town of zwolle · 2020. 11. 9. · town of zwolle, louisiana i have audited the accompanying...

Town of Zwolle, Louisiana

FINANCIAL REPORT

YEAR ENDED MAY 31, 2012

£M)" The CPA. Never Underestimate The Value?"̂

Eugene W. Fremaux II Certified Public Accountant

T O W N O F ZWOLLE, LOUISIANA ZWOLLE, LOUISIANA

MAY 31, 2012

INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL

STATEMENTS

REQUIRED S U P P L E M E N T A R Y INFORMATION - PART I

Management's Discussion and Analysis

BASIC FINANCIAL STATEMENTS

Government Wide Financial Statements

Statement of Net Assets

Statement of Activities

Fund Financial Statements - Governmental Funds

Balance Sheet - Govemmental Funds

Reconciliation ofthe Govemmental Funds Balance Sheet to the Statement of Net Assets

Statement of revenues, e:q>enditures and changes in fund balance - governmental funds

Reconciliation ofthe Govemmental Funds Statement of Revenues, Expenditures, and Changes in fund balances to the Statement of Activities

Fund Financial Statements - Proprietary Fund

Statement of Net Assets - Proprietary Fund

Statement of revenues, expenditures and changes in net assets - Proprietary Fund

Statement of cash flows - Proprietary Fund

Notes to financial statements

REQUIRED SUPPLEMENTARY INFORMATION - PART II

Budgetary Comparison - General Fund

OTHER REPORTS REQUIRED BY GOVERNMENTAL AUDITING STANDARDS

Independent auditor's report on internal control over financial reporting based on an audit of financial statements performed in accordance with Governmental Auditing Standards

Schedule of current year findings

EXHIBIT

A.

B

D

E

G

H

I

PAGE

10

11

12

13

14

15

30

31

33

Eugene W. Fremaux ii p. O. Box 134 270 Marthaville Road Certified Public Accountant Many, Louisiana 71449

318-256-0332 FAX 318-256-0389

I N D E P E N D E N T AUDITOR'S REPORT

The Honorable G. J. Martinez, Mayor and Board of Aldermen


I have audited the accompanying financial statements ofthe govemmental activities, the business-type activities, and each major fund ofthe Town of Zwolle, Louisiana, as of May 31, 2012 and for the year then ended, which collectively comprise the basic fmancial statements ofthe Town of Zwolle, Louisiana's primary government, as listed in the table of contents. These financial statements are the responsibility of the Town's management. My responsibility is to express an opinion on these fmancial statements based on my audit.

I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to fmancial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I 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 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. I believe that my audit provides a reasonable basis for my opinion.

In my 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, and each major fund ofthe Town of Zwolle, Louisiana, as of May 31, 2012, 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, I have also issued my report dated November 28, 2012, on my consideration of the Town of Zwolle, Louisiana's internal control over financial reporting and my tests of its compliance with certain provisions of laws, regulations, contracts and grants. The purpose of that report is to describe the scope of my testing of internal control over financial reporting and compliance and the results of that resting 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 my audit.

Accounting principles generally accepted in the United States of America require that management's discussion and analysis on pages 3 through 5 and the budgetary comparison information on page 30 be presented to supplement the basic financial statements. Such information, although not a part ofthe basic financial statements is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. I have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquires of management about the methods of preparing the information and comparing the information for consistency with

The CPA, Never Underestimate The Value?"̂

management's responses to my inquiries, the basic financial statements, and other knowledge I obtained during my audit ofthe basic financial statements. I do not express an opinion or provide any assurance on the infomiation because the limited procedures do not provide me with sufficient evidence to express an opinion or provide any assurance.

EUGENE W. FREMAUX II, CPA November 28. 2012

TOWN OF ZWOLLE. LOUISIANA MANAGEMENT'S DISCUSSION AND ANALYSIS

MAY 31. 2012

This section of the Town's annual financial report presents our discussion and analysis of the Town's fmancial performance during the fiscal year ended May 31, 2012. Please read it in conjunction with the Town's fmancial statements, which follow this section.

FINANCIAL HIGHLIGHTS

• The Town's net assets increased $34,825 during the year to $7,599,633. • Program and general revenues amounted to $1,464,732, a decrease of $1,028,578. • Expenses for the year amounted to $1,429,907, an increase of $138,989. • The Town's utility fund had an operating loss of $82,617 for the year, an increase of $136,682.

OVERVIEW OF FINANCIAL STATEMENTS

This annual report consists of three parts:

• Management's discussion and analysis • Basic fmancial statements • Supplementary information

The basic fmancial statements include two kinds of statements that present different views ofthe Town:

• The first two statements are government-wide fmancial statements that provide both long-term and short-term information about the Town's overall fmancial status.

• The remaining statements are fund fmancial statements that focus on individual parts ofthe Town's operations in more detail than the govemment-wide statements. The Town has a general fund and a proprietary (utility) fund.

FINANCIAL ANALYSIS OF THE TOWN AS A WHOLE

Condensed Statement of Net Assets

Current and other assets Capital assets, net

Total assets

Current and other liabilities Long-term debt

Total liabilities

Net Assets: Invested in capital assets Restricted Unassigned

Total net assets

Total liabilities & net assets

Govemmental Activities May 31,2012

$

$

1,304,360 1,877,182

3,181,542

43,912 15,441

59,353

1,877,182

1,245,007 3,122,189

3,181,542

May 31, 2011

$ 1,248,574 1,866,309

3,114,883

102,537 2.454

104,991

1,866,309

1,143,583 3,009,892

$ 3,114,883

Business-Typ May 31, 2012

$

$

1,101,168 4,156,367

5,257,535

584,444 165,500

749,944

4,156,367 94,367

226,710 4,477,444

5,227,388

e Activities May 31, 2011

$ 1,080,104 4,312,652

5,392,756

86,480 751,360

837,840

4,185,363 89,659

279,894 4,554,916

$ 5,392,756


MAY 31. 2012

Condensed Statement of Activities

Expenses:

General government

Public Safety

Highways and streets

Public works

Recreation

Interest on long-tern debt

Depreciation-unallocated

Total govemmental activities

Business-type activities-water &

Program revenues:

Charges for services

Grants aid contributions

Total program revenues

General revenues:

Taxes

Licenses and permits

Fines

Miscellaneous

Transfers

Total general revenues

Change in net assets

$

sewer

$

Govemmental Activities Year Ended

May 31, 2012

(164,958)

(370,040)

(199,226)

(65,520)

(58,394)

(2,276)

(2,019)

(862,433)

75,160

6,700

81,860

665,819

80,708

58,753

87,590

-

892,870

112,297

$

S

May 31, 2011

(208,386)

(332,392)

(119,613)

(69,451)

(63,643)

(1,845)

(2,432)

(797,762)

$

70,838

544,057

614,895

667,863

84,803

92,456

135,111

(30,000)

950,233

767,366 $

Business-type Activities Year Ended

May 31, 2012

(567,474) $

457,188

28,969

486,157

3,845

-

3,845

(77,472) $

May 31, 2011

(493,156)

517,846

376,540

894,386

3,796

30,000

33,796

435,026

Overall govemment revenues decreased by $1,028,578 to $1,464,732 this year, primarily due to the receipt of grant funds for sewer and street improvements in 2011.

