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MISSOULA PARKING COMMISSION (A Component Unit of the City of Missoula) FINANCIAL STATEMENTS June 30, 2007 and 2006 (With Independent Auditors’ Report Thereon) ---PAGE BREAK--- C O N T E N T S PAGE BOARD MEMBERS 1 INDEPENDENT AUDITORS’ REPORT 2 and 3 MANAGEMENT’S DISCUSSION AND ANALYSIS 4 to 6 FINANCIAL STATEMENTS Statements of Net Assets 7 Statements of Revenues, Expenses and Changes in Fund Net Assets 8 Statements of Cash Flows 9 and 10 Notes to Financial Statements 11 to 19 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 20 and 21 ---PAGE BREAK--- MISSOULA PARKING COMMISSION (A Component Unit of the City of Missoula) BOARD MEMBERS Member Business Term Expires Tom Wilkins, Chair Retired April 30, 2009 Rodney Austin Missoula Osprey April 30, 2010 Teresa Cox A Carousel for Missoula April 30, 2011 Carol Williams Legal Administrator April 30, 2011 John Smith Attorney April 30, 2008 Director Anne Guest ---PAGE BREAK--- INDEPENDENT AUDITORS’ REPORT Board of Commissioners Missoula Parking Commission Missoula, Montana We have audited the accompanying statements of net assets of Missoula Parking Commission (a component unit of the City of Missoula, Montana) as of June 30, 2007, and 2006, and the related statements of revenues, expenses and changes in fund net assets and cash flows for the years then ended. These component unit financial statements are the responsibility of the Commission’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the component unit financial statements referred to above present fairly, in all material respects, the financial position of Missoula Parking Commission as of June 30, 2007 and 2006, and its changes in financial position and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated [REPORT DATE] , on our consideration of Missoula Parking Commission’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. ---PAGE BREAK--- The management’s discussion and analysis information on pages 4-6, is not a required part of the component unit financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding methods of measurement and presentation of the supplementary information. However, we did not audit the information and do not express an opinion on it. Missoula, Montana [REPORT DATE] ---PAGE BREAK--- date MANAGEMENT’S DISCUSSION AND ANALYSIS Our discussion and analysis of Missoula Parking Commission’s financial performance provides an overview of the Commission’s financial activities for the fiscal year ended June 30, 2007. It should be read in conjunction with the Commission’s financial statements, which begin on page 7. Financial Highlights Condensed Financial Information The following tables summarize financial condition and operating results for 2007 compared to 2006: Increase 2007 2006 (Decrease) Current Assets 3,348,333 $ 2,953,934 $ 394,399 $ Nondepreciable Capital Assets 2,397,866 2,397,866 - Depreciable Capital Assets, Net 2,597,495 2,682,490 (84,995) Other Assets 169,916 171,083 (1,167) Total assets 8,513,610 8,205,373 308,237 Current Liabilities 187,420 178,619 8,801 Long-Term Liabilities 1,075,201 1,179,029 (103,828) Total liabilities 1,262,621 1,357,648 (95,027) Net Assets Net investment in plant 3,830,361 3,815,356 15,005 Restricted 150,000 150,000 - Unrestricted 3,270,628 2,882,369 388,259 Total net assets 7,250,989 $ 6,847,725 $ 403,264 $ ---PAGE BREAK--- Increase 2007 2006 (Decrease) Actual Actual Over 2006 Operating Revenues Parking and ticket revenues 1,391,368 $ 1,474,651 $ (83,283) $ Operating Expenses Personnel 518,205 502,053 16,152 Contract - City of Missoula 90,067 87,444 2,623 Rent 14,790 14,790 - Depreciation and amortization 153,175 134,179 18,996 Repairs, maintenance and supplies 137,767 123,568 14,199 Other operating expenses 205,427 193,426 12,001 1,119,431 1,055,460 63,971 Operating income 271,937 419,191 (147,254) Net Nonoperating Revenues (Expenses) 131,327 55,181 76,146 Increase in net assets 403,264 474,372 (71,108) Net Assets Beginning of year 6,847,725 6,373,353 474,372 End of year 7,250,989 $ 6,847,725 $ 403,264 $ Discussion of Financial Results In reviewing the Financial Highlights for FY2007, the Missoula Parking Commission had an uneventful year overall. There were no significant programs initiated, no significant projects undertaken and no significant operating expenses. Although operating parking revenues were down as compared to FY2006 but that year parking revenues were unusually high due to a variety of reasons. The parking revenues for