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Comprehensive Annual Financial Report
CITY OF ALLEN TEXAS Comprehensive Annual Financial Report 2006For Fiscal Year Ended September 30, ae ms's i/tl Allen Senior Center Official Copy S CITY OF ALLEN, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT f 7_ CITY OF ALLEN FISCAL YEAR ENDED SEPTEMBER 30, 2006 AS PREPARED BY THE FINANCE DEPARTMENT CITY OF ALLEN, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006 TABLE OF CONTENTS A. MANAGEMENT'S DISCUSSION AND ANALYSIS 3 EXHIBIT Page I. INTRODUCTORY SECTION Letter of Transmittal I Certificate of Achievement A Organizational Chart vii Elected Officials and Administrative Officers viii II. FINANCIAL SECTION Statement of Activities Independent Auditors Report 1 A. MANAGEMENT'S DISCUSSION AND ANALYSIS 3 B. BASIC FINANCIAL STATEMENTS 'Government -Wide Financial Statements Statement of Net Assets 1 19 ' Statement of Activities 2 20 Fund Financial Statements ' Govemmental Funds Financial Statements Balance Sheet -Governmental Funds 3 22 Reconciliation of the Balance Sheet of Government Funds to the Statement of Net Assets 4 24 ' Statement of Revenues, Expenditures and Changes in Fund Balances -Governmental Funds 5 26 Reconciliation of the Statement of Revenues, ' Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 6 28 ' Proprietary Funds Financial Statements Statement of Net Assets - Proprietary Funds 7 29 Reconciliation of the Fund Level Statement of Net Assets ' of Proprietary Funds to the Government -wide Statement of Net Assets 8 30 Statement of Revenues, Expenses and Changes ' In Net Assets - Proprietary Funds g 31 Reconciliation of the Statement of Revenues, Expenses and Changes in Net Assets of Proprietary Funds to the Statement of Activities 10 32 ' Statement of Cash Flows - Proprietary Funds 11 33 ' Component Units Financial Statements Statement of Net Assets - Component Units 12 34 Statement of Activities - Component Units 13 35 CITY OF ALLEN, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006 TABLE OF CONTENTS EXHIBIT Page Notes To Financial Statements Note 1. Summary of Significant Accounting Policies 37 Note 2. Deposits, Investments and Investment Policies 45 Note 3. Receivables 48 Note 4. Capital Assets 49 Note 5. Long -Term Debt 53 Note 6. Interfund Receivables and Payables 61 Note 7. Interfund Transfers 61 Changes in Fund Balances — Debt Service Fund B-4 73 Note 8. Retirement Plan 62 Note 9. Water and Sewer Contracts 64 Note 10. Deferred Compensation Plan 65 Note 11. Risk Management 65 Note 12. Commitments and Contingent Liabilities 66 C. REQUIRED SUPPLEMENTARY INFORMATION General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances — Budget and Actual A-1 67 Notes to Required Supplementary Information 68 D. COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES Major Governmental Funds Comparative Balance Sheets - General Fund B-1 70 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances — General Fund B-2 71 Comparative Balance Sheets — Debt Service Fund B-3 72 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances — Debt Service Fund B-4 73 Budgetary Comparison Schedule — Debt Service Fund B-5 74 Comparative Balance Sheets — Facilities Agreement Fund B-6 75 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - Facilities Agreement Fund B-7 76 Comparative Balance Sheets — General Capital Projects Fund B-8 77 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances — General Capital Projects Fund B-9 78 CITY OF ALLEN, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006 TABLE OF CONTENTS Internal Service Funds Combining Statement of Net Assets E-1 101 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets E-2 102 Combining Statement of Cash Flows E-3 103 EXHIBIT Page Comparative Balance Sheets — General Obligation Bond Fund B-1 D 79 Comparative Statements of Revenues, Expenditures and Changes in Fund Balance — General Obligation Bond Fund B-11 80 Non -major Governmental Funds Combining Balance Sheet C-1 82 Combining Statement of Revenues, Expenditures and Changes in Fund Balances C-2 84 Major Enterprise Funds Comparative Statements of Net Assets — Water and Sewer D-1 88 Comparative Statements of Revenues, Expenses and Changes in Fund Net Assets — Water and Sewer D-2 89 Comparative Statements of Cash Flows — Water and Sewer D-3 90 Comparative Statements of Net Assets — Solid Waste D-4 91 Comparative Statements of Revenues, Expenses and Changes in Fund Net Assets — Solid Waste D-5 92 Comparative Statements of Cash Flows — Solid Waste D-6 93 Comparative Statements of Net Assets — Drainage D-7 94 Comparative Statements of Revenues, Expenses and Changes in Fund Net Assets — Drainage D-8 95 Comparative Statements of Cash Flows — Drainage D-9 96 Statements of Net Assets — Golf Course D-10 97 Statements of Revenues, Expenses and Changes in Fund Net Assets — Golf Course Fund D-11 98 Statements of Cash Flows — Golf Course Fund D-12 99 Internal Service Funds Combining Statement of Net Assets E-1 101 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets E-2 102 Combining Statement of Cash Flows E-3 103 CITY OF ALLEN, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006 TABLE OF CONTENTS EXHIBIT Page Discretely Presented Component Units Comparative Balance Sheets -Economic Development Corporation F-1 105 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets F-2 105 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances F-3 107 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance F-4 106 Comparative Balance Sheets -Allen Community Development Corporation F-5 109 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets F-6 110 Comparative Statements of Revenues Expenditures and Changes in Fund Balances F-7 111 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance F-8 112 E. CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS Comparative Schedules by Source G-1 113 Schedule by Function and Activity G-2 114 Schedule of Changes by Function and Activity G-3 116 TABLE Page III. STATISTICAL SECTION Net Assets by Components 1 118 Changes in Net Assets, Last Four Fiscal Years 2 119 Fund Balances, Governmental Funds 3 121 Changes in Fund Balances, Governmental Funds 4 122 Assessed Value and Estimated Actual Value of Taxable Property 5 123 Direct and Overlapping Property Tax Rates 6 124 Principal Property Tax Payers 7 125 Ad Valorem Tax Levies and Collections 8 126 Ratio of Outstanding Debt by Type 9 127 Ratio of General Bonded Debt Outstanding 10 128 Direct and Overlapping Governmental Activities Debt 11 129 Pledged -Revenue Coverage 12 130 Demographic and Economic Statistics 13 131 Principal Employers 14 132 Full -Time Equivalent City Government Employees by - Function/Program 15 133 Operating Indicators by FunctiontProgram 16 134 Capital Asset Statistics by Function/Program 17 135 CITY OF ALLEN March 13, 2007 Honorable Mayor and City Council, City Manager, ' Citizens of Allen: The Comprehensive Annual Financial Report (CAFR) of the City of Allen, Texas (the City), for the fiscal year ended September 30, 2006, is submitted herewith. Management assumes full responsibility for the completeness and reliability of information contained in this report, based upon a comprehensive framework of internal control that is ' established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial ' statements are free of any material misstatements. Weaver and Tidwell, L.L.P. have issued an unqualified ('clean) opinion on the City of Allen's financial statements for the year ended September 30,2006. The independent auditors' report is ' located in the beginning of the financial section of the CAFR. This letter of transmittal is designed to complement Management's Discussion and Analysis (MD&A) and should be read in conjunction with it. The City's MD&A can be found immediately following the independent auditors' report and provides a narrative introduction, overview and analysis of the basic financial statements. ' PROFILE OF THE GOVERNMENT The City of Allen, incorporated in 1953, is located in central Collin County, Texas, 25 miles north of downtown Dallas, on U.S. Highway 75. The City currently occupies a land area of 26.31 ' square miles and serves a population of approximately 75,699. The City Council is comprised of the Mayor and six Council members, who enact local laws, determine policies and adopt the annual budget. The City Council appoints the City Manager, ' who has full responsibility for carrying out Council policies and administering City operations. City ail service departments provide a full range of services including police and fire protection, ' sanitation/solid waste service, Water and sewer services, construction and maintenance of streets, recreational activities and cultural events. The financial reporting entity, (the government) includes all funds of the primary government (i.e., the City of Allen as legally defined), as Well as all of its component units. Component units are ' legally separate entities for which the primary government is financially accountable. Discretely presented component units are legally separate entities and not part of the primary government's operations. The Allen Economic Development Corporation (AEDC) and Allen Community ' Development Corporation (ACDC) are included in the financial statements as discretely presented component units. 305 CENTURY PARKWAY • ALLEN, TEXAS 95013-8042 • 214.509.4100 ' WEB: www.cjtyofallen.org • EMAIL: coaOcilyofalim.org The annual budget serves as the foundation for Allen's financial planning and control. Annual budgets are legally adopted for the General Fund and Debt Service Fund. Each year the City Manager is required to submit to the City Council a proposed budget for the fiscal year beginning on the following October 1. The operating budget includes proposed expenditures and the means of financing them. Public hearings are conducted to obtain taxpayers' comments. Prior to October 1, the budget is legally enacted by the City Council through passage of an ordinance, setting the limit for expenditures during the fiscal year. Expenditure appropriations in the adopted budget are by department and may be amended during the year. The City Manager is authorized to adjust budgeted amounts; however, such revisions may not result in total expenditures exceeding budgeted expenditures without approval of the City Council. As part of each years budget development process, departments are required to update revenue and expenditure estimates for the current fiscal year. The re estimated current year budget is submitted to the City Council along with the proposed budget for the next fiscal year. The revised budget is then used as a working budget for the last half of the current fiscal year. During the course of the year on-line reporting has been developed using an automated management accounting system to allow individual departments to review and compare actual versus budgeted amounts. The Finance department also reviews operating revenues and expenditures, recommending adjustments as needed. On a quarterly basis, the Finance department submits financial reports to the City Council. Formal budgetary integration is not employed for Special Revenue Funds, Proprietary Funds or Capital Project Funds. However, the City does adopt an annual budget for those funds for managerial control. LOCALECONOMY Bordered by McKinney to the north and Plano to the south, Allen is directly in the path of growth. The population of approximately 75,699 is expanding with an estimated 5.5% growth rate and is anticipated to reach 97,900 by the year 2011. The quality of the Allen community attracts well- educated residents with a high level of spending power and disposable income making Allen a prime location for restaurants, shopping centers and other retail venues. Allen is a community that offers exceptional housing, award-winning schools and a pro-business attitude and enthusiastic accommodation of industry. In addition to maintaining Allen's quality of life, the Planning and Development department along with the Allen Economic Development Corporation (AEDC) actively work to balance new residential growth with quality commercial developments. Major developments underway include Star Creek, a commercial and residential development between Stacy Road and SH 121, Montgomery Farm, a commercial and residential development at Bethany Drive and US 75, and The Villages, a commercial development at U.S. 75 and Stacy Road. The vision of the City is to create the highest quality of life in Allen. These developments achieve that goal as well as create regional attractions that bring people from surrounding communities and additional tax dollars to Allen. Property Values - Assessed property values increased $377 million (7.8%) from the preceding year with $283 million in new property and a $94 million increase in the value of existing property. During the last five years assessed property value has increased 50% and accounts for 50.11% of the General Fund revenue. With a well-educated populace and median household income of $106,196, Allen enjoys an exceptionally high property tax collection rate. Increases in assessed property value along with continued economic growth have allowed the City Council to lower the property tax rate for the thirteenth consecutive year while improving quality services to its citizens. Retail Sales — The General Fund's second largest revenue source is sales tax generated from a ' variety of businesses operating in the City of Allen. Sales tax receipts resulted in revenue of $9.23 million in fiscal year 2005-08, an 18% increase over the prior year. Recent increases in sales tax revenues are indicative of increased consumer confidence and spending and increased ' numbers of retailers and restaurants. Long -Term Financial Planning — The City's annual budget process involves incorporating the goals and strategies identified by the City Council's three-year Strategic Plan to provide for the ' community's highest priority needs. The goal statements developed by the City Council are: • Enhance neighborhood livability and safety. ' • Cultivate alliances and partnerships with agencies and governmental units that affect Allen. • Improve regional mobility through transportation initiatives. • Signify, enhance and communicate Allen's identity to the region and the nation. t • Systematically invest in public infrastructure. • Maintain operational excellence in City government services. • Provide public support for new economic investment in Allen that broadens the ' employment base, provides desired goods and services for residents and contributes to the community character and identity. ' Individual departments develop their goals and objectives in terms of these all-encompassing organizational goals. Strategic Financial Plan — An appropriate financial plan for the City of Allen requires many ' elements all working in concert with one another. Current expectations are for continued sales tax revenue growth and additional demands for "essential" City services such as police, fire, water, sewer, drainage and street improvement. The Finance Department's management role will be to maintain and enhance financial plan elements and ensure the continued financial stability ' for the City of Allen. Financial Resource Planning — Strategic planning begins with determining the City's fiscal ' capacity based upon long-term financial forecasts of recurring available revenues. Financial forecasts coupled with financial trend analysis techniques and careful reserve analysis will preserve the fiscal well being of Allen. Strategic planning is a critical element not only to meet long-term financial stability goals but also to determine City Council objectives that will require special financial planning to achieve success. Capital Improvement Program Planning — The City of Allen's Capital Improvement Program is ' a multi-year financial plan for the acquisition, expansion, or rehabilitation of infrastructure, capital assets, or productive capacity of City services. The City's operating and capital projects budgets are closely linked. ' Revenues for the capital budget come primarily from bond sales, supplemented by development fees and some current revenues. The Capital Improvement Program unlike the operating budget is a seven-year plan that is reviewed and projects are reprioritized on an ongoing basis. Although ' not formally adopted as part of the annual budget, project budgets are used as a guide for ' project, debt and other related budget planning. As such, future years are subject to change; in addition, debt issuance for many future projects is subject to voter approval. Throughout the year projects are monitored and reprioritized as needed. The City utilizes the project accounting and budgeting components of the financial software to assist with the monitoring aspect of the process. Monthly reports are provided to Council to keep them informed of the status of projects. iii With support provided by City staff, in spring 2006, Allen residents participated in a planning process and determined future capital improvement projects related to Finance, ParkslRecreation, Streets/Drainage, Water/Sewer, Public Safety and other City facilities. In May 2007, the City will hold a bond election based upon the $77,895,000 program proposed by the 2007-2013 Capital Improvement Program steering committee and approved by the City Council. Debt Management—All debt issuances are for the purposes of financing capital infrastructure or long-lived costly assets. Each debt issuance is evaluated against multiple policies addressing: debt service as a percent of operating expenditures, tax and revenue bases for the repayment of debt, the overall debt burden on the community, statutory limitations and market factors affecting tax-exempt interest costs. Sizing of the City's capital improvement program based on debt capacity in conjunction with conservatively estimated pay-as-you-go revenues help stabilize per capita debt and lower annual debt service costs to the City over the long-term. To take advantage of lower interest rates, in April 2006 the Allen Community Development Corporation issued $5,600,000 to advance refund select maturities from the 1997 and 1999 outstanding sales tax revenue bonds resulting in savings of $171,367. The City also issued $1,595,000 in general obligation bonds for public safety, parks and drainage projects. Cash Management Policies and Practices —The City of Allen's investment policy is to invest all City funds at the highest available interest rate, assuring that all monies are fully secured with emphasis on safety of principal, liquidity, yield, diversification, and public trust. State statutes authorize the City to invest in U.S. Government obligations, commercial paper, obligations of Texas and its agencies and fully collateralized repurchase agreements. The City utilizes a pooled cash concept in order to invest greater amounts of cash at one time and therefore receives more favorable interest rates. Insurance and Risk Management - The City has a comprehensive risk management program, including property, liability, safety, workers' compensation, health, dental and wellness. The safety incentive program promotes employee safety on the job and focuses on risk control techniques designed to minimize accident -related losses. In addition to the safety program's preventive measure, claims are closely monitored in order to minimize the City's liability exposure. Administration of these functions requires participation from the Risk Manager, outside legal counsel and consultants. To reduce health claim costs, during 2006 the City implemented a wellness program to improve employee awareness of exercise, nutation, and lifestyle choices. Procurement Planning- Under the Finance Department, the Purchasing division is responsible for the procurement of items required to operate and maintain the City. This division assists all departments in planning and maintaining the City's financial health, by establishing a uniform procedure for obtaining goods and services in an effective and timely manner in accordance with generally accepted purchasing procedures and legally mandated procurement standards. The City has contracted with DemandStar.com for the maintenance of an automated vendor list which categorizes each vendor by commodity codes for the specific goods or services offered by the vendor. FISCAL YEAR 2006 HIGHLIGHTS The City of Allen's fiscal year 2005-2006 reflects the efforts of the governing body and City staff to address the need to provide services and facilities to support our vibrant and growing community while maintaining a strong financial position. Implementation of Capital Improvement Program projects increased staffing levels by 20.68 full time equivalent positions needed as a direct result of the operation and maintenance needs associated with each new facility. New facilities include the Youth Center, The Edge Skate Park, Senior Center, Chase Oaks Golf Course, and the Public Library. Also, as the community continues to grow an additional 10 positions were added to enhance public safety and the command structure of the Police and Fire departments. IV I ' Water conservation continues to be a priority resulting in the addition of 4 positions to manage the ' important areas of water conservation, water quality and working with the school district, homeowner's associations, civic groups and individuals to promote water conservation education. Annual 6% increases in water and sewer rates were implemented for the second consecutive year as North Texas Municipal Water District proceeds with capital expansion plans and the City ' implements conservation water rates. During the fiscal year an actuarial study was completed to implement the Government Accounting ' Standards Board's recently issued standards on accounting and reporting for healthcare and other nonpension benefits provided to retirees. This new accounting pronouncement will be implemented in fiscal year 2006-2007. ' AWARDS AND ACKNOWLEDGEMENTS ' Awards -- The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Allen for its CAFR for the fiscal year ended September 30, 2005. This was the eighth consecutive year that the government has achieved this prestigious award. In order to be ' awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. ' A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program's requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. ' Acknowledgements — Many people are responsible for the preparation of this report, and for the maintenance of records upon which it is based. Appreciation is expressed to representatives of Weaver and Tidwell L.L.P. for their invaluable assistance in producing the final document and to Dana Murray, Senior Accountant, and Tru Nguyen, Senior Accountant, who were instrumental in the complefion of this report. ' We would also like to thank the City Manager's office and the members of the City Council for their interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. Respectfully submitted, 1 ' Kevin Hammeke Joanne Stoehr Finance Director Assistant Finance Director �4 („ �i♦jt�r 1 1 i v Certificate of Achievement for Excellence in Financial Reporting Presented to City of Allen Texas For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2005 A Certificate of Acblevement for EX-11enoe m Fmmcisl Reporting is pum d by the GbVCmment Finance Officers Association office United States andQ d.to gov¢»ed mils and public employee xctu m nt systems whose compxehenstve anal financial mpaus (CAFRs) achieve the highest stsndads in gwemment accounting and5nenridrep.chu& president Executive Director City of Allen Organizational Chart vil CITY OF ALLEN, TEXAS CITY OFFICIALS CITY OF ALLEN Council Members Mayor Stephen Terrell Mayor Pro Tem, Place 4 Susan Bartlemay Place 1 Council Member Debbie Stout Place 2 Council Member Ross Obermeyer Place 3 Council Member Mark Pacheco Place 5 Council Member Gary Caplinger Place 6 Council Member Jeff McGregor Management Staff City Manager Peter H. Vargas Finance Director Kevin Hammeke Assistant Finance Director Joanne Stoehr ' We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund and the aggregate remaining fund information of the City of Allen (the "City") as of and for the year ended September 30, 2006, which collectively comprise the City's ' basic financial statements, as listed in the table of contents. These basic financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these basic financial statements based on our audit. We conducted our audit in a rdance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 basic financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Allen at September 30, 2006 and the respective changes in financial position and cash flows, where applicable, thereof, for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated January 25, 2007, on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, UAII 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 the 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 accompanying management's discussion and analysis and budgetary comparison information on pages 3 through 17 and 67 through 68, respectively, are not a required part of the basic financial statements but are supplementary information required by the GASB. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required WWW WE AVLRANDTIF.ELL COM supplementary information. However, we dM not audit the information and express no ' opinion on it AN IN R OF BAKER TILLY N ENNATIDNAL ' 1 II' INDEPENDENT AUDITOR'S REPORT WEAVER TIDWELL 'LLP CERTIFIED PUBLIC Honorable Mayor and Members of ACCOUNTANTS the City Council ' AND CONSULTANTS CITY OF ALLEN, TEXAS ' We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund and the aggregate remaining fund information of the City of Allen (the "City") as of and for the year ended September 30, 2006, which collectively comprise the City's ' basic financial statements, as listed in the table of contents. These basic financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these basic financial statements based on our audit. We conducted our audit in a rdance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 basic financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Allen at September 30, 2006 and the respective changes in financial position and cash flows, where applicable, thereof, for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated January 25, 2007, on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, UAII 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 the 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 accompanying management's discussion and analysis and budgetary comparison information on pages 3 through 17 and 67 through 68, respectively, are not a required part of the basic financial statements but are supplementary information required by the GASB. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required WWW WE AVLRANDTIF.ELL COM supplementary information. However, we dM not audit the information and express no ' opinion on it AN IN R OF BAKER TILLY N ENNATIDNAL ' 1 City of Allen, Texas Page Two 1 1 Our audit was made for the purpose of forming opinions on the basic financial statements taken as a whole. The introductory section, combining and individual major and non -major 1 fund financial statements and schedules, the discretely presented component units financial statements and schedules, schedules of capital assets used in the operation of governmental funds, and statistical tables listed in the table of contents are presented for 1 purposes of additional analysis and are not a required part of the basic financial statements of the City. The combining and individual major and non -major fund financial statements and schedules, discretely presented component units financial statements and schedules, and schedules of capital assets used in the operation of governmental funds have been 1 subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated, in all material respects in relation to the basic financial statements taken as a whole. The introductory section and statistical tables have not been 1 subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on such data. WEAVER AND TIDWELL, L.L.P. Dallas, Texas January 25, 2007 MANAGEMENT'S DISCUSSION 1 AND ANALYSIS 1 1 1 1 1 1 1 1 asSPEGT * INTFG A A m X A n CITY OF PVVV�" CITY OF ALLEN, TEXAS MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (UNAUDITED) As management of the City of Allen, Texas, we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2006. FINANCIAL HIGHLIGHTS • The assets of the City exceeded its liabilities (net assets) at September 30, 2006 by $449,899,427. Of this amount, $49,487,857 (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. • The City's total net assets increased by $38,126,085. The increase is primarily a result of an increase in operating revenues and developer contributions due to population growth, a rising economy and growth in both residential and commercial properties. • The City's governmental funds reported combined ending fund balances of $30,658,025 at September 30, 2006, an increase of $70,106 from the prior fiscal year. • At the end of the fiscal year, the unreserved fund balance for the General Fund was $11,490,983 or 29% of total General Fund expenditures. • On a government -wide basis, the City's total liabilities decreased by $5,707,646. The key factors for this decrease are a result of reduction of debt due to debt payments made in FY2006 and the issuance of only $1,595,000 in General Obligation Bonds. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements are comprised of three components: 1) government -wide financial statements, 2) fund financial statements and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government -wide financial statements - The government -wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to that of a private -sector business. The Statement of Net Assets presents information on all of the City's assets and liabilities, with ' the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. To assess the overall health of the City, other non-financial factors ' should also be taken into consideration, such as changes in the City's property tax base and the condition of the City's infrastructure. ' The Statement of Activities presents information showing how the City's net assets changed during the fiscal year. All changes in net assets are reported when the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and ' expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused compensated absences). 