FINANCIAL ANALYSIS OF THE FUNDS

The Town's govemmental funds, comprised of the general fund, increased the fund bal^ice $128,932 during the year. Revenues decreased by $620,399, due primarily to receipt of grant funds for street overlays in 2011, and expenses decreased $652,894, primarily due to decreased street repair and overlay activity.

The Town's utility fund's net assets decreased $77,472 during the year, primarily to an increase in depreciation and repair expenses. Operating revenues decreased $60,658, and operating expenses increased by $76,024 due mainly to increased sewer depreciation, operating, and maintenance costs.


MAY 31. 2012

CAPITAL ASSETS

During 2012, the Town invested $171,875 in capital assets. The majority of the amount was invested in expenditures related to the water equipment and lines, two new police cars, depot improvements, and street overlay improvements.

ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES

The Town is dependent on (1) charges for services, and (2) ad valorem taxes, sales taxes, and franchise fees for approximately 75% of the total general fund revenues (excluding grants). No significant changes are expected in charges for services; however sales tax revenues ^ e expected to continue to be volatile due to the uncertain economic issues facing the United States.

Operating expenses ofthe Town's utility fund are expected to decrease slightly in 2013; and revenues and expenses in the Town's general fund are expected to remain relative constant. In June 2012 the Town retired the remaining debt owed FHA on water improvement bonds amounting to $544,009 thereby eliminating approximately $28,000 of annual interest expense and allowing equalization of water and sewer rates.

CONTACTING THE TOWN'S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview ofthe Town's finances and to demonstrate the Town's accountability for the money it receives. If you have questions about this report or need additional fmancial information, contact Mr. G. J. Martinez, Mayor, P O Box 1038, Zwolle, LA 71486.

T O W N O F ZWOLLE ZWOLLE, LOUISIANA

STATEMENT OF NET ASSETS MAY 31, 2012

EXHIBIT A

ASSETS

Current assets: Cash Investments Due from other govemments Receivables Due fiom other funds Prepaid ejfienses

Total current assets

Non-current assets: Restricted cash Capital assets, net of accumulated depreciation

Total non-current assets

TOTAL ASSETS

I l i K I I llll-X

Governmental

$

$

Activities

469,577 235,447

45,764 10,085

534,368 9,119

1,304,360

1,877,182

1,877,182

3,181,542

Business-type

$

$

Activities Total

1,476,448 $ 1,946,025 117,714

-41,249

(534,368) 125

1,101,168

134,854 4,021,513

4,156,367

353,161 45,764 51,334

9,244

2,405,528

134,854 5,898,695

6,033,549

5,257,535 $ 8,439,077

Current liabilities: Accounts payable and other UabiLties Note payable Current portion of long-term debt

Total current liabUities

Current liabilities payable fromrestricted assets: Customer deposits Notes payable Total current liabihties payable fromrestricted assets

Non-current liabilities - notes payable

Total non-current Uabihties

TOTAL LIABttJTIES

NET AS SETS

fiivested in capital assets, net of related debt Restricted for debt service Unassigned

TOTAL NET ASSETS

29,391 $

14,521

43,912

5,501

24,646

30,147

34,892

39,167

74,059

--

15,441

15,441

59,353

1,877,182

1,245,007

$ 3,122,189 $

40,435 544,009 584,444

165,500

165,500

780,091

4,156,367 94,367

226,710

4,477,444 3

40,435 544,009 584,444

180,941

180,941

839,444

6,033,549 94,367

1,471,717

; 7,599,633

6 The accompanying notes are an integral part of these statements.

TOWN OF ZWOLLE ZWOLLE, LOUISIANA

STATEMENT OF ACTIVITIES FOR THE YEAR ENDED MAY 31, 2012

EXHIBIT B

FUNCTIONS/PROGRAMS

Govemmental activities: General govemment Public safety H^hways and streets Public works Recreation

Interest on long-term debt Depreciation - Unallocated

Total govemmental activities

Business-type activities-Water and Sewer

Total primary govemment

General revenues: Taxes: Ad valorem Sales ta?ES Franchise

Licenses and permits Fines Miscellaneous Transfers

Total general revenues

Change in net assets

Net assets, beginning of year

Net assets, end of year

F lenses

$ 164,958 370,040 199,226 65,520 58,394 2,276 2,019

Program revenues Operating

Charges for grants and Services contributions

$ 75,160

Capital grants and

contributions

$ 6,700

Net (Ebqiense) changes in

Govemmental Activities

$ (164,958) (370,040) (192,526)

9,640 (58,394) (2,276) (2,019)

Revenue and Net assets

Business-type Activities

$

Total

$ (164,958) (370,040) (192,526)

9,640 (58,394) (2,276) (2,019)

862,433

567,474

75,160

457,188

$ 1,429,907 $ 532,348

6,700 (780,573)

28,969

35,669 (780,573)

59,911 527,123 78,785 80,708 58,753 87,590

892,870

11237

3,009,892

S 3,122,189

(81,317)

(81,317)

3,845

3,845

(77,472)

4,554,916


(780,573)

(81,317)

(861,890)

59,911 527,123 78,785 80,708 58,753 91,435

896,715

34,825

7,564,808

4,477,444 $ 7,599,633

T O W N O F ZWOLLE ZWOLLE, LOUISIANA

GOVERNMENTAL FUNDS BALANCE SHEET MAY 31, 2012

EXHIBIT C

ASSETS

Cash Investments Due from other govemments Receivables Due from other fiinds Prepaid e^q^enses

Total assets

469,577 235,447 45,764 10,085

534,368 9,119

$ 1,304,360

UABILITIES AND FUND BALANCE

Liabilities: Accounts payable and other liablities Note payable

$ 29,391

Total liabilities

Fund balance - unassigned

29,391

1,274,969

Total liabiilies and fimd balance $ 1,304,360

The accompanying notes are an integral part of these statements.