FY2007 fall more into the norm of the previous years. Operating expenses were up from FY2006 mainly due to the painting of Central Park at 128 W. Main. This structure was built in 1990 and had never been totally painted. A thorough treatment was given to all the walls and railings to help preserve the condition of the structure. The cost was approximately $33,000. In spite of the statements above, FY2007 ended with an increase of $403,264 in total net assets for the overall parking program. This is in keeping with trends in the past. ---PAGE BREAK--- Key Factors Affecting Financial Performance in Fiscal Year 2008 The most significant factor affecting financial performance in FY2008 will be the participation of the Parking Commission in the Downtown Master Plan for Missoula sponsored by the Missoula Downtown Business Improvement District, the Missoula Downtown Association, the Missoula Redevelopment Agency, individual business partners, and the City. The Parking Commission Board of Directors approved to contribute $125,000 toward the study with the condition that this contribution be applied to having a complete analysis of the Parking Commission’s program. The Master Plan should be completed in FY2008. In response to new developments in the riverfront corridor, the Parking Commission has contracted with Carl Walker, Inc. to determine the feasibility of constructing additional parking inventory at our Riverside Lot location. The cost of this initial phase is $28,000. If the study determines that there is a possibility and the cost per space is acceptable, then the Parking Commission would move to design and engineering including relative cost. Again, if approved, construction on a parking structure could begin as early as fall in FY2009. ---PAGE BREAK--- F I N A N C I A L S T A T E M E N T S ---PAGE BREAK--- MISSOULA PARKING COMMISSION (A Component Unit of the City of Missoula) The Notes to Financial Statements are an integral part of these statements. STATEMENTS OF NET ASSETS June 30, 2007 and 2006 ASSETS 2007 2006 CURRENT ASSETS Cash and cash equivalents 100,874 $ 148,288 $ Investments 3,189,991 2,759,695 SID interest receivable - 576 Other receivables 57,468 45,375 Total current assets 3,348,333 2,953,934 NONDEPRECIABLE CAPITAL ASSETS 2,397,866 2,397,866 DEPRECIABLE CAPITAL ASSETS, NET 2,597,495 2,682,490 BOND ISSUANCE COSTS (Net of Amortization of $9,985 in 2007 and $8,488 in 2006) 12,476 13,973 RESTRICTED CASH - DEBT SERVICE RESERVE 150,000 150,000 OTHER ASSETS 7,440 7,110 Total assets 8,513,610 8,205,373 LIABILITIES CURRENT LIABILITIES Accounts payable 34,709 40,552 Accrued expenses 17,651 10,762 Compensated absences 30,060 27,305 Current portion of revenue bonds payable 105,000 100,000 Total current liabilities 187,420 178,619 LONG-TERM LIABILITIES Long-term portion of compensated absences 15,201 14,029 Revenue bonds payable, less current portion 1,060,000 1,165,000 Total liabilities 1,262,621 1,357,648 NET ASSETS Investment in capital assets, net of related debt 3,830,361 3,815,356 Restricted for debt service 150,000 150,000 Unrestricted 3,270,628 2,882,369 Net assets 7,250,989 $ 6,847,725 $ ---PAGE BREAK--- MISSOULA PARKING COMMISSION (A Component Unit of the City of Missoula) The Notes to Financial Statements are an integral part of these statements. STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS For the Years Ended June 30, 2007 and 2006 2007 2006 Operating Revenues Parking revenues 1,126,022 $ 1,194,358 $ Ticket revenues 265,346 280,293 Total operating revenues 1,391,368 1,474,651 Operating Expenses Personnel 518,205 502,053 Contract - City of Missoula 90,067 87,444 Rent 14,790 14,790 Depreciation and amortization 153,175 134,179 Repairs, maintenance and supplies 137,767 123,568 Other operating expenses 205,427 193,426 Total operating expenses 1,119,431 1,055,460 Operating income 271,937 419,191 Nonoperating Expenses Bond interest 61,739 66,230 Amortization of bond issuance costs 1,497 1,500 Loss on sale of asset 1,248 21 Total nonoperating expenses 64,484 67,751 Nonoperating Revenue Interest income 195,811 122,932 Total nonoperating revenue 195,811 122,932 Net nonoperating income (expense) 131,327 55,181 Increase in net assets 403,264 474,372 Net Assets Beginning of year 6,847,725 6,373,353 End of year 7,250,989 $ 6,847,725 $ ---PAGE BREAK--- MISSOULA PARKING COMMISSION (A Component Unit of the City of Missoula) The Notes to Financial Statements are an integral part of these statements. STATEMENTS OF CASH FLOWS For the Years Ended