1 I CITY OF ALLEN, TEXAS MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (UNAUDITED) Both the Statement of Net Assets and the Statement of Activities are prepared utilizing the accrual basis of accounting as opposed to the modified accrual basis used in prior reporting models. In the government -wide financial statements, pages 19 through 21, the City is divided into three kinds of activities: • Governmental activities - Most of the City's basic services are reported here, including the police, fire, library, community development, parks and recreation, municipal court, and general administration. Property and sales taxes, charges for services, franchise fees, and state and federal grants finance most of these activities. • Business -type activities - The City's water, sewer, solid waste, drainage, and golf course operations are reported here. These are functions intended to recover all or a significant portion of their costs through user fees and charges. • Component units - The City includes two separate legal entities in this report: the Allen Economic Development Corporation (AEDC) and the Allen Community Development Corporation (ACDC). Although legally separate, these component units are important because the City is financially accountable for them. Fund financial statements - A fund is a grouping of related accounts used to maintain control over resources that have been segregated for speck activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All of the funds of the City can be divided into two categories: governmental and proprietary. Governmental Funds - These funds are used to account for the majority of the City's activities, which are essentially the same functions as governmental activities in the government -wide statements. However, unlike the government -wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as resources available for future spending at fiscal year end. These funds are reported using the modified accrual basis of accounting, which measures cash and all other financial assets that can be readily converted to cash. When compared with similar information in the broader government -wide financial statements, readers may better understand the long-term impact of the government's near-term financing decisions. Reconciliation is provided that details the relationships or differences between governmental activities and governmental funds; reconciliation follows the fund financial statements. The City maintains several 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 balance for the General Fund, Debt Service Fund, Facilities Agreement Fund, General Capital Projects Fund and General Obligation Bond Fund, all of which are considered to be major funds. Data for the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the non -major governmental funds is provided in the form of combining statements elsewhere in this report. The basic governmental fund financial statements can be found on pages 22 through 28 of this report. CITY OF ALLEN, TEXAS MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (UNAUDITED) Proprietary Funds - The City maintains two different types of proprietary funds: enterprise funds and internal service funds. Enterprise funds are used to report the same functions presented as business -type activities in the govemment-wide financial statements. The City uses enterprise funds to account for its water and sewer operations, solid waste collection, disposal services, drainage operations, and golf course operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses its internal service funds to account for vehicle, machinery, and equipment replacements and costs associated with workers compensation, liability and property insurance, and employee medical and dental insurance programs. These services have been included within governmental activities in the government -wide financial statements as they predominantly benefit governmental rather than business -type functions. Proprietary funds provide the same type of information as the government -*de financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water and sewer operations, solid waste collection, and disposal services since they are considered to be major funds of the City. The Drainage Fund and the Golf Course Fund are the only remaining enterprise funds, so they are being presented as major funds even though they do not meet the criteria of a major fund established in Governmental Accounting Standards Board Statement No. 34. All internal service funds are combined into a single aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 29 through 33 of this report. Notes to the Financial Statements - Additional information that is essential to a full understanding of the data provided in the govemment-wide and fund financial statements is provided in the notes to the financial statements found on pages 37 through 66 of this report. Other Information - In addition to the basic financial statements and accompanying notes, this report also presents required supplementary information highlighting budgetary information for the General Fund found on pages 67 through 68 of this report. The combining statements referred to earlier in connection with non -major governmental funds and internal service funds are presented following the required supplementary information. Comparative schedules of capital assets used in the operation of governmental funds are found on pages 113 through 116. CITY OF ALLEN, TEXAS MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (UNAUDITED) GOVERNMENT -WIDE FINANCIAL ANALYSIS As noted earlier, over time net assets may serve as a useful indicator of the financial position of a government. The assets of the City of Allen exceed the liabilities by $449,899,427 as of September 30, 2006. By far the largest portion of the City's net assets ($398,309,580 or 88.5%) reflects its investment in capital assets (i.e. land, buildings, infrastructure, vehicles, machinery, and equipment), less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Ganem am ower assets Capaal assets Tool Assets Lm94ann llabllNes GNe, I.NfNes Total LoNlibes Net Assets' Invested in mpaal asset". net OW debt Reslnoned Unres8kled Tonal Net Assets Taa.1 8 AEbW GWemTental Atl Wes BuS.6a5-Nne A fta, 249 244§ 290 22a 48,85,199 48.972,058 398388120 3]7.757,010 445242319 424.729.088 68,041,263 89,913,5]0 9,436,399 10]39,531 96,277,682 10,853.184 3,038,807 27,941,780 93 56] 555 83,757.384 123 604 382 111.899.174 18,474,696 2,181,166 4,194,894 3.840.628 22888582 24.001,796 3406 245 76,893,000 74,913,838 491,953,675 481.514.401 560 846 Bel 530.428.242 105,315,961 110,074,730 15631 283 14580.162 398,309,500 387,249,147 118.W,254 124.854.900 319,817,880 296,732,997 78692.220 70,516,150 398,309,500 387,249,147 1,155,334 1,273,849 MASS 228,017 2,101,990 1,501,6% 27991 963 28089.318 21495094 16.953,181 48487657 43.022.498 $ 348,964,657 3240]5,964 $ 10,93 M 87,897,3]8 S M9.89 44P 411,A3.612 An additional portion of the City's net assets, $2,101,990, represents resources that are subject to external restrictions on how they may be used; the remaining balance of $49,487,857 may be used to meet the government's ongoing obligations to citizens and creditors. Analysis of the City's Operations - As of September 30, 2006, the City had an overall increase in net assets of $38,126,085 for the government as a whole which, represents $24,888,693 for governmental activities and $13,237,392 for business -type activities. The increase is due to continuous population and housing growth which stimulates local business and economic development. Assessed property values have also increased 50% over the past five years. A summary of the City's operations for the year ended September 30, 2006 is provided in Table 2. a CITY OF ALLEN, TERAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (UNAUDITED) 7 Table 2 Changes in Net Assets o m nW ActAm, Busineskivae Atlrvib TTIAW fzm 291.5 22408 M 2m 3005 Revenues'. Pngram Revenues' Charges for services S 8,4]2,421 8,133,749 $ 28,864,948 24,901,084 $ W.13],369 31,034,813 0,Wi, grants and .Wbutiom 2,068,438 2.828,863 2860.438 2,020,883 CaNal gmnb and caMdbutions 25,504,879 38,431.255 8,257,558 7,912.882 33,]82,43] 443",117 General Revenues: Pmpedy bees 29,887,888 2],414,]42 29,867,668 2],414,]42 Saks tax 9,23.200 ],]48,619 9,158,248 ],749,6]9 Frandnisetaxes 5,562,256 4,021,020 5,633,216 4,021,020 How motel taxes 411,489 W.753 411,489 W.753 004 rte.. 1,831,045 1,74,54 1.631.725 1,784,508 Intamt eamings 2,401,5]1 1,0]1,]68 985,507 208,415 3,38],078 1,2]8,183 Gain on sale of caDBal asset 327,288 327,268 hi scellanaoua 794.088 10 si'm 74,48 1,W9,205 Total Revenues 84.8]200] 80831620 38.910.013 33.020341 123.790.= 123.851961 Expenses: Geral gwemment 9,282,795 8,354,]53 9,262705 8,354,753 PUNIC wkly 19.00.822 10,938,5211 181000,822 16,938.528 PUNlo woks 13,058,410 11,204,080 13,0581"0 11.24,098 Culture and recreation 14,053,062 11,04,820 14,053,002 11.001.820 Community development 2,029,589 1,781,918 2,0n tug 1,701,916 Interest on long -ter debt 4,294814 4,388,211 4,235,814 4,360,211 Witter and sayer 17,851.504 15,915,281 17,851,504 15,915,201 Environmental waste services 3,523,084 3,470,363 3,523,04 3,470,383 Drainage 847,755 73.530 41.755 730,530 GW course 1.94.480 1.610613 1.94,400 Total Expenses 61.47.102 53.752324 24,016,Bn 21.728.787 85.883935 73888,490 Increase in net assek baba Lanka 23,224,805 3].0]8,290 14,901,100 11,283,84 38,126,085 40,372,850 Transfers 1,663.788 (4.43083) (1.663.788) 4.943.003 Increase in rtassets 24,888,893 32,136.233 13,237,392 10,23447 38,124085 48,372,850 Net assets, beginning of year 324.075.984 291,839731 87.897,378 71,460.761 41 17]3342 383,400.492 NO assets, end of year $ 948,964,85] 324.0]5,884 S 14.834,770 0],09],378 $ "9,898,42] 411.]19.42 7 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (UNAUDITED) Governmental activities Revenues — The following chart visually illustrates the City's revenue by sources for governmental activities. Revenue by Source -Governmental Activities Operating Grants 8 Contributions $2,668,638 3`% Transfers 11,663.788-- 2% Other $ 5,566,139 ---- 6% Franchise Taxes $ 5,562,256 6% Sales taxes $9,230,206 11% Capital Grants and Contributions $25,586,879 30% Pro pe rty taxes $29,667,660 35% J Charges for earvioes $6,472,121 7% Revenues for the City's governmental activities decreased by $5,959,613 or 6.6%. While some activities ended the fiscal year with an increase, capital grants and contributions significantly decreased by $12,860,168. Major components of revenue decreasestincreases are explained as follows: • Capital grants and contributions decreased from the prior year as a result of new commercial and residential growth becoming established and street construction being completed. • While the City was able to lower the property tax rate from $0.559 to $.0558 per $100 valuation, the property tax base and assessed property value increased. e Investment earnings increased due to the increase in the interest rates on investments. e Sales taxes increased due to additional retail businesses, more residents, and the rise in the economy. • Franchise taxes increased due to growth in residential and commercial customer consumption and rising commodity costs affecting the price of electricity and natural gas. The City received an additional payment from TXU Electric due to the privilege period changing from annual to quarterly. 8 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (UNAUDITED) ' Expenditures for governmental activities increased by $7,894,778 or 14.7%. Increases were due to land acquisitions, new facility openings, and an increase in service demands caused by population growth. Major components of increases are explained as follows: • The City purchased the Molsen Farm parkland. • Staffing levels increased by 22.68 full time equivalent positions needed as a direct result of operation and maintenance needs of new facilities and a growing population. • As a result of salary surveys, public safety employees received 8% and general services employees received 1 % pay increases. Also, merit increases of up to 6% for public safety employees and 4% for general services employees increased personnel expenditures. • Public works expenses increased due to maintenance of city roads. • Culture and recreation increased due to the opening of the Senior Center and increased costs to maintain public facilities and parklands. Also, the new Library completed its first full year of operations. • The General Fund and Park and Recreation Fund transferred a total of $707,000 to the Golf Course Fund due to revenue shortfalls and to cover operating expenses. • The rising cost of electricity and fuel also had a significant impact on all governmental areas. The following chart illustrates the relationship between expenses and program revenues for governmental type activities. Expenses and Program Revenues-GDvernmentaI Acitivities Government Recreation Development 9 Longterm Deft note b unone ',SSB r R ... nu• 005.507 3% Business -type activities revenues increased by $5,897,672 or 17.9%. Major components of the increase are as follows: • Charges for services for business -type activities increased by $4,763,884 or 19.13%. The Water and Sewer Fund continues to be the largest growth area with an increase of 18.03% above FY2006. This increase is a result of the continuous growth of the City, the drought condition, the City implementing stage 3 water restrictions, and the fourth year of a rate plan study which increased water and sewer rates by 6%. The City also passed a resolution which raised the rates for residential solid waste and household hazardous waste collection service fees in order to offset increased costs. • Based upon an audit by the City of the solid waste contract, the City received an additional $409,414 in revenue due to previous calculations errors. • Capital contributions increased by 4.3% due to developer contributions for water main and sewer lines and impact fees. • Due to weather related conditions, the Golf Course Fund required transfers from the General Fund and the Park and Recreation Fund totaling $707,000 for operating costs. • Interest earnings grew from $206,415 in FY2005 to $995,507 in FY2006. This is a result of the FY2005 bond issuance and the continued increase of rates on investments. Expenses for business -type activities increased by $2,290,046 or 10.5%. The increases were in part due to the acquisition of land for a future service center, increased costs of fees paid to North Texas Municipal Water District for solid waste disposal and capital expansion plans, expansion of waterlines, and the expansion of Custer Road pump station #3. The following 10 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (UNAUDITED) ' Business -type activities — Revenues — The following chart visually illustrates the City's revenue by sources for business- ' type activities. ' Revenue By Source - Business -Type Activities note b unone ',SSB r R ... nu• 005.507 3% Business -type activities revenues increased by $5,897,672 or 17.9%. Major components of the increase are as follows: • Charges for services for business -type activities increased by $4,763,884 or 19.13%. The Water and Sewer Fund continues to be the largest growth area with an increase of 18.03% above FY2006. This increase is a result of the continuous growth of the City, the drought condition, the City implementing stage 3 water restrictions, and the fourth year of a rate plan study which increased water and sewer rates by 6%. The City also passed a resolution which raised the rates for residential solid waste and household hazardous waste collection service fees in order to offset increased costs. • Based upon an audit by the City of the solid waste contract, the City received an additional $409,414 in revenue due to previous calculations errors. • Capital contributions increased by 4.3% due to developer contributions for water main and sewer lines and impact fees. • Due to weather related conditions, the Golf Course Fund required transfers from the General Fund and the Park and Recreation Fund totaling $707,000 for operating costs. • Interest earnings grew from $206,415 in FY2005 to $995,507 in FY2006. This is a result of the FY2005 bond issuance and the continued increase of rates on investments. Expenses for business -type activities increased by $2,290,046 or 10.5%. The increases were in part due to the acquisition of land for a future service center, increased costs of fees paid to North Texas Municipal Water District for solid waste disposal and capital expansion plans, expansion of waterlines, and the expansion of Custer Road pump station #3. The following 10 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (UNAUDITED) chart illustrates the relationship between expenses and program revenues for business -type activities: Expenses and Program Revenues - Business -type Activities IN Fxpense ■ Revenue 52010001000 $5,000,000 $13.000,000 55,000,000 Water B S.vdr So lid Waste reins, Golf Course FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS ' Governmental funds The focus of the City of Allen's governmental funds is to provide information on near-term ' inflows, outflows and balances of spendable resources. Such information is useful in assessing the City's measure of a government's net resources available for spending at the end of the fiscal year. ' At the end of the current fiscal year, the governmental funds reported combined ending fund balances of $30,658,025, an increase of $70,106 in comparison with the prior fiscal year. ' Approximately 89% or $27,205,312 constitutes unreserved fund balances, which are available for spending at the government's discretion. The remaining fund balances are reserved to indicate that they are not available for new spending because the funds have already been committed to pay for encumbrances ($2,157,752), debt service ($1,293,711), and to provide for prepaid items ($1,250). ' The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the unreserved fund balance was $11,490,983, while the total fund balance was $11,492,233. The total fund balance increased by $1,919,676 more than the final revised budget. Contributing to this variance was revenue greater than the revised budget by $1,860,089 due to higher than anticipated revenue from all sources except property taxes and transfers from other funds. Current operating expenditures had savings of $1,026,652 allowing an additional $205,000 to be transferred to the Golf Course Fund and $820,000 transferred to the Capital ' Projects Fund for self financing of capital projects. The fund balance increased from $9,435,175 to $11,492,233 resulting in a positive effect on the operational expenditure reserve for the 2006- 2007 budget. ' 11 I CITY OF ALLEN, TEXAS MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (UNAUDITED) , The Debt Service Fund balance of $1,293,711, all of which is reserved for the payment of debt, decreased from the prior year fund balance by $218,620. Since fiscal year 2004-05, the allocation to the debt service portion of ad valorem tax rate has decreased to $0.183 or 33% t from $0.20176 or 36%. The remaining fund balance meets the FY2007 10% of annual debt service requirement of $999,111. The Facilities Agreement Fund records the use of funds received from builders and developers ' on specific facility agreements. At fiscal year end revenues exceeded expenditures by $346,473 resulting in the fund balance increasing from $2,479,944 to $2,826,417. The net ' increase was mainly a result of interest earnings. The major expenditure for the fund was landscaping and lighting for Angel Parkway. The General Capital Projects Fund provides information on cash financed capital projects. During the fiscal year, the fund balance decreased by $1,449,502 from $7,823,152 to $6,373,650. Revenues and transfers from other funds totaled $4,436,361 which included $1,775,000 from the County and $87,500 from the City of Fairview for street improvements and $1,288,600 transferred in from other funds to cash finance capital projects. Total expenditures were $5,850,863 and consisted of street improvements at FM 2170 East, Allen Heights -FM 2551, and Bethany Drive East, and the completion of the new Senior Center facility. The General Obligation Bond Fund had an ending fund balance of $3,181,018, an increase of $255,028 from the prior year. Revenues and other financing sources included interest earnings and $1,595,000 of new issued bonds. Expenditures totaled $1,474,234 and included $918,126 to fund construction of the Arts of Collin County project and $551,650 for the new Senior Center facility. Proprietary Funds The City's proprietary funds provide the same type of information found in the govemment-wide financial statements, but in more detail. At the end of the year, unrestricted net assets for all enterprise funds are as follows: Water and Sewer, $18,163,852, Solid Waste, $1,638,952, Drainage, $1,043,255, and Golf Course, $23,613. The total change in net assets for the funds was $11,961,631, $899,151, $248,235, and $1,235, respectively. All funds had an increase in net assets as a result of capital contributions, transfers from other funds, and operating revenues. The Water and Sewer Fund contributed $2,500,000 toward the purchase of land for a future service center. Other factors concerning the finances of these funds have already been addressed in the discussion of the City's business -type activities. General Fund Budgetary Highlights During April and May, all accounts are evaluated to determine if they are in line with the original budgets. Accounts that are under or over budget are revised to meet year-end estimates. New projects are not added to the year-end estimate; only the cost of maintaining the current base operation is revised as needed. As is customary, during FY2005-06, the City Council amended the budget for the General Fund one time. Small adjustments made during FY2005-06, increased the original revenue budget by $1,829,579 and increased the expenditure budget by $1,105,833. At the end of FY2006 12 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30.20D6 (UNAUDITED) revenues exceeded the revised budget by $1,860,089. Positive franchise tax budget variances were due to growth in residential and commercial customer consumption and rising commodity costs affecting the price of electricity and natural gas. Also, a change from annual to quarterly payments from TXU recognized one more quarterly franchise tax receipt. Additional retail businesses, more residents and the rise in the economy caused positive revenue budget variances in sales tax, court fines, and interest earnings. Positive expenditure variances were due to salary savings from open staffing positions, drought conditions, reduced watering and mowing costs of city parkland, and prudent conservative management by city staff. The net result of positive revenues and expenditure budget variances allowed the General Fund to transfer out $1,025,000 representing an additional $205,000 to the Golf Course Fund for operating costs being more than expected and $820,000 to the General Capital Projects Fund to cash finance capital projects. The resulting General Fund balance increased $2,057,058 which was $1,919,676 more than budgeted and increased the funds operational expenditure reserve from the budgeted 75 days to 101.7 days, well above the City's financial policy of 60 days. CAPITAL ASSETS The City's investment in capital assets for its governmental and business -type activities as of September 30, 2006, amounts to $491,953,675 (net of accumulated depreciation.) This investment in capital assets includes land and improvements, buildings, vehicles, machinery and equipment, park land and facilities, roads and bridges. About 81 % of the capital assets are governmental and 19% are business -type activities. The total increase in investment in capital assets for the current fiscal year was 6%, out of which 68% was governmental and 32% was business -type activities. 1 13 Table 3 ' Capital Assets at Yearend Not of Accumulated Depreclatim Governmental Activities Business -type ActrAes Total 2M 2DO5 2-446 2005 2 Land S 98,611,044 84,474,787 $ 3,327,730 874,042 $ 101,938,774 85,348,829 ' Buildings Towers/ tanks/ pump stations 38,684,509 31,713,619 38,684,509 31,713,619 81,830,490 75,100,639 81,8$0,490 75,100,639 Other Improvements 227,719,989 215,417,306 453,852 465,794 228,173,841 215,883,100 'Furniture and fiMures 1,139,411 1,134,900 3,454 2,457 1,142,865 1,137,357 Vehicles 3,295,841 3,314,159 37,765 114,915 3,333,606 3,429,074 ' Machinery and equipment 1,344,146 1,439,758 1,636,066 1,749,476 2,980,212 3,189,234 Construction in progress 27,591.180 40262481 6,278,198 5,450,071 33.869378 45,712,562 ' Total S 398,386,120 377,757,010 $ 93,567,555 83,757,394 $ 491,953,675 461,514,404 1 13 Projects • Developer contributed right of way and park land $ 12,202,798 ' • Park land acquisition-Molsen Farm 1,978,800 • Renovate old library building into municipal court/offices 356,656 • Angel Parkway, landscape & lighting 325,364 t • Street construction: FM 2170 East, Allen Heights -FM 2551 3,488,622 St. Mary Drive, phase 3 792,917 , Bethany Drive East 426,248 Business -type capital improvement projects and developer contributions during the current ' fiscal year include the following: Proieds • Developer contributed water mains and sewer lines • Service center land acquisition • Custer Road pump station #3 expansion • West side waterline $ 6,504,517 ' CRY OF ALLEN, TEXAS ' MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2006 , (UNAUDITED) ' Governmental -type capital improvement projects and developer contributions during the current fiscal year included the following: t Projects • Developer contributed right of way and park land $ 12,202,798 ' • Park land acquisition-Molsen Farm 1,978,800 • Renovate old library building into municipal court/offices 356,656 • Angel Parkway, landscape & lighting 325,364 t • Street construction: FM 2170 East, Allen Heights -FM 2551 3,488,622 St. Mary Drive, phase 3 792,917 , Bethany Drive East 426,248 Business -type capital improvement projects and developer contributions during the current ' fiscal year include the following: Proieds • Developer contributed water mains and sewer lines • Service center land acquisition • Custer Road pump station #3 expansion • West side waterline $ 6,504,517 ' 2,443,539 2,427,508 1,370,194 , Additional information on the City's capital assets can be found in Note 4 on pages 49-53 of this report. DEBT ADMINISTRATION At September 30, 2006, the City had long-term debt totaling $105,315,961 shown in Table 4. General Obligation Bonds totaling $78,300,000 comprises debt backed by the full faith and credit of the government, Certificates of Obligation totaling $5,500,000 comprises of debt backed by taxes and revenue generated from the golf course facility, and $18,190,000 represents bonds secured solely by water and sewer revenue. The other long -tens debt relates to compensating absences, notes payable, debt refunding and issuance, premiums, and discounts. Governmental activities' total debt decreased by 3.42% and business -type activities' debt decreased by 8.46%. The City had authorized but un -issued direct general obligation bonds totaling $18,690,000 at fiscal year end. In July 2006, the City issued $1,595,000 in General Obligation Bonds. The City's indebtedness decreased $4,758,777 during the fiscal year. Allen Community Development Corporation had outstanding long-term debt totaling $7,663,412. This amount represents $7,625,000 of sales tax revenue bonds secured by 4B sales tax revenue and $38,412 which relates to the issuance costs and refunding of the bonds. During fiscal year 2006 the ACDC issued $5,600,000 of revenue refunding bonds Total indebtedness of the ACDC decreased by $391,588 or 4.86%. 14 CITY OF ALLEN, TEXAS MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (UNAUDITED) The City's General Obligation Bond, Community Development Corporation's Sales Tax Bond and Water and Sewer Revenue Bond ratings are listed in Table 5 below. The City's bonds are insured resulting in AAA ratings. The underlying credit ratings from both Moody's Investors Service and Standard and Poor's are shown below. Additional information on the City's long- term debt can be found in Note 5. Table 5 Bond Ratings Moody's Investors TWa3 Service Standard & Poor's General Obligation Bonds Aa3 AA - Certificates of Obligation Aa3 0OMmrdin90ebaY.� Water & Sewer Revenue Bonds A2 AA - Revenue Bonds Al 8a n,d M. Lqp Tam dW f mmMe1.4Mltin "I b TOM 2W6 2= 20M L�iS ?!95 3P3i ZG� �5 Gma OOMed MW CaererN o889mm ea,da 3 7e.3W,DW 61,IW,670 B 7813%,0% 61,IW,nD cenm�e a Deigmwn Bwds 5,YA.0.0 S,SW,OW S.W3.R0 S.SDD.tlp ReremN BIXge Taz t41W.W0 19,)35.%3 18.1%,%3 t9.]35.W0 Sealae T- R.—. ]8350.tl BOSS= ].6RS.WJ B.M,= T.. f Bonded pem B mlm WAWBID la Imm 19.m 1N.6150.0 1147N 8]D Oiler LangTeim Gb Conp,ensaw AEserres 2,EW,9W 1,617,M ] I'm 301,85] 3,938,031 Ime.= NMm Pa.. 1.197 13],0]5 139916 234818 281,113 3]5,]31 RBlundlnp (1,wm) (1,515,351) (03.382) (%1918) (1A,eW) 11,5/81815) (1,803,3%1 mMM Imeratl 1,176,]]3 1,1]6.]T! P Prem ms8 D're¢unre 1W7/16 1%7351 N3B3 (741]I 1 1)91, 1,559,07 TOM 0. wq Twm T. Deb 30113% 3982 3 Wp3Y! 3.4pB� TOM $ W.