part of this financial statement. -25- CITY OF ATLANTIC BEACH, FLORIDA, FLORIDA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS - FIDUCIARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2003 Pension Trust Funds Additions Contributions: Employees $ 83,995 Employer 470,858 State of Florida 88,641 Total contributions 643,494 Net increase in fair value of investments 917,661 Investment expenses (77,232) Total additions 1,483,923 Deductions Refunds of contributions 8,062 Benefits 484,892 Total deductions 492,954 Net increase 990,969 Net assets, beginning of year Net assets, end of year 8,460,089 $ 9,451,058 The accompanying notes to financial statements are an integral part of this statement. -29- CITY OF ATLANTIC BEACH, FLORIllA NOTES TO FINANCIAL STATEMENTS SEPTEM I3ER 30, 2003 (1) Summary of Significant Accounting Policies: The accounting; policies of the City of Atlantic Beach, Florida, Florida (the City), conform to accounting principles generally accepted in the United States of America as applicable to governments. "fhe following is a summary of the more sig,Tnificant policies used in the preparation of these financial statements. (a) Reporting entity-The City of Atlantic Beach, Florida, Florida was incorporated in 197, under a charter in accordance with the laws of the State of Florida, Florida Statutes Section ~7- l 126. The City operates under a form of government which comprises an elected City Commission (four Commissioners and aMayor-Commissioner) and provides, under the administration of an appointed City Manager, the following services: public safety, public works (streets and infrastructure), recreation, sanitation, stormwater, planning, zoning, water and sewer, and general government services. As outlined in Governmental Accounting Standards Board (GASB) Statement No. 14,1'hc Reporting Crotty, and GASB Statement No. 39, Determining lVhcther Certain Orgunizulions arc Component U-rits art Amendmcrrt to GASB Stalcrucnt No. 14, the financial reporting entity consists of the primary government, organizations for which the primary governments is financially accountable, and other organizations whose exclusions would cause the reporting entity's financial statements to be misleading or incomplete. Each potential component unit is individually evaluated using specific criteria outlined in GASB Statement No. 14, to determine whether the entity is: a) part of the primary government; b) a component unit which should be included in the reporting entity (blended or discreetly presented); or c) an organization which should be excluded from the reporting entity entirely. The principal criteria for classifying a potential component unit include the legal separateness of the organization, the financial accountability of the primary government for the potential component unit resulting from either the primary government's ability to impose its will on the potential component unit, or the potential component unit's fiscal dependency on the primary government. Based upon the application of these criteria, the City has no component units. (b) Government-vide and fund t7nancial statements-"1'he government-~~~ide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the City. For the most part, the effect of interfund activity has been removed from these statements. Governmentul actrvities, which normally arc supported by taxes and intergovernmental revenues, arc reported separately from hus•ines•s-type uctil~ities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment arc offset by program revenues. Direcl expenses arc those that arc clearly identifiable with a specific fw~ction or activity. Indirect costs arc included in the program expense reported for individual functions and activities. Prvgrum revenues include (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or activity and (2) grants and contributions that arc restricted to meeting the operational or capital requirements of a particular function or activity. Taxes and other items not properly included among program revenues are reported instead as general rel~enues. -30- CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003 (1) Summary of Significant Accounting Policies: (Continued) Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. (c) Measurement focus, basis of accounting, and financial statement presentation-The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounti~tg, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as al] eligibility requirements imposed by the provider have been met. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the City's water and sewer function and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include: (1) charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Governmental fund financial statements are reported using t11e current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Taxes, intergovernmental revenue, licenses and permits, charges for services, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. -31- CITl' OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003 (1) Summary of Significant Accounting Policies: (Continued) The City reports the following major governmental fund: The General Fu~rd is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The City reports the following major proprietary funds: The Utility Fund accounts for the activities of the City's water and sewer distribution systems and for the use of bond construction proceeds for capital projects related to the utility system. The Sa~trtatio~t Fu~td accounts for the activities of the City's sanitation system. The Stor»nvater Fund accounts for the activities of the City's stonnwater system. Additionally, the City reports the following fund types: Special Revenue Funds-The special revenue funds arc used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. Debt Service Funds-The debt service fund is used to account for the accumulation of resources for, and the payment of, long-term genera] obligation debt principal, interest and related costs other than obligations payable from the operations of the proprietary funds. Capital Projects Funds-The capital projects funds arc used to account for the financial resources to be used for the acquisition or construction of major capital facilities and improvement projects (other than those financed by proprietary funds or special revenue funds). Pension Trust Funds-These funds account for the activities of the Employees Retirement System, which accumulates resources for pension benefit payments to qualified Police Officers and General Employees. Private-sector standards of accounting and financial reporting issued prior to llecember ] , 19b9, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private- sector guidance for their business-type activities and enterprise funds, subject to this same limitation. "I'he City has elected not to follow subsequent private-sector guidance. -32- CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003 (1) Summary of Significant Accoiintin~ Policies: (Continued) Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. (d) Budgets-General governmental revenue and expenditures accounted for in budgetary funds are controlled by a budgetary accounting system in accordance with various legal requirements which govern the City's operations. Budgets are monitored at varying levels of classification detail; however, expenditures cannot legally exceed total appropriations at the individual fund level. The City uses encumbrance accounting. All appropriations lapse at year end. Unexpended items which are encumbered at year end are reappropriated in the subsequent year. Encumbrances of governmental funds at September 