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2005MIAMI SIJORES 'VILLAGE, FLORIDA CoMpREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2005 Prepared by THE FINANCE DEPARTMENT MIAMI SHORES VILLAGE, FLORIDA TABLE OF CONTENTS PAGE INTRODUCTORY SECTION Letter of Transmittal i-viii Organization Chart ix List of Elected and Appointed Officials x FINANCIAL SECTION Report of Independent Certified Public Accountants 1-2 Management's Discussion and Analysis .3-13 Basic Financial Statements: Government -wide Financial Statements: Statement of Net Assets 14 Statement of Activities 15 Fund Financial Statements: Balance Sheet — Governmental Funds 16 Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental Funds 17 Reconciliation of the Statements of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 18 Statement of Net Assets — Proprietary Funds 19 Statement of Revenues, Expenses and Changes in Net Assets — Proprietary Funds 20 Statement of Cash Flows — Proprietary Funds 21 Statement of Fiduciary Net Assets — Fiduciary Funds 22 Statement of Changes in Fiduciary Net Assets — Fiduciary Funds 23 Notes to Basic Financial Statements 24-50 Required Supplementary Information: Schedule of Employer Contributions 51 Budgetary Comparison Schedule: General Fund 52 -53 Special Revenue Funds: Excise Tax Fund 54 Local Option Gas Tax Fund 55 Note to Budgetary Comparison Schedules 56 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet -- Nonmajor Governmental Funds 57 -58 Combining Statement of Revenues, Expenditures and Changes in Fund Balances — Nonmajor Governmental Funds 59 -60 Budgetary Comparison Schedule: Half Cent Surtax Fund 61 Debt Service Fund 62 MIAMI SHORES VILLAGE, FLORIDA TABLE OF CONTENTS (Continued) FINANCIAL SECTION (Continued) PAGE Internal Service Funds: Combining Statement of Net Assets 63 Combining Statement of Revenues, Expenses and Changes in Net Assets 64 Combining Statement of Cash Flows 65 Fiduciary Funds: Combining Statement of Fiduciary Net Assets — Pension Trust Funds 66 Combining Statement of Changes in Fiduciary Net Assets — Pension Trust Funds 67 Statement of Changes in Assets and Liabilities — Agency Fund 68 STATISTICAL SECTION Government -wide Information: Government -wide Expenses by Function 69 Government -wide Revenues 70 Fund Information: General Governmental Expenditures by Function 71 General Governmental Revenues by Source 72 Property Tax Levies and Collections 73 Assessed Value of Taxable Properties 74 Property Tax Levies 75 Direct and Overlapping Debt 76 Demographic Information and Statistics 77 Property Value, Construction and Bank Deposits 78 Miscellaneous Information 79 Principal Taxpayers 80 Ten Largest Public and Private Employers Located in Miami -Dade County, Florida 81 COMPLIANCE SECTION Report of Independent Certified Public Accountants 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 82 -83 Management Letter in Accordance with the Rules of the Auditor General of the State of Florida 84 -85 Schedule of Findings 86 -91 iaryci Skorej ViCI 10050 N.E. SECOND AVE. MIAMI SHORES, FLORIDA 33138 -2382 Telephone: (305) 795 -2207 Fax: (305) 756 -8972 THOMAS J. BENTON VILLAGE MANAGER February 17, 2006 The Mayor and Members of the Village Council 10050 Northeast Second Avenue Miami Shores, Florida 33138 -2382 To the Mayor and Members of the Village Council: Financial Report (CAFR) In compliance with Florida State Statute Chapter §11.45, Chapter §10.550 of the Rules of the Auditor General, and Chapter 34(3) of the Miami Shores Village Code of Ordinances, we are pleased to submit for your review and consideration the Miami Shores Village Comprehensive Annual Financial Report (CAFR) for the fiscal year ended September 30, 2005. The report is presented in conformity with generally accepted auditing standards by our outside auditors, Rachlin Cohen & Holtz LLP, Certified Public Accountants. This report consists of management's representations concerning the financial condition of Miami Shores Village ( "The Village "). Consequently, management assumes full responsibility for the complete presentation, reliability, and accuracy of all of the information presented in this report. To provide a reasonable basis for making these representations, the Village's management has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft or misuse and to compile sufficient reliable information for the preparation of the Village's financial statements in conformity with principles generally accepted in the United States. Because the cost of internal controls should not outweigh their benefits, the Village's comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. -1- The accompanying report consists of three parts: The Introductory Section, including this letter of transmittal, provides general information on the Village's structure and personnel as well as other information that will assist readers to better understand the organization's financial condition. The Financial Section contains the basic financial statements and required supplementary information including Management's Discussion and Analysis (MD &A), the report of the independent certified public accountants, and other supplemental information useful to statement readers. The MD &A is a narrative required to accompany the basic financial statements, providing an objective and 'easy -to -read' analysis of the Village's financial activities. These activities are based on currently known facts, decisions, or conditions available able to management at the time of preparation. This letter of transmittal is designed to complement the MD &A for a graphical presentation of the report. • The Statistical Section provides tables and graphs of unaudited data depicting the financial history of the Village over the course of the past 10 years including, but not limited to demographics, key taxpayers, revenue and expense trends and more. Independent Audit Rachlin Cohen & Holtz LLP, a firm of licensed certified public accountants, has audited the Village's financial statements for the fiscal year ended September 30, 2005. Their audit was in accordance with principles of auditing standards generally accepted in the United States, Government Auditing Standards issued by the Comptroller General of the United States and the Rules of the Auditor General, State of Florida. The goal of the independent auditor was to provide reasonable assurance that the financial statements of the Village for the fiscal year ended September 30, 2005 are free of material misstatements. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the over financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the financial statements of Miami Shores Village for the fiscal year ended September 30, 2005 are fairly presented in conformity with generally accepted accounting principles (GAAP). The independent auditor's report is presented as the first component of the financial section of this report. Profile of the Government Miami Shores Village, a Florida municipal corporation incorporated in 1932, is located in Northeast Miami -Dade County. The Village has a year -round population estimated at 10,400 residents living within the 2.3 square mile jurisdiction. The Village begins at Biscayne Bay on the east and goes west to Northwest Second Avenue. The north and south boundaries are 115th Street and 91st Street respectively. The Village is primarily a residential -based community with two (2) commercial districts located on Second Avenue and Biscayne Boulevard. Demonstrating continued economic growth, the Village is recognized as the fifth most affluent residential community in the County. Over the past five -year period, total aggregate assessed property value increased by 72.9 %; averaging in excess of 14.1% annually. The primary factor continues to be the close proximity to the Miami and Fort Lauderdale metropolitan areas. With the location of the Village so close to these business areas, commuting is significantly reduced -ii- allowing for enhanced leisure and family time, an indicator identified by more than 38% of the new property owners. Government Structure and Services Provided Operating under a Council - Manager form of government, the Council consists of five members elected at large. The Mayor is chosen by each of the newly formed councils. Historically, the individual receiving the highest number of votes during the election is chosen as the Mayor and the Vice -mayor has received the second highest. Both the mayor and vice -mayor serve four (4) year terms, two as mayor /vice -mayor and two as regular council members. The Village Council is responsible for the selection and appointment of the Village Manager, Village Cleric and Village Attorney. The Village Manager is responsible for engaging all department heads and their subordinates. Miami Shores Village provides a full range of municipal services including public safety through the police, recreation and culture, public works and general administrative services for its residents and businesses. For the fiscal year ended September 30, 2005, no legally separate authorities or agencies operated under the auspices of the Village; therefore, no additional financial information will be incorporated into these statements. The Village completed the construction of the Doctor's Charter School of Miami Shores. Total construction price of the completed project came in on target and amounted to slightly more than $6,000,000. Funding for the project included a $5,000,000 General Obligation Bond and proceeds from donations originating from the North Shore Medical Foundation. Beginning with the FY:2006 audit, the financial activities will be incorporated into the Village's financial reports as a separate entity but the operational responsibilities of the school will not impact the Village's operating cash in any manner. Budgetary Process and Control Florida State Statute §200.065 requires that all municipal governments prepare, approve, adopt and execute an annual budget for such funds as may be required by law or by sound fiscal practices. In compliance with this Statute as well other state regulatory items, the Village adopts an annual operating budget into which fiends are either formally appropriated by resolution or non - appropriated in nature, depending upon the fund (i.e., - general, special revenue, debt service, enterprise, internal service or trust funds). However, in practice, all funds by those identified as fiduciary in nature, receive annual budgets and corresponding appropriations. The annual budget serves as a foundation for the financial planning, guidance and control of the Village. Funds which require legal appropriations cannot exceed their original and amended budgets. All departments are required to annually submit requests for appropriations to the Village Manager by June 1st of each year. The Village Manager then uses those requests as the base from which the annual operating and capital budgets are developed. The budget is presented to the Village Council immediately following the release of the tentatively assessed property values in early July of each year. Workshops are held in July during which council members are free to address department staff with general and specific issues proposed in the budget. Following the summer workshops, the Council adopts a resolution which sets the tentative millage rates which are subsequently sent to the County using Florida Form DR420 for inclusion on the Proposed Tax Bills. Two public hearings are held in September of each year during which members of the public are offered the opportunity to provide insight and solicit information regarding the operations of their municipality. After the second public hearing, -in- allowing for enhanced leisure and family time, an indicator identified by more than 38% of the new property owners. Government Structure and Services Provided Operating sunder a Council- Manager form of goverrunent, the Council consists of five members elected at large. The Mayor is chosen by each of the newly formed councils. Historically, the individual receiving the highest number of votes during the election is chosen as the Mayor and the Vice -mayor has received the second highest. Both the mayor and vice -mayor serve four (4) year terms, two as mayor/vice-mayor and two as regular council members. The Village Council is responsible for the selection and appointment of the Village Manager, Village Cleric and Village Attorney. The Village Manager is responsible for engaging all department heads and their subordinates. Miami Shores Village provides a full range of municipal services including public safety through the police, recreation and culture, public works and general administrative services for its residents and businesses. For the fiscal year ended September 30, 2005, no legally separate authorities or agencies operated under the auspices of the Village; therefore, no additional financial information will be incorporated into these statements. The Village completed the construction of the Doctor's Charter School of Miami Shores. Total construction price of the completed project came in on target and amounted to slightly more than $6,000,000. Funding for the project included a $5,000,000 General Obligation Bond and proceeds from donations originating from the North Shore Medical Foundation. Beginning with the FY 2006 audit, the financial activities will be incorporated into the Village's financial reports as a separate entity but the operational responsibilities of the school will not impact the Village's operating cash in any manner. Budgetary Process and Control Florida State Statute §200.065 requires that all municipal governments prepare, approve, adopt and execute an annual budget for such funds as may be required by law or by sound fiscal practices. In compliance with this Statute as well other state regulatory items, the Village adopts an annual operating budget into which funds are either formally appropriated by resolution or non - appropriated in nature, depending upon the fund (i.e., - general, special revenue, debt service, enterprise, internal service or trust funds). However, in practice, all funds by those identified as fiduciary in nature, receive annual budgets and corresponding appropriations. The annual budget serves as a foundation for the financial planning, guidance and control of the Village. Funds which require legal appropriations cannot exceed their original and amended budgets. All departments are required to annually submit requests for appropriations to the Village Manager by June 1st of each year. The Village Manager then uses those requests as the base from which the annual operating and capital budgets are developed. The budget is presented to the Village Council immediately following the release of the tentatively assessed property values in early July of each year. Workshops are held in July during which council members are free to address department staff with general and specific issues proposed in the budget. Following the summer workshops, the Council adopts a resolution which sets the tentative millage rates which are subsequently sent to the County using Florida Form DR420 for inclusion on the Proposed Tax Bills. Two public hearings are held in September of each year during which members of the public are offered the opportunity to provide insight and solicit information regarding the operations of their municipality. After the second public hearing, -iu- PENSION and POST - EMPLOYMENT BENEFIT COSTS The Village sponsors two independent defined benefit pension plans: the General Employees' Retirement Plan. and the Police Officers' Retirement Plan. Additionally,. a voluntary deferred compensation plan is made available to those employees who wish to augment their future retirement benefits with no financial obligation to the Village. Complying with the Village's Code, along with various state statutes, an independent actuary is engaged each year to calculate the annual contributions required by the Village to ensure that each benefit plan is able to fully meet its current future obligations for its retirees on a timely basis. As a matter of policy, the Village maintains fully- funded plans and funds each year's annual required contribution to each respective plan as part of the annual budget process. As a result of the conservative approach to these plans, both retirement systems are currently fully funded and report no unfunded liabilities for current or future obligations. No additional post - employment retirement benefits are offered by the Village at this time. Additional information related to the Village's two pension programs may be found in .Note 10 (a -d) in the Notes to the Financial Statements. Long -Term Debt Management The Village continues to obtain, in an efficient and innovative manner, long -term financing for the construction or acquisition of long -term assets and equipment. Management's objective is to adequately plan and meet the Village's comprehensive capital plan and related demands which are critical to'the continue enhancement of our infrastructure. At the samelime, however, we do not want to place a significant burden on the taxpayers through general obligation debt through ad valorem taxes. Following the voters direction, the Village has issued and sold two independent General Obligation Bonds: Series 1999 and Series 2004 funding the capital investment for the Village's $3,500,000 - Aquatics Facility and $5,000,000 - Doctors Charter School of Miami Shores respectively. The Village's debt service millage for 2005 was 0.5659 for the Aquatics facility. The Following chart indicates the principal amortization of the Village's general obligation debt for the next five fiscal years: General Obligation Debt Principal Amortization For the Five -Year Increment Following FY 2007 -08 -v- Principal Amortization Fiscal year ended September 30: 2009 $ 185,000 2010 190,000 2011 195,000 2012 205,000 2013 215,000 Total $ 990,000 -v- ENTERPRISE OPERATIONS The Village operates two individual enterprise operations: Sanitation and Stormwater utilities. Each area operates separate from the other functions of the Village and are fully supported by fees charged to users for the service provided. The following is a brief introduction to these two divisions: Sanitation Sanitation is an operating division of the Public Works Department. Comprised of 25 full time employees, the department provides comprehensive solid waste collections and recycling services to the Village's residents and commercial operations. Service in excess of 3,400 customers, the Village provides regular trash services, special pickups, recycling programs and other sanitation - related services. Over 15,000 tons) of trash was transferred to the County's dump site for removal costing in excess of $750,000, part of which related to the increase in dumping fees, the closure of the chipping field and natural event cleanups. These costs along with personnel, operating, administrative and non -cash charges are fully funded by the quarterly and annual fees charged to Village customers. Stormwater Utilities The Public Works Department is also responsible for the day -to -day operations of the Village's stormwater utility. Stormwater utilities as defined by Section 20 -102 of the Village's Code of Ordinances provides for a comprehensive drainage control program throughout the Village. Through the Public Works Department, the Village is responsible for the maintenance of the system as well as managing various contracts engaged to repair, rehabilitate, replace and expand the system. Charges for this division are based on a fee determined by identifying the impervious area of each residential and commercially - developed property in the Village. The calculation determines each property's Equivalent Residential Units [ERUs] equaling 2,466 square feet divided by the total impervious area. Impervious means that area of any given property which does not permit rain or run off to naturally filter back through the ground. The annual fee of $36.00 funds all costs associated with the function including, but not limited to personnel, operating, administrative, debt service and capital investment costs. This function reports through an Enterprise Fund and uses the full accrual method of.accounting including amortization and depreciation charges. INTERNAL SERVICE OPERATIONS The Village provides for two internal service funds: Fleet Maintenance and Risk Management. Internal service funds are used to capture the true costs for service which are for the sole benefit of Village. The following are brief introductions for both service areas. Fleet Maintenance Fleet Maintenance, a division of the Village's Public Works Department, is fully responsible for the day -to -day maintenance of all equipment and vehicles operated by the organization. Maintenance includes the costs for routine repairs, preventive services, general maintenance, fuel, personnel costs and other operational functions. Additionally, the acquisition of all vehicles and equipment, not specifically identified as an asset of an enterprise operation are recorded in this division. Through annual depreciation charges, replacement funds accumulate as a reserve for future equipment requirements. As an internal service fund, operational revenues originate as -vi- charges recorded in each 'user' division, transferring the corresponding cash to this self - balancing fund including non -cash charges such as depreciation, amortization and transfers to reserves. Risk Management Risk Management, a sub - function of the Village's Finance Department, is a division accumulating the costs to manage risk and losses of the Village. The Village is a self - insured entity meaning that all losses incurred by the Village are paid by Village Funds; however, as the cost to manage loss has astronomically escalated, the Village engages co- insurance coverage for each risk -loss area including general liability, property and casualty, workers' compensation and bondings. 1n addition, retention costs (deductibles) are accumulated and disbursed through this fund along with direct losses, legal, third party administrative and actuarial costs. As with the Fleet Maintenance ISF, the full cost of the Village's risk loss operations are funded by expenses charged to all departments and divisions of the Village including costs to fund future losses and mandatory reservations. Beginning with October 1, 2005, the Village contracted all risk services with the Florida League of Cities; eliminating the cost for co- payments, direct pays, and surplus insurance costs, resulting in a more than 65% annual decrease which will be clear visible and reporting in subsequent years' reports. FACTORS AFFECTING FINANCIAL CONDITIONS The information presented in the Village's financial statements primarily focus on the financial position:at the end of each fiscal year as measured by existing resources and claims against those resources. To better understand the Village's financial condition, readers should focus on both existing and future resources and potential claims (or liabilities) against those resources. This broaderYconcept is used to assist the financial condition of Miami Shores, reflecting the current financial position as well as the prospects that today's financial condition will improve or deteriorate. To achieve this objective, the Village uses a wide -range of information including local economic conditions and outlook; long -term debt management; capital construction and investments; cash management / investments; and, of course, risk controls. ECONOMIC CONDITION AND OUTLOOK For the fiscal year ended September 30, 2004 readers may recall that a continue sense of growth and a resurgence of interest in Miami Shores was highlighted. As of the end of FY 2005, strong demand for Village real estate continued as a byproduct of low housing stock or inventory, low interest rates and the Village's prime locations. Additionally, significant investment in concurrent property owners were identified through the number and value of building permits issued during the fiscal year. While this growth trends continue, a definite trend is beginning to show a slight downturn in the re -sales and values of the re -sales to levels more consistent with previous years' growth levels. Property Values & Economic Development As previously indicated, The Village continues to enjoy and reap the benefits of a generally favorable economic environment (both at the local, county, state and national levels). Leading local economic indicators and associated variables point to property value growth in the 10% range. As the Village -is primarily a residential -based community, any improvement to the commercial districts will favorably benefit the Village on a dollar- for - dollar basis. For example, -vii- the Village began the multi- agency Second Avenue Revitalization Project. The project provides for a comprehensive rehabilitation of the business - district including new sidewalks, streetlights, curb & gutter work, landscaping and related capital improvements. It is anticipated that the project, estimated to cost in excess of $2,000,000 or approximately $300 per linear foot. The project is now scheduled for a Spring 2007 start. Already, the Village has seen considerable investments in the area with recent property sales, rehabilitation of the Village Cafe and the beginning of the capital improvement of the property located on the southwest corner of 95th Street at Northeast Second Avenue. The Administration has great expectation that this project will be the beginning of a strong fiscal commitment for enhanced business opportunities throughout the Village without adversely impacting the home -town feel so deeply entrenched by its residents. The Village has also seen continued interest in community relocation, home improvements, expansions and development projects. An additional 25 town home units were added to the tax roll during the fiscal year with an aggregate assessment of over $9 million. An additional $5,000,000 in new assessed value was added to the tax rolls during the year for individual construction projects throughout the community. Staff also believes that an additional $15 -$20 million in new properties will be added to the Village's roll relating to the new condominium projects currently under construction during FY'05. FUTURE OUTLOOK As with any bullish or favorable economy resulting from the positive influences of low interest, low unemployment rates, low costs of funds, and the anticipation of a favorable future, consumers are placed into a position of impunity with little concern about tomorrow. If history tells us anything, it demonstrates that for every period of prosperity, a period of austerity will rise up to some degree and for some time. Knowing that, we will operate with fiscal conservatism and look for possible revenue sources that do not hinge on property taxes, values or other local - source dollars. We continue to believe in the future of the Village and will work to maintain, improve and enhance the services provided along with our fiscal integrity in both the near -term as well as for the future. AWARDS and ACKNOWLEDGEMENTS The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the Finance Department. We would like to express our appreciation to Village Comptroller, Carolyn Modeste and other members of the department, each of whom dedicated numerous hours of hard work to produce a report of this magnitude. Credit must also be given to Mayor Davis and the members of the Village Council for their unfailing support for maintaining the highest standards of professionalism in the financial and operational management of Miami Shores-Village. And, finally, we would like to express our sincere thanks and appreciation to the management and staff of our auditing firm, Rachlin Cohen and Holtz LLP. Their dedication to ensuring the accuracy of the data presented to you in this report was greatly evident during the past several weeks. Respectfully submitted, MIAMI SHORES VILLAGE _ UQ1b564__ THOMAS J. BENTON M -c- A. MALATAK, CPA Chief Executive Officer C ia Financial Officer -viii- INTRODUCTORY SECTION MIANH SHORES VILLAGE, FLORIDA LIST OF ELECTED AND APPOINTED OFFICIALS SEPTEMBER 30, 2005 ELECTED OFFICIALS Mayor................................................................................................... ............................... Al Davis ViceMayor ..................................................................................... ...........................J.C. Rodriguez Council Member ........................................................................ ............................... Steve Loffredo CouncilMember .................................................. ............................... ............................Jim McCoy CouncilMember ................................................................................... ..........................Herta Holly APPOINTED OFFICIALS Village Manager .....................................:...... ............................... .........................Thomas J. Benton VillageClerk ................................................................................ ............................... Barbara Estep VillageAttorney ................................................ ............................... ........................Richard Sarafan DEPARTMENT HEADS BuildingDirector ...................................................................... ............................... Claudio Grande Chief Financial Officer ................................................. ............................... Mark A.. Malatak, CPA LibraryDirector ...................... ............................... ........... ............................... Elizabeth Esper Planning, Zoning & Code Enforcement Director ......................... ..........................David Dacquisto Chiefof Police .................................................... ............................... ..........................Kevin Lystad Public Works Director ..................................................................... ............................... Scott Davis RecreationDirector ................................................. ............................... ..........................Jerry Estop VILLAGE AUDITORS Rachlin Cohen & Holtz LLP Accountants ■ Advisors -ix- MIAMI SHORES VILLAGE, FLORIDA ORGANIZATION CHART SEPTEMBER 30, 2005 MAYOR & COUNCIL MAYOR - AL DAVIS VICE MAYOR - J.C. RODRIGUEZ COUNCILMAN - STEVE LOFFREDO COUNCILMAN - JIM MCCOY COUNCILWOMAN - HERTA HOLLY VILLAGE CLERK VILLAGE ATTORNEY BARBARA A. ESTEP RICHARD SARAFAN, ESQ. ACTING PUBLIC WORKS DIRECTOR SCOTT DAVIS RECREATION DIRECTOR JERRY ESTEP VILLAGE MANAGER THOMAS J. BENTON CHIEF FINANCIAL BUILDING CHIEF OF OFFICER DIRECTOR POLICE MARK A. MALATAK, CPA CLAUDIO GRANDE KEVIN LYSTAD PLANNING & ZONING / CODE DIRECTOR OF ENFORCEMENT DIRECTOR LIBRARY SERVICES DAVID DACQUISTO ELIZABETH ESPER -x- FINANCIAL SECTION REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Ra Accountants ® Advisors REPORT OF INDEPENDENT CERTIFIED P!aL -IC ACCOUNTANTS Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of Miami Shores Village, Florida (the Village), as of and for the year ended'September 30, 2005, which collectively comprise the Village's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Village's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Audit Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a. basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we express no such opinion. 