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Comprehensive Annual Financial Report City of Fernley, Nevada For the Fiscal Year Ended June 30, 2011 Prepared by: Finance Department Melville Drown Finance Director City Treasurer ---PAGE BREAK--- CITY OF FERNLEY, NEVADA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2011 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal i-v GFOA Certificate of Achievement vi Organization Chart vii List of Principal Officials viii FINANCIAL SECTION Independent Auditor’s Report 1-2 Management’s Discussion and Analysis 3A-3L Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Assets 4 Statement of Activities 5 Fund Financial Statements: Balance Sheet – Governmental Funds 6 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets 7 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds 8 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 9 Statement of Net Assets – Proprietary Funds 10 Statement of Revenues, Expenses and Changes in Net Assets – Proprietary Funds 11 Statement of Cash Flows – Proprietary Funds 12 Statement of Fiduciary Assets and Liabilities – Fiduciary Fund 13 Notes to Financial Statements 14-36 Required Supplementary Information: Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget (Budgetary Basis) and Actual – General Fund 37-39 Reconciliation of the General Fund (Budgetary Basis) to the General Fund (GAAP Basis) Schedule of Revenues, Expenditures, and Changes in Fund Balances 40 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget (GAAP Basis) and Actual – Grants Fund 41 Schedule of Funding Progress – Other Postemployment Benefit Plans 42 Notes to Required Supplementary Information 43 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2011 TABLE OF CONTENTS (Continued) OTHER SUPPLEMENTARY INFORMATION: Reconciliation of the General Fund (Budgetary Basis) to the General Fund (GAAP Basis) Combing Balance Sheet 44 Nonmajor Governmental Funds: Combining Balance Sheet 45 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 46 Governmental Special Revenue Funds: Nonmajor Special Revenue Funds Combining Balance Sheet 47 Nonmajor Special Revenue Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 48 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget (GAAP Basis) and Actual: Municipal Court Administrative Fees Fund 49 Municipal Court Facilities Fees Fund 50 Residential Construction Tax District #2 Fund 51 Transient Lodging Tax Fund 52 Governmental Capital Projects Funds: Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget (GAAP Basis) and Actual: Capital Projects Fund 53 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget (GAAP Basis) and Actual: Nonmajor Capital Improvement Fund 54 Proprietary Funds: Schedule of Revenues, Expenses and Changes in Net Assets – Budget (GAAP Basis) and Actual: Water Utility Enterprise Fund 55 Sewer Utility Enterprise Fund 56 Fiduciary Funds: Municipal Trust Fund Statement of Changes in Assets and Liabilities 57 Internally Reported Funds: Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget (Budgetary Basis) and Actual: Streets and Storm Drains Fund 58 Private Sector Community Support Fund 59 Residential Construction Tax District #1 Fund 60 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2011 TABLE OF CONTENTS (Continued) Schedule No. Page STATISTICAL SECTION Financial Trends Information: Net Assets by Component 1 61 Change in Net Assets 2 62-64 Fund Balances of Governmental Funds 3 65 Changes in the Fund Balances of Governmental Funds 4 66 Revenue Capacity Information: Assessed and Estimated Actual Value of Taxable Property 5 67 Property Tax Rates - Direct and Overlapping Governments (Per $100 of Assessed Value) 6 68 Principal Property Owners 7 69 Water User Fees 8 70 Principal Water Users 9 71 Debt Capacity Information: Ratios of Outstanding Debt by Type 10 72 Ratios of General Bonded Debt Outstanding 11 73 Computation of General Obligation Direct and Overlapping Debt 12 74 Computation of Legal Debt Margin 13 75 Water and Sewer Funds Revenue Bond Coverage 14 76 Demographic and Economic Information: Demographic Statistics 15 77 Major Employers 16 78 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2011 TABLE OF CONTENTS (Continued) Schedule No. Page Operating Information: Full-time Equivalent City Government Employees by Function – Last Ten Fiscal Years 17 79 Operating Indicators by Function/Program – Last Nine Fiscal Years 18 80 Capital Asset Statistics by Function/Program – Last Ten Fiscal Years 19 81 COMPLIANCE SECTION Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 82-83 Independent Auditor’s Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 84-85 Schedule of Expenditures of Federal Awards 86 Notes to Schedule of Expenditures of Federal Awards 87 Schedule of Findings and Questioned Costs 88-89 Summary Schedule of Prior Year Audit Findings 90 Auditor’s Comments: Statute Compliance 91 Progress on Prior Year Statute Compliance 91 Prior Year Recommendations 91 Current Year Recommendations 91 Schedule of Fees Imposed Subject to the Provisions of NRS 354.5989 Limitation of Fees for Business Licenses 92 Independent Accountant’s Report on NRS 354.6241 93 ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- vi ---PAGE BREAK--- City Clerk/Court Administrator City Manager City Attorney Municipal Court Judge Community Development Director Public Works Director Parks and Recreation Director City Treasurer/ Finance Director Payroll/Accounts Payable Technical Specialist II Accounting Technician II Accounting Technician II Technical Specialist II Deputy City Clerk Building Official GIS Coordinator Senior Planner Permit Technician Permit Technician Code Enforcement/ Building Inspector (½ time) Code Enforcement/ Building Inspector Vector Control Supervisor Maintenance Supervisor Administrative Specialist Technical Specialist II Court Clerk II Office Assistant II Technical Specialist II Assistant Public Works Director Public Works Superintendent Public works Supervisor Mechanic Water Meter Reader Maintenance Worker Animal Control Officer Court Clerk II Maintenance Worker Maintenance Worker Maintenance Worker IT Specialist City Council/Mayor Legal Secretary Water Meter Reader Water Senior Public Works Worker Water Public Works Worker Water Public Works Worker Water Public Works Worker Streets Senior Public Works Worker Streets Public Works Worker Streets Public Works Worker Wastewater Treatment Plant Operator Wastewater Treatment Worker Wastewater Treatment Worker Senior Water Treatment Operator (contract vacant) Water Treatment Plant Operator III Water Treatment Plant Operator II (2 vacant positions) Water Treatment Plant Operator I (vacant) Water Treatment Plant Operator II (contract ) Water Treatment Plant Operator I (2 positions -contract) Citizens of City of Fernley Directors Statutory positions and City Manager (contract) City Staff Deputy Finance Director Organization Chart -May 2009 vii ---PAGE BREAK--- City Council Mayor LeRoy Goodman Council Member Ward 1 Kelly Malloy Council Member Ward 2 Don Parsons, Sr. Council Member Ward 3 Roy Edgington Council Member Ward 4 Curt Chaffin Council Member Ward 5 Cal Eilrich The Fernley City Council meets in regular session the first and third Wednesday of the month in the Council Chambers in City Hall located at 595 Silver Lace Boulevard, Fernley, Nevada. Staff Interim City Manager Fred Turnier City Attorney Brandi Jensen Chief of Police Allen Veil Municipal Court Judge Daniel Bauer Building Official James Ball City Clerk Lena Shumway Community Development Director Fred Turnier Finance Director/City Treasurer Melville Drown City Engineer Shari Whalen viii ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- 3-A Management’s Discussion and Analysis As management of the City of Fernley, we offer readers of the City of Fernley’s financial statements this narrative overview and analysis of the financial activities of the City of Fernley for the fiscal year ended June 30, 2011. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages i through vi of this report. Financial Highlights The assets of the City of Fernley exceeded its liabilities at the close of the most recent fiscal year by $145,517,272 (net assets). Of this amount, $13,277,666 (unrestricted) may be used to meet the government’s ongoing obligations to citizens and creditors. The government’s total net assets decreased by $3,035,371. The decrease is primarily attributable to the reduction in cash and investments used for the payment of the debt service for the water treatment plant which was put in service in 2010. As of the close of the current fiscal year, the City of Fernley’s governmental funds reported combined ending fund balances of $3,243,150, an increase of $193,128 in comparison with the prior year. The increase is primarily the result of a budget savings of $105,337 for group insurance resulting from a reduction in benefits. With the exception of the non-spendable, restricted, and assigned balances totaling $2,019,478 the funds are available for spending at the government’s discretion (unassigned fund balance). At the end of the current fiscal year, unassigned fund balance for the general fund was $1,223,672 or 33% of general fund expenditures. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Fernley’s basic financial statements. The City of Fernley’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. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City of Fernley’s finances, in a manner similar to a private-sector business. The Statement of Net Assets presents information on all of the City of Fernley’s assets and liabilities, with the differences 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 of Fernley is improving or deteriorating. ---PAGE BREAK--- 3-B The Statement of Activities presents information showing how the government’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 periods uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City of Fernley that are principally supported by taxes 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 of Fernley include general government, judicial, public works, culture and recreation, community development, and health. The business- type activities of the City of Fernley are water and sewer operations. The government-wide financial statements can be found on pages 4 through 5 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 Fernley, 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 of Fernley can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are 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 government’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 balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Fernley maintains eight 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 and the two funds, which are considered major funds. Data for the other five governmental funds are combined into a single, aggregated presentation. Individual fund data for each of ---PAGE BREAK--- 3-C these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The City of Fernley adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 6 through 9 of this report. Proprietary funds. The City of Fernley maintains two proprietary funds as enterprise funds to account for its potable water and sewer (wastewater) operations. Enterprise funds are 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 for the water and sewer operations. The Water Fund and Sewer Fund are considered to be major funds of the City of Fernley. The basic enterprise fund financial statements can be found on pages 10 through 12 of this report Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City of Fernley’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on page 13 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 14 through 36 of this report Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain supplementary information. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 44 through 60 of this report. ---PAGE BREAK--- 3-D Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. In the case of the City of Fernley, assets exceeded liabilities by $145,517,272 at the close of the most recent fiscal year. A large portion of the City of Fernley’s net assets (89%) reflects its investment in capital assets land, buildings, machinery, and equipment); net of any related outstanding debt used to acquire those assets. The City of Fernley uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Fernley’s investment in its 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 Fernley’s Net Assets Governmental Activities Business-type Activities Totals FY11 FY10 FY11 FY10 FY11 FY10 Current & other assets $ 4,022,176 $ 3,906,619 $ 14,364,996 $ 17,300,501 $ 18,387,172 $ 21,207,120 Capital assets 42,817,760 43,003,602 170,671,868 172,875,230 213,489,628 215,878,832 Total Assets 46,839,936 46,910,221 185,036,864 190,048,816 231,876,800 236,959,037 Long-term liabilities 4,106,620 4,274,438 77,346,108 79,035,761 81,452,728 83,310,199 Other liabilities 944,060 1,036,970 3,962,740 4,755,375 4,906,800 5,792,345 Total liabilities 5,050,680 5,311,408 81,308,848 83,791,136 86,359,528 89,102,544 Net assets: Invested in capital assets, net of related debt 38,683,760 38,680,602 91,669,313 92,141,040 130,353,073 130,821,642 Restricted 1,886,533 363,402 - - 1,886,533 363,402 Unrestricted 1,218,963 2,554,809 12,058,703 14,812,790 13,277,666 17,367,599 Total net assets $ 41,789,256 $ 41,598,813 $103,728,016 $106,953,830 $ 145,517,272 $148,552,643 A portion of the City of Fernley’s net assets represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($13,277,666) may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Fernley is able to report positive balances in all three 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. The government’s net assets decreased $3,035,371 during the current fiscal year. The decrease is primarily due to the scheduled debt service payment in the amount of $5,216,006. ---PAGE BREAK--- 3-E Governmental activities. Governmental activities increased the City of Fernley’s net assets by $190,443. The following table summarizes the change in net assets for the current and prior fiscal years: Governmental Activities Business-Type Activities Total FY11 FY10 FY11 FY10 FY11 FY10 Revenues: Program revenues: Charges for services $1,560,667 $1,817,215 $6,445,283 $6,658,068 $8,005,950 $8,475,283 Operating grants and contributions 133,460 61,500 4,893 441,742 138,353 503,242 Capital grants and contributions 3,933,102 1,538,400 1,897,368 908,392 5,830,470 2,446,792 General revenues: Property taxes 1,473,876 1,410,347 - - 1,473,876 1,410,347 Shared revenues 412,832 561,429 - - 412,832 561,429 Other revenues 187,585 73,085 222,951 506,220 410,536 579,305 Total revenues 7,701,522 5,461,976 8,570,495 8,514,422 16,272,017 13,976,398 Expenses: General government 1,499,967 1,762,449 - - 1,499,967 1,762,449 Judicial 204,071 265,515 - - 204,071 265,515 Public works 1,871,798 1,824,412 - - 1,871,798 1,824,412 Culture & recreation 734,553 622,998 - - 734,553 622,998 Community develop. 2,817,551 1,247,018 - - 2,817,551 1,247,018 Health 193,303 262,865 - - 193,303 262,865 Interest and Fiscal 189,836 198,144 - - 189,836 198,144 Water - - 9,271,351 9,420,709 9,271,351 9,420,709 Sewer - - 2,524,958 2,641,510 2,524,958 2,641,510 Total expenses 7,511,079 6,183,401 11,796,309 12,062,219 19,307,388 18,245,620 Change in net assets 190,443 (721,425) (3,225,814) (3,547,797) (3,035,371) (4,269,222) Net assets July 41,598,813 42,320,238 106,953,830 109,805,477 148,552,643 152,125,715 Prior period adjustment - - - 696,150 - 696,150 Net assets June 30 $41,789,256 $41,598,813 $103,728,016 $106,953,830 $145,517,272 $148,552,643 ---PAGE BREAK--- 3-F FY11 Program Revenues and Expenses- Governmental Activities 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 General Govt Revenue General Govt Expenses Judicial Revenues Judicial Expenses Public Works Revenues Public Works Expenses Culture & Rec Revenues Culture & Rec Expenses Comm. Dev. Revenues Comm Dev Expenses Health Expenses Program $ in thousands Program Expenses Capital Grants and Contributions Operating G&C Charges for services The major sources of program revenues for general government activities are business licenses and public utility license/franchise fees. The program expenses associated with general government activities include the operations of the Office of the City Manager, the Office of the City Clerk, Mayor and City Council activities and a portion of the expense for the Finance Department. The sources of program revenue for judicial activities include fines and fees (unassigned) as well as administrative assessment and court facility fees (restricted). The program expenses associated with judicial activities include expenses for the Judge, City Prosecutor, Public Defender, and direct court costs. Overhead costs are not allocated. The major sources of program revenues for public works activities are dedications (non- cash transactions) of streets and storm drain systems from developers, regional transportation commission distributions, fuel taxes, and shared county property tax revenues. The program expenses associated with public works activities are operating costs and depreciation related to streets and storm drain activities. Overhead costs are not allocated. The major sources of program revenues for culture and recreation activities include grants, dedications of park property and improvements, and residential construction tax. The program expenses associated with culture and recreation activities include the operating costs in the general fund parks budget and depreciation related to two residential construction tax funds for which the Parks Department is responsible. Overhead costs are not allocated. The major source of program revenues for community development activities is building permits and fees. Planning fees are also included in program revenues. The program ---PAGE BREAK--- 3-G expenses associated with these revenues include the operations of the Community Development Department. It is important to note that other, non-routine Community Development expenditures are grouped in this category. Overhead costs are not allocated. The health operations of the City include animal control and vector control activities. Neither of these activities produces significant revenue. The program revenue consists of animal license fees and donations. The major sources of general revenues (revenues that are not specifically allocated to a particular