City of Bingham Project

Solution Page Images for Required Trial Balances, financial statements and Schedules, and Reports and Analyses To Accompany

Accounting for Governmental and Nonprofit Entities, 15e

Earl R. Wilson, Jacqueline L. Reck, and Susan C. Kattelus

City of Bingham General Fund Post-Closing Trial Balance For year 2010 Cash Taxes Receivable-Delinquent Estimated Uncollectible Delinquent Taxes Interest and Penalties Receivable on Taxes Estimated Uncollectible Interest and Penalties Vouchers Payable Due to Other Funds Fund Balance Totals for all accounts Debits $70,000 470,000 23,690 1,304 354,000 13,000 152,886 $563,690 Credits

$42,500

$563,690

City of Bingham General Fund Post-Closing Trial Balance For year 2011 Cash Taxes Receivable-Delinquent Estimated Uncollectible Delinquent Taxes Interest and Penalties Receivable on Taxes Estimated Uncollectible Interest and Penalties Vouchers Payable Due to Other Funds Reserve for Encumbrances Fund Balance Totals for all accounts Debits $444,056 245,020 52,442 10,574 57,640 40,000 78,020 351,888 $741,518 Credits

$203,396

$741,518

City of Bingham General Fund Operating Statement Account Balances For year 2011

Acct 3/4020 Acct 3/4030 Acct 3/4040 Acct 3/4050 Acct 3/4060 Acct 3/4070 Acct 3/4080 Acct 3/4090

Taxes-Real Property Taxes-Sales Interest and Penalties on Taxes Licenses and Permits Fines and Forfeits Intergovernmental Revenue Charges for Services Miscellaneous Revenues

Estimated Unrealized Revenues Dr(Cr) Revenues Cr(Dr) Balance Dr(Cr) $6,000,000 $6,012,700 ($12,700) 250,000 251,000 (1,000) 44,000 42,010 1,990 577,000 578,200 (1,200) 703,000 710,700 (7,700) 500,000 500,000 0 210,000 222,400 (12,400) 110,000 110,500 (500)

Acct 5/6/7020 Acct 5/6/7030 Acct 5/6/7060 Acct 5/6/7070 Acct 5/6/7080 Acct 5/6/7100

General Government Public Safety Public Works Health and Welfare Parks and Recreation Miscellaneous

Encumbrances Dr(Cr) $2,840 24,400 27,800 12,900 9,080 1,000

Expenditures Dr(Cr) $1,630,349 3,309,955 1,429,106 957,485 713,245 110,348

Appropriations Cr(Dr) $1,640,000 3,345,000 1,462,000 975,000 735,000 112,000

Available Balance Cr(Dr) $6,811 10,645 5,094 4,615 12,675 652

4.b CITY OF BINGHAM General Fund - Balance Sheet As of December 31, 2011 Assets Cash Taxes receivabledelinquent Less: Estimated uncollectible delinquent taxes Interest and penalties receivable on taxes Less: Estimated uncollectible interest and penalties Total Assets Liabilities and Fund Balances Liabilities: Vouchers payable Due to other funds Total Liabilities Fund Balances: Reserve for Encumbrances Fund Balance Total Fund Balances Total Liabilities and Fund Balances 78,020 351,888 429,908 $527,548 $57,640 40,000 97,640 10,574 41,868 $527,548 203,396 52,442 41,624 $245,020 $444,056

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4.c

CITY OF BINGHAM General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended December 31, 2011

Revenues: Property taxes Sales taxes Interest and penalties on taxes Licenses and permits Fines and forfeits Intergovernmental revenues Charges for services Miscellaneous revenues Total Revenues Expenditures: General government Public safety Public works Health and welfare Parks and recreation Miscellaneous appropriations Total Expenditures Excess of Revenues over Expenditures Other Financing Sources (Uses) Increase in Fund Balances for Year Fund Balances, December 31, 2010 Fund Balances, December 31, 2011 1,630,349 3,309,955 1,429,106 957,485 713,245 110,348 8,150,488 277,022 -0277,022 152,886 $ 429,908 $6,012,700 251,000 42,010 578,200 710,700 500,000 222,400 110,500 8,427,510

20

4.d CITY OF BINGHAM General Fund Statement of Revenues, Expenditures*, and Changes in Fund BalancesBudget and Actual (non-GAAP basis) For the Year Ended December 31, 2011

Budgeted Amounts Original Final Revenues: Property taxes Sales taxes Interest and penalties on taxes Licenses and permits Fines and forfeits Intergovernmental revenues Charges for services Miscellaneous revenues Total Revenues $6,000,000 250,000 44,000 577,000 703,000 500,000 210,000 150,000 8,434,000 $6,000,000 250,000 44,000 577,000 703,000 500,000 210,000 110,000 8,394,000

Actual $6,012,700 251,000 42,010 578,200 710,700 500,000 222,400 110,500 8,427,510

Actual Over (Under) Final Budget $ 12,700 1,000 (1,990) 1,200 7,700 -012,400 500 33,510

