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Home My WebLink AboutRes 02-06 Approving the Comprehensive Annual Financial Report Year Ending September 30, 2001TOWN OF WESTLAKE RESOLUTION NO. 02-06 A RESOLUTION OF THE BOARD OF ALDERMEN OF THE TOWN OF WESTLAKE, TEXAS APPROVING THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2001 PRODUCED BY WHITLEY PENN. BE IT RESOLVED BY THE BOARD OF ALDERMEN OF THE TOWN OF WESTLAKE, TEXAS: SECTION 1: That the Board of Aldermen of the Town of Westlake does hereby approve the financial statements for the year ended September 30, 2001. SECTION 2: That this Resolution shall become effective upon the date of its passage. PASSED AND APPROVED ON THE 25"' DAY OF FEBRUARY 2002. ATTEST: r^ Ginge rosswy, Town Sberetary APPROVED AS TO Linton L(o OY/ T Scott Bradfey, Mayor Trent Petty, Town Manager -es 02-W TOWN OF WESTLAKE FINANCIAL STATEMENTS Year Ended September 30, 2001 with Report of Independent Auditors TOWN OF WESTLAKE FINANCIAL STATEMENTS Year Ended September 30, 2001 Table of Contents Report of Independent Auditors....................................................................................... General Purpose Financial Statements: Combined Balance Sheet — All Fund Types, Account Groups And Discretely Presented Component Unit .................................................... Combined Statement of Revenues, Expenditures and Changes in Fund Balances — All Governmental Fund Types And Discretely Presented Comuonent Unit._.._..___..... 1 2 3 Combined Statement of Revenues, Expenditures and Changes in Fund Balances — Budget and Actual — General And Special RevenueFunds................................................................................................................ 4 Combined Statement of Revenues, Expenses and Changes in Retained Earnings — All Proprietary Fund Types........................................................... 5 Combined Statement of Cash Flows — All Proprietary Fund Types ..................................... 6 Notesto the Financial Statements...................................................................................................... 7 Partners Larry G. Autrey, P.C. WHITLEY PENN CHAS AND PROFESSIONAL CONSULTANTS Felixf. Lozano ill, P.C. David L. Neal, P.C, fames C. Penn, P.C. Thomas f. Rein, P.C. Mark A. Topel, P.C. REPORT OF INDEPENDENT AUDITORS J. Alan White, P.C. B. Glen Whitley, P.C. To the Honorable Mayor and Board of Aldermen Town of Westlake, Texas We have audited the accompanying general purpose financial statements of the Town of Westlake, Texas (the "Town") as of and for the year ended September 30, 2001 as listed in the Table of Contents. These general purpose financial statements are the responsibility of the Town's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall general purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Town of Westlake, Texas at September 30, 2001, and the results of its operations and the cash flows of its proprietary fund types for the year then ended in conform ty with accounting principles generally accepted in the United States of America. U,� i //C-/) f) Fort Worth, Texas November 27, 2001 Fort Worth: 17o1 River Run Road, Suite 507 • Fort Worth, Texas 76107 • (817) 258-9100 • metro (817) 498-0237 • fax (817) 877-3036 Mid -Cities: 86o West Airport Freeway, Suite 6o1 • Hurst, Texas 76054 • (817) 258-9100 • metro (817) 498-0237 • fax (817) 656-4013 www,wpcpa.com TOWN DE WESTLAKE, TERAS COMBINED BALANCE SHUT ALL FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNIT Year Ended Sentelnber30, 2001 LIA Ill WTI FS, FUND FQIII-ry, Totals Totals Proprietary Account Account Memorandum Memorandum - $ - $ 344,154 $ Goi,munental Fund Types _ Fund Types Groups Groups only Only Qua to c6cr finds _ 710,974 - 2,291,016 80,616 General Fixed General Long Primary Reporting General Special Revenue Enlerprise Avsets Term Debt Government Component [snit Fntlly ASSETS AND 071iER Dorm _ Total labililies 1,239,714 710,974 2,637,704 - 2,439,053 7,027,445 - 7,027,445 Cash and cash urveshlicnls $ 1,608,935 s 4,004,961 $ 64,193 $ - $ - $ 5,677,189 $ 10,969 $ 5,688,178 Receivahlcs Accounts 96,535 - 6,351 - - 102,886 - 102,886 A4iscellaneous Note reocivahle - DPS, eurrent - 13,124 - - - - - - - 13,124 - 13,124 Due li'onl other funds 661,300 2,709,536 - - - 3,590,842 - 3,590,942 fixed xssels Improvements - - 6,330,296 750,000 - 7,080,296 _ 7,080,296 A4achinery and equipment - - 1,868,396 196,660 - 2,065,056 - 2,065,096 COnSIRLCIi011 in progress - - - 2,439,053 - 2,439,053 - 2,439,053 Accrmtulalcd deprecialion - - (170,315) - - (170,315) - (170315) ReS16 lad assets 546,580 - 26,200 - - 572,780 - 572,780 Note receivable - DPS, non-current 99,582 - - - - 99,582 - 99,582 01her debils: Amount to be