program) are property taxes, consolidated taxes, fuel taxes and interest earnings. Charges for Serv., $1,561 , 20% Oper. Grants & Contr., $133 , 2% Capital Grants & Cont., $3,933 , 51% Property Tax, $1,474 , 19% Shared Revenues, $413 5% Other, $188 , 3% FY11 Revenues by Source - Governmental Activities (in thousands of The Charges for Services category includes primarily fees, fines, and licenses. The Capital Grants and Contributions primarily include grants and donated (dedicated) infrastructure (streets and storm drains). The Shared Revenue category includes primarily consolidated tax, fuel tax and gaming licenses. The Other category includes interest income and other miscellaneous sources of revenue. Capital projects and donated (dedicated) infrastructure represent the largest part of the increase. Business-type activities. Business-type activities decreased the City of Fernley’s net assets by $3,225,814. The key element of this decrease is the recording of interest expense in the amount of $3,696,707. Charges for services for business-type activities decreased by $212,785 or 3.2% Operating grants decreased $436,849. All grant activity is now recorded in the Grants Fund. Capital contributions increased $988,976 or 52% primarily due to the recording of dedicated water rights from Lyon County. Investment earnings continued to decrease due to lower interest rates and lower levels of cash available for investment. ---PAGE BREAK--- 3-H 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Water Revenues Water Expenses Sewer Revenue Sewer Expenses $ in thousands FY11 Program Revenues and Expenses Business-type Activities Expenses Capital Grants and Contributions Operating Grants & Contributions Charges for Serv. Revenues include both cash and non-cash capital contributions in the “Capital Grants and Contributions” section. Charges for Serv., $6,445 , 75% Capital Grants & Contr., $1,897 , 22% Unrestricted Interest Income, $68 , 1% Other, $155 , 2% FY11 Revenue by Source Business-type Activities (in thousands of ---PAGE BREAK--- 3-I Financial Analysis of the Government’s Funds As noted earlier, the City of Fernley uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City of Fernley’s governmental funds is to provide information on the near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Fernley’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City of Fernley’s governmental funds reported combined ending fund balances of $3,243,150, an increase of $193,128 in comparison with the prior year. The total of the Non-spendable, Restricted and Assigned fund balances of $2,019,478 is reserved for prepaid items, capital projects as well as specific projects designated by the City, leaving the remaining unassigned fund balance available for spending at the government’s discretion. The general fund is the chief operating fund of the City of Fernley. At the end of the current fiscal year, unassigned fund balance of the general fund was $1,223,672, while total fund balance decreased to $1,594,029. As a measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total general fund expenditures. Unassigned fund balance represents 33% of total general fund expenditures, while total fund balance also represents about 43% of that same amount. The Grants Fund is used to track revenues and expenditures for various grants that the City has applied for and received. The Grants Fund ended the fiscal year with a fund balance of $118,133. Administrative fees comprise $77,208 of the fund balance. The majority of gratns that the City has received are reimbursement grants with a small administrative fee The City has since applied for and received an indirect rate which allows the City to receive an administrative fee of 10.98% for most federal grant awards. The Capital Projects Fund is used to accrue funds under a “pay as you go” program to provide funding for future projects involving replacement of equipment and buildings or new facilities and equipment. At the end of the current fiscal year fund balance of the Capital Projects Fund was $1,018,908. Proprietary funds. The City of Fernley’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 Fund at the end of the year amounted to $4,222,773; those for the Sewer Fund amounted to $7,835,930 resulting in total unrestricted net assets of $12,058,703. The total change in net assets for the Water Fund was a decrease of $2,684,979 and decrease in the Sewer Fund of $540,835. The $2.7 million decrease in net assets in the city’s Water Fund is being addressed in the following manner: ---PAGE BREAK--- 3-J 1. Institute a residential and commercial assessment that will increase revenue by approximately $1.5 million. 2. Transfer or advance $863,000 from the General Fund to the Water Fund. Long term solutions could include, but are not limited to bond refunding, increasing the current assessment amount and increasing the water usage rates. Other factors concerning the finances of these funds have already been addressed in the discussion of the City of Fernley’s business-type activities. General Fund Budgetary Highlights The General fund recorded a $200,000 decrease in revenues between the original and final amended budget, and finished the year with a budget shortfall of $277,768, with the largest shortfall of $286,276 in RTC shared revenue. There was not a need to increase appropriations between the original and final amended budget. Capital Asset and Debt Administration Capital assets. The City of Fernley’s investment in capital assets for its governmental and business-type activities as of June 30, 2011 amounts to $213,489,628 (net of accumulated depreciation). This investment in capital assets includes land, construction in progress, buildings, improvements, machinery and equipment, infrastructure (streets and bridges), and other capital assets. The City of Fernley’s investment in capital assets for the current fiscal year decreased 0.7%. City of Fernley Capital Assets (net of depreciation) Governmental activities Business-type activities Totals FY11 FY10 FY11 FY10(restated) FY11 FY10(restated) Land $3,909,626 $3,909,626 $1,195,948 $ 1,195,948 $5,105,574 $5,105,574 Water rights - - 38,699,444 37,634,374 38,699,444 37,634,374 Construction in progress 19,779 203,926 69,257 4,331,806 89,036 4,535,732 Buildings 6,674,631 7,018,267 - 663 6,674,631 7,018,930 Improvements other than buildings 6,289,214 6,897,184 129,367,976 128,282,816 135,657,190 135,180,000 Machinery & Equipment 363,998 257,538 471,777 480,699 835,775 738,237 Infrastructure 25,560,512 24,717,061 - - 25,560,512 24,717,061 Other capital assets 867,466 948,924 867,466 948,924 TOTAL $42,817,760 $43,003,602 $170,671,868 $172,875,230 $213,489,628 $215,878,832 ---PAGE BREAK--- 3-K Additional information on the City of Fernley’s capital assets can be found in Note 4 of this report. Long-term debt. At the end of the current fiscal year, the City of Fernley had total bonded debt outstanding of $78,951,241 and lease-purchase debt of $4,134,000. All of the debt is backed by the full faith and credit of the government. Governmental activities Business-type activities Totals 7/1/11 7/1/10 7/1/11 7/1/10 7/1/11 7/1/10 General obligation/revenue bonds $78,951,241 $80,649,772 $78,951,241 $80,649,772 Lease/Purchase Debt $4,134,000 $4,323,000 $4,134,000 $4,323,000 Unamortized bond premium $51,314 $38,995 $51,314 $38,995 Compensated absences $77,320 $111,795 $79,056 $54,020 $79,056 $54,020 TOTAL $4,211,320 $4,434,795 $79,081,611 $80,742,787 $83,215,611 $85,065,787 The City of Fernley’s total debt decreased by $1,850,176 during the current fiscal year due to the payment of budgeted debt service amounts. State statutes limit the amount of general obligation debt a city may issue to 30% of its total assessed valuation. The current debt limitation for the City of Fernley is approximately $134,431,799, which is significantly in excess of the City of Fernley’s outstanding general obligation debt of $78,951,241. Additional information of the City of Fernley’s long-term debt can be found in Note 7 on pages 29 through 31 of this report. Economic Factors and Next Year’s Budget and Rates The scheduled rate increases in the water and sewer rates were not put into effect due to a moratorium imposed by the Council pending further study of possible solutions for funding the shortfall from operations in the Water fund. Residential development has slowed to a standstill, but limited commercial development has continued. The City continues to seek grant funding to enhance the community, to fund capital projects and to defray the expense of maintaining operations of the water treatment plant. All of these factors were considered in preparing the City of Fernley budget for FY12. ---PAGE BREAK--- 3-L Requests for Information This financial report is designed to provide a general overview of the City of Fernley’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 information should be addressed to the City Treasurer/Finance Director, 595 Silver Lace Blvd, Fernley NV 89408. ---PAGE BREAK--- BUSINESS- GOVERNMENTAL TYPE ACTIVITIES ACTIVITIES TOTAL Current assets: Cash and investments 3,320,446 $ 12,346,191 $ 15,666,637 $ Restricted cash and investments Refundable deposits - 576,310 576,310 Interest receivable 4,245 16,808 21,053 Taxes receivable 68,329 - 68,329 Accounts receivable, net 218,459 708,742 927,201 Due from other governments 388,322 - 388,322 Inventories - 140,945 140,945 Prepaid expenses 22,375 - 22,375 Total Current Assets 4,022,176 13,788,996 17,811,172 Noncurrent assets: Deferred charges - 576,000 576,000 Capital assets: Land and construction in progress 3,929,405 39,964,649 43,894,054 Other capital assets, net of depreciation 38,888,355 130,707,219 169,595,574 Total Capital Assets 42,817,760 170,671,868 213,489,628 Total Noncurrent Assets 42,817,760 171,247,868 214,065,628 Total Assets 46,839,936 185,036,864 231,876,800 Current liabilities: Accounts payable and accrued expenses 498,531 1,559,913 2,058,444 Payable from restricted assets: Refundable deposits - 576,310 576,310 Due to developers 218,577 - 218,577 Due to other governments 3,952 - 3,952 Due within one year 223,000 1,826,517 2,049,517 Total Current Liabilities 944,060 3,962,740 4,906,800 Noncurrent liabilities: Other postemployment benefit liabilities 118,300 91,014 209,314 Due in more than one year 3,988,320 77,255,094 81,243,414 Total Noncurrent Liabilities 4,106,620 77,346,108 81,452,728 Total Liabilities 5,050,680 81,308,848 86,359,528 NET ASSETS Invested in capital assets, net of related debt 38,683,760 91,669,313 130,353,073 Restricted 1,886,533 - 1,886,533 Unrestricted 1,218,963 12,058,703 13,277,666 Total Net Assets 41,789,256 $ 103,728,016 $ 145,517,272 $ ASSETS LIABILITIES CITY OF FERNLEY, NEVADA STATEMENT OF NET ASSETS JUNE 30, 2011 See accompanying notes. 4 ---PAGE BREAK--- CHARGES OPERATING CAPITAL BUSINESS- FOR GRANTS AND GRANTS AND GOVERNMENTAL TYPE FUNCTIONS/PROGRAMS EXPENSES SERVICES CONTRIBUTIONS CONTRIBUTIONS ACTIVITIES ACTIVITIES TOTAL Governmental Activities: General government 1,499,967 $ 1,209,522 $ - $ 2,079,380 $ 1,788,935 $ - $ 1,788,935 $ Judicial 204,071 197,395 - - (6,676) - (6,676) Public works 1,871,798 - - 1,533,877 (337,921) - (337,921) Culture and recreation 734,553 525 93,224 319,845 (320,959) - (320,959) Community development 2,817,551 149,647 40,236 - (2,627,668) - (2,627,668) Health 193,303 3,578 - - (189,725) - (189,725) Debt Service: Interest and fiscal charges 189,836 - - - (189,836) - (189,836) Total Governmental Activities 7,511,079 1,560,667 133,460 3,933,102 (1,883,850) - (1,883,850) Business-type Activities: Water 9,271,351 4,580,081 4,893 1,817,050 - (2,869,327) (2,869,327) Sewer 2,524,958 1,865,202 - 80,318 - (579,438) (579,438) Total Business- type Activities 11,796,309 6,445,283 4,893 1,897,368 - (3,448,765) (3,448,765) Total 19,307,388 $ 8,005,950 $ 138,353 $ 5,830,470 $ (1,883,850) (3,448,765) (5,332,615) General Revenues: Property taxes 1,473,876 - 1,473,876 Consolidated taxes 130,215 - 130,215 Fuel taxes 282,617 - 282,617 Unrestricted gaming licenses 99,439 - 99,439 Unrestricted interest income 13,921 68,217 82,138 Miscellaneous revenue 74,225 154,734 228,959 Total General Revenues 2,074,293 222,951 2,297,244 Change in Net Assets 190,443 (3,225,814) (3,035,371) Net Assets July 1, as previously reported 41,598,813 106,257,680 147,856,493 Prior period adjustment - 696,150 696,150 Net Assets July 1, as adjusted 41,598,813 106,953,830 148,552,643 Net Assets June 30 41,789,256 $ 103,728,016 $ 145,517,272 $ PROGRAM REVENUES AND CHANGES IN NET ASSETS CITY OF FERNLEY, NEVADA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2011 NET (EXPENSE) REVENUES See accompanying notes. 5 ---PAGE BREAK--- CAPITAL OTHER TOTAL GENERAL PROJECTS GRANTS GOVERNMENTAL GOVERNMENTAL FUND FUND FUND FUNDS FUNDS ASSETS Cash and investments 1,765,854 $ 513,242 $ 555,948 $ 485,402 $ 3,320,446 $ Interest receivable 2,232 666 723 624 4,245 Taxes receivable 68,329 - - - 68,329 Accounts receivable 214,609 - - 3,850 218,459 Due from other governments 23,816 - 334,323 30,183 388,322 Advance to other funds - 505,000 - - 505,000 Prepaid items 22,375 - - - 22,375 Total Assets 2,097,215 $ 1,018,908 $ 890,994 $ 520,059 $ 4,527,176 $ LIABILITIES AND FUND BALANCE Liabilities: Accounts payable and accrued liabilities 222,691 $ - $ 267,861 $ 7,979 $ 498,531 $ Due to developers 218,577 - - - 218,577 Due to other governments 3,952 - - - 3,952 Advance from other funds - - 505,000 - 505,000 Deferred revenue 57,966 - - - 57,966 Total Liabilities 503,186 - 772,861 7,979 1,284,026 Fund Balance: Nonspendable Prepaid items 22,375 - - - 22,375 Restricted: Court administration and graffiti abatement - NRS 268.4085 - - - 37,313 37,313 Court fees - NRS 176.0611 - - - 76,316 76,316 Grants - - 98,606 - 98,606 Convention center - - - 132,588 132,588 Future development 327,747 - - - 327,747 Specified purpose/donations 13,575 - - - 13,575 Capital projects 1,078 1,018,908 - 180,402 1,200,388 Assigned 5,582 - 19,527 85,461 110,570 Unassigned 1,223,672 - - - 1,223,672 Total Fund Balance 1,594,029 1,018,908 118,133 512,080 3,243,150 Total Liabilities and Fund Balance 2,097,215 $ 1,018,908 $ 890,994 $ 520,059 $ 4,527,176 $ CITY OF FERNLEY, NEVADA BALANCE SHEET JUNE 30, 2011 GOVERNMENTAL FUNDS See accompanying notes. 6 ---PAGE BREAK--- Total Fund Balances - Governmental Funds 3,243,150 $ 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 governmental funds: Capital assets 52,895,492 Less: Accumulated depreciation 10,077,732 42,817,760 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the fund. 57,966 Certain liabilities are not reported in the governmental funds because they are not due and payable in the current period: Other postemployment benefits liability (118,300) Bonds payable (4,134,000) Compensated absences (77,320) (4,329,620) Total Net Assets - Governmental Activities 41,789,256 $ CITY OF FERNLEY, NEVADA RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS JUNE 30, 2011 TO THE STATEMENT OF NET ASSETS See accompanying notes. 7 ---PAGE BREAK--- CAPITAL OTHER TOTAL GENERAL PROJECTS GRANTS GOVERNMENTAL GOVERNMENTAL FUND FUND FUND FUNDS FUNDS REVENUES Taxes 1,449,538 $ - $ - $ 208,844 $ 1,658,382 $ Licenses and permits 1,455,105 - - - 1,455,105 Intergovernmental 506,056 - 2,119,615 - 2,625,671 Fines and forfeits 157,638 - - 39,759 197,397 Miscellaneous 89,775 2,623 1,448 1,906 95,752 Developer fees - - - 111,000 111,000 Total Revenues 3,658,112 2,623 2,121,063 361,509 6,143,307 EXPENDITURES Current: General government 1,661,818 - - - 1,661,818 Judicial 190,732 - - 10,330 201,062 Culture and recreation 612,681 - - 42 612,723 Community development 590,807 126 2,161,536 43,823 2,796,292 Health 176,488 - - - 176,488 Total Current 3,232,526 126 2,161,536 54,195 5,448,383 Debt service: Principal 189,000 - - - 189,000 Interest 189,836 - - - 189,836 Total Debt Service 378,836 - - - 378,836 Capital outlay: General government 72,733 - - - 72,733 Culture and recreation 14,261 - - 5,521 19,782 Community development - 30,445 - - 30,445 Total Capital Outlay 86,994 30,445 - 5,521 122,960 Total Expenditures 3,698,356 30,571 2,161,536 59,716 5,950,179 Excess (Deficiency) of Revenues over (under) Expenditures (40,244) (27,948) (40,473) 301,793 193,128 OTHER FINANCING SOURCES (USES) Transfers in (out) - (10,000) 60,000 (50,000) - Net Change in Fund Balance (40,244) (37,948) 19,527 251,793 193,128 FUND BALANCE, JULY 1 1,634,273 1,056,856 98,606 260,287 3,050,022 FUND BALANCE, JUNE 30 1,594,029 $ 1,018,908 $ 118,133 $ 512,080 $ 3,243,150 $ CITY OF FERNLEY, NEVADA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2011 GOVERNMENTAL FUNDS See accompanying notes. 8 ---PAGE BREAK--- Net Change if Fund Balances - Governmental Funds 193,128 $ Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlay as expenditures and the proceeds from the sale of assets as other financing sources. However, in the statement of activities, the cost of those assets is depreciated over their useful lives and only the gain or loss is recorded when assets are sold. Expenditures for capital assets 122,960 Less: Current year depreciation 1,839,164 (1,716,204) In the statement of activities, the gain or loss on the disposal of capital assets is reported. In the governmental funds, the gain or loss is not reported. Thus, the change in net assets differs from the change in fund balances by the cost of the assets sold less the balance in accumulated depreciation. (3,515) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the governmental fund statements: Donated capital assets 1,533,877 Because some property taxes will not be collected in time to pay for obligations in the current period, they are not considered available revenues in the governmental funds and are instead reported as deferred revenues. These revenues are accounted for as revenue in the statement of activities. 24,339 The issuance of long-term debt (i.e. bonds) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. 189,000 The liability for other postemployment benefits is not recorded in the governmental funds, but is reported in the statement of net assets. This is a current year charge in the liability, reported as an expense in the statement of activities. Change in other postemployment benefit liability (64,657) Generally expenditures recognized in the fund financial statements are limited to only those that use current financial resources but expenses are recognized in the statement of activities when incurred: Change in long-term compensated absences payable 34,475 Change in Net Assets - Governmental Activities 190,443 $ CITY OF FERNLEY, NEVADA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES FOR THE YEAR ENDED JUNE 30, 2011 IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES See accompanying notes. 