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 Village, as of September 30, 2005, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States. In accordance with Government Auditing Standards, we have also issued our report dated February 17, 2006 on our consideration of the Village's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read -in conjunction with this report in considering the results of our audit. -1- Rachlin Cohen & Holtz LLP One Southeast Third Avenue ■ Tenth Floor ■ Miami, Florida 33131 o Phone 305.377.4228 ■ Fax 305.377.8331 ■ www.rachlin.com An Independent Member of Baker Tilly International M I A M I a F 0 R T L A U 0 E R 0 A L E ■ W E S T P A L M R E A C H r S T O A R T Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida Page Two Management's Discussion and Analysis and the required supplementary information on pages 3 to 13 and 51 to 56, respectively are not a required part of the basic financial statements, but are supplementary information required by accounting principles generally accepted in the United States. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Village's basic financial statements. The introductory section, combining and individual fund financial statements and schedules and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion thereon. Miami, Florida February 17, 2006 -2- unk 'dal Accountants o Advisors MANAGEMENT'S DISCUSSION AND ANALYSIS (MD &A) Management's Discussion and Analysis As management of Miami Shores Village, we offer readers of the Village's financial statements this narrative overview and analysis of the financial activities of Miami Shores Village for the fiscal year ended September 30, 2005. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages i to viii of this report. All amounts, unless otherwise indicated, are expressed in thousands of dollars. Financial Highlights ✓ The assets of Miami Shores Village exceeded liabilities at the close of the most recent fiscal year by $7,318,391 (net assets). Of this amount, $1,437,867 (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. ✓ As of the close of the current fiscal year, Miami Shores, Village's governmental funds reported combined ending fund balances of $3,862,912, a decrease of $4,365,078 in comparison with the prior fiscal year, resulting from the disbursements of funds to develop the Doctors Charter School of Miami Shores. ✓ At the end of the current fiscal year, unreserved fund balance for the general fund was $1,437,867 or 16.1% of total general fund expenditures. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the basic financial statements of Miami Shores Village, The Village's basic financial statements comprise three components: 1) government -wide financial statements; 2) individual fund financial statements; and, 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government -wide financial statements. The government -wide financial statements are designed to provide readers with a broad overview of the financial activity of Miami Shores Village, in a manner similar to a private - sector business. The Statement of Net Assets presents information on all of the assets and liabilities of Miami Shores Village, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Village is improving or deteriorating. The Statement of Activities presents information showing how the government's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). -3- Both of the government -wide financial statements distinguish functions of Miami Shores Village that. are principally supported by taxes and intergovernmental revenues (governmental activities) as well as other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities of Miami Shores Village include general government, public safety, streets and sidewalks, building, planning, zoning, code enforcement, recreation and leisure. The business -type activities of the Village include Sanitation and Storm water operations. The government -wide financial statements may be found on pages 14 —15 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Miami Shores Village, like other local governments, use fund accounting to ensure and demonstrate compliance with finance - related legal requirements. All of the funds of Miami Shores Village can be divided into three categories: governmental funds, proprietary or fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. However, unlike the government -wide financial statements, governmental fund financial statements focus on near -term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a goverhment's-near -term cash flow and financing requirements'. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government -wide financial statements. By doing so, readers may better understand the long -term impact of the government's near -term financing decisions and the impact on short term cash flow requirements to meet basic on -going operations. Both the governmental fund balance sheet and the governmental fluid statement of revenues, expenditures and changes in fund balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Miami Shores Village maintains 16 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balance for the general, excise tax, local option gas tax, hurricane, 2"d Ave. rehabilitation, charter high school construction and capital improvements funds, all of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non -major governmental funds is provided in the form of combining statements elsewhere in this report. Miami Shores Village adopts an annual appropriated budget for its general, special revenue, capital, enterprise and internal service funds. A budgetary comparison statement has been provided for the general fund to demonstrated compliance with this budget and corresponding state statutes. The basic governmental fund financial statement may be found on pages 16 —18 of this report. -4- Proprietary funds. Miami Shores Village maintains two proprietary or enterprise funds. Enterprise Funds are used to report the same functions presented as business -type activities in the government -wide financial statement. Miami Shores uses enterprise funds to account for its Sanitation and Stormwater Operations. Internal service funds provide for an accounting method whereby the organization can accumulate and allocate costs internally among the other user divisions. The Village uses internal service funds to account for its risk management costs as well as its' fleet operation. Because both of these services predominantly benefit governmental rather than business -type functions, they have been included within governmental activities in the government -wide financial statements. Proprietary funds provide the same type of information as the government -wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Village's Sanitation and Stormwater operations, both of which are considered major funds. Additionally, the Village segregates the financial reporting of both internal service funds to better distinguish the costs of each function. The basic proprietary fund financial statements may be found on pages 19 — 21 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government -wide financial statements because the resources of those funds are not available to support the Village's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements may be found on pages 22 — 23 of this report. Notes to the financial statements. The notes provide additional information that is essential to fully understand the data provided in the government -wide and fund financial statements. The notes to the financial statements may be found on pages 24 — 50 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the progress in funding its obligations to provide pension benefits to the employees of Miami Shores Village, as well as budgetary comparison. Required supplementary information may be found on pages 51 — 56 of this report. The combining statements referred to earlier in connection with non -major governmental funds and internal service funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules may be found on pages 57 — 68 of this report. Government -wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of Miami Shores Village, assets exceeded liabilities by $7,318,391 at the close of the most recent reporting year. -5- By far, the largest component of Miami Shores' net assets (62.3 %) reflects its investments in capital assets (e.g., land, buildings, machinery, and equipment); less any related debt used to acquire those assets that is still outstanding. Miami Shores uses these capital assets to provide services. to citizens, consequently these assets are not available for future spending. Although Miami Shores' investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. MIAMI SHORES VILLAGE Net Assets For the current •reporting year, no portion of the Village's net assets is subject to external restrictions on how they may be used. Governmental activities. Financial activities for the fiscal year are reported below. Key indicators, including revenues and expenditures by category are presented herein for review: -6- 2005 2004 Governmental Business -type Governmental Business -type Activities Activities Total Activities Activities Total Current and other assets $ 12,917,131 $ 1,448,710 $ 14,365,841 $ 6,853,010 $ 856,252 $ 7,709,262 Capital assets 5,142,400 704,574 5,846,974 8,182,242 1,036 „842 9,219,084 Total assets 18,059,531 2,153,284 20,212,815 15,4351252 1,,893,094 16,928,346 Long -term liabilities outstanding 9,668,126 46,137 9,714,263 9,998,983 - 9,998,983 Other liabilities 2,298447 881,714 3,180,161 971,550 952,034 1,923,584 Total liabilities 11,966,573 927,851 12,894,424 10,970,533 952,034 11,922,567 Invested in capital assets, net of related debt 4,325,823 704,574 5,030,397 2,055,725 1,036,842 3,092,567 Restricted 3,627,263 - 3,627,263 6,897,235 - 6,897,235 Unrestricted (1,860,128) 520,859 (1,339,269) (4,888,241) (95,782) (4,984,023) Total net assets $ 6,092,958 $ 1,225,433 $ 7,318,391 $ 4,064,719 $ 941,060 $ 5,005,779 For the current •reporting year, no portion of the Village's net assets is subject to external restrictions on how they may be used. Governmental activities. Financial activities for the fiscal year are reported below. Key indicators, including revenues and expenditures by category are presented herein for review: -6- Revenues: Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Property taxes Other taxes Grants and contributions not restricted to specific programs Other Total revenues Expenses: General government Public safety Highways / streets Sanitation / stormwater Culture and recreation Interest on long -term debt Total expenses Increase (decrease) in net assets before transfers Transfers Increase (decrease) in net assets Net assets, October 1 Net assets, September 30 Governmental ,Activities Business -type Activities Total 2005 2004 2005 2004 2005 2004 $ 2,215,283 $1,558,571 $ 2,876,192 $2,009,901 $ 5,091,475 $3,568,472 697,160 89,545 - - 697,160 89,545 2,111,291 - - 2,111,291 - 5,372,790 5,398,417 - 5,372,790 5,398,417 2,145,784 1,213,775 - 2,145,784 1,213,775 1,442,274 - - 1,442,274 1,835,478 327,587 (134,958) 1,477 1,700,520 329,064 14,377,786 10,030,169 2,741,234 2,011,378 17,119,020 12,041,547 $ 3,330,873 $3,517,307 $ - $ - $ 3,330,873 $3,517,307 4,144,837 3,699,805 - - 4,144,837 3,699,805 2,133,108 1,409,982 - - 2,133,108 1,409,982 - - 2,334,876 1,635,994 2,334,876 1,635,994 2,317,936 2,488,378 - - 2,317,936 2,488,378 544,778 186,174 - - 544,778 186,174 12,471,532 11,301,646 2,334,876 1,635,994 14,806,408 12,937,640 1,906,254 (1,271,477) 406,358 375,384 2,312,612 (896,093) 210,000 195,834 (210,000) 1( 95,834) - 2,116,254 (1,075,643) 196,358 179,550 2,312,612 (896,093) 4,064,719 5,140,362 _ 941,060 761,510 5,005,779 5,901,872 $ 6,180,973 $4,064,719 $ 1,137,418 $ 941,060 $ 7,318,39I $ 5,005,779 For FY 2005, property tax revenues remained relatively constant with a 0.4% decrease or $25,627 less than the $5,398,417 recorded in the previous fiscal year. This decrease is principally associated with the volume of delinquent tax settlements which occurred during FY 2004. For this reporting period, tax proceeds more accurately reflect the property tax collections. -7- &pense & Program Revenues - Governmental Activities 8eOen,316 VOCLISes Thousands $12,p00 $1p�000 $a,p00 $6 +p00 $4,p00 $2,p00 ® General government M Public safety ® highways / Streets ® Sanitation a Economic development G Culture & recreation 17 Interest on long -term debt ® Total Revenues by Source — Governmental Activities .property, taxes 36% capital grants 15% -8- grants & contributions not restricted 10% other 4% charges for services 15% other taxes 15% operating grants 5% Business -type activities. Business -type activities increased the Village's net assets by $406,358 generated by controlling operating costs. Key elements related to this increase include the following: ✓ Less than expected dumping fee costs ✓ Productivity improvements demonstrated by activity employees. Financial Analysis of the Government's Funds As noted earlier, Miami Shores Village uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental funds. The focus of the governmental funds for Miami Shores Village is to provide information on near -term inflows, outflows and balances of spendable resources. Such information is useful in assessing the Village's financing requirements. In particular, the unreserved fiind balance may serve as a useful indicator of the governments net resources available for spending at the end of a fiscal year. Expenses and Program Revenues — Business -type Activities $2,000,000 $1,500,000f r '' $1,000;000 $500,000 Sanitation Expenses Storm Water Program revenues As of the end of the current fiscal year, the governmental funds for Miami Shores Village reported combined ending fund balances of $6,092,958, a $2,028,239 increase over FY 2004. Of this amount, $1,437,867 reflects unreserved fund balance of the general fund, which is available for spending "at the governmetit's discretion. The remainder of the fund balance is reserved or designated to indicate that it is not available for new spending as those dollars have already been committed to: 1) liquidate contracts or encumbered fiscal obligations (outstanding purchase orders including costs related to the Charter School Construction Project) valued at $1,036,502; 2) reserved $137,053 for prepaid assets. The deficit is a result of timing as the Village refinanced and closed a $3.5 million, 10 -year term note to fund the capital project deficits, refinance the 2"a Avenue Project and fund the construction of the Fleet Maintenance Facility. The general fund is the primary operating fund of the Village. At the end of the current fiscal year, the unreserved fund balance for the general fund was $1,437,867. As a measure of the general fund's liquidity, it may be useful to compare both the unreserved and total fund balances -9- to total fund expenditures. Unreserved fund balance represents 10% of the total general fund expenditures, while total fund balance represents 11% of that same amount. The value of the Village's fund balance decreased by $416,160 during the fiscal year. Key factors associated with this reduction are as follows: • Increased property values and corresponding tax revenues (exclusive of delinquent accounts) • A' larger than expected level of attrition in general fund employees resulting in salary savings • Transferring risk exposures from self insurance to first dollar coverage (internal service charges) Proprietary funds. The Village's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. • Unrestricted net assets of the Sanitation Fund at the end of the year totaled $987,521 a $232,355 increase in net asset values. • Unrestricted net assets of the Stormwater Fund at the end of the year totaled $237,912, a $52,018 increase in net asset values. General Fund Budgetary Highlights The Village adopts annual budgets by fund, department and line item in compliance with Florida State Statute Section 200.065 (commonly referred to as the Truth -in N illage Legislation). The law. requires. municipal organizations to prepare and adopt annual operating budgets for the General, Special Revenue and Debt Service Funds following uniform time frames related to property tax levies. The balanced budgets may be revised throughout the year. The Village's code allows for department level budget transfers without council approval; however, department and fund total changes require Council- approved budget amendments adopted by resolution. The Village's policy is to adopt the budget following the second public hearing of each fiscal year, held in September for an October 1 st year. The Village has also adopted a policy which provides for the reappropriation of reserved fund balance for encumbrances and prepaid assets. This amendment is always adopted as the first budget amendment of each fiscal year and is normally presented at the first meeting in November of each fiscal year. Additional budget amendments may be presented to council at any time during the fiscal year. For FY 2005, the difference between the adopted and amended budgets relate to the following: • Budget Amendment #1 provides for the reappropriation of reserved fund equity for encumbrance and prepaid asset funding ($267,850) • Budget Amendment #2 provided for an increase of $428,000 relating to the correction of understated revenue estimates in addition to changes to the Building Department, Unclassified Accounts and Risk Funds. -10- Capital Asset and Debt Administration Capital Assets. Miami Shores Village's investment in capital assets for its governmental and business -type activities as of September 30, 2005 amounts to $13,621,705 (net of accumulated depreciation). This investment in capital assets includes Village -owned buildings, equipment and other infrastructure (streets, sidewalks, easements, right -of- ways). The total capital asset increase for the year was 72 %. The value net value of capital investments EXCLUDES the cost of the Doctors' Charter School of Miami Shores construction project reporting in progress at year end. Major capital asset events during the current year included the following: ✓ Continued enhancement of the Village's information networks including computer replacements, enhancements and related equipment. ✓ Sidewalk replacement and street repaving Village -wide. ✓ Stormwater drainage enhancements. ✓ Village -wide landscape enhancements. MIAMI SHORES VILLAGE Capital Assets (Net of depreciation) Additional information on Miami Shores' capital assets may be found in Note 6 on Page 37 of this report. Long -term debt. At the end of the fiscal year, Miami Shores Village had total bonded debt outstanding of $9,145,813. Of this amount. $2,845,000/represents the balance outstanding on the General Obligation Bond, Series 1999 related to the Miami Shores Aquatics Facility; $4,905,000 represents the outstanding balance due on the General Obligation Bond Series 2004 to construct the Doctors' Charter School of Miami Shores; $788,046 represents the principal balance outstanding for the Second Avenue Revitalization program (note the outstanding balance was refinanced in the $3.5 Million term note); $98,000 reflects the balance outstanding from the consolidation and refinancing of the previously incurred debt for the acquisition and renovation of the Police Headquarters; and, the outstanding seven year line of credit exercised during Fall 2003 ($469,023). -11- 2005 2004 Governmental Business -type Governmental Business -type Classification Activities Activities Total Activities Activities Total Land $ 718,531 $ - $ 718,531 $ 718,531 $ $ 718,531 Building and system 8,667,944 704,574 9,372,518 2,053,556 2,053,556 Improvements other than buildings 1,393,608 - 1,393,608 1,429,564 - 1,429,564 Machinery and equipment 1,385,894 1,385,894 1,336,393 1,036,842 2,373,235 Infrastructure - - - - - Construction in progress 751,154 751,154 657,483 - 657,483 Total $ 12,917,131 $ 704,574 $ 13,621,705 $ 6,1951527 $ 1,036,842 $ 7,232,369 Additional information on Miami Shores' capital assets may be found in Note 6 on Page 37 of this report. Long -term debt. At the end of the fiscal year, Miami Shores Village had total bonded debt outstanding of $9,145,813. Of this amount. $2,845,000/represents the balance outstanding on the General Obligation Bond, Series 1999 related to the Miami Shores Aquatics Facility; $4,905,000 represents the outstanding balance due on the General Obligation Bond Series 2004 to construct the Doctors' Charter School of Miami Shores; $788,046 represents the principal balance outstanding for the Second Avenue Revitalization program (note the outstanding balance was refinanced in the $3.5 Million term note); $98,000 reflects the balance outstanding from the consolidation and refinancing of the previously incurred debt for the acquisition and renovation of the Police Headquarters; and, the outstanding seven year line of credit exercised during Fall 2003 ($469,023). -11- Miami Shores Villages' total debt increased $240,468 during the current fiscal year. The Village maintains an MBIA- insured rating of AAA for both S &P and Fitch Rating. Additionally state statute limits the amount of general obligation debt into which a governmental entity may be obligated for a threshold of $71,158,204 which continues to exceed the value of all outstanding debt as of the September 30, 2005. Additional information on the Village's long -term debt may be found in Note 8 on Pages 39 -41 of this report. Economic factors and Next Year's Budzets and bates Miami Shores Village is a residential, single - family community. As such, standard economic indicators used to determine the overall health of a community are slightly different for Miami Shores. Since the Village's "business community" is restricted to a four -block area on Second Avenue and isolated pockets of business entities on Biscayne Boulevard, the Village must monitor property values and other residentially- related trends to determine the health and vitality of the'community. During the reporting year, Miami Shores found strong property value increases for the fourth consecutive year. Many of the new residents to the Village have relocated from the western regions of the County and enjoy the Village's close proximity to Downtown Miami and the adjacent business areas while still having a suburban atmosphere. High recreational activities, including the Village's first -class aquatics facility, support the residents' requirement for high standards and outstanding recreation and leisure activities. This, along with its own public safety department, provides a higher standard of living than that which is found in surrounding municipalities. Leading indicators continue to reflect stability and upward movement of property values for the Village. With the anticipated investments in Second Avenue, the Charter High school and additional infrastructure enhancement efforts as identified by the Village's comprehensive five - year planning cycle, it is anticipated that future financing needs will be met; however, on a cautionary sidebar, it must be recognized that other cost factors will have adverse impacts on the Village's overall financial condition, i.e., health and risk - related insurances, pension and other benefits and future actions lshould be taken with these underlying issues still pending. -12- MIAMI SHORES VILLAGE Outstanding Debt General Obligation, Revenues, Bonds and Other Financing Instruments 2005 2004 Governmental Business -type Governmental Business -type Classification Activities Activities Total Activities Activities Total General obligation bonds $ 7,750,000 $ - $ 7,750,000 $ 7,900,413 $ - $7,900,413 Special assessment debt 788,046 - 788,046 871,868 - 871,868 Revenue bonds - - - - Other debt 607,767 - 607,767 614,000 - 614,000 Total $ 9,145,813 $ $ 9,145,813 $ 9,386,281 $ - $9,386,281 Miami Shores Villages' total debt increased $240,468 during the current fiscal year. The Village maintains an MBIA- insured rating of AAA for both S &P and Fitch Rating. Additionally state statute limits the amount of general obligation debt into which a governmental entity may be obligated for a threshold of $71,158,204 which continues to exceed the value of all outstanding debt as of the September 30, 2005. Additional information on the Village's long -term debt may be found in Note 8 on Pages 39 -41 of this report. Economic factors and Next Year's Budzets and bates Miami Shores Village is a residential, single - family community. As such, standard economic indicators used to determine the overall health of a community are slightly different for Miami Shores. Since the Village's "business community" is restricted to a four -block area on Second Avenue and isolated pockets of business entities on Biscayne Boulevard, the Village must monitor property values and other residentially- related trends to determine the health and vitality of the'community. During the reporting year, Miami Shores found strong property value increases for the fourth consecutive year. Many of the new residents to the Village have relocated from the western regions of the County and enjoy the Village's close proximity to Downtown Miami and the adjacent business areas while still having a suburban atmosphere. High recreational activities, including the Village's first -class aquatics facility, support the residents' requirement for high standards and outstanding recreation and leisure activities. This, along with its own public safety department, provides a higher standard of living than that which is found in surrounding municipalities. Leading indicators continue to reflect stability and upward movement of property values for the Village. With the anticipated investments in Second Avenue, the Charter High school and additional infrastructure enhancement efforts as identified by the Village's comprehensive five - year planning cycle, it is anticipated that future financing needs will be met; however, on a cautionary sidebar, it must be recognized that other cost factors will have adverse impacts on the Village's overall financial condition, i.e., health and risk - related insurances, pension and other benefits and future actions lshould be taken with these underlying issues still pending. -12- Requests for In formation This financial report is designed to provide a general overview of the financial condition of Miami Shores Village. Questions concerning any of the information presented in this report or requests for additional financial information should be directed to the Village's Chief Financial Officer, Mark A. Malatak, CPA at: MIAMI SHORES VILLAGE Finance Department 10050 Northeast Second Avenue Miami Shores, Florida 33138 -2382 -13- THIS PAGE INTENTIONALLY LEFT BLANK BASIC FINANCIAL STATEMENTS MIAMI SHORES VILLAGE, FLORIDA STATEMENT OF NET ASSETS SEPTEMBER 30, 2005 0 ASSETS Cash and cash equivalents Accounts receivable, net Due from other governments Deferred charges Prepaid items. Internal balances Inventories Net pension asset Capital assets not being depreciated Capital assets being depreciated, net Total assets LIABILITIES Accounts payable and accrued liabilities Unearned revenues Accrued interest payable Noncurrent liabilities: Due within one year Due in more than one year Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Law enforcement Debt service Transportation Construction Unrestricted (deficit) Total net assets Business - Governmental type Activities Activities Total $ 3,813,202 $ 188,081 $ 4,001,283 1,249,453 694,148 1,943,601 286,291 - 286,291 85,482 - 85,482 160,626 - 160,626 (527,546) 527,546 - 59,330 38,935 98,265 15,562 - 15,562 1,469,685 - 1,469,685 11,447,446 704,574 12,152,020 18,059,531 2,153,284 20,212,815 1,330,957 46,792 1,377,749 119,461 819,543 939,004 112,484 - 112,484 735,545 15,379 750,924 9,668,126 46,137 9,714,263 11,966,573 927,851 12,894,424 4,325,823 704,574 5,030,397 195,001 - 195,001 301,264 - 301,264 1,441,937 - 1,441,937 1,689,061 - 1,689,061 1,860,128 520,859 1,339,269) $ 6,092,958 $ 1,225,433 $ 7,318,391 See notes to basic financial statements. -14- Functions/Programs Governmental activities: General government Public safety Public works Culture and recreation Interest on long -term debt Total governmental activities Business -type activities: Sanitation Stormwater Total business -type activities Total MIAMI SHORES VILLAGE, FLORIDA STATEMENT OF ACTIVITIES FISCAL YEAR ENDED SEPTEMBER 30, 2005 Program Revenues Charges Operating Capital for Grants and Grants and Expenses Services Contributions Contributions $ 3,330,873 $ 1,655,350 $ 675,579 1 2,000,000 4,144,837 274,322 - - 2,133,108 285,611 - 111,291 2,317,936 - 21,581 - 544,778 - - _ 12,471,532 2,215,283 697,160 111,291 Net (Expense) Revenue and Changes in Net Assets Business - Governmental type Activities Activities Total $ 1,000,056 $ - $ 1,000,056 (3,870,515) - (3,870,515) (1,736,206) - (1,736,206) (2,296,355) - (2,296,355) (544,778) - 544,778 __E,447,198) - 7,447,798 2,201,480 2,666,340 - - - 464,860 464,860 133,396 209,852 - - - 76,456 76,456 2,334,876 2,876,192 - - - 541,316 541,316 S 14,806,408 S 5,091,475 $ 697,160 $ 2,111,291 (7,447,798) 541,316 6,906,482) General revenues: Property taxes Public services tax Other taxes Intergovernmental revenues - unrestricted Miscellaneous Interest earnings - unrestricted Gain on sale of capital assets Transfers Total general revenues and transfers Change in net assets Net assets - beginning, as previously reported Prior period adjustment (Note 2a) Net assets - beginning, as restated Net assets - ending See notes to basic financial statements. -15- 5,372,790 - 5,372,790 1,831,958 - 1,831,958 313,826 - 313,826 1,169,950 - 1,169,950 239,325 - 239,325 189,699 8,427 198,126 1,651 66,615 68,266 210,000 210,000 - 9,329,199 134,958 9,194,241 1,881,401 406,358 2,287,759 4,064,719 941,061 5,005,780 146,838 (121,986) 24,852 4,211,557 819,075 5,030,632 $ 6,092,958 $ 1,225,433 $ 7,318,391 MIAMI SHORES VILLAGE, FLORID A BALANCESAEST GOVE UZAENTAL FMS SUTENMM 30, 2005 See notes to basic financial statements_ -16- Local Charter Other Total Excise Option 2nd Ave High School Capital Governmental Governmental General Tax Gas Tax Hurricane Rehabilitation Construction Improvements Funds Funds ASSETS Cash and cash equivalents $ 96,893 S - $ 61,025 $ - $ 945,532 $ 837,889 S 287 $ 745,694 $ 2,687320 Accounts receivable, net 275 ,995 245,083 22,947 441,489 - - - 115,150 1,100,664 Due from other funds 1,554,525 - 870,597 - 111,291 778,376 3 ,514,789 Due from other governments - - - 286,291 286,291 Prepaiditems 23,944 - 16,021 5,340 - - 91,748 137,053 luventories 31,570 31 ,570 Total assets $ 1,982 ,927 $ 245,083 $ 970 ,590 $ 441,489 $ 950,872 $ 837,889 $ 111,578 $ 2,017,259 $ 7 ,557,687 LIABILITIES AND FUND BALANCES (DfiFICITS) Liabilities: Accounts payable and accrued liabilities $ 258,152 5 - $ $ 230,248 $ - $ 498,930 S $ 256,322 $ 1,243,652 Due to other funds _ 235,391 69,793 - 1,188,213 838,265 2331,662 Unearned revenues 118,411 - 1,050 119,461 Total liabilities 376 ,563 465,639 _� 498,930 1,188,213 1,095,637 3,694,775 Pundbalauces (deficits): Reserved for: Prepaiditems 23,944 16,021 - 5,340 - 91,748 137,053 Encumbrances 112,983 6,000 3,950 - 817,843 59,697 36,029 1,036,502 Inventories 31,570 _ - - - 31 ,570 Law enforcement - - - 174,550 174 ,550 Debt service - - - - 335,380 335,380 Transportation - 948,569 - - 454,824 1,403,393 Unreserved and undesignated, reported in: General fund 1,437,867 - - - 1,437,867 Special revenue fmds - 245,083 - (28,100) - - 80;600 297 ,583 Capital projects finds - 875,739 (478,884) (1,136332) (251 ,509) (990 ,586) Totalfmndbalanem (deficits) 16, 06364 v 245,083 97�. 