EXHIBIT D

TOWN OF ZWOLLE

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS

MAY 31, 2012

Total fimd balances - Governmental Funds $ 1,274,969

Cost of capital assets at May 31, 2012 Less accumidated depreciation at May 31, 2012

$ 2,446,049 (568,867) 1,877,182

Long-term note payable not reported in fund liabilities (29,962)

Total net assets at May 31, 2012 - Govemmental Activities $ 3,122,189

The accompanying notes are an integral part of these statements.

EXHIBIT E

TOWN OF ZWOLLE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

GOVERNMENTAL FUNDS GENERAL FUND


Revenues: Taxes Licenses and permits Intergoverranental Charges fi)r ser\ices Fines and forfeits Miscellaneous

Total revenues

Expenditures: Current: General govemment Public safety Debt service Highways and streets Health and sanitation Recreation

Total expenditures

Excess of revenues over expenditures before transfers and non-operating revenues

Proceeds from financing Transfer to Utility Fund

665,817 80,708 38,883 75,160 58,753 55,407

974,728

194,199 358,656

18,611 179,019 65,520 29,791

845,796

128,932

Excess of revenues over expenditures

Fund balances, beginning of year

Fund balances, end of year

128,932

1,146,037

$ 1,274,969

10 The accompanying notes are an integral part of these statements

EXHIBIT F

TOWN OF ZWOLLE RECONCILIATION OF THE GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES


E ^ e s s of revenues over ejqienditures S 128,932

Capital assets: C'apital outlay capitalized 136,656

Depreciation expense fi)r year ended May 31 , 2012 (114,732) 21,924

Loss on retirement of capital assets (11,050)

Princpal payments on notes payable recorded as expense in fimd statement 16,334

Proceeds from bng term financing (43,843)

Change in net assets - Govemmental Activities S 112,297


EXHIBIT G

TOWN OF ZWOLLE, LOUISIANA PROPRIETARY FUND (UTILITY FUND)

STATEMENT OF NET ASSETS MAY 31, 2012

A S S E T S

Current assets: C a s h and cash equivalents Investments, at cost Accounts receivable E)ue from other govemments Prepaid expenses

Total current assets ISTon-current assets: Restricted: C a s h and cash equivalents

Capital assets, net Total non-current assets Total assets

L I A B I L m E S Current hablilities:

Accounts payable Current portion of long-term debt E>ue to General Fund Total current liablities

Current habliities pa3/able fromrestricted assets: Customer deposits No te s payable Total current liablities pa3'ab]e from restricted assets

Non-current habiHtes-notes pa3'able Total liabilities

N E T A S S E T S Invested in capital assets, net of related debt Restricted tor debt service Unassigned

Total net assets

1,476,448 117,714 41,249

125

1,635,536

134,854 4,021,513

4,156,367 5,791,903

5,501 24,646

534,368

564,515

40,435 544,009

584,444

165,500

1,314,459

4,156,367 94,367

226,710 4,477,444


EXHIBIT H

TOWN OF ZWOLLE, LOUISIANA COMBINED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS

PROPRIETARY FUND YEAR ENDED MAY 31, 2012

Operating revenues: Water charges Server chaiges Tap, connect and reconnect fees Total operating i^eveiiues

Operating ejqoenses: Water Department: Personnel Supplies Repaiis and maintenance Utilities Insurance E>epreciation Other e:^enses

Total water department ejqjenses

Sewer Department: PeiBonnel Supplies Repaii^s and naiirtenance Utilities Insurance Depreciation Other ejqjenses

Total sewer department e?g)enses

Total operating ej^jenses

Operating income (loss)

Nonoperating revenues (e?qoenses): Interest income Grants Interest ej^jense

Income before transfers

Transfer from General Fund

Qiange in net assets

Net assets, beginning of year

Net assets, end of year

232,990

197,129

27,069

457,188

86,992 32,319

7,756 24,235 11,312 43,713 24,899

231,226

29,013

18,728

26,746

58,570

3,771

155,168

16,583

308,579

539,805

(82,617)

3,845

28,969

(27,669)

5,145

(77,472)

(77,472)

4,554,916

4,477,444


T O W N O F ZWOLLE, LOUISIANA STATEMENT OF CASH FLOWS - PROPRIETARY FUND TYPE


EXHIBIT I

Cash flow/s from operating activities: Cash received from customers Cash payments to suppliers Cash payments to enployees Cash received fromcustomers' deposits Cash refiinded for customers' deposits

Net cash provided by operating activities

Cash flow/s from noncapital activities: Transfers fiomgeneral fimd Increase in due to geneiBl flind

Net cash provided (used) by noncapital activities

Cash floAvs from capital and related financing activities: Principal paid on long-tenn debt Ga:ants received Iirterest paid Payments for capital acquisitions

Net cash provided (used) by capital and related fiirancing activities

Cash flows fi^ominvesting activities: Receipt of interest

Net cash provided by investing activities

Net increase (decrease) in cash and cash equivalents

Cash, cash equivalents and investments, beginning of year

Cash, cash equivalents and investments, end of year

Reconciliation of operating income (loss) to net cash provided by operating activities: C^erating income (loss)

Adjvistments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation Piovision for doubtflil accounts receivable (Increase) decrease in accounts receivable Increase (decrease) in accounts payable

and accrued wages payable Increase in customers' deposits

Total adjustments to operating income (loss)

Net cash provided by opeiating activities

461,591 (238,894) (100,464)

11,700 (8,895)

125,038

203,328

203,328

(59,746) 28,969

(27,669) (35,091)

(93,537)

3,845

3,845

238,674

1,490,342

1,729,016

(82,617)

198,881 2,374 4,403

(808) 2,805

207,655

125,038


TOWN OF ZWOLLE, LOUISIANA NOTES TO FINANCIAL STATEMENTS

MAY 31, 2012

(1) Summary of Significant Accounting Policies

The Town of Zwolle (Town) was incorporated September 13, 1889, under the provisions of a home rule charter. The Town operates under a Mayor-Board of Aldermen form of govemment.

The accounting and reporting policies of the Town conform to generally accepted accounting principles (GAAP) as applicable to govemments. The Govemmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing govemmental accounting and financial reporting principles. Such accounting and reporting procedures also conform to the requirements of Louisiana Revised Statutes 24:517 and to the guides set forth in the Louisiana Govemmental Audit Guide, and to the industry audit guide. Audits of State and Local Govemmental Units.