provided for rcti encrt 2.439,053 2,039,053 - 2,439.053 ol`gencr a! long -lens dell - Tata] assets and other debits $ 3,246,062 $ 6,713,597 $ 8,125,121 S 3,385,713 $ 2,439,053 $ 23,909,546 $ 10,989 $ 23,920,535 LIA Ill WTI FS, FUND FQIII-ry, AND (VIER CREDITS: 0ahililies: Accomita payable $ 104,282 $ - $ 239,872 $ - $ - $ 344,154 $ - $ 344,154 Cu,lnrnor deposilspayoble - - 26,200. - - 26,200 - 3,59%842 - 26,200 - 3,90842 Qua to c6cr finds 588,852 710,974 - 2,291,016 80,616 - 2,439,053 2,519,669 - 2,519,669 Note payabic - City of Keller - - 54ci_580 546,580 I)efirred revenue 546,580 - _ _ Total labililies 1,239,714 710,974 2,637,704 - 2,439,053 7,027,445 - 7,027,445 I-'l1ND EQUITY ANI] OTHF9 CREDITS: - - 5,952,170 - - 9,952,170 - 5,452,179 Conlribulcd capital - - 3,385,713 - 3,365,713 3,385,713 Ihnv2shnent in geucral fixed assoFs - (464,753) - - (46=1,753) 10,989 (453,764) Relaim:d eamings - - find balauces: R,nslricled - 6,002,623 - - 6,002,623 - 6,002,023 Uw6ifmaled 2,006.348 - - - 2,006,348 2,006,348 'I'nlal fmtd equity and other credils 1006348 6,002,623 5,487,417 3,385,713 - 16,882,101 10,989 16-893,090 I'clel liabilities and fluid equity $ 3,246,062 $ 6,713-597 $ 8,125,121 $ 3,385,713 $ 2,439,053 $ 23,909,546 $ 10989 $ 23,920535 'Ilnc accnunpanying voles arc an integral part of this slatemelht. 2 TOWN OF N'ESTLAKE, TEXAS COMBINED STATEMENT OF REVEN1'ES. EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES AND DISCRETELY PRESENTED COYIPONENT I'NIT Year Ended September 30, 2001 The accompanying nates are an intep tl pail of Obis statement. 3 Totals Totals hletnnrandum Memorandum Governmental Fund Types Only OWN, Primary General Special Revenue Government Component Li nit Reporting Entitri REVENUES; Taxes: Sales $ 967.427 $ 967,427 5 1,934,854 $ - S 1.934.654 Mixed beverage 9,479 - 9,479 9,479 Hotel occupancy - 433,679 433,679 433,679 Franchise 285,726 _ 285,726 285,726 Interest income 122.960 220,147 343,107 551 343,658 Building perniits and fees 700,313 - 700,313 700,313 Fines and penalties - - - Qthcr nalscellancous income 1,475 - 1,475 - 1,475. Total revenues 2,087,380 1,621.253 3,708.633 551 3,709,184 EXPENDITURES: Current: General government and administration 785,979 71,238 857.217 857,217 Public safety 409,512 - 409,512 409,512 Cultural and recreational 5,967 5,967 5,967 Economic development 661.077 - 661,077 661,077 Capital outlay 125,518 49.441 174,959 174.959 Total expenditures 1,988,053 120,679 2,108,737 - 2.108,732 Excess (deficiency) of revenues over (under) expenditures 99,327 1,500.574 1,599,901 551 1,600.452 Fund balances at beginning of year 1,907,021 4,502,049 6.409,070 10,438 6,419,508 Fund balances at end ofyear S 2,006.348 $ 6.007.623 $ 8,008,971 $ 10,989 $ 8,019,960 The accompanying nates are an intep tl pail of Obis statement. 3 r 4 N <f V1 C OGi a r. i. N ^ :T. c 3 0. `e e — z 7 a> l� M CI N h r 9 d v> en N v' ci ci r] ck b � vs a � a J L: o c = C k (V c v try 0 C G G n a VS m c n O ,n c M u 3 0. J TORN OF WESTLAKE. TEXAS COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS ALL PROPRIETARY FUND TYPES Year Ended September 30, 2001 OPERATING REVENUES: Charges for services Other miscellaneous income Total operating revenues OPERATING EXPENSES: Payroll costs Professional and contract services Depreciation Water purchases - City of Fort Worth Other operating costs Total operating expenses Operating income (loss) Retained earnings at beginning of year, as previously reported Correction of an error (Note J) Retained earnings at beginning of ycar, as restated Retained earnings at end of year, Contributed capital at beginning of year, as previously reported Correction of an error (Note .i) Contributed capital at beginning of year, as restated Capital contributions - donated assets Contributed capital at end of year The accompanying notes are an integral part of this statement. 5 Proprietary Fund Types Enterprise S 257,385 380 257,765 9,344 227,995 164,785 199,822 148,785 750,691 (492,926) 747,665 (719,492) 28,173 S (464,753) 719,492 719,492 5,232,678 $ 5,9522170 TOWN OF WESTLAKE, TEXAS COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES Year Ended September 30, 2001 CASH FLOWS FROM OPERATING ACTIVITIES: Operating Income (Loss) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Depreciation Changes in operating assets and liabilities: Receivables Due to other funds Restricted assets Accounts payable Customer deposits payable Net cash provided by (used for) operating activities CASH FLOWS FROM NON -CAPITAL FINANCING ACTIVITIES CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning ofthe Year Cash and Cash Equivalents at End of the Year - Supplemental Disclosure of Cash Flow Information Acquisition of fixed assets through issuance of note payable Acquisition of fixed assets through donations The accompanying rotes are an integral part of this statement. 