9 ---PAGE BREAK--- WATER SEWER TOTAL UTILITY UTILITY ENTERPRISE FUND FUND FUNDS Current assets: Cash and investments 4,515,528 $ 7,830,663 $ 12,346,191 $ Restricted cash and investments: Refundable deposits 283,973 292,337 576,310 Interest receivable 6,257 10,551 16,808 Accounts receivable, net 535,118 173,624 708,742 Inventories 116,198 24,747 140,945 Total Current Assets 5,457,074 8,331,922 13,788,996 Noncurrent assets: Deferred charges 519,428 56,572 576,000 Capital assets: Not being depreciated 39,778,939 185,710 39,964,649 Depreciable assets 115,566,896 38,389,070 153,955,966 155,345,835 38,574,780 193,920,615 Less: Accumulated depreciation 14,621,012 8,627,735 23,248,747 Total Capital Assets 140,724,823 29,947,045 170,671,868 Total Noncurrent Assets 141,244,251 30,003,617 171,247,868 Total Assets 146,701,325 38,335,539 185,036,864 Current liabilities: Accounts payable and accrued liabilities 1,385,277 174,636 1,559,913 Payable from restricted assets: Refundable deposits 283,973 292,337 576,310 Debt due within one year 1,476,519 349,998 1,826,517 Total Current Liabilities 3,145,769 816,971 3,962,740 Noncurrent liabilities: Other postemployment benefits 59,932 31,082 91,014 Bonds payable, due after one year 69,689,918 7,565,176 77,255,094 Total Noncurrent Liabilities 69,749,850 7,596,258 77,346,108 Total Liabilities 72,895,619 8,413,229 81,308,848 NET ASSETS Invested in capital assets, net of related debt 69,582,933 22,086,380 91,669,313 Unrestricted 4,222,773 7,835,930 12,058,703 Total Net Assets 73,805,706 $ 29,922,310 $ 103,728,016 $ ASSETS LIABILITIES CITY OF FERNLEY, NEVADA STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2011 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS See accompanying notes. 10 ---PAGE BREAK--- WATER SEWER TOTAL UTILITY UTILITY ENTERPRISE FUND FUND FUNDS User fees 4,580,081 $ 1,865,202 $ 6,445,283 $ Operating grants 4,893 - 4,893 Total Operating Revenues 4,584,974 1,865,202 6,450,176 Salaries and wages 850,082 373,712 1,223,794 Employee benefits 355,206 161,035 516,241 Services and supplies 1,526,874 556,688 2,083,562 Depreciation 3,207,491 1,068,514 4,276,005 Total Operating Expenses 5,939,653 2,159,949 8,099,602 Operating Income (Loss) (1,354,679) (294,747) (1,649,426) Interest earned on investments 29,619 38,598 68,217 In lieu of water rights fees 5,690 - 5,690 Miscellaneous 149,039 5 149,044 Interest expense (3,331,698) (365,009) (3,696,707) Total Nonoperating Revenue (Expense) (3,147,350) (326,406) (3,473,756) Income (Loss) Before Capital Contributions (4,502,029) (621,153) (5,123,182) Customer connection fees 40,157 31,178 71,335 Developer agreements 4,303 - 4,303 Developer contributed infrastructure 707,520 49,140 756,660 Developer contributed water rights 1,065,070 - 1,065,070 Total Capital Contributions 1,817,050 80,318 1,897,368 Change in Net Assets (2,684,979) (540,835) (3,225,814) Net Assets July 1, as previously reported 75,794,535 30,463,145 106,257,680 Prior period adjustment 696,150 - 696,150 Net Assets July 1, as previously reported 76,490,685 30,463,145 106,953,830 Net Assets, June 30 73,805,706 $ 29,922,310 $ 103,728,016 $ CAPITAL CONTRIBUTIONS OPERATING REVENUES NONOPERATING REVENUE (EXPENSE) CITY OF FERNLEY, NEVADA STATEMENT OF REVENUES, EXPENSES, AND CHANGE IN NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2011 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS OPERATING EXPENSES See accompanying notes. 11 ---PAGE BREAK--- WATER SEWER TOTAL UTILITY UTILITY ENTERPRISE FUND FUND FUNDS Cash received from customers 4,686,669 $ 1,882,515 $ 6,569,184 $ Cash received from other funds for services 28,612 - 28,612 Cash received from others 4,893 - 4,893 Cash paid for employees services (1,207,751) (507,320) (1,715,071) Cash paid to vendors for services and supplies (1,637,694) (1,305,789) (2,943,483) Net Cash Provided (Used) by Operating Activities 1,874,729 69,406 1,944,135 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Principal payments on debt (1,405,937) (292,595) (1,698,532) Interest paid on debt (3,312,607) (364,800) (3,677,407) Deferred charges 109,019 (957) 108,062 In lieu of water rights fees 5,690 - 5,690 Acquisition of capital assets (40,822) (200,296) (241,118) Developer agreements 4,303 - 4,303 Connection fees 40,157 31,178 71,335 Net Cash Provided (Used) by Capital and Related Financing Activities (4,600,197) (827,470) (5,427,667) CASH FLOWS FROM INVESTING ACTIVITIES: Interest received on investments 44,028 52,417 96,445 Net Increase (Decrease) in Cash and Cash Equivalents (2,681,440) (705,647) (3,387,087) 7,480,941 8,828,647 16,309,588 4,799,501 $ 8,123,000 $ 12,922,501 $ REPRESENTED BY: Cash and cash equivalents 4,515,528 $ 7,830,663 $ 12,346,191 $ Cash - refundable deposits 283,973 292,337 576,310 4,799,501 $ 8,123,000 $ 12,922,501 $ RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating income (loss) (1,354,679) $ (294,747) $ (1,649,426) $ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation 3,207,491 1,068,514 4,276,005 Miscellaneous revenues 149,039 5 149,044 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable, net (44,341) 17,309 (27,032) Accounts receivable, other 15,742 - 15,742 Due from other funds 14,760 - 14,760 Inventories (3,811) (18,297) (22,108) Increase (decrease) in: Accounts payable (101,923) (730,280) (832,203) Accrued liabilities - 562 562 Compensated absences payable (2,459) 27,499 25,040 Refundable deposits (36,092) (14,788) (50,880) Other postemployment benefit liability 31,002 13,629 44,631 Total Adjustments 3,229,408 364,153 3,593,561 Net Cash Provided (Used) by Operating Activities 1,874,729 $ 69,406 $ 1,944,135 $ SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND CAPITAL AND RELATED FINANCING ACTIVITIES Contribution of water rights from developers 1,065,070 - 1,065,070 Contribution of capital assets from developers 707,520 $ 49,140 $ 756,660 $ CASH AND CASH EQUIVALENTS, June 30 CASH FLOWS FROM OPERATING ACTIVITIES: CASH AND CASH EQUIVALENTS, July 1 CITY OF FERNLEY, NEVADA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2011 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS See accompanying notes. 12 ---PAGE BREAK--- AGENCY FUND Cash and cash equivalents 11,618 $ Bail bond deposits held for others 11,618 $ ASSETS LIABILITIES CITY OF FERNLEY, NEVADA STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES FIDUCIARY FUND JUNE 30, 2011 See accompanying notes. 13 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 14 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The financial statements of the City of Fernley, Nevada (“the City”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as applied to governmental units. The Government Accounting Standards Board (“GASB”) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. A summary of the more significant accounting policies consistently applied in the preparation of the accompanying financial statements follows. A. Reporting Entity: The City of Fernley, Nevada was incorporated on July 1, 2001. The City operates under a Council- Manager form of government and provides the following services as authorized by law: water and sewer utilities, streets, culture and recreation, planning and zoning, animal control, and general administrative services. Prior to July 1, 2001, the entity was organized as an unincorporated town in accordance with Nevada Revised Statutes 269. The financial statements present the financial position and results of operations and changes in fund balances for those funds under the direct jurisdiction of the Mayor and City Council of the City of Fernley for which the Mayor and City Council are financially accountable. B. Government-wide and Fund Financial Statements: The government-wide financial statements report information on all of the non-fiduciary activities of the City of Fernley, Nevada. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, 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 business-type activities are offset by program revenues. Direct expenses are those that are specifically associated with a specific function or business-type activity. Program 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 business-type activity and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or business- type activity. Taxes and other items properly not included among program revenues are reported instead as general revenues. The fund financial statements provide information about the City’s funds, including its fiduciary funds. Separate statements for each fund category – governmental, proprietary and fiduciary – are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. 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 accounting, as are the proprietary funds and fiduciary fund financial ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 15 statements. Revenues are recorded when earned and expenses are recorded when liabilities are 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 revenues as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the 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 measurable when the amount of the transaction can be determined and 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. When revenues are due, but will not be collected within this 60 day period, the receivable is recorded and an offsetting deferred revenue account is established. Deferred revenues also arise when the government receives resources before it has legal claim to them, and thus in subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, the liability for deferred revenue is removed and revenue is recognized. Expenditures generally are recorded when liabilities are incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgment are recorded only when payment is due. Property taxes, consolidated tax revenue (sales tax, cigarette taxes, business services tax, liquor taxes), gaming taxes, gasoline taxes, grants 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. All other revenue items are considered to be measurable and available only when the City receives cash. In accordance with GASB Statement No. 20 “Accounting and Financial Reporting for Proprietary Funds and other Governmental Entities That Use Proprietary Fund Accounting”, the City applied all applicable FASB pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. The City has elected not to apply FASB pronouncements issued after November 30, 1989. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are interfund services provided and used and other charges between the City’s business-type activities and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from an exchange transaction such as providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. Nonoperating revenues and nonoperating expenses result from nonexchange transactions and ancillary services. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, and then unrestricted resources as they are needed. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 16 The City reports the following major governmental funds: The General Fund is the City’s general operating fund and is used to account for all financial resources except those required to be accounted for in other funds. The Capital Projects Fund is used to accrue funds under a “pay as you go” program to provide funding for future projects involving replacement of equipment or buildings or new facilities and equipment. The Grants Fund is used to account for all federal and state grant awards received. The City reports the following major enterprise funds: The Water Utility Fund is used to account for the provision of water services to the residents of the City and some residents of Lyon County. All activities necessary to provide services are accounted for in this fund, including, but not limited to, administration, operations, maintenance, financing and related debt. The Sewer Utility Fund is used to account for the provision of sewer services to the residents of the City and some residents of Lyon County. All activities necessary to provide services are accounted for in this fund, including, but not limited to, administration, operations, maintenance, financing and related debt. Additionally, the City reports the following fund types: Agency funds are custodial in nature and do not present results of operations or have a measurement focus. Agency funds are accounted for using the accrual basis of accounting. These funds are used to account for assets that the City holds for others in an agent capacity. Included are bonds posted with the municipal court. These funds are excluded from the government-wide financial statements. D. Assets, Liabilities and Net Assets or Equity: Cash and Investments: Cash resources of the individual funds are combined to form a pool of cash and investments, which is managed by the City Treasurer. The City invests in the State of Nevada Local Government Pooled Investment Fund, which is reported at fair value. Interest income earned is distributed to the appropriate funds based on each fund’s equity in the investment. Pursuant to NRS 355 and NRS 355.170, the City of Fernley may only invest in the following types of securities: Certain rated notes and bonds purchased by a registered broker-dealer that are issued by corporations organized and operating in the United States and that mature within five years from the date of purchase; asset-backed securities and ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 17 collateralized mortgage obligations rated “AAA” or higher by a nationally recognized rating service. These investments must not, in the aggregate, exceed 20 percent of the total portfolio at the time of purchase, nor include notes and bonds issued by any one corporation in excess of 25 percent of such investments United States bonds and debentures maturing within ten (10) years from the date of purchase Certain farm loan bonds Bills and notes of the United States Treasury, maturing within ten (10) years from the date of purchase Obligations of an agency of the United States or a corporation sponsored by the government, maturing within ten (10) years from the date of purchase Obligations of state and local governments if, the interest is exempt for federal income tax purposes and the obligations have been rated or higher by a nationally recognized bond credit rating agency Negotiable and nonnegotiable certificates of deposit from commercial banks and insured savings and loan associations State of Nevada Local Government Pooled Investment Fund Certain securities issued by local governments of the State of Nevada Certain bankers’ acceptances Certain short-term paper issued by a corporation organized and operating in the United States Other securities expressly provided by other statutes, including repurchase agreements Certain “AAA” rated mutual funds that invest in securities issued by the Federal Government or agencies of the Federal Government, Master, bank notes or other short-term commercial paper rates as “A-1” or “P-1” issued by a corporation or depository institution organized, licensed and operating in the United States and/or Repurchase agreements that are fully collateralized by and above. Cash Equivalents: Cash equivalents include short-term highly liquid investments (with maturities of 3 months or less when purchased) that are both readily convertible to known amounts of cash, and so near their maturity that they present insignificant risk in changes in value. Based on the nature of the investment policies, all amounts are available on demand and are, therefore, classified as cash equivalents on the Statements of Cash Flows. Receivables and Payables: Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” or “advances to/from other funds. Advances are amounts not expected to be collected or paid within one year. Any residual balances outstanding between the governmental activities and business-type actives are reported in the government-wide financial statements as “internal balances.” . ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 18 Real property taxes result in a lien on the property and attach on July 1 (the levy date) of the year for which the taxes are levied. Taxes may be paid in four installments payable on the third Monday in August, and the first Mondays in October, January and March to the County Clerk/Treasurer of Lyon County in which the City of Fernley is located. Penalties are assessed if a taxpayer fails to pay an installment within ten days of the installment due date. After a two year waiting period, if taxes remain unpaid, a tax deed is issued conveying the property to Lyon County with a lien for back taxes and accumulated charges. Redemption may be made by the owner and such persons as described by statute by paying all back taxes and accumulated penalties, interest and costs before sale. As such, real property taxes receivable reflect only those taxes receivable from the delinquent roll years, and current taxes collected within 60 days of year end and delinquent taxes from all roll years prior to 2003-2004 have been written off. No provision for uncollectible accounts has been established, as management does not anticipate any material collection losses with respect to the remaining balances. Taxes on personal property are collected currently. Personal property declarations are mailed out annually and the tax is computed using percentages of taxable values established by the Department of Taxation at the tax rates described above. Receivables in proprietary fund types have arisen in the ordinary course of business, and are shown net of an allowance for uncollectible accounts, if applicable. Inventories and Prepaids: All inventories are valued at cost using the first in/first out (FIFO) method. Inventories of governmental funds in the fund financial statements are considered consumable supplies and as such are recorded as expenditures at the time of purchase. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Restricted Assets: City policy requires that certain resources be set aside for various purposes in the City’s water and sewer utility funds. These amounts are reported as restricted assets. When both restricted and unrestricted assets are available for the same purpose, restricted assets are used first. Capital Assets: Capital assets, which include land, construction in progress, water rights, property, plant, equipment and infrastructure, are capitalized and reported in the applicable governmental activities and business-type activities columns of the government-wide financial statements. For governmental fund types, outlays for capital assets are expensed during the current period. The City defines capital assets as assets with an initial, individual cost of more than ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 19 $5,000 for non-infrastructure assets and $100,000 for infrastructure assets and an estimated useful life in excess of two years. Water rights are considered real property. A water right can be conveyed or transferred. Water rights, however, are appurtenant to the land and are conveyed by deed with the land unless the seller specifically reserves the water right in the deed. Water rights are not depreciable or amortizable. Capital assets are recorded at cost for purchased or constructed assets. 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. Donated capital assets are recorded at estimated fair value at the date of donation. Depreciation is computed using the straight-line method over the following estimated useful lives: Buildings 25-40 years Improvements other than buildings 10-20 years Machinery and equipment 5-10 years Other capital assets 25-40 years Infrastructure 20-40 years GASB Statement No. 34 requires the City to report and depreciate new infrastructure assets effective fiscal year June 30, 2004, the initial year of implementation. Infrastructure assets include roads, bridges, underground pipe (other than related to utilities), traffic signals, etc. These infrastructure assets are likely to be the largest asset class of the City. Neither their historical cost nor related depreciation has been reported in prior years’ financial statements. The retroactive reporting of infrastructure is not required for the City based on its size. As such, the City has elected not to retroactively report all major general infrastructure acquired between July 1, 1980 and June 30, 2003. Long-Term Liabilities: In the government-wide financial statements and the proprietary fund types in the fund financial statements, long-term debt and other long-term liabilities are reported as liabilities in the applicable government activities, business-type activities, or proprietary fund type statement of net assets. It is the City’s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. The liability for compensated absences is calculated under the provisions of GASB Statement No. 16, “Accounting for Compensated Absences.” All vacation and sick pay is accrued when incurred in the government-wide and proprietary fund statements. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. For current and advance refunding resulting in a defeasance of debt, the difference between the ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 20 reacquisition price and the net carrying amount of the old debt is deferred and amortized as a component of interest expense using the straight-line method. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. A liability for compensated absences is reported in the governmental funds, primarily the General Fund, only if they have matured as a result of employee resignations, terminations and retirements. For governmental fund types, bond premiums and discounts, as well as issuance costs, are recognized during the current period. The face amount of bonds is reported as other financing sources, as are bond premiums. Bond discounts are recorded as other financing uses. Issuance costs, even if withheld from the actual net proceeds received, are reported as debt service expenditures. Equity Classification: In the government-wide financial statements, equity is classified as net assets and displayed in three components: Invested in Capital Assets, Net of Related Debt – Consists of capital assets, net of accumulated depreciation and reduced by outstanding balances of any bonds, notes, or other borrowings that are attributable to the acquisition, construction or improvement of those assets. Restricted Net Assets – Consists of net assets with constraints placed on their use either by external groups such as creditors, grantors, contributors, or laws and regulations or other governments; law through constitutional provisions or enabling legislation. Unrestricted Net Assets – All other net assets that do not meet the definition of “restricted” or “invested in capital assets, net of related debt.” Beginning with fiscal year 2011, the City implemented GASB Statement 54, “Fund Balance Reporting and Governmental Fund Type Definitions.” This Statement provides more clearly defined fund balance categories to make the nature and extent of constraints placed on the City’s fund balances more transparent. The following classifications have been implemented by the City: Nonspendable fund balance – These items are legally or contractually required to be maintained intact or are not in a spendable form, such as inventories and prepaids. Restricted fund balance – These amounts are constrained to being used for specific purposes by external parties, constitutional provisions or enabling legislation, such as debt service. Committed fund balance – These amounts can only be used for specific proposes as set forth by the City Council, the City’s highest level of decision making authority. The Council must take formal action, prior to the end of the reporting period, in ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 21 order to establish an ending fund balance commitment for any specific purpose. Formal action is also required to modify or rescind an established commitment. Assigned fund balance – Assignments are neither restrictions nor commitments and represent the City’s intent to use funds for a specific purpose. These assignments, however, are not legally binding and are meant to reflect intended future use of the City’s ending fund balance. The City Manager has the responsibility of assigning amounts of ending fund balance. Unassigned fund balance – The residual classification of the General Fund that is available to spend. When an expenditure is incurred and both restricted an unrestricted resources are available, the portion of the fund balance that was restricted for those purposes shall be reduced first. If no restricted resources exist, then the unrestricted fund balance shall be reduced. Furthermore, when an expenditure is incurred for purposes which amounts of committed, assigned, or unassigned are considered to have been spent, and any of these unrestricted fund balance classifications could be used, they are considered to be spent in the above order. The following amounts are restricted for future development as reported in the General Fund: Developer/Development Balance at June 30, 2011 Project Description Upland Ranches $ 22,258 Farm District Rd Bike Lane Upland Ranches – Phase 7 29,311 Farm District Rd Turn Lane Sundance 4,140 Farm District Rd Bike Lane Country Ranch Estates 936 Farm District Rd Bike Lane Aspen Meadows 5,100 Farm District Rd Bike Lane Mt View Estates 10,282 Farm District Rd Bike Lane Silverland Estates, Ph 1 19,387 Farm District Rd Bike Lane Truckee River Ranch, Ph 1 & 2 40,673 Farm District Rd Bike Lane Skyridge II 7,866 Farm District Rd Bike Lane Sierra Vista 14,670 95A Turn Lane Shady Grove 5,925 95A Turn Lane Fernley Chiropractic 7,260 95A Curb, Gutter & Sidewalk Renslow Commercial Bldg 14,200 95A Curb, Gutter & Sidewalk Nevada State Bank 9,328 95A Curb, Gutter & Sidewalk Quick Stop Markets 3,850 95A Curb, Gutter & Sidewalk North Seneca Falls 27,180 Hardie Ln Improvements SVWW II, LLC 105,381 Shadow Ln Improvements Total $ 327,747 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 22 NOTE 2 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY: A. Budgetary Information: The City of Fernley adheres to the Local Government Budget and Finance Act (Act) incorporated within the statutes of the State of Nevada, in which annual budgets are legally adopted for all funds except Agency funds. The Act and City policy include the following procedures to establish the budgetary data, which is reflected in these financial statements: 1. On or before April 15, the City Manager submits to the Fernley City Council a tentative budget for the fiscal year commencing the following July 1, to be filed with the Nevada Department of Taxation. 2. Public hearings on the tentative budget are held on the third Tuesday in May to obtain taxpayer comments. 3. Prior to June 1, at a public hearing, the Council indicates changes, if any, to be made to the tentative budget and adopts a final budget by the favorable vote of a majority of the members of the Council. The final budget must then be forwarded to the Nevada Tax Commission for final approval. 4. The City may not amend the budget without approval by the City Council. The City Manager is authorized to transfer appropriations between accounts within any department, with notification to the City Council. Any revisions that alter the total appropriations of a function or fund must be approved in advance by the City Council. Formal budgetary integration in the financial records of all funds is employed to enhance management control during the year. 5. Budgets for all fund types are adopted on a basis consistent with accounting principles generally accepted in the United States of America (GAAP). Appropriations lapse at year end. 6. In accordance with State statute, actual expenditures may not exceed budgeted appropriations of the various governmental functions of the General, Special Revenue, and Capital Project Funds. Per NRS 354.626, expenditures over budgeted appropriations are allowed for bond repayments, medium term obligation repayments, and other long-term contracts expressly authorized by law. The sum of operating and nonoperating expenses in Proprietary Funds also may not exceed total appropriations. The budget reflected in the financial statements has been amended from the original budget amounts. Such amendments included augmentations for prior obligations, as well as supplemental appropriations needed for grants, contingencies, and other uses. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 23 B. Excess of Expenditures/Expenses Over Appropriations: The City conformed to all significant statutory constraints on its financial administration during the year. C. Other Compliance Matters: It appears specific criteria set forth in NRS 354.6118 as clarified by NAC 354.290, requiring public hearing at which the following be determined: sufficient money was available and unrestricted in the Capital Projects Fund, an acknowledgement that the interfund loan would not comprise the economic viability of the Capital Projects Fund, the amount of time the money would be on loan, the terms and conditions of repayment, and the rate of interest if any, to be charged, were not followed in relation to the following interfund loan: o At June 30, 2011, the Grants Special Revenue Fund owed the Capital Projects Fund $505,000 as evidenced by the line item Advance to Other Funds on the Capital Projects Fund Statement of Net Assets. The advance was made in fiscal year for the purpose of funding anticipated expenditures related to the FEMA disaster of January 5th, 2008. This appears to be an apparent violation of NRS 354.6118 as clarified by NAC 354.290 (with an effective date of December 16, 2010). The City completed a physical inventory over capital assets during the fiscal year ended June 30, 2010. However the assets were not assigned an identifying number nor labeled as belonging to the City as of June 30, 2011. The above appears to be a potential violation of NAC 354.750. Actions were taken by the City Council to augment its final budget June 30, 2011. One action occurred subsequent to June 30, 2011. Neither augmentation was submitted to the Department of Taxation in a timely manner. The above appears to be a violation of NRS 354.598005. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 24 NOTE 3 – CASH AND INVESTMENTS: A summary schedule of cash and investments for the City of Fernley at June 30, 2011, is as follows: Cash and Investment Balances Held by: Governmental Funds $ 3,320,446 Fiduciary Funds 11,618 Proprietary Funds: Unrestricted 12,346,191 Restricted 576,310* Total Cash and Investments $ 16,254,565 *Restricted cash in the Proprietary Funds consists of refundable customer deposits. Balances Classified by: Cash: On hand $ 1,000 Wells Fargo Bank: Checking 1,010,968 Investments: NVEST 12,076,608 State of Nevada Local Government Investment Pool 3,165,989 Total Cash and Investments $ 16,254,565 As of June 30, 2011, the City of Fernley had the following investments and maturities: Investment Maturities (in Years) Investment Type Fair Value Less Than 1 1-5 6-10 More Than 10 NVEST: U.S. Treasuries $ 6,316,447 $ 5,482,430 $ 834,017 $ - $ - U.S. Agencies 950,894 750,806 200,088 - - Mortgage-Backed 2,309,667 58,512 34,408 1,418,248 798,499 Corporate Bonds 2,432,983 52,250 2,082,088 298,645 - Money Market Fund 66,617 66,617 - - - State of Nevada: Local Government Investment Pool 3,165,989 3,165,989* - - - Total $15,242,597 $9,576,604 $3,150,601 $1,716,893 $798,499 * average weighted maturity of 69 days. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 25 The City is a voluntary participant in the State of Nevada Local Government Investment Pool (LGIP), which has regulatory oversight from the Board of Finance of the State of Nevada. The City’s investment in the LGIP is equal to its original investment plus allocation of interest income, and realized and unrealized gains and losses, which is the same as the value of the pool shares. The City’s investment in the LGIP is reported at fair value. Nevada Revised Statutes (NRS 355.170) set forth acceptable investments for Nevada local governments. The City has not adopted a formal investment policy that would further limit its investment choices nor further limit its exposure to certain risks as set forth below: Interest Rate Risk. Interest rate risk is the risk of possible reduction in the value of a security, especially a bond, resulting from a rise in interest rates. As noted above, the City does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates beyond those specified in the statute. Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligation and is a function of the credit quality ratings of its investments. As of June 30, 2011, the City’s investments in Mortgage-Backed securities were rated AAA by Standard and Poor’s and Aaa by Moody’s Investors Service. Of the City’s investments in corporate bonds, $2,380,733 was rated AAA/Aaa, and $52,250 has a withdrawn rating. The State of Nevada Local Government Investment Pool is an unrated external investment pool. As noted above, the City does not have a formal investment policy that specifies minimum acceptable credit ratings beyond those specified in statute. As of June 30, 2011, more than 5% of the City’s investments are in Federal Home Loan Mortgage Corporation and Federal National Mortgage Association. These investments are 11%, and respectively, of the total investments. As of June 30, 2011, the City was holding $200,000 par value security of Lehman Brothers Holdings. Although rated as Lehman Brothers filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code on September 18, 2008. At fiscal year end, the value of the investment was written down to $52,250; which was the market value as determined by the City’s investment custodian. Custodial Credit Risk- Deposits. Custodial credit risk is the risk that in the event of a bank failure, the City’s deposits may not be returned. All of the bank balance was covered by FDIC insurance or collateralized by the Office of the State Treasurer/Nevada Collateral Pool. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 26 NOTE 4 – CAPITAL ASSETS: Capital asset activity for the year ended June 30, 2011, was as follows: Balance July 1, 2010 Additions or Transfers In Deletions or Transfers Out Balance June 30, 2011 Governmental Activities: Capital assets, not being depreciated Land $ 3,909,626 $ - $ - $ 3,909,626 Construction in progress 203,926 122,960 (307,107) 19,779 Total capital assets, not being depreciated 4,113,552 122,960 (307,107) 3,929,405 Capital assets, being depreciated Buildings 8,599,098 - - 8,599,098 Improvements other than buildings 8,865,909 61,207 (3,515) 8,923,601 Machinery and Equipment 1,203,383 245,900 - 1,449,283 Infrastructure 28,460,228 1,533,877 - 29,994,105 Total capital assets, being depreciated 47,128,618 1,840,984 (3,515) 48,966,087 Less accumulated depreciation for: Buildings (1,580,831) (343,636) - (1,924,467) Improvements other than buildings (1,968,725) (665,662) - (2,634,387) Machinery and Equipment (945,845) (139,440) - (1,085,285) Infrastructure (3,743,167) (690,426) - (4,433,593) Total accumulated depreciation (8,238,568) (1,839,164) - (10,077,732) Total capital assets, being depreciated, net 38,890,050 1,820 (3,515) 38,888,355 Governmental activities capital assets, net $ 43,003,602 $ 124,780 $ (310,622) $ 42,817,760 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 27 Balance July 1, 2010 (Restated) Additions or Transfers In Deletions or Transfers Out Balance June 30, 2011 Business-Type Activities: Capital assets, not being depreciated Land $ 1,195,948 $ - $ - $ 1,195,948 Water rights 37,634,374 1,065,070 - 38,699,444 Construction in progress 4,331,806 188,150 (4,450,699) 69,257 Total capital assets, not being depreciated 43,162,128 1,253,220 (4,450,699) 39,964,649 Capital assets, being depreciated Buildings 17,530 - - 17,530 Improvements other than buildings 145,291,795 5,062,622 - 150,354,417 Machinery and Equipment 1,723,466 208,819 (19,896) 1,912,389 Other capital assets 1,671,630 - - 1,671,630 Total capital assets, being depreciated 148,704,421 5,271,441 (19,896) 153,955,966 Less accumulated depreciation for: Buildings (16,867) (662) - (17,529) Improvements other than buildings (17,008,979) (3,977,463) - (20,986,442) Machinery and Equipment (1,242,767) (216,422) 18,577 (1,440,612) Other capital assets (722,706) (81,458) - (804,164) Total accumulated depreciation (18,991,319) (4,276,005) 18,577 (23,248,747) Total capital assets, being depreciated, net 129,713,102 995,436 (1,319) 130,707,219 Business-type activities capital assets, net $ 172,875,230 $ 2,248,656 $ (4,452,018) $ 170,671,868 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 28 Depreciation expense was charged to functions/programs of the City as follows: Governmental Activities: General government $ 348,835 Public works 1,347,206 Culture and recreation 127,401 Health 12,375 Community development 3,347 Total depreciation expense – governmental activities $ 1,839,164 Business-type Activities: Water $ 3,207,491 Sewer 1,068,514 Total depreciation expense – business-type activities $ 4,276,005 NOTE 5 – DEFINED BENEFIT PENSION PLAN: Plan Description. The City of Fernley contributes to the Public Employees Retirement System of the State of Nevada (PERS), a cost sharing, multiple employer, defined benefit plan administered by the Public Employees Retirement System of the State of Nevada. PERS provides retirement benefits, disability benefits, and death benefits, including annual cost of living adjustments, to plan members and their beneficiaries. Chapter 286 of the Nevada Revised Statutes establishes the benefit provisions provided to the participants of PERS. These benefit provisions may only be amended through legislation. The Public Employees Retirement System of the State of Nevada issues a publicly available financial report that includes financial statements and required supplementary information for PERS. That report may be obtained by writing to the Public Employees Retirement System of the State of Nevada, 693 West Nye Lane, Carson City, NV 89703- 1599 or by calling (775) 687-4200. Funding Policy. Benefits for plan members are funded under one of two methods; the employer (ER) pay contribution plan or the employer/employee (ER/EE) paid contribution plan. Under the ER contribution plan, the City is required to contribute all amounts due under the plan. Under the ER/EE contribution plan, employees are required to contribute a percentage of their compensation to the plan, while the City is required to match that contribution. The contribution requirements of the City are established by Chapter 286 of Nevada Revised Statutes. The funding mechanism may only be amended through legislation. The City's contribution rates and amounts contributed (equal to the required contributions for the year) for the last three years are as follows: Fiscal Year Contribution Rate ER Contribution Rate ER/EE Total Contribution 2010-2011 21.50% 11.25% $621,221 2009-2010 21.50% 11.25% $566,677 2008-2009 20.50% 10.50% $506,212 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 29 NOTE 6 – INTERFUND BALANCES AND ACTIVITY: The outstanding balances between funds result mainly from the time lag between the dates the interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payments between funds are made. Advances to/from other funds: Receivable Fund Payable Fund Amount Capital Projects Fund Grants Fund $ 505,000 The amounts payable to the Capital Projects Fund relates to an advance made to the Grants Fund in fiscal year 2008 for the purpose of funding anticipated expenditures related to the Federal Emergency Management Agency disaster of January 5th, 2008. Transfers are shown as other financing sources or uses as appropriate in all Governmental Fund types and as transfers in (out) in the Proprietary Fund types. Transfers between funds during the year ended June 30, 2011, are as follows: The principal purpose of the interfund transfers between the governmental funds is for providing matching funds related to a Land and Water Conservation Fund Grant administered by the State of Nevada, Division of Parks. The State grant requires a 50/50 match. NOTE 7 – LONG-TERM DEBT: The City was, in accordance with Nevada Revised Statutes, within the legal debt limit at June 30, 2011. Governmental Activities Transfers In Transfers Out Capital Projects Fund $ - $ (10,000) Grants Fund 60,000 - Nonmajor Governmental Fund: Residential Construction Tax District #2 Fund - (50,000) Total Governmental Funds $ 60,000 $ (60,000) ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 30 The following schedule summarizes the changes in long-term debt: Issue Date Interest Rate Maturity Date Authorized and Issued Outstanding July 1, 2010 Additions (Deletions) Outstanding June 30, 2011 Due in 2011- 2012 Governmental Activities: Compensated absences payable - - - $ - $ 111,795 $ - $ (34,475) $ 77,320 $ 25,000 City Hall Expansion Bonds 12/29/05 4.49% 12/01/2025 $ 5,000,000 4,323,000 - (189,000) 4,134,000 198,000 Total Governmental Activities 4,434,795 - (223,475) 4,211,320 223,000 Business-type Activities: State Water Pollution Control Revolving Fund 10/28/92 4.00% 6/30/2012 $ 2,000,000 369,772 - (143,531) 226,241 149,329 2007 Water/Sewer Bonds 3/28/07 4% - 5% 2/01/2037 $50,000,000 48,320,000 - (895,000) 47,425,000 940,000 2008 Water/Sewer Bonds 4/01/08 3.25% - 5% 2/01/2038 $32,600,000 31,960,000 - (660,000) 31,300,000 675,000 80,649,772 - (1,698,531) 78,951,241 1,764,329 Unamortized Bond Discount/(Premium) 38,995 12,319 - 51,314 2,484 Compensated absences payable 54,020 65,036 (40,000) 79,056 59,704 Total Business-type Activities 80,742,787 77,355 (1,738,531) 79,081,611 1,826,517 Total Long-Term Debt $ 85,177,582 $ 77,355 $ (1,962,006) $ 83,292,931 $ 2,049,517 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 31 The following schedule reflects debt service requirements to maturity of the City's long-term debt: Debt Supported by General Obligation Debt Supported by Sewer Fund Revenues Debt Supported by Water Fund Revenues Total Requirements to Maturity Fiscal Year Principal Interest Principal* Interest* Principal* Interest* Principal Interest 2012 198,000 181,172 304,493 354,377 1,459,836 3,256,950 1,958,912 3,717,836 2013 207,000 172,079 238,010 342,526 1,513,902 3,203,231 1,961,000 3,643,277 2014 216,000 162,583 168,131 334,810 1,576,869 3,145,884 2,046,000 3,567,129 2015 226,000 152,660 175,548 328,359 1,644,452 3,086,110 2,136,000 3,486,732 2016 236,000 142,288 183,516 321,550 1,716,484 3,022,894 2,136,000 3,486,732 2017-2021 1,355,000 538,329 1,051,037 1,465,334 9,793,963 13,794,978 12,200,000 15,798,641 2022-2026 1,696,000 197,201 1,322,390 1,192,974 12,272,610 11,286,508 15,291,000 12,676,683 2027-2031 - - 1,672,515 865,758 15,482,485 8,218,429 17,155,000 9,084,187 2032-2036 - - 2,100,131 435,590 19,429,869 4,187,147 21,530,000 4,622,737 2037-2041 - - 627,527 36,216 6,217,473 379,184 6,845,000 415,400 Total $ 4,134,000 $ 1,546,312 $ 7,843,298 $ 5,677,494 $ 71,107,943 $ 53,581,315 $ 83,258,912 $ 60,499,354 * Exclusive of unamortized premium and issuance costs. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 32 NOTE 8 – POSTEMPLOYMENT RETIREMENT HEALTH INSURANCE BENEFIT: Plan Descriptions: The City administers a single-employer defined benefit healthcare plan, City of Fernley Employee Health Benefits Plan (COFEHBP). Additionally, the City contributes to an agent multiple-employer defined benefit postemployment healthcare plan, Public Employees’ Benefits Plan (PEBP). Each plan provides medical, vision, dental, and life insurance benefits to eligible retired City employees and beneficiaries. Benefit provisions for the COFEHBP are established pursuant to NRS 287.023 and amended through negotiations between the City and the respective associations. NRS 288.150 assigns the authority to establish benefit provisions to the Board of Commissioners. The plan provides healthcare insurance for eligible retirees and their beneficiaries through the City’s group health insurance plan, which covers both active and retired members. Under NRS 287.023, eligible retirees are able to participate in the plan with blended rates, thereby benefitting from an implicit subsidy. Retirees are required to pay 100% of their premiums under the plan. As of June 30, 2011, no retirees were using this plan. The COFEHBP does not issue a publicly available financial report. Benefit provisions for the PEBP are administered by the State of Nevada. NRS 287.043 assigns the authority to establish and amend benefit provisions to the PEBP nine-member board of trustees. City employees who met the eligibility requirements effective September 1, 2008 for retirement within the Nevada Public Employee Retirement System had the option upon retirement to enroll in coverage under the PEBP. NRS 287.023 sunsetted the option to join PEBP for City employees who retired from the City after November 29, 2008. Local governments are required to pay the same portion of the cost of coverage for their retirees joining PEBP that the State of Nevada pays for state retirees participating in the plan. As of June 30, 2011, seven City retirees were utilizing this benefit. Funding Policy: For COFEHBP, contribution requirements of the plan members and the City are established and may be amended through negotiations between the City and the associations. Retirees pay 100% of the pay-as-you-go premiums based on a blended rate that blends active participants and retirees. The City’s contribution requirements for retirees relate to the implicit subsidy that results from using the blended rates and is determined in actuarial studies contracted for by the City. The implicit subsidy as determined by the actuary is The City did not prefund any future benefits. For the PEBP, NRS 287.046 establishes the subsidies to be contributed toward the premium costs of the eligible retired City employees. The contribution requirements of plan members and the City may be amended by the PEBP board. Premium rates determined by PEBP are the same for all participating members. Plan members receiving benefits have their contribution deducted from their pension checks based on the health plan chosen by the retiree, as reduced by the amount of the subsidy; therefore, their contributions are not available. For the plan year ended June 30, 2011, City retirees qualified for a subsidy of $105 at five years of service and $575 at twenty years of service, with incremental increases for years of service in between. As a participating employer, the City is billed for the subsidy on a basis and is legally required to provide for it. For fiscal year 2011, the City contributed $17,049 to the plan, equal to required contributions. The City did not prefund future benefits. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 33 Annual OPEB Cost and Net OPEB Obligation: The City’s annual other postemployment benefit (OPEB) cost (expense) for the plans is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plans, and the net OPEB obligations, by plan, for fiscal years 2010-11 and 2009-10 were as follows: Annual OPEB Cost Percentage of Fiscal (Entry Age Normal Employer Annual OPEB Net OPEB Year End Cost Method) Contributions Contributed Obligation COFEHBP June 30, 2011 $ 102,281 $ - 0% $ 197,094 PEBP June 30, 2011 24,056 17,049 71% 12,220 $ 126,337 $ 17,049 $ 209,314 COFEHBP June 30, 2010 $ 94,813 $ - 0% $ 94,813 PEBP June 30, 2010 23,826 18,613 78% 5,213 $ 118,639 $ 18,613 $ 100,026 The net OPEB obligation (NOPEBO) as of June 30, 2011, was calculated as follows: COFEHBP PEBP Total Annual Required Contribution (ARC) $ 102,368 $ 24,155 $ 126,523 Interest on net OPEB obligation 3,793 208 4,001 Adjustment to annual required contribution (3,880) (307) (4,187) Annual OPEB Cost 102,281 24,056 126,337 Less: Contributions made - 17,049 17,049 Increase in net OPEB obligation 102,281 7,007 109,288 Net OPEB obligation – beginning of the year 94,813 5,213 100,026 Net OPEB obligation – end of year $ 197,094 $ 12,220 $ 209,314 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 34 Funded Status and Funding Progress: The funded status of the plans as of June 30, 2011 were as follows: COFEHBP PEBP Total Accrued actuarial liability $ 301,357 $ 420,276 $ 721,633 Actuarial value of plan assets - - - Unfunded Actuarial Accrued Liability – $ 301,357 $ 420,276 $ 721,633 Funded Ratio / 0% 0% 0% Covered payroll $ 2,494,167 N/A Unfunded Actuarial Accrued Liability as a Percentage of Covered Payroll / 12% N/A Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Multiyear information will be provided as it becomes available. Actuarial Methods and Assumptions: Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the City and plan members to that point. Actuarial calculations reflect long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and actuarial value of assets. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 35 Significant methods and assumptions used in the June 30, 2011 actuarial valuation were as follows: COFEHBP PEBP Actuarial valuation date June 30, 2010 June 30, 2010 Actuarial cost method Entry Age Normal Cost Entry Age Normal Cost Amortization method Level Percentage of Payroll Level Percentage of Payroll Amortization period (open) 30 years 30 years Asset valuation method Market Value Market Value Actuarial Assumptions: Investment rate of return 4% 4% Projected overall salary increase 4% 4% Medical Healthcare inflation rate* 9%-5% - PEBP Subsidy inflation rate - - * Actual medical premiums used in 2010, 9% decreasing each year by 1% until 5% is reached in 2014. NOTE 9 – RISK MANAGEMENT: The City, like any governmental entity, is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries of employees; and natural disasters. The City has joined together with similar public agencies (cities, counties and special districts) throughout the State of Nevada to create a pool under the Nevada Interlocal Cooperation Act. The Nevada Public Agency Insurance Pool (Pool) is a public entity risk pool currently operating as a common risk management and insurance program for its members. The City pays an annual premium and specific deductibles, as necessary, to the Pool for its general insurance coverage. The Pool is considered a self-sustaining risk pool that will provide coverage for its members for up to $10,000,000 per event and a $13,000,000 general aggregate per member. The City has also joined together with similar public agencies, under the Nevada Interlocal Cooperation Act, to create an intergovernmental self-insured association for workers compensation insurance, the Public Agency Compensation Trust (PACT). ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 36 The City pays premiums based on payroll costs to the PACT. The PACT is considered a self-sustaining pool that will provide coverage based on established statutory limits. The City continues to carry commercial insurance for other risks of loss, including specific risks of loss not covered by the Pool, including bonding and employee health and accident insurance. Settled claims resulting from these risks have not exceeded commercial coverage for the past three years. NOTE 10 – COMMITMENTS AND CONTINGENCIES: There are lawsuits and unresolved disputes involving the City or its employees in which the City is represented by outside counsel. However, in the opinion of the outside counsel, these actions will not, in aggregate, have a material adverse effect upon the operations or financial position of the City. At June 30, 2011, the City had two construction contracts in progress. Management has estimated that approximately $72,472 will be billed for work completed over the next fiscal year. NOTE 11 – PRIOR PERIOD ADJUSTMENT: Management determined that intangible assets owned by the City had not been capitalized as required by Government Accounting Standards Board Statement No. 51 Basic Financial Statements. Accordingly, beginning water rights and beginning net assets in the Water Enterprise Fund were increased by $696,150. NOTE 12 – SUBSEQUENT EVENTS: On July 2, 2011, the City entered into a Settlement Agreement and Mutual Release with Truckee Carson Irrigation District. The terms of the agreement settle all claims arising from the break of the Truckee Canal on January 5, 2008. The settlement is in the amount of $200,000, not in cash, but by offsetting any consideration mutually agreed upon by the parties. The City Council awarded several contracts after year end. The most significant of these contracts include the following: Construction contracts to A&K Earthmovers, Inc. in amounts not to exceed $3,017,020. A legal contract to Taggart & Taggart, LTD in the amount not to exceed $212,376. ---PAGE BREAK--- ORIGINAL FINAL ORIGINAL FINAL ACTUAL TO FINAL TO ACTUAL REVENUES Taxes: Ad valorem 1,462,048 $ 1,462,048 $ 1,449,538 $ - $ (12,510) $ Licenses and permits: Business licenses 200,000 200,000 202,452 - 2,452 Franchise fees 920,000 920,000 951,760 - 31,760 Liquor licenses 30,000 30,000 26,128 - (3,872) City gaming licenses 90,000 90,000 99,439 - 9,439 Building permits and fees 120,000 120,000 130,527 - 10,527 Planning and zoning permits and fees 15,000 15,000 19,120 - 4,120 Public works fees 46,000 46,000 13,048 - (32,952) Other permits 11,000 11,000 12,631 - 1,631 1,432,000 1,432,000 1,455,105 - 23,105 Intergovernmental revenues: Consolidated tax distribution 150,000 150,000 130,215 - (19,785) Motor vehicle fuel tax 264,797 264,797 282,617 - 17,820 RTC shared revenue 519,500 319,500 33,224 (200,000) (286,276) Fernley park agreement 60,000 60,000 60,000 - - 994,297 794,297 506,056 (200,000) (288,241) Fines and forfeits: Community service fee - - 700 - 700 Municipal court fines 174,200 174,200 145,335 - (28,865) Municipal court fees 16,800 16,800 11,603 - (5,197) 191,000 191,000 157,638 - (33,362) Miscellaneous: Interest 12,800 12,800 7,809 - (4,991) Park development - - 525 - 525 Miscellaneous 43,600 43,600 81,306 - 37,706 56,400 56,400 89,640 - 33,240 Total Revenues 4,135,745 3,935,745 3,657,977 (200,000) (277,768) EXPENDITURES General government: Finance: Salaries and wages 70,405 70,405 72,359 - (1,954) Employee benefits 30,040 30,040 28,582 - 1,458 Services and supplies 36,910 61,910 54,906 25,000 7,004 Contingency 45,727 - - (45,727) - Total Finance 183,082 162,355 155,847 (20,727) 6,508 Information Technology: Salaries and wages 51,208 51,208 56,078 - (4,870) Employee benefits 21,434 21,434 20,171 - 1,263 Services and supplies (1,500) 23,500 17,039 25,000 6,461 Total Information Technology 71,142 96,142 93,288 25,000 2,854 CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (BUDGETARY BASIS) AND ACTUAL GENERAL FUND BUDGET VARIANCE WITH FOR THE YEAR ENDED JUNE 30, 2011 (Page 1 of 3) 37 ---PAGE BREAK--- ORIGINAL FINAL ORIGINAL FINAL ACTUAL TO FINAL TO ACTUAL Office of the City Clerk: Salaries and wages 141,672 $ 141,672 $ 150,457 $ - $ (8,785) $ Employee benefits 53,283 53,283 56,186 - (2,903) Services and supplies 23,600 23,600 11,839 - 11,761 Total City Clerk 218,555 218,555 218,482 - 73 Office of the City Manager: Salaries and wages 198,780 198,780 203,721 - (4,941) Employee benefits 