This financial report has been prepared in conformity with GASB Statement No. 34, Basic Financiai Statements - and Management's Discussion and Analysis -for State and Local Governments. The following is a summary ofthe Commission's significant policies:

The more significmit ofthe government's accounting policies are described below.

Financial Reporting Entity

In evaluating how to define the Town for finmicial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in GAAP. The basic, but not only, criterion for including a potential component unit within the reporting entity is the governing body's ability to exercise oversight responsibility. The most significant manifestation of this ability is financial interdependency. Other manifestations of the ability to exercise oversight responsibility include, but are not limited to, the selection of governing authority, the designation of management, the ability to significantly influence operations, and accountability for fiscal matters. A second criterion used in evaluating potential component units is the scope of public service. Application of this criterion involves considering whether the activity benefits the government and/or its citizens, or whether the activity is conducted within the geographic boundaries ofthe govemment and is generally available to its citizens. A third criterion used to evaluate potential component units for inclusion or exclusion from the reporting entity is the existence of special financing relationships, regardless of whether the government is able to exercise oversight responsibilities. Based upon the application of these criteria, the financial statements of the Town consists of only the funds and account groups since the Town has no oversight responsibility for any other governmental entity.

Govemment-wide and fund financial statements

The government-wide financial statements (GWFS) (i.e., the statement of net assets and the statement of activities) report information on all ofthe non-fiduciary activities ofthe primary government. For the most p ^ , the effect of inter-fund activity has been removed from these statements. Govemmental activities, which normally are supported by taxes, intergovernmental revenues, and other non-exchange transactions, are reported separately from business-type activities, which rely to a significmit extent on fees and charges for support.

The statement of net assets presents information on all of the Town's assets said 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 finmicial position ofthe Town is improving or deteriorating.

15


MAY 31, 2012

The statement of activities demonstrates the degree to which the direct expenses, of a given function or segment, are offset by program revenues. Direct expenses are those that are clemly identifiable with a specific function or segment. Depreciation expense is identified by function and is included in the direct expense of each function. Interest on general long-term debt of governmental activities is considered an indirect expense and is reported separately on the statement of activities. Interest on long-term debt of business-type activities is recorded as direct expenses. Program revenues include 1) fees, fines, and charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operation or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.

Separate fund financial statements (FFS) are provided for governmental funds and proprietary funds. Major individual govemmental and enterprise funds are reported as separate columns in the FFS. The Town had no non-major funds.

Measurement Focus, Basis of Accounting, and Financial Statement Representation

The govemment-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when eamed and expenses are recorded when a liability is incurred, regardless ofthe timing of related cash flows. Property taxes me recognized as revenues in the year for which they are levied. Grants and similar items me recognized as revenue as soon as all eligibility requirements have been met.

Government fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. The Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Ad valorem taxes are recognized as revenues in the year in which final approval is received from the Louisiana Tax Commission, at which time a valid claim exists, to the extent considered available. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensation absences are recorded only when payment is due.

Ad valorem taxes are considered "measurable" at the time of levy. Substantially all other non-intergovernmental revenues me susceptible to accrual and are recognized when eamed or the underlying transaction occurs. Those revenues susceptible to accrual are ad valorem taxes, franchise taxes, sales taxes, interest revenue, licenses, intergovemmental revenues, and charges for services. Fines, permits, penalties and interest, and miscellaneous revenues are not susceptible to accrual because generally they are not measurable until received in cash. Anticipated refunds of taxes are recorded as liabilities and deductions of revenue when they are measurable and their validity seems certain. Grants and similar items are recognized as revenues as soon as all eligibility requirements have been met. In reimbursement type programs, monies must be expended on the specific purpose or project before any amounts will be paid to the Town; therefore revenues are recognized based upon the expenditures recorded. In other programs in which monies are virtually unrestricted as to purpose of expenditure and are usually revocable only for failure to comply with prescribed compliance requirements, the resources are reflected as revenues at the time of receipt or earlier if the susceptible to accrual criteria are met mid all other eligibility requirements are met.

The accounts of the Town me orgmiized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance/net assets, revenues expenditures/expenses and

16


MAY 31, 2012

other changes in fund balance/net assets. The various funds are summmized by type in the finmicial statements. The following funds are used by the Town:

Governmental Funds -

General Fund

The General Fund is the general operating fund ofthe Town. It is used to account for all financial resources except those required to be accounted for in another fund.

Proprietary Fund -

Enterprise Fund

The Enterprise Fund is used to account for operations (a) that are financed and operated in a manner similar to private business enterprises - where the intent ofthe goveming body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be fmmiced or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenue eamed, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes.

Amounts reported as program revenues include (1) charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions, and (3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as progrmn revenues. Likewise, general revenues include all taxes.

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. The principal operating revenues ofthe enterprise funds me chmges to customers for sales and services. Operating expenses for enterprise funds and intemal service funds include the costs of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

When both restricted and unrestricted resources are available for use, it is the Town's policy to use unrestricted resources first, the restricted resources as they are needed.

Capital assets

Capital assets which include property, plant, equipment and infrastructure assets are reported in the applicable govemmental or business-type activities columns in the govemment-wide financial statements. Capital assets are capitalized at historical cost or estimated historical cost based upon like items. The Town, a phase 3 govemment, in accordance with GASB 34, has not retroactively reported infrastructure assets. As of June 1, 2004 the Town implemented a policy of capitalizing all infrastructure assets with a cost of $10,000 or more. All other assets are capitalized based on thresholds of $1,500 to $10,000, depending on asset classification, except land mid construction in progress which are capitalized at cost.

Capital assets me not reported in the governmental fund financial statements.

The cost of normal maintenance mid repairs that do not extend the assets lives or add value are not

17


MAY 31, 2012

capitalized.

Depreciation has been provided over the estimated useful lives using the straight-line method, estimated useful lives are as follows:

The

Water and sewer system Water wells and pumps

Water filter systems Water meters and hydrants

Trucks Equipment

10-50 years 20 years

10-25 years 25 years 5 yems

5 - 2 5 years

Long-term obligations

In the government-wide financial statements, and the proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable govemmental activities, business-type activities, or proprietary fund type statements of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life ofthe bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term ofthe related debt.