30, 2003 were $376,500. Budgets are adopted for all governmental funds (general, special revenue, debt service and capital projects funds). The City Manager is authorized to transfer budgeted amounts within departments within any fund; however, any revisions that increase the total expenditures of any department or fund must be approved by the City Commission. All necessary supplemental appropriations are adopted by the City Commission and are included in the reported budgetary data. The budget presented in the accompanying required supplemental information is prepared in conformity with accounting principles generally accepted in the United States of America. (e) Cash and investments-Except where prohibited, cash resources of the individual funds are combined to form a pool of cash and investments. Investments in the pooled cash fund consist primarily of cash invested with the State Board of Administration. Interest income earned on the pooled cash and investments is distributed to the appropriate funds based on the average monthly balance of investments in each fund. Investments are valued at fair market value (see Note 2). For the purposes of the statement of cash flows, the City's proprietary funds consider cash and cash equivalents to include cash and investments with an original maturity of three months or less. (f) Receivables-Receivables are recorded at their net realizable value. The allowance for uncollectible accounts and assessments at September 30, 2003, in the enterprise funds is $91,520. - 33 - CITY OF ATLANTIC BEACH, FLORIllA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, ?003 (1) Summary of Si~nif7cant Accounting Policies: (Continued) (g) Interfwid receivables and payables-Activity between funds that are representative of ]ending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds." Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. Any residual balances outstanding between the governmental activities and business-type. activities arc reported in the government-wide financial statements as "internal balances." (h) Inventories-Inventories consisting principally of expendable materials, supplies and fuel are determined by physical count at the City's year end on an annual basis and are valued at the lower of cost (first-in, first-out) or market. On the balance sheet -governmental funds, the inventory balance reported is offset by a fund balance reserve which indicates that it does not constitute "available spendable resources" even though it is a component of net current assets. The cost of governmental fund-type inventories is recorded as an expenditure when consumed. (i) Restricted assets-Certain enterprise fund assets arc required to be segregated from other current assets due to various bond indenture agreements and City ordinances. These assets arc legally restricted for specific purposes, such as debt service, new construction, and renewals and replacements. (j) Capital assets-Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, drainage improvements, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Property, plant, and equipment with initial, individual costs that equal or exceed 51,000 and estimated useful lives of over one year arc recorded as capita] assets. Capital assets arc recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The City has implemented the provision of Governmental Accounting Standard Board's Statement Number 34. In this process, infrastructure assets are being accounted for using different methods. For governmental activities, the cost or estimated cost of roads, sidewalks and drainage arc presented currently and prospectively. After a complete inventory, valuation and determination of cost, or estimated cost of donated roads, sidewalks and drainage, infrastructure will be added to the current and prospective values to arrive at total estimated cost prior to the fiscal year ending September 30, 2007. For business-type activities, infrastructure assets have been capitalized at cost. Utility improvements are being depreciated over their useful lives. Major outlays for capital assets and improvements are capitalized as projects arc constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. -34- CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003 (1) Summary of Significant Accounting Policies: (Continued) Properly, plant, and equipment are depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings and improvements 10 - 40 Improvements other than buildings 10 - 50 Machinery and equipment 3 - 40 (k) Long-term obligations-In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. (]) Compensated absences-Accumulated unpaid vacation and sick pay are accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported. The computed liability is in accordance with GASB Statement No. 16, Accounting for Compensated Absences. (m) Revenue recognition iJtility revenues are reported on the accrual basis in the accompanying financial statements. Restricted grant revenues, which are received but not expended, are recorded as deferred revenues. Grant revenues receivable are recorded when reimbursable expenditures on those grants have been incurred but not reimbursed. (n) Property taxes-The assessment of all properties and the collection of all property taxes are made through the Property Appraiser and Tax Collector of the City of Jacksonville, Florida. General property taxes are recorded as received, in cash, which approximates taxes levied less discounts for the can ent fiscal year. Taxes are levied on November 1 of each year. All taxes become delinquent on April 1 of the following year. Discounts are allowed for early payment. On or prior to June 1, interest-bearing certificates are sold for all uncollected real property taxes. Unsold certificates are held by the City of Jacksonville, Florida. (o) Interfund transactions~uring the course of normal operations, the City has various transactions between funds to construct assets and comply with local ordinances and other legal restrictions. These transactions are reflected as transfers. In addition, certain transfers have been made between systems and accounts of the utility enterprise fund as required by bond covenants. - 35 - CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEIVII3ER 30, 2003 (2) Deposits and Investments: The City maintains a cash and investment pool that is designed for use by all funds, except for those monies which are periodically transferred to the pension custodian. In addition, investments are separately held and individually accounted for by several of the City's funds where contractual arrangements and bond covenants provide for and require such arrangements. "I'he deposits and investments of the pension trust funds which have been transferred to the pension custodian are held separately from those of other City funds and are required to be administered by an investment manager. At September 30, 2003, the carrying amount of cash on hand and on deposit with banks, including interest- bearing deposits was 5633,958, and the related bank balance was 5442,700. Monies which arc placed on deposit with financial institutions in the form of demand deposit accounts, time deposit accounts and certificates of deposit are defined as public deposits. All of the City's public deposits are held in qualified public depositories pursuant to Florida Statutes, Chapter 280, "Florida Security for Yublic Deposits Act." Under the Act, all qualified public depositories are required to pledge eligible collateral having a market value equal to or greater than the average daily or monthly balance of all public deposits, times the depository's collateral pledged level. The