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City of Des Moines

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City of Des Moines

  1. 1. Washington State Auditor’s Office Financial Statements and Federal Single Audit Report City of Des Moines King County Audit Period January 1, 2007 through December 31, 2007 Report No. 75346 Issue Date September 29, 2008
  2. 2. Washington State Auditor Brian Sonntag September 29, 2008 Council City of Des Moines Des Moines, Washington Report on Financial Statements and Federal Single Audit Please find attached our report on the City of Des Moines’ financial statements and compliance with federal laws and regulations. We are issuing this report in order to provide information on the City’s financial condition. In addition to this work, we look at other areas of our audit client’s operations for compliance with state laws and regulations. The results of that audit will be included in a separately issued accountability report. Sincerely, BRIAN SONNTAG, CGFM STATE AUDITOR Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370 TDD Relay (800) 833-6388 FAX (360) 753-0646 http://www.sao.wa.gov
  3. 3. Table of Contents City of Des Moines King County January 1, 2007 through December 31, 2007 Federal Summary.......................................................................................................................................... 1 Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters in Accordance with Government Auditing Standards ........................................ 2 Independent Auditor’s Report on Compliance with Requirements Applicable to its Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133............................. 4 Independent Auditor’s Report on Financial Statements ............................................................................... 6 Financial Section........................................................................................................................................... 8
  4. 4. Federal Summary City of Des Moines King County January 1, 2007 through December 31, 2007 The results of our audit of the City of Des Moines are summarized below in accordance with U.S. Office of Management and Budget Circular A-133. FINANCIAL STATEMENTS An unqualified opinion was issued on the financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information. Internal Control Over Financial Reporting: • Significant Deficiencies: We reported no deficiencies in the design or operation of internal control over financial reporting that we consider to be significant deficiencies. • Material Weaknesses: We identified no significant deficiencies that we consider to be material weaknesses. We noted no instances of noncompliance that were material to the financial statements of the City. FEDERAL AWARDS Internal Control Over Major Programs: • Significant Deficiencies: We reported no deficiencies in the design or operation of internal control over major federal programs that we consider to be significant deficiencies. • Material Weaknesses: We identified no significant deficiencies that we consider to be material weaknesses. We issued an unqualified opinion on the City’s compliance with requirements applicable to its major federal program. We reported no findings that are required to be disclosed under OMB Circular A-133. Identification of Major Programs: The following was a major program during the period under audit: CFDA No. Program Title 20.205 Highway Planning and Construction The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by OMB Circular A-133, was $300,000. The City did not qualify as a low-risk auditee under OMB Circular A-133. ____________________________________________________________________________________________________________ Washington State Auditor's Office 1
  5. 5. Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters in Accordance with Government Auditing Standards City of Des Moines King County January 1, 2007 through December 31, 2007 Council City of Des Moines Des Moines, Washington We have audited the financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Des Moines, King County, Washington, as of and for the year ended December 31, 2007, which collectively comprise the City‘s basic financial statements, and have issued our report thereon dated August 28, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to the 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 the City’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over financial reporting. A control deficiency exists when the design or operation 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 combination of control deficiencies, that adversely affects the City's ability to initiate, authorize, record, process or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the City's financial statements that is more than inconsequential will not be prevented or detected by the City's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a 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. ____________________________________________________________________________________________________________ Washington State Auditor's Office 2
  6. 6. COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the City’s financial statements are free of material misstatement, we performed tests of the City’s 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 or other matters that are required to be reported under Government Auditing Standards. This report is intended for the information and use of management, the Council, federal awarding agencies and pass-through entities. However, this report is a matter of public record and its distribution is not limited. It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations. BRIAN SONNTAG, CGFM STATE AUDITOR August 28, 2008 ____________________________________________________________________________________________________________ Washington State Auditor's Office 3
  7. 7. Independent Auditor’s Report on Compliance with Requirements Applicable to its Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133 City of Des Moines King County January 1, 2007 through December 31, 2007 Council City of Des Moines Des Moines, Washington COMPLIANCE We have audited the compliance of the City of Des Moines, King County, Washington, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to its major federal program for the year ended December 31, 2007. The City’s major federal program is identified in the Federal Summary. Compliance with the requirements of laws, regulations, contracts and grants applicable to its major federal program is the responsibility of the City’s management. Our responsibility is to express an opinion on the City’s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to the financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City’s compliance with those requirements. In our opinion, the City complied, in all material respects, with the requirements referred to above that are applicable to its major federal program for the year ended December 31, 2007. INTERNAL CONTROL OVER COMPLIANCE The management of the City is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the City’s internal control over compliance with the requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance, but not for the purpose of expressing an opinion on the ____________________________________________________________________________________________________________ Washington State Auditor's Office 4