6 Proprietary Fund Types Enterprise S (492,926) 164,785 32,954 2,291,016 (26,200) 236,357 21,970 2227.996 (2,176,420) 51,566 12,627 64J93 93 $ 80,516 $ 5,232,678 TOWN OF WESTLAKE, TEXAS NOTES TO FINANCIAL STATEMENTS September 30, 2001 A. General Statement The Town of Westlake, Texas (the "Town") was incorporated under the provisions of the laws of the State of Texas on December 26, 1956. The Town operates under a Board -Manager form of government and provides the following services as authorized by the laws of the State of Texas: public safety, cultural and recreation, and economic development. The accounting and reporting policies of the Town conform with generally accepted accounting principles 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 entitled Audits of State and Local Governnien.tal Units and by the Financial Accounting Standards Board (when applicable). B. Summary of Significant Accounting Policies Financial Reporting Entity The Town's combined financial statements include the accounts of all Town operations. The criteria for including organizations as component units within the Town's reporting entity, as set forth in section 2100 of GASB's Codification of Governmental Accounting and Financial Reporting Standards includes whether: • the organization is legally separate (can sue and be sued in their own name) • the Town holds the corporate powers of the organization • the Town appoints a voting majority of the organizations' board • the Town is able to impose its will on the organization the organization has the potential to impose a financial benefit/burden on the Town * there is fiscal dependency by the organization on the Town Based on the aforementioned criteria, the Town of Westlake has one component unit, Lone Star Public Facilities Corporation, which uses the current financial resources measurement focus and modified accrual accounting. This component unit is reported discretely in the financial statements. Component Units Lone Star Public Facilities Corporation is a Texas non-profit corporation that acts on behalf of the Town to further the public purposes under the Public Facilities Corporation Act, as its duly constituted authority and instrumentality. TOWN OF WESTLAKE, TEXAS NOTES TO FINANCIAL STATEMENTS (continued) B. Summary of Significant Accounting Policies - continued Basis of Presentation — Funds and Account Groups The accounts of the Town are organized into funds and account groups, each of which is considered to be a separate accounting entity. The major fund categories and account groups are: The Governmental Fund Types (General and Special Revenue) are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Governmental Fuad T} yes: General Fund — is the main operating fund of the Town. This fund 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. This fund utilizes a modified accrual basis of accounting for financial statement purposes. Special Revenue Funds — are used to account for proceeds of specific revenue resources (other than assessments, expendable trusts or major capital projects) that are legally restricted to expenditures for specified purposes. These funds include 4A Development Corporation, Westlake 4B Development Corporation, and Westlake Visitors Association Fund. These funds utilize a modified accrual basis of accounting for financial statement purposes. Proprietary Funds use the economic resources measurement focus. The accounting objectives are a determination of net income, financial position and changes in cash flow. All assets and liabilities associated with a proprietary fund's activities are included on its balance sheet. Proprietary Fund equity is segregated into contributed capital and retained earnings. Proprietary Fuad Tomes: Enterprise Funds — are used to account for revenues and expenses which are financed and operated in a manner similar to private business enterprise where the intent of the governing body is that the costs (expenses, including depreciation) of providing water and sewer services to the general public on a continuing basis be financed or recovered primarily through user charges or where the governing body has decided that periodic determination of revenues earned, expenses incurred, or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. These funds include Water and Sewer. 