In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face mnount of the debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

Budgets and Budgetary Accounting

The Town follows these procedures in establishing the budgetmy data reflected in these financial statements:

1. The Town Treasurer prepares a proposed budget and submits same to the Mayor and Bomd of Aldermen no later than fifteen days prior to the beginning of each fiscal year.

2. A summary of the proposed budget is published and the public notified that the proposed budget is available for public inspection. At the same time, a public hearing is called.

3. A public hearing is held on the proposed budget at least ten days after publication of the call for the hearing.

4. After the holding ofthe public hearing and completion of all action necessmy to finalize and implement the budget, the budget is adopted through passage of mi ordinance prior to the commencement of the fiscal year for which the budget is being adopted.

5. Budgetary amendments involving the transfer of ftmds from one department, program or function to another or involving increases in expenditures resulting from revenues exceeding estimated amounts require the approval ofthe Board of Aldermen.

18


MAY 31, 2012

6. All budgetary appropriations lapse at the end of each fiscal yem.

7. The budget for the General Fund is adopted on a basis consistent with generally accepted accounting principles (GAAP). Budgeted amounts me as originally adopted, or as amended from time to time by the Board of Aldermen.

8. A budget is adopted for the Proprietary Fund on an accrual basis.

Cash and cash equivalents

Consistent with GASB Statement 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, the Town defines cash and cash equivalents as follows:

Cash - includes not only currency on hand but also demand deposits with banks or other financial institutions and other kinds of accounts that have the general characteristics of demand deposits in that the customer may deposit additional funds at any time and also effectively may withdraw funds at any time without prior notice or penalty.

Cash equivalents - includes short term, highly liquid investments that are readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of changes in value because of interest rates. Generally, only investments with original maturities of three months or less qualify under this definition.

Bad debts

Uncollectible amounts due for ad valorem taxes and customers' utility receivables me recognized as bad debts through the establishment of an allowance account at the time information becomes available which would indicate the uncoUectibility of the particulm receivable. At May 31, 2012, the reserve for uncollectible amounts amounted to $15,846.

Compensated absences

Employees of the Town are entitled to paid vacation depending on job classification, length of service, and other factors. Employees' vacation eamed does not accumulate or vest. Therefore, no liability for compensated absences has been recorded in the accompanying financial statements. The Town's policy is to recognize the costs of compensated absences when actually paid to employees.

Investments

State law and the municipality's investment policy allow the Town to invest in collateralized certificates of deposits, govemment backed securities, commercial paper, the state sponsored investment pool and mutual funds consisting solely of govemment backed securities. Investments for the Town are reported at fair value. The state investment pool (LAMP) operates in accordmice with state laws and regulations.

Prepaid Items

Payments made to vendors for services that will benefit periods beyond May 31, 2012, are recorded as prepaid items.

19


MAY 31, 2012

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues, expenditures, and expenses during the reporting period. Actual results could differ from those estimates.

(2) Ad Valorem Taxes

Ad Valorem taxes attach as an enforceable lien on property as of January 1 of each yem. Taxes are levied by the Town in October and are actually billed to the taxpayers in November. Billed taxes become delinquent on January 1 of the following year and penalties are assessed. All ad valorem tax revenues are recognized in compliance with NCGA Interpretation - 3 and GASB Codification Section P70 (Revenue Recognition - Property Taxes) which states that such revenue is recorded when it becomes measurable and available. Available means due, or past due and receivable within the current period mid collected no longer than 60 days after the close ofthe current period.

The Town bills and collects its own property taxes using the assessed values determined by the tax assessor of Sabine Pmish.

For the year ended May 31, 2012, taxes of 7.99 mills were levied on property with assessed valuations totaling $7,361,870. Total taxes levied were $58,823 for general corporate purposes.

(3) Interfund Receivables and Payables

Individual interftmd receivables and payable balances at May 31, 2012, were as follows:

Fund

General Fund

Proprietary Fimd

Total

Interfimd

Recei\'ables

$ 534,368

$ 534,368

Interfimd

Payables

$

534,368

$ 534,368

20


MAY 31, 2012

(4) Due from Other Governmental Units

Amounts due from other governmental units at May 31, 2012, consisted of the following:

General Fimd

Due from State of Louisiana $ 3,865 Due fromSabine Sales Tax Commission 41,899

$ 45,764

(5) Restricted Assets - Proprietary Fund Type

Restricted assets were applicable to the following at May 31, 2012:

Customers' deposits Revenue bonds:

Sinking fimd Reserve fimd Depreciation & contingency fimd

Total restricted assets

$ 40,488

3,924 44,463 45,979

S 134,854

(6) Changes in Fixed Assets

A summary of changes in general fixed assets for 2012 follows:

Lmid Biuldings Eqmpment Vehicles Sheets

Beginning Balance

151,991 839,916 121,315 116,351

1,215,742

Additbns

24,812 4,130

52,618 $ 55,096

Deductions

15,070 24,995 95,857

Ending, Balance

$ 151,991 849,658 100,450 73,112

1,270,838

Total $ 2,445,315 $ 136,656 $ 135,922 S 2,446,049

21


MAY 31, 2012

A summary of changes in accumulated depreciation for 2012 follows:

Buildings Eqiipment Vehicles Streets

Total

Beginning Balance

$ 250,759 97,477

100,119 130,650

$ 579,005

Additions $ 25,368

5,666 21,270 62,428

$ 114,732

Deductions $ 4,019

24,995 95,856

$ 124,870

Ending Balance

$ 272,108 78,148 25,533

193,078

$ 568,867

A summary of changes in proprietary fund type property, plant and equipment for 2012 follows:

Building Land Water System Sewer System Trucks Equipment Construction in

1

Progress

otal

Beginning Balance

$ 5,940 7,160

1,769,339 4,363,707

20,552 61,767

$ 6,228,465

Additions

15,969

6,250 13,000

$ 35,219

Deductions

9,552 20,266

$ 29,818

Ending Balance

$ 5,940 7,160

1,785,308 4,363,707

17,250 54,501

-

$ 6,233,866

22


MAY 31, 2012

A summary of changes in accumulated depreciation for 2012 follows:

Bi:ulding

Water System

Sewer System

Trucks

Eqi^ment

Construction in

]

Progress

:'otal

Beginning

Balance

$ 3,630

843,595

1,127,716

20,369

47,791

$ 2,043,101

Additions

s

s

198

37,067

155,168

925

5,524

198,882

Deductions

9,552

20,078

$ 29,630

Ending

Balance

$ 3,828

880,662

1,282,884

11,742

33,237

-

$ 2,212,353

(7) Pension Plans

Substantially all employees of the Town me members of the following statewide retirement's systems. These systems are cost sharing, multiple-employer defined benefit pension plans administered by sepmate boards of trustees. Pertinent information relative to each plan follows:

Municipal Police Employees' Retirement System

Plan Description. The Municipal Police Employees' Retirement System provides retirement benefits to employees of any municipality in the state which employs a full-time police officer, empowered to make arrests, or which has mi elected Chief of Police whose salary is at least $ 100 per month.