91,666 91,666 61,555 - 30,111 Services and supplies 28,750 28,750 52,830 - (24,080) Total City Manager 319,196 319,196 318,106 - 1,090 Office of the City Attorney: Salaries and wages 149,956 149,956 147,773 - 2,183 Employee benefits 62,218 62,218 52,514 - 9,704 Services and supplies 20,540 20,540 22,407 - (1,867) Total City Attorney 232,714 232,714 222,694 - 10,020 Mayor/City Council: Salaries and wages 71,931 71,931 71,366 - 565 Employee benefits 16,263 16,263 14,190 - 2,073 Services and supplies 37,278 37,278 35,829 - 1,449 Total Mayor/City Council 125,472 125,472 121,385 - 4,087 Streets & Public Works Salaries and wages 189,676 189,676 193,895 - (4,219) Employee benefits 81,882 81,882 72,178 - 9,704 Services and supplies 246,600 246,600 265,943 - (19,343) Capital outlay 400,000 100,000 72,733 (300,000) 27,267 Total Streets & Public Works 918,158 618,158 604,749 (300,000) 13,409 Total General Government 2,068,319 1,772,592 1,734,551 (295,727) 38,041 Judicial: Municipal court: Salaries and wages 107,627 107,627 106,332 - 1,295 Employee benefits 54,970 54,970 46,247 - 8,723 Services and supplies 42,850 42,850 38,153 - 4,697 Total Judicial 205,447 205,447 190,732 - 14,715 CITY OF FERNLEY, NEVADA GENERAL FUND BUDGET SCHEDULE OF REVENUES, EXPENDITURES, AND FOR THE YEAR ENDED JUNE 30, 2011 (Page 2 of 3) CHANGES IN FUND BALANCE - BUDGET (BUDGETARY BASIS) AND ACTUAL VARIANCE WITH 38 ---PAGE BREAK--- ORIGINAL FINAL ORIGINAL FINAL ACTUAL TO FINAL TO ACTUAL Culture and Recreation: Parks: Salaries and wages 251,739 $ 251,739 $ 247,933 $ - $ 3,806 $ Employee benefits 104,343 104,343 69,249 - 35,094 Services and supplies 297,450 297,450 295,499 - 1,951 Total Culture and Recreation 653,532 653,532 612,681 - 40,851 Community development: Building: Salaries and wages 160,316 160,316 138,942 - 21,374 Employee benefits 69,266 64,993 49,316 (4,273) 15,677 Services and supplies 24,525 24,525 16,007 - 8,518 Total Building 254,107 249,834 204,265 (4,273) 45,569 Planning: Salaries and wages 239,817 239,817 226,166 - 13,651 Employee benefits 105,276 105,276 74,684 - 30,592 Services and supplies 54,850 54,850 85,692 - (30,842) Total Planning 399,943 399,943 386,542 - 13,401 Total Community Development 654,050 649,777 590,807 (4,273) 58,970 Health: Animal control: Salaries and wages 37,294 37,294 40,702 - (3,408) Employee benefits 22,314 22,314 17,553 - 4,761 Services and supplies 7,950 7,950 8,336 - (386) Total Animal Control 67,558 67,558 66,591 - 967 Vector control: Salaries and wages 50,836 50,836 55,021 - (4,185) Employee benefits 17,677 17,677 14,782 - 2,895 Services and supplies 43,950 43,950 40,094 - 3,856 Total Vector Control 112,463 112,463 109,897 - 2,566 Total Health 180,021 180,021 176,488 - 3,533 Debt service: Principal 189,000 189,000 189,000 - - Interest 189,860 189,860 189,836 - 24 Total Debt Service 378,860 378,860 378,836 - 24 Total Expenditures 4,140,229 3,840,229 3,684,095 (300,000) 156,134 Excess of Revenues Over Expenditures (4,484) 95,516 (26,118) 100,000 (121,634) OTHER FINANCING SOURCES (USES) Transfers in (out) 531,588 791,178 791,178 259,590 - Net Change in Fund Balance 527,104 886,694 765,060 359,590 (121,634) FUND BALANCE, July 1 907,448 814,316 814,316 (93,132) - FUND BALANCE, June 30 1,434,552 $ 1,701,010 $ 1,579,376 $ 266,458 $ (121,634) $ CITY OF FERNLEY, NEVADA GENERAL FUND BUDGET SCHEDULE OF REVENUES, EXPENDITURES, AND FOR THE YEAR ENDED JUNE 30, 2011 (Page 3 of 3) CHANGES IN FUND BALANCE - BUDGET (BUDGETARY BASIS) AND ACTUAL VARIANCE WITH 39 ---PAGE BREAK--- GENERAL FUND AS REPORTED ON STATEMENT OF REVENUES, GENERAL STREETS PRIVATE RESIDENTIAL EXPENDITURES FUND AND STORM SECTOR CONSTRUCTION AND CHANGES IN (BUDGETARY DRAINS COMMUNITY TAX DISTRICT FUND BALANCES BASIS) FUND SUPPORT FUND #1 FUND (GAAP BASIS) REVENUES Taxes 1,449,538 $ - $ - $ - $ 1,449,538 $ Licenses and permits 1,455,105 - - - 1,455,105 Intergovernmental 506,056 - - - 506,056 Fines and forfeits 157,638 - - - 157,638 Miscellaneous 89,640 - 61 74 89,775 Total Revenues 3,657,977 - 61 74 3,658,112 EXPENDITURES Current General government 1,661,818 - - - 1,661,818 Judicial 190,732 - - - 190,732 Culture and recreation 612,681 - - - 612,681 Community development 590,807 - - - 590,807 Health 176,488 - - - 176,488 Total Current 3,232,526 - - - 3,232,526 Debt service: Principal 189,000 - - - 189,000 Interest 189,836 - - - 189,836 Total Debt Service 378,836 - - - 378,836 Capital outlay: General government 72,733 - - - 72,733 Culture and recreation - - - 14,261 14,261 Total Capital Outlay 72,733 - - 14,261 86,994 Total Expenditures 3,684,095 - - 14,261 3,698,356 Excess (Deficiency) of Revenues Over (Under) Expenditures (26,118) - 61 (14,187) (40,244) OTHER FINANCING SOURCES (USES) Transfers in (out) 791,178 (791,178) - - - Net Change in Fund Balance 765,060 (791,178) 61 (14,187) (40,244) FUND BALANCE, JULY 1 814,316 791,178 13,514 15,265 1,634,273 FUND BALANCE, JUNE 30 1,579,376 $ - $ 13,575 $ 1,078 $ 1,594,029 $ CITY OF FERNLEY, NEVADA RECONCILIATION OF THE GENERAL FUND (BUDGETARY BASIS) TO THE GENERAL FUND (GAAP BASIS) SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2011 INTERNALLY REPORTED FUNDS See accompanying notes to required supplementary information. 40 ---PAGE BREAK--- ORIGINAL FINAL ORIGINAL FINAL ACTUAL TO FINAL TO ACTUAL REVENUES Intergovernmental: Grant 4,489,487 $ 4,489,487 $ 2,119,615 $ - $ (2,369,872) $ Miscellaneous: Interest earnings 3,500 3,500 1,448 - (2,052) Total Revenues 4,492,987 4,492,987 2,121,063 - (2,371,924) EXPENDITURES Community Development: Salaries and wages - - 62,186 - (62,186) Employee benefits - - 24,930 - (24,930) Services and supplies 4,358,256 4,358,256 2,074,420 - 2,283,836 Total Expenditures 4,358,256 4,358,256 2,161,536 - 2,196,720 Excess (Deficiency) of Revenues Over (Under) Expenditures 134,731 134,731 (40,473) - (175,204) OTHER FINANCING SOURCES Transfers in (out) - 60,000 60,000 60,000 - Net Change in Fund Balance 134,731 194,731 19,527 60,000 (175,204) FUND BALANCE, July 1 107,344 98,606 98,606 (8,738) - FUND BALANCE, June 30 242,075 $ 293,337 $ 118,133 $ 51,262 $ (175,204) $ CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2011 VARIANCE WITH BUDGET CITY OF FERNLEY, NEVADA GRANTS FUND SCHEDULE OF REVENUES, EXPENDITURES, AND 41 ---PAGE BREAK--- Actuarial Accrued Liability Actuarial (AAL) - UAAL as a Value of Entry Age Percentage Actuarial Plan Normal Unfunded Funded Covered of covered Valuation Assets Cost AAL (UAAL) Ratio Payroll Payroll Date (b - a) (a/b) - a]/c) COFEHBP June 30, 2010 - $ 301,357 $ 301,357 $ 0% 2,494,167 $ 12% PEBP* June 30, 2010 - 420,276 420,276 0% N/A N/A Multi-year data will be provided as it becomes available. * The option to join the State plan was sunsetted for City Employees effective November 29, 2008. CITY OF FERNLEY, NEVADA FOR THE YEAR ENDED JUNE 30, 2011 SCHEDULE OF FUNDING PROGRESS - OTHER POSTEMPLOYMENT BENEFIT PLANS 42 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2011 43 The accompanying Reconciliation of the General Fund (Budgetary Basis) to the General Fund (GAAP Basis) presents balances combined for external reporting purposes. Budget to actual comparisons are presented for all funds of the City, as required by Nevada Revised Statutes. Such budget comparisons are required to be presented using the budget as adopted, and approved by the State of Nevada Department of Taxation. However, guidance provided in governmental accounting standards specify that three of these internally reported funds of the City of Fernley, not meeting the definition of special revenue funds, do not qualify to be separately presented for external reporting purposes. These internally reported funds of the City (Streets and Storm Drains Fund, Private Sector Community Support Fund, and Residential Construction Tax District #1 Fund) are combined with the General Fund for external reporting purposes. ---PAGE BREAK--- GENERAL FUND GENERAL STREETS PRIVATE RESIDENTIAL AS REPORTED ON FUND AND STORM SECTOR CONSTRUCTION BALANCE (BUDGETARY DRAINS COMMUNITY TAX DISTRICT SHEET BASIS) FUND SUPPORT FUND #1 FUND (GAAP BASIS) ASSETS Cash and investments 1,736,979 $ - $ 13,557 $ 15,318 $ 1,765,854 $ Interest receivable 2,194 - 18 20 2,232 Taxes receivable 68,329 - - - 68,329 Accounts receivable 214,609 - - - 214,609 Due from other governments 23,816 - - - 23,816 Prepaids 22,375 - - - 22,375 Total Assets 2,068,302 $ - $ 13,575 $ 15,338 $ 2,097,215 $ LIABILITIES AND FUND BALANCE Liabilities: Accounts payable 208,431 - $ - $ 14,260 $ 222,691 $ Due to developers 218,577 - - - 218,577 Due to other governments 3,952 - - - 3,952 Deferred revenue 57,966 - - - 57,966 Total Liabilities 488,926 - - 14,260 503,186 Fund Balance: Nonspendable 22,375 - - - 22,375 Restricted: Future development 327,747 - - - 327,747 Specified purpose - - 13,575 - 13,575 Capital projects - - - 1,078 1,078 Assigned 5,582 - - - 5,582 Unassigned 1,223,672 - - - 1,223,672 Total Fund Balance 1,579,376 - 13,575 1,078 1,594,029 Total Liabilities and Fund Balance 2,068,302 $ - $ 13,575 $ 15,338 $ 2,097,215 $ JUNE 30, 2011 CITY OF FERNLEY, NEVADA RECONCILIATION OF THE GENERAL FUND (BUDGETARY BASIS) TO THE GENERAL FUND (GAAP BASIS) COMBINING BALANCE SHEET INTERNALLY REPORTED 44 ---PAGE BREAK--- NONMAJOR NONMAJOR SPECIAL CAPITAL REVENUE PROJECTS FUNDS FUND TOTAL ASSETS Cash and investments 448,518 $ 36,884 $ 485,402 $ Interest receivable 576 48 624 Accounts receivable 3,850 - 3,850 Due from other governments 30,183 - 30,183 Total Assets 483,127 $ 36,932 $ 520,059 $ LIABILITIES AND FUND BALANCE Liabilities: Accounts payable and accrued liabilities 7,979 $ - $ 7,979 $ Fund Balance: Restricted: Court administration and graffiti abatement - NRS 268.4085 37,313 - 37,313 Court fees - NRS 176.0611 76,316 - 76,316 Convention center 132,588 - 132,588 Capital projects 143,470 36,932 180,402 Assigned 85,461 - 85,461 Total Fund Balance 475,148 36,932 512,080 Total Liabilities and Fund Balance 483,127 $ 36,932 $ 520,059 $ CITY OF FERNLEY, NEVADA NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2011 45 ---PAGE BREAK--- NONMAJOR NONMAJOR SPECIAL CAPITAL REVENUE PROJECTS FUNDS FUND TOTAL REVENUES Taxes: Residential construction tax 2,000 $ - $ 2,000 $ Transient lodging tax 198,628 - 198,628 Ad Valorem - 8,216 8,216 200,628 8,216 208,844 Fines and forfeits: Municipal administrative fees 39,759 - 39,759 Miscellaneous: Interest earnings 1,751 155 1,906 Developer fees 111,000 - 111,000 112,751 155 112,906 Total Revenues 353,138 8,371 361,509 EXPENDITURES Judicial: Services and supplies 10,330 - 10,330 Culture and recreation: Services and supplies 42 - 42 Community development: Services and supplies 43,823 - 43,823 Capital outlay 5,521 - 5,521 49,344 - 49,344 Total Expenditures 59,716 - 59,716 Excess (Deficiency) of Revenues Over (Under) Expenditures 293,422 8,371 301,793 OTHER FINANCING SOURCES (USES) Transfers in (out) (50,000) - (50,000) Net Change in Fund Balance 243,422 8,371 251,793 FUND BALANCE, JULY 1 231,726 28,561 260,287 FUND BALANCE, JUNE 30 475,148 $ 36,932 $ 512,080 $ CITY OF FERNLEY, NEVADA NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2011 46 ---PAGE BREAK--- MUNICIPAL RESIDENTIAL MUNICIPAL COURT COURT CONSTRUCTION TRANSIENT ADMINISTRATIVE FACILITIES TAX DISTRICT LODGING FEES FUND FEES FUND #2 FUND TAX FUND TOTAL ASSETS Cash and investments 35,708 $ 74,011 $ 148,818 $ 189,981 $ 448,518 $ Interest receivable 44 93 193 246 576 Accounts receivable 1,638 2,212 - - 3,850 Due from other governments - - - 30,183 30,183 Total Assets 37,390 $ 76,316 $ 149,011 $ 220,410 $ 483,127 $ LIABILITIES AND FUND BALANCE Liabilities: Accounts payable 77 $ - $ 5,541 $ 2,361 $ 7,979 $ Advance to other funds - - - - - Total Liabilities 77 - 5,541 2,361 7,979 Fund Balance: Restricted: Court administration and graffiti abatement - NRS 268.4085 37,313 - - - 37,313 Court fees - NRS 176.0611 - 76,316 - - 76,316 Grants - - - - - Convention center - - - 132,588 132,588 Capital projects - - 143,470 - 143,470 Assigned - - - 85,461 85,461 Total Fund Balance 37,313 76,316 143,470 218,049 475,148 Total Liabilities and Fund Balance 37,390 $ 76,316 $ 149,011 $ 220,410 $ 483,127 $ CITY OF FERNLEY, NEVADA NONMAJOR SPECIAL REVENUE FUNDS COMBINING BALANCE SHEET JUNE 30, 2011 47 ---PAGE BREAK--- MUNICIPAL RESIDENTIAL MUNICIPAL COURT COURT CONSTRUCTION TRANSIENT ADMINISTRATIVE FACILITIES TAX DISTRICT LODGING FEES FUND FEES FUND #2 FUND TAX FUND TOTAL REVENUES Taxes: Residential construction tax - $ - $ 2,000 $ - $ 2,000 $ Transient lodging tax - - - 198,628 198,628 - - 2,000 198,628 200,628 Fines and forfeits: Municipal administrative fees 16,864 22,895 - - 39,759 Miscellaneous: Interest earnings 144 288 803 516 1,751 Developer fees - - 111,000 - 111,000 144 288 111,803 516 112,751 Total Revenues 17,008 23,183 113,803 199,144 353,138 EXPENDITURES Judicial: Services and supplies 10,330 - - - 10,330 Culture and recreation: Services and supplies - - 42 - 42 Community development: Services and supplies - - - 43,823 43,823 Capital outlay - - 5,521 - 5,521 - - 5,521 43,823 49,344 Total Expenditures 10,330 - 5,563 43,823 59,716 Excess (Deficiency) of Revenues Over (Under) Expenditures 6,678 23,183 108,240 155,321 293,422 OTHER FINANCING SOURCES (USES) Transfers in (out) - - (50,000) - (50,000) Net Change in Fund Balance 6,678 23,183 58,240 155,321 243,422 FUND BALANCE, JULY 1 30,635 53,133 85,230 62,728 231,726 FUND BALANCE, JUNE 30 37,313 $ 76,316 $ 143,470 $ 218,049 $ 475,148 $ CITY OF FERNLEY, NEVADA NONMAJOR SPECIAL REVENUE FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2011 48 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Fines and forfeits: Municipal administrative fees 12,000 $ 16,864 $ 4,864 $ Miscellaneous: Interest earnings 250 144 (106) Total Revenues 12,250 17,008 4,758 EXPENDITURES Judicial: Services and supplies 15,000 10,330 4,670 Net Change in Fund Balance (2,750) 6,678 9,428 FUND BALANCE, July 1 30,431 30,635 204 FUND BALANCE, June 30 27,681 $ 37,313 $ 9,632 $ FOR THE YEAR ENDED JUNE 30, 2011 CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL MUNICIPAL COURT ADMINISTRATIVE FEES FUND 49 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Fines and forfeits: Municipal administrative fees 17,000 $ 22,895 $ 5,895 $ Miscellaneous: Interest earnings 400 288 (112) Net Change in Fund Balance 17,400 23,183 5,783 FUND BALANCE, July 1 53,133 53,133 - FUND BALANCE, June 30 70,533 $ 76,316 $ 5,783 $ FOR THE YEAR ENDED JUNE 30, 2011 CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL MUNICIPAL COURT FACILITY FEES FUND 50 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Taxes: Residential construction tax 2,000 $ 2,000 $ - $ Miscellaneous: Developer fees - 111,000 111,000 Interest earnings 750 803 53 Total Revenues 2,750 113,803 111,053 EXPENDITURES Culture and recreation: Services and supplies 46 42 4 Capital outlay 161,000 5,521 155,479 Total Expenditures 161,046 5,563 155,483 Excess (Deficiency) of Revenues Over (Under) Expenditures (158,296) 108,240 266,536 OTHER FINANCING SOURCES Transfers in (out) (50,000) (50,000) - Net Change in Fund Balance (208,296) 58,240 266,536 FUND BALANCE, July 1 85,230 85,230 - FUND BALANCE, June 30 (123,066) $ 143,470 $ 266,536 $ FOR THE YEAR ENDED JUNE 30, 2011 CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL RESIDENTIAL CONSTRUCTION TAX DISTRICT #2 FUND 51 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Taxes: Transient lodging tax 150,000 $ 198,628 $ 48,628 $ Miscellaneous: Interest earnings 70 516 446 Total Revenues 150,070 199,144 49,074 EXPENDITURES Culture and recreation: Services and supplies 50,000 43,823 6,177 Net Change in Fund Balance 100,070 155,321 55,251 FUND BALANCE, July 1 - 62,728 62,728 FUND BALANCE, June 30 100,070 $ 218,049 $ 117,979 $ CITY OF FERNLEY, NEVADA TRANSIENT LODGING TAX FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2011 52 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Miscellaneous: Interest earnings 2,400 $ 2,623 $ 223 $ EXPENDITURES Community development: Services and supplies - 126 (126) Capital outlay 147,400 30,445 116,955 Total Expenditures 147,400 30,571 116,829 Excess (Deficiency) of Revenues Over (Under) Expenditures (145,000) (27,948) (116,606) OTHER FINANCING SOURCES Transfers in (out) (10,000) (10,000) - Net Change in Fund Balance (155,000) (37,948) (116,606) FUND BALANCE, July 1 1,056,856 1,056,856 - FUND BALANCE, June 30 901,856 $ 1,018,908 $ (116,606) $ FOR THE YEAR ENDED JUNE 30, 2011 CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL CAPITAL PROJECTS FUND 53 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Taxes: Ad Valorem 8,029 $ 8,216 $ 187 $ Miscellaneous: Interest earnings (50) 155 205 Net Change in Fund Balance 7,979 8,371 392 FUND BALANCE, July 1 - 28,561 28,561 FUND BALANCE, June 30 7,979 $ 36,932 $ 28,953 $ CITY OF FERNLEY, NEVADA NONMAJOR CAPITAL IMPROVEMENT FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2011 54 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE User fees 5,010,000 $ 4,580,081 $ (429,919) $ Operating Grant - 4,893 4,893 Total Operating Revenues 5,010,000 4,584,974 (425,026) Salaries and wages 800,203 850,082 (49,879) Employee benefits 372,223 355,206 17,017 Services and supplies 1,889,280 1,526,874 362,406 Depreciation 3,149,500 3,207,491 (57,991) Total Operating Expenses 6,211,206 5,939,653 271,553 Operating Income (Loss) (1,201,206) (1,354,679) (153,473) Interest earned on investments 100,000 29,619 (70,381) In lieu of water rights fees 5,000 5,690 690 Miscellaneous 200,000 149,039 (50,961) Interest expense (3,308,617) (3,331,698) (23,081) Total Nonoperating Revenue (Expense) (3,003,617) (3,147,350) (143,733) Income (Loss) Before Capital Contributions (4,204,823) (4,502,029) (297,206) Customer connection fees 50,000 40,157 (9,843) Developer agreements - 4,303 4,303 Developer contributed infrastructure 250,000 707,520 457,520 Developer contributed water rights 10,000 1,065,070 1,055,070 Total Capital Contributions 310,000 1,817,050 1,507,050 Change in Net Assets (3,894,823) (2,684,979) 1,209,844 Net Assets July 1, as previously reported 76,490,685 75,794,535 (696,150) Prior period adjustment - 696,150 696,150 Net Assets July 1, as previously reported 76,490,685 76,490,685 - Net Assets, June 30 72,595,862 $ 73,805,706 $ 1,209,844 $ CAPITAL CONTRIBUTIONS OPERATING REVENUES NONOPERATING REVENUE (EXPENSE) CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENSES, AND WATER UTILITY ENTERPRISE FUND FOR THE YEAR ENDED JUNE 30, 2011 OPERATING EXPENSES CHANGES IN NET ASSETS - BUDGET (GAAP BASIS) AND ACTUAL 55 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE User fees 1,920,000 $ 1,865,202 $ (54,798) $ Salaries and wages 338,644 373,712 (35,068) Employee benefits 172,081 161,035 11,046 Services and supplies 665,150 556,688 108,462 Depreciation 1,011,000 1,068,514 (57,514) Total Operating Expenses 2,186,875 2,159,949 26,926 Operating Income (Loss) (266,875) (294,747) (27,872) Interest earned on investments 125,000 38,598 (86,402) Miscellaneous 1,000 5 (995) Interest expense (365,759) (365,009) 750 Total Nonoperating Revenue (Expense) (239,759) (326,406) (86,647) Income (Loss) Before Capital Contributions (506,634) (621,153) (114,519) Customer connection fees 30,000 31,178 1,178 Developer contributed infrastructure 100,000 49,140 (50,860) Total Capital Contributions 130,000 80,318 (49,682) Change in Net Assets (376,634) (540,835) (164,201) NET ASSETS, July 1 30,463,145 30,463,145 - NET ASSETS, June 30 30,086,511 $ 29,922,310 $ (164,201) $ CAPITAL CONTRIBUTIONS OPERATING REVENUES NONOPERATING REVENUE (EXPENSE) CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENSES, AND SEWER UTILITY ENTERPRISE FUND FOR THE YEAR ENDED JUNE 30, 2011 OPERATING EXPENSES CHANGES IN NET ASSETS - BUDGET (GAAP BASIS) AND ACTUAL 56 ---PAGE BREAK--- BALANCE BALANCE JULY 1, 2010 ADDITIONS DELETIONS JUNE 30, 2011 Cash and investments 16,450 $ - $ 4,832 $ 11,618 $ Bail bond deposits held for others 15,739 $ - $ 4,121 $ 11,618 $ Other liabilities 711 - 711 - Total Liabilities 16,450 $ - $ 4,832 $ 11,618 $ ASSETS LIABILITIES CITY OF FERNLEY, NEVADA STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FIDUCIARY FUND - MUNICIPAL TRUST FUND FOR THE YEAR ENDED JUNE 30, 2011 57 ---PAGE BREAK--- FINAL BUDGET ACTUAL VARIANCE REVENUES Licenses and permits: Public works fees - $ - $ - $ OTHER FINANCING SOURCES (USES) Transfers in (out) (791,178) (791,178) - Net Change in Fund Balance (791,178) (791,178) - FUND BALANCE, July 1 791,178 791,178 - FUND BALANCE, June 30 - $ - $ - $ FOR THE YEAR ENDED JUNE 30, 2011 CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (BUDGETARY BASIS) AND ACTUAL STREETS AND STORM DRAINS FUND 58 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Miscellaneous: Interest earnings 100 $ 61 $ (39) $ Other 13,000 - (13,000) Total Revenues 13,100 61 (13,039) EXPENDITURES Culture and recreation: Services and supplies 13,000 - 13,000 Net Change in Fund Balance 100 61 (39) FUND BALANCE, July 1 - 13,514 13,514 FUND BALANCE, June 30 100 $ 13,575 $ 13,475 $ FOR THE YEAR ENDED JUNE 30, 2011 CITY OF FERNLEY, NEVADA PRIVATE SECTOR COMMUNITY SUPPORT FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (BUDGETARY BASIS) AND ACTUAL 59 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Miscellaneous: Interest 65 $ 74 $ 9 $ EXPENDITURES Culture and recreation: Capital outlay 15,326 14,261 1,065 Total Expenditures 15,326 14,261 1,065 Net Change in Fund Balance (15,261) (14,187) 1,074 FUND BALANCE, July 1 15,265 15,265 - FUND BALANCE, June 30 4 $ 1,078 $ 1,074 $ FOR THE YEAR ENDED JUNE 30, 2011 CITY OF FERNLEY, NEVADA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (BUDGETARY BASIS) AND ACTUAL RESIDENTIAL CONSTRUCTION TAX DISTRICT #1 FUND 60 ---PAGE BREAK--- This part of the City of Fernley's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. Section Contents Schedule # Financial Trends 1 - 4 These schedules contain trend information to help the reader understand how the City's financial performance and well being have changed over time. Revenue Capacity 5 - 9 These schedules contain information to help the reader assess the factors affecting the City's ability to generate its property and sales taxes. Debt Capacity 10 - 14 These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt, and its ability to issue additional future debt. Demographic and Economic Information 15 - 16 These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place and to help make comparisons over time and with other governments. Operating Information 17 - 19 These schedules contain information about the City's operations and resources to help the reader understand how the City's financial information relates to the services the City provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from comprehensive annual financial reports for the relevant year. The city implemented GASB 34 in fiscal year 2004, and schedules presenting government-wide information include information beginning in that year. CITY OF FERNLEY, NEVADA STATISTICAL SECTION ---PAGE BREAK--- SCHEDULE 1 2004 2005 2006 2007 2008 2009 2010 2011 GOVERNMENTAL ACTIVITIES Invested in capital assets, net of related debt 11,913,896 $ 15,883,001 $ 24,608,748 $ 30,721,447 $ 35,677,010 $ 39,652,258 $ 38,680,602 $ 38,683,760 $ Restricted - - - - 362,289 391,600 363,602 1,886,533 Unrestricted 3,927,329 5,884,904 5,535,323 4,549,063 2,395,580 2,276,380 2,554,609 1,218,963 Total Governmental Activities Net Assets 15,841,225 $ 21,767,905 $ 30,144,071 $ 35,270,510 $ 38,434,879 $ 42,320,238 $ 41,598,813 $ 41,789,256 $ BUSINESS-TYPE ACTIVITIES Invested in capital assets, net of related debt 32,471,737 $ 39,238,863 $ 57,581,522 $ 35,352,177 $ 77,070,390 $ 95,281,505 $ 92,141,040 $ 91,669,313 $ Restricted - 535,237 579,560 - - - - - Unrestricted 12,780,664 16,901,342 17,939,851 60,502,722 25,025,399 14,523,972 14,812,790 12,058,703 Total Business-type Activities Net Assets 45,252,401 $ 56,675,442 $ 76,100,933 $ 95,854,899 $ 102,095,789 $ 109,805,477 $ 106,953,830 $ 103,728,016 $ PRIMARY GOVERNMENT Invested in capital assets, net of related debt 44,385,633 $ 55,121,864 $ 82,190,270 $ 66,073,624 $ 112,747,400 $ 134,933,763 $ 130,821,642 $ 130,353,073 $ Restricted - 535,237 579,560 - 362,289 391,600 363,602 1,886,533 Unrestricted 16,707,993 22,786,246 23,475,174 65,051,785 27,420,979 16,800,352 17,367,399 13,277,666 Total Primary Government Net Assets 61,093,626 $ 78,443,347 $ 106,245,004 $ 131,125,409 $ 140,530,668 $ 152,125,715 $ 148,552,643 $ 145,517,272 $ Trend data is only available for the last eight years due to implementation of GASB 34. FISCAL YEAR ENDED JUNE 30, CITY OF FERNLEY, NEVADA NET ASSETS BY COMPONENT LAST EIGHT FISCAL YEARS 61 ---PAGE BREAK--- SCHEDULE 2 2004 2005 2006 2007 2008 2009 2010 2011 EXPENSES Governmental Activities: General government 587,873 $ 595,912 $ 796,403 $ 1,173,360 $ 1,572,115 $ 1,626,115 $ 1,762,449 $ 1,499,967 $ Judicial 156,796 173,804 170,479 194,353 252,189 243,889 265,515 204,071 Public works 463,188 642,480 729,919 1,326,718 783,565 1,778,649 1,824,412 1,871,798 Culture and recreation 362,983 458,828 646,259 838,674 689,281 685,706 622,998 734,553 Community development 434,627 861,555 875,056 848,010 1,977,586 811,701 1,247,018 2,817,551 Health 50,560 102,768 263,919 295,413 280,743 252,320 262,865 193,303 Debt Service: Interest and fiscal charges - - 224,500 221,032 214,326 206,092 198,144 189,836 Total Governmental Activities Expenses 2,056,027 2,835,347 3,706,535 4,897,560 5,769,805 5,604,472 6,183,401 7,511,079 Business-type Activities: Water 2,035,646 2,134,429 2,422,583 3,058,553 3,152,845 4,127,466 9,420,709 9,271,351 Sewer 1,347,388 1,509,433 1,530,898 1,812,583 2,012,862 2,581,981 2,641,510 2,524,958 Other - - 700 9,340 212,651 - - - Total Business-type Activities Expenses 3,383,034 3,643,862 3,954,181 4,880,476 5,378,358 6,709,447 12,062,219 11,796,309 Total Primary Government Expenses 5,439,061 $ 6,479,209 $ 7,660,716 $ 9,778,036 $ 11,148,163 $ 12,313,919 $ 18,245,620 $ 19,307,388 $ Trend data is only available for the last eight years due to implementation of GASB 34. CITY OF FERNLEY, NEVADA CHANGE IN NET ASSETS LAST EIGHT FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 62 ---PAGE BREAK--- SCHEDULE 2 2004 2005 2006 2007 2008 2009 2010 2011 PROGRAM REVENUES Governmental Activities: Charges for Services: General government 731,510 $ 887,827 $ 1,008,662 $ 1,137,510 $ 1,030,613 $ 1,243,230 $ 1,267,670 $ 1,209,522 $ Judicial 170,835 423,178 196,249 89,248 162,416 161,819 196,886 197,395 Public works 10,901 31,278 40,071 29,754 23,021 65,129 116,619 - Culture and recreation 16,950 13,400 8,150 48,355 1,600 200 25 525 Community development 1,422,438 1,804,978 1,123,508 679,608 509,440 258,801 232,719 149,647 Health 1,766 1,611 2,341 4,318 4,650 3,819 3,296 3,578 Operating Grants and Contributions 276,701 268,632 348,627 60,000 60,000 60,383 61,500 133,460 Capital Grants and Contributions 8,112,137 4,232,398 7,531,080 6,052,749 4,869,410 5,613,270 1,538,400 3,933,102 Total Governmental Activities Program Revenues 10,743,238 7,663,302 10,258,688 8,101,542 6,661,150 7,406,651 3,417,115 5,627,229 Business-type Activities: Charges for Services: Water 1,794,430 1,975,451 2,201,916 2,306,193 3,273,625 3,833,095 4,774,366 4,580,081 Sewer 1,187,212 1,441,455 1,686,101 1,754,820 1,829,736 1,830,814 1,883,702 1,865,202 Other - 131,300 - - 1,055 - - - Operating Grants and Contributions - - - - 424,671 562,372 441,742 4,893 Capital Grants and Contributions: 10,829,870 11,157,733 18,729,430 19,015,856 4,579,348 7,146,143 908,392 1,897,368 Total Business-type Activities Program Revenues 13,811,512 14,705,939 22,617,447 23,076,869 10,108,435 13,372,424 8,008,202 8,347,544 Total Primary Government Program Revenue 24,554,750 $ 22,369,241 $ 32,876,135 $ 31,178,411 $ 16,769,585 $ 20,779,075 $ 11,425,317 $ 13,974,773 $ NET (EXPENSE)/REVENUE Governmental Activities 8,687,211 $ 4,827,956 $ 6,552,153 $ 3,203,982 $ 891,345 $ 1,802,179 $ (2,766,286) $ (1,883,850) $ Business-type Activities 10,428,478 11,062,077 18,663,266 18,196,393 4,730,077 6,662,977 (4,054,017) (3,448,765) Total Primary Government Net (Expense)/Revenue 19,115,689 $ 15,890,033 $ 25,215,419 $ 21,400,375 $ 5,621,422 $ 8,465,156 $ (6,820,303) $ (5,332,615) $ Trend data is only available for the last eight years due to implementation of GASB 34. CITY OF FERNLEY, NEVADA CHANGE IN NET ASSETS LAST EIGHT FISCAL YEARS FISCAL YEAR ENDED JUNE 30, CONTINUED 63 ---PAGE BREAK--- SCHEDULE 2 2004 2005 2006 2007 2008 2009 2010 2011 GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS Governmental Activities: Taxes: Property 427,738 $ 496,207 $ 591,082 $ 925,297 $ 1,074,726 $ 1,381,621 $ 1,410,347 $ 1,473,876 $ Consolidated 137,610 163,429 189,158 188,128 197,040 202,188 170,186 130,215 Fuel 216,736 233,448 227,691 259,603 304,718 309,896 294,645 282,617 Unrestricted gaming licenses 75,015 71,271 97,121 98,753 96,021 92,211 96,598 99,439 Unrestricted interest income 22,441 97,729 329,341 361,301 175,866 41,085 26,847 13,921 Miscellaneous revenue 35,660 36,640 389,619 89,378 424,649 56,179 46,238 74,225 Total Governmental Activities 915,200 1,098,724 1,824,012 1,922,460 2,273,020 2,083,180 2,044,861 2,074,293 Business-type Activities: Unrestricted interest income 86,972 295,730 702,781 1,511,286 1,126,258 477,258 261,988 68,217 Miscellaneous revenue 37,142 65,234 59,441 46,287 384,555 569,452 244,232 154,734 Total Business-type Activities 124,114 360,964 762,222 1,557,573 1,510,813 1,046,710 506,220 222,951 Total Primary Government General Revenues 1,039,314 $ 1,459,688 $ 2,586,234 $ 3,480,033 $ 3,783,833 $ 3,129,890 $ 2,551,081 $ 2,297,244 $ CHANGE IN NET ASSETS Governmental activities 9,602,411 $ 5,926,680 $ 8,376,165 $ 5,126,439 $ 3,164,365 $ 3,885,359 $ (721,425) $ 190,443 $ Business-type activities 10,552,592 11,423,041 19,425,488 19,753,966 6,240,890 7,709,687 (3,547,797) (3,225,814) Total Primary Government Change in Net Assets 20,155,003 $ 17,349,721 $ 27,801,653 $ 24,880,405 $ 9,405,255 $ 11,595,046 $ (4,269,222) $ (3,035,371) $ Trend data is only available for the last eight years due to implementation of GASB 34. CONTINUED LAST EIGHT FISCAL YEARS CHANGE IN NET ASSETS CITY OF FERNLEY, NEVADA FISCAL YEAR ENDED JUNE 30, 64 ---PAGE BREAK--- SCHEDULE 3 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011* General fund Reserved 2,478 $ 287,018 $ 1,330 $ 5,205 $ 6,239 $ 6,709 $ 366,424 $ 394,251 $ 332,238 $ - $ Unreserved 774,938 725,358 790,990 869,817 938,757 582,237 279,443 294,617 482,078 - Nonspendable - - - - - - - - - 22,375 Restricted - - - - - - - - - 342,400 Assigned - - - - - - - - - 5,582 Unassigned - - - - - - - - - 1,223,672 Total general fund 777,416 $ 1,012,376 $ 792,320 $ 875,022 $ 944,996 $ 588,946 $ 645,867 $ 688,868 $ 814,316 $ 1,594,029 $ All other governmental funds Reserved - Transient Lodging Tax Fund - $ - $ - $ - $ - $ - $ - $ - $ 31,364 $ - $ Unreserved, reported in: Special revenue fund 17,234 309,399 1,688,126 2,302,972 1,398,315 1,568,588 971,544 787,928 1,118,925 - Capital projects fund - 728,195 1,499,182 2,502,129 8,032,479 2,397,510 1,160,893 1,145,372 1,085,417 - Restricted - - - - - - - - - 1,544,133 Assigned - - - - - - - - - 104,988 Total all other governmental funds 17,234 $ 1,037,594 $ 3,187,308 $ 4,805,101 $ 9,430,794 $ 3,966,098 $ 2,132,437 $ 1,933,300 $ 2,235,706 $ 1,649,121 $ * Due to implementation of GASB 54 fund balance classifications changed in fiscal year 2011. FISCAL YEAR ENDED JUNE 30, CITY OF FERNLEY, NEVADA FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS 65 ---PAGE BREAK--- SCHEDULE 4 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 REVENUES Taxes 359,112 $ 585,458 $ 1,190,598 $ 1,316,826 $ 1,787,949 $ 988,056 $ 1,077,545 $ 1,316,879 $ 1,599,284 $ 1,658,382 $ Licenses and permits 936,421 1,724,743 2,241,629 2,796,965 2,271,703 1,949,947 1,663,745 1,663,184 1,643,381 1,455,105 Intergovernmental 494,110 772,510 1,415,460 1,354,521 1,231,732 2,333,333 2,117,309 1,631,060 1,868,532 2,625,671 Fines and forfeits 17,643 104,330 170,836 175,167 228,424 234,353 207,465 161,820 222,566 197,397 Miscellaneous 40,306 55,149 199,081 192,613 794,352 581,833 610,883 138,018 88,765 95,752 Developer fees - - - - - - - - - 111,000 Total revenues 1,847,592 3,242,190 5,217,604 5,836,092 6,314,160 6,087,522 5,676,947 4,910,961 5,422,528 6,143,307 EXPENDITURES General government 480,143 475,065 528,906 595,297 717,355 1,025,295 1,238,982 1,290,272 1,402,434 1,661,818 Judicial 61,567 144,797 154,514 171,868 169,163 194,518 251,829 244,714 257,983 201,062 Public works 297,293 517,855 331,318 420,500 376,571 515,394 428,988 457,243 448,224 - Culture and recreation 221,460 337,677 324,629 381,962 508,797 647,542 522,392 546,492 482,871 612,723 Community development 240,811 301,269 405,298 669,105 810,965 834,503 1,226,149 787,056 1,332,123 2,796,292 Health 10,036 40,828 48,395 96,876 256,738 275,905 262,526 232,843 242,279 176,488 Debt service: Principal 84,000 90,314 - - - 158,000 165,000 173,000 181,000 189,000 Interest 10,822 5,117 - - 94,789 221,032 214,326 206,092 198,144 189,836 Capital outlay - 73,948 1,499,163 1,799,989 3,684,115 8,097,529 3,143,509 1,129,385 457,600 122,960 Total expenditures 1,406,132 1,986,870 3,292,223 4,135,597 6,618,493 11,969,718 7,453,701 5,067,097 5,002,658 5,950,179 Excess (deficiency) of revenues over expenditures 441,460 1,255,320 1,925,381 1,700,495 (304,333) (5,882,196) (1,776,754) (156,136) 419,870 193,128 OTHER FINANCING SOURCES (USES) Transfers out - (950,000) (1,931,030) (1,690,000) (1,050,000) (711,712) (20,000) (26,000) - 60,000 Transfers in - 950,000 1,931,030 1,690,000 1,050,000 711,712 20,000 26,000 - (60,000) General obligations bonds issued - - - - 5,000,000 - - - - - Proceeds from disposal of capital assets - - 4,277 - - 61,450 - - 7,984 - Total other financing sources (uses) - - 4,277 - 5,000,000 61,450 - - 7,984 - Net change in fund balance 441,460 $ 1,255,320 $ 1,929,658 $ 1,700,495 $ 4,695,667 $ (5,820,746) $ (1,776,754) $ (156,136) $ 427,854 $ 193,128 $ Debt service as a percentage of noncapital expenditures 7.2% 5.3% 0.0% 0.0% 3.3% 10.9% 9.6% 10.7% 9.1% 7.0% CITY OF FERNLEY, NEVADA CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 66 ---PAGE BREAK--- SCHEDULE 5 Ratio of Total Real and Personal Property Assessed To Total Estimated Estimated Fiscal Assessed Actual Actual Year Value Value Value 2002 233,552,164 $ 667,291,897 $ 35.0 2003 246,640,476 704,687,074 35.0 2004 279,452,986 798,437,103 35.0 2005 303,180,006 866,228,589 35.0 2006 377,743,200 1,079,266,286 35.0 2007 511,154,623 1,460,441,780 35.0 2008 679,959,918 1,942,742,623 35.0 2009 755,529,070 2,158,654,486 35.0 2010 632,953,139 1,808,437,540 35.0 2011 448,105,998 1,280,302,851 35.0 Source: State of NV Department of Taxation's "Local Government Finance Redbook" CITY OF FERNLEY, NEVADA ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS 67 ---PAGE BREAK--- SCHEDULE 6 CITY OF FERNLEY, NEVADA PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS (PER $100 OF ASSESSED VALUE) Fiscal City of State of School Special Year Fernley Nevada District County Districts Total 2002 0.1528 0.1500 1.3367 0.7577 0.3431 2.7403 2003 0.1528 0.1500 1.3367 0.7839 0.3544 2.7778 2004 0.1528 0.1700 1.3367 0.8350 0.3627 2.8572 2005 0.1528 0.1700 1.3367 0.8644 0.3726 2.8965 2006 0.1528 0.1700 1.3367 0.8644 0.3736 2.8975 2007 0.3481 0.1700 1.3367 0.8644 0.0274 2.7466 2008 0.3505 0.1700 1.3367 0.8644 0.3772 3.0988 2009 0.3515 0.1700 1.3367 0.8644 0.3782 3.1008 2010 0.3510 0.1700 1.3367 0.8644 0.3788 3.1009 2011 0.3510 0.1700 1.3367 0.8644 0.4395 3.1616 Source: State of NV Department of Taxation's "Local Government Finance Redbook" LAST TEN FISCAL YEARS 68 ---PAGE BREAK--- SCHEDULE 7 CITY OF FERNLEY, NEVADA PRINCIPAL PROPERTY OWNERS June 30, 2011 Taxable Approximate Estimated Taxable Percentage of Appraised Assessed Taxable Assessed Taxpayer Product/Service Value Value Valuation NV Energy Utility 157,887,477 $ 55,260,617 $ 12.332% BMO Leasing US, Inc. (Quebecor) Printing 44,253,963 15,488,887 3.457% Southwest Gas Corp. Utility 39,250,260 13,737,591 3.066% TREX Company, Inc. Wood Product Manufacturer 35,045,271 12,265,845 2.737% 1600 East Newlands Dr., LLC Developer 25,513,837 8,929,843 1.993% Sherwin-Williams Acceptance Corp Paint Manufacturer 23,057,626 8,070,169 1.801% Sonterra Development Co. Inc. Developer 21,683,657 7,589,280 1.694% Peri & Peri/ Desert Pearl Farms Agriculture 20,683,843 7,239,345 1.616% Amazon.com Retail Distributor 20,404,366 7,141,528 1.594% MSC Industrial Direct Co. Inc. Industrial Distributor 19,526,246 6,834,186 1.525% Totals 407,306,546 $ 142,557,291 $ 12.958% Source: Lyon County Assessor's Office Note: Estimated appraised value is based on assessed value at 35% of appraised value 69 ---PAGE BREAK--- SCHEDULE 8 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 WATER UTILITY Number of Customers 3309 3,966 4,980 6,083 6,634 6,816 7,170 7,371 7,061 7,103 Annual Average Day Demand per customer 750 750 750 750 750 750 750 750 750 750 Gallons of water used (in thousands) 905,839 1,085,693 1,363,275 1,665,221 1,816,058 1,865,880 1,954,754 