Expenditures and Encumbrances: General government Public safety Public works Health and welfare Parks and recreation Miscellaneous appropriations Total Expenditures and Encumbrances 1,510,000 3,325,000 1,450,000 965,000 770,000 130,000 8,150,000 1,640,000 3,345,000 1,462,000 975,000 735,000 112,000 8,269,000 125,000 -0125,000 152,886 $ 277,886 1,633,189 3,334,355 1,456,906 970,385 722,325 111,348 8,228,508 199,002 78,020 277,022 152,886 $ 429,908 ( 6,811) (10,645) ( 5,094) ( 4,615) (12,675) ( 652) (40,492) 74,002 78,020 152,022 -0$152,022

Excess of Revenues over Expenditures 284,000 Add: Increase in Reserve for Encumbrances -0Change in Fund Balances for Year 284,000 Fund Balances, December 31, 2010 152,886 Fund Balances, December 31, 2011 $436,886

*Including encumbrances of FY2011 appropriation outstanding as of December 31, 2011.

21

City of Bingham City Hall Annex Construction Fund Pre-Closing Trial Balance For year 2011 Debits OFS - Proceeds of Bonds Exp. - Construction Expenditures OFU - Interfund Transfers Out Totals for all accounts Credits $5,000,000

$4,980,200 19,800 $5,000,000 $5,000,000

5.c.

CITY OF BINGHAM City Hall Annex Construction Fund Statement of Revenues, Expenditures and Changes in Fund Balance For the Year Ended December 31, 2011 $ -04,980,200 (4,980,200) 5,000,000 (19,800) -0-0$ -0-

Revenues Expenditures: Construction Expenditures Excess of Revenues over (under) Expenditures Other Financing Sources/(Uses): Proceeds of Bonds Interfund Transfers Out Excess of Revenues and Other Sources over (under) Expenditures and Other Financing Uses Fund Balance, December 31, 2010 Fund Balance, December 31, 2011

54

City of Bingham Debt Service Fund Post-Closing Trial Balance For year 2011 Cash Taxes Receivable - Delinquent Estimated Uncollectible Delinquent Taxes Interest and Penalties Receivable on Taxes Estimated Uncollectible Interest and Penalties Investments Temporary Fund Balance Totals for all accounts Debits $1,032,315 167,000 7,285 880 430,000 1,529,720 $1,636,600 $1,636,600 Credits

$106,000

6.d

City of Bingham Debt Service Fund Balance Sheet As of December 31, 2011 Assets Cash Investmentstemporary Taxes receivabledelinquent Less: Estimated uncollectible Delinquent Taxes Interest and penalties receivable Less: Estimated uncollectible Interest and Penalties Total assets Liabilities Fund Balance Total Liabilities and Fund Balance $167,000 106,000 7,285 880 6,405 $1,529,720 -01,529,720 $1,529,720 61,000 $1,032,315 430,000

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City of Bingham Debt Service Fund Pre-Closing Trial Balance For year 2011 Debits Cash Taxes Receivable - Delinquent Estimated Uncollectible Delinquent Taxes Interest and Penalties Receivable on Taxes Estimated Uncollectible Interest and Penalties Investments Temporary Fund Balance Budgetary Fund Balance Est. Revenue - Taxes Est. Revenue - Interest and Penalties on Taxes Est. Revenue - Investment Income Estimated Other Financing Sources-Premium on Bonds Estimated Other Financing Sources-Interfund Transfers In Revenue - Taxes Revenue - Interest and Penalties on Taxes Revenue - Investment Income Other Financing Sources-Premium on Bonds Other Financing Sources-Interfund Transfers In Appropriations Expenditures Bond Principal Expenditures - Bond Interest Totals for all accounts $1,032,315 167,000 $106,000 7,285 880 430,000 1,014,840 531,800 1,800,000 7,000 32,000 100,000 19,800 1,800,000 1,080 21,000 100,000 19,800 1,427,000 600,000 827,000 $5,022,400 Credits

$5,022,400

6.e City of Bingham Debt Service Fund Statement of Revenues, Expenditures, and Changes in Fund Balance For the Year Ended December 31, 2011 Revenues: Property taxes Interest on investments Interest and penalties on taxes Total revenues Expenditures: Interest on bonds Principal of matured bonds Total expenditures Excess of revenues over expenditures Other Financing Sources: Premium on bonds sold Interfund transfers in Excess of revenues and other financing sources over expenditures Fund balance, December 31, 2010 Fund balance, December 31, 2011 514,880 1,014,840 $1,529,720 100,000 19,800 119,800 827,000 600,000 1,427,000 395,080 $1,800,000 21,000 1,080 1,822,080

65

6.f City of Bingham Debt Service Fund Statement of Revenues, Expenditures, and Changes in Fund BalanceBudget and Actual For the Year Ended December 31, 2011 Original Budget Revenues: Property taxes Interest on investments Interest and penalties on taxes Total revenues Expenditures: Interest on bonds payable Principal of matured bonds Total expenditures Excess of revenues over expenditures Other Financing Sources: Premium on bonds sold Interfund transfer in Excess of revenues and other financing sources over expenditures Fund Balance, December 31, 2010 Fund Balance, December 31, 2011 512,000 1,014,840 $1,526,840 531,800 1,014,840 $1,546,640 514,880 1,014,840 $1,529,720 (16,920) -0$(16,920) 100,000 -0100,000 19,800 100,000 19,800 -0-0827,000 600,000 1,427,000 412,000 827,000 600,000 1,427,000 412,000 827,000 600,000 1,427,000 395,080 -0-0-0(16,920) $1,800,000 32,000 7,000 1,839,000 $1,800,000 32,000 7,000 1,839,000 $1,800,000 21,000 1,080 1,822,080 $ -0(5,920) (16,920) (11,000) Final Budget Actual Over (Under) Budget___