0,590 _ (24,150) 881,079 338,959 (1,076,635) 921,622 3,862,912 Total liabilities and fund balances (deficits) S 1,982$27 S 245,083 $ 970,590 S +941,489 S 950,872 S 837,889 S 111 ,578 $ 2,017,259 Amounts reported for govemmental activities in the statement ofnet assets are different because: Capital assets (excluding internal service fiords) used in governmental activities are not fnamcial resources and, therefore, are not reported in the funds. 12 ,598 ,537 Unamortized bond issuance costs are not available to pay for cuuentperiod expenditures and therefore are not reported in the governmental fiords Long -term liabilities, including bands payable, are not due and payable in the current period and therefore are not reported in the {ands. 85,482 Bonds and notes payable S (8,676,790) Claims payable (194,030) Compensated absences (524,220) Accraed interest payable (112-484) (9 ,507,524) Net assets of intemal service fads are not reported in the fiords (962,011) Net p erosion asset is not reported in the finds 15,5562 62 Net assets of governmental activities $ 6,092,958 See notes to basic financial statements_ -16- MIAIVII SHORES VILLAGE, FLORIDA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FISCAL YEAR ENDED SEPTEMBER 30, 2005 See notes to basic financial statements -17- Local Charter Other Total Excise Option 2nd Ave High School Capital Governmental Governmental General ax T . Gas Tax Hurricane Rehabilitation Constriction Improvements Funds Funds Revenues: Property taxes $ 4,723,963 $ - $ - $ - $ - $ - $ - $ 648,827 $ 5,372,790 Public service taxes - 1,831,958 - - 1,831,958 Othertaxes - - 285,611 313,826 599,437 Licenses and permits 790,257 - - - 790,257 Intergovernmental revenues 994,950 435,546 326,324 1,756,820 Charges for services 865,093 - - - 865,093 Fines and forfeitures 264,742 - - - 264,742 Miscellaneous 190,978 - 6,193 - 51,734 248,905 Interest 36,381 5,265 18,296 88,094 2,510 16,169 166,715 Contributions - - - 2,000,000 - 221,581 2,221,581 Total revenues 7,866,364 1,831,958 290,876 435,546 18,296 2,0943287 2,510 1,578,461 14,118,298 Expenditures: Current: General government 2,101,910 - - 447,813 - 10,997/ - 411,406 2,972,126 Public safety 3,730,673 - - - - - 20,803 3,751,476 Public works 1,533,867 - 162,791 100,506 1,797,164 Culture and recreation 1,869,175 - - 207 1,869,382 Capital outlay 57,742 - - 6,331,245/ 567,363' 233,611 7,189,961 Debt service: Principal 34,800 - 62,867 20,955 - 350,000 241,200 709,822 Interest 761 - 21,191 - 7,297 - 8,101 366,095 403,445 Total expenditures 9,328,928 - 246,849 447,813 28,252 6,342,242 925,464 1,373,828 18,693,376 Excess (deficiency) of revenues over expenditures 1,462,564 1,831,958 44,027 (12,267 (9,956) (4,247,955) (922,954} 204,633 (4,575,078) Other financing sources (uses): Transfers in 1,991,595 - - 38,332 132;500 112,811 2,275,2381/ Transfers out 112,871 1,781,59 8,332 - - - 132,500 2,465 298 Total other financing sources (uses) 1,878,724 1,781 59 38 332 - 38,332 - 132,500 (19,629) 210 -Q00 Net change in fund balances 426,160 50,363 5,695 (12,267) 28,376 (4,247,955) (790,454) 185,004 (4,365,079) Fund balances (deficits), beginning 1,190,204 194,720 964,895 11,883 852,703 4,586,914 286,181) 736,618 8,227,990 Fund balances (deficits), ending $ 1,606,364 $ 245,083 $ 970,590 $ 24,150 $ 881,079 $ 338,959 $ (1,076,635) $ 921,622 5 3,862,912 See notes to basic financial statements -17- MIAMI SHORES VILLAGE, FLORIDA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FISCAL YEAR ENDED SEPTEMBER 30, 2005 Amounts reported for governmental activities in the statement of activities (Page 15) are different because: Net change in fund balances - total governmental funds (Page 17) Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. The details of the difference are as follows: Capital outlay $ 6,803,255 Depreciation expense (excluding depreciation on internal service funds) (7493996) The issuance of long -term debt (e.g., bonds) provides current financial resources to governmental funds, while the repayment of the principal of long -term debt consumes the current financial resources of governmental funds. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. Principal payments: General obligation bonds $ 160,000 Line of credit 350,000 Revenue notes payable 199,822 709,822 Amortization of issuance costs, premiums and discounts (3,566) 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. The details of the difference are as follows: Allocation of internal service fund's net loss Compensated absences Accrued interest payable Net pension asset . Change in net assets of governmental activities (Page 15) See notes to basic financial statements. -18- $ (4,365,078) 6,053,259 706,256 (116,908) (282,639) (112,484) (1,005) $ 1,881,401 MIAMI SFIOR is VILLAGE, FLORIDA STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2005 See notes to basic financial statements. -19- Business -type Activities - Enterprise Funds Governmental Stormwater Ac6vi6e.s - Utility Internal (a Nonmaj or Service Sanitation Fund ) Totals Funds ASSETS Current assets: Cash and cash equivalents $ 121,028 $ 67,053 $ 188,081 $ 1,125,882 Accounts receivable, net 657,435 36,713 694,148 148,789 Due from other funds 519,096 137,264 656,360 229,205 Prepaid items - - - 23,573 Inventories 38,935 - 38,935 27,760 Total current assets 1,336,494 241,030 1,577,524 1,555,209 Noncurrent assets: Capital assets not being depreciated - - - 7,127 Capital assets being depreciated, net 581,963 122,611 704,574 311,467 Total noncurrent assets 581,963 122,611 704,574 318,594 Total assets 1,918,457 363,641 2,282,098 1,873,803 LIABILITIES Liabilities: Current liabilities: Accounts payable and accrued liabilities 4S,874 918 46,792 87,305 Due to other funds 53,018 75,796 128,814 1,739,878 Unearned revenue 773,617 45,926 819,543 - Compensated absences 14,607 772 15,379 8,236 Notes payable - - - 42,960 Claims payable - - - 139 52.8 Total current liabilities 887,116 123,412 1,010,528 2,017,907 Non - current liabilities: Compensated absences 43,820 2,317 46,137 24,707 Notes payable - - - 426,063 Claims payable - - - 367,137 Total non - current liabilities 43,820 2,317 46,137 817,907 Total liabilities 930,936 125,729 1,056,665 2,835,814 NET ASSETS (DEFICIT) Invested in capital assets, net of related debt 581,963 122,611 704,574 318,594 Restricted for construction - - - 469,023 Unrestricted (deficit) 405,558 115,301 520,859 (1,749,628 Total net assets (deficit) $ 987,521 $ 237,912 $ 1,225,433 $ (962,011) See notes to basic financial statements. -19- MIAMI SHORES VILLAGE, FLORIDA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUNDS FISCAL YEAR ENDED SEPTEMBER 30, 2005 Charges for services Operating expenses: Administrative and general Personnel expenses Depreciation Contractual services Insurance premiums Insurance claims Total operating expenses Operating income (loss) Non - operating income (expense): Crain on sale of capital assets Interest income Interest expense Total non - operating income (expense) Income (foss) before transfers Transfers out Change in net assets Net assets (deficit), beginning, as previously reported Prior period adjustment (Note 2a) Net assets (deficit), beginning, as restated Net assets (deficit), ending Business -type Activities - 29,789 Enterprise Funds Governmental Stormwater Activities - Utility Internal (a Nonmajor Service Sanitation Ftmd Totals Fiords $ 2,666,340 $ 209,852 $ 2,876,192 $ 1,835,460 767,864 29,789 797,653 795,490 708,883 40,040 748,923 210,212 136,448 21,206 157,654 135,976 588,285 42,361 630,646 - - - 630,366 _ - - - 179,494 2,201,480 133,396 2,334,876 1,951,538 464,860 76,456 541,316 116,078 66,615 - 66,615 1,651 7,866 561 8,427 22,984 - - - (25,465) 74,481 561 75,042 (830) 539,341 77,017 616,358 (116,908) 185,000 25,000 210,000 354,341 52,017 406,358 (116,908 755,166 185,895 941,061 (991,941) (121,986) - 121,986 146,838 633,180 185,895 819,075 (845,103) $ 987,521 $ 237,912 $ 1,225,433 $ (962,011) See notes to basic financial statements. -20- MIAMI SHORES VILLAGE, FLORIDA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FISCAL YEAR ENDED SEPTEMBER 30, 2005 Cash flows from operating activities: Cash received from customers, governments and other funds Cash paid to suppliers Cash paid to employees Net cash provided (used) by operating activities Cash flows from non - capital financing activities: Proceeds from noncapital debt Principal paid on noncapital debt Interest paid on noncapital debt Transfers out Net cash used by noncapital financing activities Cash flows from capital and related financing activities: Proceeds from capital debt Principal paid on capital debt Interest paid on capital debt Proceeds from sale of capital assets Acquisition of capital assets Net cash provided by capital and related financing activities Cash flows from investing activities: Interest received Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning Cash and cash equivalents, ending Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation Changes in operating assets and liabilities: Accounts receivable Due from other funds Prepaid items Inventories Accounts payable and accrued liabilities Due to other funds Unearned revenues Compensated absences Net cash provided (used) by operating activities Business -type Activities - 21,206 Enterprise Funds Governmental Stormwater Activities - Utility Internal (a Nonmajor Service Sanitation Fund ) Totals Funds $ 2,576,766 $ 217,812 $ 2,794,578 $ 2,780,612 (2,118,452) (216,617) (2,335,069) (1,567,460) _(738,287) (39,914) (778,201] (233,265) (279,973) (38,719) (318,692) 979,887 675,000 (675,000) (11,142) (185,000) (25,000) X0,000) - (185,000] (25,000) 210,000) (11,142) 500,000 - (30,977) - - - (14,323) 180,971 - 180,971 1,651 (61,729) (61,729) - 119,242 21,206 119,242 456,351 (98,300) 7,840 (90,460) 7,866 561 8,427 22,984 (337,865) (63,158) (401,023) 1,448,080 458,893 130,211 589,104 (322,198) $ 121,028 $ 67,053 $ 188,081 $ 1,125,882 $ 464,860 $ 76,456 $ 541,316 $ (116,078) 136,448 21,206 157,654 135,976 (98,300) 7,840 (90,460) (11,428) (519,096) (137,264) (656,360) (140,753) - - (1I,323) (8,208) (8,208) 4,273 (33,272) (8,664) (41,936) 45,871 (238,453) - (238,453) 1,097,333 8,726 120 8,846 - 7,322 1,587 8,909 (23,984) $ 279,973 $ (38,719 $ 318,692 $ 979,887 See notes to basic financial statements, -21- MIAMI SHORES VILLAGE+;, FLORIDA STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS SEPTEMBER 30, 2005 ASSETS Pension Trust Funds A enc Cash and cash equivalents $ 562,185 $ Cash held with trustee - 98,512 Investments: Common stocks 11,945,690 - Corporate bonds 2,624,353 - U.S. obligations 2,653,942 - U.S. Federal agencies 720,797 - Accrued interest receivable 62,464 - Other assets 103 - Total assets 18,569,534 98,512 LIABILITIES AND NET PLAN ASSETS Liabilities: Accounts payable 77,715 - DROP liability 262,450 - Deposits held in trust - 98,512 Total liabilities 340,165 98,512 Net assets held in trust for pension benefits $ 18,229,369 $ - See notes to basic financial statements. -22- MIAMI SHORES VILLAGE, FLORIDA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS FISCAL YEAR ENDED SEPTEMBER 30, 2005 ADDITIONS Contributions: City . Employees State Other receipts Total contributions Investment income: Net appreciation in fair value of investments Interest Dividends Less investment expenses Net investment income Total additions DEDUCTIONS Pension benefits Refunds Professional services Total deductions Change in net assets Net assets held in trust for pension benefits, beginning Net assets held in trust for pension benefits, ending See notes to basic financial statements. -23- Pension Trust Funds $ 249,329 292,478 68,063 3,329 613,199 1,556,130 264,544 192,775 (49,064) 1,964,385 2,577,584 814,612 134,327 32,069 981,008 1,596,576 16,632,793 $ 18,229,369 NOTES TO BASIC FINANCIAL STATEMENTS MIAMI ,SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2005 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Miami Shores Village, Florida (the Village) was incorporated in 1931 and is a political subdivision of the State of Florida located in northeastern Miami -Dade County. The Village operates under a Council- Manager form of government, with the legislative function being vested in a five - member council. The Village Council is governed by the Village Charter and by state and local laws and regulations. The Village Council is responsible for establishment and adoption of policy. The Village provides the following full range of municipal services authorized by its charter: public safety, streets, sanitation, stormwater, cultural and recreational activities, public improvements, planning and zoning, and general administrative services. The basic financial statements of the Village have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard - setting body for governmental accounting and financial reporting. The more significant of the Village's accounting policies are described below. a. Financial Reporting Entity The financial statements were prepared in accordance with government accounting standards which establishes standards for defining and reporting on the financial reporting entity. The definition of the financial reporting entity is based upon the concept that elected officials are accountable to their constituents for their actions. One of the objectives of financial reporting is to provide users of financial statements with a basis for assessing the accountability of the elected officials. The financial reporting entity consists of the primary government, organizations for which the primary government is financially accountable, and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The Village is financially accountable for a component unit if it appoints a voting majority of the organization's governing board and it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on the Village. The Village does not have any component units that meet the definition disclosed above. b. Government -wide and Fund Financial Statements The government -wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the non - fiduciary activities of the Village. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. -24- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 1, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) b. Government -wide and Fund Financial Statements (Continued) 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 clearly identifiable with a specific function or segment. Program revenues include (1) 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 operational 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 financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government -wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. All remaining nonmajor governmental funds are aggregated and reported as other governmental funds. c. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. The agency fund has no measurement focus. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental 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. For this purpose, the Village considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise fees, utility taxes, sales taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the Village. -25- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) c. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued) The Village reports the following major governmental funds: General Fund — This is the Village's primary operating fund. It accounts for all financial resources of the Village, except those required to be accounted for in another fund. Resources are derived primarily from property taxes, franchise fees and utility taxes, charges for services and state shared revenues. Expenditures are incurred to provide general government, public safety, public works and community services. Excise Tax Fund — This fund records revenues received by the Village for contractually - adopted franchise fee agreements and corresponding public service or utility taxes. The receipts of these funds are used to subordinate the Village's General Obligation Bond Series 1999 should insufficient debt service revenues be received from ad valorem levies. Surplus proceeds are then transferred out of this fund and into the General Fund for operating purposes. Local Option Gas Tax Fund — This fund accounts for the revenues form the six cents and additional three cents sales tax levied on all petroleum products sold in Miami -Dade County. Hurricane Fund — This fund accounts for hurricane related expenditures as well as FEMA reimbursements. The fund is used to centralize financial activities required to restore the Village to normal operations following a natural disaster. 2 °0 Avenue Rehabilitation Fund — This fund was established to account for the joint partnership agreement between the Village, Miami -Dade County and the State of Florida Department of Transportation to redesign and rehabilitate Second Avenue between 95d' and 103`d Streets. The Village is responsible for approximately $1,000,000 of the $2,500,000 project. Charter 11itlh 4chco! Construction Fund —This fund accounts for all the costs associated with the design, development and construction of the Doctors Charter School of Miami Shores, which was completed in fiscal year 2005. _Capital Improvements Fund — This fund accounts for major capital acquisitions and projects to improve the Village. The Village reports the following major proprietary fund: Sanitation Fund — This fund accounts for the operations and maintenance of the Village's sanitation system. -26- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) c. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued) The Village reports the following nonmajor proprietary fund: Stormwater Utility Fund — This fund accounts for the operations and maintenance of the Village's stormwater system. Additionally, the Village reports the following fund types: Other Governmental Funds — The other governmental funds are used to account for all other various special revenue, debt service and capital projects funds. Internal Service Funds — The internal service funds are used to account for the financing of goods or services provided by one department to other departments of the Village, on a cost reimbursement basis. The Village has two internal service funds, the Risk Management Fund and the Fleet Maintenance Fund. Pension Trust Funds — The pension trust funds accumulate resources for pension benefit payments. The pension trust funds account for the activities of the Village's two pension plans. Agency Fund — This fund is used to account for assets that the Village holds for others in an agency capacity. Private - sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government -wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. The Village has the option of following subsequent private - sector guidance for their business -type activities and enterprise funds, subject to this same limitation. The Village has elected not to follow subsequent private- sector guidance. As a general rule, the effect of interfund activity has been eliminated from the government - wide financial statements. Exceptions to this general rule are charges between the Village's utility functions and various other functions of the Village. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. 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. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes with the exception of local option gas tax. Proceeds from the local option gas tax are used to fund transportation related expenditures and therefore are reported as program revenues under the function "Public Works ". -27- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) c. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued) Proprietary funds distinguish operating revenues and expenses from non - operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Village's sanitation and stormwater services and of the Village's internal service funds are charges to customers for services. Operating expenses for enterprise funds and internal service funds include the costs of 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 government's policy to use restricted resources first, then unrestricted resources as they are needed. d. Assets, Liabilities and Net Assets or Equity 1. Cash and Cash Equivalents Cash and cash equivalents includes cash on hand and investments with the State Board of Administration investment pool (2A -7 Pool). The Village maintains a pooled cash account for all funds. This enables the Village to invest large amounts of idle cash for short periods of time and to optimize earnings potential. Cash and cash equivalents represents the amount owned by each fund of the Village. Interest earned on pooled cash and cash equivalents is allocated monthly based upon equity balances of the respective funds. 2. Investments The Village's investments are reported at fair value. The investments held with the State Board Investment Pool (2A -7 Pool) are reported at its fair value of its position in the Pool, which is the same as the value of the Pool shares. The investments in the pension trust fund are reported at fair value. 3. Interfund Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to /from other funds" (i.e., the current portion of interfund loans). Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial- statements as "internal balances." -28- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) d. Assets, Liabilities and Net Assets or Equity (Continued) 4. Receivables Receivables include amounts due from others for services provided by the Village. Receivables are recorded and revenues are recognized as earned or specific program expenditures are incurred. Allowances for uncollectible receivables are based upon historical trends. 5. Prepaid Items Prepaid items consist of costs applicable to future accounting periods which have been paid prior to the end of the fiscal year. Amounts reported in the governmental funds are offset by an equal reservation of fund balance in the fund financial statements. This is an indication that these components of current assets do not constitute "available spending resources ". 6. Inventories Inventories of materials and supplies in the General Fund are recorded as expenditures when purchased (purchase method) and are stated at cost. Inventory in the Proprietary Funds consists of fuel, oil, tires, parts, office supplies and other inventories held for consumption. The initial cost is recorded as an asset at the time of purchase and is charged against operations in the period when used (consumption method) using the first -in, first -out method. Inventories are stated at the lower of cost or market on the balance sheet with a related reservation of fund balance for inventories accounted for under the purchase method. 7. Capital Assets Capital assets, which include property, plant and equipment, and certain infrastructure assets (e.g., roads, curbs and gutters, lighting systems, and similar items), are reported in the applicable governmental or business -type activities columns in the government -wide financial, statements. Capital assets are defined by the Village as assets with an initial, individual cost of more than $1,000 and an estimated useful life in excess of three years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at their estimated fair market value at the date donated. The retroactive reporting of infrastructure for governmental activities is being deferred to a later date. Only the current additions to infrastructure of governmental activities, for which depreciation is computed in the year of acquisition, are being reported at this time. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business -type activities is included as part of the capitalized value of the asset constructed. No such costs were capitalized in 2005. -29- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) d. Assets, Liabilities and Net Assets or Equity (Continued) 7. Capital Assets Capital assets of the Village are depreciated using the straight -line method over the following estimated useful lives: Years Buildings and improvements 10 -40 Drainage improvements 40 Sanitation equipment 10 Vehicles 5 Other equipment, machinery, furniture and fixtures 3 -10 8. Deferred Charges Deferred charges in the government -wide financial statements represent the unamortized portion of bond issuance costs. These costs are being amortized over the term of the respective bond issue. 9. Compensated Absences Village employees are granted vacation and sick leave in varying amounts based on length of service and the department which the employee serves. The Village's vacation policy allows all regular non - temporary employees to accrue vacation leave with pay on a monthly basis. Vacation leave accrued in a previous year must be used prior to the next year's anniversary date (unless authorized by the Village Manager). Upon separation from Village employment in good standing, employees shall receive a lump sum payment for any unused accrued vacation leave up to the maximum allotted for the employee's length of service. The Village's sick leave policy is to accumulate one normal work day per month up to a maximum of 720 hours for a general employee. A general employee shall receive payment for one hundred percent (100% to a maximum of 720 hours) of accrued sick leave upon retirement and fifty percent (50 %) upon separation in good standing. For both vacation and sick leave, there is no payout for an employee who is discharged for misconduct, termination or is not in good standing with the Village. All vacation and sick leave pay is accrued when incurred in the government -wide and proprietary fund financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements. The general fund has typically been used to liquidate such amounts. -30- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) d. Assets, Liabilities and Net Assets or Equity (Continued) 10. Long -Term Obligations In the government -wide financial statements, and proprietary fund types in the fund financial statements, long -term debt and other long -term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the 'life of the bonds using the straight -line amortization 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 of the 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 amount of debt issued is reported as an other financing source. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, even if withheld from the net proceeds received, are reported as debt service expenditures. 11. Property Taxes Property taxes (ad valorem taxes) are assessed on January I" (the lien date) and are billed and payable November I". They are due March 3151 and become delinquent April 15`. On June 15`, delinquent taxes are offered for sale in the form of tax certificates. These taxes are collected by the County and are remitted to the Village. As of September 30, 2005, delinquent property taxes were immaterial in amount. Assessed values are established by the Miami -Dade County Property Appraiser for all properties in the County at fair market value. The County bills and collects all property taxes for the Village. The assessed value of property at January 1, 2004, upon which the 2004 -2005 levy was based was approximately $593,000,000. Under Florida law, the assessment of all properties and the collection of all County, municipal,, school district and special district property taxes are consolidated in the offices of the County Property Appraiser and County Tax Collector. The Village is permitted by Article 7, Section 8 of the Florida Constitution to levy taxes up to 10 mills ($10 per $1,000 of assessed valuation) for general governmental services other than general obligation debt service. To the extent required by voter approved general obligation debt, unlimited amounts may be levied to pay debt service. The millage rate levied to finance general governmental services for the 2004 -05 fiscal year was 8.250 mills ($8.25 per $1,000 of assessed valuation). -31- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) d. Assets, Liabilities and Net Assets or Equity (Continued) 12. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally segregated for a specific future use. The description of each reserve indicates the purpose for which each was intended. Designations of fund balance indicate that a portion of fund balance has been segregated based on previous fiscal obligations or tentative plans of the Village. Such plans or intent are subject to change at the discretion of the Village. Unreserved and undesignated fund balance is the portion of fund equity available for any lawful use. 13. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the period reported. These estimates include assessing collectibility of receivables, the use and recoverability of inventory, the realization of pension and postretirement obligations, and useful lives and impairment of tangible assets, among others. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary. Actual results may differ from those estimates. NOTE 2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY a. Prior Period Adjustment During the fiscal year 2004 -2005, the Village determined that the capital assets and accumulated depreciation of the Sanitation Fund and the Fleet Maintenance Fund (internal service fund) were not properly stated. As a result, the net assets of these funds, as of October 1, 2004, were restated as follows: Fleet Sanitation Maintenance Fund Fund Net assets (deficit), beginning, as previously reported $ 755,166 $ 464,317 Adjustment for capital assets: Capital assets 440,313 (441,006) Less accumulated depreciation 562,299 587,844 Net adjustment 121,986 146,838 Net assets (deficit), beginning, as restated $633,180 $ 317,479) -32- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (Continued) a. Prior Period Adjustment (Continued) As a result of the prior period adjustment in the Fleet Maintenance Fund (internal service fund), the governmental activities beginning net assets were restated by $146,838. , b. Fund Deficits The following funds of the Village had unreserved and undesignated deficits as of September 30, 2005 in the amounts indicated: Fund Amount Special Revenue Funds: Hurricane $ 28,100 Grants ' 21,371 Capital Projects Funds: Charter High School Construction 478,884 Capital Improvements 1,136,332 Aquatic Facility 251,509 Additionally, the Risk Management and Fleet Maintenance Internal Service Funds had unrestricted deficits of $649,070 and $1,100,558, respectively. The Village, during the ensuing year, will develop a plan to eliminate these deficits. c. Excess of Expenditures over Appropriations Expenditures exceeded appropriations by the amounts indicated in the following areas: Amount General Fund: Village attorney $ 2,718 Village clerk 381 Building department 95,516 Capital outlay 2,158 Debt service: Principal 34,800 Interest 761 Local Option Gas Tax Fund: Other financing uses - transfers out 38,332 Half Cent Surtax Fund: Other financing uses - transfers out 50,500 -33- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 3. DEPOSITS AND INVESTMENTS Deposits In addition to insurance provided by the Federal Depository Insurance Corporation, deposits are held in banking institutions approved by the State Treasurer of the State of Florida to hold public funds. Linder Florida Statutes Chapter 280, Florida Security for. Public Deposits Act, the State Treasurer requires all Florida qualified public depositories to deposit with the Treasurer or another banking institution eligible collateral. In the event of a failure of a qualified public depository, the remaining public depositories would be responsible for covering any resulting losses. Accordingly, all amounts reported as deposits are deemed as insured or collateralized with securities held by the entity or its agent in the entity's name. Investments The Village is authorized to invest in those instruments authorized by the Florida Statutes, including obligations of the U.S. Treasury, its agencies, instrumentalities and the State Board of Administration Investment Pool (SBA). The State Board of Administration administers the Local Government Surplus Funds Trust Fund and is governed by Ch. 19 -7 of the Florida Administrative Code. These rules provide guidance and establish the general operating procedures for the administration of the Local Government Surplus Funds Trust Fund. Additionally, the Office of the Auditor General performs the operational audit of the activities and investments of the State Board of Administration. The Local Government Surplus Funds Trust Fund is not a registrant with the Securities and Exchange Commission (SEC); however, the board has adopted operating procedures consistent with the requirements for a 2a -7 fund. Investments — City Credit Risk Excess funds are sent to the Florida State Board of Administration (SBA) for their investment. The SBA does not have a rating from a nationally recognized statistical rating organization. Investments — Pension Plans As of September 30, 2005, the City's Defined Benefit Pension plans had the following investments: -34- Investment_ Maturities (In Years) Fair Less than 1 to 5 6 to 10 More Pension Investments Value 1 Year Years Years Than 10 U.S. Treasuries $2,653,942 $172,317 $1,116,934 $ 982,569 $382,121 U.S. Agency Obligations 720,797 44,648 302,620 373,529 - Corporate Bonds 2,624,353 43,893 1,255,733 792,161 532,566 $5,999,092 $260,858 $2,675,287 $2,148,259 $914,687 -34- NOTE 3 MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) DEPOSITS AND INVESTMENTS (Continued) Investments — Pension Plans (Continued) Interest Rate Risk Interest rate risk refers to the portfolio's exposure to fair value Iosses arising from increasing interest rates. The Plans have formal investment policies that limit investment maturities as a means of managing its exposure to market value looses arising from increasing interest rates. Credit Risk State Iaw and the Plans' investment policies limit investments in bonds, stocks, or other evidences of indebtedness issued or guaranteed by a corporation organized under the laws of the United States, any state or organized territory of the United States, or the District of Columbia, provided the corporation is listed on one or more of the recognized national stock exchanges or on the National Market System of the NASDAQ Stock Market and in the case of bonds only, holds a rating in one of the three highest classifications by a major rating 'service. - Investment in foreign companies is limited to American Depository Receipts (ADRs) and foreign common stock listed on U.S. Exchanges. The Plan's investment policies limit investments to common stocks, corporate bonds rated "A" or higher by Moody or Standard & Poor's, collateralized mortgage obligations (CMO's) rated "Aaa" by Moody's or "AAA" by Standard & Poor's rating services. The Plans' corporate bonds were rated an average of "A" by Standard & Poor's. The Plans' mutual bond fund investments were all rated "AAA" under Standard & Poor's ratings. Concentration of Credit Risk The Plans' investment policies prohibit equity securities concentrations greater than 5% in the securities of any one company at cost nor can the aggregate investment in equity securities total more than 70% of the total funds asset value at market; and fixed income securities concentrations greater than 10% in any one issuer with the exception of U.S. government or agency issues. As of September 30, 2005, the value of each equity position held by the Plans' portfolios consisted of less than 5% of equity assets and less than 70% in the aggregate. Seven percent (7 %) of the Village's total Pension Investments are fixed income securities in the Federal National Mortgage Association. Given the restriction to the highest rating, the additional concentration is not viewed to be an additional risk by the City. Risks and Uncertainties The Plans have investments in a combination of investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit risk. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term would materially affect the balances and the amounts reported in the statements of plan net assets and the statements of changes in plan net assets. The Plans through their investment advisors monitor the Plans' investments and risks associated therewith on a regular basis, which the Plans believe minimizes these risks. -35- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 4. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS Interfund receivables and payables at September 30, 2005 were as follows: Fund General fund Local option gas tax fund Hurricane fund Capital improvements fund Second avenue rehabilitation fund Nonmajor governmental funds Enterprise Funds: Sanitation fund Stormwater fund Internal Service Funds: Risk management fund Fleet maintenance fund Due from Due to Other Funds Other Funds $ 1,554,525 $ - 870,597 - - 235,391 111,291 1,188,213 - 69,793 778,376 838,265 519,096 53,018 137,264 75,796 - 533,655 229,205 1,206,223 $ 4,200,354 $ 4,200,354 These outstanding balances between funds result mainly from the time lag between the dates that (a) interfund goods and services are provided or reimbursable expenditures /expenses occur, (b) transactions are recorded in the accounting system and (c) payments between funds are made. Interfund transfers at September 30, 2005 were as follows: Transfers In 2nd Avenue Nonmajor General Capital Rehabilitation Governmental Transfers Out Fund impovements Fund Funds Total General fund $ - $ - $ - $ 112,871 $ 112,871 Excise tax fund 1,781,595 - - 1,781,595 Local option gas tax fund - - 38,332 - 38,332 Nonmajor governmental funds - 132,500 - - 132,500 Sanitation fund 185,0011 - - 185,000 Stormwater fund 25,000 - - - 25,000 $1,991,595 $ 132,500 $ 38,332 $ 112,871 $2,275,298 Transfers are used to (a) move revenues from the fund that statute or budget requires to collect them to the fund the statute or budget requires to expend them and (b) move unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorization. -36- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 5. ACCOUNTS RECEIVABLE Accounts receivable as of September 30, 2005 for the Village's major and nonmajor funds in the aggregate, including the applicable allowance for uncollectible amounts are as follows: NOTE 6. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2005 was as follows: Governmental activities: Capital assets not being depreciated: Land Construction-in-progress Total capital assets not being depreciated Capital assets being depreciated: Buildings and improvements Other Improvements Furniture, fixtures and equipment Total capital assets being depreciated Less accumulated depreciation for: Buildings and improvements Other improvements Furniture, fixtures and equipment Total accumulated depreciation Total capital assets being depreciated, net Governmental activities capital assets, net -37- Beginning Balance Ending as Restated* Additions Deductions Balance $ 718,531 $ - $ - Local 657,483 Nonmajor - 751,154 1,376,014 93,671 - 1,469,685 Excise Option Governmental 5,548,155 Storm- Risk 11,683,882 3,571,264 General Tax Gas Tax Hurricane Funds sanitation water Mann err>ent Total Receivable: 21,326,848 2,837,116 178,822 - 3,015,938 Accounts $ 77,715 $ - $ - $441,489 $ 115,150 $657,435 $36,713 $ 148,789 $1,477,291 Taxes 198,280 245,083 22,947 - - - - - 466,310 Gross receivables 275,995 245,083 22,947 441,489 115,150 657,435 36,713 148,789 1,943,601 Less allowance for uncollectibles - Net total receivable $275,995 $245,083 $22,947 $441,489 $ 115,150 $657,435 $36,713 $ 148,789 $1,943,601 NOTE 6. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2005 was as follows: Governmental activities: Capital assets not being depreciated: Land Construction-in-progress Total capital assets not being depreciated Capital assets being depreciated: Buildings and improvements Other Improvements Furniture, fixtures and equipment Total capital assets being depreciated Less accumulated depreciation for: Buildings and improvements Other improvements Furniture, fixtures and equipment Total accumulated depreciation Total capital assets being depreciated, net Governmental activities capital assets, net -37- Beginning Balance Ending as Restated* Additions Deductions Balance $ 718,531 $ - $ - $ 718,531 657,483 93,671 - 751,154 1,376,014 93,671 - 1,469,685 5,548,155 6,135,727 - 11,683,882 3,571,264 19,740 - 3,591,004 5,517234 554,117 __(2 089 6,051,962 14,637,353 6,709,584 20,089 21,326,848 2,837,116 178,822 - 3,015,938 2,141,700 55,696 - 2,197,396 4,034,703 651,453 20,089 4,666,067 9,013,519 885,972 20,089 9,879,402 5,623,834 5,823,612 - 11,447,446 $ 6,999,848 $ 5,917,283 $ $12,917,131 MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 6. CAPITAL ASSETS (Continued) Beginning Balance Ending as Restated* Additions Deductions Balance Business -type activities: Capital assets being depreciated: Utility plant and equipment $2,085,818 $ 61,729 $ 190,594 $ 1,956,953 Less accumulated depreciation for: Utility plant and equipment 1,170,962 157,654 76,237 1,252,379 Total capital assets being depreciated, net 914,856 95,925 114,357 704,574 Business -type activities capital assets, net $ 914,856 $ (95,925 $ 114,357 $ 704,574 *The Village has restated its governmental activities and business -type activities capital assets by $146,838 and $121,986, respectively, as of October 1, 2004. See Note 2a for further details. Depreciation expense was charged to functions as follows: Governmental activities: General government Public safety Public works Parks and recreation Capital assets held by the government's internal service funds are charged to the various functions based on their usage of assets Total depreciation expense - governmental activities Business -type activities: Sanitation Stormwater Total depreciation expense - business -type activities NOTE 7. SHORT -TERM NON - CAPITAL BORROWINGS The schedule below details the changes in short-term non - capital borrowings. Commercial note $ 256,257 81,489 135,989 276,261 749,996 135,976 $ 885,972 $136,448 21,206 $157,654 Beginning Ending Balance Additions Reductions Balance $ - $675,000 $ 675,000 $ - The Village, on October 14, 2004, secured a $675,000 commercial note from SunTrust Bank bearing a fixed interest rate of 3.50 %. The note was secured for the purpose of financing budgeted insurance premiums for the 2005 fiscal year. The note came due on September 1, 2005. -38- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTES. - LONG -TERM LIABILITIES a. Summary of Long -Term Liabilities The following is a summary of changes in long -term liabilities of the Village for governmental and business -type activities for the year ended September 30, 2005. Governmental activities: General obligation bonds payable - 2004 Less issuance discount General obligation bonds payable - 1999 Line of credit - 2002 Line of credit - 2005 Revenue note payable - 2003 Revenue notes payable - 2003 Subtotal Compensated absences Claims payable Business -type activities: Compensation absences 2004 General Obligation Bonds Beginning Principal Interest Ending Due Within Balance Additions Reductions Balance Onc Year $ 220,080 $ 5,000,000 $ - $ 95,000 $ 4,905,000 $ 100,000 (9,587) 105,000 (331) (9,256) - 2,910,000 210,930 65,000 2,845,000 65,000 400,000 317,630 350,000 50,000 50,000 - 500,000 30,977 469,023 42,960 871,868 - 83,822 788,046 87,195 214,000 - 116,000 98,000 98,000 9,386,281 500,000 740,468 9,145,813 443,155 272,216 541,331 256,384 557,163 139,291 700,695 179,494 179,494 700,695 153,099 $10,359,192 $1,220,825 $1,176,346 $10,40301 ' $ 735,545 $ 52,609 $ 35,198 $ 26,291 $ 61,516 $ 15,379 The 2004 General Obligation bonds were issued by the Village of Miami Shores. Principal is due annually over 30 years at various amounts from $100,000 in 2006 to a final payment of $305,000 in 2033. The bonds bear interest at variable rates ranging from 3% to 5 %, payable semi - annually. -39- Principal Interest Total Fiscal year ended September 30: 2006 $ 100,000 $ 220,080 $ 320,080 2007 100,000 217,080 317,080 2008 105,000 214,080 319,080 2009 110,000 210,930 320,930 2010 110,000 207,630 317,630 2011 -2015 625,000 978,540 1,603,540 2016 -2020 755,000 845,903 1,600,903 2021 -2025 935,000 656,088 1,591,088 2.026 -2030 1,195,000 403,000 1,598,000 2031 -2033 870,000 88,500 958,500 Total $ 4,905,000 $ 4,041,830 $ 8,946,830 -39- NOTE 8 MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) LONG -TERM LIABILITIES (Continued) a. Summary of Long -Term Liabilities (Continued) 1999 General Obligation Bonds The 1999 General Obligation bonds were issued by the Florida Municipal Loan Council. Principal is due annually over 30 years at various amounts from $65,000 in 2006 to a final payment of $195,000 in 2029. The bonds bear interest at variable rates ranging from 3.20% to 5.00 %, payable semi - annually. Line of Credit — 2002 On September 5, 2002, the Village secured a $500,000 non - revolving line of credit from a bank bearing interest at 2.270 %. The line matures in September 1, 2009 and requires quarterly interest payments in the first year. After the first year, principal and interest payments are due on demand. The line is secured by investments equaling the outstanding balance. The outstanding balance at September 30, 2005 is $50,000. Line of Credit — 2005 On October 1, 2004, the Village secured a $500,000 line of credit from SunTrust Bank bearing an interest rate of 3.90 %. The note was secured for the purpose of making renovations to the fleet maintenance facility. The line matures on September 30, 2014 and requires quarterly principal and interest payments throughout the life of the loan. The security for the note is an appropriation from legally available non -ad valorem revenues and a pledge of the guaranteed entitlement revenues received by the Village in each fiscal year. The outstanding balance at September 30, 2005 was $469,023. -40- Principal Interest Total Fiscal year ended September 30: 2006 $ 65,000 $ 137,832 $ 202,832 2007 70,000 135,232 205,232 2008 75,000 132,432 207,432 2009 75,000 129,338 204,338 2010 80,000 126,150 206,150 2011 -2015 450,000 574,406 1,024,406 2016 -2020 575,000 450,844 1,025,844 2021 -2025 730,000 294,500 1,024,500 2026 -2029 725,000 92,750 817,750 Total $ 2,845,000 $ 2,073,484 $ 4,918,484 Line of Credit — 2002 On September 5, 2002, the Village secured a $500,000 non - revolving line of credit from a bank bearing interest at 2.270 %. The line matures in September 1, 2009 and requires quarterly interest payments in the first year. After the first year, principal and interest payments are due on demand. The line is secured by investments equaling the outstanding balance. The outstanding balance at September 30, 2005 is $50,000. Line of Credit — 2005 On October 1, 2004, the Village secured a $500,000 line of credit from SunTrust Bank bearing an interest rate of 3.90 %. The note was secured for the purpose of making renovations to the fleet maintenance facility. The line matures on September 30, 2014 and requires quarterly principal and interest payments throughout the life of the loan. The security for the note is an appropriation from legally available non -ad valorem revenues and a pledge of the guaranteed entitlement revenues received by the Village in each fiscal year. The outstanding balance at September 30, 2005 was $469,023. -40- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 8. .LONG -TERM LIABILITIES (Continued) a. Summary of Long -Term Liabilities (Continued) Line of Credit - 2005 (Continued) Line of Credit 2005 Principal Interest Total Fiscal year ended September 30: 2006 $ 42,960 $17,662 $ 60,622 2007 44,660 15,962 60,622 2008 46,428 14,194 60,622 2009 48,265 12,357 60,622 2010 50,175 10,447 60,622 2011-2014 236,535 21,278 257,813 Total $ 469,023 $ 91,900 $ 560,923 Revenue Notes Payable - 2003 On June 2, 2003, the Village secured a $950,000 note payable from a bank to renovate the Village's police building. The note bears interest at 3.9% per year and requires quarterly principal and interest payments of $113,608, commencing October 1, 2003. The note is secured by 33% of local option gas tax proceeds and matures on June 1, 2013. On June 2, 2003, the Village secured a $330,000 note payable from a bank to refinance two existing revenue notes used to acquire police related equipment. The note bears interest at 4.99% per annum and requires quarterly principal and interest at various amounts. The note is collateralized by certain Village capital assets and matures on July 1, 2006. The note will be repaid by the Police Forfeiture Fund and the 2nd Avenue Rehabilitation Fund. Fiscal year ended September 30: 2006 KIM Principal Interest Total $ 98,000 $1,419 $ 99,419 Principal Interest Total Fiscal year ended September 30: 2006 $ 87,195 $ 26,413 $113,608 2007 90,287 23,321 113,608 2008 93,489 20,119 113,608 2009 96,804 16,803 113,608 2010 100,237 13,371 113,608 2011-2013 320,034 18,275 338,309 Total $ 788,046 $118,302 $ 906,349 On June 2, 2003, the Village secured a $330,000 note payable from a bank to refinance two existing revenue notes used to acquire police related equipment. The note bears interest at 4.99% per annum and requires quarterly principal and interest at various amounts. The note is collateralized by certain Village capital assets and matures on July 1, 2006. The note will be repaid by the Police Forfeiture Fund and the 2nd Avenue Rehabilitation Fund. Fiscal year ended September 30: 2006 KIM Principal Interest Total $ 98,000 $1,419 $ 99,419 MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 9. POST - EMPLOYMENT RETIREMENT BENEFITS Plan Description The Village provides post - retirement health benefits in accordance with the requirements of an agreement between the Village and the Police Benevolent Association (PBA). Police officers who retire and begin receiving benefits from the Village's pension plan on or after October 1, 1991 are eligible to receive a monthly benefit of up to $100 to defray the cost of health insurance coverage for the retiree. Only those police officers who retire under the provisions of the Village's pension plan with at least 25 years of creditable service, or who are granted a disability benefit under the provisions of the Village's Pension Plan, are eligible for the retiree health benefit. Eligible retired police officers receive the retiree health benefit until they become eligible for Medicare benefits, at which time the Village retiree health benefit is suspended. The employer makes benefit payments directly to an insurance carrier or health benefit program on behalf of the eligible retired police officer up to $100 which is funded through payroll deductions from each police officer. Total contributions for the year were $5,500. If the retired police officer is covered by any other insurance or health benefit program, the Village retiree health benefit will be secondary to any and all other insurance or benefit programs. If the actual cost of the retired police officer's participation in such other insurance or benefit program is less than $100 per month, the Village retiree health benefit payable is the actual cost of such insurance or benefit program. Employee contributions to the retiree health benefit fund are refundable to the employee if the employee terminates Village employment after contributing to the retiree health benefit fund for ten (10) or more years. Any employee who receives a refund of contributions from the retiree health benefit fund is not eligible to receive a retiree health benefit. The Village does not provide any other post - employment retirement benefits NOTE 10. RISK MANAGEMENT The Village is exposed to various risks of loss related to torts, theft, damage to and destruction of assets, errors and omissions and natural disasters for which they are self - insured. The maximum risk of loss for the Village is $350,000; thereafter the Village carries commercial insurance. Florida law limits the liability in any one claim or judgment not to exceed $100,000 and in each occurrence not to exceed $200,000. The amount of settlements for each of the past three fiscal years did not exceed insurance coverage. There was no reduction in insurance coverage from coverage in the prior year. -42- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 10. RISIC MANAGEMENT (Continued) Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR's). Claim liabilities are calculated considering the recent claim settlement trends. The liability for claims is reported in the Internal Service Fund. Changes in the balances of estimated claims for the years ended September 30 are as follows: 2005/ 2004 Unpaid claims, beginning $ 506,665 $ 506,665 Incurred claims (including IBNR's) 179,494 153,000 Claim payments and disbursements (179,494) 153,000 Unpaid claims, ending $ 506,665 $ 506,665 In addition to the above claims liability, t�e-Vill-age has 'a` ommitment to Miami -Dade County for prior workers' compensation claims or $194,030_asAA September 30, 2005. The Village generally makes annual payments to the o on reimbursable eimbursable basis. I NOTE 11. PENSION PLANS The Village maintains two separate single - employer Public Employee Retirement Systems (PERS). These plans were established to provide pension benefits for its employees. The PERS is considered to be part of the Village's financial reporting entity and is included in the Village's financial statements as pension trust funds. Summary of Significant Account Policies Basis of Accounting The Village's defined benefit pension funds are prepared using the accrual basis of accounting, Plan member contributions are recognized in the period in which the contributions are due. Employer contributions to each plan are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of each Plan. Method Used to Value Investments Investments are reported at fair value. Securities traded on a national or international exchange are valued at the last reported sales price. Net appreciation in fair value of investments, realized and unrealized gains (losses) are determined on the basis of specific cost. Within. certain limitations as specified in each of the Plans, the investment policies are determined by the Plans' Board of Trustees and is implemented by each Plan's investment advisor. -43- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 11. PENSION PLANS (Continued) Method Used to Value Investments There were no investments (other than U.S. Government Securities and U.S. Government Guaranteed Obligations) in any one organization that represented 5% or more of plan net assets, nor were there any investments in, loans to, or leases with any Village official, Plan Trustee or other related parties. a. General Employees' Retirement Plan Plan Description The General Employees' Retirement System (the Plan) is a single - employer defined benefit pension plan that covers all Village employees, except for police, and certain appointed employees. The Plan was established on January 1, 1957 by the Village Council. On December 31, 1999, the Plan was split between the general employees and the police officers. The Plans are governed by certain provisions of Chapter 112, Florida Statutes. The Board of Trustees for the Plan administers the Plan. Plan amendments must be authorized by the Village Council. The Plan provides retirement, disability, and death benefits to Plan members and beneficiaries. The Plan does not issue a separate financial report. Funding Policy Plan members are required to contribute 6% of their annual covered salary. The Village is not required to contribute to the plan. Therefore, there is no annual required contribution, no annual pension cost and no net pension obligation. Other The General Employees Retirement Plan does not issue separate stand -alone financial statements, therefore, included below is the Statement of Fiduciary Net Assets and the Statement of Changes in Net Assets as of and for the fiscal year ended September 30, 2005. Statement of Fiduciary Net Assets September 30, 2005 Assets: Cash and cash equivalents $ 141,144 Investments, at fair value 7,795,974 Accrued interest receivable 26,769 Total assets 7,963,887 Liabilities 36,321 Net assets held in trust for pension benefits $7,927,566 -44- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 11. PENSION PLANS (Continued) a. General Employees' Retirement Plan (Continued) Statement of Changes in Net Assets Year Ended September 30, 2005 ADDITIONS Contributions $ 171,037 Net investment income 824,146 Total additions 995,183 DEDUCTIONS Pension benefits 243,961 Refunds 12,371 Professional services 5,013 Total deductions 261,345 Changes in net assets 733,838 Net assets held in trust for pension benefits, beginning 7,193,728 Net assets held in trust for pension benefits, ending $ 7,927,566 b. Police Officers' Retirement Plan Plan Description The Police Officers' Retirement System (the Plan) is a single - employer defined benefit pension plan that covers substantially all of the Village's certified police officers. The Plan was established as of the effective date of January 1, 1957 by the Village Council. It was amended on December 31, 1999, to split the Plan between General Employees and Police Officers. The Plan is also governed by certain provisions of Chapter 185, Florida Statutes. The Board of Trustees for the Plan administers the Plan. Plan amendments must be authorized by the Village Council. The Plan provides retirement, disability, and death benefits to Plan members and beneficiaries. The Plan does not issue a separate financial report. Deferred Retirement Option Plan Effective May 5, 1998, subsequent to the approval from the State of Florida, Division of Retirement, current employees with at least 25 but not more than 30 years of continuous service as a member of the plan may elect to participate in the deferred retirement option plan (DROP) for sworn police personnel. The employee may elect to participate in the plan for a maximum of 60 months before the employee attains 30 years of continuous service. -45- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 11. PENSION PLANS (Continued) b. Police Officers' Retirement Plan (Continued) Deferred Retirement Option Plan (Continued) A member's continuous service and accrued benefit under the plan shall be determined and frozen on the effective date of the employee's election to participate in the DROP. Additional continuous service or benefits under the plan shall not be accrued, except for cost -of- living adjustments provided to retirees under the plan. No payments are made directly to the employee from the pension plan while the member participates in the drop plan. During the period of the member's participation in the DROP, the employee's normal retirement benefit, shall be credited to the employee's DROP account. No further contributions to the police officers' retirement system will be required by the Village nor the employee on behalf of any employee who has elected participation in the DROP. The member's account is invested as part of the corpus of the system by the Board and is credited with interest equal to the overall net rate of return on the fund assets during the reporting period during which the member participates in the DROP. At the conclusion of the member's participation in the DROP, the member will receive a normal benefit calculated in accordance with the plan using an average monthly earnings and continuous service as of the effective date of the member's election to participate in the DROP. The DROP account is distributed to the member in a cash lump sum, unless the member alternatively elects to receive payments in approximately equal quarterly or annual installments over a period designated by the member. If a member dies before distribution of the member's DROP plan commences, the account balance is paid to the member's designated beneficiary in an immediate cash lump sum. Provisions of the plan do not allow for the distribution of a member's DROP account to begin later than April 1 following the later of the calendar year in which the member separates from service with the Village or attains age 70%2 years. At the end of September 30, 2005, total liabilities for the DROP were $262,450. It should be noted that one plan member elected to retire prior to the end of the fiscal year; however, the resulting lump sum benefit payment of $237,249 was made subsequent to year end, on November 15, 2005. Funding Policy Plan members are required to contribute 9% of their annual covered salary. The State of Florida contributes a portion of the property insurance premiums, which pass through the Village as contributions to the Plan. The Village is required to contribute at actuarially determined rates that are designed to accumulate sufficient assets to pay benefits when due. -46- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 11. PENSION PLANS (Continued) b. Police Officers' Retirement Plan (Continued) Annual Pension Cost and Net Pension Obligation (Asset) As of October 1, 2003, the date of the latest actuarial valuation, the Village's net pension obligation (asset) was