&13W 89913,5]0 10,174,698 30.161.1M 7.M412 0.055= S 113.9]9Y73 1101N,]38 The City's General Obligation Bond, Community Development Corporation's Sales Tax Bond and Water and Sewer Revenue Bond ratings are listed in Table 5 below. The City's bonds are insured resulting in AAA ratings. The underlying credit ratings from both Moody's Investors Service and Standard and Poor's are shown below. Additional information on the City's long- term debt can be found in Note 5. Table 5 Bond Ratings 15 Moody's Investors Service Standard & Poor's General Obligation Bonds Aa3 AA - Certificates of Obligation Aa3 AA - Water & Sewer Revenue Bonds A2 AA - Revenue Bonds Al 15 I CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (UNAUDITED) ' ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES Allen's current population is 75,699 and is expected to surpass 97,900 by the year 2011. ' National employment statistics show the region as leading the bouhtry in employment growth, ahead of much larger metropolitan areas. With its proactive approach to economic development, Allen has earned a reputation as a premier location for high-tech manufacturing, t assembly/distribution facilities and corporate headquarters, retail and services. The reasonable cost of living, a highly rated school district and home prices below the national average continue to make Allen an attractive area for businesses to locate. The 2006-2007 budget reflects the , efforts of the governing body and city staff to address the need to provide services and facilities to support our vibrant and growing community while maintaining a strong financial position. At the end of fiscal year 2005-2006 the General Fund balance increased by $2,057,058. This increased the operational expenditures in reserve from the budgeted 75 days to 101.7 days, which is well above the City's financial policy of 60 days. This will have a positive effect on the 2006-2007 budget estimate of approximately 71.6 days. The certified assessed property value for 2006-2007 equates to an overall increase of approximately $557.58 million (10.8%) from the preceding year. This has afforded the opportunity for the City to reduce the property tax rate for the fourteenth straight year from $0.559 to $0.558 per $100 valuation. Of the total tax rate, $0.391001 is dedicated to operations and maintenance in the General Fund, and $0.166999 is dedicated to general obligation debt service. Due to an improved economic outlook from increased commercial development, Allen sales tax receipts are projected to increase 11.2%. As of January 2007, sales tax revenue is 6.55% above last year, but is 2.90% below projection. Finance staff will monitor the monthly sales tax revenues and make adjustments as needed. The 2006-2007 budget demonstrates the significant commitment to provide public safety to the community and to operate and maintain each of the public facilities and the increasing staffing levels they require. The 2006-2007 General Fund expenditure budget reflects a 11.4% increase from the revised 2005-2006 budget. City-wide staffing levels will increase by 14.90 full-time equivalent positions, which includes 14.40 from the General Fund to primarily address public safety and the construction activities that impact Parks, Building Codes and Planning. With the City's residential and commercial growth, there are needs for additional police and fire personnel and equipment. Fire stations 95 and #6 are being planned along with a new service center to accommodate the increasing fleet of the City. A five year Information Technology Strategic Plan will be implemented city-wide requiring a $590,400 investment in 2006-2007. The City has been impacted by the rise in electricity and gasoline prices and will continue to look for ways to conserve energy and utilize alternative solutions when cost efficient. In 2006-2007, the City plans to issue $1,726,500 of the $1,976,500 remaining un -issued 1999 general obligation bonds. The City is also planning to issue $3,763,500 for the Arts of Collin County project and $9,045,000 of new bonds if the voters approve the $77,895,000 bond election in May 2007. The City is monitoring the interest rates for any refunding opportunity. Annual 6% increases in the water and sewer rates were implemented in 2004-2005 and again in 2005-2006. Due to recent drought conditions the City has implemented a water conservation and drought policy. The rate increases were necessary as North Texas Municipal Water District 16 ' CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2006 ' (UNAUDITED) proceeds with capital expansion plans and the City implements conservation water rates. In 2005-2006, the City also implemented a 25% rate increase for water usage above 10,000 ' gallons. This was necessary to help reduce lawn watering and help the community achieve reduced water consumption goals. The City contributed $2.5 million in 2005-2006 for the purchase of land to be used for a future service center. Cash financing of water and sewer t projects has reduced working capital; however, the City will meet bond coverage requirements necessary to maintain working capital minimum of 1.2 times the annual debt service obligations. The recommended rate changes from the 2005-2006 rate plan study are currently being modified due to the impact of the drought on revenues. Implementation of the modified rates will be done in the Spring of 2007 and will affect the revised 2006-2007 budget. ' In May 2006, the Solid Waste Fund completely contracted out all litter collection. This fully outsourced service resulted in a one dollar per month fee increase in the Solid Waste Fund. The Parks and Recreation Enterprise Fund continues to record only revenue generating activities and related costs. Operation and maintenance expenditures for facilities are being budgeted in the General Fund. It is the goal of the City to have all revenue generating programs be 100% self sustaining. The City finished the second year of operating the Chase Oaks Golf Course. Due to drought conditions and excessive heat, the City subsidized the course with approximately $707,000 to cover revenue shortfalls and increased expenditure. The plan is to continue making renovations to the course and the clubhouse. These improvements should improve the playability of the course which should lead to more rounds being played and also increase the use of the facility for meetings. Additional revenue for golf operations is the expected resutt from the improvements. Since healthcare costs continue to rise, the 2006-2007 budget includes a 12.457% budget increase to cover projected costs for medical, prescriptions, dental and vision claims, immunizations and physicals for employees and claims handling administration. Premium costs for employees will increase 3.0% with the City making up the difference with an additional 7.3% increase. The City contributes about 76% of the cost of the health insurance premiums. Request for Information The financial report is designed to provide our citizens, customers, investors, and creditors with a general overview of the City's finances. If you have questions about this report or need any additional information, contact the Finance Department at 305 Century Parkway, Allen, Texas, 75013, or call (214)509-4626. 17 OOPECT * INTeC • Rlr. CITY OF PIVIC.c BASIC FINANCIAL STATEMENTS it:, a*.SPECT * I NTFC ♦ RIA. A 9 m X O m ClTV OP A���. tCITY OF ALLEN, TEXAS EXHIBIT 1 STATEMENT OF NET ASSETS AS OF SEPTEMBER 30, 2006 The Notes to Financial Statements are an integral part of this statement. IM PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS -TYPE COMPONENT ACTIVITIES ACTIVITIES TOTAL UNITS ASSETS Cash and cash equivalents $ 24,450,706 $ 12,406,964 $ 36,857,670 $ 8,586,164 Investments 18,512,853 9,853,578 28,366,231 3,695,813 Receivables (net of allowance for uncolkUibles) 4,252,779 3,931,932 8,184,711 1,657,699 Internal balances (716,222) 716,222 Prepaid items and other assets 1,250 11,050 12,300 Inventories 141,509 141,509 Restricted cash and cash equivalents 2,814,241 2,814,241 Capital assets: Non -depreciable 126,202,224 9,605,928 135,808,152 4,531,803 Depreciable (net of depredation) 272,183,896 83,961,627 356,145,523 2,013,105 Deferred charges 355,033 161,311 516,344 90,481 TOTAL ASSETS $ 445,242,319 $ 123,604,362 $ 568,846,681 $ 20,575065 LIABILITIES Accounts payable $ 1,898,870 $ 2,197,420 $ 4,096,290 $ 417,024 Accrued liabilities 2,440,111 435,335 2,875,446 Accrued interest payable 383,487 287,586 671,073 28,604 Customer deposits 1,274,553 1,274,553 Unearned revenue 4,206,608 4 206 608 Retainage payable 507,323 507,323 42,144 Noncurrent liabilities: Due within one year 7,949,109 1,793,296 9,742,405 470,000 Due in more than one year 78,892,154 16,681,402 95,573,556 7,193,412 TOTAL LIABILITIES $ 96,277,662 $ 22,669,592 $ 118,947,254 $ 8,151,164 NETASSETS Invested in capital assets (net of related debt) 319,817,360 78,492,220 398,309,580 (1,028,023) Restricted for debt service 1,155,334 946,656 2,101,990 Unrestricted 27,991,983 21,495,894 49,487,857 13,451,904 TOTAL NET ASSETS $ 348,964,657 $ 100,934,770 $ 449,899,427 $ 12,423,881 The Notes to Financial Statements are an integral part of this statement. IM CITY OF ALLEN, TEXAS STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30 2006 Program Revenues The Notes to Financial Statements are an integral part of this statement. 20 General revenues: Taxes: Property taxes, levied for general purposes Sales taxes Franchise taxes Hotel motel taxes Othertaxes Investment earnings Gain on sale of capital assets Miscellaneous Transfers Total general revenues and transfers CHANGE IN NET ASSETS NET ASSETS, beginning of year NET ASSETS, anti of year Charges for Operating Grants Capital Grants Expenses Services and Contributions and Contributions Functions/Program Activities PRIMARY GOVERNMENT: Govemmental ActivNes: General government $ 9,262,795 $ 387,773 $ $ Public safety 19,006,622 827,845 751,611 Publicworks 13,058,440 287,527 25,504,879 Culture and recreation 14,053,062 2,403,913 1,662,518 Community development 2,029,569 2,565,363 454,309 Interest on long-term debt 4,236,614 Total governmental activities 61,647,102 6,472,421 2,868,436 25.504.879 Business -type Activities: Water and sewer 17,851,504 22,931,094 8,257,558 Environmental waste services 3,523,094 4,436,419 Drainage 647,755 1,000,008 Golf Course 1,994,480 1,297,427 Total business -type activities 24,016,833 29.664.948 8,257.558 TOTAL PRIMARY GOVERNMENT $ 65.863.935 $ 36.137.369 $ 2.868.438 $ 33.762.437 COMPONENT UNITS: Allen Economic Development Corporation $ 5,294,224 $ $ $ Allen Community Development Corporation 2,057,879 TOTAL COMPONENT UNITS $ The Notes to Financial Statements are an integral part of this statement. 20 General revenues: Taxes: Property taxes, levied for general purposes Sales taxes Franchise taxes Hotel motel taxes Othertaxes Investment earnings Gain on sale of capital assets Miscellaneous Transfers Total general revenues and transfers CHANGE IN NET ASSETS NET ASSETS, beginning of year NET ASSETS, anti of year ' EXHIBIT 2 ' Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Business -Type COMPONENT Activities Activities TOTAL UNITS $ (8,875,022) $ $ (8,875,022) $ ' (17,427,166) 12,733,966 (17,427,166) 12,733,966 (9,986,631) (9,986,631) 990,103 990,103 ' (4,236,614) (4,236,614) (26,801.364) (26,801.364) ' 13,337,148 13,337,148 913,325 913,325 352,253 352,253 (697.053) (697.053) 13.905.673 13.905.673 ' $ (26.801.3841 $ 13.905.673 $ (12.895.691) $ $ $ $ $ (5,294,224) '(2,057,879) 3 $ $ $ (7.352.1031 $ 29,667,668 $ $ 29,667,668 $ 9,230,206 9,230,206 9,159,246 ' 5,562,256 5,562,256 411,489 411,489 1,631,725 1,631,725 2,401,571 995,507 3,397,078 561,612 ' 327,268 327,268 794,086 794,086 250,216 1.663,788 (1,663,788) ' 51.690,057 (668,281) 51.021,776 9,971.074 24,688,693 13,237,392 38,126,085 2,618,971 ' 324,075.964 87.697,378 411,773342 9.804,910 $ _ 348.964.657 $ 100.934.770 $ _ 449.899.427 $ 12.423.881 ' 21 CITY OF ALLEN, TEXAS BALANCE SHEET GOVERNMENTALFUNDS SEPTEMBER 30, 2006 The Notes to Financial Statements are an integral part of this statement. 22 GENERAL DEBT FACILITIES CAPITAL GENERAL SERVICE AGREEMENT PROJECTS ASSETS Cash and cash equivalents $ 5,764,838 It 183,319 $ 5,728,521 $ 3,325,456 Investments 6,169,000 1,099,854 1,320,499 3,119,786 Receivables, net of allowances for uncollectibles: Ad valorem [axes 608,305 245,110 Sales taxes 1,625,234 Accounts receivable Accrued interest 25,158 8,732 10,483 24,768 Other 1,364,218 1,806 Special assessments 187,557 Due from other funds 820,000 Prepaid items 1,25D TOTAL ASSETS $ 15,458,003 $ 1,536,621 $ 7,059,503 It 7,477,567 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ 1,308,438 $ $ 38,134 $ 194,479 Accrued liabilities 1,239,027 622,326 Retainage payable 21,068 287,112 Due to other funds 910,000 Deferred revenue 508,305 245,110 4,173,884 TOTAL LIABILITIES 3,965,770 245,110 4,233,066 1,103,917 FUND BALANCES Reserved for Encumbrances 545,426 1,449,765 Prepaid items 1,250 Debt service 1,293,711 Unreserved, reported in: General fund 11,490,983 Facilities agreement 2,280,991 General obligation bond fund Specal revenue funds Capital projects funds 4,923,885 TOTAL FUND BALANCES 11,492,233 1,293,711 2,828,417 6,373,650 TOTAL LIABILITIES AND FUND BALANCES $ 15,458,003 It 1,538,821 $ 7,059,503 $ 7,477,567 The Notes to Financial Statements are an integral part of this statement. 22 EXHIBIT 3 GENERAL OTHER TOTAL OBLIGATION GOVERNMENTAL GOVERNMENTAL BOND FUNDS FUNDS E 1,782,836 $ 3,234,311 $ 20,019,281 1,528,373 2,288,315 15,525,827 753,415 1,625,234 205,508 205,508 12,134 10,054 91,329 1,366,024 187,557 820,000 1,250 $ 3,323,343 E 5,738,188 $ 40,595,425 $ 5,877 $ 88,036 $ 1,634,964 63,737 1,925,090 136,448 62,695 507,323 910,000 32,724 4.960.023 142,325 247,192 9,937 400 2,563 159,998 2,157,752 1,250 1,293,711 11,490,983 2,280,991 3,178,455 3,178,455 3,430,439 3,430,439 1,900,559 6.824444 3,181,018 5,49D,996 30,658 025 E 3,323,343 $ 5,738,188 $ 40,595,425 23 CITY OF ALLEN, TEXAS RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS SEPTEMBER 30, 2006 EXHIBIT4 , Total fund balances - governmental funds $ 30,658,025 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds balance sheet 398,386,120 Costs associated with the issuance of governmental long-term debt are expensed when incurred in the fund statements and capitalized and amortized over the life of the debt in the government -wide financial statements. 355,033 Interest payable on long-term debt does not require current financial resources, therefore interest payable is not reported as a liability in the governmental funds balance sheet. (383,487) Internal service funds are used by management to charge the cost of certain activities, such as insurance and fleet management, to individual funds. The assets and liabilities of the internal service funds are net of the amount allocated to business -type activities ($626,222) and to capital assets ($2,299,392). 6,036,814 Revenues earned but not available within sixty days of the year end are not recognized as revenue on the fund financial statements. 753,415 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the fund financial statements. (86,841,263) Net assets of governmental activities $ 348,964,657 The Notes to the Basic Financial Statements are an integral part of this statement. 24 f"VGT * INTE ctry OF p1.4E" 25 CITY OF ALLEN, TEXAS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTALFUNDS FOR THE YEAR ENDED SEPTEMBER 30.20M GENERAL DEBT FACILITIES CAPITAL GENERAL SERVICE AGREEMENT PROJECTS REVENUES Ad valorem taxes, penalties and interest $ 19,727,993 $ 9,600,260 $ $ Franchise taxes 5,520,215 Municipal sales tax 9230.206 Licenses, permits and fees 1,732,374 Charges for services 1,447,878 593,749 Court fines 1,506,429 Gifts and contributions 78,370 448,159 Hotel / motel fees Recreation fees Intergovernmental 1.882,500 Investment earnings 789,876 178,792 346,473 368,414 Miscellaneous 498,658 303,098 Total revenues 40,531,999 9779052 794,632 3147,761 EXPENDITURES Current General government 7,293,588 143,277 Public safety 18,124,797 Publicmrks 3,257,485 Culture and recreation 8,750,856 Community development 1,723,126 Capital outlay 448,159 5,707,586 Debt service: Principal retirement 4,725,670 Interest and fiscal charges 5,272,002 Total expenditures 39,149,852 9997,672 448,159 5,850.863 Excess (deficiency) of revenues over(under)expenditures 1,382,147 (218,620) 346,473 (2703102) OTHER FINANCING SOURCES (USES) Issuance of debt Transfers from other funds 2,339,600 1,288,600 Transfers to other funds (2,111,267) (35,000) Capital lease obligations 65,944 Sale of capital assets 380,634 Total other financing sources (uses) 674,911 1,253,600 NET CHANGE IN FUND BALANCES 2,057,058 (218,620) 346,473 (1,449,502) FUND BALANCES, BEGINNING OF YEAR 9,435,175 1,512,331 2,479,944 7,823,152 FUND BALANCES, END OF YEAR $ 11,492,233 $ 1,293,711 $ 2,826,417 $ 6,373,650 The Notes to Financial Statements are an integral part of this statement. 26 EXHIBIT 5 GENERAL OTHER TOTAL OBLIGATION GOVERNMENTAL GOVERNMENTAL BOND FUNDS FUNDS $ $ $ 29,328,253 22,679 42,041 5,562,256 (25,823) 3,497688 9,230,206 (920,331) 1,096,853 2,829,227 6,411327 30,587,919 2,041,627 $ 5.490,996 $ 125,296 1,631,725 183,079 709,608 411,489 411,489 2,140,496 2,140,496 1,479,285 3,361,785 134,262 295,761 2,113,578 134,287 936,043 134,262 5,908587 60,296293 918,126 155,276 8,510,267 664,784 18,789,581 44,271 3,301,756 2,787,264 11,538,120 199,990 1,923,116 556,108 2,951,510 9,663,363 4,725,670 5272,002 1,474234 6.803,095 63,723875 (1,339,972) (894,508) (3,427,582) 1,595,000 1,595,000 311,555 3,939,755 (360,057) (2,506,324) 65,944 22,679 403,313 1,595000 (25,823) 3,497688 255,028 (920,331) 70,106 2,925,990 6,411327 30,587,919 $ 3,181.018 $ 5.490,996 $ 30.658.025 27 CITY OF ALLEN, TEXAS j EXHIBIT6 3 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30,2006 Net change in fund balances - total governmental funds Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This Is the amount of capital assets recorded in the current period. Govemmental funds do not recognize assets contributed by developers. However, in the statement of activities the fair market value of those assets is recognized as revenue, then allocated over their estimated useful lives and reported as depredation expense. Depredation expense on capital assets is reported in the statement of activities but does not require the use of current financial resources. Therefore, depreciation expense is not reported as expenditures in the governmental funds. In governmental fund financial statements , the proceeds from sale of assets are shown as an increase in financial resources. However, in the statement of activities, the gain or loss is calculated and reported. The proceeds from issuance of long-term debt (e.g. bonds) provides current finanael resources to governmental funds ($1,595,000), while the repayment of the principal of long -tern debt consumes the current financial resources of governmental funds ($4,784,492). Neither transaction, however, has any effect on net assets. Current year proceeds from capital leases are other financing sources in the fund financial statements. However, these amounts are reported as increases in the liabilities within the government -wide financial statements. Governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued. However, these amounts are deferred and amortized in the government -wide financial statements. Current year changes in long -tens liability for compensated absences do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Current year changes in accrued interest payable do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Internal service funds are used by management to charge the costs of certain activities, such as insurance and fleet management, to individual funds. The net operating and non-opereling Income and transfers of the internal service funds is reported with governmental activities net of amounts allocated to business -type activities. Current year accretion on capital appreciation bonds is not reflected in the fund financial statements, but is shown as an increase in the accreted interest on the government -wide financial statements. Payments of accreted interest on capital appreciation bonds am expenditures in the fund financial statements, but are shown as reductions in long -tens debt in the govemment-wide financial statements. Certain revenues in the government -vide statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds. Change in Net Assets of Governmental activities The Notes to the Basic Financial Statements are an integral part of this statement. 28 $ 70,106 ' 11,134,510 23,822,379 (14,515,489) 1 (87,137) 3,189,492 ' (65,944) ' (113,378) ' (1,079,636) ' (17,346) 1,234,948 ' 1,176,773 ' 339,415 ' $ 24,888,693 . CITY OF ALLEN, TEXAS EXHIBIT 7 STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 3D. 2DD6 The Notes to Financial Statements are an integral part of this statement 29 BUSINESSTYPE ACTIVITIES ENTERPRISE FUNDS GOVERNMENTAL ACTAnTES WATER AND SOLID GOLF INTERNAL SERVICE SEWER WASTE DRAINAGE COURSE TOTAL FUNDS ASSETS CURRENTASSETS Caleb aB wah eOuivaled. $ 10,070,114 S 1,2]5,1]9 $ 1,027.531 S 34,140 S 12,408,964 $ 4,431,425 Imentmems .853.570 9,05.578 2,98,820 Rdceveblea, net 0allo mnce tee mrnAecbbin Assume 3,331,6]2 188.440 42,008 15,710 3,5]8,030 Adorned dmame 51,410 54,41D 23,712 Other 299,492 299,492 Due(mm other funds 80.008 X,900 Inverdemm 321,509 141,09 Prepeddllema 11,050 11,0050 Reemdad uNn and usM1 eeuNaleMs 2.014241 2811.211 TOW wmand name 26.265.]24 1.763.111 1.009539 150.900 29249.274 7.411953 CAPITAL ASSES Land 3,37!,730 3,32],]30 ONer rmproremems 496,132 196.132 Towers, tanks, a8 pump elabora 118.145,466 110.145A8 Velli Jes 725,314 ".oda 18,89 8]6,5]1 3,300,38 Machinery am eeuipmerd 2,489,928 9,819 3]3.]34 296,790 3,150,271 821,431 Fumtlum and fvlums 11,114 11,114 Gemmel In prdoms. 8.2]8,198 6.28.18 Teal cepped seams 1211,957,750 54.267 9]6,6]5 298,790 130,285,462 4.209,731 Lne: aceumulaled depmdiden (36.143548) (41235) f3679381 (1]52101 !8.717.927) (1.910.339) Ceased nems. rM of aavmuWed deprecalien 92814204 13.032 618.739 121.58 93.567555 2.299392 DEFERRED CNARGES Bend issuance does, bad of wla9tion 161.311 161.311 TOTALASSETS $ 1192H2J9 8 1.978.10 $ L888.270 $ 272.400 $ 122.970.140 S 9.741355 LIABILITIES AND NET ASSETS CURRENT LABILIRES Amounts payable S ;075,020 S 69,033 S 7,397 $ 4.052 $ 2,197,420 S 28.908 Adorned 4abates 8.938 32,542 8,355 33,18 435,335 Inwned balled imported claim. 515.021 Payable from mercled mets: Revenue( umis payable -curteM 1,58D,000 1"o'ead Capital Impede payable -cumel 86,713 88,713 Acvuetl kdamed payable 287,58 287.58 Accrued eompensmed absences -culmen 124,58 124,83 Cuslcmer tledoed. payable 1.250581 23.969 12]4.553 Tota wnead NbMies 5.678.717 101575 156]5 192273 5.988.18 T]997] NON-CURREMLIABILITES Revenue bend. parable 16,523,438 16,523,430 CapBel haus Payable 51,203 51,203 Armed dompene ed absences 49.793 22.589 10,89 23773 18.763 TOW non4vrreM M1aMNes 16.573.2X 22.58,11 10.809 74.980 16.681402 TOTAL LWBILMES 22.261948 124.159 20204 267.203 22.89.592 Tmar NETASSETS dnmeted In capped assets, nm of rebid dam ].8]8178 13,032 618,739 (1.338) 78,492220 2.299.392 Ralricled Ido mmnue b<md pandpm and(Merest 91.68 948,68 Unmtpiletl 18,163.852 1.838.952 1.043255 23.613 20.889.872 B.BBJ,O% TOTAL NET ASSETS S 8.989.293 S 1.651.981 $ 1.81.991 $ 597 6 18.908.518 $ 6,82.428 The Notes to Financial Statements are an integral part of this statement 29 CITY OF ALLEN, TEXAS EXHIBIT 8 RECONCILIATION OF THE STATEMENT OF NET ASSETS OF PROPRIETARY FUNDS TO THE GOVERNMENT -WIDE STATEMENT OF NET ASSETS AS OF SEPTEMBER 30, 2006 Amounts reported for business -type activities in the statement of net assets are different because: Total net assets per statement of net assets Internal service funds are used by management to charge the costs of replacing machinery and equipment, fleet management, workers compensation, property liability loss, medical and dental insurance, and health claims to individual funds. The assets and liabilities of internal service funds are included in the governmental activities in the government -wide statement of net assets. The amount shown represents the net receivable from internal service funds allocated to business -type activities since the adoption of GASB 34. Total net assets of business -type activities The Notes to Financial Statements are an integral part of this statement. 30 $ 100,308,548 626,222 $ 100,934,770 CITY OF ALLEN, TEXAS EXHIBIT 9 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30.2006 BUSINESSTYPE ACTMTIES ENTERPRISE FUNDS GOVERNMENTAL ACTIVITIES WATER AND SOLID GOLF INTERNAL SERVICE OPERATING REVENUES SEWER WASTE DRAINAGE COURSE TOTAL FUNDS The Notes to Financial Statements are an integral part of this statement. 31 Charges for sales and services: Water sales $ 15,189,548 $ $ $ It 15,189,548 $ Server dramas 6,786,694 6,786,694 Connec0on fees 269,051 269,051 Garbage collectams 4,073,155 4,073,155 Service charges 638,541 123,166 1,294,941 2,056,648 6,266,847 Dminage fees 861,947 861 947 Miscellaneous 47,280 363.264 14.895 2,486 427.905 44789 Total opersdaW revenues 22931,094 4,436,419 1.(XD,W8 1,297427 29,664.948 6.311.636 OPERATING EXPENSES Personntl services 2,725,162 258,661 270,148 RUBI] 4,236,581 148,613 Contractual services 9,810,399 3,174,8W 07,469 64],3]4 13,720,092 4,874,327 Maintenance 212,249 106,423 107,234 505,806 Supplies 109,319 11,074 11,691 108,421 240.455 Depredation and amortization 4,087,271 10,806 55,791 106,763 4,262502 450,369 Offer 127.661 6]]07 35,283 40.78 271,725 Total operating expenses 17,072,012 3,523,094 647755 1,99448) 23,237341 5473309 OPERATING INCOME (LOSS) 5,859.082 913,325 352,253 (697,053) 6,427,67 838.327 NON-0PERATING REVENUES (EXPENSES) saaashmmt..INS 923,966 33,904 3],63] 995,W7 286,652 Interest expense (906,632) (906,632) Gain on disposal of capnal assets 6,752 Development fees 1,753041 1753.41 Total non-operating revenues 1,]]0,375 33,909 3].07] 1,841,916 293.404 INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS ],629.45] IPIT 9 389,890 (697,053) 8269,523 1,131,731 CAPITAL CONTRIBUTIONS AND TRANSFERS Capital contributions 6,504,517 6,504517 Transfers from other limcls 10,290 77,000 ]1],290 230,357 Transfers to ofea fulls (2,182,633) (48,078) (141655) (8,712) (2,381,078) Total capital mmdMNons and 4snsfam 4.332,174 (48078) (141,655) 693,288 4,840,]29 23835] CHANGEINNETASSETS 11,961,831 899,151 248,235 1,235 13,110,252 1,362,088 NET ASSETS, BEGINNING OF YEAR 85,027,662 752.833 1,413,759 4,042 87,198296 7.60834D NET ASSETS, END OF YEAR $ 96,989,293 $ 1,851,984 $ 1,651,994 $ 5,277 $10D,308,54B $ 8,962428 The Notes to Financial Statements are an integral part of this statement. 31 CITY OF ALLEN, TEXAS EXHIBIT 10 ' RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS OF PROPRIETARY FUNDS ' TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2005 Amounts reported for business -type activities in the statement of activities are different because: Net change in fund net assets- total proprietary funds $ 13,110,252 Internal service funds are used by management to charge the costs of replacing machinery and equipment, fleet management, workers compensation, property liability loss, medical and dental insurance, and health claims to individual funds. The net expenses of certain activities of internal service funds is allocated to business -type activities. 127,140 Change in net assets of business -type activities $ 13,237,392 The Notes to Financial Statements are an integral part of this statement. 32 ' ' CT' OF ALLEN, TEXAS ENTERPRISE FUNDS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30 2006 EXHIBIT 11 BUSINESS-TYPE ACTNITIES ENTERPRISE FUN DS GOVERNMENTAL ' ANO SOLID GOLF ACTIVITIESWATER INTERNAL SERVICE SEWER WASTE DRAINAGE COURSE TOTAL FUNDS CASH FLONS FROM OPERATING ACTIViIIES Call recaNeE hem wslomen E 23.888,558 $ 4.272,563 S 996686 $ 1,297,413 $ 30.455,020 S CaM1racWaE han brlsaclions wiN otlrer NNa 8,515,613 ' caan 9atl le empoaeawwrvMea (474,407) .410,15 (470,70x) (6",6511 (4,193.669) (116.613) LesO Pale 7p Baod¢9M smees (6,]48,89) (3.176,561)1 (328.831) (90].881) (14,1.1,118) CasM1 PeOlartlelma 2.b20501 NO msin paW9eE 9y(uaetl n7 Waat atlFMiea 11.365.3" 537827 b1.503 (584.N51 11]M.013 1.500554 ' C H FLOWS FROM NONCPPITPL FIVOICINGAOTMTIES Tansies Oam MlerhuiEs 10.2M 627.000 631.290 290,357 Trantlert to dtw MSa (2.182.8331 (M.D78) (1/16551 (8]121 2.36113]6) t NO pie ggMeE by(used n) non ,hdI hlarclg actlrilia 2.1733431 (160]81 (141655) 616.288 11]43]661 290.357 CASH FLOWS FROM 4APITAL MID ' RELATED R.NCING ACTNRIES PM1dpal pall on hosannas 8pq matuMka (1,545,090. (1,515,6x) Interest and less pail on lon¢noth dent (901,693) awn $83) Acquismnn aM ronshudbn Mttpal assets (7,556,517) (]358,54'0 (9n214) CW" lease Eam paymem (� ) (90,]90) ' Prnce MshwnsabMuptalasaets Contneutlons from lapsoons 1.753."1 179."1 e,lsz Nat casn Mel m)capta ens 61161 o�adN wianHa m.2sz.190I 196.7M) m.asD.9M) 7416 66x1 CASH FLOWS FROM INVEBTMG ACTNRIE6 ' PONase Nhrvashtettl sed161ea Prarzls(mm sW eM meluHNa o7h�vaanenl seo ltlea (9.008,x3) 12,035,393 (9.959,693) 1;035,393 (3.033,02) Waral on inaeslmeMs 797053 39MN 31617 688.5" 3,000,x0 264.863 NO WLl poailM Ey Mestliq a9Nties 2.872.753 M.91141 3]00] I9H.M4 231.591 ' NET CHANGE IN CASH AND CASH EOUNAtENTS 3,813,599 523,653 297,185 (55,147) 4,569,590 I.W. 0 CASH ANO CASH EQUNAtfNTS, BEGINNING OF YEAR 8070756 751390 7900,16 99.287 lawl.615 3387365 ' C PND GASH EQUNALENFD, END OF YEAR $ 12.651.355 $ 1.2]5.119 S 1.02].531 $ MAN) t 15.x21.M5 S 4131.425 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES NO opea511B ocwn.(loss) $ 5.658092 $ 913.325 E 9429 S (901.09)$ 6.427.007 S 838.327 AePamess to reconcile Wean, 111"746 (Inds) ' to net path protein ay (used nl o a a6n8 actWi4as: Daprndarkin and! amoNzatlonepense 4,07,222 10,8" 9,191 103,769 4,262,562 450369 Ch-,d.n ossa, and liadllies. (loOease) eevraae in appoants receMNe 955.461 (27.161) (1,532) (14) 990.924 at'im Bnoaase) In orris ohowsables (136j52) (138.752) Bncreaae) in yapaids 2139 2383 Devease inlmenlones (95,935) (1,022) (67.967) hapass (doorease) in xwxs PA'a61a 489,858 =MG) (4,596) 7,289 29,183 131GE5 Increase.4possO m apici laWNea 28,810 1D,"9 (517) 46282 Inveau(davease) m aompensaNd When. (18.045) as IN (5,051) (50.511) Imaese y deposits n Mal 67.032 57DS2 TOO adstlmeNa S.S16.306 (315.4981 49.260 112318 5.902.408 612.x27 Nel rill poyMed Ey Qmed'n)apermin9 a]Ftllea f 11.905.388 f ST.63] i 41" S (5".](4)S 11.720,013 $ 1.51 ' NONCASH INVESTINGACTNIRES: CIIai9e in 61616159eM1e olanenlmeNs S 1x.95 E E S E 1[6.95 S 7271 NO SHFINVJCINGACTIVITIES' ' UmNNlions of eapAal asselz hwn devebpea f 8.91.51] S S S S 8.x1,517 $ ReWta3iation 0 tots cash to thin nalemaM N ret Ouni: LaN aM rash egiizlents-6746111 S 10,070,114 S LP5,179 s 1,x7191 $ 34,140 E 12,406,9" S 4,131,42s Ristrpa edrashoo 0slieplYvabnla 2.814241 2814.241 t CASH AND CASH EQUNPIEMS, END OF YEAR E 12.861.355 S 1.275,179 $ 1.x].91 E 34.140 3 15=1305 $ 4.QI,425 The Nous to Financial Slalemenls ' are an integral P in of this statement. 33 CITY OF ALLEN, TEXAS EXHIBIT 12 COMPONENT UNITS STATEMENT OF NET ASSETS SEPTEMBER 30, 2006 ALLEN ALLEN ECONOMIC COMMUNITY DEVELOPMENT DEVELOPMENT CORPORATION CORPORATION TOTAILS ASSETS CURRENT ASSETS Cash and cash aqurvalents $ 3,454,552 $ 5,131,612 $ 8,586,164 Investments 1,961,439 1,734,374 3,695,813 Sales fizz receivable 812,617 812,617 1,625,234 Accounts receivable 1,562 1,562 3,124 Acuued interest receivable 15,572 13,769 29,341 Total current assets 6,245,742 7,693,934 13,939,676 CAPITALASSETS Land 4,324,525 4,324,525 Land improvements 207,278 207,278 Furniture and fixtures 74,028 74,028 Improvements other than buildings 3,129,289 3,129,289 Total capital assets 7,735,120 7,735,120 Less accumulated depreciation (1,190,212) (1,190,212) Capital assets, net of accumulated depreciation 6,544,908 6,544,908 DEFERRED CHARGES Bond issuance costs, net of amortization 90,481 90,481 TOTALASSETS $ 12,790,650 $ 7,784,415 $ 20,575,065 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 225,531 $ 191,493 $ 417,024 Accrued interest payable 28,604 28,604 Retainage payable 10,253 31,891 42,144 Revenue bonds payable - current 470,000 470,000 Total current liabilities 235,784 721,988 957,772 NON-CURRENT LIABILITIES Revenue bonds payable (net of unamortaed discounts and deferred amount on refunding) 7,193,412 7,193,412 Total noncurrent liabilities 7,193,412 7,193,412 TOTAL LIABILITIES 235,784 7,915,400 8,151,184 NET ASSETS (ACCUMULATED DEFICIT) Invasted in capital assets, net of related debt 6,54'908 (7,572,931) (1,028,023) Unrestricted 6,009,958 7,441,946 13,451,904 TOTAL NET ASSETS (ACCUMULATED DEFICIT) $ 12,554,866 $ (130,985) $ 12,423,881 The Notes to Financial Statements are an integral part of this statement. 