  8. 8. effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. A control deficiency in an entity’s internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity’s ability to administer a federal program such that there is a more than remote likelihood that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by the entity’s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in a more than remote likelihood that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected by the entity’s internal control. Our consideration of internal control over compliance 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 compliance that we consider to be material weaknesses, as defined above. This report is intended for the information of management, the Council, federal awarding agencies and pass-through entities. However, this report is a matter of public record and its distribution is not limited. It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations. BRIAN SONNTAG, CGFM STATE AUDITOR August 28, 2008 ____________________________________________________________________________________________________________ Washington State Auditor's Office 5
  9. 9. Independent Auditor’s Report on Financial Statements City of Des Moines King County January 1, 2007 through December 31, 2007 Council City of Des Moines Des Moines, Washington We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Des Moines, King County, Washington, as of and for the year ended December 31, 2007, which collectively comprise the City’s basic financial statements as listed on page 8. These financial statements are the responsibility of the City’s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Des Moines, as of December 31, 2007, and the respective changes in financial position and, where applicable, cash flows thereof, and the respective budgetary comparison for the General, Street, Arterial Street and Municipal Capital Improvement funds, for the year 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 on our consideration of the City’s internal control over financial reporting and on 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. The management's discussion and analysis on pages 9 through 19 is not a required part of the basic financial statements but is supplementary information presented for purposes of additional analysis. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on it. Our audit was performed for the purpose of forming an opinion on the financial statements that collectively comprise the City’s basic financial statements. The accompanying Schedule of Expenditures ____________________________________________________________________________________________________________ Washington State Auditor's Office 6
  10. 10. of Federal Awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. This schedule is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. BRIAN SONNTAG, CGFM STATE AUDITOR August 28, 2008 ____________________________________________________________________________________________________________ Washington State Auditor's Office 7
  11. 11. Financial Section City of Des Moines King County January 1, 2007 through December 31, 2007 REQUIRED SUPPLEMENTAL INFORMATION Management’s Discussion and Analysis – 2007 BASIC FINANCIAL STATEMENTS Statement of Net Assets – 2007 Statement of Activities – 2007 Balance Sheet – Governmental Funds – 2007 Reconciliation of the Balance Sheet to the Statement of Net Assets – Governmental Funds – 2007 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds – 2007 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities – 2007 Statement of Revenues, Expenditures and Changes in Fund Balances – Budget (GAAP Basis) and Actual – General Funds – 2007 Statement of Revenues, Expenditures and Changes in Fund Balances – Budget (GAAP Basis) and Actual – Street Funds – 2007 Statement of Revenues, Expenditures and Changes in Fund Balances – Budget (GAAP Basis) and Actual – Arterial Street Funds – 2007 Statement of Revenues, Expenditures and Changes in Fund Balances – Budget (GAAP Basis) and Actual – Municipal Capital Improvements Funds – 2007 Statement of Net Assets – Proprietary Funds – 2007 Statement of Revenues, Expenses and Changes in Net Assets – Proprietary Funds – 2007 Statement of Cash Flows – Proprietary Funds – 2007 Notes to the Financial Statements – 2007 SUPPLEMENTAL INFORMATION Schedule of Expenditures of Federal Awards – 2007 Notes to the Schedule of Expenditures of Federal Awards – 2007 ____________________________________________________________________________________________________________ Washington State Auditor's Office 8
  12. 12. CITY OF DES MOINES, WASHINGTON Management’s Discussion and Analysis CITY OF DES MOINES MANAGEMENT’S DISCUSSION AND ANALYSIS For the Year Ended December 31, 2007 The management discussion and analysis section of this report provides a narrative overall review of the City of Des Moines’s (the “City”) financial performance for the fiscal year ended December 31, 2007. The intent of this discussion and analysis is to assist the reader in focusing on significant financial issues and trends impacting the current financial activities of the City and should be read in conjunction with the independent auditor’s report, basic financial statements, and notes to the financial statements. FINANCIAL HIGHLIGHTS • Net assets, the amount by which total assets exceed total liabilities, equal $162.0 million. Of this amount, $151.2 million, or 93.3%, is invested in capital assets such as land, infrastructure, buildings, equipment, and other improvements. The remaining net assets of $10.8 million are available for debt service, capital projects, repair and replacement reserves, and to meet the government’s ongoing activities and obligations. • The government’s net assets increased by $7 million in 2007. Government activities provided $6.1 million or 86.8% with the remainder being provided by the business-type activities. • As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $7,441,613. Approximately 99.9% of this total amount, or $7,433,636, is available for spending at the government’s discretion. • At the end of the current fiscal year, unreserved fund balance for the general fund was $745,437, or 4.9% of total general fund expenditures, net of capital outlay and equipment and computer replacement assessments. • The City’s total debt decreased by $1,127,053. Debt principal retirements during 2007 totaled $ 1,295,779. A final draw of $2,500 was taken against the Public Works Trust Fund pre-construction loan for the Pacific Highway Redevelopment Project. A copier was added to the 2006 contract for the leasing of citywide copiers and recognized as a capital lease totaling $7,836. The remainder of the long-term debt activity primarily relates to compensated absences. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City of Des Moines’s basic financial statements. The basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. The first two statements, Statement of Net Assets and Statement of Activities, comprise the government-wide financial statements. These statements provide both long-term and short- term information about the City’s overall financial status. The remaining statements are fund financial statements that focus on individual parts of the city government, reporting the City’s operations in more detail than the government-wide ____________________________________________________________________________________________________________ Washington State Auditor's Office 9
  13. 13. CITY OF DES MOINES, WASHINGTON Management’s Discussion and Analysis statements. These statements are presented with a focus on major funds. All other nonmajor funds are presented in total in one column. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. Figure A-1 provides a summary of the major features of the City’s financial statements, including the portion of the City government they cover and the types of information they contain. The remainder of this overview section of management’s discussion and analysis explains the structure and contents of each of the statements. Figure A-1 Major Features of the City of Des Moines's Governm ent-w ide and Fund Financial Statem ents Fund Statem ents Governm ent-Wide Statem ents Governm ental Funds Proprietary Funds Scope Entire City government The activities of the City that Activities the City operates are not proprietary, such as similar to private police, public w orks, and businesses: Marina and the parks Surface Water Management Utility Required financial ●Statement of net assets ●Balance sheet ●Statement of net assets Statements ●Statement of activities ●Statement of revenues, ●Statement of revenues, expenditures, and expenses, and changes changes in fund balances in net assets ●Statement of cash flow s Accounting basis and Accrual accounting and Modified accrual accounting Accrual accounting and measurement focus economic resources focus and current financial economic resources focus resources focus Type of asset/liability All assets and liabilities, Only assets expected to be All assets and liabilities, information both financial and capital, used up and liabilities that both financial and capital, and short-term and long- come due during the year or and short-term and long- term soon thereafter; no capital term assets included Type of inflow /outflow All revenues and expenses Revenues for w hich cash is All revenues and expenses information during year, regardless of received during or soon during year, regardless of w hen cash is received or after the end of the year; w hen cash is received or paid expenditures w hen goods paid or services have been received and payment is due during the year or soon thereafter Government-wide Financial Statements The government-wide financial statements report information about the City as a whole using accounting methods similar to those used by private-sector companies. The government-wide financial statements only include activities of the City of Des Moines, Washington. The City has no component units or entities over which it exercises influence over operations or financial control or accountability. ____________________________________________________________________________________________________________ Washington State Auditor's Office 10
  14. 14. CITY OF DES MOINES, WASHINGTON Management’s Discussion and Analysis The statement of net assets includes all of the City funds’ assets and liabilities. The difference between assets and liabilities is reported as net assets. All of the current year’s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report the City’s net assets and how they have changed. Overtime, increases or decreases in net assets provide a measure of the financial position of the City. The change in net assets provides an indication of whether the City’s financial health is improving or deteriorating. Governmental activities include most of the City’s basic services such as public safety, engineering, public works, and building regulation (physical environment and transportation), community land use planning (economic environment), human services (mental and physical health), culture and recreation, and general administration. These activities are primarily supported by taxes, intergovernmental revenues, building permits, and plan review fees. Business-type activities are financed primarily from user fees and charges. The Marina and Surface Water Management Utility are included under this category. Fund Financial Statements Traditional users of governmental financial statements will find the Fund Financial Statements presentation familiar. However, the focus for these presentations is on major funds, rather than fund types. A fund is an accounting device for grouping related accounts used to maintain control over resources that are segregated for specific activities or objectives. Some funds are required by State law and by bond covenants. The City Council establishes other funds to control and manage money for particular purposes. All of the funds of the City can be divided into two categories: governmental funds and proprietary 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 provide a short-term view focusing 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 ability to finance the City’s programs in the near future. Because the focus of the governmental funds is short-term versus long-term, we have provided additional information that explains the differences between the government-wide financial statements and the fund financial statements. This additional information is provided in a reconciliation format on both the governmental balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances. The City of Des Moines’s maintains seventeen 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, Street Fund, Arterial Street Fund, and Municipal Capital Improvements Fund. The General Fund, Arterial Street Fund, and Municipal Capital Improvements Fund are major funds based on the criteria established by GASB Statement No. 34. The Street Fund does not meet the criteria ____________________________________________________________________________________________________________ Washington State Auditor's Office 11