Actual

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6.g

CITY OF BINGHAM Computation of Legal Debt Margin December 31, 2011 $400,000,000 40,000,000 $11,400,000 5,000,000 16,400,000 $23,600,000

Assessed valuation of taxable property Legal debt limit (10% of assessed valuation) Debt outstanding subject to the legal limit: 6% general obligation serial bonds 5% general obligation serial bonds Total debt outstanding subject to limit Legal debt margin

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City of Bingham Water Utility Fund Post-Closing Trial Balance For year 2010 Cash Restricted Cash - Customer Deposits Customer Accounts Receivable Accumulated Provision for Uncollectible Accounts Inventory of Supplies Due from Other Funds Utility Plant in Service Accumulated Depreciation Utility Plant Construction Work in Progress Vouchers Payable Customer Deposits Accrued Interest Payable 6% Revenue Bonds Payable Unamortized Bond Discounts on Revenue Bonds Payable Net Assets - Invested in Capital Assets, Net of related Debt Net Assets - Unrestricted Totals for all accounts Debits $284,904 57,200 160,440 94,146 13,000 19,000,390 4,011,278 1,189,400 72,420 57,200 434,100 14,470,000 65,200 1,773,712 41,250 $20,864,680 $20,864,680 Credits

$4,720

City of Bingham Water Utility Fund Post-Closing Trial Balance For year 2011 Cash Restricted Cash - Customer Deposits Customer Accounts Receivable Accumulated Provision for Uncollectible Accounts Inventory of Supplies Due from Other Funds Utility Plant in Service Accumulated Depreciation Utility Plant Construction Work in Progress Vouchers Payable Customer Deposits Accrued Interest Payable 6% Revenue Bonds Payable Unamortized Bond Discounts on Revenue Bonds Payable Net Assets - Invested in Capital Assets, Net of related Debt Net Assets - Unrestricted Totals for all accounts $985,168 58,460 199,490 $5,820 101,546 40,000 19,902,990 4,391,286 664,300 94,020 58,460 434,100 14,470,000 61,940 1,767,944 792,264 $22,013,894 $22,013,894

7.e CITY OF BINGHAM Water Utility Fund Statement of Net Assets As of December 31, 2011 ASSETS: Current Assets: Cash Due from other funds Customer accounts receivable Less: Accumulated provision uncollectible accounts Inventory of supplies Total Current Assets Restricted Assets: Cash Utility Plant: Utility plant in service Less: Accumulated provision for depreciation Construction work in progress Total Utility Plant Total Assets LIABILITIES: Current and Accrued Liabilities: Vouchers payable Accrued interest payable Total Current and Accrued Liabilities Liabilities Payable from Restricted Assets: Customer deposits Long-Term Debt: 6% Revenue bonds Less: Unamortized bond discount Total Liabilities NET ASSETS: Invested in capital assets, net of related debt Unrestricted Total Net Assets 1,767,944 792,264 $ 2,560,208 14,470,000 61,940 14,408,060 14,994,640 94,020 434,100 528,120 58,460 19,902,990 4,391,286 15,511,704 664,300 16,176,004 17,554,848 $ 199,490 5,820 193,670 101,546 1,320,384 58,460 $ 985,168 40,000

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City of Bingham Water Utility Fund Pre-Closing Trial Balance For year 2011 Debits Credits

Cash $985,168 Restricted Cash - Customer Deposits 58,460 Customer Accounts Receivable 199,490 Accumulated Provision for Uncollectible Accounts $5,820 Inventory of Supplies 101,546 Due from Other Funds 40,000 Utility Plant in Service 19,902,990 Accumulated Depreciation Utility Plant 4,391,286 Construction Work in Progress 664,300 Vouchers Payable 94,020 Customer Deposits 58,460 Accrued Interest Payable 434,100 6% Revenue Bonds Payable 14,470,000 Unamortized Bond Discounts on Revenue Bonds Payable 61,940 Net Assets - Invested in Capital Assets, Net of related Debt 1,773,712 Net Assets - Unrestricted 41,250 Sales of Water 3,066,700 Operation Expense 826,786 Maintenance Expense 268,400 Depreciation Expense 380,008 Uncollectible Accounts 3,800 Interest on Long-Term Debt 842,460 Totals for all accounts $24,335,348 $24,335,348

7.e

CITY OF BINGHAM Water Utility Fund Statement of Revenues, Expenses, and Changes in Net Assets For the Year Ended December 31, 2011