Eligible employees include any full-time police officer, empowered to make mrests, employed by a municipality ofthe State and engaged in law enforcement, earning at least $375 per month excluding state supplemental pay, or an elected Chief of Police whose salary is at least $100 per month. Elected Councilmen and Mayors are excluded from membership.

Persons who were members on September 7, 1977 must remain members ofthe System and persons hired on or after that date must become members of the System as a condition of employment if they are under age 50 and me not covered by the Social Security System.

Employees attaining the age of 50 completing 20 or more years of service, or the age of 55 and completing 12 years of service, me entitled to a yearly benefit of 3 1/3% of their average final compensation, as defined in the plan, times years of creditable service. Active employees who become disabled after 1985 due to total and permanent disability, with at least 5 years of creditable service, receive a benefit of 3% of average final compensation multiplied by the years of creditable service, but not less than 40% nor more than 60%> of average final compensation. Upon reaching retirement age, disability pensioners receive the greater of disability benefits or accrued benefits eamed to the date of disability. Prior to the enactment of Act 81 of 1985, other disability rules may be applicable as described in the plan. The system also provides for death benefits as described in the plan.

The System issues an annual publicly available finmicial report that includes financial statements and

23


MAY 31, 2012

required supplementary information for the System. That report may be obtained by writing to the Municipal Police Employees Retirement System of Louisimia, 8401 United Plaza Boulevard, Baton Rouge, Louisiana 70809-2250, or by calling 225-929-7411.

Funding Policy. Covered employees me required by state statute to contribute 7.5%o of their salary to the System. The Town is required to contribute 29%> of covered employees' salaries to the System. The contribution requirement for the Town for the year ended May 31, 2012, 2011, and 2010 were $20,948, $17,601, and $7,876, respectively. The contribution requirements of plan members and the Town are established and may be amended by state statute. As provided by Louisiana Revised Statute 11:103, the employer contributions are determined by actuarial valuation mid are subject to change each year based on the results ofthe valuation for the prior fiscal year.

Municipal Employees' Retirement System

Plan Description. Other full time employees participate in the Municipal Employees' Retirement System of Louisiana (the System), Plan B, a multiple-employer public employee retirement system. Employees who retire at or after age 65 with 10 years of credited service me entitled to a retirement benefit, payable monthly for life, equal to 2 percent of their final-average salary for each year of credited service. Final-average salary is the employee's average salary over the last three years of credited service. Employees may retire at or after age 60 and receive reduced retirement benefits. The System also provides death and disability benefits. Benefits are established by State statute.

The System issues an annual publicly available financial report that includes finmicial statements and required supplementary information for the System. That report may be obtained by writing to the Municipal Employees Retirement System of Louisiana, 7937 Office Pmk Boulevard, Baton Rouge, Louisiana 70809, or by calling 225-925-4810.

Funding Policy. Under Plmi B participating employees contribute 5%> of their total salary into the System, and the Town contributes an amount equal to 8.00%i, ofthe total salaries of participating employees. For the year ended May 31, 2012, 2011, and 2010, the total contributions by the Town to this System were $9,704, $3,768 and, $4,275, respectively.

The contribution requirements of plan members and the Town are established and may be amended by state statute. As provided by Louisiana Revised Statute 11:103, the employer contributions are determined by actuarial valuation mid are subject to change each yem based on the results of the valuation for the prior fiscal year.

(8) Lease Obligations

The Town is obligated under a certain lease accounted for as an operating lease. This lease is for the use of land comprising 2.98 acres for the operation and drilling of water wells. The term ofthe lease is forty years with an annual rental of $1,500 payable monthly at $125 per month. Operating leases do not give rise to property rights or lease obligations, and therefore the result of the lease agreement is not reflected in the Town's account groups. The following is a schedule by years of future minimum rental payments under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of May 31,2012:

24


Yem ending May31,2012 2013 2014 2015 2016 2017 Later years

MAY 31, 2012

$

Amount 1,500 1,500 1,500 1,500 1,500

19,625 Total miniimmi payments required $ 27,125

(9) Cash and Investments

Louisiana revised Statutes authorize the Town to invest in United States bonds, treasury notes or certificates, or to deposit funds in demand deposits, interest bearing demand deposits, money market accounts, or time deposits with state banks organized under Louisiana law and national banks having their principal offices in Louisiana.

As described in Note 1, cash equivalents include all short term highly liquid investments that are readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of changes in value because of interest rates. Generally, only investments which, at the date of purchase, have a maturity date no longer than three months qualify under this definition.

At May 31, 2011, the Town has cash and investments as follows:

Unrestricted

Cash $ 1,946,025 Investments 353,161

Total $2,299,186

Restricted

$ 134,854

$ 134,854

Total

$ 2,080,879 353,161

$2,434,040

Of the total of $2,433,640 deposited in demand and time deposits as of May 31, 2012, $376,119 was secured through federal depository insurance, $1,735,642 was secured by the pledge of securities owned by the depository bank, and $321,879 was on deposit with the Louisiana Asset Management Pool (LAMP). These securities me held in the name of the pledging bank in a custodial bank that is mutually acceptable to both parties. These secured bank deposits are considered uncollateralized under the provisions of GASB Statement 3; however, Louisiana Revised Statutes require the custodial bank to advertise and sell the pledged securities within ten (10) days of being notified by the Town that the pledging bank has failed to pay deposited funds upon demand.

LAMP is a non-profit corporation organized under the laws of the State of Louisiana. Only local govemment entities having contracted to participate in LAMP have an investment interest in its pool of assets. The primary objective of LAMP is to provide a safe environment for the placement of public funds in short-term, high quality investments. The LAMP portfolio includes only securities mid other obligations

25


MAY 31, 2012

in which local governments in Louisiana are authorized to invest in accordance with LA-R.S. 33:2955. LAMP is rated AAAm by Standard & Poor's. The dollar weighted average portfolio maturity of LAMP assets in restricted to not more thmi 90 days, and consists of no securities with a maturity in excess of 397 days. LAMP is designed to be highly liquid to give its participants immediate access to their account balances.