  15. 15. CITY OF DES MOINES, WASHINGTON Management’s Discussion and Analysis for a major fund but is shown separately at the discretion of the City. All remaining nonmajor governmental funds’ data are combined into a single, aggregated presentation. The City of Des Moines adopts an annual appropriated budget for its major funds: General Fund, Street Fund, Arterial Street Fund, and Municipal Capital Improvements Fund. Budget comparison statements have been provided for these funds to demonstrate budgetary compliance. Proprietary Funds. The City of Des Moines maintains two different types of proprietary funds. Enterprise funds are use to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its Marina and Surface Water Management Utility. Internal service funds represent an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its equipment rental operations and equipment replacement, computer operations and equipment and software replacement, self-insurance programs, and unemployment compensation reserves. Because internal service funds predominantly benefit governmental rather than business-type activities, they have been included within governmental activities in the government-wide financial statements. Proprietary fund financial statements provide the same type of information as the government- wide financial statements, but in greater detail. The internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. 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. GOVERNMENT-WIDE FINANCIAL ANALYSIS Net Assets. As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. For the City of Des Moines, total assets exceeded liabilities by $162,012,504 at December 31, 2007. Table A-1 displays the City’s net assets for the current fiscal year. Table A-1 City of Des Moines's Net Assets Governmental Business-type Activities Activities Total 2007 2006 2007 2006 2007 2006 Current and other assets $ 12,953,779 $ 13,273,706 $ 5,854,277 $ 5,604,510 $ 18,808,056 $ 18,878,216 Capital assets 136,145,111 129,587,749 19,119,812 18,953,366 155,264,923 148,541,115 Total assets 149,098,890 142,861,455 24,974,089 24,557,876 174,072,979 167,419,331 Long-term debt outstanding 4,097,128 4,874,751 3,491,538 4,320,968 7,588,666 9,195,719 Other liabilities 3,448,718 2,500,245 1,023,091 699,846 4,471,809 3,200,091 Total liabilities 7,545,846 7,374,996 4,514,629 5,020,814 12,060,475 12,395,810 Net assets Invested in capital assets, net of related debt 134,441,619 126,900,100 16,755,712 16,419,218 151,197,331 143,319,318 Restricted 1,647,378 1,429,888 2,405,569 2,406,683 4,052,947 3,836,571 Unrestricted 5,464,047 7,156,471 1,298,179 711,161 6,762,226 7,867,632 Total net assets $ 141,553,044 $ 135,486,459 $ 20,459,460 $ 19,537,062 $ 162,012,504 $ 155,023,521 ____________________________________________________________________________________________________________ Washington State Auditor's Office 12
  16. 16. CITY OF DES MOINES, WASHINGTON Management’s Discussion and Analysis The largest portion of the City’s net assets (93.3 percent) reflects its investment in capital assets (e.g., land, infrastructure, buildings, machinery and equipment) less any related outstanding debt to acquire those assets. A portion of the City’s net assets (2.5 percent) represents resources that are subject to constitutional or external restrictions on how they may be used. The remaining balance of unrestricted net assets may be used to meet the City’s ongoing obligations to citizens and creditors. Changes in Net Assets. Governmental activities increased the City of Des Moines’s net assets by $6,066,585, thereby accounting for 86.8 percent of the total growth in the net assets of the City. Key elements of this increase are provided in Table A-2. Table A-2 City of Des Moines's Changes in Net Assets Governmental Business-type Activities Activities Total 2007 2006 2007 2006 2007 2006 Revenues: Program revenues: Charges for services $ 4,341,926 $ 3,458,727 $ 5,423,538 $ 4,912,367 9,765,464 $ 8,371,094 Operating grants and contributions 1,375,789 1,352,744 7,431 3,698 1,383,220 1,356,442 Capital grants and contributions 4,995,010 711,690 147,010 457,269 5,142,020 1,168,959 General revenues: Property taxes 4,646,958 3,392,392 - - 4,646,958 3,392,392 Retail sales and use taxes 2,897,242 2,586,570 - - 2,897,242 2,586,570 Business taxes 4,350,957 3,878,935 - - 4,350,957 3,878,935 Other taxes 1,393,386 1,490,638 - - 1,393,386 1,490,638 State entitlements 450,054 451,778 - - 450,054 451,778 Unrestricted investment earnings 491,503 465,823 266,390 246,875 757,893 712,698 Equity in income of joint venture (35,293) 13,753 - - (35,293) 13,753 Gain on sale of capital assets 21,362 16,633 - - 21,362 16,633 Loss on disposal of capital assets - - - - - - Miscellaneous 30,977 76,473 (2,787) (61,190) 28,190 15,283 Total Revenues 24,959,871 17,896,156 5,841,582 5,559,019 30,801,453 23,455,175 Program expenses: General government 2,355,893 2,000,133 - - 2,355,893 2,000,133 Public safety 8,546,928 7,605,119 - - 8,546,928 7,605,119 Physical environment 1,391,151 1,119,453 - - 1,391,151 1,119,453 Transportation 3,165,527 3,129,456 - - 3,165,527 3,129,456 Economic environment 721,847 589,277 - - 721,847 589,277 Mental and physical health 342,015 329,693 - - 342,015 329,693 Culture and recreation 2,369,485 2,196,579 - - 2,369,485 2,196,579 Interest on long-term debt 110,169 146,713 - - 110,169 146,713 Marina - - 3,450,114 3,389,736 3,450,114 3,389,736 Surface Water Utility - - 1,419,323 1,226,098 1,419,323 1,226,098 Total Expenses 19,003,015 17,116,423 4,869,437 4,615,834 23,872,452 21,732,257 Increase (decrease) in net assets before special items and transfers 5,956,856 779,733 972,145 943,185 6,929,001 1,722,918 Special item: insurance recoveries 17,287 703 42,695 - 59,982 703 Transfers 92,442 273,967 (92,442) (273,967) - - Increase (decrease) in net assets $ 6,066,585 $ 1,054,403 $ 922,398 $ 669,218 $ 6,988,983 $ 1,723,621 ____________________________________________________________________________________________________________ Washington State Auditor's Office 13