9 TOWN OF WESTLAKE, TEXAS NOTES TO FINANCIAL STATEMENTS (continued) B. Summary of Accounting Policies - continued Account Gr ouDs: Account groups are used to establish accounting control and accountability for the Town's fixed assets and long-term liabilities, which are not reported in the respective governmental funds. Account groups are not "funds". They are concerned only with the measurement of financial position. Account Groups are not involved with measurement of results of Operations. The following are the Town's Account Croups: General Fixed Assets Account Group — is established to account for general fixed assets used for general purposes, other than those accounted for in the Proprietary Funds. Capital outlays in funds other than Proprietary Funds are recorded as expenditures of those funds at the time of purchase and are subsequently recorded for control purposes in the General Fixed Assets Account Group. Fixed assets in the General Fixed Assets Account Group are not depreciated. General Long -Term. Debt Account Group — This account group is used for the long-term obligations of the Town. Measurement Focus/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. Linder the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (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 current period or soon enough thereafter to be used to pay liabilities of the current period. A one-year availability period is used for recognition of all Governmental Fund revenues. Expenditures are recorded when the related fund liability is incurred. Exceptions to this general rule include accrued vacation and sick leave, which is recorded when payable from current available financial resources. The revenues susceptible to accrual are sales taxes, hotel/motel taxes, franchise fees, special assessments, building permits and fees, and interest income. Investment earnings are recorded when earned, since they are both measurable and available. The accrual basis of accounting is used in proprietary fund types. The accrual basis of accounting recognizes revenues when earned. Expenses are recorded when incurred. TOWN OF WESTLAKE, TEXAS NOTES TO F'INANCI_AL STATEMENTS (cantinued) B. Summary of Accounting Policies - continued Budgetary Control As set forth in the Town Charter, the Town's Board of Aldermen adopts an annual budget prior to October 1 for the General and Proprietary Funds. The annual budget for the General and Proprietary Funds is prepared in accordance with the basis of accounting utilized by that fund and is legally enacted through passage of an ordinance. The Board of Alderman throughout the fiscal year can amend the budget. The Combined Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual — General and Special Revenue Funds presents a comparison of budgetary data to actual results of operations for which annual operating budgets are legally adopted. These funds utilize the same basis of accounting for both budgetary purposes and actual results. The formal budgetary accounting is to be employed as a management control for all funds of the Town. However, legal budgets will be adopted only for General Fund. The Town Manager is authorized to transfer budgeted amounts between line items and departments within any fund; however, the Town's Board of Aldennen must approve any revisions that alter the total expenses/expenditures of any fund. Cash and Investments Cash and Cash Investments of all funds, including restricted cash, are available upon demand and are considered to be "cash equivalents". The Town reporting entity considers highly liquid investments (including restricted assets) with an original maturity of three months or less when purchased to be cash equivalents. All investments are recorded at fair value based on quoted market prices. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties. Interfund Receivables and Payables Short-term amounts owed between funds are classified as "Due to/from other funds". Fund Changes and Transactions Between Funds Legally authorized transfers are treated as operating transfers and are included in the results of operations of both Governmental and Proprietary Funds. The Town transferred fixed assets from the General Fund to the Water and Sewer Fund. These transfers have been accounted for as contributed capital of the respective funds. The Town allocates to the Enterprise Funds an indirect cost percentage of the salaries and wages and related costs of personnel who perform administrative services for those funds but are paid through the General Fund along with other indirect costs deemed necessary for their operations. 