34 1 ' The Notes to Financial Statements are an integral part of this statement 35 CITY OF ALLEN, TEXAS EXHIBIT 13 OF ACTIVITIES 'STATEMENT COMPONENT UNITS FOR THE YEAR ENDED SEPTEMBER 30 2006 ' Net (Ewense) Revenue and Program Revenues Changes in Net Assets COMPONENT UNITS ALLEN ALLEN Operating ECONOMIC COMMUNITY Charges for Grants and DEVELOPMENT DEVELOPMENT Expenses services Contributions CORPORATION CORPORATION TOTALS 'FunGioNProgram Activities COMPONENT UNITS Allen Emnomic Development Corporation $ 5,294,224 It $ $ (5,294,224) $ $ (5,294,22A) Allen Community Development Corporation 2,057,879 (2,057,879) (2057879) ' TOTAL COMPONENT UNITS $ 7.352.103 $ $ E (5,294,2247 $ 06057.8791 E (7.352.103) General revenues: Sales taxes $ 4,579,623 $ 4,579,623 $ 9,159,246 Interest on investments 277,912 283,700 561,612 ' Miscellaneous Total 250,218 250,216 general revenues 5,107,751 4,863,323 9,971,074 ' CHANGE IN NET ASSETS (186,473) 2,805,444 2,618,971 NET ASSETS, beginning of year 12,741,339 (2936429) 9,804,910 . NET ASSETS, end of year 8 12.554,866 $ !130.985) $ 12.423.881 1 ' The Notes to Financial Statements are an integral part of this statement 35 PESp ECT # I NtFC s R�r CltY OF AUUl ' cm NOTES TO FINANCIAL STATEMENTS aeSpr CT * 1NFti T � Rir. C1TV OF CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30. 2006 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Statement The City of Allen (the "Cit1/') was incorporated in 1953, under the provisions of Chapter 11, Title 28, Texas Revised Civil Statutes of 1925. In 1979, the City adopted a charter making it a home rule city operating under a Council -Manager forth of government The City provides such services as are authorized by its charter to advance the welfare, health, comfort, safety and convenience of its inhabitants. The accounting and reporting policies of the City relating to the funds included in the accompanying basic financial statements conform to accounting principles generally accepted in the United States of America applicable to state and local governments. Generally accepted accounting principles for local governments include those principles prescribed by the Governmental Accounting Standards Board (GASB), the American Institute of Certified Public Accountants in the publication entitled Audits of State and Local Governmental Units and by the Financial Accounting Standards Board (when applicable). As allowed by Governmental Accounting and Financial Reporting Standards, the City has elected not to apply Financial Accounting Standards Board Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins of the Committee of Accounting Procedure issued after November 30, 1989. The more significant accounting policies of the City are described below. Financial Reporting Entity ' As required by accounting principles generally accepted in the United States of America, the financial statements of the City include the primary government and organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. ' The City is financially accountable for legally separate organizations if its officials appoint a voting majority of an organization's governing body and either it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on, the primary government A primary government may also be financially ' accountable for governmental organizations that are fiscally dependent on it. A primary government has the ability to impose its will on an organization if it can significantly influence the programs, projects, or activities of, or the level of services performed or provided by, the ' organization. A financial benefit or burden relationship exists if the primary government (a) is entitled to the organization's resources; (b) is legally obligated or has otherwise assumed the obligation to finance the deficits of, or provide financial support to, the organization; or (c) is obligated in some manner for the debt of the organization. Some organizations are included as component units because of their fiscal dependency on the primary government. An organization is fiscally dependent on the primary government if it is unable to ' adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval by the primary government. 37 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 I I NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- CONTINUED Financial Reporting Entity - continued The following entities were found to be component units of the City and are included in the basic financial statements: Allen Economic Development Corporation (AEDC) - The AEDC is responsible for aiding, promoting and furthering economic development within the City. Allen Community Development Corporation (ACDC) - The ACDC is responsible for supporting the improvements in community parks and recreation, streets and sidewalks, public safety and the community library. The members of both the AEDC's and ACDC's Boards of Directors are appointed by the City Council. Both the AEDC and ACDC are fiscally dependent upon the City as the City Council approves their budgets and must approve any debt issuance. However, the component units do not qualify for blending because the component services directly benefit the community rather than the City itself. The AEDC and ACDC are discreetly presented as governmental fund types and do not issue separate financial statements. Basis of Presentation The govemment-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the non -fiduciary activities of the primary government and its component units. The effect of interfund activity, within the governmental and business -type activities columns, has been removed from these statements; however, interfund services provided and used are not eliminated in the process of consolidation. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support Additionally, the primary government is reported separately from the legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given program are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific program. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given program and 2) operating or capital grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Taxes and other items not properly included among program revenues are reported instead as general revenues. Fund Financial Statements: The City segregates transactions related to certain functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Separate statements are presented for governmental funds and proprietary funds. These statements present each major fund as a separate column on the fund financial statements; all non -major funds are aggregated and presented in a single column. 73 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30.20D6 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Basis of Presentation — continued Governmental funds are those funds through which most governmental functions typically are financed. The measurement focus of governmental funds is on the sources, uses and balances of current financial resources. The City has presented the following major governmental funds: General Fund - The General Fund is the general operating fund of the City. It is used to account for all financial resources not accounted for in other funds. All general tax revenues and other receipts that are not restricted by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures, fixed charges and capital improvement costs that are not paid through other funds are paid from the General Fund. Debt Service Fund - The Debt Service Fund is used to account for the accumulation of financial resources for the payment of principal, interest and related costs on general long-term debt paid primarily from taxes levied by the City. The fund balance of the Debt Service Fund is reserved to signify the amounts that are restricted exclusively for debt service expenditures. Facilities Agreement Special Revenue Fund - The Facilities Agreement Special Revenue Fund is used to account for funds received from builders and developers used on specific facility agreements such as neighborhood parks, paving and assessments in new developments. General Capital Projects Fund - The General Capital Projects Fund is used to account for resources used for the acquisition and/or construction of capital facilities by the City, except those financed by proprietary funds and not accounted for by another capital projects fund. General Obligation Bond Capital Projects Fund - To account for financing, acquisitions, and construction of improvements to City facilities and infrastructure not accounted for by other bond funds. 39 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 ' ' NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Basis of Presentation - wntinued ' Proprietary Funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. The accounting objectives are determinations of net income, financial position and cash flow. All assets and liabilities are included on the Statement of Net Assets. The City , has presented the following major proprietary funds: Enterprise Funds: . , Water and Sewer Fund - The Water and Sewer Fund is used to account for the provision of water and sewer services to the residents of the City. Activities for the fund include administration, operations and maintenance of the water and sewer system and billing and collection activities. The fund also accounts for the accumulation of resources for, and the payment of, long-term debt principal and interest for water ' and sewer debt All costs are financed through charges to utility customers with rates reviewed regularly and adjusted if necessary to ensure integrity of the fund. Solid Waste Fund - ' The Solid Waste Fund is used to account for the provision of solid waste services to residents of the City. ' Drainage Fund - The Drainage Fund is used to account for the provision of developing and maintaining proper ' drainage services to the residents of the City. Golf Course Fund - ' The Golf Course Fund is used to account for activities associated with the operations of the Chase Oaks Golf Course purchased by the City in October 2004. ' Internal Service Funds: Replacement Fund - , The Replacement Fund is an internal service fund that accounts for the costs associated with the acquisition and replacement of vehicles, machinery, and equipment through the rental of such items to other departments. , Risk Management Fund - The Risk Management Fund accounts for the costs associated workers compensation, liability and ' property insurance and medical and dental programs established for City employees and their covered dependents. 40 I I CRY OF ALLEN, TEXAS ' NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 ' NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED ' Basis of Presentation - continued Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating ' revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. Operating expenses for the proprietary funds include the cost of personnel and contractual services, supplies and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. Measurement Focus and Basis of Accounting Measurement focus refers to what is being measured. Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. The government -wide statements and fund financial statements for proprietary funds are reported using the economic resources measurement focus and the accrual basis of accounting. The economic resources measurement focus means all assets and liabilities (whether current or noncurrent) are included on the statement of net assets and the operating statements present increases (revenues) and decreases (expenses) in total net assets. Under the accrual basis of accounting, revenues are ' recognized when earned, including unbilled water and sewer services which are accrued. Expenses are recognized at the time the liabilities are incurred. ' Governmental fund financial statements are reported using the current financial resources measurement focus and are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to acuual; i.e., when ' they become both measurable and available. 'Measurable' means the amount of the transaction can be determined and 'available' means collectible within the cument period or soon enough thereafter to be used to pay liabilities of the current period. The City considers all revenues as available if they are collected within 60 days after year end. Expenditures are recorded when the related fund liability is ' incurred, except for unmatured interest on general long-term debt which is recognized when due, and certain compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources. ' The revenues susceptible to accrual are property and sales taxes, franchise taxes and interest income. Other receipts (special assessments) become measurable and available when cash is received by the City and are recognized as revenue at that time. ' Cash, Cash Equivalents and Investments t State statutes and policy as established by the City Council authorize the City to invest in certificates of deposit, direct obligations of the U.S. Treasury, investment pools consisting of such U.S. Treasury obligations, repurchase agreements, commercial paper and mutual funds. Substantially all operating cash and cash equivalents are maintained in pooled cash and time deposit accounts. Interest income ' relating to pooled deposits is allocated to the individual funds based on each fund's pro rata share of total pooled deposits. ' 41 I CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 , NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Cash, Cash Equivalents and Investments - continued ' For purposes of the statement of cash flows, the proprietary funds consider all highly liquid investments (including restricted assets) with an original maturity of three months or less when purchased to be cash equivalents, as they are available for withdrawal on demand. , Investments are recorded at amortized cost when original maturity at the time of purchase is less than one year or at market if greater than one year. ' Encumbrances Encumbrance accounting, under which purchase orders, contracts, and other commitments for the ' expenditure of funds are recorded in order to reserve that portion of the applicable appropriation, is utilized in the governmental funds. Under the City's budgetary process, appropriations lapse at fiscal year end. Encumbrances are reported as reservations of fund balances because they do not constitute expenditures or liabilities. ' Property Taxes The City's property tax is levied each October 1 on the assessed value listed as of the prior January 1 for all real and certain personal property located within the City. Appraised values are established by the Central Appraisal District of Collin County at 100% of estimated market value and certified by the Appraisal Review Board. The assessed value upon which the 2005 levy was based is ' $5,161,661,317. Taxes are due on October 1 and are delinquent after the following January 31. The City is pemritted by Article XI, Section 5 of the State of Texas Constitution to levy taxes up to $2.50 per $100 of assessed valuation for general governmental services, including the payment of principal and interest on general obligation long-term debt. The combined tax rate to finance general governmental services including the payment of principal and interest on long -tens debt for the year ended September 30, 2006 was $0.559 per $100 of assessed valuation. In Texas, countywide central appraisal districts are required to assess all property within the appraisal district on the basis of 100% of its appraised value and are prohibited from applying any assessment ratios. The value of property within the appraisal district must be reviewed every five years; however, the City may, at its own expense, require annual reviews of appraised values. The City may challenge appraised values established by the appraisal district through various appeals and, if necessary, legal action. Under this legislation, the City continues to set tax rates on City property. However, if the effective tax rate, excluding tax rates for bonds and other contractual obligations, adjusted for new improvements, exceeds the rate for the previous year by more than 8%, qualified voters of the City may petition for an election to determine whether to limit the tax rate to no more than 8% above the tax rate of the previous year. 42 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTE t. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —CONTINUED Interfund Receivables and Payables Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are reported as "due to/from other funds'. Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances'. Transactions Between Funds and Between Funds and Component Units Intertund services provided and used are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditureslexpenses in the reimbursing fund and as a reduction of expenditures/expenses in the fund reimbursed. All other interiund transactions, except transactions between the component units and the primary government, are recorded as transfers. Transactions between the component units and the primary government are accounted for as external transactions (revenues and expenses). During the fiscal year ended September 30, 2006, ACDC contributed $36,000 to the General Fund and $60,000 to the Park and Recreation Special Revenue Fund and AEDC contributed $33,000 to the General Fund. These revenues were reflected as grants and contributions for the primary government in the govemment-wide statement of activities. Inventories and Prepaid Items Inventories, which are expended when consumed, are recorded using the average cost method, and are valued at cost Prepaid items are for payments made by the City in the current year to provide services occurring in the subsequent fiscal year. A reserve for prepaid items is recognized in the governmental funds in the fund level financial statements to signify that a portion of fund balance is not available for other subsequent expenditures. Special Assessments The City has the authority to make special assessments to property owners as part of the financing of capital improvements. Such assessments are recorded in the capital projects fund as receivables when assessed and are recognized as revenue when both the measurable and available criteria have been met (generally when collected). 43 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets, are reported in the applicable governmental or business -type activities columns in the government -wide financial statements and in the fund financial statements for proprietary funds. All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated assets are valued at fair market value on the date donated. The costs of normal repairs and maintenance that do not add to the value of the asset or materially extend the asset lives are not capitalized. Renewals and betterments are capitalized. Interest has not been capitalized during the construction period on property, plant and equipment Assets capitalized have an original cost of $5,000 or more and over one year of useful life. Depreciation has been calculated on each class of depreciable property using the straight-line method. Estimated useful lives are as follows, Buildings 15 - 40 Years Towers, tanks, and pump stations 30 Years Infrastructure 10 - 50 Years Machinery and equipment 3 - 15 Years Vehicles 2 - 15 years Library books 5 Years Furniture and fixture 5 Years Other improvements 2 - 30 Years The City has established the Replacement Fund to account for the replacement of the City -owned vehicle, machinery, and equipment Charges for use in the form of user payments are made by City departments to the Replacement Fund to provide for future acquisitions and replacements. Compensated Absences City employees earn vacation and sick leave, which may either be taken or accumulated, up to certain amounts, until paid upon retirement or termination. Upon termination or retirement, an employee is reimbursed up to a maximum number of hours of vacation pay and sick leave based upon the years of service. Accumulated vacation and sick leave is accrued when incurred in the govemment-wide, proprietary, and fiduciary fund financial statements. Net Assets Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of those assets, and adding back unspent proceeds. Net assets are reported as restricted when there are limitations imposed on their use either through the enabling legislations adopted by the City or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. 5 11 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 ' NOTE 2. DEPOSITS, INVESTMENTS AND INVESTMENT POLICIES t Deposits — State statutes require that all deposits be fully collateralized by U.S. Government obligations or obligations of Texas and its agencies that have a market value of not less than the principal amount of the deposits. ' The City's demand deposits and certificates of deposit were fully insured or collateralized at September 30, 2006, with collateral required by state statutes. At yearend, the carrying amount of the City's deposits was $23,886 and the bank balance was $1,183,815. Of the bank balance, federal depository insurance covered ' $200,000 and the remainder was covered by collateral held by the pledging financial institution's agent in the City's name. The City's petty cash balance at September 30, 2006 was $9,400. The carrying amount of deposits for ACDC and AEDC, discretely presented component units, were $3,843 and $5,385, respectively, with no corresponding bank balances as they are pooled with the City's deposits. Investments — State statutes authorize the City to invest in U.S. Government obligations, obligations of Texas and its agencies and fully collateralized repurchase agreements. The City, AEDC and ACDC invest in Texpool which is an investment fund authorized by the Texas Legislature and administered by the Texas State Treasury. The Texas Treasury Safekeeping Trust Company is trustee of Texpool and is a limited purpose trust company authorized pursuant to Texas Government Code. The purpose of Texpool is to allow for the pooling of public funds to provide a higher yield on the pooled investment than would be possible with the investment of the individual public entity's funds. Texpool investments are subject to the same investment policies maintained by the State Treasury for all state funds. The Legislature has authorized only certain investment instruments for public funds, including repurchase agreements, U.S. Treasury bills and bonds, securities of other U.S. Government agencies, commercial paper and other safe instruments. The investment in Texpool and any accrued interest may be redeemed at the City's discretion. The City's position in the pool is not materially different from the value of the pool shares. The table below identifies the investment types that are authorized for the City by the Public Funds Investment Act (Government Code Chapter 2256). The table also identifies certain provisions of the City's investment policy that address interest rate risk, credit risk, and concentration of credit risk. Authorized Investment Tvoe Cerlificates of Deposit Repurchase Agreements U. S. Treasure Obligations Municipal Investment Pool Commercial Bank Savings Account U. S. Government Securities tmncallable) U. S. Government Securities (callable) U. S. Government Sponsored Corp. Instruments: non -callable U. S. Government Sponsored Corp. Instruments: callable Commercial Paper Bankers Acceptance Guaranteed Investment Contracts State or Local Governmental Obligations 45 Maximum Maximum Maximum Percentage Investment Matu " of Portfolio In One Issuer 5 years 30% None 5 years 30% None 5 years 100% None 5 years 100% None 5 years 15% None 5 years 100% None 5 years 70% None 5 years 75% None 5 years 70% None 5 years 20% None 5 years 10% None 5 years 25% None 5 years 30% None 45 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 I I 1 NOTE 2. DEPOSITS, INVESTMENTS,AND INVESTMENT POLICIES -CONTINUED Disclosures relating to interest rate risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment Investments with interest rates that are fixed for longer periods of time are more likely to be subject to increased variability in their fair values due to changes in the market interest rates. The City manages its exposure to market price changes by avoiding over -concentration of assets in a specific maturity sector, limitation of average maturity of operating funds investments to less than eighteen months, and avoidance of over-ooncentration of assets in specific instruments other than U.S. Treasury Securities and authorized investment pools. As of September 30, 2006, the City had the following investments: Fair Value Weighted investment Primary Avg. Maturity Type Government AEDC ACDC Total (Years) FFC $ 2,420,325 $ $ $ 2,420,325 2.46 Commercial Paper 1,449,270 1,449,270 .05 FHLB 4,235,841 548,459 485,585 5,269,885 .95 FNMA 8,813,263 647,616 572,362 1D,033,241 1.06 FHLMC 5,447,533 765,364 676,427 6,889,324 1.18 Certificates of Deposit 6,000,000 6,000,000 .35 Texpool 39.638,724 3.449.067 5.127.769 48.215.550 .003 Disclosures relating to credit risk Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment This type of risk is typically expressed in terms of the credit ratings issued by a nationally recognized statistical rating organization. The City reduces the risk of issuer default by limiting investments to those instruments allowed by the Public Funds Investment Act, Chapter 2256, Texas Government Code. The City's investments in U.S. Agency securities (FHLB, FNMA, FFCB, and FHLMC) are rated AAA by Standard & Poor's and Aaa by Moody's Investors Service. The investment in the Texas Local Government Pool (TexPool) carried a credit rating of AAAm by Standard & Poor's as of September 30, 2006. The City's investments in commercial paper are rated A-1, F-1, and P-1 by Moody's Investors Service and Standard & Poor's as of September 30, 2006. 46 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTE 2. DEPOSITS, INVESTMENTS AND INVESTMENT POLICIES - CONTINUED Concentration of Credit Risk The City's investment policy does not contain stipulations regarding the amount of funds that can be invested in any single issuer. As of September 30, 2006, with the exception of funds invested at Texpool, the following table represents 5% or more of the City's investments. Issuer Investment Type Reported Amount Percentage FHLB Federal agency securities $ 5,269,685 6.56% FNMA Federal agency securities $ 10,033,241 12.50% FHLMC Federal agency securities $ 6,889,324 8.58% Am. National Bank Certificate of Deposit $ 6,000,000 7.47% Custodial Credit Risk The custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. The Citys investment policy does not contain specific policy or legal requirements that address the potential for custodial credit risk for investments. The Public Funds Investment Act does require that financial institutions secure deposits made by state or local governmental bodies by pledging securities in an undivided collateral pool held by a depository regulated under state law. The market value of the pledged securities of the collateral must always remain at least equivalent to the bank balance less the FDIC insurance. As of September 30, 2006, the City's deposits with financial institutions above the federal depository limits were fully collateralized. 47 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTE 3. RECEIVABLES Receivables at September 30, 2006, for the governments individual major and non -major funds, and internal service funds in the aggregate, including the applicable allowances for uncollectible accounts, consist of the following: properly Saks Ao ed Tax Taxes A=unts Interest Assessmen Other Total General Fund $ 729,096 $ 1,625,234 $ $ 25,158 $ $1,364,218 $ 3,743,706 Debt Service 378,538 8,732 1,806 389,076 Fadri ies Agreement 10,483 10,483 General Capital peps 24,768 187,557 212,325 G.O. Bond Fund 12,134 12,134 Non -major Govemmental Funds 205,508 1D,054 215,562 Water and Sewer 3,346,453 54,410 3,400,863 Sorg Waste 168,440 299,492 487,932 Drainage 42,008 42,008 Goff Course 15,710 15,710 Internet Service Funds 23.712 23,712 Gross Receivables 1,107,634 1,625,234 3,798,119 169,451 187,557 1,685,516 8,553,511 Less: Allowance for Uncollectibles ( 354.2191 ( 14.581) ( 368.8001 Total Net Receivables, Primary Govemmenl $ 753,415 $ 1,825,234 It 3,763,538 $ 169,451 $ 187,557 $ 1,665,516 $ 8,184,711 Component Units 1.625.234 3.124 29.341 1.657.699 Total Net Receivables, Reporting Entityli 53. LUUM$ 37aG.fi62 $$_ 19g 792792 S 181 S61 $ 1665 516 $ tj! The Water and Sewer Fund accounts receivable include unbilled charges far services rendered through September 30, 2006. 48 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTE 4. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2006, was as follows: Governmental Activtties 49 Balance Sales or Balance September 30, Other Adjustments/ September 30, 2005 Additions Dispositions Transfers 2006 Governmental Funds: General capital assets not being depreciated Land and land vnprovemenes $ 64,474,787 $ 14,211,257 ($ 75,00)) $ $ 98,611,0.14 Constmdion in progress 40.252.481 8.058.769 ( 20.730.0701 27591.1 Total capital assets not being depreciated 124.737.268 22270.