  17. 17. CITY OF DES MOINES, WASHINGTON Management’s Discussion and Analysis Property and other taxes total $13,288,543 and represent 43.1 percent of the total revenues of the City. The other major revenue sources are charges for services and operating and capital grants and contributions. Combined, these revenue sources total $16,290,704, or 52.9 percent of the City’s total revenues. Figure A-2 provides the percentage distribution of revenue sources for the City. The City’s expenses cover a range of services, with about 35 percent related to public safety. Figure A-3 provides the percentage allocation of functional expenses for the City. Figure A-2 Figure A-3 Sources of Revenue Interest on LT Functional Expenses Debt General Capital Ot her Propert y 1% Government Grant s 3% Taxes 10% 17% 15% Cult ure & Recreat ion Economic 24% Environment Sales Taxes 3% Operating Grant s 9% M ental & 4% Physical Healt h Ot her Taxes Transport at'n 1% Charges for 19% 14% Physical Services Stat e Environment 32% Public Safet y Ent itlement s 12% 1% 35% Governmental activities. As stated, governmental activities account for 86.8 percent of the total growth in net assets for the City. Key elements of this increase are as follows. • Growth in property taxes, retail sales and use taxes, and business taxes. • Capital grants and contributions related to major transportation projects. Business-type activities. Business-type activities increased the City of Des Moines’s net assets by $922,398, accounting for 13.2 percent of the total growth in the City’s net assets. Key elements of this increase are as follows: • Net operating income of $869,775 plus non-operating revenue of $561 account for $870,336 of the increase. • Transfers out of $92,442 related to the Marine View Drive Bridge Culvert Replacement project. • Capital contributions of $144,504 account for the remainder of the net change. Figure A-4 provides the elements comprising the sources of revenues in comparison to the functional expenses for the business-type activities of the City. ____________________________________________________________________________________________________________ Washington State Auditor's Office 14
  18. 18. CITY OF DES MOINES, WASHINGTON Management’s Discussion and Analysis Figure A-4 Business-type Activities Program Revenues and Expenses $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- Revenues Expenses Revenues Expenses Marina Surface Water Utility REVENUES EXPENSES Charges for Services Personal Services Other Income Supplies & Expenses Depreciation Other Expenses Transfers FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, the City of Des Moines uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds. As discussed earlier, the focus of the City of Des Moines’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Des Moines’s financing requirements. In particular, unreserved 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 Des Moines’s governmental funds reported combined ending fund balances of $7,441,613. Approximately 99.9 percent of this total amount ($7,433,636) constitutes unreserved fund balance, which is available for spending at the government’s discretion. The remaining .1 percent ($7,977) of fund balance is reserved to indicate that it is not available for new spending because it has already been committed to Imprest Funds and Prepaid Items. The General Fund is the primary operating fund of the City of Des Moines. At the end of the fiscal year, total fund balance for the General Fund equaled $753,414. Unreserved fund balance, the amount considered available to spend, totaled $745,437. Of the General Fund balance, $24,756 has been designated for maintenance of the Sierra permitting system. The remaining amount $720,681 is designated for continuing appropriations. The City is required to maintain an unreserved fund balance of seven percent of the General Fund’s operating expenditures, net of capital expenditures and equipment and computer replacement assessments. At the end of the fiscal year, the unreserved fund balance of $745,437 equaled 4.9 percent of the general fund’s operating expenditures. ____________________________________________________________________________________________________________ Washington State Auditor's Office 15
  19. 19. CITY OF DES MOINES, WASHINGTON Management’s Discussion and Analysis The fund balance of the City of Des Moines’s General Fund decreased by $168,519 during the current fiscal year. Proprietary Funds. The City of Des Moines’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. BUDGETARY HIGHLIGHTS FOR GENERAL AND MAJOR FUNDS Differences between the General Fund original budget and the final amended budget declined by $71,893. Following are the components of the differences: Increases in budget appropriations: • $170,000 supplemental appropriation for police overtime; • $160,000 supplemental appropriation for real estate/economic development consultant; • $88,500 supplemental appropriation for donated art collection; • $35,637 supplemental appropriation for jail services; • $30,000 supplemental appropriation for emergency management consultant; • $21,430 supplemental appropriation for computer maintenance assessment to fund GIS Administrator position in the Computer Equipment Operations Fund; • $17,666 supplemental appropriation for minor home repair program; • $15,437 supplemental appropriation for fire protection services; • $13,339 supplemental appropriation for police video camera system; • $11,414 supplemental appropriation for legal fees; • $7,800 supplemental appropriation for additional funding for recreation programs software purchase; • $5,000 supplemental appropriation for additional funding for the Steven J. Underwood Memorial Park restroom project; • $5,000 supplemental appropriation for Arts Commission events; • $3,836 supplemental appropriation for transfer to the Computer Equipment Replacement Fund for automation fees; • $2,000 supplemental appropriation for consultant to prepare City Council minutes. Decreases in budget appropriations: • $350,000 removal of appropriation for permitting system; • $225,000 removal of appropriation for capital transfer to the Municipal Capital Improvements Fund; • $58,952 removal of appropriations for .45 full-time equivalent Assistant Planner/GIS position; • $25,000 removal of appropriations for Downtown Design Guidelines consultant. ____________________________________________________________________________________________________________ Washington State Auditor's Office 16
  20. 20. CITY OF DES MOINES, WASHINGTON Management’s Discussion and Analysis Funding sources for the supplemental appropriations, excluding police overtime, donated art collection, and minor home repair program, primarily are from fund balance and the removal of appropriations. The police overtime is funded by a transfer to the General Fund from the Police Services Restoration Fund. The art collection includes a revenue of $88,500 recognizing the fair value of the donated art. The minor home repair program is funded by a community development block grant. The Street Fund’s supplemental appropriations include $20,830 for traffic signal maintenance, $7,662 to provide additional funding for a new chipper purchased out of the Equipment Rental Replacement Fund, and $423 additional computer maintenance assessment to fund GIS administrator position in the Computer Equipment Operations Fund. Differences between the Arterial Street Fund original budget and the final amended budget total $2,140,707 and relate to continuing appropriations for capital projects. Funding sources are grants, and transfers from the Transportation Impact Fee Fund and Local Improvement District Fund. The Municipal Capital Improvements Fund supplemental appropriations of $412,360 relate to continuing appropriations for capital projects funded primarily by grants. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets. The City of Des Moines’s investment in capital assets for its governmental and business-type activities as of December 31, 2007 totals $155,264,923 (net of accumulated depreciation). This investment in capital assets includes land, buildings and structures, machinery and equipment, park facilities, sidewalks, roads, highways, and bridges as shown in Table A-3. During the fiscal year, major capital asset additions included: • 16th Avenue South to 260th pedestrian and mobility improvements totaling $5,234,192. • Saltwater State Park Bridge December 2006 windstorm repairs totaling $1,137,372. • Vehicle and equipment acquisitions totaling $810,596. • Slide repairs totaling $673,921 for Marine View Drive, Des Moines Memorial Drive, and Saltwater State Park Bridge. • Des Moines Creek Basin projects totaling $320,559. • Steven J. Underwood Memorial Park Phase 1-C restroom totaling $204,367. • Redondo Police Department Substation Tenant Improvements totaling $154,682, plus security system totaling $11,790, and phone system totaling $12,447. • Des Moines Beach Park Auditorium rehabilitation project totaling $150,075. • Marine View Drive Bridge Culvert Replacement Project stream and trail improvements paid for with funds from the Des Moines Creek Basin Interlocal agreement and Surface Water Management revenues totaling $134,922. • Des Moines Creek Trail improvements totaling $134,651. • Art collection valued at $88,500 donated by artist Camille Patha. ____________________________________________________________________________________________________________ Washington State Auditor's Office 17
  21. 21. CITY OF DES MOINES, WASHINGTON Management’s Discussion and Analysis • Field House Park renovation project totaling $65,947. • Des Moines Beach Park buildings rehabilitation project totaling $45,473. • Wooten Park lighting replacement totaling $30,222. • Activity Center landscaping improvements totaling $17,987. • Capital lease for copier totaling $7,836. The Marina continues with its major renovations addressed in the Marina Master Plan. Additions for 2007 total $423,274 all funded by proceeds from the 2002 general obligation bond issue. Other improvements include updates to the Marina Master Plan ($13,721) and outlays for a security camera system ($100,823) using fund balance as a source of revenue. Marina equipment acquisitions for 2007 include $21,490 for accounts receivable software upgrade, $12,001 for a sewage pump-out system, and $5,016 for a one-third share of a portable stage. More detailed information about the City’s capital assets is presented in Note 6 to the financial statements. Table A-3 City of Des Moines's Capital Assets (net of depreciation) Governmental Business-type Activities Activities Total 2007 2006 2007 2006 2007 2006 Land $ 100,515,615 $ 100,508,719 $ 3,757,984 $ 3,757,984 $ 104,273,599 $ 104,266,703 Art Collections 88,500 - - - 88,500 - Buildings & structures 7,036,355 6,867,735 1,663,427 1,782,456 8,699,782 8,650,191 Capital lease 34,760 36,181 4,244 5,584 39,004 41,765 Other improvements 3,166,932 3,372,015 10,789,758 11,208,669 13,956,690 14,580,684 Machinery & equipment 1,676,133 1,301,297 190,275 37,557 1,866,408 1,338,854 Leasehold improvements 136,636 - 1,546,524 59,835 1,683,160 59,835 Infrastructure 15,033,917 15,609,284 - - 15,033,917 15,609,284 Construction in progress 8,439,378 1,842,396 977,389 2,008,124 9,416,767 3,850,520 Intangible assets 16,885 50,122 190,211 93,157 207,096 143,279 Total $ 136,145,111 $ 129,587,749 $ 19,119,812 $ 18,953,366 $ 155,264,923 $ 148,541,115 Long-term debt. At the end of the current fiscal year, the City of Des Moines had total bonded debt outstanding of $4,940,000 which is backed by the full faith and credit of the government. Of this amount, $3,730,000 is also backed by revenues of the Marina. The remainder of the City’s debt represents Public Works Trust Fund Loans and Capital Lease. Table A-4 provides a breakdown of the City’s outstanding debt. Table A-4 City of Des Moines's Outstanding Debt Governmental Business-type Activities Activities Total Total 2007 2006 2007 2006 2007 2006 General obligation bonds $ 1,210,000 $ 1,870,000 $ 3,730,000 $ 4,210,000 $ 4,940,000 $ 6,080,000 Public Works Trust Fund Loans 2,040,471 2,183,705 - - 2,040,471 2,183,705 Capital Lease 35,867 36,802 4,406 5,680 40,273 42,482 Total $ 3,286,338 $ 4,090,507 $ 3,734,406 $ 4,215,680 $ 7,020,744 $ 8,306,187 The City’s received its latest bond rating of A3 in November 2002. The rating was assigned to its 2002 Limited Tax General Obligation and Refunding Bonds. The rating and stable outlook ____________________________________________________________________________________________________________ Washington State Auditor's Office 18
  22. 22. CITY OF DES MOINES, WASHINGTON Management’s Discussion and Analysis reflected the improved financial position of the City since voter approval of I-695 eliminated the motor vehicle excise tax revenues, a major funding source for the City. More detailed information about the City’s long-term liabilities is presented in Note 11 to the financial statements. ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES The expectation for the region’s economy is for moderate to weak growth. Factors such as the deteriorating housing market, and related financial markets, high energy prices and declining consumer confidence will have an impact on revenue forecasts for the 2008 budget. One positive factor is that the City’s residential housing remains more affordable in comparison to other regions of the Pacific Northwest. The outlook for commercial construction activity in 2008 continues strong as a number of mixed-use developments will be progressing, and the Highline School District plans to renovate one of its elementary schools. Preparation of the 2008 budget process will take into consideration these factors. Voter approval of a six-year levy lid lift ballot measure in May 2006 will provide additional property taxes of approximately $1,483,400 in 2008 to be utilized to restore police department staffing. The 2008 budget process continues to face a structural imbalance with its General and Street Funds. The initial imbalance for the 2008 base budget totaled $1,985,964. Strategies utilized to balance and reduce the deficit between recurring revenues and expenditures included operating budget reductions, identification of new recurring revenue sources, and use of one-time revenues. The strategies implemented reduced the imbalance to $498,488. Significant one- time revenues from building and development activities are expected in the next few years. Also, the Marina and Surface Water Management Utility will implement their annual rate increases on moorage and surface water management fees. REQUESTS FOR INFORMATION This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City’s finances and to demonstrate the City’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact Paula A. Henderson, Finance Director, 21630 11th Ave. S., Suite A, Des Moines, Washington, 98198. ____________________________________________________________________________________________________________ Washington State Auditor's Office 19
