City of Van Alstyne 2012 Annual Financial Report

1. City of Van Alstyne2012 Annual Financial Report Presented by:Susan K. LaFollett, CPA Managing Partner

2. Agenda Objectives of Audit Scope of Audit Annual Financial Report Financial Highlights Overview of Audit Results Required Governance Communications Management Recommendations

3. Objectives of Audit • Objectives • Conduct our audit in accordance with Government Auditing Standards • Plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement

4. Scope of Audit • Full Scope Audit • Governmental activities • Business type activities – water, sewer and sanitation • Component units – Economic Development Corporation (EDC) and Community Development Corporation (CDC) • Each major fund – general, debt service, capital projects

5. Annual Financial Report • Financial Section • Independent Auditor’s Report (pages 1-2) • Management’s Discussion and Analysis (pages 3-7) • Government Wide Statements (pages 8-9) • Fund Statements (pages 10-16) • Notes to Financial Statements (pages 17-37)

6. Annual Financial Report • Required Supplementary Information • General Fund Budgetary Comparison (page 38) • TMRS Schedule of Funding Progress (pages 39-41) • Compliance and Internal Controls Section • Report on Compliance and on Internal Controls – Government Auditing Standards (pages 42-43)

7. Financial Highlights – Government Wide Statements • Statement of Net Assets (page 8) • Statement of Activities (page 9) • Includes primary government and discretely presented component units – EDC and CDC • Prepared on a full accrual basis

8. Financial Highlights – Government Wide Statements • Statement of Net Assets (page 8): • Total assets are $15,881,650 (page 8) primarily capital assets of $12,776,885 • Total liabilities are $9,785,215 (page 8) including long-term debt of $8,567,440 • Assets exceeded liabilities by $6,096,435 (net assets, page 8) • Unrestricted net assets are $1,007,199 (page 8) and may be used to meet the City’s ongoing obligations to citizens and creditors

9. Financial Highlights – Government Wide Statements • Statement of Activities (page 9): • Program revenues are $3,424,787 and general revenues are $1,827,399 with a total of $5,252,186 • Total expenses are $5,126,338 (page 9) • Total net assets increased by $125,848 (page 9), or 2.1%. • FY11 had a decrease in net assets of $271,076.

10. Financial Highlights – Fund Statements • General Fund - fund balances (page 10): • $655,708 at September 30, 2012 • $734,614 at September 30, 2011 (restated) • $507,840 is unassigned and may be used to meet the City’s ongoing obligations • Total General Fund expenditures (page 12): • $3,300,059 during fiscal year 2012 • $3,708,679 during fiscal year 2011 • City of Van Alstyne’ s General Fund has 1.85 months reserves • (Unassigned general fund balance / Total general fund expenditures) x 12 months

11. Financial Highlights - Fund Statements • Overall, General Fund revenue was down from $3,323,255 in 2011 to $3,125,833 (page 12) largely due to decreased revenues from ambulance services and court fines. • Sales tax revenue was up from $492,706 in 2011 to $565,072 (page 12), which is a 13% increase. • Fund balance of General Fund decreased by $78,906 (page 12) due to capital outlays and decreased revenues.

12. Financial Highlights – Fund Statements • Water & Sewer unrestricted net assets (page 14): • $137,781 at September 30, 2012 • $59,652 at September 30, 2011 (restated) • Water & Sewer operating revenues (page 15): • $1,533,836 during fiscal year 2012 • $1,397,780 during fiscal year 2011 • Rate increases in fiscal year 2012

13. Financial Highlights – Fund Statements • Water & Sewer operating expenses (page 15): • $1,387,586 during fiscal year 2012 • $1,250,221 during fiscal year 2011 • Increased repair and maintenance costs • Water & Sewer net assets (page 15): • $4,749,456 at September 30, 2012 • $4,822,896 at September 30, 2011 • Overall decrease in net assets of $73,440 • Without non-cash depreciation net assets would increase $207,366

14. Overview of Audit Results • Unqualified Audit Opinion (page 1-2) • “Clean” opinion • 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 (pages 42-43) • We did not identify any deficiencies in internal controls over financial reporting that we consider to be material weaknesses, as defined in the report.

15. Required Governance Communications • Per our letter, significant audit findings: • Qualitative aspects of accounting practices – no issues • Difficulties encountered in performing the audit – none • Corrected and uncorrected misstatements – all recommended adjustments were accepted by the City. Refer to attached list of adjustments. • Disagreements with management - none

16. Management Recommendations • Per our letter, we became aware of matters that are opportunities to strengthen internal controls and operating efficiency. We recommend the City: • Continue to work closely with their consultant to refine year-end closing procedures to ensure all routine closing adjustments are posted before the audit begins. • Consider reinstating fund 98 – General Fixed Asset Account Group and fund 99 – Long Term Debt Account Group, as required by GAAP.

17. Management Recommendations • Reconcile revenue per the court system to the general ledger system on a monthly basis. • Print details for court receivables, utility receivables, ambulance receivables, and accounts payable on the last day of the year and reconcile to the general ledger as part of the closing process. • Appoint a staff member to oversee the ambulance collection process and perform an analysis of the outstanding receivable balance of approx. $4,798,000 to determine collectability. Consider writing off old uncollectible amounts.

18. Management Recommendations • Continue to follow check disbursement policies. • Review depreciation schedules and remove assets no longer in service. • EDC/CDC should consider engaging a consultant to refine year-end closing procedures to ensure all routine closing adjustments are posted before the audit begins. • EDC - follow GAAP and not record depreciation on land. • EDC – implement internal controls to ensure that 941 reports are filed on time.

19. Closing • Thank you • LaFollett & Company PLLC would like to thank: • Frank Baker, City Manager • Jennifer Gould, City Clerk • Joe Madden CPA, City Consultant, and • Kanita Larkins, EDC/CDC • These individuals were very responsive to all of our audit requests and a pleasure to work with on this engagement.