pledging level may range from 50%~ to 125% depending upon the depository's financial condition and establishment period. All collateral must be deposited with an approved financial institution. Any losses to public depositors are covered by applicable deposit insurance, sale of securities pledged as collateral and, if necessary, assessments against other qualified public depositories of the same type as the depository in default. Accordingly, all deposits are considered category one credit risk under GASB Statement No. 3. The City's investment practices are also governed by hlorida Statutes, which allow the City to invest in certificates of deposit, money market certificates, obligations of the U.S. Treasury, its agencies and instrumentalities, repurchase and reverse repurchase agreements collateralized by U.S. securities, and the State Board of Administration. The pension trust funds are also authorized to invest in corporate bonds, preferred stocks, common stocks, and mutual funds. Cash and investments at September 30, 2003, are categorized in accordance with GASB Statement No. 3 to indicate the level of risk assumed by the City. The pension investments held by Sun'I'rust Trust Department and Merrill Lynch are considered to be category one credit risk investments, which means that they are fully insured (5100,000 per participant). The deposits and investments with state agencies (State Board of Administration) are not classified by credit risk since they are held by independent agencies. The City is a member of the Local Government Surplus Funds Trust Fund Investment Pool (the fool) that is administered by the State Board of Administration of Florida (SBA). This pool is a " 2a-7 like" pool which has the characteristics of a money market fund. Therefore, the fair value of the City's position in the Pool is the same as the value of the Pool shares. Funds that have not been transferred to the state investment pool arc placed in a money market fund. The Bank of America Repurchase Agreement is invested in treasury funds and is not classified by credit risk since this is a mutual fund. 'I'hcrc were no violations of the legal or contractual provisions for deposits and investments. -3G- CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003 (2) Deposits and Investments: (Continued) The total cash and cash equivalents and investment balances of the City at September 30, 2003, are comprised of the following items: Cash and cash equivalents Petty cash on hand $ 1,938 Checking and repurchase agreement 442,700 Investment with State Board of Administration 14,298,039 Total cash and cash equivalents 14,742,677 Less: Cash and cash equivalents, restricted, including $41,908 of cash and cash equivalents with trustee 3,474,206 Total cash and cash equivalents, unrestricted $ 11,268,471 Pension trust investments SunTrust Short-Term Treasury Portfolio $ 26,732 SunTrust High-Grade Equity Fund 4,417,957 SunTrust High-Grade Bond Fund 4,130,537 Merrill Lynch American Euro Pacific Growth 854,500 Merrill Lynch Ready Assets 71 Total pension trust investments $ 9,429,797 Restricted cash and investments at September 30, 2003, in the enterprise funds follows: Customer Renewal and Deposits Replacement Construction Account Debt Service Total Enterprise fund Utility fund $ 473,571 $ 500,000 $ 498,747 $ 928,933 $ 2,401,251 Stormwater Fund $ - $ - $ 814,146 $ 216,901 $ 1,031,047 (3) Special Assessments: During 1991, the City imposed a special assessment on residents in a certain area of the City known as "Section H" to recover a portion of the costs of water and wastewater improvements constructed by the City in that area. Assessments are payable in equal annual installments through 2010 plus interest at 5.35% (reduced from 8% in 1999). During 1993, the City imposed other special assessments on residents in certain areas of the City known as "Ocean Grove Unit 2," "Dewees," and "Seminole" (shown below as Other Assessments) to recover the cost of water and wastewater improvements constructed by the City in those areas. Assessments are payable in equal monthly installments through 2004 plus interest at 5.91 %. -37- CITY OF ATLANTIC BEACH, FLORIllA NOTES TO I'INANCIAL STATEMENTS SEPTEMI3ER 30, 2003 (3) Special Assessments: (Continued) During 1998, the City imposed a special assessment on residents in a certain area of the City kno~~m as "Beach Avenue" to recover the costs of sewer improvements constructed by the City in that area. Assessments are payable in equal monthly installments through 200) plus interest at G.00~%,. During 2002, the City imposed a special assessment on residents in a certain area of the City kno~~m as "Selva Marina" to recover the costs of water lines, stormwater improvements and street improvements constructed by the City in that area. Assessments arc payable in equal monthly installments over one year plus interest at 7.00%. Following is a summary of the outstanding balances at September 30, 2003: Special assessment receivable, September 30, 2003 Less: current portion Special assessment receivable - noncurrent (4) Receivables: 13cach Section 1-I Avenue Sch~a Other Assessment Assessments Marina Assessments 'Total 5 223,000 5 18,570 5 1,964 $ 14,390 5 257,924 57,000 14,844 1,964 9,831 83,639 5 1 GG,000 5 3,726 5 - 5 4,559 5 174,285 Receivables, net of the allowance for doubtful accounts at September 30, 2003, consists of the following: Less Total Allowance Accounts Accowrts for lloubtful Receivable Fund Receivable Accounts Net General 5 15,188 5 - 5 15, 188 Utility 493,673 (81,221) 412,452 Stormwater 19, ] G3 (1,854) 17,309 Sanitation 67,352 (8,440 58,907 Total 5 595,376 5 (91,520) 5 503,856 Included in accounts receivable arc 5203,261 of water and sewer revenues earned but not billed as of September 30, 2003. -38- CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003 (5) Note Receivable: During 1993, the City signed an agreement with a new mobile home park customer which allowed the customer to pay its sewer connection fee over an extended period. An initial down payment of $20,000 was received in 1993 on the total connection fee of $175,432. Per agreement, the remainder will be paid in 180 equal monthly installments of $863.51 beginning April 1, 1993, with no interest ($10,362 was received during 2003). The City has reserved the right to terminate service in the event of nonpayment. Following is a summary of the outstanding balance at September 30, 2003: Note receivable, September 30, 2003 $ 46,630 Less: Current portion 10,362 Note receivable -noncurrent $ 36,268 (6) Capital Assets: Capital asset activity for the fiscal year ended September 30, 2003 is as follows: Governmental activities: Capital assets, not being depreciated - Land Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated - Buildings Improvements other than buildings Machinery and equipment Total capital assets, being depreciated Less accumulated depreciation for- Buildings Improvements other than buildings Machinery and equipment Total accumulated depreciation Total capital assets, being depreciated, net Governmental activities capital assets, net Beginning Balance Increases Decreases $ 1,604,311 $ - $ - 582,567 720,536 577,373 2,186,878 720,536 577,373 3,064,161 1,766,959 2,197,545 7,028,665 526,257 665,747 395,185 1,587,189 120,308 237,416 357,724 707,335 289,143 1,230,754 2,227,232 4,801,433 $ 6,988,311 73,715 92,240 286,868 452,823 1,134,366 $ 1,854,902 7,219 162,557 169,776 187,948 $ 765,321 Ending Balance $ 1,604,311 725,730 2,330,041 3,590,418 2,312,398 2,355,314 8,258,130 781,050 374,164 1,355,065 2,510,279 5,747,851 $ 8,077,892 -39- CITI' Or ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003 (6) Capital Assets: (Continued) 'The beginning balance of governmental activities capital assets has been adjusted to reflect the removal of improvements to infrastructure assets totaling $1,263,420 that were previously reported in the general fixed assets account group. 