(10) Long-term Debt

On October 29, 1991, the Town entered into an agreement with Farmers Home Administration (FmHA) to allow the Town to undertake a water system improvement project at an estimated cost of $975,000. Funding for the project was provided by FmHA by means of issuance of $780,000 of revenue bonds (Bonds) and by a $195,000 grant. On April 20, 1992, the Town executed a 'Project Advance Agreement" with the Louisiana Public Facilities Authority (LPFA) to provide interim financing for the water system improvement project based on the commitment for permanent financing from FmHA. On September 25, 1993 the Bonds were issued and the interim financing with LPFA was repaid. The Bonds bem interest at the rate of five percent (5%i) from the date of issuance. Principal and interest on the Bonds are payable over a forty (40) year period, with the first payment consisting of interest only ($39,000) which was due on the first anniversary of the issuance date (September 25, 1993). Commencing one month after the first anniversmy date, and monthly thereafter, payments of principal and interest will be $3,799 monthly.

Under the terms of the bond agreement with FmHA, all income and revenues emned or derived from operations ofthe utility fund are pledged and dedicated to the retirement ofthe Bonds, and are to be used for the following expressed purposes:

(a) Payment of all reasonable expenses of operation and maintenance of the system.

(b) Each month there will be set aside into a fund called the "Water Revenue Bond and Interest Sinking Fund" (the "Sinking Fund"), a sum equal to one-twelfth (l/12th) the interest falling due on the next interest payment date during the first year the Bonds are outstanding and, thereafter, a sum equal to the total amount of principal and interest falling due on the next principal and interest payment date together with such additional proportionate sum as may be required to pay said principal and interest as the same respectively become due. Monthly deposits of $3,250 are required through September 25, 1993, mid $3,799 monthly thereafter. The balance required at May 31, 2012 is $3,799. The present balance is $3,924.

(c) There will be set aside monthly into a "Water Revenue Bond Reserve Fund" (the "Reserve Fund"), commencing with the month following completion of and acceptance ofthe improvements and extensions financed with the proceeds ofthe Bonds, a sum at least equal to five percent (5%i) of the amount to be paid into the Sinking Fund provided for in paragraph (b) above, the payments into the Reserve Fund to continue until such time as there has been accumulated in the Reserve Fund a sum equal to the highest combined principal and interest falling due in any year on the Bonds as a Debt Service Reserve, the money in the Reserve Fund to be retained solely for the purpose of paying the principal of and interest on bonds payable from the Sinking Fund as to which there would otherwise be default. Monthly deposits of $163 me required through September 25, 1993 and $190 monthly thereafter until the balance reaches $45,583. The balance required at May 31, 2012 is $44,192. The present balance is $44,463.

(d) There will be set aside monthly into a "Water Depreciation and Contingency Fund" (the "Contingency Fund") to care for depreciation, extensions, additions, improvements and replacements necessary to operate properly the System, commencing with the month following completion of and

26


MAY 31, 2012

acceptance ofthe improvements and extensions financed with the proceeds ofthe Bonds, the sum of $193 per month. The balance required at May 31, 2012 is $45,748. The present balance is $45,979.

A portion of retained eamings is reserved to cover these restricted assets for future debt service on the revenue bonds.

In June 2012, the Town retired the Bonds, in the amount of $544,009.

On November 1, 1999 the town entered into a Utility Relocation Assistance Funding Agreement with the Louisiana Department of Transportation & Development (DOTD) whereby DOTD agreed to loan the town up to $136,361 in coimection with utility relocation costs on Highway 171. The town has recorded a non-interest bearing note payable to DOTD in the amount of $74,460 in connection with this project. Although there is no formal repayment schedule for this loan, in June 2010 the town began repaying this loan at the rate of $7,446 annually. The balance at May 31, 2012 is $52,123.

On October 13, 2005 the town entered into a Utility Relocation Assistance Funding Agreement with the DOTD whereby DOTD agreed to loan the town up to $292,912 in connection with additional utility relocation costs on Highway 171. The town has recorded a non-interest beming note payable to DOT in the amount of $172,424 in connection with this project. Although there is no formal repayment schedule for this loan, in July 2011 the town began repaying this loan at the rate of $17,200 annually. The balance at May 31, 2012 is $138,024.

On June 17, 2011, the Town entered into a $43,843 loan with Ford Motor Credit Corporation at 6.15%> interest to purchase two police cars. The loan is repayable over thirty-six (36) months at $ 1,330 per month.

The following is a schedule by yems of future payments under the above loan:

Year ending

May 31

2013

2014

Total

Princf)al

$ 14,521

15,441

$ 29,962

$

$

Interest

1,438

518

1,956

Total

$ 15,959

15,959

$ 31,918

27


MAY 31, 2012

The following is a summary schedule by years of future payments under the above debt:

Year ending

May 31 Princpal Interest Total

2013 2014 2015 2016 2017

Later years

Total

$ 583,176 40,087 24,646 24,646 24,646

66,916

$ 764,117

$ 1,438 518

-

-

-

_

$ 1,956

$

$

584,614 40,605 24,646 24,646 24,646

66,916

766,073

(11) Sales and UseTax

On April 16, 1988, the voters ofthe Town approved a 1% sales and use tax upon the sale at retail, the use, the lease or rental, the consumption or storage for use or consumption of tangible personal property and on sales of services in the Town. The l%i sales and use tax is dedicated to the General Fund to be used for any lawful corporate purpose as deemed necessary by the Board of Aldermen. In addition, effective October 1, 2005 the voters ofthe Town approved an additional \% sales and use tax.

(12) Contingencies

Grant Audits

The Town receives Federal mid State grants for specific purposes that are subject to review and audit by Federal and State agencies. Such audits could result in a request for reimbursement by the State for expenditures disallowed, if any, under the terms mid conditions ofthe appropriate agency.

(13) Pending Litigation

The Town is a party to legal proceedings involving suits filed against the Town for various reasons; however Town management does not believe the Town is exposed to any material losses in these proceedings. Accordingly, no provision for losses is included in the financial statements.

28


MAY 31, 2012

(14) Compensation paid to Mayor and Aldermen

In accordance with the requirements of the Office of the Legislative Auditor, State of Louisiana, the following reflects compensation paid the Mayor and members ofthe Town Council for the year ended May 31,2012:

Mayor G. J. Martinez $ 12,000 Council members: Allen Rivers 4,800 Martha Henderson 4,800 Carolyn C. Cutright 4,800 Darlene Frazier 4,800 Stephen Remedies 4,800

(15) Subsequent Events

In June 2012 the Town paid the remaining balance of the note payable to FHA in the amount of $544,009.