June 30, 2007 and 2006 2007 2006 CASH FLOWS FROM OPERATING ACTIVITIES: Cash receipts from customers 1,391,368 $ 1,474,651 $ Cash payments to suppliers (466,692) (250,359) Cash payments to employees (518,535) (509,093) Net cash provided by operating activities 406,141 715,199 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Revenue bond principal paid (100,000) (95,000) Revenue bond interest paid (50,218) (66,958) Purchase of fixed assets (69,428) (122,836) SID assessment receivables collected - 19,964 SID assessment interest collected 576 3,217 Net cash used in capital and related financing activities (219,070) (261,613) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investments (430,296) (538,269) Interest income 195,811 122,318 Net cash used in investing activities (234,485) (415,951) Net increase (decrease) in cash and cash equivalents (47,414) 37,635 Cash and Cash Equivalents Beginning of year 148,288 110,653 End of year 100,874 $ 148,288 $ ---PAGE BREAK--- -10- 2007 2006 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Operating Income 271,937 $ 419,191 $ Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities Depreciation and amortization 153,175 134,179 Changes in operating assets and liabilities Other receivables (12,093) 149,992 Other assets (330) (7,040) Accounts payable (5,843) 19,582 Accrued liabilities (705) (705) Net cash provided by operating activities 406,141 $ 715,199 $ ---PAGE BREAK--- -11- MISSOULA PARKING COMMISSION (A Component Unit of the City of Missoula) NOTES TO FINANCIAL STATEMENTS June 30, 2007 and 2006 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity: The Missoula Parking Commission (the Commission) was established in 1971 by the City of Missoula (the City) as a separate legal entity in accordance with state parking commission laws (Section 7-14-4601 MCA). The five-member governing board is appointed by the Mayor and approved by City Council. Due to the control exercised by the City, the Commission is considered a component unit of the City. Parking Operations, Facilities, and Rates: The Commission manages approximately 1,061 parking meters that are located both on street and in various off-street lots throughout Missoula’s downtown. The Commission also manages approximately 1,275 off-street parking spaces located in 14 lease lots utilized mainly by downtown employees. The commission also operates two parking structures (Central Park and the Bank Street Structure) that offer both short-term and long-term parking. The Commission’s jurisdiction extends beyond the Central Business District and includes a Residential Parking Permit Program adjacent to The University of Montana with approximately 820 on-street parking spaces. For the year ended June 30, 2007, the approximate percentage of revenues from all sources were as follows: Parking tickets 17% Parking meters 30 Parking structures 17 Leased spaces (other than parking structures) 20 All other sources 16 100% As of June 30, 2007, on-street hourly parking fees were $0.50 per hour. The parking fees for the two structures are as follows: $0.25/hr. for the first two hours, $0.50 for the third hour, and $0.75/hr for subsequent hours. Lease rates for the off-street lots and structures range from $30 to $65 per month. The average lease rate for the off-street lots and structures was $45. Basis of Presentation and Accounting: The Commission adopted the provisions of GASB Statement No. 34 and has utilizes accounting principles applicable to proprietary funds. The Commission uses the accrual basis of accounting, whereby revenues are recognized when earned and expenses are recorded when services are rendered and the liability is incurred. Operating revenues and expenses generally arise from managing parking structures, lots, and spaces in the City of Missoula. All other revenues and expenses are classified as nonoperating. The Commission has elected to apply the provisions of ---PAGE BREAK--- -12- MISSOULA PARKING COMMISSION (A Component Unit of the City of Missoula) NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2007 and 2006 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Presentation and Accounting (Continued): applicable pronouncements issued by the Financial Accounting Standards Board and the AICPA prior to November 30, 1989, except those that conflict with or contradict Governmental Accounting Standards Board pronouncements. Budgets: Although not statutorily required, the Commission legally adopts an annual budget based primarily on the cash