13cl;innittg Endllig Balance Increases llecrcases Balance Business-type activities: Capital assets, not being depreciated - Land Construction in progress Total capital assets, not being dcprcciatcd Capital assets, being depreciated - Buildings hnprovements other than buildings Machinery and equipment Total capital assets, being dcprcciatcd Less accumulated depreciation for - Buildings Improvements other tliat~ buildings Machinery and equipment Total accumulated depreciation Total capital assets, being depreciated, net Business-type activities capital assets, net $ 749,499 S - S - S 749,499 2,949,829 5,204,775 127,212 8,027,392 3,699,328 5,204,775 127,212 8,776,891 4,328,554 4, 161 - 4,332,715 36,946,133 575,472 183,694 37,337,911 1,131,640 80,590 12,430 1,199,800 42,406,327 660,223 196,124 42,870,426 2,795,949 148,332 - 2,944,28 ] 10,843,879 1,376,622 - 12,220,501 731,466 111,834 1,828 841,472 14,371,294 1,636,788 1,828 16,006,254 28,035,033 (976,565) 194,296 26,864,172 S 31,734,361 S 4,228,210 S 321,508 $ 35,641,063 Depreciation expense was charged to functions/programs as follows: Governmental activities: Genera] governmental Public safety "Transportation Parks and recreation Total depreciation expense-governmental activities Business-type activities: Utility Stormwater Sanitation Total depreciation expense-business-type activities S 1 17,934 161,836 74,068 ~)R X5;5 S 452,823 S 1,533,154 102,029 i rns -4U- CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003 (7) Long-Term Debt: Revenue bonds payable are comprised of the following: Utilities System Revenue Bonds, Series 1996 payable in annual installments of principal and semiannual installments of interest through October 1, 2025, bearing coupon rates of 3.90% to 5.50%, secured solely by a pledge of and lien on net water and sewer system revenues and certain other revenues as defined in the bond ordinances. $ 20,695,000 SunTrust Revenue Refunding Bonds, Series 1999 payable in annual installments of principal and semiannual installments of interest a rate of 4.20%. The note is secured by the City's utility service taxes. 1,417,006 Total revenue bonds payable 22,112,006 Less: Unamortized discount 401,312 Less: Unamortized refunding loss 12,828 Long-term debt, net $ 21,697,866 The annual requirements to amortize all revenue bonds payable outstanding at September 30, 2003, are as follows: Governmental Activities Long-Term Debt Business-Type Activities Long -Term Debt Year Ending September 30, Principal Intcrest Total Principal Intcrest Total 2004 $ 45,550 $ 25,536 $ 71,086 $ 541,915 $ ],137,338 $ 1,679,253 2005 48,950 23,485 72,435 571, I G4 1,111,634 1,682,798 2006 SO,000 21,439 71,505 592,557 1,084,373 1,676,930 2007 53,213 19,270 72,483 621,491 ],055,346 1,676,837 2008 53,930 17,042 70,972 652,387 1,024,046 1,676,433 2009 - 2013 309,014 48,084 357,098 3,801,114 4,663,738 8,464,852 2014 - 201 S 69,195 31,457 100,652 4,551,460 3,433,134 7,984,594 2019 - 2023 - - - 5,825,000 2,024,689 7,849,689 2023 - 2027 - - - 4,325,000 365,338 4,690,338 Totals $ 629,918 $ 186,313 $ 816,231 $ 21,482,088 $ 15,899,636 $ 37,381,724 Interest incurred during the year ended September 30, 2003, was $33,729 in the debt service fund and $1,194,184 in the enterprise funds. Of the amount incurred in the enterprise funds, $156,321 was capitalized. The City is also required to maintain certain debt service coverage ratios in accordance with bond resolutions. As of September 30, 2003, and during the year then ended, the City was in compliance with those ratios. On October 1, 2002, the City paid the outstanding balance of the SunTrust Revenue Note, Series 1995 in the amount of $468,257. The note was scheduled to mature on January 1, 2006 and was secured by a pledge of non-ad valorem revenues. -41 - CITY OF ATLANTIC BEACH, rLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003 (7) Long-Term Debt: (Continued) The following is a summary of the changes in long-term debt of the City for the year ended September 30, 2003: I3alancc I3alancc llue October 1, September ~~'ithin 2002 Additions Reductions 30, 2003 One Year Governmental Activities: Revenue bonds payable Compensated absences Governmental activities - long- term liabilities Business-type Activities: Revenue bond payable Less deferred amounts: For issuance discounts Loss on bond refunding; Total revenue bonds payable Compensated absences Business-type activities -long; term liabilities ~ 1,142,367 5 - 5 512,449 S 629,918 5 45,550 365,959 436,180 407,116 395,023 395,023 5 1,508,326 5 436,180 5 919,565 51,024,941 5 440,573 72,002,304 - 520,21E 21,482,088 541,914 432,522 - 31,210 401,312 - 14,111 - 1,283 12,828 - 21,555,67] - 487,723 21,067,948 541,914 104,01 G 99,814 81,369 122,461 122,461 521,659,687 5 99,814 5 569,092 5 21,190,409 5 664,375 (8) Defined Benefit Pension Plans: (a) Plan descriptions and contribution information-The City maintains ttvo separate single- employer pension plans, one for police officers and one for general employees, which cover substantially all full-time City employees. "fhe pension plans do not issue separate stand-alone financial statements. Membership of each plan consists of the following at September 30, 2002, the date of the latest actuarial valuation: General Employees Police Retirees and beneficiaries receiving benefits Disabled members and beneficiaries receiving benefits Terminated plan members entitled to but not yet receiving benefits Active plan members Total 25 7 2 2 13 3 75 26 115 38 - 42 - CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003 (8) Defined Benefit Pension Plans: (Continued) (i) General Employees' Retirement Plan Pla» Descriptio~i The General Employees' Retirement Plan provides retirement, disability and death benefits to plan members and their beneficiaries. The City Commission has the authority to establish and amend the benefit provisions of the plan. Co»tributiolis--The City is required to contribute at an actuarially determined rate. Plan members are required to contribute 2.0% of their annual covered salary. Contribution requirements are established by City code, which may be amended by the City Commission. (ii) Police Retirement Plan Pla» Description The Police Retirement Plan provides retirement, disability and death benefits to plan members and their beneficiaries. The Police Retirement Plan is governed by the Policemen's Pension Board of Trustees, although the City Commission retains the authority to establish and amend the benefit provisions of the plan. Co»tributio~zs-Plan members are required to contribute 1.0% (4.815% for nonunion participants) of their annual covered salary. The City is required to contribute at actuarially determined rates, if State of Florida contributions are not sufficient. Per City code, the City Commission may amend established contribution requirements. (b) Annual pension costs and net pension asset The City's annual pension cost and net pension asset to the General Employee's and Police Retirement Plans for the current year were as follows: General Employees Police Total Annual required contribution (ARC) Interest on net pension obligation Adjustment to ARC Annual pension cost Contributions made Net pension asset, end of year $ 315,106 $ 225,991 $ 541,097 315,106 225,991 541,097 (315,106) (244,393) (559,499) $ - $ 18,402 $ 18,402 Because a valuation has not been done as of September 30, 2003, the net pension asset has not been recorded