Operating Revenues: Sales of water (net of provision for uncollectible accounts of $3,800) Operating Expenses: Operation expense Maintenance expense Depreciation expense Total Operating Expense Operating Income Nonoperating Revenue and Expense: Interest on long-term debt Change in Net Assets Net Assets, December 31, 2010 Net Assets, December 31, 2011 842,460 745,246 1,814,962 $2,560,208 $ 826,786 268,400 380,008 1,475,194 1,587,706 $3,062,900

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7.f CITY OF BINGHAM Water Utility Fund Statement of Cash Flows For Year Ended December 31, 2011 Cash flows from operating activities: Cash received from customers and City Cash provided by customer deposits (see Note A) Cash payments to employees for services(less: $70,500 for construction) Cash payments to suppliers Net cash provided by operating activities Cash flows from capital and related financing activities: Construction of capital assets Interest paid on long-term debt Net cash used for capital and related financing activities Net increase in cash and cash equivalents Cash and cash equivalents, December 31, 2010 Cash and cash equivalents, December 31, 2011 Reconciliation of cash and cash equivalents to the balance sheet: End of Year Cash and cash equivalents in current and accrued assets Restricted cash and cash equivalents Total cash and cash equivalents $ 985,168 58,460 $1,043,628 $284,904 57,200 $342,104 Beginning of Year (1,216,700) 701,524 342,104 $1,043,628 (348,500) (868,200) (746,930) (332,800) $1,918,224 3,854 $2,994,100

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7.f (Contd) Reconciliation of operating income to net cash provided by operating activities: Operating income Adjustments: Depreciation Increase in accounts receivable, net Increase in inventory of supplies Increase in due from other funds Increase in accounts payable Increase in customer deposits Net adjustments Net cash provided by operating activities $ 380,008 (37,950) (7,400) (27,000) 21,600 1,260 330,518 $1,918,224 $1,587,706

Note A: Entry 7-b-13, deposits received, $6,904, minus deposits refunded to customers, $3,050.

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City of Bingham Employees' Retirement Fund Post-Closing Trial Balance For year 2010 Cash Investments Interest Receivable on Investments Accounts Payable and Accrued Expenses Net Assets Held in Trust for Pension Benefits Totals for all accounts Debits $33,440 3,003,360 60,000 Credits

$24,000 $3,072,800 $3,096,800 $3,096,800

City of Bingham Employees' Retirement Fund Pre-Closing Trial Balance For year 2011 Cash Investments Interest Receivable on Investments Accounts Payable and Accrued Expenses Net Assets Held in Trust for Pension Benefits Additions - Employer Contributions Additions - Investment Income Additions - Change in Fair Value of Investments Deductions - Annuity Benefits Totals for all accounts Debits $39,440 3,358,760 64,000 Credits

$12,000 3,072,800 363,000 184,000 130,400 300,000 $3,762,200 $3,762,200

City of Bingham Employees' Retirement Fund Post-Closing Trial Balance For year 2011 Cash Investments Interest Receivable on Investments Accounts Payable and Accrued Expenses Net Assets Held in Trust for Pension Benefits Totals for all accounts Debits $39,440 3,358,760 64,000 Credits

$12,000 3,450,200 $3,462,200 $3,462,200

8.c CITY OF BINGHAM Employees' Retirement Fund Statement of Plan Net Assets As of December 31, 2011 Assets: Cash Accrued interest receivable Investments, at fair value Total Assets Liabilities: Accounts payable and accrued expenses Net assets held in trust for pension benefits 8.d CITY OF BINGHAM Employees' Retirement Fund Statement of Changes in Plan Net Assets For the Year Ended December 31, 2011 $ 363,000 184,000 130,400 314,400 677,400 300,000 377,400 3,072,800 $3,450,200 $ 39,440 64,000 3,358,760 3,462,200

12,000 $3,450,200

Additions: Employer contributions Investment income: Interest Increase in fair value of investments Total investment income Total additions Deductions: Annuity benefits Net increase in plan net assets Net assets, December 31, 2010 Net assets, December 31, 2011

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City of Bingham Governmental Activities, Government-Wide Level Pre-Closing Trial Balance For year 2011 Debits Credits

Cash $1,476,371 Taxes Receivable - Delinquent 412,020 Estimated Uncollectible Delinquent Taxes $309,396 Interest and Penalties Receivable on Taxes 59,727 Estimated Uncollectible Interest and Penalties 11,454 Investments - Temporary 430,000 Land 1,350,000 Improvements other than Buildings 9,000,000 Accumulated Depreciation - Improvements other than Buildings 2,280,000 Infrastructure 29,190,000 Accumulated Depreciation - Infrastructure 11,860,000 Buildings 13,532,000 Accumulated Depreciation - Buildings 2,560,000 Equipment 8,098,200 Accumulated Depreciation - Equipment 5,484,000 Vouchers Payable 57,640 Accrued Interest Payable on Long-term Debt 467,000 Internal Payables to Business-Type Activities 40,000 Current Portion of Long Term Debt 850,000 5% Serial Bonds Payable 4,750,000 6% Serial Bonds Payable 10,800,000 Unamortized Premium on Serial Bonds Payable 95,000 Net Assets - Invested in Capital Assets, Net of Related Debt 25,046,000 Net Assets - Restricted for Debt Service 1,014,840 Net Assets - Unrestricted 207,114 Program Revenues - General Govt. - Charges for Services 1,085,600 Program Revenues - General Government - Operating Grants and Contributions 500,000 Program Revenues - Public Safety - Charges for Services 425,700 General Revenues - Property Taxes 7,812,700 General Revenues - Taxes - Sales 251,000 General Revenues - Interest and Penalties on Taxes 43,090 General Revenues - Miscellaneous 110,500 General Revenues - Investment Earnings 21,000 Exp. - General Government 2,371,197 Exp. - Public Safety 4,589,955 Exp. - Public Works 1,909,106 Exp. - Health and Welfare 1,277,485 Exp. - Parks and Rec. 1,033,245 Exp. - Interest on Long-Term Debt 929,000 Exp. - Interest on Tax Anticipation Notes 9,500 Totals for all accounts $75,874,920 $75,874,920