as follows: Annual required contributions (ARC) $ 279,522 Interest on net pension asset (1,340) Adjustment to ARC 2,525 Annual pension cost 280,707 Actual contribution 279,522 Change in net pension obligation (asset) 1,185 Net pension obligation (asset), beginning 16,747 Net pension obligation (asset), ending $ 15,562 The annual required contributions for the current year were determined as part of the October 1, 2003 actuarial valuation using the frozen entry age normal actuarial cost method: This method is the same as the Aggregate Cost Method and does not identify and separately amortize the unfunded actuarial liabilities. The actuarial assumptions included (a) 8% investment rate of return and (b) projected salary increases of 6.5% per year. Both (a) and (b) included an inflation component of 4 %. The actuarial value of assets was determined using market values. Three-year Trend Information Annual Percentage Net Pension Pension of APC Obligation Fiscal Year Ending Cost (APCI Contributed Asset 9/3.0/2003 $ 134,228 99.1% $ (17,862) 9/30/2004 198,613 99.4% (16,747) 9/30/2005 280,707 99.6% (15,562) Other The Police Officers Retirement Plan does not issue separate stand -alone financial statements, therefore, included below is the Statement of Fiduciary Net Assets and the Statement of Changes in Net Assets as of and for the fiscal year ended September 30, 2005. -47- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 11. PENSION PLANS (Continued) b. Police Officers' Retirement Plan (Continued) Other (Continued) Statement of Fiduciary Net Assets September 30, 2005 Assets: Cash and cash equivalents Investments, at fair value Accrued interest receivable Other assets Total assets Liabilities Net assets held in trust for pension benefits Statement of Changes in Net Assets Year Ended September 30, 2005 ADDITIONS Contributions Net investment income Total additions DEDUCTIONS Pension benefits Refunds Other Total deductions Changes in net assets Net assets held in trust for pension benefits, beginning Net assets held in trust for pension benefits, ending -48- $ 421,041 10,148,808 35,695 103 10,605,647 303,844 $10,301,803 $ 442,162 1,140,239 1,582,401 570,651 121,956 27,056 719,663 862,738 9,439,065 $10,301,803 MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 11. PENSION PLANS (Continued) c. Membership Membership of each Plan consisted of the following at September 30, 2005: General Em to ees Police Retirees and beneficiaries currently receiving benefits and terminated employees entitled to benefits but not yet receiving them 37 19 Fully vested 31 14 Non - vested 51 10 82 24 d. Required Supplementary Information The schedule of employer contributions for each of the past six consecutive fiscal years for the Police plan is presented immediately after. the notes to the basic financial statements. As the Plan uses the Frozen Entry Age Actuarial Cost Method, a schedule of funding progress is not required. NOTE 12. COMMITMENTS AND CONTINGENCIES a. Legal Matters The Village has several claims arising in the ordinary course of operations pending against the Village. In. the opinion of legal counsel and management, any potential losses arising from such actions, would not have a materially adverse affect on the financial position of the Village, b. Employment Contract Effective May 1, 2002, the Village entered into a three -year employment contract with its retired Police Chief that provides for an annual salary and certain benefits approximating $92,500 per year. The Police Chief retired in December 2005. c. Contingent Liabilities Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies. While no matters of non - compliance were disclosed by the audit, grantor agencies may subject grant programs to additional compliance tests, which may result in disallowed costs. In the opinion of management, future disallowances of current grant expenditures, if any, would not have a material adverse effect on the Village's financial condition. -49- MIAMI SHORES VILLAGE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 13. SUBSEQUENT EVENTS The Village Council and the Board of Directors of Barry University, North Dade Medical Foundation and the Parent Teachers Association participate in the thirteen - member Board of Directors of Doctors Charter School of Miami Shores (Board). Seven members of the Board are appointed by the Village Council, two members each are appointed by the University, the Medical Foundation and the Parent Teachers Association, respectively. During the fiscal year ending June 30, 2005, the Village contributed approximately $175,000 to the operations of the school. The Village has no equity interest nor does the Village materially contribute to the continued existence of the school. The Village, effective August 2005, entered into a sub -lease agreement with the Doctor's Charter School for the leasing of land (currently being leased by the Village from Barry University under a ground lease) and the school building, construction of which was completed in the current fiscal year. The Village is to receive rent in the amount of $180,000 annually. On May 26, 2006, the Village entered into an agreement with the SunTrust Bank to borrow $3,500,000 for the refinancing of certain loans totaling approximately $1,170,000, finance the cost of improvements to the Village's fleet maintenance facility and improvements to N.E. Second Avenue as well as funding a debt service fund and paying the costs of issuance and a contribution to the capital projects. Quarterly payments including interest at 4.56% are due beginning on August 15, 2006, November 150', February 15 °i and May 15`x' in the amount of $95,081.79. Final installment due May 15, 2018. There are no prepayment penalties. The loan will be secured by the same collateral as the SunTrust credit facilities being refinanced -50- THIS PA GE INTE�'I iTIO BALL Y LEFT BLANK REQUIRED SUPPLEMENTARY INFORMATION MIAMI SHORES VILLAGE, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF EMPLOYER CONTRIBUTIONS Police Officer's Retirement Svstenr Year Annual Contribution Contribution Ended Required from from Percentage September 30, Contribution Emlloyer State Contributed 2003 $ 132,996 $ 102,803 $ 39,564 99.1% 2004 197,498 167,305 53,849 99.4% 2005 279,522 249,329 68,063 113.5% The information presented in the required supplemental schedules was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows. The annual required contribution for the fiscal year ended September 30, 2005 was determined as part of the October 1, 2003 actuarial valuation. Police Officer's Retirement System Valuation date 10/1/03 Actuarial cost method Aggregate Amortization method N/A Remaining amortization period N/A Asset valuation method 5 year smoothed market Actuarial assumptions: Investment rate of return* 8% Projected salary increases* 6.5% Cost of living adjustments N/A *Includes inflation at 4% (1) This method does not separately identify an actuarial accrued liability. Based on this, a schedule of funding progress is not included as it is not required per GASB 25. -51- MIAMI SHORES VILLAGE, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE GENERAL FUND FISCAL YEAR ENDED SEPTEMBER 30, 2005 Charges for services: Physical environment 55,199 55,199 53,773 Variance with Police extra duty 188,059 215,303 147,153 Final Budget - Landscape maintenance Budstoted. Amounts Actual Positive - Orijzin ai Final Amounts a ative Revenues: Total charges for services 962,511 962,511 865,093 Taxes: Fines and forfeitures: Property taxes, current and delinquent S 4,794,9200 $ 4,794,920 $ 4,723,963 $ (70,957 Licenses and permits: School crossing guards 33,200 33,200 33,569 Business licenses - Village 66,500 66,500 26,582 (39,918) Business licenses - County 20,000 20,000 27,589 7,589 Bililding permits 415,500 415,500 664,961 249,461 Certificate of reoccupancy 12,000 12,000 18,035 6,035 Other licenses and permits 62,750 62,750 53,090 _(9,660) Total licenses and permits 576,750 576,750 790,257 213,507 Intergovernmental revenues: Interest 38,716 38,716 36,381 State shared revenues: Total revenues $ 7,775,713 $ 7,775,713 $ 7,866,364 State revenue sharing 256,250 256,250 337,004 80,754 Local government half cent sales tax 592,174 592,174 646,634 54,460 Gasoline tax rebate 8,250 8,250 9,920 1,670 Other 1,200 • 1,200 1,392 192 Total intergovernmental revenues 857,874 857,874 994,950 137,076 Charges for services: Physical environment 55,199 55,199 53,773 (1,426) Police extra duty 188,059 215,303 147,153 (68,150) Landscape maintenance 19,901 19,901 19,901 - Culture /recreation 699,352 672,108 644,266 (27,842) Total charges for services 962,511 962,511 865,093 (97,418) Fines and forfeitures: Court fines and costs 75,150 75,150 79,240 4,090 School crossing guards 33,200 33,200 33,569 369 Other 121,450 121,450 151,933 30,483 Total fines and forfeitures 229,800 229,800 264,742 34,942 Miscellaneous: Rents 155,000 155,000 150,030 (4,970) Other 160,142 160,142 402948 ___(L19,194) Total miscellaneous 315,142 315,142 190,978 (124,164) Interest 38,716 38,716 36,381 (2,335) Total revenues $ 7,775,713 $ 7,775,713 $ 7,866,364 $ 90,651 (Continued) See note to budgetary comparison schedules. -52- MIAMI SHORES VILLAGE, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE GENERALFUND (Continued) FISCAL YEAR ENDED SEPTEMBER 30, 2005 Expenditures: Current: General government: Village council Village attorney Village manager Village clerk Code enforcement Building department Planning and zoning Finance Other Total general government Public safety: Law enforcement School crossing guard Total public safety Public works: Parks Street maintenance Public works administration Recreation maintenance Total public services Culture and recreation: Recreation Library Total culture and recreation Capital outlay Debt service: Principal Interest Total debt service Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balance, beginning Fund balance, ending Variance with Final Budget - Budgeted Amounts Actual Positive Origin Final Amounts a ative $ 8,618 $ 8,618 $ 5,511 $ 3,107 226,916 226,916 229,634 (2,718) 221,180 221,180 205,007 16,173 153,014 153,014 153,395 (381) 147,930 147,930 128,328 19,602 283,820 283,820 379,336 (95,516) 153,872 156,019 115,420 40,599 597,580 633,580 459,203 174,377 586,412 631,696 426,076 205,620 2,379,342 2,462,773 2,101,910 360,863 4,179,814 4,230,650 3,705,526 525,124 _33,948 25,147 8,801 4,213,762 4,264,598 3,730,673 533,925 547,353 547,601 395,741 151,860 599,285 599,858 506,766 93,092 519,277 519,453 462,912 56,541 182,599 182,599 168,448 14,151 1,848,514 1,849,511 1,533,867 315,644 1,723,120 1,731,553 1,519,481 212,072 372,210 372,210 349,694 22,516 2,095,330 2,103,763 X869,175 234,588 55,584 55,584 57,742 (2,158) - 34,800 (34,800) - 761 (761) - 35,561 (35,561) 10,592,532 10,736,229 9,328,928 1,407,301 2,81E 819 _(2,960,51 62564 1,4 1,497,952 2,393,160 2,393,160 1,991,595 (401,565) M4,20 (214,209 (112,871 _ 101,338 2,178,951 2,178,951 1,978,,724 (300,227) (637,868) (781,565) 416,160 1,197,725 637,868 781,565 1,190,204 408,639 - $ - $ 1,606,364 $ 1,606,364 See note to budgetary comparison schedules. -53- MIAMI SHORES VILLAGE, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE EXCISE TAX FUND FISCAL YEAR ENDED SEPTEMBER 30, 2005 Revenues: Public services taxes Expenditures Excess of revenues over expenditures Other financing uses: Transfers out Net change in fund balance Fund balance, beginning Fund balance, ending Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ 1,827,968 $ 1,827,968 $ 1,831,958 $ 3,990 1,827,968 1,827,968 1,831,958 3,990 (1,827,968) (1,827,968) 1,781,595) 46,373 50,363 50,363 194,720 194,720 $ - $ - $ 245,083 $ 245,083 See note to budgetary comparison schedules. -54- MIAMI SHORES VILLAGE, FLORIDA BUDGETARY COMPARISON SCHEDULE LOCAL OPTION GAS TAX FUND FISCAL YEAR ENDED SEPTEMBER 30, 2005 Revenues: Other taxes Interest Total revenues Expenditures: Current: Public works Debt service: Principal Interest Total debt service Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balance, beginning Fund balance, ending Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts e ative $ 263,242 $ 263,242 $ 285,611 $ 22,369 15,017 15,017 5,265 9,752 278,259 278,259 290,876 12,617 296,248 296,248 162,791 133,457 63,304 63,304 62,867 437 21,450 21,450 21,191 259 84,754 84,754 84,058 696 381,002 381,002 246,849 134,153 (102,743) 102,743 44,027 146,770 102,743 103,822 - (103,822) - 38,332 38,332 102,743 103,822 38,332 142,154 See note to budgetary comparison schedules. -55- 1,079 5,695 4,616 1,079 964,895 965,974 $ 970,590 $ 970,590 MIAMI SHORES VILLAGE, FLORIDA NOTE TO BUDGETARY COMPARISON SCHEDULES FISCAL YEAR ENDED SEPTEMBER 30, 2005 NOTE 1. BUDGETS AND BUDGETARY ACCOUNTING Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States. The Village annually adopts an operating budget for the General Fund, Excise Tax Fund, Local Option Gas Tax Fund, Half Cent Surtax Fund and the Debt Service Fund. (1) 35 days prior to fiscal year end, the Village Manager submits to the Village Council a proposed operating budget for the fiscal year commencing the following October 1st. The operating budget is restricted to proposed expenditures and the means of financing them by means of appropriated revenues, other financing sources and appropriations of fund balances. Budgetary control over expenditures for the General Fund is legally maintained at the departmental level. (2) Two public hearings are conducted to obtain taxpayer comments as required by Truth in Millage (TRIM) legislation. (3) Prior to September 28th (unless preempted by TRIM) as stated in the Village's Charter, the budget is legally enacted through passage of an ordinance. (4) The Village Manager may at any time transfer any unencumbered appropriated balance or portion thereof between general classifications of expenditures within an office, department or agency. At the request of the Village Manager and within the last three months of the budget year, the Council may by resolution transfer. any unencumbered appropriated balance or portion thereof, from one office, department or agency to another. (5) Budgeted amounts are as originally adopted or as amended. No significant revisions to the budget were required in 2005. There was one supplemental appropriation during fiscal year ended September 30, 2005 for funding outstanding financial obligations and unanticipated retirement contributions. The General Fund budget was amended by $143,697, the Local Option Gas Tax Fund was amended by $1,079 and the Half Cent Surtax Fund was amended by $27,641. (6) Unencumbered appropriations lapse at year end. -56- COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES NONMAJOR GOVERNMENTAL FUNDS Special Revenue Funds General Trust — This fund accumulates assets for its employees, other governmental entities and /or funds, primarily for the recreation, library or police departments. Half -Cent Surtax — This fund accounts for the Village's portion of the Miami -Dade County one -half percent sales surtax approved by voters in November 2002. Grants — This fund accounts for the use of specific designated resources related to grant programs. Charter High School — This fund accounts for the initial cost and transactions associated with the Charter High School. Law Enforcement Training — This fund accounts for proceeds obtained through fines designated specifically for training law enforcement officers. Police Forfeiture — This fund accounts for proceeds obtained through the sale of confiscated and unclaimed property turned over to the Village through court judgments. Proceeds are to be used solely for law enforcement purposes. Debt Service Fund General Obligation Bonds — This fund accounts for the 1999 and 2004 General Obligation bonds issued to fund the design, developments and construction of the Miami Shores Aquatic Facility (1999) and for the charter school construction (2004). Capital Proiects Funds Aquatic Facility - This fund accounts for the construction of the aquatic center which was funded by the issuance of general obligation bonds through the Florida Municipal Loan Council, Building Better Communities — This fund accounts for the improvements to sidewalks and drainage systems which are being funded by Miami -Dade County. MIANII SHORES VILLAGE, FLORIDA COMBINING BALANCE SHEET NONNWOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2005 ASSETS Cash and cash equivalents Accounts receivable, net Due from other funds Due from other governments Prepaid items Total assets LIABILITIES AND FUND B ANCES (DEFICITS) Liabilities: Accounts payable and accrued liabilities Due to other funds Unearned revenues Total liabilities Fund balances (deficits): Reserved for: Prepaid items Encumbrances Law enforcement Debt service Transportation Unreserved and undesignated Total fund balances (deficits) Total liabilities and fund balances (deficits) Special Revenue Fund_ s Charter Law General Half -Cent High Enforcement Police Trust Surtax Grants School Training Forfeiture Total $ 134,342 $ 92,548 $ 14,976 $ 6,526 $ 12,990 $ 193,795 $ 455,177 - 81,363 25,000 - 276 - 106,639 235,417 300,000 - - - - 535,417 - - - 175,000 - - 175,000 - - 20,880 20,880 S 369,759 $ 473,912 $ 39,976 $ 181,526 $ 13,266 3 214,675 $ 1,293,113 $ 255,480 $ 842 $ - - - 61,347 175,000 1,050 256,530 842 61,347 175,000 - $ - $ 256,322 32,511 268,858 - - 1,050 32,511 526,230 20,880 20,880 17,784 18,245 - - - - 36,029 - - - - 13,266 161,284 174,550 - 454,824 - - - - 454,824 95,445 - 21,371 6,526 - - 80,600 113,229 473,069 21,371 6,526 13,266 182,164 766,883 $ 369,759 $ 473,911 $ 39,976 $ 181,526 $ 13,266 $ 214,675 $ 1,293,113 -57- ML4M SHORES VILLAGE, FLORIDA COMBINING BALANCE SHEET NONMA70R GOVERNMENTAL FUNDS (Continued) SEPTEMBER 30, 2005 LIABILITIES AND FUND BALANCES (DEFICITS) Liabilities: Accounts payable and accrued liabilities Due to other funds Unearned revenues Total liabilities Fund balances (deficits): Reserved for: Prepaid items Encumbrances Law enforcement Debt service Transportation Unreserved and undesignated Total fund balances (deficits) Total liabilities and fand balances (deficits) -58- $ - $ - $ - $ 256,322 100,981 357,135 111,291 838,265 - - - 1,050 100,981 357,135 111,291 1,095,637 70,868 335,380 _(251,509 - 406,248 251,509 _ 507,229 $ 105,626 $ 91,748 36,029 174,550 - 335,380 - 454,824 - (170,909) - 921,622 111,291 $ 2,017,259 Capital Projects Total Debt Building Nonmajor Service Aquatic Better Governmental GO Bonds Facili Communities Funds ASSETS Cash and cash equivalents $ 219,208 $ 71,309 $ $ 745,694 Accounts receivable, net 8,511 - - 115,150 Due from other funds 208,642 34,317 - 778,376 Due from other governments - - 111,291 286,291 Prepaid items 70,868 - - 91,748 Total assets $ 507,229 $ 105,626 $ 111,291 $ 2,017,259 LIABILITIES AND FUND BALANCES (DEFICITS) Liabilities: Accounts payable and accrued liabilities Due to other funds Unearned revenues Total liabilities Fund balances (deficits): Reserved for: Prepaid items Encumbrances Law enforcement Debt service Transportation Unreserved and undesignated Total fund balances (deficits) Total liabilities and fand balances (deficits) -58- $ - $ - $ - $ 256,322 100,981 357,135 111,291 838,265 - - - 1,050 100,981 357,135 111,291 1,095,637 70,868 335,380 _(251,509 - 406,248 251,509 _ 507,229 $ 105,626 $ 91,748 36,029 174,550 - 335,380 - 454,824 - (170,909) - 921,622 111,291 $ 2,017,259 MIANU SHORES VILLAGE, FLORIDA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMA70R GOVERNMENTAL FUNDS FISCAL YEAR ENDED SEPTEMBER 30; 2005 Sp_ ecial Revenue Funds Charter Law General Half -Cent High Enforcement Police Trust Surtax Grants School Training Forfeiture Total Revenues: Property taxes $ _ $ - $ Other taxes - 313,826 - - 313,826 Intergovernmental revenues - - 40,033 175,000 - - 215,033 Miscellaneous 35,357 - - 6,797 3,523 6,057 51,734 Interest - 2,781 1,273 - - 5,227 9,281 Contributions 21,581 - - 200,000 - - 221,581 Total revenues 56,938 316,607 41,3176; 381,797 3,523 11,284 811,455 Expenditures: Current: General government 2,124 - 21,405 367,923 - - 391,452 Public safety - - - 20,803 20,803 Public works - 100,506 - _ 100,506 Culture and recreation 207 - - - - - 207 Capital outlay - 28,034 - - - 28,034 Debt service: Principal - - - - - 81,200 81,200 Interest _ _ _ - 2,831 2,831 Total expenditures 2,331 100,506 49,439 367,923 - 104,834 625,033 Excess (deficiency) of revenues over expenditures 54,607 216,101 8,133 13,874 3,523 (93,550) 186,422 Other financing sources (uses): Transfers in - - - - - 72,871 72,871 Transfers out - (13_ 2,50fJ) - - - - 132,500) Total other financing sources (uses) - 132,500 - - 722871 (59,629 Net change in fund balances 54,607 83,601 (8,133) 13,874 3,523 (20,679) 126,793 Fund balances (deficits), beginning 58,622 389,468 (13,238) (7,348) 9,743 202,843 640,090 Fund balances (deficits), ending $ 113,229 S 473,069 S 21,371 ) S 6,526 $ 13,266 $ 182,164 $ 766,883 -59- MIAMI SHORES VILLAGE, FLORIDA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAIOR GOVERNMENTAL FUNDS (Continued) FISCAL YEAR ENDED SEPTEMBER 30, 2005 Revenues: Property taxes Other taxes Intergovernmental revenues Miscellaneous Interest Contributions Total revenues Expenditures: Current: General government Public safety Public works Culture and recreation Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances (deficits), beginning Fund balances (deficits), ending -60- Capital Projects Total Debt Building Nonmajor Service Aquatic Better Governmental GO Bonds FaciIi Communities Funds $ 648,827 $ - $ - $ 648,827 - - 313,826 - - 111,291 326,324 - - - 51,734 4,624 2,264 - 16,169 - - - 221,581 653,451 2,264 111,291 1,578,461 4,119 15,835 - 411,406 - - 20,803 - - 100,506 - - - 207 - 94,286 111,291 233,611 160,000 - - 241,200 363,264 - - 366,095 527,383 110,121 111,291 1,373,828 126,068 1( 07,8 - 204,633 - 40,000 - 112,871 - - (132,500) - 40,000 - (19,629) 126,068 (67,857) 185,004 280,180 183,652 736,618 $ 406,248 $ 251,509 $ - $ 921,622 MIAMI SHORES VILLAGE, FLORIDA BUDGETARY COMPARISON SCHEDULE HALF CENT SURTAX FUND FISCAL YEAR ENDED SEPTEMBER 30, 2005 Revenues: Other taxes Interest Total revenues Expenditures: Current: Public works Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balance, beginning Fund balance, ending -61- Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ 285,000 $ 285,000 $ 313,826 $ 28,826 6,498 6,498 2,781 3,717 291,498 291,498 316,607 25,109 291,430 237,071 100,506 136,565 5,068 5;068 - 5,068 296,498 242,139 100,506 141,633 (5,000 49,359 216,101 166,742 5,000 - - - 82,000 132,500 50,500 5,000 (82,000 (132,500) 50,500 - (32,641) 83,601 116,242 - 32,641 389,468 356,827 $ 473,069 $ 473,069 MIAMI SHORES VILLAGE, FLORIDA BUDGETARY COMPARISON SCHEDULE DEBT SERVICE FUND FISCAL YEAR ENDED SEPTEMBER 30, 2005 Revenues: Property taxes Interest Total revenues Expenditures: Current: General government Debt service: Principal Interest Total debt service Total expenditures Excess of revenues over expenditures Other financing uses - transfers out Net change in fund balance Fund balance, beginning Fund balance, ending 25,575 25,575 4,119 Variance with 120,000 160,000 160,000 Final 318,460 432,179 363,264 Budget - Bud eg ted Amounts Actual Positive Ori inal Final Amounts qLe&ative $ 665,350 $ 665,350 $ 648,827 $ (16,523) 7,927 7,927 4,624 (3,303 673,277 673,277 653,451 19,826 25,575 25,575 4,119 21,456 120,000 160,000 160,000 - 318,460 432,179 363,264 68,915 438,460 592,179 523,264 68,915 464,035 617,754 527,383 90,371 209,242 55,523 126,068 70,545 2092242 55,523 - 55,523 - - 126,068 126,068 - - 280,180 280,180 $ - $ - $ 406,248 $ 406,248 -62- INTERNAL SERVICE TUNIS Internal service funds are used to account for the financing of goods or services provided by one department to other departments of the Village on a cost reimbursement basis. Risk Management Fund — This fund accounts for the accumulation and allocation of costs associated with insurance. Fleet Maintenance Fund — This fund accounts for all direct and indirect costs to maintain and operate the Village's vehicles and equipment fleet. MIAMI SHORES VILLAGE, FLORIDA COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS SEPTEMBER 30, 2005 ASSETS Current assets: Cash and cash equivalents Accounts receivable, net Due from other funds Prepaid items Inventories Total current assets Capital assets: Capital assets not being depreciated Capital assets being depreciated, net Total noncurrent assets Total assets LIABILITIES Current liabilities: Accounts payable and accrued liabilities Due to other funds Compensated absences Notes payable Claims payable Total current liabilities Noncurrent liabilities: Compensated absences Notes payable Claims payable Total noncurrent liabilities Total liabilities NET ASSETS M FIC1Ti Invested in capital assets, net of related debt Restricted for construction Unrestricted (deficit) Total net assets (deficit) -63- Risk Fleet Management Maintenance Total $ 310,910 $ 814,972 $ 1,125,882 148,789 - 148,789 - 229,205 229,205 6,000 17,573 23,573 - 27,760 27,760 465,699 1,089,510 1,555,209 - 7,127 7,127 311,467 311,467 - 318,594 318,594 465,699 1,408,104 1,873,803 74,449 12,856 87,305 533,655 1,206,223 1,739,878 - 8,236 8,236 - 42,960 42,960 139,528 - 139,528 747,632 1,270,275 2,017,907 - 24,707 24,707 - 426,063 426,063 367,137 - 367,137 367,137 450,770 817,907 1,114,769 1,721,045 2,835,814 - 318,594 318,594 - 469,023 469,023 649,070 1,100 558 (1,749,628) $ (649,070) L__(312,941 $ 962,011 MIAMI SHORES VILLAGE, FLORIDA COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS INTERNAL SERVICE FUNDS FISCAL YEAR ENDED SEPTEMBER 30, 2005 Charges for services Operating expenses: Administrative and general Personnel expenses Depreciation Insurance premiums Insurance claims Total operating expenses Operating income (loss) Non - operating income (expense): Gain on sale of capital assets Interest income Interest expense Total non - operating income (expense) Change in net assets Deficit, beginning, as previously reported Prior period adjustment (Note 2a) Deficit, beginning, as restated Deficit, ending -64- Risk Fleet Management Maintenance Fund Fund Total $ 1,114,590 $ 720,870 $ 1,835,460 423,428 372,062 795,490 - 210,212 210,212 - 135,976 135,976 630,366 - 630,366 179,494 - 179,494 1,233,288 718,250 1,951,538 (118,698) 2,620 (116,078 - 1,651 1,651 8,394 14,590 22,984 (11,142 ) (14,323) (25,465) (2,748) 1,918 (830) (121,446) 4,538 (116,908) (527,624) (464,317) (991,941) 146,838 146,838 (527,624 (317,479) (845,103) $ 649,070) $ (312,941) $ 962,011 MIAMI SHORES VILLAGE, FLORIDA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FISCAL YEAR ENDED SEPTEMBER 30, 2005 Cash flows from operating activities: Cash received from customers, governments and other funds Cash paid to suppliers Cash paid to employees Net cash provided by operating activities Cash flows from noncapital financing activities: Proceeds from noncapital debt Principal paid on noncapital debt Interest paid on noncapital debt Net cash used by noncapital financing activities Cash flows from capital and related financing activities: Proceeds from capital debt Principal paid on capital debt Interest paid on capital debt Proceeds from sale of capital assets Net cash provided by capital and related financing Cash flows from investing activities: Interest received Net increase in cash and cash equivalents Cash and cash equivalents, beginning Cash and cash equivalents, ending Reconciliation of operating revenue (loss) to net cash used by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation Changes in operating assets and liabilities: Accounts receivable Due from other funds Prepaid items Inventories Accounts payable and accrued liabilities Due to other funds Compensated absences Net cash provided by operating activities -65- Risk . Fleet Management Maintenance Fund Fund Total $ 1,596,134 $ 1,184,478 $ 2,780,612 (1,180,626) (386,834) (1,567,460) _(233,265 (233,265) 415,508 564,379 979,887 675,000 - 675,000 (675,000) - (675,000) (11,142) - (11,142 11,142) - (11,142) - 500,000 500,000 - (30,977) (30,977) - (14,323) (14,323) - 1,651 1,651 - 456,351 456,351 4,273 8,394 ---- 1400 22,984 412,760 1,035,320 1,448,080 (101,850 220,348 322,198 $ 310,910 $L 814,972 1 1,125,882 $ (118,698) $ 2,620 $ 116,078 135,976 135,976 (11,428) - (11,428) 88,452 (229,205) (140,753) 4,000 (15,323) (11,323) - 4,273 4,273 48,662 (2,791) 45,871 404,520 692,813 1,097,333 - (23,984) 23,984 $ 415,508 $ 564,379 $ 979,887 THIS PAGE LNTENTIONALLYLEFT BLANK FIDUCIARY FUNDS These funds account for assets held by the Village in a trustee capacity or as an agent for employees. Pension Trust Funds: Police Officers Retirement System — To account for the accumulation of resources for pension benefit payments to police officers who have retired from Miami Shores Village. General Employees Retirement System — To account for the accumulation of resources for pension benefit payments to employees, other than police, who have retired from Miami Shores Village. Agency Fund: Police Insurance Trust Fund — To accumulate resources on behalf of police personnel to partially cover retirement health insurance. MIAMI SHORES VILLAGE, FLORIDA COMBINING STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS SEPTEMBER 30, 2005 ASSETS Cash and cash equivalents Investments: Connnon stocks Corporate bonds U.S. obligations U.S. Federal agencies Accrued interest receivable Other assets Total assets LIABILITIES AND NET ASSETS Liabilities: Accounts payable DROP liability Total liabilities Net assets held in trust for pension benefits -66- General Police Employees Pension Pension Trust Trust Total $ 421,041, $ 141,144 $ 562,185 6,719,651 5,226,039 11,945,690 1,504,129 1,120,224 2,624,353, 1,206,323 1,447,619 2,653,942 ' 718,705 2,092 720,797' 35,695 26,769 62,464 103 - 103 10,605,647 7,963,887 18,569,534 41,394 36,321 77,715 262,450 - 262,450 303,844 36,321 340,165 $ 10,30,1,803 $ 7,927,566 $ 18,229369 MIAMI SHORES VILLAGE, FLORIDA COMBINING STATEMENT OF CHANGES IN FIDUCIARYNET ASSETS FIDUCIARY FUNDS FISCAL YEAR ENDED SEPTEMBER 30, 2005 ADDITIONS Contributions: City Employees State Other receipts Total contributions Investment income: Net appreciation in fair value of investments Interest Dividends Less investment expenses Net investment income Total additions DEDUCTIONS Pension benefits Refmids Professional services Total deductions Change in net assets Net assets held in trust for pension benefits, beginning Net assets held in trust for pension benefits, ending -67- General Police Employees Pension Pension Fund Fund Total $ 249,329 $ - $ 249,329 121,441 171,037 292,478 68,063 - 68,063 3,329 - 3,329 442,162 171,037 613,199 891,770 664,360 1,556,130 149,585 114,959 264,544 109,776 82,999 192,775 (10,892) (38,172) (49,064) 1,140,239 824,146 1,964,3 85 1,582,401 995,183 2,577,584 570,651 243,961 814,612 121,956 12,371 134,327 27,056 5,013 32,069 719,663 261,345 981,008 862,738 733,838 1,596,576 9,439,065 7,193,728 16,632,793 $ 10,301,803 $ 7,927,566 $ 18,229,369 ASSETS Cash held with trustee LIABILITIES Deposits held in trust MIAMI SHORES VILLAGE, FLORIDA STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUND FISCAL YEAR ENDED SEPTEMBER 