10 TOWN OF WESTLAKE, TEXAS NOTES TO FINANCIAL STATEMENTS (continued) B. Summary of Accounting Policies - continued Fund Changes and Transactions Between Funds — continued During the year ended September 30, 2001, the Town allocated approximately $98,000 for such services. The Water and Sewer Fund was established during fiscal year 2000 as an Enterprise Fund to account for water and sewer operations. Fixed assets were transferred from the General Fixed Asset Account Group to the Enterprise Fund. Property, Plant and Equipment General Fixed Assets Account Grou Fixed assets used in Governmental Fund Type operations are accounted for in the General Fixed Assets Account Group, rather than in Governmental Funds. Public domain (`infrastructure") general fixed assets including roads, bridges, curbs and gutters, streets and sidewalks, drainage systems and lighting systems are not capitalized along with other general fixed assets for reporting purposes. No depreciation has been provided on any of the remaining assets. All fixed assets are valued at historical cost or estimated historical cost if actual historical is not available. Donated assets are valued at their fair market value on the date donated. Assets capitalized have an original cost of $1,000 or more and over three years of life. Proprieta?j� Fund Types Property, plant, and equipment owned by the Proprietary Fund is recorded at cost or, if contributed property, at their estimated fair value at time of contribution. Repairs and maintenance are recorded as expenses; renewals and betterments are capitalized. Assets capitalized have an original cost of $1,000 or more and over three years of life. Depreciation has been calculated on each class of depreciable property using the straight-line method. Estimated useful lives are as follows: Water and Sewer System 10-50 years Machinery and Equipment 5-10 years Improvements 20 years Compensated Absences The Town's policy allows employees to earn ten days of vacation per year of employment. After completion of five years of service, fifteen days per year are earned. Twenty days per year are earned after completion of 10 years of service. Any earned, but not used amount is payable upon termination. No accumulated, unused sick time is payable upon termination or retirement. 11 TOWN OF WESTLAKE, TEAS NOTES TO FINANCIAL STATEMENTS (continued!) B. Summary of Accounting Policies — continued Restricted and Designated Fund Equity Restricted fund balances are legally required segregations that are required by state law, corporate charters, or by agreement with third parties. Deferred Revenue Deferred revenue accounted for on the balance sheet of the general fund relates to amounts received from surrounding cities/towns, businesses, and residents that will benefit from the construction of FM1938. Construction has not begun on this capital project as of fiscal year ending September 30, 2001. Total Columns (Memorandum Only) Total columns on the combined financial statements are captioned "memorandum only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or changes in cash flows in conformity with generally accepted accounting principles. lnterfund eliminations, if applicable, have not been made in the aggregation of this data; and it is therefore, not comparable to a consolidation. C. Deposits and Investments Deposits State statutes require that all deposits in financial institutions be fully collateralized by U.S. Government obligations or its agencies and instrumentalities or direct obligations of Texas or its agencies and instrumentalities that have a market value of not less than the principal amount of the deposits. The Town's deposits were not fully insured or collateralized as required by the state statutes at September 30, 2001. The Town did not experience any losses as a result of not being fully insured or collateralized. At September 30, 2001, the carrying amount of the Town's deposits was bank balances totaling approximately $227,000. The cash deposits held at financial institutions can be categorized according to three levels of risk. These three levels of risk are: Category 1 - Deposits that are insured or collateralized with securities held by the Town or by its agent in the Town's name. Category 2 - Deposits, which are collateralized with securities, held by the pledging financial institution's trust department or agent in the Town's name. Category 3 - Deposits which are not collateralized. At September 30, 2001, the Town's cash deposits are classified as Category 3 12 TOWN OF WESTLAKE, TEXAS NOTES TO FINANCIAL STATEMENTS (continued) C. Deposits and Investments - continued Investments — State statutes, town ordinances and town resolutions authorize the Town's investments. The Town is authorized to invest in U.S. Government obligations and its agencies or instrumentalities, direct obligations of the State of Texas or its agencies and instrumentalities, collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, obligations of states, agencies, counties, cities and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm and having received a rating of not less than "A" or its equivalent rating, no load, SEC registered mutual funds with a weighted average state maturity of less than two years that are invested in allowable