@6 ( 75.0001 ( 20.730.070) 126.202.224 General ®pial assets being depreciated Buildings 37,322,621 8,261,094 45,583,715 Improvemen5 other than buildings 291,001,529 11,419,581 12,468,976 314,890,086 Fumiture and futures 2,484,520 362,237 2,846,757 Vehicles 3,298,071 81,229 ( 207,755) 3,171,545 Library books 2,586,104 168,027 ( 65.279) 2,570,852 Machinery and equipment 3.657.827 455789 ( 107.7891 4.005.827 Total capital assets being depredated 340.352.672 12.486 863 ( 400.823) 20.730.070 373,168.7a2 Less accumulated depreciation for Buildings ( 5,609,002) ( 1,29D,204) ( 6,899,206) Improvements other than buildings ( 76,042,342) ( 11,576,256) ( 87.618,598) Furniture and futures ( 1,349,621) ( 357,727) ( 1,707,348) Val -Use ( 1,625,235) ( 329,BI2) 195,618 ( 1,659,429) Library Books ( 2,129,953) ( 177,646) 85,279 ( 2,222,350) Machinery and equipment ( 2.501.2921 ( 783.844) 107.7B9 ( 3.177.3471 Total accumulated depredation ( 89.157.475) ( 14.515.4891 388,686 ( 103.2842781 Total general capital assets being depredated, net 251.195.197 ( 2.028 6261 ( 12,137 20.730.070 269.884.504 General capital assets, net $ 375.932.465 $ 20,241.40D ($ 871371 $ $ 396.088.728 49 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTE 4. CAPITAL ASSETS - CONTINUED Balance Saks or Balance Septanber 30, Other Adjustments/ September 30, 2005 Additions Dusoositions Transfers 2006 Internal Service Funds: Capital assets being depreciated Vehicles $ 2,900,622 $ 5-B,T70 Is 91,092) $ $ 3,388,300 Machinery and equipment 475.737 346.444 ( 7501 - 821.431 Total internal service assets being depreciated 3.376.359 925.214 ( 91.8421 4.209.731 Less accumulated depredation for Vehicle ( 1,359,29B) ( 336,366) 91,092 ( 1,604,574) Machinery and equipment L 192.5141 L 114.0011 750 ( 305765) Total accumulated depreciation ( 1.551.6121 ( 450.3691 91.842 ( 1.910.3391 Internal service funds capital assets, net $ 1.824.547 $ 474.845 $ $ $ 2.299.392 Governmental a]ivities capital assets, net $ 3]].757,012 $ 2n 71 R.245 ($ R].13]I $ $ 398 386 120 Business -Type Activities Water and Sewer Activities: Capital assets not being depreciated Land! $ 847,042 $ 2,453,688 $ $ $ 3,327,730 Construction in progress 5.450.071 4.706.890 ( 3.878.763) 6.278.198 Total capital assets not being depreciated 6.324.113 7.160.578 ( 3.878.7631 9.605.928 CapBal Assets Being depreciated: Towers, tanks, &pumps stations 105,762,186 6,504,517 3,878,763 116,W,466 Furniture and Wums 8,817 2,927 11,114 Machinery and equipment 2,104,071 432,693 ( 66,836) 2,469,928 Vehicles 751.878 29185 ( 557491 725.314 Total capital assets being depreciated 108.626.322 6.969.322 ( 122.5851 3.878.763 119.351.822 Less accumulated depreciation for Towers, ranks, & pumps stations ( 30,661,547) ( 3,653,429) ( 34,314,976) FumRum and futures ( 5,730) ( 1,930) ( 7,680) Machinery and equipment ( 771,868) ( 331,300) ( 1,103,168) Vehicles ( M.fi071 ( 9D.884 55,749 ( 717.7421 Total accumulated depreciation ( 32.121.7521 ( 4.077.5431 55.749 ( 36.143.6461 Total capital assets being depreciated, net 76.504.570 2.891.T79 ( 68.836) 3.878.763 83.208.276 Water and sewer activities capital assets, net $ 82.828,683 $10.052.357 ($ 86.8361 $ $ 92,814.2 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTE 4. CAPITAL ASSETS - CONTINUED Balance Sales or Balance September 30, Other Adjusirnents/ September 30, 2005 Additions Dispositions Transfers 2006 Solid Waste Activities: Capital assets being depredated Machinery and equipment $ 9,819 $ $ $ $ 9,819 Vehicles 44.448 49.448 Total capital assets berg depreciated 54.267 54.267 Lew acarmulated depredation for Machinery and equipment ( 3,104) ( 1,913) Vehicles ( 27.3251 ( 8.8931 ( 36.218) Total a=mulated depreciation ( 30.4291 ( 10.8m ( 41.2351 Solid waste activities capital assets, net $ 23SW ($ 10.8061 $ $ $ 13.032 Drainage Activities: Capital assets being depreciated Other bnprovements $ 495,132 $ $ $ $ 498,132 Vehicles 160,637 ( 53,828) 106,809 Machinery and equipment 373.734 373.739 Total capital assets being depreciated 1.030.503 ( 53.628) 976675 Less aommulated depreciation (or. Other inprovements ( 30,338) ( 11,942) ( 42,280) Vehicles ( 132,116) ( 6,557) 53,828 ( 84,845) Machinery and equipment ( 193.5191 ( 372921 ( 230.8111 Total aammulated depreciation ( 355.973) ( 55,7911 53.828 ( 357.9361 Drainage acdwities capital assets, net $ 674.530 ($ 55.7911 $ $ $ 618.739 Golf Course Activities: Capital assets being depredated Machinery and equipment $ 296.970 $ $ $ S 296J90 Less accumulated depredation for Machinery and equipment ( 5644T ( 108.7631 ( 175.210) Total accumulated depredation ( 664471 ( 108.763) ( 175.2101 Golf course activities capital assets, net $ 230.343 (S 108 7631 $ S $ 121.580 Business -type activities capital assets, net S 83 ]5] Sea 99] L-2&= (S tis Aim S 93 6e] 5 8 51 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTE4. CAPITAL ASSETS—CONTINUED $ 812,522 Public safety 821,243 Public works 9,243,481 Balance 3,610,006 Saks or 28.237 Balance 14,515,489 September 30, 450.369 Other Adjustments/ September 30, 2(M5 Additions Dispositions Transfer: 2" Component Units Capital assets not being deprecated: Land $ 4,419,996 ($ 95,471) $ $ 4,324,525 Land improvements 207,278 207,278 construction in progress 186.690 251.203 ( 437.8831 Total capital assets not being depreciated $ 4.813.964 $ 251.203 is 95.4711 is 437.8931 $ 4.531.803 Capital assets being depreciated; Improvements other than buildings 2,942,599 ( 251,203) 437,893 3,129,289 Furniture and fodures 74.028 74.028 Total capital assets being depreciated 3.016.627 ( 251203) 437.893 3203.317 Leas accumulated depredation for. Buildings ( 956,344) ( 150232) ( 1,106,576) Furniture and fodures ( 77.9%7 ( 5.6701 ( 83.6361 Total accumulated depreciation ( 1.034.3101 ( 155.9021 f 1.190.212) Total capital assets being depredated, net 1.982.317 ( 155.902) ( 251.203) 437.893 2.013.105 Component units capital assets, net S 6]96281 $ 95301 (S 3466]41 S 4 6544.908 Depreciation expense was charged as direct expense to programs of the primary government as follows Govemmental activities: General government $ 812,522 Public safety 821,243 Public works 9,243,481 Culture and recreation 3,610,006 Community development 28.237 Total depreciation expense - General capital assets 14,515,489 Internal Service Funds 450.369 Total depreciation expense - Governmental activities 6 14.965.858 52 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTE 4. CAPITAL ASSETS - CONTINUED Business -type activities: Water and sewer $ 4,077,543 Solid waste 10,806 Drainage utility 55,791 Goff course 108.763 Total depredation expense - Business -type activities 4252.903 Component units: Allen Economic Development Corporation $ 155.902 Outstanding commitments at September 30, 2006, under authorized construction contracts were $5,366,971. These outstanding commitments for capital projects will be funded from unexpended bond proceeds and additional general obligation bonds. Authorization to issue additional bonds may be ' requested from the qualified voters of the City. NOTE S. LONG-TERM DEBT At September 30, 20D6, bonds payable consisted of the following individual issues: General Obligation Bonds: Governmental Business -type $10,000,000 Series 1996 Bonds due in annual installments of $95,000 to $795,000 through September 1, 2008; interest at 4.5% to 6.5%. $ 930,000 $13,340,000 Series 1999 Bonds due in annual installments of $320,000 to $1,055,000 through September 1, 2019; interest at 4.875% to 6.375%. 1,795,000 $11,100,000 Series 2000 Bonds due in annual installments of $115,000 to $915,000 through September 1, 2020; interest at 5.0% to 6.5%. 1,920,000 $20,715,000 Series 2001 Bonds due in annual installments of $160,000 to $2,110,000 through September 1, 2021; interest at 4.0%to 5.25%. 9,920,000 $13,000,000 Series 2002 Bonds due in annual installments of $175,000 to 1,020,000 through September 1, 2022; interest at 4.2% to 5.5%. 11,525,000 $2,705,000 Series 2003 Bonds due in annual installments of $25,000 to $955,000 through September 1, 2007; interest at 2.0% to 3.0%. 920,000 53 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTES. LONG-TERM DEBT—CONTINUED General Obligation Bonds - continued: Governmental Business -type $7,210,000 Series 2003 Bonds due in annual installments of $175,000 to $515,000 through September 1, 2023; interest at 2.75% to 4.25%. $ 6,515,000 $ $11,700,000 Series 2004 Bonds due in annual installments of $395,000 to $790,000 through September 1, 2024; interest at 4.0% to 5.25%. 11,055,000 $32,330,000 Series 2005 Refunding Bonds due in annual installments of $75,000 to $3,505,000 through August 15, 2021; interest at 3.0% to 5.00%. 32,125,000 $1,595,000 Series 2006 Bonds due in annual installments of $50,000 to $115,000 through August 15, 2026; interest at 4.0% to 4.20%. 1.595.000 $ 78.300 000 � Certificates of Obligation: $4,735,000 Series 2004A Combination Tax & Revenue Golf Course Certificates of Obligation due in annual installments of $165,000 to $390,000 through September 1, 2024; interest at 3.50% to 5.00%. $ 4,735,000 $ $765,000 Series 20046 Combination Tax & Revenue Golf Course Certificates of Obligation due in annual installments of $25,000 to $70,000 through September 1, 2024;interest at 4.875% to 5.50%. 765.000 5 $ ACDC Sales Tax Revenue Bonds $5,350,000 Series 1997 Sales Tax Revenue Bonds due in annual installments of $125,000 to $435,000 through September 1, 2017; interest at 4.625% to 6.625%. $ 510,000 $ $5,125,000 Series 1999 Sales Tax Revenue Bonds due in annual installments of $55,000 to $400,000 through September 1, 2019; interest at 4.5% to 6.0%. 1,515,000 $5,600,000 Series 2006 Refunding Bonds due in annual installments of $290,000 to $785,000 through September 1, 2019; interest at 3.75% to 5.0%. 5.600.000 $ 7.625.000 $ VTj Governmental Activities General Obligation Bonds Certificates of Obligation Capital lease payable Compensated absences Accreted interest Len deferred amounts: For issuance premiums For refundings Governmental activity Long-term debt $ 81,430,670 $ 1,595,000 ($ 4,725,670) $ 78,300,000 $ 6,135,000 5,500,000 5.566,060 190,606 CITY OF ALLEN, TEXAS 65,944 ( 58,622) NOTES TO BASIC FINANCIAL STATEMENTS 1,617,049 1,198,832 ( YEAR ENDED SEPTEMBER 30, 2006 2,696,685 1,556,184 1,176,773 137,557 ( 1,314,330) NOTE 5. LONG-TERM DEBT -CONTINUED ( ' Water and Sewer Revenue Bonds: Governmental ( 1.515.3511 ($ 158.316 Business -type ' $12,545,000 Series 1999 Bonds due in annual installments of $330,000 to $950,000 through June 1, 2019; interest at 3.55% to 5.0%. $ $ 6,075,000 $6,710,000 Series 2004 Bonds due in annual installments of $175,000 to $490,000 through June 1, 2024; interest at 4.75% to 5.0%. 5,980,000 ' $4,300,000 Series 2005 Bonds due in annual installments of $140,000 to $310,000 through June 1, 2025; interest at 3.75% to 6.625%. 4.135.000 $ $ 18.190.000 ' The following is a summary of long -tens debt transactions, including current portion, of the City for the year ended September 30, 2006: ' Balance Balance Beginning End Due Whin of Year Increases Decreases of Year One Year Governmental Activities General Obligation Bonds Certificates of Obligation Capital lease payable Compensated absences Accreted interest Len deferred amounts: For issuance premiums For refundings Governmental activity Long-term debt $ 81,430,670 $ 1,595,000 ($ 4,725,670) $ 78,300,000 $ 6,135,000 5,500,000 5.566,060 190,606 137,075 65,944 ( 58,622) 144,197 67,925 1,617,049 1,198,832 ( 119,196) 2,696,685 1,556,184 1,176,773 137,557 ( 1,314,330) 1,567,354 ( 9,938) 1,557,416 ( 1.515.3511 ($ 158.316 ( 1.357.0351 L68&= ]949.169 $ 89� ?2i1M 6.069.fi461 55 11 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTES. LONG-TERM DEBT—CONTINUED Annual Requirements to Retire Debt Obligations The City intends to retire all of its general long-term liabilities, plus accrued interest, from ad valorem taxes and other current revenues. The proprietary fund type long-term debt will be repaid, plus accrued interest, from operating revenues of the Water and Sewer Fund. The annual aggregate maturities for each bond type for the years subsequent to September 30, 2006, are as follows: General Obligation Bonds Annual debt service requirements to maturity for general obligation bonds, including interest of $30,535,313 are as follows: Balance Governmental Activities Balance Due Beginning September 30 Principal End Whin 2007 of Year Increases Decreases of Year One Year 3,294,678 Business Type Activities 2009 4,365,000 3,112,901 7,477,901 2010 Water and Sewer Revenue Bonds $ 19,735,000 $ ($1,545,030) $ 18,190,000 $ 1,580,000 Compensated absences 281,857 25,585 ( 76,09(3) 231,346 124,583 Capital lease payable 238,646 26,374,741 ( 98,730) 139,916 88,713 Less deferred amounts: For refundings ( 86,918) 4,636 ( 82,282) For issuance discounts t premiums ( 7.4171 3.135 ( 4.2821 Business -type activity Long-term debt20> $$?5-585 r$1 772 0551 78.474.69 $ 1793 296 Component Units Sales Tax Revenue Bonds $ 8,055,000 $ 5,600,000 ($6,030,000) $ 7,625,000 $ 470,000 Less deferred amounts: For issuance premiums 184,499 ( 6,589) 177,910 For refundings ( 147.7041 8.206 ( 139.4981 Component units Long-term debt $ 8 055 000 $ 5 63fi.795 !$ 6.02A 3831 $ 7663 412 $ 470 000 Annual Requirements to Retire Debt Obligations The City intends to retire all of its general long-term liabilities, plus accrued interest, from ad valorem taxes and other current revenues. The proprietary fund type long-term debt will be repaid, plus accrued interest, from operating revenues of the Water and Sewer Fund. The annual aggregate maturities for each bond type for the years subsequent to September 30, 2006, are as follows: General Obligation Bonds Annual debt service requirements to maturity for general obligation bonds, including interest of $30,535,313 are as follows: 1. ,-�'. r r r r r �c7rkl�i��Sk�3GZ:I:Rb�r367 Governmental Activities Fiscal Year Ending September 30 Principal Interest Total 2007 6,135,000 3,584,875 9,719,875 2008 4,170,000 3,294,678 7,464,678 2009 4,365,000 3,112,901 7,477,901 2010 4,565,000 2,930,555 7,495,555 2011 4,765,000 2,744,961 7,509,961 2012-2016 27,005,000 10,309,052 37,314,052 2017-2021 22,250,000 4,124,741 26,374,741 2022-2026 5.045.000 433.550 5.478.550 1. ,-�'. r r r r r �c7rkl�i��Sk�3GZ:I:Rb�r367 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTES. LONG-TERM DEBT -CONTINUED Cerdficates of Obligation Annual debt service requirements to maturity for the Certificates of Obligation, including interest of $2,635,367 are as follows: Governmental Activities Fiscal Year Ending September 30 Pdncioal Interest Total 2007 $ 190,000 243,450 433,450 2008 200,000 233,625 433,825 2009 205,000 223,700 426,700 2010 220,000 213,325 433,325 2011 230,000 202,175 432,175 2012-2016 1,360,000 851,846 2,211,846 2017-2021 1,760,000 543,461 2,323,461 2022-2024 1.315.ODD 123.585 1.438.585 Total c . SM.00p E 2 fi35.367 E 8.135.367 Water and Sewer Revenue Bonds Revenue bond debt service requirements to maturity, including interest of $$6,971,785 are as follows: Business-tvpe Activities Fiscal Year Ending September 30 Principal Interest Total 2007 1,580,D00 862,757 2,442,757 2008 1,575,000 789,358 2,364,358 2009 1,035,000 709,408 1,744,408 2010 1,085,000 659,089 1,744,089 2011 1,145,000 605,278 1,750,278 2012-2016 5,735,DDG 2,196,846 7,931,846 2017-2021 4,125,000 942,119 5,067,119 2022-2025 1.910.000 206.930 2.116.930 Total E 18.190.000 $ 8 971 785 $ 25.161 765 Sales Tax and Revenue Bonds Sales Tax Revenue bond debt service requirements to maturity, including interest of $2,403,813 are as follows: Governmental Activities Fiscal Year Ending September 30 Principal Interest Total 2007 470,000 343,068 813,068 2006 495,000 318,305 813,305 2009 535,000 291,985 826,985 2010 570,000 266,410 836,410 2011 590,000 243,085 833,085 2012-2016 3,420,000 819,6&5 4,239,685 2017-2019 1.545.000 121.275 1.666.275 Total E 7825 000 $ 2403 813 $ 10$ 10 028 81 T81'{ 57 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30,20D6 NOTES. LONG-TERM DEBT—CONTINUED General Oblioation Bonds I I 1 The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities and infrastructure. During the year, $1,595,000 of general obligation bonds were issued to finance permanent public improvements and public purposes. The City is required by ordinance to create from ad valorem tax revenues a sinking fund sufficient to pay the current interest and principal installments as they become due. The Debt Service Fund has $1,293,711 available to service the general obligation debt at September 30, 2006. There are a number of limitations and restrictions Contained in the various general obligation bond indentures. The City is in compliance with all significant limitations and restrictions at September 30, 2006. A schedule of authorized but unissued direct General Obligation Bonds as of September 30, 2006, is as follows: Data of Amount Previously 2005 Tarim Body Authorization Purpose Authorimd Issued Issue Unissuad City of Allen 06-12-99 Fina Stn 8 Equip $ 4,900,000 $ 3,565,ODO $ 200,DOO $ 1,135,000 06-12-99 streets 20,500,000 20,309,500 190,500 D5-12-99 Drainage 1,5DO,ODD 1,365,000 135,000 06-12-99 Parks 22,DDO,000 20,099,DDD 1,260,000 651,000 11-05-02 Perforning Arta Center 19.500.000 2.786.500 .16.713.500 Total 568400000 $48.115000 E 1595 ono $18690.000 Debt Defeasance On March 15, 2006, Allen Community Development Corporation issued $5,600,000 in Sales Tax Revenue Refunding Bonds with an average interest rate of 3.92 percent to (i) advance refund $5,585,000 of Sales Tax Revenue Refunding Bonds Series 1997 and 1998, with an average interest rate of 4.82 percent and (ii) to pay the Costs of issuance of the bonds. The net proceeds were used to purchase U.S. Securities that were deposited in an irrevocable trust with an escrow agent in sufficient amounts to provide for all future payments of the refunded debt. As a result, the refunded debt is Considered defeased and the liability for those bonds has been removed from the Component Units Statement of Net Assets. ACDC Completed the advance refunding to reduce its total debt service payments over the next nine (9) years by $224,943 and to obtain an economic gain (difference between the present values of the old and new debt service payments) of $171,367. In prior years, the City legally defeased certain outstanding general obligation and revenue bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. 58 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30.2006 NOTES. LONG-TERM DEBT—CONTINUED Water and Sewer Revenue Bonds The City is required by the applicable revenue bond indentures to pledge the net revenues of the Water and Sewer Enterprise Fund for the retirement of its outstanding revenue bonds, including interest thereon, and is required to maintain debt service funds and bond reserve funds for all such bonds outstanding. Funds aggregating $946,655 at September 30, 2006 are restricted within the Water and Sewer Enterprise Fund for servicing of the debt. The respective bond indentures require the City to make equal monthly Payments to the restricted accounts to accumulate the annual principal and interest requirements as they become due. Water and Sewer Revenue Bonds and Refunding Bonds are payable solely from and, equally secured by, a first lien on and pledge of the net revenue of the City's combined waterworks and sanitary sewer systems. The ordinances authorizing the Revenue Bonds stipulate that the City will deposit, in addition to principal and interest requirements, certain amounts in a reserve fund. Amounts in the reserve fund are to be used to pay principal and interest on outstanding bonds at any time sufficient funds are not available in the bond interest and redemption fund. The bond indentures require that the City accumulate reserves to an amount equal to the average annual principal and interest requirements of all outstanding bonds secured by the net revenues of the system. Such reserves are funded up to the required level in equal monthly installments over a maximum five-year period, as defined in the indentures. Amounts in the reserve fund at September 30, 2006 of $2,814,241 are adequate to meet the reserve requirements. At September 30, 2006, restricted assets, which include Water and Sewer Revenue Bond Debt Service and Reserve Funds, were as follows: Revenue bond debt service $ 1,524,011 Revenue bond reserve fund 1.290.230 Retained earnings reserved for Water and Sewer revenue bond retirement is detailed as follows: Restricted assets, revenue bond debt Service and reserve funds $ 2,814,241 Accrued interest, payable from restricted assets ( 287,586) Current maturities of revenue bonds, payable from restricted assets ( 1.580.0001 Reserved for revenue bond principal and interest The City is in compliance with the various requirements of the bond ordinances. This covenant requires that operating revenues, as defined, cover the current debt requirement including principal and interest by a minimum of 1.2 times. Such coverage at September 30, 2006 was 5.2 times. 59 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTES. LONG-TERM DEBT—CONTINUED Capital Leases The City acquired office equipment under various leases accounted for as capital leases. These leases meet the criteria of a capital lease as defined by Statement of Financial Accounting Standards No. 13, .'Accounting for Leases", which defines a capital lease generally as one which transfers benefits and risks of ownership to the lessee. As of September 30, 2006, the capitalized costs of the Governmental leased property and Business -type leased property under capital leases were $632,755 and $296,790, respectively. The terms of the leases range from 3 - 5 years and call for monthly and annual payments over the life of the leases. The future minimum lease payments under the capitalized leases and the net present value of the future minimum lease payments at September 30, 2006 are as follows: Operating Leases The City leases machinery and equipment under noncancelable operating leases. Total costs for such leases were $72,255 for the fiscal year ended September 30, 2006. Future minimum lease payments, by year and in the aggregate, under the non -cancelable lease commitments are as follows: Fiscal Year Ending September 30, 2007 2008 2009 Total L'Pr Amount $ 70,868 70,073 92,884 $ 233,825 Governmental Activities Fiscal Year Ending September 3D. Principal Interest Total 2007 67,925 6,539 74,464 2008 57,698 2,662 60,360 2009 12,622 780 13,362 2010 3,893 343 4,236 2011 2.059 59 2.118 Total $ 144.197 $ 10.363 $ 154.560 Business -type Acth ifies Fiscal Year Ending September 30, Principal Interest Total 20D7 88,713 4,993 93,706 20118 36,063 1,491 37,554 2009 9,954 584 10,538 2010 5.186 83 5.269 Total 139.916 $ 7.151 $ 147.067 Operating Leases The City leases machinery and equipment under noncancelable operating leases. Total costs for such leases were $72,255 for the fiscal year ended September 30, 2006. Future minimum lease payments, by year and in the aggregate, under the non -cancelable lease commitments are as follows: Fiscal Year Ending September 30, 2007 2008 2009 Total L'Pr Amount $ 70,868 70,073 92,884 $ 233,825 CRY OF ALLEN, TEXAS NOTES TO FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTE S. INTERFUND RECEIVABLES AND PAYABLES ' The purpose of interfund receivables and payables is to record loans and transfers between funds. All balances are expected to be settled within one year. Due to/Due from other funds at September 30, 2006 consisted of the following individual fund receivables and payables: ' Fund Receivable Payable General Capital Projects General Fund $ 620,000 $ Golf Course General Fund 90,000 ' General Fund General Capital Projects 820,000 Golf Course 90.000 910.000 910.000 NOTE 7. INTERFUND TRANSFERS All interfund transfers between the various funds are approved supplements to the operations of ' those funds. Individual fund operating transfers for fiscal year 2006 were as follows: Fund Transfers In Transfers Out Major Governmental Funds: General Fund $ 2,339,600 $ 2,111,267 Non -Bond Capital Projects 1.268 600 35.000 Total Major Governmental Funds 3.628 200 2.146.267 Non -major Governmental Funds: Park Improvements Fund 31,425 3,632 Antenna Rental Fund 175,000 Parks & Recreation Special Revenue 175,000 150,000 Grants & Special Revenue 105.130 31,425 Total Non -major Governmental Funds 311.555 360.057 Major Enterprise Funds Water and Sewer Fund 10,290 2,182,633 Solid Waste Fund 48,078 Drainage Utility Fund 141,655 Golf Course Fund 707.000 8.712 Total Major Enterprise Funds $ 717.290 $ 2.381.078 61 CITY OF ALLEN, TEXAS NOTES TO FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTE 7. INTERFUND TRANSFERS -CONTINUED Fund TransfersIn Internal Service Funds: Replacement Fund $ 38,632 Risk Management Fund 191,725 Total Internal Service Funds 230.357 Total Transfers $ 4.867.402 Transfers Out Transfers are used to 1) move amounts from funds receiving administrative and operating support to the appropriate fund incurring the administrative and operating costs and 2) to move unrestricted funds to finance various programs that the City must account for in other funds in accordance with budgetary authorizations, including amounts provided as subsidies or matching funds for various grant programs and to support cash financing of capital projects. The fund financial statements show. Governmental funds: Total transfers in of $3,939,755 include funding for capital projects, grant matching funds, and reimbursement for operating and administrative costs incurred to provide technology, procurement, human resources, building maintenance, financial and administrative support- Transfers out totaling $2,506,324 include cash financing of capital projects, support of programs recorded in non -major governmental funds and internal service funds. Proprietary funds: Total transfers in of $717,290 mainly represent amounts transferred into the Golf Course to support operations. The total transfer out of $2,381,078 represents the amount provided by other funds for technology, procurement, human resources, building maintenance, financial and administrative support The Internal Service Funds total transfer in of $230,357 mainly represents the amounts needed for administrative support of the Risk Management Fund. Plan Description The City provides pension benefits for all of its full-time employees through a non-traditional, joint contributory, hybrid defined benefit plan in the state-wide Texas Municipal Retirement System (TMRS), one of 811 currently administered by TMRS, an agent multiple -employer public employee retirement system. Each of the 811 municipalities has an annual, individual actuarial valuation performed. All assumptions for the December 31, 2005 valuations are contained in the 2005 TMRS Comprehensive Annual Financial Report A copy of that report can be obtained by writing to: Texas Municipal Retirement System, P.O. Box 149153, Austin, Texas 78714-9153. 62 CITY OF ALLEN, TEXAS NOTES TO FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30. 2006 NOTE 6. RETIREMENT PLAN -CONTINUED Plan Description - continued Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the City - financed monetary credits, with interest At the date the plan began, the City granted monetary credits for service rendered before the plan began of a theoretical amount at least equal to two times what would have been contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service since the plan began are a percentage (100%, 150%, or 200%) of the employee's accumulated contributions. In addition, the City can grant, as often as annually, another type of monetary credit referred to as an updated service credit which is a theoretical amount which, when added to the employee's accumulated contributions and the monetary credits for service since the plan began, would be the total monetary credits and employee contributions accumulated with interest if the current employee contribution rate and City matching percent had allays been in existence and if the employee's salary had always been the average of his salary in the last three years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer -financed monetary credits with interest were used to purchase an annuity. The plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS. Plan provisions for the City were as follows (as of 4/19/06): Deposit Rate: 7% Matching Ratio (City to Employee): 2 to 1 A member is vested after 5 years ' Members can retire at certain ages, based on the years of service with the City. The Service Retirement Eligibilities for the City are: 5 yearslage 60; 20 years/any age. ' Contributions and Funding Policy Under the state law governing TMRS, the actuary annually determines the City contribution rate. This ' rate consists of the normal cost contribution rate and the prior service contribution rate, both of which are calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the currently accruing monetary credits due to the City matching percent, which are the obligation of the ' City as of an employee's retirement date, not at the time the employee's contributions are made. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the time his/her retirement becomes effective. The prior service contribution rate amortizes the unfunded (over funded) actuarial liability (asset) over the ' remainder of the plan's 25 -year amortization period. The unit credit actuarial cost method is used for determining the City contribution rate. Both the employees and the City make contributions monthly. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one-year t delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the rate goes into effect (i.e. December 31, 2005 valuation is effective for rates beginning January 2007). 1 63 CITY OF ALLEN, TEXAS NOTES TO FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTE 8. RETIREMENT PLAN — CONTINUED Contributions and Fundina Policy — continued Contributions by the City were $2,570,900 or 10.9% of the covered payroll of $23,580,572 as required by the actuarial valuation. Annual City TMRS pension cost and related information for the last three years is as follows, Annual Pension Fiscal Year Cost (APCI 2004 $1,943,352 2005 2,307,968 2006 2,570,900 Percentage of Net Pension APC Contributed Obligation 100% 0 100% 0 100% 0 Actuarial Assumptions Actuarial Cost Method — Unit Credit Amortization Method — Level Percent of Payroll Remaining Amortization Period — 25 Years— Open Period Asset Valuation Method — Amortized Cost Investment Rate of Return — 7% Projected Salary increases — None Includes Inflation At — 3.5% Cost -of -Living Adjustments — None Schedule of Fundina Progress December 31 Actuarial Valuation Date 2005 — 2004 2003 2002 2001 Actuarial value of assets $34,749,259$30,154,132 $26,378,242$23,100,250 $19,247,568 Actuarial accrued liability 41,257,545 36,451,050 33,315,146 28,115,556 24,411,638 Percentage funded 842% 83% 79% 82% 79% Unfunded (Over -funded) Actuarial Accrued Liability (UAAL) 6,508,286 6,296,918 6,936,904 5,015,406 5,164,070 Annual covered payroll 23,580,572 21,251,288 18,963,358 17,651,515 14,778,443 UAAL as a percentage of covered payroll 27.6% 30% 37% 28% 35% NOTE 9. WATER AND SEWER CONTRACTS In 1972, the City entered into a forty -year contract with the North Texas Municipal Water District (District) for the purchase of water. Under the terms of this contract, the City is obligated to make a minimum annual payment (adjusted annually) in return for a minimum volume of gallons of water per year. During 1998, the City was annexed into the North Texas Municipal Water District, which guaranteed the City a minimum volume of water. During the year ended September 30, 2006, the cost of water purchased under this contract was $4,754,388. M— I ' CITY OF ALLEN, TEXAS ' NOTES TO FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2006 NOTE 9. WATER AND SEWER CONTRACTS- CONTINUED In 1978, the City entered into a contract with the District for the transportation, treatment and disposal of sanitary sewage and other waste. The contract will continue in force at least until all bonds issued by the District pursuant to the contract have been paid in full and will remain in force thereafter throughout the useful life of the District's sanitary sewer system. The contract requires the City to pay varying amounts based on the costs associated with sewage transported and/or treated and disposed of. The cost includes the City's proportionate share of the District's operating and maintenance expenses and related debt service costs. During 2006, the cost for transportation, treatment and disposal of sewage and other wastes was $3,701,652. NOTE 10. DEFERRED COMPENSATION PLAN As a result of legislative changes, all amounts of compensation deferred, all property and rights purchased, and all income, property or rights are (until paid or made available to the employee or other beneficiary) held in trust for the exclusive benefit of the participants and their beneficiaries, whereas, prior to these legislative changes, these amounts were solely the property and rights of the City subject only to the claims of the City's general creditors. As a result, at September 30, 2006, the deferred compensation investments are not reported in the City's financial statements. NOTE 11. RISK MANAGEMENT ' Health and Dental Insurance ' The City provides health and dental insurance benefits to City employees under a modified self-insurance plan. Under the plan, the City and the employee pay a portion of a predetermined monthly premium, which is based on the estimated claims cost for the plan and the extent of medical coverage selected by the employee. To cover annual costs, premium payments are reported as operating revenues of the Risk Management Fund and operating expenditures/expenses of the participating funds. A commercial insurance carrier is utilized to adjudicate and pay medical claims on behalf of the City. The ' City's liability is limited by an excess ('stop loss') insurance policy covering individual claims in excess of $100,000 per person. Throughout the policy year, the 'stop loss' insurance carder reimburses the City for claims paid during the policy year which exceeded the "stop loss' amount A commercial insurance company re -insures the City for individual claims in excess of up to a lifetime maximum of $2,000,000. ' Workers Compensation Property and Liability Insurance ' The City participates in the Texas Municipal League Intergovernmental Risk Pool ('TMLIRP") for workers' compensation claims, liability (general, automobile, law enforcement, and emors/omissions), and property insurance. The cost is based on the pool's claims cost, which is adjusted to reflect the City's individual claims experience. As claims arise they are submitted to and paid by TMLIRP. To cover annual costs, ' premium payments are reported as operating revenues of the Risk Management Fund and operating expenditures/expenses of the participating funds. ' The City has a workers' compensation deductible of $25,000 per occurrence, with an annual aggregate deductible of $400,000. During 2006, the City contributed $617,813 to the Risk Management Fund for workers' compensation. ' 65 CITY OF ALLEN, TEXAS NOTES TO FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30. 