basis. Information related to budget development procedures and budget and actual information is available in the City of Missoula’s comprehensive annual financial report. Classification of Net Assets: The Commission classifies its net assets as follows: Investment in Capital Assets, Net of Related Debt The Commission’s investment in property and equipment, net of depreciation and related outstanding debt. Restricted Resources that are not expendable due to bond agreements are reported as restricted net assets. Restricted net assets are principally amounts that cannot be spent prior to outstanding bonds being repaid. Unrestricted Resources over which the governing board has discretionary control. Cash, Investments and Investment Income: The Commission’s cash is held by the City Treasurer and pooled with other City cash. Interest earned on pooled investments is distributed to each contributing entity and fund on a pro rata basis. Authorized investments allowed by Section 20-9-213, MCA, include savings or time deposits in a state or national bank, building or loan association, or credit union insured by the FDIC or NCUA located in the state; repurchase agreements; and the State Unified Investment Program. Further, Section 7-6-202, MCA, authorizes investments in U.S. government treasury bills, notes, bonds, U.S. Treasury obligations, treasury receipts, general obligations of certain agencies of the United States, and U.S. government security money market fund if the fund meets certain conditions. ---PAGE BREAK--- -13- MISSOULA PARKING COMMISSION (A Component Unit of the City of Missoula) NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2007 and 2006 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Cash, Investments and Investment Income (Continued): For purpose of the statements of cash flows, the Commission considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Capital Assets and Depreciation: Capital assets are recorded at cost including capitalization of interest cost during construction. Nondepreciable capital assets consist of land used principally for parking facilities. Straight-line depreciation is calculated based on the following useful lives: Parking structures 40 years Parking lot improvements 5-15 years Utility improvements 5-15 years Machinery and equipment 5-15 years Furniture and fixtures 5-15 years Maintenance and repairs are charged to expense as incurred and betterments costing more than $5,000 are capitalized. Compensated Absences: Under terms of state law, Commission employees are granted vacation and sick leave in varying amounts. In the event of termination, an employee is reimbursed for all accumulated vacation leave and 25% of accumulated sick leave. Compensated absences to be funded from future resources are reflected in accrued expenses to the extent they are vested. Amortization: Bond issuance costs and deferred bond refunding costs are amortized on a straight-line basis over the life of the related bonds. Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenue and expenses. Actual results could differ from those estimates. ---PAGE BREAK--- -14- MISSOULA PARKING COMMISSION (A Component Unit of the City of Missoula) NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2007 and 2006 NOTE 2. CASH AND CASH EQUIVALENTS AND INVESTMENTS During fiscal year 2007, the Commission added its cash to the City’s investment pool. The Commission’s portion of underlying cash and investments of the City’s investment pool at June 30, 2007, consist of the following: 2007 Cash On Hand $ 1,045 Demand deposits 99,829 Repurchase Investment Account 937,072 Government Securities 2,237,773 Investment in State Short-Term Investment Pool 85,025 Certificates of Deposit 80,121 3,440,865 Less restricted cash held for debt service reserve (150,000) $ 3,290,865 Cash and investments at June 30, 2006, were as follows: 2006 Cash On Hand $ 1,045 Demand deposits 147,243 Repurchase Investment Account 9,237 Government Securities 1,874,926 Investment in State Short-Term Investment Pool 961,741 Certificates of Deposit 63,791 3,057,983 Less restricted cash held for debt service reserve (150,000) $ 2,907,983 The City’s investment pool does not have a credit rating. Investment in the pool exposes the Commission to interest rate risk due to the underlying investment in government securities. This risk is managed by the City. Information regarding insurance coverage or collateralization, interest rate risk, and investment in derivatives and similar instruments for the