securities, obligations of Texas and its agencies, fully collateralized repurchase agreements and reverse repurchase agreements, prime domestic commercial paper, prime domestic bankers' acceptances, insured or collateralized certificates of deposits, government pools and no-load SEC registered money-market fiends consisting of any of these securities listed. For fiscal year 2001, the Town invested only in interest bearing accounts in state and national banks domiciled in Texas that are insured by the FDIC or secured by qualified obligations. The Town records all interest revenue related to investment activities in the respective funds. Similar to cash deposits, investments held at a financial institution can be categorized according to three levels of risk. These three levels of risk are: Category 1 - Investments that are insured or collateralized with securities held by the Town or by its agent in the Town's name. Category 2 - Investments, which are collateralized with securities, held by the pledging financial institution's trust department or agent in the Town's name. Category 3 - Investments, which are not collateralized. Restricted Cash — At September 30, 2001, the Town had $572,780 of cash on deposit with a fiscal agent. This represents $546,580 received from surrounding towns, businesses, and residents that will benefit from the construction of FM 1938. These deposits are considered restricted cash and must be used for expenditures related to FM 1938. In addition, $26,200 was received as customer deposits for water and sewer that are refundable upon termination of service, 13 TOWN OF WESTLAKE, TE) AS NOTES TO FINANCIAL STATEMENTS (continued) C. Deposits and Investments - continued At September 30, 2001, the Town's investments included investment pools in the name of the Town or its agent in the Town's name. The Town's investments (in thousands) were as follows, Investments: Government Pool Total investments Cash Total cash and investments Market Value $ 5,454,000 5,454,000 234,000 $ 5,688,000 Government Pool investments are not categorized, in accordance with GASB No. 3, because they are not evidenced by securities that exist in physical or book entry form. Government Pool investments as of September 30, 2001 were invested in TexPool. The State Comptroller of Public Accounts exercises oversight responsibility over TexPool, the Texas Local Government Investment Pool. Oversight includes the ability to significantly influence operations, designation of management and accountability for fiscal matters. Additionally, the State Comptroller has established an advisory board composed of both Participants in TexPool and other persons who do not have a business relationship with TexPool. The Advisory Board members review the investment policy and management fee structure. Finally, TexPool is rated AAAm by Standard and Poors. As a requirement to maintain the rating, weekly portfolio information must be submitted to Standard and Poors, as well as the office of the Comptroller of Public Accounts for review. TexPool operates in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. TexPool uses amortized cost rather than market value to report net assets to compute share prices. Accordingly, the fair value of the position in TexPool is the same as the value of TexPool shares. D. Interlocal Agreement with Trophy Club/Westlake Department of Public Safety On April 24, 2000, the Town approved an interlocal agreement with the Trophy Club/Westlake Department of Public Safety ("DPS"), which called for the Town of Westlake to participate in the financing of an emergency vehicle for the DPS. The Town recorded a note receivable of $125,000 based on the terms of the interlocal agreement. The Agreement calls for eight (8) principal and interest payments to the Town, with the first payment due on June 1, 2001, with interest calculated at an interest rate stated at 6.75% simple interest. 14 TOWN OF WESTLAKE, TEXAS NOTES TO FINANCIAL STATEMENTS (continued) D. Interlocal Agreement with Trophy Club/Westlake Department of Public Safety — cont'd The schedule of fixture collections by the Town under this agreement, in each of the next seven fiscal years, is as follows: Fiscal year ended _September 30 Amount of Scheduled Collections Principal Interest Total 2002 $ 13,124 $ 7,607 $ 20,731 2003 14,009 6,722 20,731 2004 14,955 5,776 20,731 2005 15,964 41767 20,731 2006 17,042 3,689 20,731 2007 18,192 2,539 20,731 2008 19,420 1,311 20,731 Total $ 112.706 $ 32.411 $ 145.117 E. Fixed Assets A summary of General Fixed Assets Account Group transactions for the year ended September 30, 2001 follows: Balance Balance 1011100 Additions Deletions Transfers 9130101 Improvements $ - $ 750,000 $ - $ - $ 750,000 Machinery and Equipment 397483 157,177 - - 196,660 Construction in Progress - 2,4397053 - - 2,439.053 Totals $ 39,483 $ 3,346,230 $ $ 3,385,713 During 2001, the Town received donated fixed assets totaling $750,000. These assets have been recorded, at their fair market value at the date of donation, as improvements within the General Fixed Asset Account Group. The Town has elected under generally_ accepted accounting principles to not capitalize infrastructure fixed assets. 