in the accompanying financial statements. Administrative expenses of the plans totaling $23,702 were paid by the general fund. - 43 - CITY OF ATLANTIC BEACH, FLORIDt1 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003 (8) Defined Benefit Pension Plans: (Continued) (c) Other pension plan information=The annual required contributions for the current year were determined as part of the September 30, 2000, actuarial valuations for the Genera] Employees' and Police Retirement Plans using the individual entry-age actuarial cost method. "I'he actuarial assumptions include an 8.0% rate of return on investments and projected salary increases, which range from 5.5% to 8.5% for both plans. The assumptions did not include post retirement benciit increases. The actuarial value of assets was determined using market value and a funding value adjustment f~~r both plans. The unfunded actuarial accrued liabilities arc being amortized over remaining amortization periods of 7 to 30 years. Three-year trend information: Allllllal Ycrcentage Fiscal Year Ended PCIlSIOIl Cost of APC Net Pension September 30, (AI'C) Contributed Asset. General Employees 2001 266,148 100% - 2002 288,070 100% - 2003 315,106 100% - Police 20U ] 183,092 100°/~ - 2002 240,242 100% - 2003 225,991 108%~ ~ 18,402 (9) Intcrfund Accounts: Individual fund interfund receivables and payablcs, at September 30, 2003, consist of the following: lluc prom Due to Other Other Funds Funds General Non-major governmental ~ 32,917 S - - 32,917 $ 32,917 S 32,917 - 44 - CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003 (10) Interfund Transfers: Transfers of resources from a fund receiving revenue to the fund through which the resources are to be expended are recorded as transfers and are reported as other financing sources (uses) in the Governmental Funds and as transfers in (out) in the Proprietary Funds. Following is a summary of interfund transfers for the year ended September 30, 2003: Nonmajor General Governmental Stormwatcr Total Fund Funds Fund Transfers Out General Fund $ - $ 424,600 $ 164,067 $ 588,667 Nonmajor Governmental Funds 108,893 106,171 193,000 408,064 Utility Fund 424,360 - - 424,360 Sanitation Fund 212,180 - - 212,180 Total transfers in $ 745,433 $ 530,771 $ 357,067 $ 1,633,271 Transfers are used to move revenues from the fund that ordinance or budget requires to collect them to the fund that ordinance or budget requires to expend them. During the year ended September 30, 2003, the General Fund transferred assets to the Stormwatcr Fund with a net book value of $113,089. No amounts were reported in the governmental funds as the amount did not involve the transfer of financial resources. However, the Stormwatcr Fund did report a transfer in for the capital resources received. The Statement of Revenues, Expenditures and Changes in Fund Balances for Governmental Funds reports transfers out of $475,578, which is $588,667 less the transferred assets of $113,089. (11) Commitments: As of September 30, 2003, the City had outstanding commitments on contracts in progress as follows: Unexpended Contract Project Type Amounts Utility system improvements Stormwatcr system improvements General government improvements $ 478,519 273,928 315,608 On June 2, 1999, the City entered into an agreement with the City of Jacksonville, Florida, whereas the City of Jacksonville will provide advanced life support and fire services to the residents and businesses located in Atlantic Beach. The term of the agreement shall be from the effective date and continuing for a period of 25 years unless terminated earlier by the parties (such parties must provide a one year notice). For the year ended September 30, 2003, the City incurred $748,061 in services under this agreement. The amount will be adjusted annually by an amount equal to 103% of the previous year's amount for all services provided by the City of Jacksonville. - 45 - CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMI3EI2 30, ?003 (12) Contin~encics: The City is a defendant in several lawsuits which arose in the ordinary course of the City's business. It is the City's position that the probability is unlikely that material amounts will ever be payable as a result of these proceedings. (13) Risk Management: The City is exposed to various risks of loss related to torts; theft of; damage to and destruction of assets; errors and omissions; and natural disasters for which the City carries commercial insurance. Insurance against losses are provided through the Florida League of Cities, Inc. and Risk Management Associates, Inc. for the following types of risk: ^ Workers' Compensation and Employer's Liability • Automobile Liability ^ Automobile Physical Damage ^ Accidental Death and Dismemberment ^ General Liability ^ Public Officials' Liability ^ Property Coverage "The City's coverage for workers' compensation is under a retrospectively rated policy. Premiums are accrued based on the ultimate cost to-date of the City's experience for this type of risk. (14) Prior Ycar Restatements: In 2003, the City implemented Governmental Accounting Standards Board (GASH) Statement No. 34 Basic Financial Statement - and Managcnrcrrt's Discussion urrd Arrulysis - fvr Stutc and Local Goverrur:cuts, Statement No. 37, Basic FllrarlClal Staterrrerrts - Urld MaJlal~rGr)rL'!rt ~S' Drscrtssrorr urrd Arrulysis -for- Stute urrd Local Goverrrrnerrts: Omnibus, Statement No. 38, Certuin Firrarrciul Stutenrcrrt Note Disclosures, and Interpretation No. G, Recogrritiar and Mcusurem~nt of Certuin Liabilities and Expenditures irr Governmental Fund Finarrcrul Stutenrents. GASI3 Number 34 established new Cnancial requirements for all state and local governments and consist of the following: m Management's Discussion and Analysis Basic Financial Statements Government-wide financial statements, prepared using the economic resources measurement focus and the accrual basis of accounting. Fund financial statements that focus on major governmental funds and enterprise funds. Notes to the financial statements. Required supplementary information which requires disclosure regarding the modified approach used to record information. - 4G - CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2003 (14) Prior Year Restatements: (Continued) Additionally, this new statement required the elimination of the effect of internal service activities and required the recording of infrastructure assets and related depreciation. The impact of these restatements on governmental type activities is as follows: Fund balance, September 30, 2002 Reclassification of Internal Service Fund Adjusted Fund Balance, September 30, 2002 Capital assets -net Other long-term assets Bonds and capital leases payable -net Accrued interest payable Compensated absences Net assets -governmental activities as of September 30, 2003 Nonmajor Governmental General Fund Funds Total $ 5,556,211 $ 2,268,952 $ 7,825,163 (15,123) - (15,123) 5,541,088 2,268,952 7,810,040 6,988,311 - 6,988,311 16,047 - 16,047 (1,142,367) - (1,142,367) (9,463) - (9,463) (365,959) - (365,959) $ 11,027,657 $ 2,268,952 $ 13,296,609 - 47 - REQUIItEll SUI'I'LEIIIENTARY INFORMATION -4b- CITY OF ATLANTIC BEACH, FLORIDA, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULES OF PENSION FUNDING PROGRESS SEPTEMBER 30, 2003 General Employees' Retirement Plan Annual UAAL as Valuation Funded Covered Percentage Date AVA AAL UAAL Ratio Payroll of Payroll 9/30199 $ 4,650,000 $ 5,796,000 $ 1,146,000 80.2% $ 2,185,000 52.4% 9/30100 5,229,000 6,462,000 1,233,000 80.9% 2,330,000 52.9% 9/30/01 5,587,000 6,986,000 1,399,000 80.0% 2,462,000 56.8% 9/30/02 5,747,000 7,479,000 1,732,000 76.8% 2,768,000 62.6% Police