City of Bingham Governmental Activities, Government-Wide Level Post-Closing Trial Balance For year 2011 Debits

Credits

Cash $1,476,371 Taxes Receivable - Delinquent 412,020 Estimated Uncollectible Delinquent Taxes $309,396 Interest and Penalties Receivable on Taxes 59,727 Estimated Uncollectible Interest and Penalties 11,454 Investments - Temporary 430,000 Land 1,350,000 Improvements other than Buildings 9,000,000 Accumulated Depreciation - Improvements other than Buildings 2,280,000 Infrastructure 29,190,000 Accumulated Depreciation - Infrastructure 11,860,000 Buildings 13,532,000 Accumulated Depreciation - Buildings 2,560,000 Equipment 8,098,200 Accumulated Depreciation - Equipment 5,484,000 Vouchers Payable 57,640 Accrued Interest Payable on Long-term Debt 467,000 Internal Payables to Business-Type Activities 40,000 Current Portion of Long Term Debt 850,000 5% Serial Bonds Payable 4,750,000 6% Serial Bonds Payable 10,800,000 Unamortized Premium on Serial Bonds Payable 95,000 Net Assets - Invested in Capital Assets, Net of Related Debt 22,491,200 Net Assets - Restricted for Debt Service 1,529,720 Net Assets - Unrestricted 37,092 Totals for all accounts $63,585,410 $63,585,410

9.d CITY OF BINGHAM Statement of Net Assets As of December 31, 2011 Governmental
Activities

Business-type
Activities Total

Assets Cash and cash equivalents Receivables (net of estimated uncollectibles) Internal balances Inventories Restricted assets: cash Investments Capital assets (net of accumulated depreciation) Total Assets Liabilities Vouchers payable Accrued interest payable Customer deposits Current portion of long-term debt Bonds payable(net of discounts and premiums) Total Liabilities Net Assets Invested in capital assets, net of related debt Restricted for: Debt service Unrestricted Total Net Assets 22,491,200 1,529,720 (37,092) $23,983,828 1,767,944 792,264 $ 2,560,208 24,259,144 1,529,720 755,172 $ 26,544,036 57,640 467,000 850,000 15,645,000 17,019,640 94,020 434,100 58,460 14,408,060 14,994,640 151,660 901,100 58,460 850,000 30,053,060 32,014,280 $ 1,476,371 150,897 (40,000) 430,000 38,986,200 41,003,468 $ 985,168 193,670 40,000 101,546 58,460 16,176,004 17,554,848 $ 2,461,539 344,567 0 101,546 58,460 430,000 55,162,204 58,558,316

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9.d CITY OF BINGHAM Statement of Activities For the year ended December 31, 2011 Program Revenues Functions/Programs Expenses Charges for services Operating Capital grants and Grants and contributions Contributions $ 500,000 Net (Expense) Revenue and Changes in Net Assets Governmental Business-type Total Activities Activities

Governmental activities: General government Public safety Public works Health and welfare Parks and recreation Interest expense Total Business-type activities: Water utility Total government

$ 2,371,197 4,589,955 1,909,106 1,277,485 1,033,245 938,500 12,119,488

$1,085,600 425,700

______ 1,511,300

_______ 500,000 $ 500,000

(785,597) (4,164,255) (1,909,106) (1,277,485) (1,033,245) (938,500) (10,108,188) 745,246 7,812,700 251,000 43,090

$ (785,597) (4,164,255) (1,909,106) (1,277,485) (1,033,245) (938,500) (10,108,188) 745,246 (9,362,942) 7,812,700 251,000 43,090 21,000 110,500 8,238,290 (1,124,652) 27,668,688 $26,544,036

2,321,454 3,066,700 $14,440,942 $4,578,000 General revenues: Property taxes Sales taxes Interest and penalties Investment earnings Miscellaneous Total general revenues Decrease in net assets Net assets, December 31, 2010 Net assets, December 31, 2011