  23. 23. CITY OF DES MOINES, WASHINGTON Page 1 of 1 GOVERNMENT-WIDE FINANCIAL STATEMENTS STATEMENT OF NET ASSETS December 31, 2007 GOVERNMENTAL BUSINESS-TYPE DESCRIPTION ACTIVITIES ACTIVITIES TOTAL ASSETS Cash and cash equivalents $ 8,261,183 $ 2,717,793 $ 10,978,976 Cash with fiscal agent 5,000 - 5,000 Investments 2,014,965 504,129 2,519,094 Receivables: Taxes 1,308,707 - 1,308,707 Customer accounts 436,914 291,795 728,709 Interest 17,433 3,683 21,116 Other 81,097 6,536 87,633 Due from other governments 788,729 23,586 812,315 Internal balances - - - Inventories 15,215 21,395 36,610 Prepaid items 3,377 275 3,652 Restricted assets: Cash and cash equivalents - 1,670,702 1,670,702 Investments - 504,672 504,672 Interest receivable 3,550 3,550 Other receivable 42,695 42,695 Investment in Joint Venture - - - Capital assets: Land 100,515,615 3,757,984 104,273,599 Art Collections 88,500 88,500 Depreciable capital assets, net 27,101,618 14,384,439 41,486,057 Construction in progress 8,439,378 977,389 9,416,767 Deferred charges 21,159 63,467 84,626 TOTAL ASSETS $ 149,098,890 $ 24,974,089 $ 174,072,979 LIABILITIES Accounts payable $ 1,800,124 $ 187,946 $ 1,988,070 Matured interest payable 5,000 - 5,000 Due to other governments 177,945 167 178,112 Accrued interest payable 10,272 13,326 23,598 Other current liabilities 1,302,424 78,498 1,380,922 Liabilities payable from restricted assets: General obligation bonds principal - 365,000 365,000 Deposits - 158,422 158,422 Deferred revenues 152,953 219,732 372,685 Long-term liabilities: Due within one year 1,906,929 1,329 1,908,258 Due in more than one year 2,190,199 3,490,209 5,680,408 TOTAL LIABILITIES 7,545,846 4,514,629 12,060,475 NET ASSETS Invested In capital assets, net of related debt 134,441,619 16,755,712 151,197,331 Restricted for: Capital projects 1,560,428 1,653,792 3,214,220 Debt service 86,950 416,742 503,692 Repair and replacement - 335,035 335,035 Unrestricted 5,464,047 1,298,179 6,762,226 TOTAL NET ASSETS $ 141,553,044 $ 20,459,460 $ 162,012,504 The accompanying notes are an integral part of this statement. ____________________________________________________________________________________________________________ Washington State Auditor's Office 20
  24. 24. CITY OF DES MOINES, WASHINGTON GOVERNMENT-WIDE FINANCIAL STATEMENTS STATEMENT OF ACTIVITIES For the Year Ended December 31, 2007 PROGRAM REVENUES NET (EXPENSES) REVENUE AND CHANGES IN NET ASSETS CHARGES OPERATING CAPITAL BUSINESS- FOR GRANTS AND GRANTS AND GOVERNMENTAL TYPE FUNCTIONS/PROGRAMS EXPENSES SERVICES CONTRIBUTIONS CONTRIBUTIONS ACTIVITIES ACTIVITIES TOTAL Governmental activities: General government $ 2,355,893 $ 743,104 $ 27,135 $ - $ (1,585,654) $ - $ (1,585,654) Public safety 8,546,928 249,207 307,838 7,774 (7,982,109) - (7,982,109) Physical environment 1,391,151 123,484 60,851 - (1,206,816) - (1,206,816) Transportation 3,165,527 493,975 706,922 4,815,175 2,850,545 - 2,850,545 Economic environment 721,847 1,812,335 16,721 - 1,107,209 - 1,107,209 Mental and physical health 342,015 68,401 16,984 - (256,630) - (256,630) Culture and recreation 2,369,485 851,420 239,338 172,061 (1,106,666) - (1,106,666) Interest on long-term debt 110,169 - - - (110,169) - (110,169) Total governmental activities 19,003,015 4,341,926 1,375,789 4,995,010 (8,290,290) - (8,290,290) Business-type activities: Marina 3,450,114 3,651,188 1,000 9,582 - 211,656 211,656 Surface Water Utility 1,419,323 1,772,350 6,431 137,428 - 496,886 496,886 Total business-type activities 4,869,437 5,423,538 7,431 147,010 - 708,542 708,542 21 Total government $ 23,872,452 $ 9,765,464 $ 1,383,220 $ 5,142,020 $ (8,290,290) $ 708,542 $ (7,581,748) General revenues: Property taxes $ 4,646,958 $ - $ 4,646,958 Washington State Auditor's Office Retail sales and use taxes 2,897,242 - 2,897,242 Business taxes 4,350,957 - 4,350,957 Other taxes 1,393,386 - 1,393,386 State entitlements 450,054 - 450,054 Unrestricted investment earnings 491,503 266,390 757,893 Equity in income of joint venture (35,293) (35,293) Gain on sale of capital assets 21,362 - 21,362 Miscellaneous 30,977 (2,787) 28,190 Special item: Insurance Recoveries 17,287 42,695 59,982 Transfers 92,442 (92,442) - Total general revenues and transfers 14,356,875 213,856 14,570,731 Change in net assets 6,066,585 922,398 6,988,983 Net assets beginning of the year 135,486,459 19,537,062 155,023,521 Net assets end of the year $ 141,553,044 $ 20,459,460 $ 162,012,504 ____________________________________________________________________________________________________________ The accompanying notes are an integral part of this statement.
  25. 25. CITY OF DES MOINES, WASHINGTON Page 1 of 2 FUND FINANCIAL STATEMENTS BALANCE SHEET December 31, 2007 MUNICIPAL NONMAJOR GENERAL STREET ARTERIAL CAPITAL GOVERNMENTAL DESCRIPTION FUND FUND STREET IMPRV FUNDS ASSETS Cash and cash equivalents $ 1,343,122 $ 424,629 $ 2,253,363 $ 1,666,073 $ 1,400,023 Cash with fiscal agent - - - - 5,000 Investments 300,239 300,239 701,262 Receivables: Taxes 1,195,163 1,335 - 67,109 35,998 Customer accounts 382,220 - - 4,391 50,303 Interest - - 2,600 2,600 5,608 Other 32,205 1,354 2,153 30,493 9,239 Due from other funds - - - - - Due from other governments 61,182 - 584,953 80,295 42,515 Prepaid items 3,377 - - - TOTAL ASSETS $ 3,017,269 $ 427,318 $ 3,143,308 $ 2,151,200 $ 2,249,948 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 622,137 $ 104,846 $ 613,680 $ 108,266 $ 50,380 Matured interest payable - - - - 5,000 Due to other funds - - - - - Due to other governments 7,644 - - - - Customer deposits 513,458 - - - - Other current liabilities 495,588 15,268 219,911 23,183 19,896 Deferred revenues 625,028 (483) 3,655 2,362 117,611 Total liabilities 2,263,855 119,631 837,246 133,811 192,887 Fund balances: Reserved for: Imprest funds $ 4,600 $ - $ - $ - $ - Prepaid items 3,377 - - - - Unreserved, designated for: Maintenance agreement 24,756 - - - - Continuing appropriations 720,681 62,211 - - - Capital projects funds - - 1,560,428 - - Unreserved, undesignated reported in: General fund - - - - - Special revenue funds - 245,476 745,634 - 1,970,111 Debt service funds - - - - 86,950 Capital projects funds - - - 2,017,389 - Total fund balances 753,414 307,687 2,306,062 2,017,389 2,057,061 TOTAL LIABILITIES AND FUND BALANCES $ 3,017,269 $ 427,318 $ 3,143,308 $ 2,151,200 $ 2,249,948 The accompanying notes are an integral part of this statement. ____________________________________________________________________________________________________________ Washington State Auditor's Office 22