Retirement Plan Annual UAAL as Valuation Funded Covered Percentage Date AVA AAL UAAL Ratio Payroll of Payroll 9/30/99 $ 3,393,000 $ 4,089,000 $ 696,000 83.0% $ 1,018,000 68.4% 9/30/00 3,791,000 4,615,000 824,000 82.1% 1,213,000 67.9% 9/30/01 4,068,000 5,016,000 948,000 81.1% 1,155,000 82.1% 9/30/02 4,230,000 5,334,000 1,104,000 79.3% 1,195,000 92.4% Analysis of the dollar amounts of actuarial value of assets, actuarial accrued liability, or unfunded actuarial accrued liability in isolation can be misleading. Expressing the actuarial value of assets as a percentage of the actuarial accrued liability provides one indication of the system's funded status on a going-concern basis. Analysis of this percentage over time indicates whether the system is becoming financially stronger or weaker. Generally, the greater this percentage, the stronger the plan. The unfunded actuarial accrued liability and annual covered payroll are both affected by inflation. Expressing the unfunded actuarial accrued liability as a percentage of covered payroll approximately adjusts for the effects of inflation and aids analysis of the progress being made in accumulating sufficient assets to pay benefits when due. Generally, the smaller this percentage; the stronger the plan. - 49 - CITY OF ATLANTIC BEACH, FLORIllA, FLORIDA REQUIRED SUPPLEMENTARI' INFOI~IVIATION SCHEDULES OF CONTRIBUTIONS FROM EMPLOYER AND OTHER CONTRIBUTING ENTITIES SEI'TEMBEI2 30, 2003 General Employees' Retirement Plan Annual Required Year Ended Contributed I'crcentagc September 30, (ARC) Contributed 2000 $ 259,4]4 100%~ 2001 266,148 100% 2002 288,070 ] 00"/<, 2003 315, 106 ] 00`%, Police Retirement Plan Year Ended September 30 Annual Required Contributed (ARC) Percentage Contributed 2000 $ 179,988 100`%, 2001 183,091 100'% 2002 240,242 100`% 2003 22.5,991 108`% The information presented in the required supplementary schedules was determined as part of the actuarial valuation at the dates indicated. Additional information for the general employees' and police retirement plans as of the latest actuarial valuation follows: Valuation llatc Actuarial Cost Method Amortization Method Remaining Amortization Period Asset Valuation Method Actuarial Assumptions Investment Rate of Return Projected Salary Increases Inflation September 30, 2002 Entry-Age Actuarial Cost Method Level Percent of Payroll, Closed 7 to 30 years Funding Value 8.00°/~ ~.~0`%, 5.00°/~ -50- CITY OF ATLANTIC BEACH, FLORIDA, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL- GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2003 Variance with Budgeted Amounts Final Budget - Positivc Original Final Actual Amounts (Negative) REVENUES Taxes $ 3,816,964 $ 3,816,964 $ 4,042,23 ] $ 225,267 Licenses and permits 273,100 .273,100 441,808 168,708 State-shared revenues 1,729,248 1,729,248 1,573,121 (156,127) Other intergovernmental revenues 406,254 406,254 416,539 10,285 Charges for services 1,436,695 1,443,032 1,431,004 (12,028) Fines and forfeitures 158,735 158,735 145,003 (13,732) Interest income 100,000 100,000 72,367 (27,633) . Miscellaneous revenues 108,000 108,000 97,73 ] (10,269) Total revenues 8,028,996 8,035,333 8,219,804 184,471 EXPENDITURES Current: General government: Legislative 42,929 42,929 41,340 1,589 Legal counsel 121,318 121,318 83,596 37,722 Planning and zoning 123,358 123,358 105,461 17,897 City clerk 237,070 237,070 202,002 35,068 Citymanagcr 257,428 257,428 235,492 21,936 Finance and accounting 1,066,956 1,066,956 1,029,947 37,009 Human resources 161,355 161,355 153,839 7,516 Other 262,085 262,088 232,096 29,992 Total general government 2,272,502 2,272,502 2,083,773 188,729 Public safety: Law cnfarccmcnt 2,797,865 2,797,865 2,699,783 98,082 Lifeguards 154,628 154,628 148,310 6,318 Firccontrol 834,765 834,765 767,651 67,114 Code enforcement 53,480 53,480 50,228 3,252 Building 297,278 298,557 264,3]8 34,239 Total public safety 4,138,016 4,139,295 3,930,290 209,005 Transportation: - Publicworks administration 435,274 435,274 424,017 11,257 Streets and roads 655,284 665,784 620,564 45,220 Flcct maintcnancc 219,451 228,172 226,700 1,472 Total transportation 1,310,009 1,329,230 1,271,281 57,949 Parks and recreation 928,448 928,448 905,037 23,411 Total expenditures 8,648,975 8,669,475 8,190,381 479,094 Excess of revenues over (under) expenditures (619,979) (634,142) 29,423 663,565 Other financing sources (uses): Transfers in 745,433 745,433 745,433 - Transfcrs out (454,600) (505,578) (475,578) 30,000 Total other financing sources (uses) 290,833 239,855 269,855 30,000 Excess of revenues and other sources over (under) expenditures and other uses (329,146) (394,287) 299,278 693,565 Fund balances, beginning of year 5,541,085 5,541,088 5,541,088 - Fund balances, end of year $ 5,211,942 $ 5,146,801 $ 5,840,366 $ 693,565 Sce notes to schedule of revenues, expenditures and changes in fund balance -budget and actual -genera] fund -51- CITY OF ATLANTIC BEACFI, FLORIDA, FLORIDA NOTES TO SCHEDULE OF REVENUES, EJ-:PENDITURES ANll CI~ANGES IN FUNll BALANCE - BUDGET AND ACTUAL -GENERAL FUNll FOI2 THE YEAR ENDED SEPTEMBER 30, ?003 Budgets and Budgetary Accounting-General governmental revenue and expenditures accounted for in budgetary funds are controlled by a budgetary accounting system in accordance with various legal requirements which govern the City's operations. Budgets arc monitored at varying levels of classification detail; however, expenditures cannot legally exceed total appropriations at the individual fund level. )/ncumbrances arc recorded. Unexpended items which arc unencumbered at year end must be reappropriated in the subsequent year. Budgets are adopted for all governmental funds (general, special revenue, debt service and capital projects funds). The City Manager is authorized to transfer budgeted amounts within departments within any fund; however, any revisions that increase the total expenditures of any department or fund must be approved by the City Commission. All necessary supplemental appropriations arc adopted by the City Commission a~ld arc included in the reported budgetary data. The budget presented in the accompanying required supplemental information is prepared in conformity with accounting principles generally accepted in the United States of America. -52- SUPPLEMENTARY INFORMATION - 53 - O d N N ~, N ~, N N ~, ~= c ow ~ c c' o: ` •~ r M M M i M w CJ ~ ~ ~ ~ ~ c v^.1 ~n ~ ~ r N DO ~ ~ ~ N ~ ' N N O~ • 00 M N N N N ~ C - r. ~ .7. ~ C C V N N ~ ~ o~ oo r h r ~~ ~o ~ ~ - v~ O~ o0 ~r~ ~ 00 ~ ,r~ 00 ,r 00 ,~ v •C N M t, : M M O r V ~ ~ ~ ~ C ^' U O M M f~ h O N 00 V M N N O O ~ ~:. i N r r ~ P Q\ ~ v7 J ~~ U F ~i r o ~ rn ~ ~ ~ O~ V V' .--• 'C W N N 00 00 ~ ~O F ~ ~' J N C W c c r .c .. ~ ~ ~ W W M 0 0 M V 07 D 'J ~ 00 ~ = _~ E r _. v~ ri ~ ~ o+ ~ c. ~ o~ ~ ~ `; Q 47 . a o ca o0 00 oc oc c o0 ~;,N F ~ O ~ U u ^ ~ „ U ~ in in v, ~ k: ~ ~+ -' t/~ ~ 00 m 00 00 ~ r~ N m U , C O P W VJ V `7 _ (~ ~ N N K ~/'1 O i - - N F% p ro ~ `° ~ r .. h r . _ . W ~ ~ i vi ~n ~n v~ Lc. ~/: i~ O U c c+ o c~ - - w oo a P O G~ O 00 00 N N O F / ... .G ~ Ci• .~ o ~ N ~ N ~ ~ 00 ~ DO .~ F ~.., ~ r o W ~., v , 00 00 o o ~ L ~i ^~ ~ ~ h f~ OG O C ^`` r ~ N ~ N '-' ~p O O O O C y ~.^. V' ~: ! L^. '~ v7 t I, O i ~ ~/1 N ~ N ~ ~ N v N V N U F. v~ w v3 v~ c ~ ~ u 4: _ r U . ~ u f - ti ~ ~ ~ u ~ u u _ ~ U G r. U h u ~ ~ ~ („ - E .J ~ C ^J '~ s ~ ~ ~ ~ ~ ~ ou a ~ ~ ~ ~ v ~ c ~ ~ ~ -o ~ ~ c -_ ~ n `u ~n c~ ,~ p `'~ ` u .v ~ u ~ ~ o n o N ~:_ o :. F .. `' ... ~ u v= " c ' .c v .. ,,, u a~ '. ~ c ~ W C O J O [" O C G -T N ~ W ~~ O n W~ n W ~ O _ ~ N O O~ O ' O~ ~Y oo N D ~D ~ N V d is ~N 'O r I p N ~ M N r 'V N M V'1 I M ~ M r O C C ~D M O~ . ~ ~ ~ o w W .