21,000 110,500 8,238,290 (1,869,898) 25,853,726 $ 23,983,828

745,246 1,814,962 $ 2,560,208

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9.d CITY OF BINGHAM Balance Sheet Governmental Funds As of December 31, 2011 General Fund ASSETS Cash and cash equivalents Investments Receivables (net) Total assets LIABILITIES AND FUND BALANCES Liabilities: Vouchers payable Due to other funds Total liabilities Fund balances: Reserved for Encumbrances Unreserved, reported in: General fund Debt service funds Total fund balances Total liabilities and fund balances $ 444,056 83,492 $ 527,548 Debt Service Fund $1,032,315 430,000 67,405 $ 1,529,720 Total Governmental
Funds

$ 1,476,371 430,000 150,897 $ 2,057,268

$ 57,640 40,000 97,640 78,020 351,888 _______ 429,908 $ 527,548 1,529,720 1,529,720 $ 1,529,720

57,640 40,000 97,640 78,020

351,888 1,529,720 1,959,628 $ 2,057,268

Reconciliation of governmental funds fund balances to governmental activities net assets at the government-wide level Total governmental funds fund balances $ 1,959,628 Amounts reported for governmental activities in the statement of net assets differ from the total fund balances reported in this statement because: Capital assets used in governmental activities, net of 38,986,200 depreciation, are not reported in the funds. Long-term liabilities are not due and payable and therefore are not reported in the funds. (16,495,000) Accrued interest payable are not a liability of the funds (467,000) Net assets of governmental activities $23,983,828 Note: The City Hall Annex Construction Fund is excluded from the balance sheet since the fund was closed prior to year-end.

99

9.d Fund Debt Construction3,309,955 Totals ,590 Service Fund 1,822,080000 -010,249 8,427,510 222,400 500,000 578,200 110,500 710,700 110,500 500,000 578,200 43,090 827,000 1,630,349 713,245 957,485 4,980,200 251,000 42,010 1,080 1,630,349 713,245 3,309,955 957,485 4,980,200 1,427,000 14,557,688 600,000 4,980,200 8,150,488 710,700 222,400 $ 21, 7,812,700 $6,012,700 1,429,106 $1,800,000 1,429,106 251,000 110,348 110,348 Current: Interest December For the YearAnd Changes Expenditures Ended StatementTaxes of Governmental Fund 2011 Revenues, in Funds General government 31, Balances CITY OF BINGHAM City Hall

21,000 827,000 600,000

100

9.d Contd. CITY OF BINGHAM Statement of Revenues, Expenditures And Changes in Fund BalancesGovernmental Funds For the Fiscal Year Ended December 31, 2011 Capital Projects Fund (4,980,200) 5,000,000 (19,800) 4,980,200 0 0 $ 0 Debt Service Fund 395,080 100,000 19,800 119,800 514,880 1,014,840 $1,529,720

General Fund Excess (deficiency) of revenues over expenditures Proceeds of tax supported bonds Premium on Bonds Sold Interfund transfers in (out) Total other financing sources (uses) Net change in fund balances Fund balances, December 31, 2010 277,022 ________ ________ 277,022 152,886

Totals (4,308,098) 5,000,000 100,000 ______-05,100,000 791,902 1,167,726 $ 1,959,628

Fund balances, December 31, 2011 $ 429,908

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9.d Contd. CITY OF BINGHAM Reconciliation of the Statement of Revenues, Expenditures And Changes in Fund BalancesGovernmental Funds to the Statement of Activities For the Year Ended December 31, 2011 Net changes in fund balances total governmental funds Amounts reported for the governmental activities in the statement of activities are different because: Governmental funds report capital outlay as expenditures. However, in the statement of activities, the cost of these assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. On the accrual basis, interest expense exceeded interest expenditures by $102,000 for the year. In addition, amortization of premium of $5,000 was reported in the statement of activities. Change in net assets of governmental activities 1,940,200 $ 791,902

(4,495,000)

(107,000) ($1,869,898)

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9.d Contd. CITY OF BINGHAM Statement of Net Assets Proprietary Funds As of December 31, 2011

Water Utility Fund ASSETS Current assets: Cash and cash equivalents Customer accounts receivables, net Internal receivables Inventories Total current assets Noncurrent assets: Restricted cash and cash equivalents Capital assets: Utility plant in service Less: accumulated depreciation Construction work in progress Total capital assets Total Assets LIABILITIES Current liabilities: Accounts payable Accrued interest payable Total current liabilities Noncurrent liabilities: Customer deposits Advance from General Fund 6% revenue bonds payable, net of discount Total Liabilities NET ASSETS Invested in capital assets, net of related debt Unrestricted Total Net Assets $ 985,168 193,670 40,000 101,546 1,320,384 58,460 19,902,990 (4,391,286) 664,300 16,176,004 17,554,848

94,020 434,100 528,120 58,460 14,408,060 14,994,640 1,767,944 792,264 $2,560,208

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9.d Contd. CITY OF BINGHAM Combined Statement of Revenues, Expenses, and Changes in Proprietary Net AssetsProprietary Funds For the Year Ended December 31, 2011 Operating revenues: Sales of water (Net of provision for Uncollectible accounts of $3,800) Operating expenses: Operation expense Maintenance expense Depreciation expense Total operating expenses Operating income Other income and deductions: Interest expense, net of amortization Change in net assets Net assets December 31, 2010 Net assets December 31, 2011