1,488,674 1,317,721 1,183,382 Direct rate per 1000 gallons 0.95 $ 0.95 $ 0.95 $ 0.95 $ 0.95 $ 0.95 $ 1.11 $ 1.50 $ 2.02 $ 2.02 $ Source: City of Fernley FISCAL YEAR ENDED JUNE 30, CITY OF FERNLEY, NEVADA WATER USER FEES LAST TEN FISCAL YEARS 70 ---PAGE BREAK--- SCHEDULE 9 User User Employer Fees Rank Fees Rank World Color Fernley 95,296 $ 1 - $ - Trex Manufacturing Company 66,226 2 42,141 1 Veteran's Cemetery 52,524 3 15,059 4 Fernley High School 40,107 4 11,081 7 City of Fernley 10 Acre Park 28,612 5 - - Hollywood Investments 27,195 6 18,076 3 Larsen Properties 26,785 7 - - Sherwin Williams 24,483 8 - - Fernley Intermediate School 21,932 9 6,318 9 Blue Beacon Wash 21,269 10 7,413 8 Source: City of Fernley * Earliest year information available is 2004 due to change in tracking system. . CITY OF FERNLEY, NEVADA PRINCIPLE WATER USERS 2011 2004* JUNE 30, 71 ---PAGE BREAK--- SCHEDULE 10 Governmental Activities General Total Percentage Fiscal Obligation Water Sewer Primary of Personal Per Year Bonds Bonds Bonds Government Income Capita 2002 90,314 $ - $ - $ 90,314 $ 0.04% 9 $ 2003 - - - - 0.00% - 2004 - - - - 0.00% - 2005 - - - - 0.00% - 2006 5,000,000 670,000 890,282 6,560,282 1.64% 401 2007 4,842,000 45,015,000 6,267,780 56,124,780 12.20% 2,977 2008 4,677,000 74,954,997 8,640,332 88,272,329 17.12% 4,507 2009 4,504,000 74,055,200 8,417,529 86,976,729 16.90% 4,436 2010 4,323,000 72,538,029 8,150,738 85,011,767 16.10% 4,491 2011 4,134,000 71,107,943 7,843,297 83,085,240 15.71% 4,290 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. See Schedule 15 of Demographic Statistics on page 77 for personal income and population data. Business-Type Activities CITY OF FERNLEY, NEVADA RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS 72 ---PAGE BREAK--- SCHEDULE 11 Percentage General Business of Actual Fiscal Obligation Type Property Per Year Bonds Activities Total Value Capita 2002 90,314 $ 1,341,684 $ 1,431,998 $ 0.21% 150.28 $ 2003 - 1,219,713 1,219,713 0.17% 116.83 2004 - 1,108,830 1,108,830 0.14% 94.63 2005 - 1,008,027 1,008,027 0.12% 73.18 2006 5,000,000 1,560,282 6,560,282 0.61% 401.07 2007 4,842,000 51,282,780 56,124,780 3.84% 2,977.44 2008 4,677,000 83,595,329 88,272,329 4.54% 4,507.14 2009 4,504,000 82,472,729 86,976,729 4.03% 4,435.55 2010 4,323,000 80,688,767 85,011,767 4.70% 4,491.09 2011 4,134,000 78,951,240 83,085,240 6.49% 4,289.82 Note: See the Schedule of Assessed Value and Estimated Actual Value of Taxable Property for property value data. Population information may be found on Schedule 15 - Demographic Statistics on page 77 CITY OF FERNLEY, NEVADA RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS 73 ---PAGE BREAK--- SCHEDULE 12 CITY OF FERNLEY, NEVADA COMPUTATION OF GENERAL OBLIGATION DIRECT AND OVERLAPPING DEBT June 30, 2011 Total Presently General Self-Supporting Obligation General Net Debt % Applicable Debt Obligation Debt Outstanding Net Debt Direct: City of Fernley 83,085,240 $ 78,951,240 $ 4,134,000 $ 100.00% 4,134,000 $ Overlapping: State of Nevada 1,374,695,000 - 1,374,695,000 0.44% 6,048,658 Lyon County 13,966,874 13,966,874 - 37% - Lyon County School District 82,265,000 - 82,265,000 37% 30,444,998 Total Overlapping Debt 36,493,656 Total Direct and Overlapping Debt 40,627,656 $ Source: State of Nevada Lyon County Lyon County School District Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the city. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Fernley This process recognizes that, when considering the government's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. Applicable 74 ---PAGE BREAK--- SCHEDULE 13 CITY OF FERNLEY, NEVADA COMPUTATION OF LEGAL DEBT MARGIN June 30, 2011 Estimated Assessed Value 448,105,998 $ Debt Limit - 30 Percent of Total Assessed Value 134,431,799 Total Amount of Debt Applicable to Debt Limit 83,085,240 Legal Debt Margin 51,346,559 $ Note: Legal debt margin as set forth in NRS 266.600 75 ---PAGE BREAK--- SCHEDULE 14 CITY OF FERNLEY, NEVADA WATER AND SEWER FUNDS REVENUE BOND COVERAGE LAST TEN FISCAL YEARS Net Revenue Available Debt Service Requirements Fiscal Operating Operating For Debt Year Revenue Expenses(1) Service Principal Interest Total Coverage 2002 2,201,361 $ 1,645,441 $ 555,920 $ 283,405 $ 107,847 $ 391,252 $ 142% 2003 2,501,125 1,815,858 685,267 243,778 97,428 341,206 201% 2004 2,981,642 2,096,056 885,586 248,173 84,152 332,325 266% 2005 3,416,906 2,338,729 1,078,177 262,745 72,580 335,325 322% 2006 3,888,017 2,647,912 1,240,105 277,502 60,323 337,825 367% 2007 4,061,013 2,873,207 1,187,806 287,451 620,879 908,330 131% 2008 5,528,032 3,420,207 2,107,825 1,122,600 3,531,002 4,653,602 45% 2009 5,975,722 4,168,048 1,807,674 1,122,600 3,773,565 4,896,165 37% 2010 7,099,810 4,836,862 2,262,948 1,822,957 3,738,999 5,561,956 41% 2011 6,450,173 3,758,965 2,691,208 1,698,531 3,674,376 5,372,907 50% 76 Note: Total operating expenses exclusive of depreciation 76 ---PAGE BREAK--- SCHEDULE 15 Fiscal Total Personal Per Capita Unemployment Year Population Income Personal Income Rate 2002 9,529 217,089,678 $ 22,782 $ 5.60% 2003 10,440 243,617,400 23,335 5.40% 2004 11,718 285,380,172 24,354 5.20% 2005 13,775 336,110,000 24,400 5.00% 2006 16,357 399,110,800 24,400 4.70% 2007 18,850 459,940,000 24,400 7.30% 2008 19,585 515,555,540 26,324 8.90% 2009 19,609 514,677,423 26,247 15.30% 2010 18,929 527,967,668 27,892 19.20% 2011 19,368 528,746,400 27,300 17.70% Sources: Nevada Demographer's Office Bureau of Economic Analysis Nevada Employment Security Department- Lyon County Data CITY OF FERNLEY, NEVADA DEMOGRAPHIC STATISTICS LAST TEN FISCAL YEARS 77 ---PAGE BREAK--- SCHEDULE 16 Percentage Percentage of Total County of Total County Employer Employees Rank Employment Employees Rank Employment Lyon County School District 1000-1499 1 8.93% - - - Amazon.com 600-699 2 5.36% 700-799 1 6.14% Lyon County 400-499 3 3.57% - - - Wal-Mart 200-299 4 1.79% MSC Industrial Supply Co. 200-299 5 1.79% 100-199 3 1.23% World Color Printing USA Corp 100-199 6 0.89% - - - South Lyon Medical Center 100-199 7 0.89% - - - TREX Company 100-199 8 0.89% 100-199 4 1.23% Nevada Automotive Testing Center 100-199 9 0.89% - - - Rite of Passage 100-199 10 0.89% - - - Total employment statistics are for the Lyon County area, as information not available at the City leve * Information presented from calendar year 2005, the first year the Comprehensive Annual Financial Report was prepared CITY OF FERNLEY, NEVADA MAJOR EMPLOYERS JUNE 30, . Source: Nevada Department of Employment, Training and Rehabilitation 2011 2005* 78 ---PAGE BREAK--- SCHEDULE 17 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 FUNCTION/PROGRAM General government 11.9 14.3 14.7 15.5 12.1 18.6 22.3 9.3 13.0 16.0 Judicial 1.7 1.7 1.9 1.9 2.0 1.9 1.9 3.0 2.4 2.4 Public works 1.2 1.2 1.3 1.3 2.0 1.5 1.8 2.5 5.5 10.0 Culture and recreation 3.5 4.5 4.5 7.5 7.5 10.9 11.5 4.8 6.0 4.0 Community development 4.5 7.0 7.0 12.0 15.5 16.0 14.0 8.1 8.0 6.0 Health - - - 2.0 3.9 2.9 2.5 3.0 2.0 2.0 Water 5.4 5.4 5.6 5.9 8.6 6.8 8.1 15.3 16.5 13.0 Sewer 5.4 5.4 5.6 5.9 9.1 6.8 8.1 9.2 4.5 4.0 Total 33.6 39.5 40.6 51.9 60.7 65.4 70.1 55.2 57.9 57.4 Sources: City of Fernley, Nevada FY 2010/2011 Annual Budget CITY OF FERNLEY, NEVADA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 79 ---PAGE BREAK--- SCHEDULE 18 2003 2004 2005 2006 2007 2008 2009 2010 2011 Function/Program Judicial: Municipal Court Cases Filed: Drug 55 33 34 68 35 28 25 39 20 Driving Under Influence 82 71 75 91 81 83 68 79 59 Domestic Violence 37 48 65 45 5 3 1 3 0 Traffic 1,979 2,132 2,410 2,530 1,829 1,668 1,260 2,206 2002 Non-Traffic 160 309 314 326 319 397 326 307 175 Other 5 0 1 0 0 3 3 3 0 Public Safety: Calls for Service: Criminal 2,292 2,760 3,072 3,382 3,866 3,633 2,791 2,679 2,407 Non-Criminal 948 828 924 1,028 1,180 1,129 1,889 2,144 2,523 Domestic Violence 312 432 684 678 866 889 463 414 352 Follow-up 1,044 1,488 1,404 1,630 1,439 1,624 1,599 1,920 2,497 Traffic Stops 1,080 672 876 1,026 1,450 1,639 2,067 1,999 1,626 Civil Papers 2,028 1,596 2,028 2,232 2,136 2,601 2,359 2,568 2,418 Animal 132 192 168 102 156 204 337 377 252 Death/Coroner 36 36 36 42 33 45 42 29 41 Public Service 1,536 1,440 1,044 1,250 927 1,191 1,111 1,195 1,337 Assist other Agencies 612 600 684 732 625 1,112 1,024 851 791 Alarms 216 252 276 346 383 377 517 494 492 Property Damage Accident 72 120 132 92 120 98 115 108 87 Injury Accident 12 12 24 24 20 5 15 9 17 Private Property Accident 60 48 48 48 73 81 65 52 57 Administrative 2,016 2,316 2,196 2,304 2,761 3,113 3,204 4,715 7,911 Total Calls for Service 12,372 12,792 13,572 15,076 16,035 17,741 17,598 19,554 22,808 Total Reports Written 1,788 1,740 1,704 1,756 2,298 2,130 1,947 2,326 2,023 Arrests: Felony 84 72 60 90 123 76 95 122 133 Gross Misdemeanor 12 12 24 16 17 27 44 34 27 Misdemeanor 192 168 120 112 143 146 121 160 135 Driving Under the Influence 48 48 36 48 84 90 76 111 57 Domestic Violence 48 48 72 52 71 53 73 61 67 Mental Health 12 12 12 8 12 11 4 5 4 Total Arrests 396 360 312 326 450 403 413 493 423 Citations: Traffic 444 240 228 274 593 464 557 535 409 Non-Traffic 240 132 168 162 209 234 328 339 287 Total Citation 684 372 408 436 802 698 885 874 696 Water Utility Customer Count 3,966 4,980 6,083 6,634 6,816 6,896 6,876 6,693 6,736 New Connections 657 1,014 1,103 551 182 80 15 12 12 Sewer Utility Customer Count 3,950 4,957 6,049 6,600 6,782 6,862 6,312 6,140 6,174 New Connections 649 1,007 1,092 551 182 80 14 12 7 Building Number of Permits Issued 868 1,492 1,445 897 500 352 221 217 228 Number of Inspection Performed 7,042 15,929 19,108 13,302 5,838 3,107 1,894 929 803 Planning Number of applications processed 144 195 211 238 223 150 93 52 32 Sources: City of Fernley *Information presented for fiscal years as available FISCAL YEAR ENDED JUNE 30, CITY OF FERNLEY, NEVADA OPERATING INDICATORS BY FUNCTION/PROGRAM LAST NINE FISCAL YEARS* 80 ---PAGE BREAK--- SCHEDULE 19 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Function/Program Streets Public Road Mileage 89.5 92.03 95.45 104.12 106.64 116.96 125.36 126.79 126.79 126.79 Parks and Recreation: Parks and Open Space Acreage 56.9 68 68.3 85.3 150 155 155 155 155 155 Developed Parks 5 7 7 8 11 11 11 11 11 11 Tennis Courts 1 1 1 1 1 1 1 1 1 1 Rodeo Arena 1 1 1 1 2 2 2 2 2 2 Playing Fields 6 6 7 8 10 19 19 19 19 19 Pavilions 1 1 1 2 2 2 3 3 7 7 Skate Park 1 1 1 1 1 1 1 1 1 1 Water Utility: Water lines (miles) 73.5 79.4 85.8 92.6 105 115.2 124.7 148.9 152.1 152.01 Fire Hydrants 700 775 850 925 1,000 1,033 1,083 1,102 1,102 1,102 Sewer Utility: Sanitary Sewer lines (miles) 63.0 68.0 73.4 79.3 90.0 93.6 101.3 124.2 124.2 124.2 Sanitary Sewer Manhole Count 615 864 1,113 1,362 1,510 1,600 2,126 2,227 2,227 2,227 Sources: City of Fernley CITY OF FERNLEY, NEVADA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 81 ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- PROJECT/ FEDERAL PASS-THROUGH FEDERAL-GRANTOR/PASS-THROUGH CFDA CFDA FEDERAL GRANTOR/PROGRAM TITLE NUMBER NUMBER EXPENDITURES Department of the Interior: Direct Programs: Bureau of Reclamation Providing Water to At-Risk Natural Desert Terminal Lakes 15.508 R09AP20010 928,824 $ Department of Transportation: Passed through the State of Nevada: Department of Transportation Highway Planning and Construction Cluster: Highway Planning and Construction 20.205 PR259-10-63 44,319 Highway Planning and Construction 20.205 P352-09-802 20,484 Highway Planning and Construction 20.205 PR714-05-056 43,552 Total Department of Transportation 108,355 Department of Justice: Direct Program: Bureau of Justice Assistance BJA FY 09 Congressionally Recommended Awards 16.753 2009-D1-BX-0070 26,927 Department of Health and Human Services: Passed through the State of Nevada: Department of Health and Human Services Title XX Social Services Block Grant 93.667 T27001574 984,226 Total Expenditures of Federal Awards 2,048,332 $ CITY OF FERNLEY, NEVADA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2011 See accompanying notes. 86 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2011 87 A. REPORTING ENTITY: The accompanying schedule of expenditures of federal awards presents the expenditure activity of all federal awards programs of City of Fernley (the City) for the year ended June 30, 2011. The City’s reporting entity is defined in Note 1 to its basic financial statements. All expenditures of federal awards received directly from federal agencies as well as federal awards passed through other government agencies are included in the schedule. B. BASIS OF ACCOUNTING: The accompanying schedule of expenditures of federal awards is prepared on the modified accrual basis of accounting. C. RELATIONSHIP TO BASIC FINANCIAL STATEMENTS: Expenditures of federal awards have been included in the individual funds of the City as follows: Governmental Activities: Other Governmental Funds: Grants $ 2,048,332 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2011 88 SECTION I – SUMMARY OF AUDITOR’S RESULTS: Financial Statements Type of auditor’s report issued: Unqualified Internal control over financial reporting: Material weakness(es) identified? X Yes No Significant deficiency(ies)? Yes X None reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major programs: Material weakness(es) identified? Yes X No Significant deficiency(ies)? Yes X None reported Type of auditor’s report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with section 510(a) of OMB Circular A-133? Yes X No Identification of major programs: CFDA Numbers Name of Federal Program or Cluster CFDA 15.508 Providing Water to At-Risk Natural Desert Terminal Lakes CFDA 93.667 Social Services Block Grant Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Auditee qualified as a low-risk auditee? Yes X No SECTION II – FINANCIAL STATEMENT FINDINGS: Finding 2011-1: Material Weakness Criteria: Internal controls should be in place to provide reasonable assurance that the City prepares its financial statements in accordance with generally accepted accounting principles. Condition: Several audit adjustments were required to either record transactions or to correct transactions in order for the financial statements to be reported in accordance with generally accepted accounting principles. Effect: The City’s financial statements were not completed in accordance with generally accepted accounting principles without audit adjustments. Cause: The audit adjustments originated in five areas: ---PAGE BREAK--- CITY OF FERNLEY, NEVADA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2011 89 1) Allowance estimates related to the collectability of Water and Sewer fund receivables were understated based on current payment performance. Audit adjustments totaling $108,642 were made to increase allowance for doubtful accounts. 2) A revenue adjustment of $111,000 was made to the Nonmajor Residential Construction Tax Fund #1 to record prior year developer fees received and deferred in a prior period but available to be used by the City for capital projects in accordance with NRS 278.497 and NRS 278.2987. 3) Other postemployment benefit liabilities were not updated to reflect the actuarial calculated net obligation at fiscal year end. Audit adjustments totaling $109,288 were made to increase the year end obligation. 4) An audit adjustment of $114,827 was made to correct a client prepared entry to remove the Bond Debt Assessment charge effective July 1, 2011 posted at year end. 5) Intangible assets are required to be reported as capital asset additions in accordance with Governmental Accounting Standards Board No. 41 Accounting and Financial Reporting for Intangible Assets. A prior period adjustment of $696,150 was made to record water rights received by the City but not recorded as capital asset additions by the Finance department. In addition, an adjustment of $1,021,920 was required in the current year to record water rights received but not recorded at year-end. Recommendation: We recommend that the City establish internal controls procedures to provide reasonable assurance that the City records transactions in accordance with generally accepted accounting principles. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS: None reported. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2011 90 Finding 10-1 U.S. Department of Interior Joint Planning and Development for Water Systems, CFDA 15.508 Condition: During our testing of allowable costs, no supporting documentation was found for the administrative cost allocation plan. Questioned Costs: $12,170 Recommendation: We recommend the City develop an overhead allocation plan based upon current costs and allocated on a reasonable basis and all documentation supporting such allocations be retained for audit. Current status: The City started tracking the actual costs and applied for an indirect cost rate with the U.S. Department of Interior. On August 10, 2011, an indirect cost rate was approved for the years ending June 30, 2012 and 2013. The approved rate is 10.98%. An indirect rate of 4% was being used prior to the approval. ---PAGE BREAK--- 91 AUDITOR'S COMMENTS June 30, 2011 Statute Compliance The required disclosure on compliance with Nevada Revised Statutes and the Nevada Administrative Code is contained in Note 2 to the financial statements. Progress on Prior Year Statute Compliance The City monitored expenditures during the current year in order to prevent over expenditures; however, refer to Note 2 to the financial statements. Prior Year Recommendations We disclosed no recommendation in the prior year. Current Year Recommendations Our audit disclosed a recommendation for the current year required to be included in the Schedule of Findings and Questioned Costs. See Finding 2011-1. ---PAGE BREAK--- 92 Schedule of Fees Imposed Subject to the Provisions of NRS 354.5989 – Limitation of Fees for Business Licenses Flat Fixed Fees: Business license revenue for the year ended June 30, 2010 $ 183,952 Adjustment to Base: Base year: 1. Percentage increase in population of the local government 2.32% 2. Percentage increase in the Consumer Price Index for the year ending on December 31, next preceding the year for which the limit is being calculated 3.00% Adjusted Base at June 30, 2011 5.32% 193,738 Actual Revenue 202,452 Actual Amount over (under) Allowable Amount $ 8,714 Fee calculated on a Percentage of Gross Revenue: Adjusted base at June 30, 2010 $865,718 Percentage change in CPI 1.03 Adjusted base at June 30, 2011 891,689 Actual Revenue 202,452 Actual Amount over (under) Allowable Amount $(689,237) ---PAGE BREAK---