- ~ O U w v3 ~ ~ ' o o ~ ~ ~ ~ _ g o O K M oo O~ N ' 00 Do O ~ '~ O O N M ~D ~O O (/~ 'd ti h h M M Vl Va` A w va vi w ~ ~ ~ ~ ~ ~ W o r ~ a M r M r M M r r M n Q Z A A ~ o' ~ C ; ~ ~ of va ~ O W wC7p ~a~ a~ M =o~ ~ ~ ~ M V ~ h Q a ° ri r' M N o .~i o M ~ N v ~ ~ ~ o 00 W W ~o ~. v i oo ? ~ Ca ~ h ~ ^. _ U O W •~ w va vj ~ F 'L Q o z ~ '^ ~ M o o Q r~ w - N N N ~ N N N ~ a ~ O W ~" U W fIj fH /1 ~ H FK-f ~:. U.aCG Q O ca w U ~ w u •= z • " ~ O v ° a U ' ~~ p 2 A ~ M N ~ N 'O ~ 4~ 4~. 7 '~ 4 C ~ . C ~ Q ~ H ~ ~~ ~ + ~ V w ~ W v~ G .v u ~ .~ ~ .a ~ a ~ v C E ~ F" ,v 7 ~ ~ ca ~ ~ ~ .~ ~ 'G v QA d aC] v~U N W A o J c w ~ o 0 a ~ :~ ~- H H N Q ' C~ C C C i v. ~ ~: ~ U~ F nc U~ f- C Q ~ .~ ~ ~ 4 k. O~ H ~ U~ n 0 . N r ~ % n ~ C ' v. ~ .~ n >~ w ~ ~ , N ~+% i {a; 4: ' r C C 4i 1 O ~ ~ i ¢ '~ i 47 "' O ~ C O 'C u K ? O O _ h 00 `1 ~ K ~O G ~~ - = n n~ n ' ' N N P ' W' N _ ' W h N r~ OO h ~ ~ _ U ~" ' ~ L ~~ r'1 ? K N rv P K N {i ~ O !`' V v, ~• M rn N P P .~ -r r O C N NI ~ ~ W 00 ~~ i v1 i ~ ~ h h O , !~ O ~ V W V ~~ ~ ~o ~o r, ,-, I+1 ~ r; .. n = L V ~ /i v~ ~O K ~O m K .{ N N n ~O P `D ' P P N ' r v N v7 V F" r1 ~D ~p V1 N h~ ~ P P W W 1~ r m O ~. ~ N N N1 r+~ K r ~ V) C C w rv K ~O O ~ N 'O ~ • ' ~ 1 ' ' ' 6 O ~ O00 O ~ n ~O Y G O• N - h p p oo O O P o F c w O O - .~ .., .o .. ~. _ ~ V C ~ vi ~ ^ ~ _ - q n o o ~ ~ o U _ _ j ~+ v~ C ~O h N O N vi ^ N h C .G R ~ h r1 ~ P ~ N O~ h ' _ M W 1 ~ -1 !~ h O - "I _ ~1 O E"' NO /~1 ~D ~ ~O O b r1 e` O N ~U r v1 ^- 'O W N ~ - h .~ vi 'n c ~ ~ - .~ d E ' ~ ~ ~ ~ ~ ~ ,N„ O C r - .~ -* ~ ~ P P F' M N 5 v3 ~, i u _ u 7. u V v ~ c ~ ~ « ~ ~ ~ ` V _ .G G L C C paa ~ u G c o - ~ v ~ _ f- l:.l F- ~ t+. -~ h h ~'1 N U ~n a -r .n N r N O~ D\ v+ h a ~r N v+ ~ h oo h n~ o 00 r N ~n ? n ~ C N1 e'f 00 h h 0\ h ~ 'V' h V - ~'1 h O h ~O Oi N C n R ~ b E C ~/1 O h ~O h ~D M N m of R N N ~D N NI Al N h h oo - f~f e~f h .. V1 •T b O W N •'1 O N h Q .. - O. ? ~ ~O N r h l ~ O f o w ^ ~ ~ N .. ri ._ ~ O C7 w '^ O. P h ~/1 n O ~ ^ h M1 r h N '^ u r'l M ~ O m ~ ~ ~ h h h r ~ ~ W .• .G C U ^ ~ - h v i e ~t M r n U G` w w ~ ~ 'O 'O o. o. oo ~ ~ ~ ~ ~ `~ ~ o O. O~ h. ~ oo ~ ~ oo b rn av w w w M 0 ~ N N q o' h a0 MI Y1 f1 h O N e^1 -e~a~ oo N .- N P V' ~/1 h O. ~'1 vi hrnh ~ ~ a;v .~ N a N ee~~ N O. ~O h vio v ~l O h N °T V f7 r h N f1 h 00 b ~ N .•• ~ N N ~O Vl 00 Vl V'1 00 N ~ O~ N O 00 ~l ~ V M MI ? ~O~pp~ O ~O b ~ ~ - - N .] tl ~ ,c w 'A W .e i W v ~+ N = v •~1 h O o ~o h 00 'Q 00 ~D n r r N v R e N o 7 v1 ~ u ,~ i et ~ v ~ N ~ ~ ~ ri vi .- h o0 0o rv n - W W ,~ ' u ^ e ~ 7 vi o .~ e~ ... N ~ ~. q o v ~ ~ o' V V ~ w w a~ < d ~ o , N .~ ~ NO ~ ~ a e ~ W '.' ~ .~ b ~ .,, ~ 7 O~ ~'1 N , ~n h - ' N en r r .-i O ~ ~~~ ~ `.'~ ^ O b h N i~ 9 C N z a a E ~ I U w w I ~ u 9 i ~ u ~ b ~ ~ u ~ u ~ G H _ U v L M ~ V I O 7 9G~ ~ ~ ~ T u C ~ C tJ O u ~ O Dp ~ . c c C ' p O V ~'.~ ' qy~~ u O ~ gi ~ u O r~ O pp O q 0 PO ~ ~ u y M y~ L u 'd M C M ~ c . ~ '^ t~~ t ^ C~ °~ e ~'r' O. 7 'O W u y C O 4 G C .~ mo d u yy F ~ G v O 6 C C . d U U 6l C u C F n ` Y U ~ L' . . C O N 0 Q u 0 ~ C7 1-~~ n 6 v ` V ~.. ~ ~ ~ o ~° a ~ d K ~ ~ • S a = p .. -. ~ , . D N u . e . O. dF o U o ~U ~° rHF c ~' ~ o 0.' ~-• W H W O F 'L 4. W a_( Nr ~ O. L,i. t .." i t ~ ~ tl i U~ <~ F~ 4~ ~. Oi ~ I U r CITY OF ATLANTIC BEACH, FLORIDA, FLORIDA SCHEDULE OF EXPENll1TUItES OF FEllEI2AL AV1'ARUS FOR THE YEAR ENDED SEI'TEMI3ER 30, 2003 Federal/ Pass=Through Entity CFUA Federal Program Title Number U.S. llcpartmcnt of Housing and Urban llevclopment Passed through City of Jacksonville, Florida Community Development Block Grant 14.218 U.S. Department of Justice Passed through Florida Department of Law Enforcement Byrne Grant -Mobile Computers 16.579 U.S. llcpartmcnt of Justice Passed through Office of Justice Programs Local Law Enforcement Block Grant - FY2001 16.592 Local Law Enforcement Block Grant - FY2002 16.592 U.S. Department of Justice Passed through Bureau of Justice Assistance Bulletproof Vest Partnership Grant 16.607 Contract/ Cram Number Nrogram A tir~a rd Program Expenditures 5629-22 03-CJ-SA-04-26-02-029 200 ] -LB-Ba-4109 2002-LB-BX- ] 699 03018357 U.S. llcpartmcnt of Environmental Protection Passed through Florida Department of Environmental Protection Nonpoint Source lmplementation - 319 Program 66.460 C9994515-99-0 'Ibtal Federal Awards -58- S 180,658 8 ] 70,570 44,999 44,694 14,402 9,170 15,720 15,720 5,385 428,450 5,385 367,303 G89,614 $ 612,842 CITY OF ATLANTIC BEACH, FLORIDA, FLORIDA NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2003 (1) Basis of Presentation: The accompanying Schedule of Expenditures of Federal Awards includes the Federal award activity of the City of Atlantic Beach, Florida, Florida and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A- 133, Audits of States, Local Governments and Non-Profit Organizations. -59- CITY OF ATLANTIC BEACH, FLORIDA, FLORIDA SCHEDULE OF FINDINGS ANll QUESTIONED COSTS FOR THE PEAR ENDED SEPTEMBER 30, ?003 I. Summary oI' Auditors' Results: Financial Statements: o Type of audit report issued on the basic financial statements: Unqualified There were no reportable conditions related to internal control disclosed by the audit of the basic financial statements. The audit did not disclose any noncompliance which was material to the basic financial statements. Type of report issued on compliance for major programs: Unqualified o The audit did not disclose any audit findings, which arc required to be reported in accordance with Section 510(a) of OMB Circular A-l 33. Major program identification: CFDA Number 66.460 - Nonpoint Source lmplcmentation Dollar threshold used to distinguish between "Type A and "Type B programs was 5300,000. Auditee did not qualify as a low-risk auditec as defined in OMB Circular A-133. lI. Basic Financial Statements Findings: None. III. Federal Award Findings and Questioned Costs: None. IV. Summary Sclicdulc oI' Prior Audit Findings: m "There were no audit findings for the year ended September 30, 2002 relative to federal programs requiring action on the part of the auditce for that fiscal year. V. Corrective Action Plan: There was no corrective action plan necessary for the year ended September 30, 2003 since there were no audit findings in the auditors' report for that fiscal year. -60- JAMES MOORS ~ CO., P.L. CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS INDEPENDENT AUDITORS' REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER COMPLIANCE APPLICABLE TO EACH MAJOR FEDERAL AWARDS PROGRAM To the Honorable Mayor, City Commissioners, and City Manager Of City of Atlantic Beach, Florida, Florida: Compliance We have audited the compliance of the City of Atlantic Beach, Florida, Florida, with the types of compliance requirements described in the U.S. Off ce of Mattage»tent and Budget (OMB) Circular A=133 Compliance Supplement that are applicable to each of its major federal awards programs for the year ended September 30, 2003. The City of Atlantic Beach, Florida, Florida's major federal awards programs are identified in the summary of auditors' results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal awards programs is the responsibility of the City of Atlantic Beach, Florida, Florida's management. Our responsibility is to express an opinion on the City of Atlantic Beach, Florida, Florida's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Gover~tntetit 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 awards program occurred. An audit includes examining, on a test basis, evidence about the City of Atlantic Beach, Florida, Florida's 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 of Atlantic Beach, Florida, Florida's compliance with those requirements. In our opinion; the City of Atlantic Beach, Florida, Florida, complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal awards programs for the year ended September 30, 2003. Internal Control Over Compliance The management of the City of Atlantic Beach, Florida, Florida, is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal awards programs. In planning and performing our audit, we considered the City of Atlantic Beach, Florida, Florida's internal control over compliance with requirements that could have a direct and material effect on a major federal awards program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on the internal control over compliance in accordance with OMB Circular A-133. -61- 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 ]ow level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major federal awards prol,~ram 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 weal.