$3,062,900 826,786 268,400 380,008 1,475,194 1,587,706

(842,460) 745,246 1,814,962 $2,560,208

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9.d. Contd. CITY OF BINGHAM Proprietary Funds Statement of Cash Flows For Year Ended December 31, 2011 Water Utility Fund Cash flows from operating activities: Cash received from customers and City Cash provided by customers deposits Cash paid to employees Cash paid to suppliers Net cash provided by operating activities Cash flows from capital and related financing activities: Construction of capital assets Interest paid on long-term debt Net cash used for capital and related financing activities Net increase in cash Cash and cash equivalents, December 31, 2010 Cash and cash equivalents, December 31, 2011 $2,994,100 3,854 (746,930) (332,800) 1,918,224 (348,500) (868,200) (1,216,700) 701,524 342,104 $1,043,628

Reconciliation of Operating Income to Net Cash Provided by Operating Activities Water Utility Fund $1,587,706 380,008 (37,950) (7,400) (27,000) 21,600 1,260 $1,918,224

Operating Income Adjustments: Depreciation Expense Increase in receivables, net Increase in inventory of supplies Increase in due from other funds Increase in accounts payable Increase in customer deposits Net cash provided by operating activities

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9.d Contd. CITY OF BINGHAM Statement of Fiduciary Net Assets For Year Ended December 31, 2011 Employees Retirement Plan ASSETS Cash and cash equivalents Interest receivable Investments, at fair value Total Assets LIABILITIES Accounts payable and accrued expenses NET ASSETS Held in trust for pension benefits $ 39,440 64,000 3,358,760 3,462,200 12,000 $3,450,200

CITY OF BINGHAM Statement of Changes in Fiduciary Net Assets For Year Ended December 31, 2011 Employees Retirement Plan Additions: Employer contributions Investment earnings: Net increase in fair value of investments Investment income Total investment earnings Total additions Deductions: Annuity benefits Change in net assets Net assets, December 31, 2010 Net assets, December 31, 2011 $ 363,000 130,400 184,000 314,400 677,400 300,000 377,400 3,072,800 $3,450,200

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Chapter 10
Considerable variation in the content of the financial analysis is to be expected since the analysis of a Citys financial information is not an exact science. Some students may attempt to extrapolate beyond what can reasonably be supported by the information in the problem, particularly since time series data for multiple years are unavailable. Moreover, the lack of demographic or economic data about the City of Bingham essentially precludes a complete analysis. Thus, the somewhat limited financial analysis we provide here should not be construed as a template by which you should judge your students analyses. a. Calculation of Crawford Performeter ratios: (Values of ratios are rounded) Performance Category
Financial Position Same Same Same Same Same Same Financial Performance Same Same Same Same Financial Capability Same Same Same Same Same

Performance Measure
Unrestricted net assets General Fund budgetary fund balance Capital asset Condition Pension plan funding Debt to assets Current ratio Quick ratio Change in net assets Interperiod equity Sales tax growth BTA self-sufficiency Debt service coverage Revenue dispersion Debt service load Financing margin bonded debt per capita Financing margin legal debt limit Financing margin property taxes per capita Financing margin sales tax rate

Value of Ratio Numerator

($37,092) $351,888 $22,184,000 See Note (d) $17,019,640 $2,057,268 $444,056 $26,544,036 $10,249,590 See Note (j) $3,066,700 $10,249,590 $2,011,300 $1,427,000 $16,495,000 $16,495,000 $7,812,700 See Note (r) (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) (q) (r)

Denominator
$10,249,590 $8,427,510 $57,455,100 See Note (d) $41,003,468 $1,414,640 $1,414,640 $27,668,688 $12,119,488 See Note (j) $2,321,454 $1,427,000 $10,249,590 $11,254,600 50,000 $40,000,000 50,000 See Note (r) -(.004) .042 .386 Note (d) .415 1.454 0.314
-$1,124,652

.846 Note (j) 1.321 7.183 .196 .127 $329.90 .412 $156.25 Note (r)

Notes: Unless indicated otherwise, government-wide ratios use governmental activities data.

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(a) Unrestricted net assets / Total governmental activities revenue (Source: GW financial statements) (b) Unreserved General Fund fund balance / Total GF revenues (Source: Governmental fund financial statements) (c) Accumulated depreciation / Average cost of depreciable assets (Sources: December 31, 2010 trial balance from p. 6 of instructions; GW statement of net assets) (d) Fair value of plan assets / actuarial accrued liability. Since actuarial information is not provided for the City of Bingham problem, this ratio cannot be calculated. (e) Total GA liabilities / total GA assets (Source: GW statement of net assets) (f) Current assets ($1,476,371 cash and cash equivalents + $150,897 net receivables + $430,000 temporary investments in debt service fund) / current liabilities ($57,640 vouchers payable + $40,000 internal balances payable + $467,000 interest payable + $850,000 current portion of long-term debt) (Sources: 12-31-2011 pre-closing trial balance; GW statement of net assets) (g) Unrestricted cash in the General Fund / current liabilities (Sources: Governmental funds balance sheet; GW statement of net assets) (h) Total net assets (governmental and business-type activities), end of year minus total net assets, beginning of year (Source: GW statement of activities) (i) Net revenues, governmental activities / total expenses, governmental activities (Source: GW statement of activities) (j) Sales tax growth cannot be calculated because sales tax information for FY 2010 was not provided. (k) Service charge revenues, business-type activities / total expenses of business-type activities. (Sources: GW statement of activities) (l) net revenues, governmental activities / total expenditures for principal and interest of general long-term debt (Source: GW statement of activities and governmental funds statement of revenues, expenditures, and changes in fund balances). (m) Non-tax revenues (i.e., program revenues) / total revenues, governmental activities (Source: GW statement of activities) (n) Total expenditures for principal and interest on general long-term debt / total noncapital cash outlays, governmental activities (Sources: Governmental funds statement of revenues, expenditures, and changes in fund balances; inspection of governmental activities Cash accountall credits except those for the capital projects fund)