30, 2005 Police Insurance Trust Agency Fund Balance Balance September 30, September 30, 2004 Additions Deductions 2005 $ 93,004 $ 5,508 $ - $ 98,512 $ 93,004 $ 5,508 $ -68- $ 98,512 THIS PAGE INNTENTIONALL Y LEFT BLANK MIAMI SHORES VILLAGE, ]FLORIDA GOVERNMENT WIDE EXPENSES BY FUNCTION (1) LAST TEN FISCAL YEARS (1) Governmental Activities (1) Information for fiscal years ended September 30, 1996 to 2002 are unavailable. -69- Business -type Activities Storm- Sanitation water Total $ 1,390,255 $ 126,965 $ 12,017,979 1,48 6,983 149,011 12,937,640 2,201,480 133,396 14,806,408 Interest Recreation on Fiscal General Public Public and Long -Term Year Government Safety works Culture Debt 2003 $ 2,420,450 $ 3,891,173 $ 1,749,842 $ 2,280,170 $ 159,124 2004 3,517,307 3,699,805 1,409,982 2,488,378 186,174 2005 3,330,873 4,144,837 2,133,108 2,317,936 544,778 (1) Information for fiscal years ended September 30, 1996 to 2002 are unavailable. -69- Business -type Activities Storm- Sanitation water Total $ 1,390,255 $ 126,965 $ 12,017,979 1,48 6,983 149,011 12,937,640 2,201,480 133,396 14,806,408 ML4MI SHORES VILLAGE, ]FLORIDA GOVERI'IMENT -WIDE REVENUES LAST TENT FISCAL YEARS (1) Program. Revenues General Revenues (1) Information for fiscal years ended September 30, 1996 to 2002 are unavailable. -70- Operating Capital Inter- Gain on Charges Grants Grants Public governmental Interest Sale of Fiscal for and and Property Services Other Revenues- Earnings - Capital Year Services Contnbutions Contnbutious Taxes Tag Taxes Unrestricted Miscellaneous Unrestricted Assets Total 2003 $ 3 ;602,305 $ 637,595 $ - $ 4,362,922 $ 1,221,854 $ 4587749 $ 502,887 $ 117,731 $ 55,096 $ - $ 10,959,139 2004 3,568,472 89,545 - 5,398,417 1,213,775 554,118 888,156 284,224 43,363 - 12,040,070 2005 5,091,475 697;160 2,111,291 5,372,790 1;831,958 313,826 1,169,950 239,325 189,699 1,651 17,017,474 (1) Information for fiscal years ended September 30, 1996 to 2002 are unavailable. -70- MIAMI SHORES VILLAGE, FLORIDA GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION LAST TEN FISCAL YEARS (1) (1) Includes general fund only (excludes capital outlay) . -71- Culture Fiscal General Public Public and Debt Year Government Mety Works Recreation Service Total 1996 $ 858,675 $ 3,637,242 $ 2,517,619 $ 1,946,134 $ 77,744 $ 9,037,414 1997 1,006,853 3,552,639 2,398,900 1,666,977 275,353 8,900,722 1998 1,003,637 3,024,810 2,350,017 1,667,392 34,875 8,080,731 1999 894,358 3,026,323 2,145,106 1,539,543 22,759 7,628,089 2000 841,917 3,168,647 1,241,137 1,662,944 19,491 6,934,136 2001 1,070,889 3,529,091 1,089,441 2,174,840 22,769 7,887,030 2002 1,706,105 3,340,822 1,521,791 1,643,286 16,498 8,228,502 2003 1,906,820 3,314,738 1,522,246 1,871,604 10,713 8,626,121 2004 2,114,665 3,553,208 1,232,009 2,056,544 23,423 8,979,849 2005 2,101,910 3,730,673 1,533,867 1,869,175 35,561 9,271,186 (1) Includes general fund only (excludes capital outlay) . -71- MIAMI SHORES VILLAGE, FLORIDA GENERAL GOVERNMENTAL REVENUES BY SOURCE LAST TEN FISCAL YEARS ( *) Sanitation services and fees transferred to newly created Enterprise Fund on 10/01/00. -72- Licenses Charges Fires Miscellaneous Fiscal Property and Inter- for and and Year Taxes Pen-nits goverpmental Services * Forfeitures Interest Total 1996 $ 4,226,963 $ 218,768 $ 1,156,703 $ 1,927,433 $ 215,633 $ 484,328 $ 8,229,828 1997 4,285,860 196,806 1,196,306 2,674,061 207,350 368,131 8,328,514 1998 4,525,306 211,459 1,203,077 2,304,259 205,237 370,648 8,819,986 1999 3,072,144 231,674 942,571 2,145,903 111,930 411,006 6,915,228 2000 3,092,104 292,917 910,633 492,005 258,611 617,994 5,664,264 2001 3,152,976 355,561 919,339 671,075 290,484 507,349 5,896,784 2002 3,404,110 396,766 1,097,231 672,946 264,248 305,188 6,140,489 2003 3,512,068 433,156 1,120,152 629,181 249,560 290,426 6,234,543 2004 4,042,656 645,238 1,164,631 653,943 253,121 226,777 6,986,366 2005 -4,723,963 790,257 994,950 865,093 264,742 227,359 7,866,364 ( *) Sanitation services and fees transferred to newly created Enterprise Fund on 10/01/00. -72- MIAMI SHORES VILLAGE, FLORIDA PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS Source: Miami Shores Village Finance Department and Miami -Dade County Property Appraisers Office. -73- % of Total Current % of Delinquent Total Total Tax Fiscal Tax Tax Levy Tax Tax Collection Year Levy Collections Collected Collections Collections to Le 1996 $ 2,904,311 $ 2,765,122 95.2% $ 46,639 $ 2,811,761 96.8% 1997 2,989,650 2,821,922 94.4% 35,579 2,857,501 95.6% 1998 2,986,804 2,985,026 99.9% 47,634 3,032,660 101.5% 1999 3,096,789 3,044,701 98.3% 27,443 3,072,144 99.2% 2000 3,100,630 3,051,598 98.4% 40,506 3,092,104 99.7% 2001 3,277,996 3,496,643 106.7% 153,480 3,650,123 111.4% 2002 3,507,040 3,723,063 106.2% 105,618 3,828,681 109.2% 2003 3,750,982 3,323,531 88.6% 104,404 3,427,935 91.4% 2004 4,183,498 4,132,154 98.8% 14,001 4,146,155 99.1% 2005 4,922,951 4,930,423 100.2% 21,406 4,951,829 100.6% Source: Miami Shores Village Finance Department and Miami -Dade County Property Appraisers Office. -73- MIAMI SHORES VILLAGE, FLORIDA ASSESSED VALUE OF TAXABLE PROPERTIES LAST TEN FISCAL YEARS Source: Miami -Dade County Property Appraisers Office. -74- Real Personal Property Properly Centrally Total Fiscal Assessed Assessed Assessed Assessed Year Value Value Value Value 1996 $ 328,044,932 $ 13,238,273 $ 681,979 $ 341,965,184 1997 327,242,080 14,159,332 663,877 342,065,289 1998 352,803,811 14,849,506 862,792 368,516,109 1999 367,730,418 17,216,418 854,252 385,801,088 2000 390,040,958 16,975,407 894,140 407,910,505 2001 424, 016,297 15, 878,103 908,240 440, 802,640 2002 462,954,450 18,854,983 946,240 482,755,673 2003 516,425,642 20,389,383 944,009 537,759,034 2004 572,491,450 23,151,545 1,078,390 596,721,385 2005 686,912,201 23,406,085 1,233,756 711,552,042 Source: Miami -Dade County Property Appraisers Office. -74- MIAMI SHORES VILLAGE, FLORIDA PROPERTY TAX LEVIES LAST TEN FISCAL YEARS Source: Miami -Dade County Property Appraiser. -75- Total Fiscal County- Debt Tax Year yillag Wide Service Fire Libraa School State Levies 1996 8.493 6.828 0,829 2.518 0.329 10.389 0.687 30.073 1997 8.740 6.469 0.774 2.745 0.339 10.366 0.710 30.143 1998 8.740 6.023 0.837 2.869 0.334 10.260 0.644 29.707 1999 8.740 - 0.607 2.752 - 9.744 0.641 22.484 2000 8.363 6.403 0.515 2.752 - 9.617 0.738 28.388 2001 8.363 6.403 0.515 2.752 - 9.617 0.738 28.388 2002 7.750 6.279 0.515 2.661 9.252 0.736 27.193 2003 7.750 6.382 0.515 2.337 - 9.715 0.816 27.515 2004 8.250 6.664 1.125 2.661 - 8.787 0.636 28.123 2005 8.250 6.549 0.930 2.661 - 8.438 0.736 27.564 Source: Miami -Dade County Property Appraiser. -75- MIAMI SHORES VILLAGE, FLORIDA DIRECT AND OVERLAPPING DEBT SEPTEMBER 30, 2005 Sources: (1) Miami Shores Village, Florida - Finance Department (2) Miami -Dade County, Finance Department - Bond Administration Division (3) Miami -Dade County Pubic Schools - Finance Department -76- Percent Amount Net Applicable Applicable Debt to Name of to Name of Jurisdiction Outstandb Government Govemment Miami Shores Village, Florida (1) $ 7,221,000 100.00% $ 7,221,000 Miami -Dade County, Florida (2) 500,362,000 0.41% 2,051,484 Miami -Dade County Public Schools (3) 498,794,000 0.41% 2,045,055 Sources: (1) Miami Shores Village, Florida - Finance Department (2) Miami -Dade County, Finance Department - Bond Administration Division (3) Miami -Dade County Pubic Schools - Finance Department -76- MIAMI SHORES VILLAGE, FLORIDA DEMOGRAPHIC INFORMATION AND STATISTICS LAST TEN FISCAL YEARS Sources: University of Florida, Gainesville, Florida - Florida Bureau of Economic and Business Research State of Florida, Tallahassee, Florida - Florida Department of Labor & Security Miami -Dade County Public Schools - Finance Department, Budget & Planning Division Beacon Council Florida Research and'Economic Database -77- Per Capita Personal Income Uneinplo zy nent_ILate Miami- State Miami- State Fiscal Village Median Miami Dade of Nation- Dade of Nation - Year Population Age Shores Coup Florida wide Coun Florida wide 1996 10,147 36.9 $ 19,266 $ 22,370 $ 24,198 $ 24,436 7.7% 3.2% 4.1% 1997 10,137 38.7 19,459 22,392 24,234 24,680 6.5% 4.2% 4.6% 1998 10,142 40.7 19,556 22,504 24,355 24,924 6.5% 4.3% 4.7% 1999 10,139 39.9 19,947 22,954 24,843 25,171 6.3% 4.3% 4.9% 2000 10,129 39.7 27,926 22,840 24,097 25,422 5.1% 4.5% 3.8% 2001 10,130 39.S 28,624 23,183 24,217 26,058 4.1% 4.9% 4.2% 2002 10,380 37.7 31,017 25,320 27,764 29,496 7.4% S.4% 5.8% 2003 10,385 35.6 33,033 25,953 28,403 29,938 6.4 % 4.5% 6.0% 2004 10,385 37.7 34,129 26,594 28,523 30,413 6.6% 5.3 % 6.0% 2005 10,380 37.7 56,306 27,593 28,470 31,472 4.7% 4.2% 5.2% Sources: University of Florida, Gainesville, Florida - Florida Bureau of Economic and Business Research State of Florida, Tallahassee, Florida - Florida Department of Labor & Security Miami -Dade County Public Schools - Finance Department, Budget & Planning Division Beacon Council Florida Research and'Economic Database -77- MIAMI SHORES VILLAGE, FLORIDA PROPERTY VALUE, CONSTRUCTION AND BANK DEPOSITS LAST TEN FISCAL YEARS Construction Value Pxopea- Values I2� Fiscal Property Bank Year Values Commercial Residential Deposits I Commercial Resi&Rtial 1996 $ 341,965,184 $ 4,196,947 $ 4,958,956 $ 11,296,602 $ 30,816,273 $ 311,148,911 1997 342,065,289 1,622,916 3,934,603 10,524,759 30,594,928 311,470,361 1998 368,516,109 823,366 4,938,015 10,737,507 31,830,638 336,685,471 1999 385,801,088 893,352 5,555,267 15,025,296 33,660,694 352,140,394 2000 407,910,505 2,683,853 3,888,687 17,366,270 33,885,496 374,028,009 2001 440,802,640 9,587,390 7,224,981 17,149,192 46,685,839 394,116,801 2002 482,755,673 12,827,928 7,586,230 20,365,445 53,994,591 428,761,082 2003 537,759,034 577,257 9,180,269 20,976,409 67,219,879 470,539,155 2004 596,721,385 2,387,812 10,078,404 12,594,055 49,289,186 547,432,199 2005 711,552,042 2,602,715 10,985,460 17,262,389 74,070,000 637,482,042 Sources: (1) Municipal Bank Deposit Records (2) Estimated Actual Values -78- MIAMI SHORES VILLAGE, FLORIDA MISCELLANEOUS INFORMATION SEPTEMBER 30, 2005 Date of incorporation January 1, 1932 Form of government Council/Manager Population as of September 30, 2005 10,385 Size (of Village area) 2.5 square miles Total sheet miles 40 Number of streetlights 1,038 Fire protection (provided by Miami -Dade County): Number of county- operated stations I Number of firefighters including officers 7 Police protection: Number of stations 1 Number of police officers (all ranks /staff) 43 Education: 5 University: 1 Number of classrooms 104 Number of academicians 564 Number of students 6.,154 Elementary school: 1 Number of classrooms 71 Number of academicians 105 Nurnber of students 2,101 Pre - school and centers: Number of classrooms 20 Number of academicians 40 Number of students 308 Recreation and cultural activities: Number of village -owned parks 5 Number of libraries 1 Number of volumes as of September 30, 2005 52,011 Number of public swimming facilities 1 Number of recreation facilities 1 Number of public golf courses 1 Village employment: Number of full -time employees 227 Number of part -time and seasonal employees 385 Other information: Number of new building /home constructions 27 -79- TMpgyer Publix Supermarket City National Bank of Florida Tropical Chevrolet, Inc. Omar Cassola Bujolo, Inc. David and June Heller Robert Ader Leung Venture Sandra K. Chaille Tsao Investment, Inc. MIAMI SHORES VILLAGE, FLORIDA PRINCIPAL TAXPAYERS SEPTEMBER 30, 2005 Propefty Location 9050 Biscayne Boulevard Shores Square, 9000 Block Biscayne Boulevard 8800 Biscayne Boulevard 9325 North Bayshore Drive W algreen's Center, 9020 Biscayne Boulevard 1300 N.E. 94th Street 9701 N.E. 13th Avenue 9101 Biscayne Boulevard 9105 Biscayne Boulevard 10500 Biscayne Boulevard Assessed Value Source: Miami -Dade County Property Appraiser Office -80- Assessed Value for 2004 $ 7,414,598 3,200,000 2,409,092 2,233,411 2,223,705 1,748,536 1,616,058 1,429,546 1,320,579 1,283,524 $ 24,879,049 $ 686,912,201 Percent of Total Village -Wide Assessment 1.079% 0.466% 0.351% 0.325% 0.324% 0.255% 0.235% 0.208% 0.192% 0.187% MIAMI SHORES VILLAGE, FLORIDA TEN LARGEST PUBLIC AND PRIVATE EMPLOYERS LOCATED IN MIAMI -DADE COUNTY, FLORIDA SEPTEMBER 30, 2005 Ten Largest Public Employers Ten Lax est Private Em to ers Miami -Dade County Public Schools 45,886 University of Miami 9,079 Miami -Dade County, Florida 32,000 American Airlines 9,000 United States Government 20,100 Baptist Health Care Systems 7,000 State of Florida 18,900 Precision Response Corporation 6,000 Jackson Memorial Hospital 11,700 UPS 5,000 Miami -Dade Conununity College 7,500 BellSouth, Inc. 4,700 Florida International University 3,500 Carnival Cruise Lines 4,000 City of Miami, Florida 3,400 Publix Supermarkets 4,000 Veterans Adrnin. Medical Center 2,018 Florida Power & Light Company 3,665 U.S. Coast Guard 1,823 Mt. Sinai Medical Center 3,000 Source: The Beacon Council - Research Department -81- THIS PAGE INTENTIONALL Y LEFT BLANK COMPLIANCE SECTION R a C h I 1, 0 Holt Accountants ® Advisors Report of Independent Certified Public Accountants 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 Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida We have audited the financial statements of the governmental activities, business -type activities, each major fund, and the aggregate remaining fund information of Miami Shores Village, Florida (the Village), as of September 30, 2005 and for the year then ended, which collectively comprise of the Village's basic financial statements and have issued our report thereon dated February 17, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial ReDortin In planning and performing our audit, we considered the Village's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the basic financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the basic financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. However, we noted other matters involving the internal control over financial reporting that we have reported to management in the accompanying schedule of findings. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Village's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. -82- Rachlin Cohen & Holtz UP One Southeast Third Avenue ■ Tenth Floor ■ Miami, Florida 33131 ■ Phone 305.377.4228 ■ Fax 305.377.8331 ■ www.rachlin.com An Independent Member of Baker Tilly International M I A M I ■ F 0 R T L A U 0 E R D A L E ■ W E S T P A L M B E A C H S T U A R T Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida Page Two This report is intended solely for the information and use of the Mayor, Village Council, management, and applicable governmental agencies and is not intended to be and should not be used by anyone other than these specified parties. Miami, Florida February 17, 2006 -83- Ra cr02Z Accountants o Advisors Accountants m Advisors Management Letter in Accordance with the Rules of the Auditor General of the State of Florida Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida We have audited the financial statements of the governmental activities, business -type activities, each major fund, and the aggregate remaining fund information of Miami Shores Village, Florida (the Village) as of September 30, 2005 and for the year then ended, which collectively comprise of the Village's basic financial statements and have issued our report thereon dated February 17, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. We have issued our Report of Independent Certified Public Accountants on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements. Disclosures in this report, which is dated February 17, 2006, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with the provisions of Chapter 10.550, Rules of the Auditor General, which govern the conduct of local governmental entity audits performed in the State of Florida and require that certain items be addressed in this letter. In connection with our audit of the basic financial statements of the Village for the year ended September 30, 2005, we report the following in accordance with Chapter 10.550 Rules of the Auditor General, Local Governmental Entity Audits, which requires that this report specifically address but not be limited to the matters outlined in Rule 10.554(1)(h): I . Recommendations made in the preceding financial audit report have been implemented, except as disclosed in the accompanying schedule of findings. 2. The Village was in compliance with Section 218.415, Florida Statutes, regarding the investment of public funds. 3. Recommendations to improve the Village's present financial management, accounting procedures, and internal controls accompany this report in the schedule of findings. 4. During the course of our audit, other than matters that are clearly inconsequential, considering both quantitative and qualitative factors, nothing came to our attention that caused us to believe that the Village: a. Was in violation of any laws, rules or regulations and contractual provisions or abuse that have occurred, or were likely to have occurred, or were discovered within the scope of the audit. -84- Rachlin Cohen & Haltz LLP One Southeast Third Avenue • Tenth Floor ■ Miami, Florida 33131 ■ Phone 305.377.4228 ■ Fax 305.377.8331 ■ www.rachlin.com An Independent Member of Baker Tilly International M I A M I ■ F 0 R T L A U D E R D A L E W E S T P A L M B E A C R ■ S T U A R T Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida Page Two b. Made any illegal or improper expenditures that were discovered within the scope of the audit that may materially affect the financial statements. c. Had deficiencies in internal control that are reportable conditions including but not limited to: (1) Improper or inadequate accounting procedures, except as reported in the schedule of findings. (2) Failures to properly record financial transactions (3) Other inaccuracies, shortages, defalcations, and instances of fraud discovered by, or that came to the attention of the auditor. Miami Shores Village, Florida was incorporated by Laws of Florida 15690. a. The Village, during fiscal year 2005, did ineet one of the conditions described in Section 218.503(1), Florida Statutes. b. The annual financial report for the fiscal year ended September 30, 2005 has been filed with the Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes and is in agreement with the audited financial statements for the fiscal year ended September 30, 2005. c. During the course of our audit, we applied financial condition assessment procedures pursuant to Rule 10.556(7). It is management's responsibility to monitor the Village's financial condition, and our financial condition assessment, which was performed as of the Village's fiscal year end, was based on representations made by management and the review of financial information provided by the Village. There were matters that identified deteriorating financial conditions as presented in the schedule of findings which have been discussed and disclosed to the responsible Village officials. This report is intended solely for the information and use of the Mayor, Village Council, management and the Auditor General of the State of Florida and is not intended to be and should not be used by anyone other than these specified parties. . /L e - Miami, Florida February 17, 2006 N]a ffft Cm 1i Ka n c i;w7 - Accountants - Advisors MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS SEPTEMBER 30, 2005 PART I. CURRENT YEAR COMMENTS AND RECOMMENDATIONS 05 -01 Excess of Expenditures Over Appropriations Finding Pursuant to Section 166.241 (2) of Chapter 166 of the Florida Statutes, the governing body of each municipality shall adopt a budget each fiscal year. The budget must be adopted by ordinance or resolution unless otherwise specified in the respective municipality's charter. The amount available from taxation and other sources, including amounts carried over from prior fiscal years, must equal the total appropriations for expenditures and reserves. The budget must regulate expenditures of the municipality, and it is unlawful for any officer of a municipal government to expend or contract for expenditures in any fiscal year except in pursuance of budgeted appropriations. We noted that various categories of expenditures in the General Fund, Local Option Gas Tax Fund and Half Cent Surtax Fund exceeded budgetary provisions. Recommendation Section 166.241 (3) a of the Florida Statutes provides the authority for the governing body of the Village to increase and decrease appropriations within each fund. We suggest that, in the fixture, all budgets be monitored to ensure compliance with Florida Statutes. View of Responsible Officials and Corrective Action Standard procedures provide for Budget Amendment, two of which were presented and passed during FY'05. The overruns were inadvertently overlooked and were excluded from the Budget Amendments passed by the Village Council. Future financials will be maintained within budgetary restraints. 05 -02 Fund Deficits Finding Deficits place a financial burden upon a municipality. The effects of a deficit are varied but their initial impact will generally be felt on cash flows. The financial statements of the Village reflect unrestricted deficits in the Risk Management Fund and Fleet Maintenance internal service funds of $649,070 and $1,100,558, respectively, at September 30, 2005. The deficit in the Risk Management Fund increased by $121,446 in the 2005 fiscal year primarily as a result of expenditures exceeding charges for services. In prior years, a large portion of the deficit was created as a result of the compliance with generally accepted accounting principles as they pertain to risk activities. These principles provide that, upon establishment of an internal service fund, all fund liabilities be recorded within the fund. The recorded liabilities include reported claims as well as a provision for claims incurred but not reported. -86- MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART I. CURRENT YEAR COMMENTS AND RECOMMENDATIONS (Continued) 05 -02 Fund Deficits (Continued) Finding (Continued) The deficit in the Fleet Maintenance Fund decreased in the current year by $4,538, before the prior period adjustment. In the prior year, the deficit was created as a result of expenditures in excess of charges for services. • The Charter High School Construction, Capital Improvements and Aquatic Facility Capital Projects Funds reflect unreserved and undesignated deficits of $478,884, $1,247,623 and $251,509, respectively, as of September 30, 2005. These deficits are the result of construction costs in excess of funding to date. Recommendation We suggest that the Village Council address.the deficits in these funds. For the internal service funds, the Village may consider increasing the charges to the other funds to eliminate the deficit. For the Capital Projects Funds, the Village should authorize the necessary funding to ensure the elimination of the deficits. View of Responsible Officials and Corrective Action The Deficits resulted from cash flow and timing issues. For the Risk Management Fund, the deficit resulted in a significantly larger number of losses incurred by the Village. The budget adopted for FY'06 included funding to reduce the deficit by fiscal year end. The deficit in Fleet Maintenance resulted in emergency repairs on vehicles. Future budgets will include reservations for shortfalls and emergencies. The deficit in the Charter School Capital Project Fund results form investments that were recorded in the General Fund. The General Fund will transfer the proceeds of the investment in' FY'06 to eliminate the deficit. The deficit in the Capital Improvement Fund is a result of timing. The Village refinanced debt, moving $1,750,000 into the Capital Projects Fund, reversing the deficit. This transaction was delayed until after January 1, 2006 and will be recognized in FY'06. The deficit in the Aquatics Capital Project Fund results from timing. Investments were recorded in the General Fund and will be reclassified in FY'06, eliminating the deficit. -87- MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART I. CURRENT YEAR COMMENTS AND RECOMMENDATIONS (Continued) 05 -03 Cash Transactions Finding Our cash audit procedures disclosed that the outstanding check list for the risk management bank reconciliation as of September 30, 2005 reconciliation included a cheek for $65,000 for the payment of a workers' compensation claim. Further review indicated that this check issued October 14, 2005 and therefore was not a valid outstanding check. Accordingly, the books of the Village were adjusted to reflect the correct cash balance as well as the related liability. Recommendation We recommend that cash transactions be recorded only upon the actual receipt or disbursement of funds. View of Responsible Officials and Corrective Action The Village will ensure that cash transactions be recorded only upon actual receipt and disbursement of funds. OS -04 Capital Asset Records Finding The establishment and maintenance of detailed accounting records for capital assets are necessary to help assure that government property, plant and equipment are not stolen, misused or subject to undue wear and tear. These records aid in the establishment of stewardship responsibility for particular assets on individual governmental officials. They are also a necessary element in an on -going governmental fixed asset repair and preventative maintenance program and enhance efforts to obtain optimum insurance coverage levels. We noted that the Village did not have a comprehensive detail inventory record of capital assets. Schedules provided consisted of the prior year balances and current year additions and deletions to the capital assets. Recommendation We recommend that the Village compile a comprehensive listing of all capital assets that clearly identifies all assets owned by the Village. This listing should include a detailed description of the asset, the assets location, acquisition date, estimated life, cost and accumulated depreciation. View of Responsible Officials and Corrective Act.ion The Finance Department is in the process of revising the Village's Capital Asset procedures. Previous policy capitalized the costs of many items under the "capital" threshold. Recording and tracking items valued less than the set threshold of $750 resulted in condition which may have misstated the value. Effective 10/1/06, the Village's policy for capital projects will be for those items valued at $750 or more and a comprehensive capital asset analysis will be performed by the Finance Department. -88- MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART I: CURRENT YEAR COMMENTS AND RECOMMENDATIONS (Continued) 05 -05 Recreation Revenue Finding Revenues generated for programs run at the Village's various recreational facilities are first entered into the Recreation Department's revenue system, RecTrac@. Cash receipts collected at the various recreation facilities are brought to the Village along with a revenue summary report generated from the RecTrac@ system. The Village cashier then enters the information into the cash receipts module of the Village's general ledger system, Mainstreet@ based on the information recorded on the revenue summary report. During procedures performed for revenue transactions, cash receipt reports obtained from the RecTrac@ system for various recreation departments did not reconcile to the revenue balances recorded in the Village's general ledger. Recommendation Though the variances noted in the current fiscal year were not material, we recommend that the Village implement procedures to ensure that amounts recorded in the general ledger as revenue from the various recreation facilit�es are in agreement with the revenue summary reports generated by RecTrac@. View of Responsible Officials and Corrective Action The Finance Department reconciles recreation receipts to daily deposits and also enters the adjustments or reclassifications provided by Recreation; however, in many instances, the reclassification results from prepaid classes and timing may be an issue. The Finance Department will continue to monitor cash receipts against RecTrac reports in an effort to ensure compliance between the two systems. OS -06 Infrastructure Reporting Requirements Pursuant to GASB Statement No. 34, the Village, which is a Phase 2 government, is allowed four additional years after the basic effective date of the statement to implement the required retroactive capitalization of major infrastructure assets for all major general infrastructure assets that were acquired or significantly reconstructed, or that received significant improvements, in fiscal years ending after June 30, 1980. For the - Village, the effective date for retroactively recording infrastructure assets is September 30, 2007. Recommendation We suggest that the Village obtain an outside appraisal service to inventory and value all general infrastructure assets. This procedure is essential as the Village approaches the period for compliance with the retroactive capitalization of major infrastructure assets provisions of GASB Statement No. 34. View of Responsible Officials The Village is working with its new insurance provider, the Florida League of Cities, to value all capital assets. The Village's infrastructure is limited to buildings, sidewalks and for storm water improvements made after 2002. -89- MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART II. PRIOR YEAR COMMENTS AND RECOMMENDATIONS NOT IMPLEMENTED 04 -01 Governmental Accounting Standards Board Statement No. 45 — Accounting and financial Reporting by Employers for Post - Employment Benefits Other than Pensions As part of the total compensation offered to attract and retain the services of qualified employees, many state and local governmental employers, in addition to pensions, provide other post - employment benefits (OPEB). OPEB includes post - employment healthcare, as well as other forms of post - employment benefits when provided separately from a pension plan. The Governmental Accounting Standards Board has issued Statement No: 45 which establishes standards for the measurement, recognition, and display of OPEB expenses /expenditures and related liabilities (assets), note disclosures, and if applicable, required supplementary information (RSI) in the financial reports of state and local governmental employers. Post - employment benefits (OPEB) are part of an exchange of salaries and benefits for employee services rendered, and are taken after the employee's services have ended. From an accrual accounting perspective, the cost of OPEB should be associated with the periods in which the exchange occurs, rather than with the periods, often many years later, when benefits are paid or provided. However, in current practice, most OPEB plans are financed on a pay -as- you -go basis, and financial statements generally do not report financial effects of OPEB until the promised benefits are paid. As a result, current financial reporting generally fails to recognize the cost of the benefits in periods when the related services are received by the employer, provide information about the actuarial accrued liabilities for promised benefits associated with past services and whether and to what extent those benefits have been funded and provide information useful in assessing potential demands on the employer's future cash flows. The Statement improves the relevance and usefulness of financial reporting by (a) requiring systematic, accrual basis measurement and recognition of OPEB expense over a period that approximates employees' years of service and (b) providing information about actuarial accrued liabilities associated with OPEB and whether and to what extent progress is being made in funding the plan. OPEB expenditures for governmental funds should be recognized on the modified accrual basis. The amount recognized should be equal to the amount contributed to the plan or expected to be liquidated with expendable available resources. Essentially, there is no change from current practice for governmental funds. However, for proprietary and govemment -wide financial statements, the accrual basis must be used. The accrual method will require the calculations to be made using actuarial computations and will result in the recognition of a present value liability which measures the value of OPEB benefits earned by employees during their tenure with the government and likely to be paid upon retirement. This calculation will result in substantial amounts, due to the current cost of such benefits and their escalating costs. It should also be emphasized that there is no requirement to fund these benefits with current resources. The Statement merely requires the reporting of the value of the benefit primarily in the government -wide financial statements. The computations are extremely complex and the use of an actuary will invariably be required. The Statement would permit prospective implementation, that is, employers would be permitted to set the beginning net OPEB obligation at zero as of the beginning of the initial year. Implementation would occur in three phases based on the government's total annual revenues in the first fiscal year ending after June 15, 1999. The definitions and cutoff points for that purpose otherwise would be the same as in GASB's Statement No. 34, Basic Financial Statements — and Management's Discussion and Analysis — for State and Local Governments. For the Miami Shores Village, this Statement is effective for periods beginning after June 15, 2009. -90- MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART U. PRIOR YEAR COMMENTS AND RECOMMENDATIONS NOT IMPLEMENTED (Continued) 04 -01 Governmental Accounting Standards Board Statement No. 45 —Accounting and Financial Reporting by Employers for Post - Employment Benefits Other than Pensions (Continued) Recommendation The contents of this statement are highly complex and will require significant lead time to implement on the respective implementation date. We would suggest that the Village obtain a thorough understanding of the requirements and initiate planning for implementation in a prudent manner. View of Responsible Officials and Corrective Action The Village does not provide post retirement benefits; but,-will become familiar with the GASB 45 reporting requirements, ensuring that the. Village complies with the procedures. 