2006 NOTE11. RISK MANAGEMENT -CONTINUED I I 1 The City has a wide range of deductibles for property, liability, and automobile with the maximum deductible at $10,000. All insured claims are paid by TMLIRP, less the appropriate deductible. During 2006, the City contributed $445,001 for property and general liability. The liabilities for insurance claims reported are based on GASB No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. These liabilities include an estimate for incurred but not reported claims. The estimated amount at September 30, 2006 was $515,021. Changes in the Risk Management liability during the past five fiscal years were as follows: Current Year Balance at Claims and Balance at Year Ending Beginning of Changes in Claim End of September 30, Fiscal Year Estimates Payments Racal Year 2002 $ 307,765 $ 2,467,587 $ 2,472,106 $ 303,246 2003 303,246 3,011,365 2,952,591 362,020 2004 362,020 3,827,089 3,764,493 424,616 2005 424,616 4,506,755 4,404,086 527,285 2006 527,285 4,347,042 4,359,306 515,021 NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES Federal Grants The City participates in a number of State and federally assisted grant programs. Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the City expects such amounts, if any, to be immaterial. Litigation The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, it is the opinion of the City's Council that resolution of these matters will not have a material adverse effect on the financial condition of the City. Economic Development Grant The City has entered into an economic development agreement whereby it has agreed to pay a grant to a developer in retum for the developer designing, constructing, operating, and managing a retail shopping center. The grant is calculated at $22 per gross leasable square feet up to a maximum of 458,000 square feet The grant is payable solely from sales tax receipts imposed by the City, AEDC, and ACDC, attributed only to sales by retailers at the retail shopping center for a period not to exceed 15 years from the date of certificate of occupancy. If the developer has not completed a minimum of 418,000 square feet by January 2007, then the City is no longer obligated to make any future grant payments. The developer had completed construction of 401,249 square feet of the retail shopping center as of September 30, 2006. 09 REQUIRED SUPPLEMENTARY INFORMATION a�SpecT • 'Air fc n A rt m x n Clrr OF PU%'E- CITY OF ALLEN, TEXAS EXHIBIT A-1 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2006 EXPENDITURES Transfers from otter funds 2,411,600 2,408,600 VARIANCE WITH Current BUDGETED AMOUNTS Transfers to other funds FINALBUDGET- (1,086,267) General government 7,959,340 7,616,133 POSITIVE 322,545 ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Public vrorks 3,199,644 3,405,187 3,257,485 Ad valorem taxes, penalties and interest $ 19,828,714 $ 19,833,731 $ 19,727,993 $ (105,738) Franchise taxes 3,868,059 4,695,623 5,520,215 824,592 Municipal sales tax 8,373,710 9,033,250 9,230,206 196,956 Licenses, permits and fees 1,487,260 1,604,600 1,732,374 127,774 Charge for services 1,283,152 1,285,506 1,447,878 162,372 Court fines 1,540,720 1,317,683 1,506,429 188,746 Gifts and contributions 2,000 5,150 78,370 73,220 Investment earnings 337,613 426,000 789,876 363,876 Miscellaneous 437,756 470,367 498,658 28,291 Total revenues 37,158,974 38,671,910 40,531,999 1,860,069 EXPENDITURES Transfers from otter funds 2,411,600 2,408,600 2,339,600 Current ' Transfers to other funds (608,60D) (1,086,267) General government 7,959,340 7,616,133 7,293,588 322,545 Public safety 17,722,985 18,253,652 18,124,797 128,855 Public vrorks 3,199,644 3,405,187 3,257,485 147,702 Culture and recreation 8,900,255 9,136,481 8,750,856 385,625 Community development 1,766,114 1,765,051 1,723,126 41,925 Total expenditures 39,548,338 40,176,504 39,149,652 1,026,652 Excess (deficiency) of revenues FUND BALANCES, END OF YEAR $ 8,848,811 $ over expenditures (2,389369) (1,504,594) 1,382,147 2,886,741 OTHER FINANCING SOURCES (USES) Transfers from otter funds 2,411,600 2,408,600 2,339,600 (69,000) ' Transfers to other funds (608,60D) (1,086,267) (2,111,267) (1,025,000) Capital lease obligations 65,944 65944 Sale of capital assets 319,643 380,634 60,991 ' Total other financing sources (uses) 1,803,000 1,641,976 674,911 (967,065) NET CHANGE IN FUND BALANCE (586,369) 137,382 2,057,058 1,919,676 ' FUND BALANCES, BEGINNING OF YEAR 9,435,175 9,435,175 9,435,175 FUND BALANCES, END OF YEAR $ 8,848,811 $ 9,572,557 $ 11,492,233 $ 1,919,676 ' 67 CITY OF ALLEN, TEXAS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED SEPTEMBER 30, 2006 BUDGETARY INFORMATION The City Council adheres to the following procedures in establishing the budgets reflected in the financial statements: 1. Each year the City Manager is required to submit to the City Council a proposed budget for the fiscal year beginning on the following October 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayers' comments. 3. Prior to October 1, the budget is legally enacted by the City Council through passage of an ordinance. 4. Annual budgets are legally adopted for the General Fund and Debt Service Fund on a basis consistent with accounting principles generally accepted in the United States of America. Formal budgetary integration is not employed for proprietary funds. However, the City does adopt an annual budget for those funds for managerial control. 5. The City Manager is authorized to adjust budgeted amounts; however, such revisions may not result in total expenditures (appropriations) in excess of budgeted expenditures without approval of the City Council. Therefore, the legal level of budgetary control is total budgeted expenditures. 6. Formal budgetary integration is not employed for Special Revenue Funds, Proprietary Funds or Capital Projects Funds. However, the City does adopt an annual budget for those funds for managerial control. 7. Budgetary data for the Special Revenue Funds and Capital Projects Funds has not been presented in the accompanying basic financial statements as such funds are budgeted over the life of the respective grant or project and not on an annual basis. Budgetary information for the Proprietary Funds has not been presented since reporting on such budgets is not legally required. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual — General Fund presents a comparison of budgetary data to actual results. The General Fund utilizes the same basis of accounting for both budgetary purposes and actual results. M.- 1 1 1 '1 1 1 1 ' COMBINING AND INDIVIDUAL FUND ' STATEMENTS AND SCHEDULES a�SpgGT # I NTFG C,TY GF o" MAJOR GOVERNMENTAL FUNDS GENERALFUND The General Fund is used to account for resources associated with traditional governmental functions that are not required legally or by sound financial management to be accounted for in another fund. DEBT SERVICE FUND The Debt Service Fund is used to account for the accumulation of resources for and the payment of general obligation bonds, certificate of obligation bonds, and interest from governmental resources. MAJOR SPECIAL REVENUE FUND The Special Revenue Funds account for the proceeds of specific revenue sources (other than expendable trust or capital projects) that are legally restricted to expenditures for specific purposes. The City classifies the following Special Revenue Fund as a major fund: Facilities Agreement Fund — To account for funds received from builders and developers used on specific facility agreements such as neighborhood parks, paving and assessments in new developments. MAJOR CAPITAL PROJECTS FUNDS The Capital Projects Funds account for all resources used for the acquisition and/or construction of major capital facilities by the City, except those financed by proprietary funds and trust funds. The following Capital Projects Funds are classified as major funds: General Capital Projects Fund — To account for the acquisition and/or construction of capital facilities and infrastructure, except those financed by proprietary and trust funds and not accounted for by the other capital project funds. Pmceeds from nonrecurring revenue sources are allocated to this fund. General Obligation Bond Fund — To account for bond proceeds used for financing, acquisitions, and construction of improvements to City facilities and infrastructure not accounted for by other bond funds. Proceeds from the sale of general obligation bonds provide financing for this fund. CITY OF ALLEN, TEXAS GENERALFUND COMPARATIVE BALANCE SHEETS SEPTEMBER 30, 2006 AND 2005 ASSETS Cash and cash equivalents Investments Receivables: Ad valorem taxes (net of allowances for uncollectibles of $220,791 in 2006 and $173,676 in 2005) Sales taxes Accrued interest Other Prepaid items TOTAL ASSETS LIABILITIES AND FUND BALANCE LIABILITIES Accounts payable Aamed liabilities Due to other funds Deferred revenue TOTAL LIABILITIES FUND BALANCES Reserved for prepaid items Unreserved, undesignated TOTAL FUND BALANCES TOTAL LIABILITIES AND FUND BALANCE 70 EXHIBIT B-1 2006 2005 $ 5,764,838 $ 903,616 6,169,000 8,877,403 508,305 262,202 1,625,234 1,369,666 25,158 27,097 1,364,218 529,976 1,250 7,796 1,250 7,796 $ 15,458,003 $ 11,977,756 $ 1,308,438 $ 1,083,165 1,239,027 1,097,214 910,000 100,000 508,305 262,202 3965,770 2,542,581 1,250 7,796 11,490,983 9,427,379 11,492,233 9,435,175 $ 15,458,003 $ 11,977,756 ' CITY OF ALLEN, TEXAS EXHIBIT &2 ' GENERALFUND COMPARATIVE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEARS ENDED SEPTEMBER 30, 2006 AND 2005 1 2006 2005 REVENUES ' Ad valorem taxes, penalties and interest $ 19,727,993 $ 17,473,438 Franchise taxes 5,520,215 3,912,115 Municipal sales tax 9,230,206 7,815,949 ' Licenses, permits and fees 1,732,374 1,402,565 Charge for services 1,447,878 1,399,831 Court fines 1,506,429 1,669,687 Gifts and contributions 78,370 76,790 ' Investment earnings 789,876 180,172 Miscellaneous 498,658 613,098 Total revenues 40,531,999 34,543,645 EXPENDITURES Current: ' General government 7,293,588 6,785,161 Public safety 18,124,797 16,190,179 ' Public works Culture and recreation 3,257,485 8,750,856 2,926,473 6,244,521 Community development 1,723,126 1,693,019 Total expenditures 39,149,852 33,839,353 Excess of revenues over expenditures 1,382,147 704,292 ' OTHER FINANCING SOURCES AND (USES) Transfers from other funds 2,339,600 2,266,104 Transfers to other funds (2,111,267) (2,155,144) ' Capital lease obligations 65,944 140,863 Sale of capital assets 380,634 52,484 ' Total other financing sources 674,911 304,307 NET CHANGE IN FUND BALANCES 2,057,058 1,008,599 ' FUND BALANCE, BEGINNING OF YEAR 9,435,175 8,426,576 FUND BALANCE, END OF YEAR $ 11,492,233 $ 9,435,175 1 71 ASSETS: Cash and cash equivalents Investments Receivables: Ad valorem taxes (net of allowances for uncollectibles of $133,426 in 2006 and $103,600 in 2005) Accrued interest receivable Other receivables Total assets LIABILITIES AND FUND BALANCES: LIABILITIES Deferred revenue Total liabilities FUND BALANCE Reserved for debt service TOTAL LIABILITIES AND FUND BALANCE 72 $ 183,319 $ 1,510,128 1,099,854 245,110 151,798 8,732 1,806 2,203 $ 1,536,821 $ 1,664,129 $ 245,110 $ 151,798 245,110 151,798 1,293,711 1,512,331 $ 1,538,821 $ 1,664,129 CITY OF ALLEN, TEXAS EXHIBIT B-3 ' DEBT SERVICE FUND COMPARATIVE BALANCE SHEETS ' SEPTEMBER 30, 2006 AND 2005 2006 2005 ASSETS: Cash and cash equivalents Investments Receivables: Ad valorem taxes (net of allowances for uncollectibles of $133,426 in 2006 and $103,600 in 2005) Accrued interest receivable Other receivables Total assets LIABILITIES AND FUND BALANCES: LIABILITIES Deferred revenue Total liabilities FUND BALANCE Reserved for debt service TOTAL LIABILITIES AND FUND BALANCE 72 $ 183,319 $ 1,510,128 1,099,854 245,110 151,798 8,732 1,806 2,203 $ 1,536,821 $ 1,664,129 $ 245,110 $ 151,798 245,110 151,798 1,293,711 1,512,331 $ 1,538,821 $ 1,664,129 CITY OF ALLEN, TEXAS EXHIBIT B-0 DEBT SERVICE FUND COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEARS ENDED SEPTEMBER 30, 2006 AND 2005 REVENUES Ad valorem taxes Investment earnings Total revenues EXPENDITURES Principal retirement Interest and fiscal charges Total expenditures Deficiency of revenues over expenditures OTHER FINANCING SOURCES AND (USES) Issuance of refunding bonds Premium on issuance of bonds Payment to refund bond escrow agent Total other financing sources NET CHANGE IN FUND BALANCES FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR 1493 2006 $ 9,600,260 178,792 9,79,052 4,725,670 5,272,002 9,997,672 (218,620) 2005 $ 9,841,387 138,100 9,979,487 4,563,251 5,564,814 10,128,065 (148,578) 32,330,000 1,567,354 (33,77,702) 119,652 (218,620) (28,926) 1,512,331 1,541,257 $ 1,293,711 $ 1,512,331 CITY OF ALLEN, TEXAS EXHIBIT B-5 DEBT SERVICE FUND BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED SEPTEMBER 30, 2006 74 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Ad valorem taxes $ 9,647,588 $ 9,712,586 $ 9,600,260 $ (112,328) Investment earnings 178,570 193,470 178,792 (14,678) Total revenues 9,826,158 9,906,058 9,779,052 (127,006) EXPENDITURES Principal retirement 4,725,670 4,725,670 4,725,670 Interest and fiscal charges 5,272,537 5,272,937 5,272,002 935 Total expenditures 9,998,2117 9,998,607 9,997,672 935 NET CHANGE IN FUND BALANCES (172,049) (92,549) (218,620) (126,071) FUND BALANCE, BEGINNING OF YEAR 1,512,331 1,512,331 1,512,331 FUND BALANCE, END OF YEAR $ 1,340,282 $ 1,419,782 $ 1,293,711 $ (126,071) 74 CITY OF ALLEN, TEXAS EXHIBIT B$ FACILITIES AGREEMENT FUND COMPARATIVE BALANCE SHEETS SEPTEMBER 30, 2006 AND 2005 ASSETS Cash and cash equivalents Investments Accrued interest receivable Total assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable Retainage payable Deferred revenue Total liabilities FUND BALANCES Reserved for encumbrances Unreserved, undesignated Total fund balances Total liabilities and fund balances 75 2006 2005 $ 5,728,521 $ 1,335,754 1,320,499 5,454,581 10,483 16,649 $ 7,059,503 $ 6,806,964 $ 38,134 $ 127,161 21,068 30,532 4,173,884 4,169,347 4,233,086 4,327,040 545,426 460,759 2,280,991 2,019,185 2,826,417 2,479,944 $ 7,059,503 $ 6,806,984 CITY OF ALLEN, TEXAS EXHIBIT B-7 FACILITIES AGREEMENT FUND COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEARS ENDED SEPTEMBER 30, 2006 AND 2005 REVENUES Gifts and contributions Investment earnings Intergovernmental Total revenues EXPENDITURES Capital outlay Total expenditures NET CHANGE IN FUND BALANCES FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR 76 2006 2005 $ 448,159 $ 1,002,509 346,473 84,839 175,000 794,632 1,262,348 448,159 448,159 346,473 2,479,944 $ 2,826,417 1,002,509 1,002,509 259,839 2,220,105 $ 2,479,944 CITY OF ALLEN, TEXAS GENERAL CAPITAL PROJECTS FUND COMPARATIVE BALANCE SHEETS SEPTEMBER 30.2006 AND 2005 ASSETS Cash and cash equivalents Investments Accrued interest receivable Special assessments receivable Due from other funds Total assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable Retainage payable Accrued liabilities Total liabilities FUND BALANCES Reserved for encumbrances Unreserved, designated Total fund balances Total liabilities and fund balances 77 EXHIBIT B-8 2006 2005 $ 3,325,456 $ 1,844,932 3,119,786 7,375,601 24,768 22,513 187,557 187,557 820,000 155,000 $ 7,477,567 $ 9,585,603 $ 194,479 $ 935,437 287,112 237,864 622,326 589,150 1,103,917 1,762,451 1,449,765 4,212,487 4,923,885 3,610,665 6,373,650 7,823,152 $ 7,477,567 $ 9,585,603 CITY OF ALLEN, TEXAS GENERAL CAPITAL PROJECTS FUND COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEARS ENDED SEPTEMBER 30, 2006 AND 2005 REVENUES Charges for services IMer9ovemmental Investment earnings Gifts and contributions Miscellaneous Total revenues EXPENDITURES General government Capital outlay Total expenditures Deficiency of revenues over expenditures OTHER FINANCING SOURCES (USES) Transfers from other funds Transfers to other funds Total other financing sources (uses) NET CHANGE IN FUND BALANCES FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR 78 EXHIBIT B-9 2006 2005 $ 593,749 $ 795,898 1,882,50D 1,653,715 368,414 224,377 23,326 303,098 251,075 3,147,761 2,948,391 143,277 229,683 5,707,586 6,247,141 5,850,863 6,476,824 (2,703,102) (3,528,433) 1,288,600 580,652 (35,000) (6,872,228) 1,253,600 (6,291,576) (1,449,502) (9,820,009) 7,823,152 17,643,161 $ 6,373,650 $ 7,823,152 CITY OF ALLEN, TEXAS EXHIBIT B-10 GENERAL OBLIGATION BOND FUND COMPARATIVE BALANCE SHEETS SEPTEMBER 30, 2006 AND 2005 ASSETS Cash and cash equivalents Investments Accrued interest receivable Total assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable Retainage payable Total liabilities FUND BALANCES Reserved for encumbrances Unreserved, undesignated Total fund balances Total liabilities and fund balances 79 2006 2005 $ 1,782,836 $ 1,016,447 1,528,373 2,710,768 12,134 8,274 $ 3,323,343 $ 3,735,489 $ 5,677 $ 523,291 136,448 286,208 142,325 809,499 2,563 548,688 3,178,455 2,377,302 3,181,018 2,925,990 $ 3,323,343 $ 3,735,489 CITY OF ALLEN, TEXAS EXHIBIT B-11 GENERAL OBLIGATION BOND FUND COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES SEPTEMBER 30, 2006 AND 2005 REVENUES Investment earnings Total revenues EXPENDITURES General government Capital outlay Total expenditures Deficiency of revenues over expenditures OTHER FINANCING SOURCES Issuance of debt Total other financing sources NET CHANGE IN FUND BALANCES FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR Z9 2006 2005 $ 134,262 $ 106,536 134,262 106,536 918,126 540,369 556,108 3,031,702 1,474,234 3,572,071 (1,339,972) (3,465,535) 1,595,000 1,595,000 255,028 (3,465,535) 2,925,990 6,391,525 $ 3,181,018 $ 2,925,990 I ' NON -MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS ' The Special Revenue Funds account for the proceeds of specific revenue sources (other than expendable trust or capital projects) that are legally restricted to expenditures for specific purposes. Non -major Special Revenue Funds are as follows: Antenna Rental Fund —To account for funds received and expended for capital items for the City. Hotel Occupancy Tax Fund — To account for funds received from hotel occupancy tax and expend as ' allowed by state law. Asset Forfeiture Fund — To account for activities associated with assets legally seized and forfeited. ' Grants and Special Revenue Fund — To account for monies received from other governmental agencies that have restricted legal requirements and multi-year budgets. ' Parks and Recreation Fund — To account for the provision of recreation services to the residents of the City, account for the operations and maintenance of the City's leisure and competitive swimming pools and to account for funds received and expended for the City of Allen swim team activities. ' Library Acquisition Fund — To account for funds received and expended for the acquisition of library books and other resources. ' Park Dedication Fund — To account for funds received and expended for the acquisition of additional park land and for the development of neighborhood parks. H CAPITAL PROJECTS FUNDS The Capital Pmjects Funds account for all resources used for the acquisition and/or construction of major t capital facilities by the City, except those financed by proprietary funds and trust funds. The following Capital Projects Funds are classed as non -major funds: ' Certificates of Obligation Fund — To account for the acquisition of Chase Oaks Golf Course, related facilities, personal property and improvements to the course. Street Improvements Fund — To account for the financing and construction of improvements to and the ' extension of the City's streets. The construction is financed primarily by the proceeds of general obligation bonds and interest on investments. ' Park Improvements Fund — To account for the financing, improvements, and enlargements of the City's parks. These improvements and enlargements are funded by general obligation bond proceeds and interest on investments. ' Library Fund — To account for the financing, construction and furnishing of library facilities with the proceeds of general obligation bonds and interest on investments. 1 81 CITY OF ALLEN, TEXAS NON -MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET SEPTEMBER 30,2008 ASSETS Cash and cash equivalenle Investments Accounts receivable Awrued interest TOTALASSETS LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable Retainage payable Aw ed liabilities Defert revenue TOTAL LIABILITIES FUND BALANCES Reserved for enwmbrances Unreserved TOTAL FUND BALANCES TOTAL LIABILITIES AND FUND BALANCES SPECIAL REVENUE GRANTS HOTEL AND PARKS ANTENNA OCCUPANCY ASSET SPECIAL AND RENTAL TAX FORFEITURE REVENUE RECREATION $ 181,389 $ 153,858 $ 23,257 $ 133,929 $ 394,446 50,847 144,684 1,864 $ 181,389 $ 204.705 $ 23,257 $ 278,613 $ 396.310 S $ 22,987 $ $ 42,952 S 11,584 7,083 15,241 41,413 32,724 22,987 7,083 90,917 52,997 22,405 181,389 181,718 16,174 165,291 343,313 181,389 181,718 16,174 187,696 343,313 $ 181,389 $ 204,705 S 23257 $ 278.613 $ 396.310 82 EXHIBIT 61 CAPITAL PROJECTS TOTAL CERTIFICATES NON -MAJOR LIBRARY PARK OF STREET PARK GOVERNMENTAL ACQUISI11ON DEDICATION OBLIGATION IMPROVEMENTS IMPROVEMENTS LIBRARY FUNDS $ 248,768 $ 1,268,467 $ $ 319,930 S 510,267 $ $ 3,234,311 1,02103 510,231 756,201 2,288,315 8,113 205,508 4,051 6,003 10,054 $ 248,768 $ 2,298,453 $ $ 834,212 $ 1272,471 $ $ 5,738,188 $ $ 2,660 $ $ 3,411 S 4,442 $ $ 88,036 62,417 278 62,695 63,737 32,724 2,660 65,828 4.720 247,192 2,017 115,308 20,268 159,998 248,768 2293,786 653,076 1,247,483 5,330,998 248,768 2295,803 768,380 1,267,751 5,490,996 $ 248,768 $ 2,298,463 $ $ 834,212 E 1,272,471 $ $ 5,738,188 83 CITY OF ALLEN, TEXAS NON -MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED SEPTEMBER 30, 2006 Hotel I motel taxes Recreation fees Gifts and contributions Intergovernmental Investment earnings Miscellaneous Total revenues EXPENDITURES General government Public safety Public works Culture and recreation Community development Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures OTHER FINANCING SOURCES (USES) Transfers from other funds Transfers to other funds Sale of capital assets Total other financing sources (uses) NET CHANGE IN FUND BALANCES FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR 411,489 SPECIAL REVENUE 2,140,496 GRANTS HOTEL AND PARKS 1,479,285 ANTENNA OCCUPANCY ASSET SPECIAL AND 18,188 RENTAL TAX FORFEITURE REVENUE RECREATION REVENUES 417,280 3,209 1663,753 2,462,714 Franchise taxes $ $ $ $ 42,041 $ Licenses, permits, and fees 303,748 35,954 628,830 Court fines 125,296 Hotel I motel taxes Recreation fees Gifts and contributions Intergovernmental Investment earnings Miscellaneous Total revenues EXPENDITURES General government Public safety Public works Culture and recreation Community development Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures OTHER FINANCING SOURCES (USES) Transfers from other funds Transfers to other funds Sale of capital assets Total other financing sources (uses) NET CHANGE IN FUND BALANCES FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR I:r 411,489 2,140,496 173,560 1,479,285 4,305 5,791 733 17,131 18,188 2,476 130,470 308,053 417,280 3,209 1663,753 2,462,714 133,752 35,954 628,830 36,442 70,239 348,434 37,719 2,324,591 192,750 614,059 70,239 348,434 35,954 1,643,552 2,324,591 237,814 68,846 (32,745) 20,201 138,123 105,130 175,000 (175,000) (31,425) (150,000) 22,679 (175,000) 22,679 73,705 25,000 62,814 68,846 (10,066) 93,906 163,123 118,575 112,872 26,240 93,790 180,190 $ 181,389 $ 181,718 $ 16,174 $ 187,696 $ 343,313 I:r 'I EXHIBIT C-2 ' CAPITAL PROJECTS 85 t TOTAL ' LIBRARY PARK CERTIFICATES OF STREET PARK NON -MAJOR GOVERNMENTAL ACQUISITION DEDICATION OBLIGATION IMPROVEMENTS IMPROVEMENTS LIBRARY FUNDS $ $ $ $ $ $ $ 42,041 793,105 1,096,863 125,296 411,489 2,140,496 9,519 183,079 1,479,285 10,663 82,644 47,849 107,180 1,477 295,761 1,341 134.287 20,182 875,749 1,341 47,649 107,180 1,477 5,908.587 ' 1,524 20DW 155,276 664,784 7,629 44,271 6,281 2,787,264 ' 7,240 199,990 259,355 34.967 397.348 1,579,428 66,353 2.951,510 ' 1,524 279,355 42.207 405.177 1,585,709 66,353 6.803,095 18.658 596,394 (40,866) (357,528) (1,478,529) (64,876) (894.508) ' 31,425 311,555 (3,632) (360,057) ' 22.679 27,793 (25,823) ' 18,658 596,394 (40,866) (357,528) (1,450,736) (64,876) (920,331) 230,110 1,699,409 40,866 1.125,912 2,718,487 64.876 6,411,327 t$ 248,768 $ 2,295,803 $ $ 768,384 $ 1,267,751 $ $ 5,490.996 85 t 5"CT * "VrpC C/ry OF Ab�.rc•_ MAJOR ENTERPRISE FUNDS 1 The Enterprise Funds are used to account for operations that are financed and operated in a manner similar ' to private business enterprises, where the intent is that the costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges, or where the City's council has decided that periodic determination of net income is appropriate for accountability ' purposes. Water and Sewer Fund — To account for the provision of water and sewer services to the residents of the City. ' Solid Waste Fund — To account for the provision of solid waste services to the residents of the City. ' Drainage Fund — To account for the provision of developing and maintaining proper drainage services to the residents of the City. Golf Course Fund — To account for activities associated with the operations of the Chase Oaks Golf Course ' purchased by the City in October 2004. t 1 87 CITY OF ALLEN, TEXAS WATER AND SEWER ENTERPRISE FUND COMPARATIVE STATEMENTS OF NET ASSETS SEPTEMBER 30, 2006 AND 2005 EXHIBIT D-1 2008 2005 ASSETS CURRENT ASSETS Cash and cash equivalents $ 10,070,114 $ 7,007,291 Investments 9,853,578 11,820,693 Receivables, net of allowance for uncollectibles: Accounts 3,331,872 4,287,336 Accrued interest 54,410 36,082 Inventories 141,509 74,674 Restricted cash and cash equivalents 2,814,241 2,063,465 Total current assets 26,265,724 25,289,541 CAPITALASSETS Land 3,327,730 874,042 Towers, tanks, and pump stations 116,145,466 105,762,186 Vehicles 725,314 751,878 Machinery and equipment 2,469,928 2,104,071 Furniture and fodures 11,114 8,187 Construction in progress 6,278,198 5,450,071 Total capital assets 128,957,750 114,950,435 Less: accumulated depreciation (36,143,546) (32,121,752) Capital assets, net of accumulated depredation 92,814,204 82,828,683 DEFERRED CHARGES - bond issuance costs, net of amortization 161,311 170,990 TOTAL ASSETS 119,241,239 108,289,214 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable 2,075,028 1,565,370 Acwed liabilities 360,936 331,126 Payable from restricted assets: Revenue bonds payable - current 1,580,000 1,545,000 Accrued interest payable 287,586 290,418 Accrued compensated absences - current 124,583 112,956 Customer deposits payable 1,250,584 1,193,552 Total current liabilities 5,678,717 5,058,422 NON-CURRENT LIABILITIES Revenue bonds payable 16,523,436 18,095,665 Accrued compensated absences 49,793 107,485 Total non-cunent liabilities 16,573,229 18,203,130 TOTAL LIABILITIES 22,251,946 23,261,552 NET ASSETS Invested in capital assets, net of related debt 77,878,785 69,826,085 Restricted Restricted for revenue bond principal and interest 946,656 228,047 Unrestricted 18,163,852 14,973,530 TOTAL NET ASSETS $ 96,989,293 $ 85,027,662 88 CITY OF ALLEN, TEXAS EXHIBIT D-2 WATER AND SEWER ENTERPRISE FUND COMPARATIVE STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS SEPTEMBER 30, 2006 AND 2005 2006 2005 OPERATING REVENUES Water sales $ 15,189,548 $ 12,660,109 Sewer charges 6,786,694 5,892,969 Connection fees 269,051 262,461 Service charges 638,541 547,168 Miscellaneous 47,260 65,485 Total operating revenues 22,931,094 19,428,212 OPERATING EXPENSES Personnel services 2,725,162 2,699,435 Contractual and other services 9,810,399 8,542,403 Maintenance 212,249 180,054 Supplies 109,319 122,035 Depreciation and amor8ution 4,087,222 3,639,895 Other 127,661 138,691 Total operating expenses 17,072,012 15,322,513 OPERATING INCOME 5,859,082 4,105,699 NON-OPERATING REVENUES (EXPENSES) Interest income 923,966 167,208 Interest expense (906,632) (809,574) Development fees 1,753 041 1,089,345 Total non-operating expense 1,770 375 446,979 INCOME BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS 7,629,457 4,552,678 CAPITAL CONTRIBUTIONS AND TRANSFERS Capital contributions 6,504,517 6,823,517 Transfers from other funds 10,290 6,912,235 