investment in the City’s investment pool is available in the City’s comprehensive annual financial report. There is no regulatory oversight for the City’s investment pool, and participants’ equity in the pool approximates the fair value of the underlying investments. ---PAGE BREAK--- -15- MISSOULA PARKING COMMISSION (A Component Unit of the City of Missoula) NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2007 and 2006 NOTE 2. CASH AND CASH EQUIVALENTS AND INVESTMENTS (CONTINUED) Recent media reports have stated that the Short-Term Investment Pool (STIP), along with many other public and private money market type accounts, holds asset-backed securities called Structural Investment Vehicles (SIV). These types of investments are issued by financial institutions and/or investment managers and are backed by underlying assets of various types. The investment rating of certain SIVs held by STIP was downgraded to CCC on November 9, 2007, which according to the Montana Board of Investments was approximately 3.69% of total STIP investments. At June 30, 2007, the Commission’s investment in STIP amounted to 2.5% of its total investments. As of August 15, 2007, the City of Missoula only had $5,000 invested in STIP. The effect of the potential revaluation of STIP would not be material to the Commission’s financial statements. NOTE 3. CAPITAL ASSETS A summary of capital assets at June 30 is as follows: Changes in Capital Assets for 2007: July 1, 2006 June 30, 2007 Balance Additions Deletions Balance Capital Assets not being Depreciated Parking lots 2,397,866 $ - $ - $ 2,397,866 $ Capital Assets being Depreciated Parking structures 2,256,461 9,173 - 2,265,634 Furniture, fixtures and computers 54,890 1,147 8,523 47,514 Machinery, equipment and vehicles 406,800 59,108 8,349 457,559 Parking lot improvements 1,173,437 - 7,461 1,165,976 Capitalized interest 409,007 - - 409,007 4,300,595 69,428 24,333 4,345,690 Less accumulated depreciation (1,618,105) (153,175) (23,085) (1,748,195) Total capital assets being depreciated, net 2,682,490 (83,747) 1,248 2,597,495 Capital assets, net 5,080,356 $ (83,747) $ 1,248 $ 4,995,361 $ ---PAGE BREAK--- -16- MISSOULA PARKING COMMISSION (A Component Unit of the City of Missoula) NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2007 and 2006 NOTE 3. CAPITAL ASSETS (CONTINUED) Changes in Fixed Assets for 2006: July 1, 2005 June 30, 2006 Balance Additions Deletions Balance Capital Assets not being Depreciated Parking lots 2,397,866 $ - $ - $ 2,397,866 $ Capital Assets being Depreciated Parking structures 2,256,461 - - 2,256,461 Furniture, fixtures and computers 189,346 - 134,456 54,890 Machinery, equipment and vehicles 433,381 25,524 52,105 406,800 Parking lot improvements 1,076,989 97,312 864 1,173,437 Capitalized interest 409,007 - - 409,007 4,365,184 122,836 187,425 4,300,595 Less accumulated depreciation (1,671,330) (134,179) (187,404) (1,618,105) Total capital assets being depreciated, net 2,693,854 (11,343) 21 2,682,490 Capital assets, net 5,091,720 $ (11,343) $ 21 $ 5,080,356 $ NOTE 4. LONG-TERM DEBT Long-term debt at June 30 consists of: 2007 2006 $1,700,000 Series 2000 revenue bonds, 4.4 % to 5.5%, due in varying amounts to November 2015 $ 1,165,000 $ 1,265,000 Changes in the revenue bonds for the years ended June 30, 2007 and 2006, consisted of principal payments of $100,000 and $95,000, respectively. On November 1, 2000, the Commission issued $1.7 million of Series 2000 Parking Facilities Revenue Bonds. The bonds were issued at par, bear interest ranging from 4.4% to 5.5%, and are secured by a pledge of gross parking revenues. Proceeds from the bonds were used to finance the construction of a new public parking facility in downtown Missoula. The land on which the new facility is located was donated by First Interstate Bank at a value of $570,000. A total of $131,208 of interest on the Series 2000 Revenue Bonds was capitalized. ---PAGE BREAK--- -17- MISSOULA PARKING COMMISSION (A Component Unit of the City of Missoula) NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2007 and 2006 NOTE 4. LONG-TERM DEBT (CONTINUED) Debt service requirements to maturity on the revenue bonds at June 30, 2007, are as follows: Year Ending June 30, Principal Interest Total 2008 105,000 $ 57,379 $ 162,379 $ 2009 110,000 52,245 162,245 2010 115,000 47,788 162,788 2011 120,000 40,970 160,970 2012 130,000 34,655 164,655 2013 135,000 27,830 162,830 2014 140,000 20,610 160,610 2015 150,000 12,850 162,850 2016 160,000 4,400 164,400 Total 1,165,000 $ 