01 -9. Accounting Procedures Manual Finding We noted that the Village does not have an accounting procedures manual. There may be an assumption that because the Village's accounting system is relatively simple and accounting personnel have direct access to the chief financial officer when questions arise, there is no need for a manual. However, written procedures, instructions, and assignments of duties will prevent or reduce misunderstandings, errors, inefficient or wasted effort duplicated or omitted procedures, and other situations that can result in inaccurate or untimely accounting records. This comment was also reported in the prior year. Recommendation A well- devised accounting manual can also help to ensure that all similar transactions are treated consistently, that accounting principles used are proper, and that records are produced in the form desired by management. A good accounting manual assists with the training of new employees and possibly allows for delegation of some of the accounting functions currently performed by management for other employees. It will take some time and effort for management to`develop a manual; however, we believe this time will be more than offset by time saved later in training and- supervising accounting personnel. Also, in the process of the comprehensive review of existing accounting procedures for the purpose of developing the manual, management might discover procedures that can be eliminated -or improved to make the system more efficient and effective. Should management desire; we would be pleased to assist the Village in developing an accounting manual as a separate engagement. View of Responsible Officials and Corrective Action The Village has an accounting procedures manual. Each component of Main Street and other operations of the Department are retained by the individual primarily responsible for the operations. -)1- Ra C h I I, ""'HIrl, Accountants m Advisors Report of Independent Certified Public Accountants on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government AuditinZ Standards Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida We have audited the financial statements of the governmental activities, business -type activities, each major fund, and the aggregate remaining fund information of Miami Shores Village, Florida (the Village), as of September 30, 2005 and for the year then ended, which collectively comprise of the Village's basic financial statements and have issued our report thereon dated February 17, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Rmortin In planning and performing our audit, we considered the Village's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the basic financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the basic financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. However, we noted other matters involving the internal control over financial reporting that we have reported to management in the accompanying schedule of findings. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Village's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. -82- L , A- Rachilin Cohen & Holtz LLP One Southeast Third Avenue ■ Tenth Floor ■ Miami, Florida 33131 ■ Phone 305.377.4228 ■ Fax 305.377.8331 ■ www.rachlin.com An Independent Member of Baker Tilly International M I A M I F 0 R T L A U D E R D A L E • W E S T P A L M B E A C H ■ S T U A R T Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida Page Two This report is.intended solely for the information and use of the Mayor, Village Council, management, and applicable governmental agencies and is not intended to be and should not be used by anyone other than these specified parties. Miami, Florida February 17, 2006 -83- bben ]ptr�l Accountants ,, Advisors .� r Accountants • • Management Letter in Accordance with the Rules of the Auditor General of the State of Florida Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida We have audited the financial statements of the governmental activities, business -type activities, each major fund, and the aggregate remaining fund information of Miami Shores Village, Florida (the Village) as of September 30, 2005 and for the year then ended, which collectively comprise of the Village's basic financial statements and have issued our report thereon dated February 17, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. We have issued our Report of Independent Certified Public Accountants on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements. Disclosures in this report, which is dated February 17, 2006, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with the provisions of Chapter 10.550, Rules of the Auditor General, which govern the conduct of local governmental entity audits performed in the State of Florida and require that certain items be addressed in this letter. In connection with our audit of the basic financial statements of the Village for the year ended September 30, 2005, we report the following in accordance with Chapter 10.550 Rules of the Auditor General, Local Governmental Entity Audits, which requires that this report specifically address but not be limited to the matters outlined in Rule 10.554(1)(h): Recommendations made in the preceding financial audit report have been implemented, except as disclosed in the accompanying schedule of findings. 2. The Village was in compliance with Section 218.415, Florida Statutes, regarding the investment of public funds. Recommendations to improve the Village's present financial management, accounting procedures, and internal controls accompany this report in the schedule of findings. 4. During the course of our audit, other than matters that are clearly inconsequential, considering both quantitative and qualitative factors, nothing came to our attention that caused us to believe that the Village: a. Was in violation of any laws, rules or regulations and contractual provisions or abuse that have occurred, or were likely to have occurred, or were discovered within the scope of the audit. -84- Rachlin Cohen & Noltz LLP One Southeast Third Avenue ■ Tenth Floor ■ Miami, Florida 33131 r Phone 305.377.4228 ■ Fax 305.377.8331 n www.rachlin.com An Independent Member of Baker Tilly International M I A M I F 0 R T L A U 0 E R B A L E - W E S T P A L M B E A C N + S T 9 A R T Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida Page Two b. Made any illegal or improper expenditures that were discovered within the scope of the audit that may materially affect the financial statements. Had deficiencies in internal control that are reportable conditions including but not limited to: (1) Improper or inadequate accounting procedures, except as reported in the schedule of findings. (2) Failures to properly record financial transactions (3) Other inaccuracies, shortages, defalcations, and instances of fraud discovered by, or that came to the attention of the auditor. Miami Shores Village, Florida was incorporated by Laws of Florida 15690. 6. a. The Village, during fiscal year 2005, did meet one of the conditions described in Section 218.503(1), Florida Statutes. b. The annual financial report for the fiscal year ended September 30, 2005 has been filed with the Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes and is in agreement with the audited financial statements for the fiscal year ended September 30, 2005. During the course of our audit, we applied financial condition assessment procedures pursuant to Rule 10.556(7). It is management's responsibility to monitor the Village's financial condition, and our financial condition assessment, which was performed as of the Village's fiscal year end, was based on representations made by management and the review of. financial information provided by the Village. There were matters that identified deteriorating financial conditions as presented in the schedule of findings which have been discussed and disclosed to the responsible Village officials. This report is intended solely for the information and use of the Mayor, Village Council, management and the Auditor General of the State of Florida and is not intended to be and should not be used by anyone other than these specified parties. Miami, Florida February 17, 2006 -85- i� Itz Accountants Advisors MIANH SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS SEPTEMBER 30, 2005 PART I. CURRENT YEAR COMMENTS AND RECOMMENDATIONS 05 -01 Excess of Expenditures Over Appropriations Finding Pursuant to Section 166.241 (2) of Chapter 166 of the Florida Statutes, the governing body of each municipality shall adopt a budget each fiscal year. The budget must be adopted by ordinance or resolution unless otherwise specified in the respective municipality's charter. The amount available from taxation and other sources, including amounts carried over from prior fiscal years, must equal the total appropriations for expenditures and reserves. The budget must regulate expenditures of the municipality, and it is unlawful for any officer of a municipal government to expend or contract for expenditures in any fiscal year except in pursuance of budgeted appropriations. We noted that various categories of expenditures in the General Fund, Local Option Gas Tax Fund and Half Cent Surtax Fund exceeded budgetary provisions. Recommendation Section 166.241 (3) a of the Florida Statutes provides the authority for the governing body of the Village to increase and decrease appropriations within each fund. We suggest that, in the future, all budgets be monitored to ensure compliance with Florida Statutes. View of Responsible Officials and Corrective Action Standard procedures provide for Budget Amendment, two of which were presented and passed during FY'05. The overruns were inadvertently overlooked and were excluded from the Budget Amendments passed by the Village Council. Future financials will be maintained within budgetary restraints. 05 -02 Fund Deficits Finding Deficits place a financial burden upon a municipality. The effects of a deficit are varied but their initial impact will generally be felt on cash flows. The financial statements of the Village reflect unrestricted deficits in the Risk Management Fund and Fleet Maintenance internal service funds of $649,070 and $1,100,558, respectively, at September 30, 2005. The deficit in the Risk Management Fund increased by $121,446 in the 2005 fiscal year primarily as a result of expenditures exceeding charges for services. In prior years, a large portion of the deficit was created as a result of the compliance with generally accepted accounting principles as they pertain to risk activities. These principles provide that, upon establishment of an internal service fiend, all fund liabilities be recorded within the fund. The recorded liabilities include reported claims as well as a provision for claims incurred but not reported. -86- MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART I. CURRENT YEAR COMMENTS AND RECOMMENDATIONS (Continued) 05 -02 Fund Deficits (Continued) Finding (Continued) The deficit in the Fleet Maintenance Fund decreased in the current year by $4,538, before the prior period adjustment. In the prior year, the deficit was created as a result of expenditures in excess of charges for services. • The Charter High School Construction, Capital Improvements and Aquatic Facility Capital Projects Funds reflect unreserved and undesignated deficits of $478,884, $1,247,623 and $251,509, respectively, as of September 30, 2005. These deficits are the result of construction costs in excess of funding to date. Recommendation We suggest that the Village Council address the deficits in these funds. For the internal service funds, the Village may consider increasing the charges to the other funds to eliminate the deficit. For the Capital Projects Funds, the Village should authorize the necessary funding to ensure the elimination of the deficits. View of Responsible Officials and Corrective Action The Deficits resulted from cash flow and timing issues. For the Risk Management Fund, the deficit resulted in a significantly larger number of losses incurred by the Village. The budget adopted for FY'06 included funding to reduce the deficit by fiscal year end. The deficit in Fleet Maintenance resulted in emergency repairs on vehicles. Future budgets will include reservations for shortfalls and emergencies. The deficit in the Charter School Capital Project Fund results form investments that were recorded in the General Fund. The General Fund will transfer the proceeds of the investment in FY'06 to eliminate the deficit. The deficit in the Capital Improvement Fund is a result of timing. The Village refinanced debt, moving $1,750,000 into the Capital Projects Fund, reversing the deficit. This transaction was delayed until after January 1, 2006 and will be recognized in FY'06. The deficit in the Aquatics Capital Project Fund results from timing. Investments were recorded in the General Fund and will be reclassified in FY'06, eliminating the deficit. -87- MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART I. CURRENT YEAR COMMENTS AND RECOMMENDATIONS (Continued) 05 -03 Cash Transactions Finding Our cash audit procedures disclosed that the outstanding check list for the risk management bank reconciliation as of September 30, 2005 reconciliation included a check for $65,000 for the payment of a workers' compensation claim. Further review indicated that this check issued October 14, 2005 and therefore was not a valid outstanding check. Accordingly, the books of the Village were adjusted to reflect the correct cash balance as well as the related liability. Recommendation We recommend that cash transactions be recorded only upon the actual receipt or disbursement of funds. View of Responsible Officials and Corrective Action The Village will ensure that cash transactions be recorded only upon actual receipt and disbursement of funds. 05 -04 Capital Asset Records Finding The establishment and maintenance of detailed accounting records for capital assets are necessary to help assure that government property, plant and equipment are not stolen, misused or subject to undue wear and tear. These records aid in the establishment of stewardship responsibility for particular assets on individual governmental officials. They are also a necessary element in an on -going governmental fixed asset repair and preventative maintenance program and enhance efforts to obtain optimum insurance coverage levels. We noted that the Village did not have a comprehensive detail inventory record of capital assets. Schedules provided consisted of the prior year balances and current year additions and deletions to the capital assets. Recommendation We recommend that the Village compile a comprehensive listing of all capital assets that clearly identifies all assets owned by the Village. This listing should include a detailed description of the asset, the assets location, acquisition date, estimated life, cost and accumulated depreciation. View of Responsible Officials and Corrective Action The Finance Department is in the process of revising the Village's Capital Asset procedures. Previous policy capitalized the costs of many items under the "capital" threshold. Recording and tracking items valued less than the set threshold of $750 resulted in condition which may have misstated the value. Effective 10/1/06, the Village's policy for capital projects will be for those items valued at $750 or more and a comprehensive capital asset analysis will be performed by the Finance Department. :: MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART I. CURRENT YEAR COMMENTS AND RECOMMENDATIONS (Continued) 05 -05 Recreation Revenue Finding Revenues generated for programs run at the Village's various recreational facilities are first entered into the Recreation Department's revenue system, RecTracO. Cash receipts collected at the various recreation facilities are brought to the Village along with a revenue summary report generated from the RecTracOO system. The Village cashier then enters the information into the cash receipts module of the Village's general ledger system, Mainstreet0 based on the information recorded on the revenue summary report. During procedures performed for revenue transactions, cash receipt reports obtained from the RecTracO system for various recreation departments did not reconcile to the revenue balances recorded in the Village's general ledger. Recommendation Though the variances noted in the current fiscal year were not material, we recommend that the Village implement procedures to ensure that amounts recorded in the general ledger as revenue from the various recreation facilities are in agreement with the revenue summary reports generated by RecTracO. View of Responsible Officials and Corrective Action The Finance Department reconciles recreation receipts to daily deposits and also enters the adjustments or reclassifications provided by Recreation; however, in many instances, the reclassification results from prepaid classes and timing may be an issue. The Finance Department will continue to monitor cash receipts against RecTrac reports in an effort to ensure compliance between the two systems. 05 -06 Infrastructure Reporting Requirements Pursuant to GASB Statement No. 34, the Village, which is a Phase 2 government, is allowed four additional years after the basic effective date of the statement to implement the required retroactive capitalization of major infrastructure assets for all major general infrastructure assets that were acquired or significantly reconstructed, or that received significant improvements, in fiscal years ending after June 30, 1980. For the Village, the effective date for retroactively recording infrastructure assets is September 30, 2007. Recommendation We suggest that the Village obtain an outside appraisal service to inventory and value all general infrastructure assets. This procedure is essential as the Village approaches the period for compliance with the retroactive capitalization of major infrastructure assets provisions of GASB Statement No. 34. View of Responsible Officials The Village is working with its new insurance provider, the Florida League of Cities, to value all capital assets. The Village's infrastructure is limited to buildings, sidewalks and for storm water improvements made after 2002. -89- MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART II. PRIOR YEAR COMMENTS AND RECOMMENDATIONS NOT IMPLEMENTED 04 -01 Governmental Accounting Standards Board Statement No. 45 — Accounting and Financial Reporting by Employers for Post - Employment Benefits Other than Pensions As part of the total compensation offered to attract and retain the services of qualified employees, many state and local governmental employers, in addition to pensions, provide other post - employment benefits (OPEB). OPEB includes post - employment healthcare, as well as other forms of post - employment benefits when provided separately from a pension plan. The Governmental Accounting Standards Board has issued Statement No. 45 which establishes standards for the measurement, recognition, and display of OPEB expenses /expenditures and related liabilities (assets), note disclosures, and if applicable, required supplementary information (RSI) in the financial reports of state and local governmental employers. Post - employment benefits (OPEB) are part of an exchange of salaries and benefits for employee services rendered, and are taken after the employee's services have ended. From an accrual accounting perspective, the cost of OPEB should be associated with the periods in which the exchange occurs, rather than with the periods, often many years later, when benefits are paid or provided. However, in current practice, most OPEB plans are financed on a pay -as- you -go basis, and financial statements generally do not report financial effects of OPEB until the promised benefits are paid. As a result, current financial reporting generally fails to recognize the cost of the benefits in periods when the related services are received by the employer, provide information about the actuarial accrued liabilities for promised benefits associated with past services and whether and to what extent those benefits have been funded and provide information useful in assessing potential demands on the employer's future cash flows. The Statement improves the relevance and usefulness of financial reporting by (a) requiring systematic, accrual basis measurement and recognition of OPEB expense over a period that approximates employees' years of service and (b) providing information about actuarial accrued liabilities associated with OPEB and whether and to what extent progress is being made in funding the plan. OPEB expenditures for governmental funds should be recognized on the modified accrual basis. The amount recognized should be equal to the amount contributed to the plan or expected to be liquidated with expendable available resources. Essentially, there is no change from current practice for governmental funds. However, for proprietary and government -wide financial statements, the accrual basis must be used. The accrual method will require the calculations to be made using actuarial computations and will result in the recognition of a present value liability which measures the value of OPEB benefits earned by employees during their tenure with the government and likely to be paid upon retirement. This calculation will result in substantial amounts, due to the current cost of such benefits and their escalating costs. It should also be emphasized that there is no requirement to fund these benefits with current resources. The Statement merely requires the reporting of the value of the benefit primarily in the government -wide financial statements. The computations are extremely complex and the use of an actuary will invariably be required. The Statement would permit prospective implementation; that is, employers would be permitted to set the beginning net OPEB obligation at zero as of the beginning of the initial year. Implementation would occur in three phases based on the government's total annual revenues in the first fiscal year ending after June 15, 1999. The definitions and cutoff points for that purpose otherwise would be the same as in GASB's Statement No. 34, Basic Financial Statements — and Management's Discussion and Analysis — for State and Local Governments. For the Miami Shores Village, this Statement is effective for periods beginning after June 15, 2009. -90- MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART H. PRIOR YEAR COMMENTS AND RECOMMENDATIONS NOT IMPLEMENTED (Continued) 04 -01 Governmental Accounting Standards Board Statement No. 45 — Accounting and Financial Reporting by Employers for Post- Employment Benefits Other than Pensions (Continued) Recommendation The contents of this statement are highly complex and will require significant lead time to implement on the respective implementation date. We would suggest that the Village obtain a thorough understanding of the requirements and initiate planning for implementation in a prudent manner. View of Responsible Officials and Corrective Action The Village does not provide post retirement benefits; but, will become familiar with the GASB 45 reporting requirements, ensuring that the Village complies with the procedures. 01 -9. Accounting Procedures Manual Finding We noted that the Village does not have an accounting procedures manual. There may be an assumption that because the Village's accounting system is relatively simple and accounting personnel have direct access to the chief financial officer when questions arise, there is no need for a manual. However, written procedures, instructions, and assignments of duties will prevent or reduce misunderstandings, errors, inefficient or wasted effort duplicated or omitted procedures, and other situations that can result in inaccurate or untimely accounting records. This comment was also reported in the prior year. Recommendation A well - devised accounting manual can also help to ensure that all similar transactions are treated consistently, that accounting principles used are proper, and that records are produced in the form desired by management. A good accounting manual assists with the training of new employees and possibly allows for delegation of some of the accounting functions currently performed by management for other employees. It will take some time and effort for management to develop a manual; however, we believe this time will be more than offset by time saved later in training and supervising accounting personnel. Also, in the process of the comprehensive review of existing accounting procedures for the purpose of developing the manual, management might discover procedures that can be eliminated or improved to make the system more efficient and effective. Should management desire; we would be pleased to assist the Village in developing an accounting manual as a separate engagement. View of Responsible Officials and Corrective Action The Village has an accounting procedures manual. Each component of Main Street and other operations of the Department are retained by the individual primarily responsible for the operations. -91- Thomas J. Benton Village Manager Mark A. Malatak, CPA Chief Financial Officer February 13, 2006 Miami shores Village 10050 N.E.2nd Avenue Miami Shores, Florida 33138 Tel: (305) 795.2209 Fax: (305) 756.8972 E -mail: BentonT@MiamiShoresVillage.com E -mail: MatatakMCMiamiShoresVillaze.com Rachlin Cohen Et Holtz, LLP One S.E. Third Avenue, 10th Floor Miami, FL 33131 We are providing this letter in connection with your audit of the financial statements of Miami Shores Village as of September 30, 2005 and for the year then ended for the purpose of expressing an opinion as to whether the financial statements 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 Miami Shores Village and the respective changes in financial position and cash flows, where applicable, in conformity with accounting principles generally accepted in the United States. We confirm that we are responsible for the fair presentation of the previously mentioned financial statements in conformity with accounting principles generally accepted in the United States. We are also responsible for adopting sound accounting policies, establishing and maintaining internal control, and preventing and detecting fraud. We confirm, to the best of our knowledge and belief, as of the following representations made to you during your audit: 1. The financial statements referred to above are fairly presented in conformity with accounting principles generally accepted in the United States and include all properly classified funds and other financial information of the primary government and all component units required by generally accepted accounting principles to be included in the financial reporting entity. 2. We have made available to you all: a. Financial records and related data. b. Minutes of the meetings of Miami Shores Village's Council or summaries of actions of recent meetings for which minutes have not yet been prepared. 3. There have been no communications from regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices. 4. There are no material transactions that have not been properly recorded in the accounting records underlying the financial statements or the schedule of expenditures of federal awards. 5. We are in agreement with the adjusting journal entries you have recommended, and they have been posted. Management Representation letter (FY'05) Date February 13, 2006 00 0 0 0 ■0 ■5 0 ■0 0 0 0 ■■■■ 0 ■e0 0 600■..■ 666.. 0 06K0,,6000. ..00600 0 ■6X00 06 ■..00.8 r0060 .0•0 6. We acknowledge our responsibility for the design and implementation of programs and controls to prevent and detect fraud. 