Transfers to other funds (2,182,633) (2,118,475) Total capital contributions and transfers 4,332,174 11,617,277 CHANGE IN NET ASSETS 11,961,631 16,169,955 NET ASSETS, BEGINNING OF YEAR 85,027,662 68,857,707 NET ASSETS, END OF YEAR $ 96,989,293 $ 85,027,662 liz CITY OF ALLEN, TEXAS EXHIBIT D-3 WATER AND SEWER ENTERPRISE FUNDS COMPARATIVE STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2006 AND 2005 2006 20D5 CASH. FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 23,886.558 $ 17,713,207 Cash paitl to employees for services (2,771,207) (2,552,845) Cash paid for goods and services (9,749,963) (9,099,117) Net cash provided by operating activities 11,365,388 6,061,245 CASH FLOWS. FROM. NON -CAPITAL FINANCING ACTIVITIES Transfers from other funds 10,290 6,912,235 Transfers to other funds (2,182,633) (2,118,475) Net cash provided used in non -capital financing activities (2,172,343) 4,793,760 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid on revenue bond maturities (1,545,000) (1,340,000) Proceeds from issuance of bonds 4,251,774 Interest and fees paid on long-term debt (901,693) (776,769) Acquisition and construction of capital assets (7,558,547) (5,860,620) Contributions from developers 1,753,041 1,089,345 Net cash provided by (used in) caphal and related financing activities (8252,199) (2,636,270) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investment securities (9,959,693) (11,82D,893) Proceeds from the sale and maturities of investment securities 12,235,393 5,975,346 Interest on investments 797,053 150,628 Net cash provided by (used in) investing activities 2,872,753 (5,694,719) NET INCREASE IN CASH AND CASH EQUIVALENTS 3,813,599 2,524,016 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 9.070,756 6,546,740 CASH AND CASH EQUIVALENTS, END OF YEAR $ 12.864,355 $ 9,070,756 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net Operating income $ 5,859,082 $ 4,105,699 Adjustmentsto reconcile net operating income to net cash provided by operating activities: Depreciation and amortization expense 4,087,222 3,633,477 Change in assets and liabilities' (Increase) decrease in accounts receivable 955,464 (1,715,005) (Increase) decrease in inventories (66,835) 10,395 Increase (decrease) in accounts payable 489,658 (402,704) Increase in accrued liabilities 29,810 222,098 Increase (decrease) in compensated absences (46,045) 146,590 Increase in utility deposits 57,032 60,695 Total adjustments 5.506,306 1,955,546 Net cash Provided by operating activities $ 11.365,388 $ 6,061,245 NON-CASH INVESTING ACTIVITIES: Change in the fair value of investments $ 106,585 $ (214,700) NON-CASH FINANCING ACTIVITIES' Cmtributions of capital assets from developers $_ _ 6,504,517 $ 6,823,517 90 CITY OF ALLEN, TEXAS SOLID WASTE ENTERPRISE FUND COMPARATIVE STATEMENTS OF NET ASSETS SEPTEMBER 30, 2006 AND 2005 EXHIBIT D4 2006 2005 ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,275,179 $ 751,526 Receivables, net of allowance for uncollectibles: Accounts 188,440 161,336 Other 299,492 162,740 Total current assets 1,763 111 1,075,602 CAPITAL ASSETS Vehicles 44,448 44,448 Machinery and equipment 9,819 9,819 Total capital assets 54,267 54,267 Less: accumulated depreciation (41,235) (30,429) Capital assets, net of accumulated depreciation 13,032 23,838 TOTAL ASSETS 1,776,143 1,099,440 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable 69,033 302,919 Accrued liabilities 32,542 21,593 Total current liabilities 101,575 324,512 NON-CURRENT LIABILITIES Accrued compensated absences 22,584 22,095 Total non-current liabilities 22,584 22,095 TOTAL LIABILITIES 124,159 346,607 NET ASSETS Invested in capital assets, net of related debt 13,032 23,838 Unrestricted 1,638,952 728,995 TOTAL NET ASSETS $ 1,651,984 $ 752,833 91 CITY OF ALLEN, TEXAS EXHIBIT D-5 SOLID WASTE ENTERPRISE FUND COMPARATIVE STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEARS ENDED SEPTEMBER 30, 2006 AND 2005 OPERATING REVENUES Garbage collections Other Total operating revenues OPERATING EXPENSES Personnel services Contractual and other services Supplies Depredation Other Total operating expenses OPERATING INCOME (LOSS) NON-OPERATING REVENUES Interest income INCOME (LOSS) BEFORE TRANSFERS TRANSFERS Transfers to other funds Total transfers CHANGE IN NET ASSETS NET ASSETS, BEGINNING OF YEAR NET ASSETS, END OF YEAR 2006 2005 $ 4,073,155 $ 3,295,542 363,264 35,000 4,436,419 3,330,542 258,661 247,957 3,174,850 3,143,040 11,074 8,215 10,806 10,292 67,703 60,859 3,523,094 3,470,363 913,325 (139,821) 33,904 20,976 947,229 (118,845) (48,078) (92,960) (48,078) (92,960) 899,151 (211,805) 752,833 964,638 $ 1,651,984 $ 752,833 CITY OF ALLEN, TEXAS EXHIBIT D-6 SOLID WASTE ENTERPRISE FUND COMPARATIVE STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2006 AND 2005 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers Cash paid to employees for services Cash paid for goods and services Net cash provided by (used in) operating activities CASH FLOWS FROM NON -CAPITAL FINANCING ACTIVITIES Transfers to other funds Net cash used in non -capital financing activities CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments Net cash provided by investing activities NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR RECONCILIATION OF OPERATING (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Net operating (loss) Adjustments to reconcile net operating (loss) to net cash provided by (used in) operating activities: Depreciation Change in assets and liabilities: Increase in accounts receivable Increase in other receivables Increase (decrease) in accounts payable Increase in accrued liabilities Increase in accrued compensated absences Total adjustments Net cash provided by (used in) operating activities 93 $ 4,272,563 It 3,281,345 (258,172) (233,503) (3,478,564) (3,190,935) 537,827 (143,093) (48,078) (92,960) (48,078) (92,960.00) 33,904 20,976 33,904 20,976 523,653 (215,077) 751,526 966,603 $ 1,275,179 $ 751,526 $ 913,325 $ (139,821) 10,806 10,292 (27,104) (25,060) (136,752) (24,137) (233,886) 18,991 10,949 2,188 489 14.454 (375,498) (3,272) $ 537,827 $ (143,093) CITY OF ALLEN, TEXAS EXHIBIT D-7 ' DRAINAGE ENTERPRISE FUND Accounts receivable COMPARATIVE STATEMENTS OF NET ASSETS 40,486 SEPTEMBER 30, 2006 AND 2005 , 770,532 CAPITAL ASSETS 2006 2005 ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,027,531 $ 730,046 Accounts receivable 42,008 40,486 Total current assets 1,069,539 770,532 CAPITAL ASSETS Other improvements 496,132 496,132 Vehicles 106,809 160,637 Machinery and equipment 373,734 373,734 Total capital assets 976,675 1,030,503 Less: accumulated depreciation (357,936) (355,973) Capital assets, net of accumulated depreciation 618,739 674,530 TOTAL ASSETS 1,688,278 1,445,062 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable 7,307 11,905 Accrued liabilities 8,368 8,885 Total current liabilities 15,675 20,790 NON-CURRENT LIABILITIES Accrued compensated absences 10,609 10,513 Total non-current liabilities 10,609 10,513 TOTAL LIABILITIES 26,264 31,303 NET ASSETS Invested in capital assets, net of related debt 618,739 674,530 Unrestricted 1,043,255 739,229 TOTAL NET ASSETS $ 1,661,994 $ 1,413,759 94 95 ' CITY OF ALLEN, TEXAS EXHIBIT D-8 DRAINAGE ENTERPRISE FUND COMPARATIVE STATEMENTS OF REVENUES, EXPENSES ' AND CHANGES IN FUND NET ASSETS FOR THE YEARS ENDED SEPTEMBER 30, 2006 AND 2005 2006 2005 OPERATING REVENUES Drainage fees $ 861,947 S 801,481 ' Service charges 123,166 136,293 Miscellaneous 14,895 ' Total operating revenues 1,000,008 937,774 OPERATING EXPENSES Personnel services 270,148 262,388 ' Contractual and other services 87,469 153,005 Maintenance 186,423 162,894 ' Supplies Depreciation 11,641 55,791 19,771 72,331 Other 36,283 60,141 ' Total operating expenses 647,755 730,530 OPERATING INCOME 352,253 207,244 ' Non-operating revenues - interest income 37,637 18,231 INCOME BEFORE TRANSFERS 389,890 225,475 TRANSFERS Transfers from other funds 19,344 tTransfers to other funds (141,655) (187,200) Total operating transfers (141,655) (167,856) ' CHANGE IN NET ASSETS 248,235 57,619 NET ASSETS, BEGINNING OF YEAR 1,413,759 1,356,140 NET ASSETS, END OF YEAR $ 1,661,994 $ 1,413,759 95 CIN OF ALLEN, TEXAS DRAINAGE ENTERPRISE FUND COMPARATIVE STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2006 AND 2005 EXHIBIT D-9 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 998,486 $ 936,938 Cash paid to employees for services (270,052) (255,456) Cash paid for goods and services (326,931) (395,637) Net cash provided by operating. activities 401,503 285,845 CASH FLOWS FROM. NON -CAPITAL FINANCING ACTIVITIES Transfers from. other funs 19,344 Transfers to other funds (141,655) (187,200) Net cash used in non-capitalfinancing activities (141,655) (167,856) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of capital assets (19,343) Net cash used in capitalandrelated financing activities (19,343) CASH FLOWS FROM INVESTING ACTIVITIES Interest on. investments 37,637 18,231 Net cash provided by investing activities 37,637 18,231 NET INCREASE IN CASH AND CASH EQUIVALENTS 297,485 116,877 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 730,046 613,169 CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,027,531 $ 730,046 RECONCILIATION OF OPERATING INCOME. TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net operating income $ 352,253 $ 207,244 Adjustments to reconcile net operatingincome to net cashprovided by operating activities: Depreciation 55,791 72,331 Change in assets and liabilities: (Increase) in accounts receivable (1,522) (836) (Decrease)in accounts payable (4,598) (671) Increase (decrease) in accrued liabilities (517) 845 Increase in compensated absences 96 6,932 Total adjustments 49,250 78,601 Net cash provided by operating activities $ 401,503 $ 285,845 CITY OF ALLEN, TEXAS GOLF COURSE ENTERPRISE FUND STATEMENTS OF NET ASSETS SEPTEMBER 30, 2006 AND 2005 EXHIBIT D-10 2006 2005 ASSETS CURRENT ASSETS Cash and cash equivalents $ 34,140 $ 99,287 Accounts receivable 15,710 15,696 Due from other funds 90,000 10,000 Prepaid items 11,050 11,050 Total current assets 150,900 136,033 CAPITAL ASSETS Machinery and equipment 296,790 296,790 Less: accumulated depreciation (175,210) (66,447) Capital assets, net of accumulated depreciation 121,560 230,343 TOTAL ASSETS 272,480 366,376 LIABILITIES AND NET ASSETS CURRENT LIABILITIES - Accounts payable 46,052 43,669 Accrued liabilities 33,489 34,511 Capital leases payable - current 88,713 98,730 Customer deposits payable 23,969 16,680 Total current liabilities 192,223 193,590 NON-CURRENT LIABILITIES Capital leases payable 51,203 139,916 Accrued compensated absences 23,777 28,828 Total non-current liabilities 74,980 168,744 TOTAL LIABILITIES 267,203 362,334 NET ASSETS Invested in capital assets, net of related debt (18,336) (8,303) Unrestricted 23,613 12,345 TOTAL NET ASSETS $ 5,277 $ 4,042 97 CITY OF ALLEN, TEXAS EXHIBIT D-11 GOLF COURSE ENTERPRISE FUND STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEARS ENDED SEPTEMBER 30, 2006 AND 2005 2006 2005 OPERATING REVENUES Service charges Miscellaneous Total operating revenues OPERATING EXPENSES Personnel services Contractual and other services Maintenance Supplies Depreciation Other Total operating expenses OPERATING LOSS TRANSFERS Transfers from other funds Transfers to other funds Total operating transfers CHANGE IN NET ASSETS NET ASSETS, BEGINNING OF YEAR NET ASSETS, END OF YEAR 00 $ 1,294,941 $ 1,201,237 2,486 3,299 698,288 410,119 1,297,427 1,204,536 4,042 982,610 753,889 647,374 615,423 107,234 74,492 108,421 79,351 108,763 66,447 40,078 21,011 1,994,480 1,610,613 (697,053) (406,077) 707,000 410,119 (8,712) 698,288 410,119 1,235 4,042 4,042 $ 5,277 $ 4,042 ' CITY OF ALLEN, TEXAS EXHIBIT D-12 ' GOLF COURSE ENTERPRISE FUND STATEMENTS OF CASH FLOWS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006 AND 2005 2006 2005 1 1 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 1,297,413 $ 1,188,840 Cash paid to employees for services (894,457) (725,061) Cash paid for goods and services (987,661) (706,467) Net cash used in operating activities (584,705) (242,688) CASH FLOWS FROM NON -CAPITAL FINANCING ACTIVITIES ' Operating transfers from other funds 627,OOD 400,119 Operating transfers to other funds (8,712) Net cash provided by non -capital financing activities 618,288 400,119 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital lease down payment (98,730) (58,144) ' Net cash used in capital and related financing activities (98,730) (58,144) NET DECREASE IN CASH AND CASH EQUIVALENTS (65,147) 99,287 ' CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 99,287 CASH AND CASH EQUIVALENTS, END OF YEAR $ 34,140 $ 99,287 RECONCILIATION OF OPERATING LOSS TO NET CASH USED IN OPERATING ACTIVITIES Net operating loss $ (697,053) $ (406,077) Adjustments to reconcile net operating loss to net cash used in operating activities: Depreciation 108,763 66,447 ' Change in assets and liabilifies: (Increase)in accounts receivable (14) (15,696) ' (increase)in prepaids Increase in accounts payable 2,383 (11,050) 43,669 Increase (decrease) in accrued liabilities (1,022) 34,511 Increase in customer deposits 7,289 16,680 'Increase (decrease) in compensated absences (5,051) 28,828 Total adjustments 112,348 163,389 ' Net cash used in operating activities $ (564,705) $ (242,688) 1 1 99 a£SpfGT * I NTFC * RST. n * m x n n 11 INTERNAL SERVICE FUNDS The Internal Service Funds are used to account for financing of services provided by one department to ' other departments of the City on a cost -reimbursement basis. Replacement Fund - accounts for the costs associated with the acquisition of vehicles, machinery, and IN equipment through the rental of such items to other departments. Risk Management Fund — accounts for the costs associated with workers compensation, liability and property insurance and medical and dental programs established for City employees and their covered dependents. 100 CITY OF ALLEN, TEXAS EXHIBIT E-1 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF NET ASSETS SEPTEMBER 30,2006 (WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2005) RISK TOTALS REPLACEMENT MANAGEMENT FUND FUND 2006 2005 ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,319,642 $ 2,111,783 $ 4,431,425 $ 3,387,385 Investments 2,986,826 2,986,826 2,946,483 Accounts receivable 80,193 Accrued interest receivable 23,712 23,712 8,994 Total current assets 5,330,180 2,111,783 7,441,963 6,423,055 CAPITAL ASSETS Machinery and equipment 821,431 821,431 475,737 Vehicles 3,388,300 3,388,300 2,900,622 Accumulated depreciation (1,910,339) (1,910,339) (1,551,812) Capital assets, net of accumulated depreciation 2,299,392 2,299,392 1,824,547 TOTAL ASSETS 7,629,572 2,111,783 9,741,355 8,247,602 LIABILITIES AND NET ASSETS LIABILITIES Accounts payable 123,784 140,122 263,906 119,977 Incurred but not reported claims 515,021 515,021 527,285 TOTAL LIABILITIES 123,784 655,143 778,927 647,262 NET ASSETS Invested in capital assets, net of related debt 2,299,392 2,299,392 1,824,547 Unrestricted 5,206,396 1,456,640 6,663,036 5,775,793 TOTAL NET ASSETS $ 7,505,788 $ 1,456,640 $ 8,962,428 $ 7,600,340 101 CITY OF ALLEN, TEXAS EXHIBIT E-2 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30 2005) RISK TOTALS REPLACEMENT MANAGEMENT FUND FUND 2006 2005 OPERATING REVENUES Charges for services $ 958,675 $ 5,308,172 $ 6,266,847 $ 5,883,962 Other Income 44,789 44,789 41,433 Total operating revenues 958,675 5,352,961 6,311,636 5,925,395 OPERATING EXPENSES Personal services 148,613 148,613 133,041 Contractual services 4,874,327 4,874,327 4,506,755 Depreciation 450,369 450,369 266,210 Total operating expenses 450,369 5,022,940 5,473,309 4,906,006 OPERATING INCOME 508,306 330,021 838,327 1,019,389 NON-OPERATING REVENUES Investment earnings 209,723 76,929 286,652 89,962 Gain on disposal of capital assets 6,752 6,752 14,303 Total non-operating revenues 216,475 76,929 293,404 104,265 INCOME BEFORE TRANSFERS 724,781 406,950 1,131,731 1,123,654 TRANSFERS Transfers from other funds 38,632 191,725 230,357 259,400 Transfers to other funds (19,343) Total transfers 38,632 191,725 230,357 240,057 CHANGE IN NET ASSETS 763,413 598,675 1,362,088 1,363,711 NET ASSETS, BEGINNING OF YEAR 6,742,375 857,965 7,600,340 6,236,629 NET ASSETS, END OF YEAR $ 7,505,788 $ 1,456,640 $ 8,962,428 $ 7,600,340 102 CITY OF ALLEN, TEXAS EXHIBIT E-3 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS FORTHE YEAR ENDED SEPTEMBER 30, 2006 (WITH! COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30 2005) RISK TOTALS REPLACEMENT MANAGEMENT FUND FUND 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES Cash reserved from trarea chona isith other funds Cash paid to employees for services Cash paid for goods and services Cash paid for claims Net cash provided by operating activities CASH FLOWS FROM NON -CAPITAL FINANCING ACTIVITIES Transfers from other funds Transfers to either funds Net cash provided by non -capital financing activdiea CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets Proceeds from sale of capital assets Net cash used in capital and related financing aclivbies CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investment securities Proceeds from Is and maturities of investment securities, Intereat on Investments Net cash provided by (used in) hassling aefi ifice NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH. EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR RECONCILIATION OF OPERATING INCOMETO NET CASH. PROVIDED BY OPERATING ACTIVITIES Net operefing income Adjustments to reconcile opengng Income to net cash provided by operating adNities: Depredation Change ts assets and liabilities: Decrease (Increase) in accounts receivables Increase In accounts Payable Total adjustments Net cash provided by operating activities NON-CASH INVESTING ACTIVITIES: Change in the fair value d investments $ 1,101,457 $ 5,414,158 $ 6,515,613 $ 5,872,689 (148,613) (148,613) (133,041) , (1,404,388) (+,404.388) (956,487) (3,482,058) (3,462,056) (3,410,157) 1,101,457 399,097 1,500,554 1,373,004 , 36,632 191,725 230,357 259,400 (19,343) , 36,632 191,725 230,357 248057 (925,214) (925,214) (1,106,779) ' 6,752 6,752 55.493 (918,482) (918,462) (1,051,286) ' (3,033,072) (3,033,072) (2,946,483) 3,QD0,000 3,0X,000 2,100,000 ' .187,734 76,929 264,651 87,890 .154,662 76,929 231,591 (758,593) , 376,289 61 1,044,040 (196,818) 1,943,353 1,444,032 3,387,385 3,584,203 ' $ 2,319,642 $ 2,111,7113 $ d,431,425 $ . 3,387,385 $ 508,306 $ 330,021 $ 838,327 $ 1,019,389 450,369 450,369 266,210 t 18,998 61,195 90,193 (52,706) 123,784 7,881 131,665 140,111 , 593,151 69.076 662,227 ..353,815 $ 1,101,457 $ 398,09] $ 1500,554 If 1,373,004 , $ 7,271 f $ 7.271 $ 103 �I DISCRETELY PRESENTED COMPONENT UNITS Allen Economic Development Corporation (AEDC) — AEDC is a legally separate entity from the City and is responsible for aiding, promoting and furthering economic development within the City. Allen Community Development Corporation (ACDC)—ACDC is a legally separate entity from the City and t is responsible for supporting the improvements in community parks and recreation, streets and sidewalks, public safety and the community library. 1 t t 1 104 CITY OF ALLEN, TEXAS EXHIBIT F-1 ALLEN ECONOMIC DEVELOPMENT CORPORATION COMPARATIVE BALANCE SHEETS SEPTEMBER 30, 2006 AND 2005 ASSETS CURRENT ASSETS Cash and cash equivalents Investments Sales tax receivable Accounts receivable Accrued interest receivable TOTAL ASSETS LIABILITIES AND FUND BALANCES CURRENT LIABILITIES Accounts payable Accrued and other liabilities TOTAL LIABILITIES FUND BALANCES Unrestricted TOTAL LIABILITIES AND FUND BALANCES 105 2D06 2005 $ 3,454,552 $ 1,707,300 1,961,439 3,854,982 812,617 684,833 1,562 1,285 15,572 11,767 $ 6,245,742 $ 6,260,167 $ 225,531 $ 305,426 10,253 9,683 235,784 315,109 6,009,958 5,945,058 $ 6,245,742 $ 6,260,167 ' CITY OF ALLEN, TEXAS EXHIBIT F-2 ' RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS ALLEN ECONOMIC DEVELOPMENT CORPORATION SEPTEMBER 30,2006 Total governmental fund balance Amounts reported for governmental activities in the statement of net assets are different because: Capital assets (net of accumulated depreciation) used in governmental activities are not current financial resources and therefore are not reported in the governmental funds balance sheet. Net assets of governmental activities 106 $ 6,009,958 6,544,908 $ 12,554,866 CITY OF ALLEN, TEXAS EXHIBIT F-3 ALLEN ECONOMIC DEVELOPMENT CORPORATION COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEARS ENDED SEPTEMBER 30, 2006 AND 2005 REVENUES Sales and other taxes Investment earnings Miscellaneous Total revenues EXPENDITURES Current: Economic development Capital projects: Economic development Total expenditures Excess of revenues over expenditures FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR if8Yl 2006 2005 $ 4,579,623 $ 3,874,528 277,912 58,957 596,890 1,118,708 5,454,425 5,052,193 5,138,322 3,667,365 251,203 44,335 5,389,525 3,711,700 64,900 1,340,493 5,945,058 4,604,565 $ 6,009,958 $ 5,945,058 I CITY OF ALLEN, TEXAS ' RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES ALLEN ECONOMIC DEVELOPMENT CORPORATION FOR THE YEAR ENDED SEPTEMBER 30, 2006 EXHIBIT F-4 Net change in fund balances - total governmental funds $ 64,900 Amounts reported for governmental activities in the statement of activities are different because: Depreciation expense on capital assets is reported in the statement of activities but does not require the use of current financial resources. Therefore, depreciation expense is not reported as expenditures in the governmental funds. (155,902) In governmental fund financial statements, the proceeds from sale of assets are shown as an increase in financial resources. In the government -wide financial statements, the gain or loss is calculated and reported. (346,674) Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets are allocated over their estimated useful lives and reported as depreciation expense. 251,203 Change in net assets of governmental activities $ (186,473) 108 CITY OF ALLEN, TEXAS EXHIBIT F-5 ALLEN COMMUNITY DEVELOPMENT CORPORATION COMPARATIVE BALANCE SHEETS SEPTEMBER 30, 2006 AND 2005 ASSETS CURRENT ASSETS Cash and cash equivalents Investments Sales tax receivable Accounts receivable Accrued interest receivable TOTAL ASSETS LIABILITIES AND FUND BALANCES CURRENT LIABILITIES Accounts payable Retainage payable TOTAL LIABILITIES FUND BALANCES Reserved for encumbrances Unreserved Total fund balance TOTAL LIABILITIES AND FUND BALANCES 109 2006 2005 $ 5,131,612 $ 2,173,415 1,734,374 2,423,260 812,617 684,833 1,562 1,285 13,769 7,397 $ 7,693,934 $ 5,290,190 $ 191,493 $ 83,653 31,891 54,928 223,384 138,581 547,625 101,240 6,922,925 5,050,369 7,470,550 5,151,609 $ 7,693,934 $ 5,290,190 ' CITY OF ALLEN, TEXAS ' RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS ' ALLEN COMMUNITY DEVELOPMENT CORPORATION SEPTEMBER 30, 2006 EXHIBIT F -S Total governmental fund balance $ 7,470,550 Amounts reported for governmental activities in the statement of net assets are different because: Costs associated with the issuance of governmental long-term debt are expensed when incurred in the fund statements and capitalized and amortized over the life of the debt in the government -wide financial statements. 90,481 Interest payable on long-term debt does not require current financial resources, and, therefore, is not reported as a liability in the governmental funds balance sheet. (28,604) Long-term liabilities, including bonds payable are not due and payable in the current period and, therefore, are not reported in the fund financial statements. (7,663,412) Net assets of governmental activities $ (130,985) 110 CITY OF ALLEN, TEXAS EXHIBIT F-7 ALLEN COMMUNITY DEVELOPMENT CORPORATION COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEARS ENDED SEPTEMBER 30, 2006 AND 2005 REVENUES Sales and other taxes Investment earnings Total revenues EXPENDITURES Current: Community development Capital projects: Community development Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess of revenues over expenditures OTHER FINANCING SOURCES AND (USES) Issuance of refunding debt Premium on issuance of debt Payment to refund bond escrow agent Total other financing sources NET CHANGE IN FUND BALANCES FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR 111 2006 2005 $ 4,579,623 $ 3,874,528 283,700 81,101 4,863,323 3,955,629 11 691,494 425,449 ' 1,115,573 1,884,858 445,000 420,000 ' 344,110 423,026 2,596,177 3,153,333 2,267,146 802,296 ' 5,600,000 184,499 ' (5,732,704) 51,795 ' 2,318,941 802,296 5,151,609 4,349,313 $ 7,470,550 $ 5,151,609 t CITY OF ALLEN, TEXAS EXHIBIT F-8 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES ALLEN COMMUNITY DEVELOPMENT CORPORATION FOR THE YEAR ENDED SEPTEMBER 30, 2006 Net change in fund balances - total govemmental funds $ 2,318,941 Amounts reported for governmental activities in the statement of activities are different because, The proceeds from issuance of long-term debt (e.g. bonds) provides current financial resources to governmental funds ($5,600,000), while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds ($5,732,704). Neither transaction, however, has any effect on net assets. 132,704 Governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued. However, these amounts are deferred and amortized in the government -wide financial statements. (95,635) Current year changes in accrued interest payable do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. 4,434 Repayment of the principal on long-term debt consumes the current financial resources of governmental funds. However, these transactions have no effect on net assets. 445,000 Change in net assets of governmental activities $ 2,805,444 112 ��SQgcT * INTFG 1 f etcvur�g A � fes.. m v w r * ClTV OF AVV'N ' 1 CAPITAL ASSETS 1 USED IN THE OPERATION 1 OF GOVERNMENTAL FUNDS 1 1 1 1 1 1 1 1 1 1 1 aESpQGT * INTFO CITY OF I uuv-- r ' CITY OF ALLEN, TEXAS 1 1 1 NX.01.31111l COMPARATIVE SCHEDULES OF CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS - BY SOURCE (a) SEPTEMBER 30, 2006 AND 2005 2006 2005 GOVERNMENTAL FUNDS CAPITAL ASSETS Land and land improvements Buildings Machinery and equipment Fumlure and fixtures Vehicles Books Infrastructure ' Total property and equipment in service Construction in progress ' Total governmental funds capital assets INVESTMENTS IN GOVERNMENTAL FUNDS CAPITAL ASSETS ' BY REVENUE SOURCE General obligation bond proceeds and interest income Revenue bonds Contributions ' Other governments General and other fund operations Special revenue funds ' Total governmental funds capital assets $ 98,611,044 $ 84,474,787 45,583,715 37,322,621 4,005,827 3,657,827 2,846,757 2,484,520 3,171,545 3,298,071 2,670,852 2,588,104 314,890,086 291,001,529 465,089,940 471,779,826 424,827,459 27,591,180 40,262,481 $ 499,371,006 $ 465,089,940 $ 104,521,162 $ 101,886,956 10,475,000 10,475,000 291,128,363 267,505,984 9,951,500 9,951,500 73,728,723 67,025,815 9,566,257 8,244,683 $ 499,371,006 $ 465,089,940 (a) This schedule presents only the capital asset balances related to governmental funds, including infrastructure. Accordingly, the capital assets reported in the internal service funds are excluded from the above amounts. Generally, the capital assets of internal tservice funds are included as governmental activities in the statement of net assets. 1 ' 113 CITY OF ALLEN, TEXAS SCHEDULE OF CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS - BY FUNCTION AND ACTIVITY (a) AS OF SEPTEMBER 30, 2006 CULTURE & RECREATION Packs & recreation Library Total culture & recreation COMMUNITY DEVELOPMENT Building and code compliance Planning & development Total community development GRANT ADMINISTRATION Grant adminisbabon Total grant administration Construction in Progress Total governmental funds capital assets 10,668,291 842,156 12,944,764 908,227 10,107,373 532,649 10,668,291 842,156 23,052,137 1,441,076 500,000 500.000 10,790 6,993 17,783 612.454 ' 612,454 $ 97,768,888 $ 842,158 $ 45.583.715 $ 4,005.827 (a) This schedule presents only the capital asset balances related to governmental funds, including infrastructure. Accordingly, the capital assets reported in the internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net assets. 114 Land Machinery It Function and Activity Land Improvements Buildings Equipment GENERAL GOVERNMENT Municipal court $ 631,788 $ $ 289,669 $ 57,885 City administration 432,332 8,841,547 181,028 Information technology 184,052 Human Resources Internal Services (6,784) Total general government 1,064,120 9.131.216 416,181 PUBLIC SAFETY Police 6,483,775 368,005 Fire 2,600 6,916,587 792,071 Total public safety 2,600 13,400,362 1,160,076 PUBLIC WORKS Community services & streets 51,238,812 342,360 Engineering 34,295,065 15,897 Total public works 85,533,877 358,257 CULTURE & RECREATION Packs & recreation Library Total culture & recreation COMMUNITY DEVELOPMENT Building and code compliance Planning & development Total community development GRANT ADMINISTRATION Grant adminisbabon Total grant administration Construction in Progress Total governmental funds capital assets 10,668,291 842,156 12,944,764 908,227 10,107,373 532,649 10,668,291 842,156 23,052,137 1,441,076 500,000 500.000 10,790 6,993 17,783 612.454 ' 612,454 $ 97,768,888 $ 842,158 $ 45.583.715 $ 4,005.827 (a) This schedule presents only the capital asset balances related to governmental funds, including infrastructure. Accordingly, the capital assets reported in the internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net assets. 114 EXHIBIT CG2 FumBune & 304,040 Other Construction In 311,241,139 Fixtures Vehicles Books Improvements Progress Total 17,701 435,329 $ 413 $ $ $ $ $ 979,755 829,584 5,434,182 10,284,491 14,565 9,682 222,321 430,620 3,336 3,336 18,321 7,478 11,537 866,219 9,662 222,321 11,709,739 147,343 224,330 362,839 71,867 7,510,816 235,398 1,386,183 269,885 9,602,724 459,728 1,749,022 341,752 17,113,540 656,172 304,040 259,355,927 311,241,139 17,701 131,289 49,431,796 83,891,748 17,701 435,329 308,787,723 395,132,887 656,172 642,695 5,434,182 32,096,487 839,459 2,606,724 14,086,405 1,495,631 642,695 2.608,724 5,434,182 46,182,892 147,343 158,133 7,478 14,471 7,478 147,343 172,604 187,474 64,128 104,108 1,468,164 187,474 64,128 1D4,108 1,468,164 27,591,180 27,591,180 27,591,180 27,591,180 $ 2,846,757 $_ 3,777,545 $_ 2,670.852 $ 314,890.066 $ 27591.180 $ 499.371,006 115 CITY OF ALLEN, TEXAS EXHIBIT G-3 SCHEDULE OF CHANGES IN CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS - BY FUNCTION AND ACTNITY (a) FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006 (a) This schedule presents only the capital asset balances related to governmental funds, including infrastructure. Accordingly, the capital assets reported in the internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net assets. 