  26. 26. Page 2 of 2 CITY OF DES MOINES, WASHINGTON FUND FINANCIAL STATEMENTS RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERNMENTAL FUNDS December 31, 2007 TOTAL Fund balances - total governmental funds $ 7,441,613 GOVERNMENTAL FUNDS Amounts reported for governmental activities in the statement of net assets are different because: $ 7,087,210 5,000 Capital assets used in governmental activities are not financial 1,301,740 resources and therefore are not reported in the governmental funds. 1,299,605 Land $ 100,515,615 436,914 Art Collections 88,500 10,808 Depreciable capital assets, net 25,905,026 75,444 Construction in progress 8,439,378 - 134,948,519 768,945 3,377 Other assets used in governmental activities are not financial resources $ 10,989,043 and therefore are not reported in the governmental funds. Other accounts receivable 11,952 Interest receivable 7,285 $ 1,499,309 Unamortized bond issuance costs 21,159 5,000 Investment in joint venture - - 40,396 7,644 Current liabilities includes amounts not payable in the current 513,458 period and therefore are not reported in the governmental funds. 773,846 748,173 Accounts payable and other accrued liabilities (268,837) 3,547,430 Accrued interest payable (10,272) Due to other governments (170,301) (449,410) Deferred revenue in governmental funds is susceptible to full $ 4,600 accrual and therefore are not reported in the governmental funds. 3,377 Deferred revenue - current period 123,200 24,756 Deferred revenue - prior period 472,020 782,892 1,560,428 Long-term liabilities, including bonds, notes, and loans payable are not due and payable in the current period and therefore are not reported - in fund balance in the governmental funds. 2,961,221 86,950 Governmental bonds, notes, and loans payable (3,285,079) 2,017,389 Compensated absences (784,836) 7,441,613 (4,069,915) $ 10,989,043 Internal service funds are used by management to charge the costs of certain activities to individual funds. The assets and liabilities of internal service funds are included in governmental activities in the statement of net assets. 3,046,621 Net assets of governmental activities $ 141,553,044 ____________________________________________________________________________________________________________ Washington State Auditor's Office 23
  27. 27. CITY OF DES MOINES, WASHINGTON Page 1 of 2 FUND FINANCIAL STATEMENTS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended December 31, 2007 MUNICIPAL NONMAJOR GENERAL STREET ARTERIAL CAPITAL GOVERNMENTAL DESCRIPTION FUND FUND STREET IMPRV FUNDS REVENUES Taxes $ 9,891,185 $ 217,470 $ - $ 1,287,073 $ 1,866,261 Licenses and permits 1,469,961 - - - Intergovernmental 832,818 713,068 4,814,003 150,084 122,829 Charges for services 2,491,986 - 129,839 96,230 379,274 Fines and forfeits 238,350 - - - Investment income 122,476 24,084 143,075 94,885 54,252 Miscellaneous 233,155 2,351 3,699 8,327 60,115 TOTAL REVENUES 15,279,931 956,973 5,090,616 1,636,599 2,482,731 EXPENDITURES Current: General government 2,835,402 - - - - Public safety 7,783,418 - - - 479,979 Physical environment 1,348,149 - - 62,984 Transportation 472,515 902,660 434,825 - Economic environment 652,925 - - - 21,080 Mental and physical health 343,835 - - - Culture and recreation 1,838,306 - - 34,926 124,882 Debt service: Principal - - - 814,505 Interest and fiscal charges - - - 105,269 Capital outlay 233,551 52,361 6,828,485 872,541 131,735 TOTAL EXPENDITURES 15,508,102 955,021 7,263,310 907,467 1,740,435 Excess (deficiency) of revenues over (under) expenditures (228,171) 1,952 (2,172,694) 729,132 742,296 OTHER FINANCING SOURCES (USES) Capital related debt issued 7,836 - 2,500 - Transfers in 161,605 - 1,046,085 19,416 445,450 Transfers out (110,139) (238,362) (156,898) (706,665) (496,990) Insurance recoveries - - - 30,494 21,771 Sale of capital assets 350 - 5,000 - - TOTAL OTHER FINANCING SOURCES (USES) 59,652 (238,362) 896,687 (656,755) (29,769) Net change in fund balances (168,519) (236,410) (1,276,007) 72,377 712,527 Fund balances beginning of year 921,933 544,097 3,582,069 1,945,012 1,344,534 FUND BALANCES END OF YEAR $ 753,414 $ 307,687 $ 2,306,062 $ 2,017,389 $ 2,057,061 The accompanying notes are an integral part of this statement. ____________________________________________________________________________________________________________ Washington State Auditor's Office 24
  28. 28. Page 2 of 2 CITY OF DES MOINES, WASHINGTON FUND FINANCIAL STATEMENTS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended December 31, 2007 TOTAL GOVERNMENTAL Net change in fund balance - total governmental funds $ (896,032) FUNDS $ 13,261,989 Amounts reported for governmental activities in the statement of 1,469,961 activities are different because: 6,632,802 3,097,329 Governmental funds report capital outlays as expenditures. However, 238,350 in the statement of activities, the cost of capital assets is allocated 438,772 over their estimated useful lives as depreciation expense. 307,647 Capital outlay $ 8,118,673 25,446,850 Capital outlay contributed from business-type activities 92,442 Depreciation expense (2,023,581) Excess of capital outlay over depreciation expense 6,187,534 2,835,402 The City has an equity interest in a joint venture. This investment is not a 8,263,397 current financial resource and therefore is not reported in the funds. (35,293) 1,411,133 1,810,000 The issuance of long-term debt provides current financial resources to 674,005 governmental funds, while the repayment of the principal of long-term 343,835 debt consumes the current financial resources of governmental funds. 1,998,114 Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, 814,505 discounts and similar items when debt is first issued, whereas these 105,269 amounts are deferred and amortized in the statement of activities. 8,118,673 Long-term debt issued (10,336) 26,374,334 Debt principal retirement 814,505 Amortization of issuance costs (7,360) Amortization of bond premium and discount (778) (927,485) 796,031 Internal service funds are used by management to charge the costs of certain 10,336 activities to individual funds. The net revenue (expense) of the internal service 1,672,556 funds is reported with governmental activities. 116,794 (1,709,054) 52,264 Revenues reported in the statement of activities that do not provide current 5,350 financial resources are not reported as revenues in the governmental funds. (47,177) 31,452 Expenses reported in the statement of activities that do not require the use of (896,032) current financial resources are not reported as expenditures in the 8,337,645 governmental funds. (55,272) $ 7,441,613 Change in net assets of governmental activities $ 6,066,585 ____________________________________________________________________________________________________________ Washington State Auditor's Office 25

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