15 TOWN OF WESTLAKE, TEXAS NOTES TO FINANCIAL STATEMENTS (continued) E. Fixed Assets — continued A summary of Proprietary Fund Type property, plant and equipment at September 30, 2001 follows: Improvements Machinery and equipment Construction in progress Total Total Proprietary Funds $ 6,330,296 1,868,396 S 8,198,692 During 2001, the Town received donated fixed assets totaling $3,232,678. These assets have been recorded, at their fair market value at the date of donation, as improvements and contributed capital within the Enterprise Fund. F. Concentrations of Credit Risk The Town maintains deposits in financial institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation up to $100,000. At September 30; 2001 the Town had deposits at one financial institution in excess of federally insured limits of approximately $127,000. G. Commitments and Contingencies The Town has commitments relative to municipal services, and contractual relationships concerning certain utilities and public safety resources, which are normal in its ongoing activity. Non -cancelable obligations consist of a lease of Town office space and agreements for services at September 30, 2001. Minimum lease payments and contractual obligations under these non -cancelable leases and agreements as of September 30, 2001 are as follows: Fiscal Year End, September 30 2002 2003 2001 Total Amount S 109,302 107.598 97.632 $ 311.533 Rental expenditures in 2001 were approximately $43,000. 16 TOWN OF WESTLAKE, TEXAS NOTES TO FINANCIAL STATEMENTS (continued) G. Commitments and Contingencies - continued On October 9, 2000, the Town approved an interlocal agreement with the City of Keller, which provided for the joint construction, operation, maintenance and use of an elevated water storage facility and appurtenances. The Town recorded a note payable of $2,439,053 based on the terms of the interlocal agreement, which requires twenty (20) annual principal and interest payments to the City of Keller, with the first payment due on September 30, 2001 at interest rates ranging from 5.0% to 5.65%. he schedule of fi-t-are payments by l le Town under this agrce1A ent, is as follows. Fiscal year ended September 30 .Amount of Scheduled Payment Principal Principal Interest Total 2002 $ 41,656 $ 78,012 S 1191668 2003 44,860 75,569 120,429 2004 46,466 72,984 119,450 2005 49,667 70,273 119,940 2006 52,873 67,374 120,247 Thereafter 1,198,437 521,995 1,720,432 Total $ 1,433,959 $ 886,207 $ 2,320,166 H. Note Payable City of Beller During 2001, the Town reached a settlement agreement with the City of Keller for certain surface area system equipment to be transferred to Town and included as part of its Enterprise Fund. As a result of this settlement agreement the Town is required to pay a total of $121,016 to the City of Keller over a three-year period, bearing interest at 5.50% per annum, beginning March 1, 2001 and continuing until March 1, 2003. The balance of this note at September 30, 2001 is $80,616. The schedule of future payments by the Town under this agreement, is as follows: Fiscal year ended September 30 Amount of Scheduled Payment_ Principal Interest Total 2002 $ 40,308 $ 4,434 $ 44,742 2003 40,308 2,217 42,525 Total $ 80,616 $ 6,651 $ 87,267 17 TOWN OF WESTLAKE, TEXAS NOTES TO FINANCIAL STATEMENTS (continued) I. Retirement Plan Plan Description — The Town provides pension benefits for all of its fiill-time employees through a non-traditional, joint contributory, defined contribution plan in the statewide Texas Municipal Retirement System ("TMRS"), one of over 700 administered by TMRS, an agent multiple - employer public employee retirement system. Contributions — are at a rate of 7% for the employees, and the Town matching ratio is currently 2 to 1, both as adopted by the governing body of the Town. Under the state law governing TMRS, the actuary annually determines the Town contribution rate. The rate was 10.3% of covered payroll for the months in calendar year 2001. 