116 GovemmeMal Funds Governmenal Funds Capsid Assets Deveinpsr CeP6al Assets Function and Ac ity Otlnbar 1, 2005 communions AtldNms Detluc80ns Tarsiers September 30, 2006 GENERAL GOVERNMENT Munidpal mud S 928,937 & B 52,818 $ 6 6 9]9,]55 Cltyadminlatra0m 10,918,734 23,95/ (75,000) 18,800 10,28,491 Infoma9m UxInnology 389,950 40,870 430,1120 Human resources 3,336 3,336 Internal services 11,537 11.07 Total general govemmeM 11648494 117.445 (751000) Ism 11,709,738 PUBLIC SAFETY Police 7,504,896 8,985 (178,085) 7,510,818 Fire 8,65,423 37,301 9,602,724 Total publk safety 1],1]0,319 122.286 (179.085) 17,113,540 PUBLIC WORKS Community services&streets 308,186,491 42,1" (23,581) 3,036,005 311,241,139 Engineedlg 55,593212 22.65,8"0 (5.500) 5.647,050 83,891,748 Total publk vmrks 383]]$703 22.856,988 42,1" (29.081) 8,683,135 395,192,867 CULTURE & RECREATION Pah,&reue.h.n 2,318,564 985,393 2,104,066 (107,396) 9,615,840 32,090,407 Library 5,]]],089 1112.320 (85.279) 8,212,295 14,088,405 T,dal culture&reveation 31,095,653 965.393 2286,388 (19216Tn 12,028,135 48.182.892 COMMUNITYDEVELOPMENT Building& oade compliance 158,133 158,133 Planning & devebpment 6,999 7,478 14,471 Total community devebpment 165.126 7,478 172.804 GRANTADMINISTRATION Gent adminis"Don 08,164 500.000 1,468,164 Total giant administagm 908.181 500.000 1,488.184 Total general f d assets albcated by function 424,827,459 23,622,379 3,0]5,]41 (475,823) 20,]30,0]0 471,n%M Contraction in pa,niss 40,262,401 8,058,789 (20.730.070) 27,591,180 Total govemmemal funds cep8al assets 9 465.089.940 $ 23,822,379 8 11.131.510 & (4]5,823) 3 8 499.3]1.008 (a) This schedule presents only the capital asset balances related to governmental funds, including infrastructure. Accordingly, the capital assets reported in the internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net assets. 116 i STATISTICAL SECTION (UNAUDITED) a�SPEGT * INT F6 . ■ 'P�s. n A m x m CITY OF p``�r II STATISTICAL SECTION This part of the City of Allen's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, notes disclosures, and required supplementary information says about the City's overall financial health. This information has not been audited by the independent auditor. I Contents I Financial Trends These tables contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. Table #s 1,2,3&4 Revenue Capacity 5, 6, 7 & 8 These tables contain information to help the reader assess the City's two most significant local revenue sources, the property and sales taxes. Debt Capacity 9, 10, 11 & 12 These tables present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future Economic and Demographic Information 13 & 14 These tables offer economic and demographic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information 15, 16 & 17 These tables contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides. Source: Unless otherwise noted, the information in these tables is derived from the comprehensive annual financial reports for the relevant year. 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G \ /| # ;) §`a i )k k!f ` ® §� , ) _ a! !!!!,! : - �� ]E / ! 2 2r|! | !® ( ) )` ] _ a q f !�, o m D m m m o o m d E d o D3 m.$o �p_m vo�co'omoEd � o U c y 2 E U o m— o c o -0-0-0-0— mom^ mmm moo 5 t0 m u DaaLLa >m¢ �auma:mFZYC7 ='3ii u)rn 0 m M ^ f (O M h N N P m O N P n M O � ''MOON � p NeP- �POf m O � N �- r P P •- m � n M (7 N 'O P N N�� N N N N O N �`p N m Y m N N N N m r m o m D m m m o o m d E d o D3 m.$o �p_m vo�co'omoEd � o U c y 2 E U o m— o c o -0-0-0-0— mom^ mmm moo 5 t0 m u DaaLLa >m¢ �auma:mFZYC7 ='3ii u)rn 0 m M 1 1 1 1 * 0E5PECT ,. ,NTECR T 1 h� Y♦ 4,4 1 F o o n * * C,- a * OF p``� CITY OF ALLEN TEXAS Comprehensive Annual Financial Report For Fiscal Year Ended September 30, 2006 __--„mvlvvG'v A � i � ay riper 'ei - ¢- Jtttt r- i D'r Allen Senior Center Reports Prepared by Weaver and Tidwell, LLP • Schedule of Expenditures of Federal Awards And Related Reports in Accordance with OMB Circular A-133 • Communication of Internal Control Structure Related Matters Noted During The Audit • Summary Report to the Finance Committee Official Copy II F1 1 CITY OF ALLEN, TEXAS ' SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND RELATED REPORTS IN ACCORDANCE WITH OMB CIRCULAR A-133 ' YEAR ENDED SEPTEMBER 30, 2006 1 1 1 1 1 1 1 TABLE OF CONTENTS Independent Auditors 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 Independent Auditors Report on Compliance with Requirements Applicable To Each Major Federal and State Program and on Internal Control Over Compliance In Accordance with OMB Circular A-133 and on the Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs Corrective Action Plan Schedule of Prior Audit Findings Supplementary Information: Schedule of Expenditures of Federal and State Awards Notes to Schedule of Expenditures of Federal and State Awards Page 1 3 5 8 9 WEAVER TIDWELL L.L.P. CERTIFIED PUBLIC A CC OUNT,. NTS AND CDNS ULTANTS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Mayor, City Council and City Manager City Of Allen Allen, Texas We have audited the financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund and the aggregate remaining fund information of the City Of Allen (the City) as of and for the year ended September 30, 2006, which collectively comprise the City of Allen's basic financial statements and have issued our report thereon dated January 25, 2007. We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, " considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that in our judgment, could adversely affect the City's ability to record, process, summarize and report financial data consistent with the assertions of management in the general purpose financial statements. The reportable condition is described in the accompanying schedule of findings and questioned costs as finding 2006-01. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that DALLAS misstatements in amounts that would be material in relation to the financial statements being nr.. F- w.,, audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over aN,r.Imn financial reporting would not necessarily disclose all matters in the internal control over o„ «.r. r.Nr-51i,-SMN financial reporting that might be reportable conditions and accordingly, would not disclose all s'1 11 " F9.-1reportable conditions that are considered to be material weaknesses. However, we believe .-11-n+rill I� the reportable condition described above is not a material weakness. FORT WORTH 16W Um SO d, -0112. I- 3"" ferr Nnr,l.Ticar -IID s. 81-332 -"i F R1-129 iyi/ ' WWW WEAVERANDTIOWELL GOY AN I N..AE.... I YEYBER OE BAKER TILLY INTERNATIONAL 1 City of Allen, Texas Page 2 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 its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended for the information and use of the City council, management, and federal awarding agencies and pass-through entities, and is not intended to be and should not be used by anyone other than these specfied parties. WEAVER AND TIDWELL, L.L.P. Dallas, Texas January 25, 2007 2 I INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS I APPLICABLE TO EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 AND ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS WEAVER TIDWELL To the Honorable Mayor, LLD City Council and City Manager CERTIIIEO PUBLIC City VtI Allen ' ACCOUNTANT: Allen, Texas AND CONSULTANTS ' Compliance We have audited the compliance of the City of Allen (the City), 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 programs for the year ended September 30, 2006. The City's major federal programs are identified in the summary of auditofs results section of the accompanying schedule of audit findings. ' Compliance with the requirements of laws, regulations, contracts and grants applicable to its major federal program is the responsibility of the Citys management Our responsibility is to express an opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with generally accepted auditing standards: the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 and state programs for the year ended September 30, 2006. Internal Control Over Compliance The management of the City of Allen is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts Tb—F.:.,, PIKm and grants applicable to federal and state programs. In planning and performing our audit, ' I)1/Moir D— we considered the City's internal control over compliance with requirements that could T -A, 75DO Onik,. r..., '3x1-Lxn have a direct and material effect on a major federal or state 1 program in order to determine v»30.191 our auditing procedures for the purpose of expressing our opinion on compliance and to F 8-1.'0183.1 test and report on internal control over compliance in accordance with OMB Circular A-133. ' FORT WON ",U R'i,t S— 1,, V:rrr sR,.r 3OR ' F IT -15, T,xi„'Nn2.+51N 8I-J32.-YU1 FRI-429. 5'114 ' WYIN.WEAVERRN. bOWELL LON N INDEPENDENT MEMBER OF BAKER TILLY INTERNATIONAL City of Allen, Texas Page 2 Our consideration of the intemal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operafwn of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts, and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. Schedule of Expenditures of Federal Awards We have audited the financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Allen, Texas as of and for the year ended September 30, 2006, and have issued our report thereon dated January 25, 2007. Our audit was performed for the purpose of forming opinion on the basic financial statements which collectively comprise the City of Allen's basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by OMB Circular A-133 and 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. This report is intended for the information of the City council, management, and federal awarding agencies and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties. �2:Z .�� WEAVER AND TIDWELL, L.L.P. Dallas, Texas January25, 2007 CITY OF ALLEN, TEXAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2006 Section I -Summary of Auditor's Results FINANCIAL STATEMENTS: An unqualified opinion was issued on the financial statements. Internal control over financial reporting: • Material weakness(es) identified? Yes X No • Reportable condition(s) identified that are not considered to be material weakness(es)? X Yes _No Noncompliance material to financial statements noted? _Yes XNo FEDERAL AWARDS: Internal control over major programs: • Material weakness(es) identified? _Yes X No • Reportable condition(s) identified that are not considered to be material weakness(es)? _Yes X None An unqualified opinion was issued on compliance for major program. Any audit findings disclosed that are required to be reported in accordance with section 510(a) or Circular A-133? _Yes X No Major programs include: • Federal Programs CFDA Numbers) Name of Program or Cluster 97.008 Urban Area Security Initiative 97.073 State Homeland Security Program 97.053 Citizen Corps Program Dollar threshold used to distinguish between type A and type B programs: Federal Programs S300,000 Auditee qualified as low-risk auditee? X Yes _No 5 CITY OF ALLEN, TEXAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2006 ' Section II - Financial Statement Findings Finding 0 2006-01 — Performance and Review of Bank Reconciliations tCriteria or Specific Requirement: An effective internal control structure is comprehensive and includes several components. Control ' activities are an essential component of a comprehensive framework of accounting and financial reporting. A key control activity is the timely performance and review of bank reconciliations. This control activity should help ensure that all transactions in the City's accounting records are property and accurately included in and reflected on the City's financial statements. Condition: ' ( ) Compliance Finding (X) Reportable Condition ( ) Material Weakness. Context: ' During our audit, we were informed that the finance department, upon review of the City's bank reconciliation for the month of July 2006, recognized that the pooled cash accounts had an unreconciled difference. This difference remained uncorrected during the period from August 2006 through December 2006 despite the City's efforts to identify the cause of the difference. In December 2006, the City discovered that the difference was caused by a deposit error recorded in preparing the July 2006 reconciliation. The correction of this error in the amount of $190,479 caused the pooled cash accounts to reconcile. Although the City corrected the error subsequent to its discovery, a significant amount of time was spent by the City personnel in finding the discrepancy that could have otherwise been spent performing regularly assigned functions of the department. ' Effect: Potential overstatement or understatement of cash and increased risk of loss as a result of asset misappropriation. Recommendations: We recommend that the finance department ensure bank reconciliations conflnue to be reviewed by persons other than the preparers, preferably at the supervisory level or above and that unreconciled amounts be investigated and resolved in a timely manner. Additionally, we recommend that the department perform periodic reviews of the volume and complexity of work assigned to associate and supervisory staff levels in order to accommodate increasing volumes of work and to effectively distribute that work such that efficiency is maintained and assigned tasks performed timely. ' CITY OF ALLEN, TEXAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2006 Section III - Federal Awards Findings and Questioned Costs ' This section identifies the reportable conditions, material weaknesses, and instances of noncompliance, including questioned costs, related to the audit of major federal programs, as required to be reported by ' Circular A-133 Compliance Supplement, section .510. Where practical, findings should be organized by federal agency or pass-through entity. ' There were no findings for the year ended September 30, 2006. 11 CITY OF ALLEN, TEXAS CORRECTIVE ACTION PLAN FOR THE YEAR ENDED SEPTEMBER 30.2006 Finding # 2006-01 Type: Reportable Condition, Performance and Review of Bank Reconciliations Recommendations: We recommended that the finance department ensure bank reconciliations continue to be reviewed by persons other than the preparers, preferably at the supervisory level or above and that unreconciled amounts be investigated and resolved in a timely manner. Additionally, we recommended that the department perform periodic reviews of the volume and complexity of work assigned to associate and supervisory staff levels in order to accommodate increasing volumes of work and to effectively distribute that work such that efficiency is maintained and assigned tasks performed timely. Corrective Action Plan: Bank reconciliations are completed every month and reviewed by upper management. In July 2006, the bank showed a larger balance than the general ledger. The discrepancy could not be found. Therefore, prior to the audit, the auditors were informed that the bank accounts did not reconcile and were told that there are on-going efforts by Finance staff to find the difference. In December 2006, before the 2006 audit was completed, an error in the amount of $190,479 was found and corrected. The error occurred when an employee from another department made a $236,902 deposit but only entered $46,422 into the Cash Receipt application. The difference of $190,479 was hand written on the report but never entered. When the report came to the Finance department, a recently hired and inexperienced Finance employee posted the entry without validating that the deposit at the bank equaled the amount of the Cash Receipt posted to the general ledger. To find the error every item on the bank statement and every departments cash receipt paperwork had to be individually reviewed, a very time consuming task while also keeping up with day to day accounting responsibilities. Employee error, staff turnover, complexity of the cash receipt processes, lack of automation and a high volume of work due to City growth have all played a factor in causing this error. Timely reconciliations will always be given a high priority. However, all of these factors will continue to affect the work environment within the Finance department and other City departments. CITY OF ALLEN, TEXAS SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED SEPTEMBER 30, 2006 2005 Financial Statement Findings Finding # 2005-01 — Approval of Journal Entries Corrective Action Plan for Fiscal Year Ended September 30, 2005: The auditors recommended that review processes in the finance department be strengthened and to implement prior approval for interfund transfers. The management of the City of Allen emphasized that budget variances are indicators currently in use to monitor problem areas. Unfortunately, the incident was an isolated case caused by an employee who is no longer in the employ of the City. The current staff has good working relationships among each other and has been encouraged to hold open communication with management and to discuss accounting issues together to determine the appropriate action to take. In addition, current staffing levels restrict time spent on each accounting function. An additional degreed accountant will be requested for the 2006-2007 fiscal year to improve work levels. Status: The City hired another staff who was assigned the duties of accounting for the capital projects, capital assets and associated charges to depreciation. The City considers this finding resolved. Finding # 2005-02 — Approval of Journal Entries Corrective Action Plan for Fiscal Year Ended September 30.2005: Staffing limitations has made the department rely on the automated process to calculate the compensated absence balances. Since this entry is based on estimations rather than actual amounts, the department will develop a methodology to estimate the sick leave and implement this change during the 2005/2006 fiscal year. Status: A methodology for estimating the City's liability for earned vacation and sick leave was implemented during the 20052006 fiscal year. The City considers this finding resolved. 1 SUPPLEMENTARY INFORMATION CIT' OF ALLEN, TEXAS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED SEPTEMBER 30.2006 United States Department of Homeland Securi Office of Domestic Preparedness Staffing for Adequate Fire & Emerg Resp Federal EMW-2005-FF-02581 Federal Grantor/Pass-Through CFDA Contract Grantor/Program Title Number Number Expenditures EXPENDITURES OF FEDERAL AWARDS 2005 Urban Area Security Initiative United States Department of Housing and Urban Dev. 2005 -GE -T5-4025 235,312 Community Development Block Grant Programs 14.218 B-04-MC48-0044 $ 6,455 Community Development Block Grant Programs - 14.218 B -05 -MC -48-0044 186,295 Total U.S. Department of Housing and Urban Dev. 25,136 192,750 United States Department of Homeland Securi Office of Domestic Preparedness Staffing for Adequate Fire & Emerg Resp 97.083 EMW-2005-FF-02581 81,000 Pass Through Governor's Division of Emergency Management Homeland Security Grant Program 2005 Urban Area Security Initiative 97.008 2005 -GE -T5-4025 235,312 2005 State Homeland Security Program 97.073 2005 -GE -TS -4025 114,082 2005 Citizen Corps Program 97.053 2005 -GE -TS -4025 25,136 Total U.S. Department of Homeland Security 455,530 Total Expenditures of Federal Awards $ 648.280 See Notes to Schedule of Expenditures of Federal Awards 10 ' CITY OF ALLEN, TEXAS NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Note 1. General The accompanying Schedule of Expenditures of Federal Awards presents the activity of all federal awards programs of the City of Allen, Texas. The City's accounting policies and procedures are defined in the Note 1 to the financial statements. All awards received directly from federal agencies ' as well as awards passed through other government agencies have been included in the accompanying schedule. ' Note 2. Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards is presented using the accrual basis ' of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. All grants are accounted for in special revenue funds. ' Note 3. Relationship to Federal Financial Reports Amounts reported in the accompanying schedule may not agree with amounts reported in related ' federal and state financial reports since the City used the modified accrual basis of accounting in preparing the schedule and the cash basis in preparing federal financial reports. 1 1 11 ' CITY OF ALLEN, TEXAS COMMUNICATION OF INTERNAL CONTROL STRUCTURE RELATED MATTERS NOTED DURING THE AUDIT ' FOR THE YEAR ENDED SEPTEMBER 30, 2006 1 1 Management of the City of Allen, Texas (the "City') is responsible for establishing and maintaining the Citys internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The City's internal control structure consists of policies and procedures established by management to provide reasonable, but not absolute, assurance that the financial data are recorded, processed, summarized, and reported consistent with the assertions embodied in the financial statements. In establishing those policies and procedures, management assesses their expected benefits and related costs. Because of the inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of any assessment of the internal control structure to future periods is subject to the risk that policies or procedures may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. In planning and performing our audit of the basic financial statements of the City of Allen for the year ended September 30, 2006, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control stricture. However, during our audit, we noted a certain matter involving accounting internal control structure and other operational matters that is presented for your consideration. This matter, which was considered by us during our audit of the financial statements and do not modify the opinion expressed in our report dated January 25, 2007, is presented in the following paragraphs. We will review the status of these comments during our next audit engagement. Our comments and recommendations are intended to improve the internal control structure or to result in other operating efficiencies. Additionally, we evaluated the status of the comments from our audit of the previous year. DALLAS Performance and Review of Bank Reconciliations Tru„ f- " r,,•_' Observation: During our audit, we were informed that the finance department, upon review of the City's bank reconciliation for the month of Jul 2006, recognized that the ooled cash accounts YP had an unreconciled difference. This difference remained uncorrected during the period from August 2006 through December 2006 despite the City's efforts to identify the cause of FO.T WD.B. the difference. In December 2006, the City discovered that the difference was caused by a 1600 n.., I—?h 11.,,: deposit error recorded in preparing the July 2006 reconciliefion. The correction of this error bu,r 0K, in the amount of $190,479 caused the pooled cash accounts to reconcile. Although the City r.., W-1.7..- -611,2.l;w• corrected the error subsequent to its discovery, a significant amount of time was spent by ac an_ -v,x F,11 R,„I„ the City personnel in finding the discrepancy that could have otherwise been spent NFAW B,ERNERANDTIOMELL CON performing regularly assigned functions of the department. AN INDEPENDENT MEMBER OF BAKER TILLY INTERNATIONAL March 13, 2007 WEAVER TIDWELL L.L A To the Honorable Mayor, CERTInED PUBLIC City Council and City Manager ACCORE of Allen, Texas A.. CORE ULTA6 NO C0N6YLT/.NT6 Management of the City of Allen, Texas (the "City') is responsible for establishing and maintaining the Citys internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The City's internal control structure consists of policies and procedures established by management to provide reasonable, but not absolute, assurance that the financial data are recorded, processed, summarized, and reported consistent with the assertions embodied in the financial statements. In establishing those policies and procedures, management assesses their expected benefits and related costs. Because of the inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of any assessment of the internal control structure to future periods is subject to the risk that policies or procedures may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. In planning and performing our audit of the basic financial statements of the City of Allen for the year ended September 30, 2006, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control stricture. However, during our audit, we noted a certain matter involving accounting internal control structure and other operational matters that is presented for your consideration. This matter, which was considered by us during our audit of the financial statements and do not modify the opinion expressed in our report dated January 25, 2007, is presented in the following paragraphs. We will review the status of these comments during our next audit engagement. Our comments and recommendations are intended to improve the internal control structure or to result in other operating efficiencies. Additionally, we evaluated the status of the comments from our audit of the previous year. DALLAS Performance and Review of Bank Reconciliations Tru„ f- " r,,•_' Observation: During our audit, we were informed that the finance department, upon review of the City's bank reconciliation for the month of Jul 2006, recognized that the ooled cash accounts YP had an unreconciled difference. This difference remained uncorrected during the period from August 2006 through December 2006 despite the City's efforts to identify the cause of FO.T WD.B. the difference. In December 2006, the City discovered that the difference was caused by a 1600 n.., I—?h 11.,,: deposit error recorded in preparing the July 2006 reconciliefion. The correction of this error bu,r 0K, in the amount of $190,479 caused the pooled cash accounts to reconcile. Although the City r.., W-1.7..- -611,2.l;w• corrected the error subsequent to its discovery, a significant amount of time was spent by ac an_ -v,x F,11 R,„I„ the City personnel in finding the discrepancy that could have otherwise been spent NFAW B,ERNERANDTIOMELL CON performing regularly assigned functions of the department. AN INDEPENDENT MEMBER OF BAKER TILLY INTERNATIONAL CITY OF ALLEN, TEXAS March 13, 2007 Page Two Recommendations We recommend that the finance department ensure bank reconciliations continue to be reviewed by persons other than the preparers, preferably at the supervisory level or above and that unreconciled amounts be investigated and resolved in a timely manner. Additionally, we recommend that the department perform periodic reviews of the volume and complexity of work assigned to associate and supervisory staff levels in order to accommodate increasing volumes of work and to effectively distribute that work such that efficiency is maintained and assigned tasks performed timely. Managements Response: Bank reconciliations are completed every month and reviewed by upper management. In ' July 2006, the bank showed a larger balance than the general ledger. The discrepancy could not be found; therefore prior to the audit, the auditors were informed that the bank accounts did not reconcile and that on-going efforts were being made by the staff of the finance department to find the difference. In December 2006, before the 2006 audit was completed, an error in the amount of $190,479 was found and corrected. The error occurred when an employee from another department made a $236,902 deposit but only entered $46,422 into the Cash Receipt application. The difference of $190,479 was hand written on the report but never entered. When the report came to the Finance department, a recently -hired and ' inexperienced employee posted the entry without validating that the deposit at the bank equaled the amount of the Cash Receipt posted to the general ledger. To find the error, every item on the bank statement and every departments cash receipt paperwork had to be individually reviewed. The procedure was a very time consuming task that was ' conducted while keeping up with day to day accounting responsibilities. Employee error, staff turnover, complexity of the cash receipt processes, lack of t automation and a high volume of work due to City growth have all played a factor in causing this error. Timely reconciliations will always be given a high priority; however, all of these factors will continue to affect the work environment within the Finance ' department and other City departments. Status of Prior Year Comments ' Accompanying this letter is a summary of the status of prior year comments, which should be read along with our current observations and recommendations. ' Concluding Comments We appreciate the opportunity to be of service and wish to express our appreciation to the officials and employees of the City for their cooperation and assistance during the course of ' the audit. We would be pleased to discuss these recommendations in greater detail or otherwise assist in their implementation. This report is intended solely for the information and use of the City council, management, ' and within organization. /others nthe WEAVER AND TIDWELL, L.L.P. 'CITY OF ALLEN, TEXAS March 13, 2007 Page Three I STATUS OF PRIOR YEAR COMMENTS The status of prior year's recommendations is based upon discussion with management and limited review of their implementation. Such recommendations were reported to the City Council and are more fully described in prior year's Communication of Internal Control Structure Related Matters Noted during the Audit. Recommendations 1. We recommended that the finance department consider enhancing and strengthening the current review process over the approval and recording of journal entries. Significant, unusual, and non-recurring transactions should specifically be reviewed and approved by management to ensure that proper accounting is followed and generally accepted accounting Principles are applied consistently. Implementation Implemented Not Implemented In Process X ' 2. Additionally, we recommended that management implement measures to ensure that transfers between funds get proper prior approval, possess economic substance, and the purpose of the ' transfers are in accordance with managements intentions. We also recommended that capital asset transactions be reviewed monthly so that discrepancies such as those described can be t more easily and quickly researched and resolved. In addition, regular comparisons of capital assets balances from the projects module and sub ledgers ' with recorded capital assets per general ledger should be performed to help maintain control over the City's assets. X ' 3 We recommend that management develop a methodology to estimate the amount of sick leave ' that is earned and expected to be paid at the time of employee termination. X 1