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(o) General bonded debt (including unamortized premium) / Population (Given in instructions as 50,000). (Source: GW statement of net assets.) (p) Bonded debt over legal debt limit, which from 6.g of this case was given as $40,000,000. (q) Property tax levy (General Fund and debt service fund, as adjusted for transaction 4.a.14) / Population of 50,000. (Source: Governmental activities general ledger, Taxes Receivable Current account) (r) (Sales tax revenue current year minus sales tax revenue prior year) / sales tax revenue prior year. Since information about sales taxes or the prior year was not provided, this ratio cannot be calculated. Analysis: Although there is no information provided by which to compare the City of Binghams ratios to those of comparable small cities, certain tentative conclusions can be made regarding the citys financial condition, as explained below: 1. As shown by several of the financial position ratios, the City of Bingham does not have adequate financial reserves and could suffer significant problems in the following year should a revenue shortfall or unforeseen expenditures occur. Its unrestricted net assets ratio, current ratio, and quick ratio, all reflect lower than needed levels of current financial resources. The ratio of its General Fund budgetary fund balance to general revenues is only .042, slightly below the red flag level of .05 commonly considered a level of financial distress. As a further indication of possible financial distress, the citys net assets decreased substantially during the year. In addition, its interperiod equity declined during the year because total expenses for the year exceeded total revenues. In the long-run, the fact that capital assets are only about 39 percent depreciated suggests that financing needs for replacement capital assets may be only moderate in the next few years. On the other hand, the rather high debt to asset ratio (about .42) and moderate ratios of bonded debt per capita ($329.90) and property taxes per capita ($156.25) suggests that although the citizens of the City of Bingham will be supporting a significant debt service load for many years to come, resource growth may not meet the needs. This is also reflected in the fixed charge debt service load of 12.7 percent of noncapital expenditures being used for debt service. Overall, the citys debt burden is contributing significantly to the observed financial weakness, and this is likely to continue for quite some time. A "much needed" annex to the city hall was built at a cost of approximately $4,230,000. A $5,000,000 general obligation bond issue ("sold at an advantageous 5 percent annual interest rate") financed the construction and the cost of land which had to be purchased as 109

2.

3.

4.

a site for the annex ($250,000) and furniture and equipment for the annex ($498,200). Construction efficiencies allowed $19,800 to be saved. Premium on the sale of the bonds amounted to $100,000. This premium was invested during the year, as was all other cash received in advance of required disbursements. Interest of $21,000 was earned on these investments, and $1,080 interest and penalties on taxes levied for debt service were earned. The savings on construction, bond premium, and interest earnings helped cover bond interest payments during the year. Revenue from taxes levied for debt service amounted to $1,800,000. This amount plus the $100,000 premium added, after expenditures, more than $500,000 to the debt service fund fund balance for future redemption of bonds and interest due on December 31, 2011. 5. Net income of the water utility for the year amounted to $745,246, on sales of $3,066,700, or about 24 percent of sales. This may appear excessive, depending on the Utility managers future plans for the funds unrestricted net assets. Perhaps, the billing rate is set at the current high level in anticipation of future plant expansion or replacement. 6. Over $377,000 was added to the net assets available for benefits to members of the Employees' Retirement Fund of the City of Bingham during the year. In conclusion, the City of Bingham appears to be struggling with a high debt burden and low operating reserves. The current year saw some improvement in operating reserves, but $4,400,000 ($5,000,000 new bond issue less $600,000 retired) was added to bonded debt during the year.

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Chapter 12
The auditor's report for the City of Bingham should follow the wording of Illustration 12-2. An unqualified report, similar to that shown in Illustration 12-2 appears to be appropriate for the year ended December 31, 2011. Nevertheless, some students may have issued a "qualified" report for some perceived reason. If so, it should use the wording specified in the audit guide, although most probably will not use the exact wording specified. If not, this will provide you with an opportunity to explain to the student why the specified report wording is critical to an auditor. An unqualified audit report on the City of Bingham should appear as follows:
The Honorable Mayor, City Council, and City Manager, City of Bingham We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the City of Bingham (State), as of and for the year ended December 31, 2011, which collectively comprise the Citys basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Binghams management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Bingham (State), as of December 31, 2011, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

In addition, one or more explanatory paragraphs are usually required in most situations, such as those shown in Illustration 12-2.

--End--

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