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. J. Correction of an Error In the prior year, management reported fixed assets transferred from the General Fund to the Enterprise Fund as an operating transfer. This should have been reported as contributed capital from the General Fund to the Enterprise Fund. The effect of the correction will result in a decrease in retained earnings and an increase in contributed capital of $719,492. K. Individual Fund Disclosures (1) Enterprise Fund — The Enterprise Fund's deficit balance in retained earnings of $464,753 is the result of revenues inadequate to cover expenses including depreciation. Management intends to recover the accumulated deficit balance in retained earnings through fixture years' charges for services. (2) Interfiuxd receivables and payables at September 30, 2001 were as follows: Fund Due from Other Funds Due to Other Funds General Fund $ 881,306 $ 588,852 Special Revenue Furid 2,709,536 710,974 Enterprise Fund - 2,291,016 S 3.90.842 $ 3.590.842 18 TOWN OF WESTLAKE, TEXAS NOTES TO FINANCIAL STATEMENTS (continued) L. Water Purchase and Wastewater Treatment Contracts The Town has a contract with the City of Fort Worth, Texas to purchase water when the Town does not have and cannot provide economically and within a reasonable period of time, any other source of water supply, fully adequate to meet its present and/or future needs or potential emergency needs. Under the contract, the Town may obtain from the City of Fort Worth, Texas a supply of potable water at a reasonable rate based on water usage. The rates charges are subject to minimum annual contract payments. Water expense for the year ended September 30, 2001 was approximately $16$,000. The Town has an agreement with Trinity River Authority whereby the Trinity River Authority has agreed to provide a wastewater treatment system for the benefit of the Town. The Town's annual expense for the year ended September 30, 2001 was approximately $69,000. M. Self -Insurance As established by the Texas Labor Code Section 504.016 in order to deal with potential liabilities, the Town contracts with the Texas Municipal League to participate in a self-insured retention program ("Silt"), which is accounted for within the General Fund. Claims in excess of the self- insured retention amounts are covered through third -party limited -coverage insurance policies. The Town is self-insured with excess coverage in these areas: (a) worker's compensation liability with no limit on each occurrence with no an annual aggregate (b) general liability with a $3,000,000 and a $2,000,000 limit on each occurrence for limits on liability and sudden events involving pollution, respectively with an annual aggregate of $6,000,000, (c) law enforcement liability with a $3,000,000 limit on each occurrence with an annual aggregate of $6,000,000, (d) errors and omissions liability with a $3,000,000 limit for each wrongful act with an annual aggregate of $6,000,000, and (e) automobile liability with a $3,000,000 limit on each occurrence. N. Contingent Liabilities Various claims and lawsuits are pending against the Town. In the opinion of Town management, after consultation with legal counsel, the potential loss on all claims and lawsuits will not materially effect the Town's financial position. 19 TOWN OF WESTLAKE, TEXAS NOTES TO FINANCIAL STATEMENTS (continued) O. Related Party Transactions On September 13, 1999, the Town entered into a 5 -year agreement with Petty and Associates, Inc. for Mr. Trent Petty to render services to the Town as its Town Manager. The agreement requires the Town to pay Petty and Associates $120,000 per year beginning September 27, 1999. This amount was subsequently increased by 12% to $134,400 beginning October 1, 2000. The agreement expires September 30, 2004. In 2001, the agreement was amended and extended one year to 2005. Future payments under Liill agreement as of Scptei111L) 3v, 2vv i arc. as Avll7l'JS: Fiscal Year End September 30 P. Subsequent Event Payment Amount 2002 $ 134,400 2003 134,400 2004 134,400 2005 134,400 Total S 537,600 On November 26, 2001, the Board of Alderman approved issuance of Certificates of Obligation Bonds, in the amount of $12,377,555. Proceeds will be used to construct a civic complex that will house the town hall administrative office, the court, town council chambers and a recreation facility for town citizens. Q. New Reporting Standard In June 1999, GASB issued Statement 34 "Basic Financial Statements and Management's Discussion. and Analysis for State and Local Governments. "'This Statement establishes new financial reporting requirements for state and local governments throughout the United States. When implemented, it will require new information and restructure much of the information that governments have presented in the past. Comparability with reports issued in all prior years will be affected. The Town is required to implement this standard for the fiscal year ending September 30, 2004. The Town has not yet determined the full impact that adoption of GASB Statement 34 will have on the financial statements. 20