298,727 $ 1,463,727 $ NOTE 5. DESIGNATED NET ASSETS The Commission’s board has designated $1,310,838 as of June 30, 2007 and 2006, of unrestricted net assets for acquisition of parking lots and parking facilities. NOTE 6. RELATED PARTY TRANSACTIONS The Commission paid $90,067 and $87,444 to the City of Missoula for the years ended June 30, 2007 and 2006, respectively, for administrative services. Accounts payable at June 30, 2007, included $444 due to the City of Missoula for vehicle maintenance, administrative services, and health insurance. ---PAGE BREAK--- -18- MISSOULA PARKING COMMISSION (A Component Unit of the City of Missoula) NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2007 and 2006 NOTE 7. LEASES The Commission conducts a major part of its operations from leased property, which includes land parcels utilized for off-street parking facilities. These parcels are under operating leases which expire over periods ranging from two to twenty years. Most of the leases contain an option whereby the Commission, at the end of the initial lease term, may renew the lease at the then fair rental value. All leases are cancelable by Missoula Parking Commission without penalty, and do not have provisions requiring minimum payments. In most cases, it is expected that in the normal course of business, leases will be renewed or replaced with other leases. NOTE 8. RETIREMENT PLAN All full-time employees of the Commission are covered under the Montana Public Employees’ Retirement System (PERS). The plan is established by state law and administered by the state of Montana. The plan provides retirement, disability, and death benefits to plan members and beneficiaries. Contribution rates are determined by state law. The contribution rate was 6.8% for employees, 6.7% for employers, and 0.1% for the state of Montana, expressed as a percentage of covered payroll. The amounts contributed during the years ended June 30, 2005, 2006, and 2007, were equal to the required contribution for each year. The amounts contributed by the Commission were as follows: 2005 $ 23,224 2006 $ 23,804 2007 $ 23,412 PERS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained from PERS at: Public Employees Retirement Division 1712 Ninth Avenue P.O. Box 200131 Helena, Montana 59620-0131 Telephone (406) 444-3154 ---PAGE BREAK--- -19- MISSOULA PARKING COMMISSION (A Component Unit of the City of Missoula) NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2007 and 2006 NOTE 9. RISK MANAGEMENT The Commission is exposed to various risks of loss related to torts, damage or loss of assets, errors and omissions, injuries to employees, employee medical claims, and natural disasters. The Commission manages these risks through participation with the City of Missoula’s risk management practices. Information related to the City’s risk management is available in its comprehensive annual financial report. NOTE 10. COMMITMENTS At June 30, 2007, the Commission had a commitment of $125,000 for the Missoula Downtown Master Plan. ---PAGE BREAK--- -20- 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 Board of Commissioners Missoula Parking Commission Missoula, Montana We have audited the financial statements of Missoula Parking Commission, as of and for the year ended June 30, 2007, and have issued our report thereon dated [REPORT DATE] . We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Missoula Parking Commission’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not to provide an opinion on the effectiveness of Missoula Parking Commission’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of Missoula Parking Commission’s internal control over financial reporting. A control deficiency exists when the design of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or a combination of control deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is a more than remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected by the entity’s internal control. ---PAGE BREAK--- -21- A material weakness is a significant deficiency, or combination of significant deficiencies, that results in a more than remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity’s internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether Missoula Parking Commission’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the board of directors, management, and relevant federal awarding agencies and is not intended to be and should not be used by anyone other than these specified parties. Missoula, Montana [REPORT DATE]