~nesses. This report is intended solely for the information and use of the City Commission and management, and respective federal awarding agencies and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties. ~~ Daytona Beach, Florida December 5, 2003 -62- JAMES MOORS &. CO., P.L. CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS INDEPENDENT AUDITORS' REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF BASIC FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERN1l1ENTAUDITING STANDARDS To the Honorable Mayor, City Commissioners, and City Manager Of City of Atlantic Beach, Florida, Florida: We have audited the basic financial statements of City of Atlantic Beach, Florida, Florida, as of and for the year ended September 30, 2003, and have issued our report thereon dated December 5, 2003. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Gover-unent Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether City of Atlantic Beach, Florida, Florida's basic 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 financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Repnrtin~ In planning and performing our audit, we considered City of Atlantic Beach, Florida, Florida's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the basic, financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting 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 misstatements in amounts that would be material in relation to the basic 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. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of management, the City Commissioners, and the office of the Auditor General, State of Florida and agencies providing state and federal financial assistance and is not intended to be and should not be used by anyone other than these specified parties. Daytona Beach, Florida December 5, 2003 d~ ~~. - 63 - THIS PAGE INTENTIONALLY LEI~T BLANK. -64- JAMES MOORS ~ CO., P.L. CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS MANAGEMENT LETTER OF INDEPENDENT AUDITORS REQUIRED BY CHAPTER 10.550 RULES OF THE AUDITOR GENERAL To the Honorable Mayor, City Commissioners, and City Manager of City of Atlantic Beach, Florida, Florida: We have audited the basic financial statements of City of Atlantic Beach, Florida, Florida, as of and for the fiscal year ended September 30, 2003, and have issued our report thereon dated December 5, 2003. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Gover~z--re-rt Auditing Sta-rdards, issued by the Comptroller General of the United States. We have issued our Independent Auditors' Report on Compliance and on Internal Control Over Financial Reporting dated December 5, 2003. Disclosures in that report, if any, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with the provisions of Chapter 10.550, Rules of the Auditor General, which govern the conduct of local governmental entity audits performed in the State of Florida and require that certain items be addressed in this letter. The Rules of the Auditor General (Section 10.554 (1) (g) l.a.) require that we comment as to whether or not inaccuracies, shortages, defalcations, fraud, and/or violations of laws, rules, regulations, and contractual provisions reported in the preceding annual financial audit report have been corrected. There were no comments n-ade in the preceding annual financial audit report. The Rules of the Auditor General (Section 10.554 (1) (g) l.b.) require that we comment as to whether or not recommendations made in the preceding annual financial audit report have been followed. There were no recommendations made in the preceding annual financial audit report. As required by the Rules of the Auditor General (Section 10.554 (1) (g) 2.), the City of Atlantic Beach, Florida has complied with Section 218.415, Florida Statutes, regarding the investment of public funds. The Rules of the Auditor General (Sections 10.554 (1) (g) 3., and 4.) require disclosure in the management letter of the following matters if not already addressed in the auditors' report on compliance and internal control or schedule of findings and questioned costs: (1) recommendations to improve financial management, accounting procedures, and internal controls; (2) violations of laws, rules, regulations, and contractual provisions that have occurred, or were likely to have occurred, and were discovered within the scope of the audit; (3) illegal or improper expenditures discovered within the scope of the financial audit that may or may not materially affect the financial statements; (4) improper or inadequate accounting procedures (e.g., the omission of required disclosures from the financial statements); (5) failures to properly record financial transactions; and, (6) other inaccuracies, shortages, defalcations and instances of fraud discovered by, or that came to the attention of, the auditor. None of the aforementioned was discovered within the scope of our audit. . - 65 - The Rules of the Auditor General (Section 10.554 (1) (g) 5.) also require that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in the management letter, unless disclosed in the notes to the financial statements. The City of Atlantic Beach, Florida, was established by Florida Statutes Section ] 65.031(4), Chapter 57-1126. There are no component units related to the City of Atlantic Beach, Florida, Florida. As required by the Rules of the Auditor Genera] (Section 10.554 (1) (g) 6.a.), the scope of our audit included a review of the provisions of Section 218.503 (1), Florida Statutes, "Determination of Financial Emergency." In connection with our audit, we determined that the City of Atlantic Beach, Florida, Florida, is not in a state of financial emergency as a consequence of the conditions described in Section 2 ] 8.503(1), Florida Statutes. As required by the Rules of the Auditor General (Section 10.554 (1) (g) 6.b.), we determined that the annual financial report for the City of Atlantic Beach, Florida, Florida, for the fiscal year ended September 30, 2003, was filed with the Department of Banking Finance pursuant to Section 218.32 (] ) (a), Florida Statutes, and is in agreement with the annual financial audit report for the fiscal year ended September 30, 2003. As required by the Rules of the Auditor General (Section 10.554 (1) (g) 6.c.), the scope of our audit included application of financial condition assessment procedures pursuant to Rule 10.556(8) of the Auditor General. It is management's responsibility to monitor the City's financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. 'T'his report is intended solely for the information and use of the Auditor General of the State of Florida, management, and the City Commissioners, and is not intended to be and should not be used by anyone other than these specified parties. ~ ~~ Daytona Beach, Florida December 5, 2003 -66-