(16) Risk Management

The Town is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Town has purchased commercial insurance to cover or reduce the risk of loss that might arise should one of these incidents occur. No settlements were made during the current or prior three fiscal years that exceeded the Town's insurance coverage. The Town's management has not purchased commercial insurance or made provision to cover or reduce the risk of loss as a result of business interruption and certain acts of God.

29

EXHIBIT J

TOWN OF ZWOLLE, LOUISIANA STATEMENT OF REVENUE, EXPENDITURES, AND CHANGES IN FUND BALANCES -

BUDGET AND ACTUAL ON A BUDGETARY BASIS GENERAL FUND


Revenues:

Licenses and pennits Intergovemmental Qiarges for services Fines and forfeits

Miscellaneous

Total revenues

E^enditures: Current: Cjeneral govemment Public safety

Debt service Highways and streets Health and sanitation Recreation

Total ejq)enditures

E>fl:ess of revenues overe?5>enditures before transfers

Proceeds fiomfinancing Transfer to Utility Fund

E}fl:ess ofrevenues overe^enditures

Fund balances, beginning of year

Fund balances, end of year

Original Budget

685,000 92,500 18,900

70,500 90,000 18,550

Final Budget

$ 660,000 92,500 18,900

70,500 60,000 30,550

975.450

92,552

932,450

49,552

tual

665,817 80,708 38,883

75,160 58,753 55,407

Variance with Final Budget

Positive (Negative)

$ 5,817 (11,792) 19,983

4,660 (1,247) 24,857

974,728

128,932

42,278

184,123 357,003

-247,272 62,500 32,000

882,898

184,123 357,003

-247,272 62,500 32,000

882,898

194,199 358,656

18,611 179,019 65,520 29,791

845,796

(10,076) (1,653)

(18,611) 68,253 (3,020) 2,209

37,102

79,380

s

92,552

1,079,600

1,172,152 $

49,552

1,079,600

1,129,152 $

128,932

1,146,037

1,274,969 $

79,380

79,380

30

The notes to the financial statements are an integral pml: of this statement.


318-256-0332 FAX 318-256-0389

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

The Honorable G. J. Martinez, Mayor and Board of Aldermen


I have audited the basic fmancial statements ofthe Town of Zwolle, Louisiana, as of May 31, 2012 for the year then ended, and have issued my report thereon dated November 28, 2012. I conducted my audit in accordance with auditing standards generally accepted in the United States of American and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States.

Internal Control over Financial Reporting

Management of the Town of Zwolle, Louisiana is responsible for establishing and maintaining effective internal control over fmancial reporting. In planning and performing my audit, I considered the Town of Zwolle, Louisiana's intemal control over fmancial reporting as a basis for designing my auditing procedures for the purpose of expressing my opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness ofthe Town of Zwolle, Louisiana's internal control over fmancial reporting. Accordingly, I do not express an opinion on the effectiveness ofthe entity's internal control over fmancial reporting.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement ofthe entity's fmancial statements will not be prevented, or detected and corrected on a timely basis.

My consideration of intemal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. I did not identify any deficiencies in internal control over financial reporting that I consider to be material weaknesses, as defmed above.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Town of Zwolle, Louisiana's financial statements are free of material misstatement, I performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance 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 my audit and, accordingly, I do not express

The CPA, Never Underestimate The Value?"̂

such an opinion. The results of my 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 ofthe Mayor, management, Town Council, Louisiana Legislative Auditor, 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. Under Louisiana revised Statute 24:513, this report is distributed by the Legislative Auditor as a public document.

EUGENE W. FREMAUX II, CPA November 28. 2012

32


318-256-0332 FAX 318-256-0389

CURRENT YEAR

2012-01 Payroll

During our tests of payroll records and procedures, we noted that two police officers were not paid overtime rates for overtime hours during the time they were attending the police academy and also working some shifts. U. S. Department of Labor regulations are clear that training and travel time are considered as time worked when determining if overtime pay is appropriate. The amount of additional overtime pay amounts to $780.

Recommendation

The Town should reimburse the two police officers for the overtime not paid at the correct rate, and copies of the appropriate U. S. Department of Labor overtime rules should be added to the Town's accounting policies and procedures

Management 's Response

The two police offices will be reimbursed as above before December 31, 2012.

2012-02 Trade-in of Vehicle

During our tests of capital assets, we noted that the Town purchased a used vehicle for $4,000 and received a trade-in allowance of $700 for a Town truck. Louisiana rules for disposition of surplus property prohibit trade-in of items.

Recommendation

The Mayor and Council should be aware ofthe prohibition of trade-in's under the disposition of surplus property rules.


Management has been made awme that a vehicle trade-in was not allowed under the surplus property disposition rules.

2012-03 Nepotism

In September 2011, the Town used the services of Roger Rivers Construction to construct a welcome sign platform in the mnount of $800. Roger Rivers Construction is owned by Aldermen Allen River's son. Allen River's son would meet the Board of Ethics definition of "immediate family" under LSA R.S.42:1119 and therefore this transaction is a violation of this law.

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318-256-0332 FAX 318-256-0389

Recommendation

The Mayor and Council should become more aware ofthe Board of Ethics rules concerning nepotism.


The Mayor, Aldermen, and employees me expected to have taken the mandatory one hour ethics training course by December 31, 2012, which should help management understand the ethics rules.

PRIOR YEAR

2011-01 Accounting Policies and Procedures

The Town does not have written accounting policies or procedures for employees to use as a guide. The lack of written policies and procedures was highlighted in January 2010 when there was turnover in the Town clerk's position and the new clerk missed filing some reports (such as retirement reports) and payments on a timely basis. Potential problems relating to staff turnover can be greatly reduced if there are adequate written accounting policies and procedures, which are reviewed and updated on an annual basis.

Reco m m en dation

The Town should develop and implement written accounting policies and procedures for the office staff to follow; and adopt procedures to keep these procedures up-to-date. As a minimum the policies and procedures should relate to:

Filing and retention of records Financial reporting Receipts and collections Customer utility accounts Payroll and personnel Capital assets Computer use and backup Credit card use Travel Purchasing Cash disbursements Month end closing procedures

Disposition

Written policies and procedures have been prepared.

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town of zwolle · 2020. 11. 9. · town of zwolle, louisiana i have audited the accompanying...

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