7. We have no knowledge of any fraud or suspected fraud affecting the entity involving: a. Management, b. Employees who have significant roles in internal control, or c. Others where the fraud could have a material effect on the financial statements. 8. We have no knowledge of any allegations of fraud or suspected fraud affecting the entity received in communications from employees, former employees, analysts, regulators, short sellers, or others. 9. The Village has no plans or intentions that may materially affect the carrying value or classification of assets, liabilities, or fund equity. 10. The following, if any, have been properly recorded or disclosed in the financial statements: a. Related party transactions, including revenues, expenditures /expenses, loans, transfers, leasing arrangements, and guarantees, and amounts receivable from or payable to related parties. b. Guarantees, whether written or oral, under which Miami Shores Village is contingently liable. c. All accounting estimates that could be material to the financial statements, including the key factors and significant assumptions underlying those estimates, and we believe the estimates are reasonable in the circumstances. d. The financial statements properly classify all funds and activities. e. All funds that meet the quantitative criteria in GASB Statement No. 34 for presentation as major are identified and presented as such and all other funds that are presented as major are particularly important to financial statement users. f. Net asset components (invested in capital assets, net of related debt; restricted; and unrestricted) and fund balance reserves and designations are properly classified and, if applicable, approved. g. Provisions for uncollectible receivables have been properly identified and recorded. h. Expenses have been appropriately classified in or allocated to functions and programs in the statement of activities, and allocations have been made on a reasonable basis. i. Revenues are appropriately classified in the statement of activities within program revenues, general revenues, contributions to term or permanent endowments, or contributions to permanent fund principal. j. Inter -fund, internal, and intra- entity activity and balances have been appropriately classified and reported. k. Deposits and investment securities are properly classified in category of custodial credit risk. 1. Capital assets, including infrastructure assets, are properly capitalized, reported, and, if applicable, depreciated. m. Required supplementary information (RSI) is measured and presented within prescribed guidelines. n. Receivables recorded in the financial statements represent valid claims against debtors for transactions arising on or before the balance sheet date and have been appropriately reduced to their estimated net realizable value. o. We believe that all material expenditures that have been deferred to future periods will be recoverable. 11. We are responsible for compliance with the laws, regulations, and provisions of contracts and grant agreements applicable to us, including tax on debt limits and debt contracts; and we have identified and disclosed to you all laws, regulations and provisions of contracts and grant agreements that we believe have a direct and material effect on the determination of financial statement amounts, including legal and contractual provisions for reporting specific activities in separate funds. 12. We are in compliance with IRS arbitrage regulations. Page #2 of 3 Management Representation Letter (FY'05) Date February 13, 2006 aaaaaa as M . a a a a a a a a a a a a a a a a a a a a a a a a a ■a■ a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a aaa aaa K 13. There are no— a. Violations or possible violations of budget ordinances, laws and regulations (including those pertaining to adopting, approving, and amending budgets), provisions of contracts and grant agreements, tax or debt limits, and any related debt covenants whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency. b. Unasserted claims or assessments that our lawyer has advised us are probable of assertion and must be disclosed in accordance with Financial Accounting Standards Board (FASB) Statement No. 5, Accounting for Contingencies. c. Other liabilities or gain or loss contingencies that are required to be accrued or disclosed by FASB Statement No. 5. d. Reservations or designation of fund equity which were not properly authorized and approved. 14. The Village has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any asset been pledged as collateral. 15. Miami Shores Village has complied with all aspects of contractual agreements that would have a material effect on the financial statements in the event of noncompliance. 16. We believe the ongoing IRS examinations in the areas of payroll, use of Village vehicles and others, will not have a material effect on the financial statements. No accrual for any penalties or interests have been recorded as no material amount is deemed required by management. 17. We believe that the actuarial assumptions and methods used to measure pension liabilities and costs for financial accounting purposes are appropriate in the circumstances. 18. We understand that as part of your audit, you prepared the draft financial statements and related notes from the trial balance. We have reviewed and approved those financial statements and related notes and believe they are adequately supported by the books and records of the government. To the best of our knowledge and belief, no events, including instances of noncompliance, have occurred subsequent to the balance sheet date and through the date of financial statement issuance that would require adjustment to or disclosure in the aforementioned financial statements or in the schedule of findings and questioned costs. Respectfully submitted, MIAMI SHORES VILLAGE �// THOMAS J. BENTON Chief Executive Officer Village Manager TJ B: MAM: Page #3 of 3 MARK A. MALATAK, CPA~', Chief Financial Officer Finance Director Cohen cvHokz Accountants Advisors Report of Independent Certified Public Accountants 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 Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida We have audited the financial statements of the governmental activities, business -type activities, each major fund, and the aggregate remaining fund information of Miami Shores Village, Florida (the Village), as of September 30, 2005 and for the year then ended, which collectively comprise of the Village's basic financial statements and have issued our report thereon dated February 17, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Village's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the basic financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the basic financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned fiinctions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. However, we noted other matters involving the internal control over financial reporting that we have reported to management in the accompanying schedule of findings. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Village's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. -82- s � N N LY Rachlin Cohen & Holtz LLP One Southeast Third Avenue r Tenth Floor ■ Miami, Florida 33131 ■ Phone 305.377.4228 ■ Fax 305.377.8331 a www.rachlin.com An Independent Member of Baker Tilly International M I A M I ■ F 0 R T L A U D E R D A L E s W E S T P A L M B E A C H ■ S T U A R T Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida Page Two This report is intended solely for the information and use of the Mayor, Village Council, management, and applicable governmental agencies and is not intended to be and should not be used by anyone other than these specified parties. 4,:: o a�- 4 P-- ,�4 44-,eo Miami, Florida February 17, 2006 -83- Gohen &Holtz Accountants m Advisors Chen Accountants Advisors Management Letter in Accordance with the Rules of the Auditor General of the State of Florida Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida We have audited the financial statements of the governmental activities, business -type activities, each major fund, and the aggregate remaining fund information of Miami Shores Village, Florida (the Village) as of September 30, 2005 and for the year then ended, which collectively comprise of the Village's basic financial statements and have issued our report thereon dated February 17, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. We have issued our Report of Independent Certified Public Accountants on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements. Disclosures in this report, which is dated February 17, 2006, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with the provisions of Chapter 10.550, Rules of the Auditor General, which govern the conduct of local governmental entity audits performed in the State of Florida and require that certain items be addressed in this letter. In connection with our audit of the basic financial statements of the Village for the year ended September 30, 2005, we report the following in accordance with Chapter 10.550 Rules of the Auditor General, Local Governmental Entity Audits, which requires that this report specifically address but not be limited to the matters outlined in Rule 10.554(l)(h): Recommendations made in the preceding financial audit report have been implemented, except as disclosed in the accompanying schedule of findings. 2. The Village was in compliance with Section 218.415, Florida Statutes, regarding the investment of public funds. 3. Recommendations to improve the Village's present financial management, accounting procedures, and internal controls accompany this report in the schedule of findings. 4. During the course of our audit, other than matters that are clearly inconsequential, considering both quantitative and qualitative factors, nothing came to our attention that caused us to believe that the Village: a. Was in violation of any laws, rules or regulations and contractual provisions or abuse that have occurred, or were likely to have occurred, or were discovered within the scope of the audit. -84- Rachlin Cohen & Holtz LLP One Southeast Third Avenue ■ Tenth Floor r Miami, Florida 33131 ■ Phone 305.377.4228 ■ Fax 305.377.8331 ■ www.rachlin.com An Independent Member of Baker Tilly International M I A M I ■ F 0 R T L A U D E R D A L E ■ W E S T P A L M B E A C H ■ S T U A R T Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida Page Two b. Made any illegal or improper expenditures that were discovered within the scope of the audit that may materially affect the financial statements. Had deficiencies in internal control that are reportable conditions including but not limited to: (1) Improper or inadequate accounting procedures, except as reported in the schedule of findings. (2) Failures to properly record financial transactions (3) Other inaccuracies, shortages, defalcations, and instances of fraud discovered by, or that came to the attention of the auditor. Miami Shores Village, Florida was incorporated by Laws of Florida 15690. 6. a. The Village, during fiscal year 2005, did meet one of the conditions described in Section 218.503(1), Florida Statutes. b, The annual financial report for the fiscal year ended September 30, 2005 has been filed with the Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes and is in agreement with the audited financial statements for the fiscal year ended September 30, 2005. c. During the course of our audit, we applied financial condition assessment procedures pursuant to Rule 10.556(7). It is management's responsibility to monitor the Village's financial condition, and our financial condition assessment, which was performed as of the Village's fiscal year end, was based on representations made by management and the review of financial information provided by the Village. There were matters that identified deteriorating financial conditions as presented in the schedule of findings which have been discussed and disclosed to the responsible Village officials. This report is intended solely for the information and use of the Mayor, Village Council, management and the Auditor General of the State of Florida and is not intended to be and should not be used by anyone other than these specified parties. 4:elleez�� 6�04m- .0 1V4Y /1 4/0 Miami, Florida February 17, 2006 -85- (7oh— en waltz Accountants - Advisors MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS SEPTEMBER 30, 2005 PART I. CURRENT YEAR COMMENTS AND RECOMMENDATIONS 05 -01 Excess of Expenditures Over Appropriations Finding Pursuant to Section 166.241 (2) of Chapter 166 of the Florida Statutes, the governing body of each municipality shall adopt a budget each fiscal year. The budget must be adopted by ordinance or resolution unless otherwise specified in the respective municipality's charter. The amount available from taxation and other sources, including amounts carried over from prior fiscal years, must equal the total appropriations for expenditures and reserves. The budget must regulate expenditures of the municipality, and it is unlawful for any officer of a municipal government to expend or contract for expenditures in any fiscal year except in pursuance of budgeted appropriations. We noted that various categories of expenditures in the General Fund, Local Option Gas Tax Fund and Half Cent Surtax Fund exceeded budgetary provisions. Recommendation Section 166.241 (3) a of the Florida Statutes provides the authority for the governing body of the Village to increase and decrease appropriations within each fund. We suggest that, in the future, all budgets be monitored to ensure compliance with Florida Statutes. View of Responsible Officials and Corrective Action Standard procedures provide for Budget Amendment, two of which were presented and passed during FY'05. The overruns were inadvertently overlooked and were excluded from the Budget Amendments passed by the Village Council. Future financials will be maintained within budgetary restraints. 05 -02 Fund Deficits Finding Deficits place a financial burden upon a municipality. The effects of a deficit are varied but their initial impact will generally be felt on cash flows. The financial statements of the Village reflect unrestricted deficits in the Risk Management Fund and Fleet Maintenance internal service funds of $649,070 and $1,100,558, respectively, at September 30, 2005. The deficit in the Risk Management Fund increased by $121,446 in the 2005 fiscal year primarily as a result of expenditures exceeding charges for services. In prior years, a large portion of the deficit was created as a result of the compliance with generally accepted accounting principles as they pertain to risk activities. These principles provide that, upon establishment of an internal service fund, all fund liabilities be recorded within the fund. The recorded liabilities include reported claims as well as a provision for claims incurred but not reported. MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART I. CURRENT YEAR COMMENTS AND RECOMMENDATIONS (Continued) 05 -02 Fund Deficits (Continued) Finding (Continued) The deficit in the Fleet Maintenance Fund decreased in the current year by $4,538, before the prior period adjustment. In the prior year, the deficit was created as a result of expenditures in excess of charges for services. The Charter High School Construction, Capital Improvements and Aquatic Facility Capital Projects Funds reflect unreserved and undesignated deficits of $478,884, $1,247,623 and $251,509, respectively, as of September 30, 2005. These deficits are the result of construction costs in excess of funding to date. Recommendation We suggest that the Village Council address the deficits in these funds. For the internal service fiends, the Village may consider increasing the charges to the other fiends to eliminate the deficit. For the Capital Projects Funds, the Village should authorize the necessary funding to ensure the elimination of the deficits. View of Responsible Officials and Corrective Action The Deficits resulted from cash flow and timing issues. For the Risk Management Fund, the deficit resulted in a significantly larger number of losses incurred by the Village. The budget adopted for FY'06 included funding to reduce the deficit by fiscal year end. The deficit in Fleet Maintenance resulted in emergency repairs on vehicles. Future budgets will include reservations for shortfalls and emergencies. The deficit in the Charter School Capital Project Fund results form investments that were recorded in the General Fund. The General Fund will transfer the proceeds of the investment in FY'06 to eliminate the deficit. The deficit in the Capital Improvement Fund is a result of timing. The Village refinanced debt, moving $1,750,000 into the Capital Projects Fund, reversing the deficit. This transaction was delayed until after January 1, 2006 and will be recognized in FY'06. The deficit in the Aquatics Capital Project Fund results from timing. Investments were recorded in the General Fund and will be reclassified in FY'06, eliminating the deficit. MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART I. CURRENT YEAR COMMENTS AND RECOMMENDATIONS (Continued) 05 -03 Cash Transactions Finding Our cash audit procedures disclosed that the outstanding check list for the risk management bank reconciliation as of September 30, 2005 reconciliation included a check for $65,000 for the payment of a workers' compensation claim. Further review indicated that this check issued October 14, 2005 and therefore was not a valid outstanding check. Accordingly, the books of the Village were adjusted to reflect the correct cash balance as well as the related liability. Recommendation We recommend that cash transactions be recorded only upon the actual receipt or disbursement of fiends. View of Responsible Officials and Corrective Action The Village will ensure that cash transactions be recorded only upon actual receipt and disbursement of funds. 05 -04 Capital Asset Records Finding The establishment and maintenance of detailed accounting records for capital assets are necessary to help assure that government property, plant and equipment are not stolen, misused or subject to undue wear and tear. These records aid in the establishment of stewardship responsibility for particular assets on individual governmental officials. They are also a necessary element in an on -going governmental fixed asset repair and preventative maintenance program and enhance efforts to obtain optimum insurance coverage levels. We noted that the Village did not have a comprehensive detail inventory record of capital assets. Schedules provided consisted of the prior year balances and current year additions and deletions to the capital assets. Recommendation We recommend that the Village compile a comprehensive listing of all capital assets that clearly identifies all assets owned by the Village. This listing should include a detailed description of the asset, the assets location, acquisition date, estimated life, cost and accumulated depreciation. View of Responsible Officials and Corrective Action The Finance Department is in the process of revising the Village's Capital Asset procedures. Previous policy capitalized the costs of many items under the "capital" threshold. Recording and tracking items valued less than the set threshold of $750 resulted in condition which may have misstated the value. Effective 10/1/06, the Village's policy for capital projects will be for those items valued at $750 or more and a comprehensive capital asset analysis will be performed by the Finance Department. MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART I. CURRENT YEAR COMMENTS AND RECOMMENDATIONS (Continued) 05 -05 Recreation Revenue Finding Revenues generated for programs run at the Village's various recreational facilities are first entered into the Recreation Department's revenue system, RecTrac& Cash receipts collected at the various recreation facilities are brought to the Village along with a revenue summary report generated from the RecTracO system. The Village cashier then enters the information into the cash receipts module of the Village's general ledger system, MainstreetOO based on the information recorded on the revenue summary report. During procedures performed for revenue transactions, cash receipt reports obtained from the RecTracO system for various recreation departments did not reconcile to the revenue balances recorded in the Village's general ledger. Recommendation Though the variances noted in the current fiscal year were not material, we recommend that the Village implement procedures to ensure that amounts recorded in the general ledger as revenue from the various recreation facilities are in agreement with the revenue summary reports generated by RecTracO. View of Responsible Officials and Corrective Action The Finance Department reconciles recreation receipts to daily deposits and also enters the adjustments or reclassifications provided by Recreation; however, in many instances, the reclassification results from prepaid classes and timing may be an issue. The Finance Department will continue to monitor cash receipts against RecTrac reports in an effort to ensure compliance between the two systems. 05 -06 Infrastructure Reporting Requirements Pursuant to GASB Statement No. 34, the Village, which is a Phase 2 government, is allowed four additional years after the basic effective date of the statement to implement the required retroactive capitalization of major infrastructure assets for all major general infrastructure assets that were acquired or significantly reconstructed, or that received significant improvements, in fiscal years ending after June 30, 1980. For the Village, the effective date for retroactively recording infrastructure assets is September 30, 2007. Recommendation We suggest that the Village obtain an outside appraisal service to inventory and value all general infrastructure assets. This procedure is essential as the Village approaches the period for compliance with the retroactive capitalization of major infrastructure assets provisions of GASB Statement No. 34. View of Responsible Officials The Village is working with its new insurance provider, the Florida League of Cities, to value all capital assets. The Village's infrastructure is limited to buildings, sidewalks and for storm water improvements made after 2002. MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART II. PRIOR YEAR COMMENTS AND RECOMMENDATIONS NOT IMPLEMENTED 04 -01 Governmental Accounting Standards Board Statement No. 45 — Accounting and Financial Reporting by Employers for Post - Employment Benefits Other than Pensions As part of the total compensation offered to attract and retain the services of qualified employees, many state and local governmental employers, in addition to pensions, provide other post - employment benefits (OPEB). OPEB includes post - employment healthcare, as well as other forms of post - employment benefits when provided separately from a pension plan. The Governmental Accounting Standards Board has issued Statement No. 45 which establishes standards for the measurement, recognition, and display of OPEB expenses /expenditures and related liabilities (assets), note disclosures, and if applicable, required supplementary information (RSI) in the financial reports of state and local governmental employers. Post - employment benefits (OPEB) are part of an exchange of salaries and benefits for employee services rendered, and are taken after the employee's services have ended. From an accrual accounting perspective, the cost of OPEB should be associated with the periods in which the exchange occurs, rather than with the periods, often many years later, when benefits are paid or provided. However, in current practice, most OPEB plans are financed on a pay -as- you -go basis, and financial statements generally do not report financial effects of OPEB until the promised benefits are paid. As a result, current financial reporting generally fails to recognize the cost of the benefits in periods when the related services are received by the employer, provide information about the actuarial accrued liabilities for promised benefits associated with past services and whether and to what extent those benefits have been funded and provide information useful in assessing potential demands on the employer's future cash flows. The Statement improves the relevance and usefulness of financial reporting by (a) requiring systematic, accrual basis measurement and recognition of OPEB expense over a period that approximates employees' years of service and (b) providing information about actuarial accrued liabilities associated with OPEB and whether and to what extent progress is being made in funding the plan. OPEB expenditures for governmental funds should be recognized on the modified accrual basis. The amount recognized should be equal to the amount contributed to the plan or expected to be liquidated with expendable available resources. Essentially, there is no change from current practice for governmental fiends. However, for proprietary and government -wide financial statements, the accrual basis must be used. The accrual method will require the calculations to be made using actuarial computations and will result in the recognition of a present value liability which measures the value of OPEB benefits earned by employees during their tenure with the government and likely to be paid upon retirement. This calculation will result in substantial amounts, due to the current cost of such benefits and their escalating costs. It should also be emphasized that there is no requirement to fund these benefits with current resources. The Statement merely requires the reporting of the value of the benefit primarily in the government -wide financial statements. The computations are extremely complex and the use of an actuary will invariably be required. The Statement would permit prospective implementation, that is, employers would be permitted to set the beginning net OPEB obligation at zero as of the beginning of the initial year. Implementation would occur in three phases based on the government's total annual revenues in the first fiscal year ending after June 15, 1999. The definitions and cutoff points for that purpose otherwise would be the same as in GASB's Statement No. 34, Basic Financial Statements — and Management's Discussion and Analysis — for State and Local Governments. For the Miami Shores Village, this Statement is effective for periods beginning after June 15, 2009. -90- MIAMI SHORES VILLAGE, FLORIDA SCHEDULE OF FINDINGS (Continued) PART II. PRIOR YEAR COMMENTS AND RECOMMENDATIONS NOT IMPLEMENTED (Continued) 04 -01 Governmental Accounting Standards Board Statement No. 45 — Accounting and Financial Reporting by Employers for Post - Employment Benefits Other than Pensions (Continued) Recommendation The contents of this statement are highly complex and will require significant lead time to implement on the respective implementation date. We would suggest that the Village obtain a thorough understanding of the requirements and initiate planning for implementation in a prudent manner. View of Responsible Officials and Corrective Action The Village does not provide post retirement benefits; but, will become familiar with the GASB 45 reporting requirements, ensuring that the Village complies with the procedures. 01 -9. Accounting Procedures Manual Finding We noted that the Village does not have an accounting procedures manual. There may be an assumption that because the Village's accounting system is relatively simple and accounting personnel have direct access to the chief financial officer when questions arise, there is no need for a manual. However, written procedures, instructions, and assignments of duties will prevent or reduce misunderstandings, errors, inefficient or wasted effort duplicated or omitted procedures, and other situations that can result in inaccurate or untimely accounting records. This comment was also reported in the prior year. Recon:n:endation A well- devised accounting manual can also help to ensure that all similar transactions are treated consistently, that accounting principles used are proper, and that records are produced in the form desired by management. A good accounting manual assists with the training of new employees and possibly allows for delegation of some of the accounting functions currently performed by management for other employees. It will take some time and effort for management to develop a manual; however, we believe this time will be more than offset by time saved later in training and supervising accounting personnel. Also, in the process of the comprehensive review of existing accounting procedures for the purpose of developing the manual, management might discover procedures that can be eliminated or improved to make the system more efficient and effective. Should management desire; we would be pleased to assist the Village in developing an accounting manual as a separate engagement. View of Responsible Officials and Corrective Action The Village has an accounting procedures manual. Each component of Main Street and other operations of the Department are retained by the individual primarily responsible for the operations. -91- �n. Cohen S& Holtz Accountants Advisors REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of Miami Shores Village, Florida (the Village), as of and for the year ended September 30, 2005, which collectively comprise the Village's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Village's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Audit Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we express no such opinion. 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 Village, as of September 30, 2005, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States. In accordance with Government Auditing Standards, we have also issued our report dated February 17, 2006 on our consideration of the Village's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. -1- Rachlin Cohen & Holtz LLP One Southeast Third Avenue ■ Tenth Floor , Miami, Florida 33131 ■ Phone 305.377.4228 a Fax 305.377.8331 a www.rachlin.com An Independent Member of Baker Tilly International M I A M I ■ F 0 R T L A U D E R D A L E r W E S T P A L M B E A C N ■ S T U A R T Honorable Mayor, Village Council and Village Manager Miami Shores Village, Florida Page Two Management's Discussion and Analysis and the required supplementary information on pages 3 to 13 and 51 to 56, respectively are not a required part of the basic financial statements, but are supplementary information required by accounting principles generally accepted in the United States. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Village's basic financial statements. The introductory section, combining and individual fund financial statements and schedules and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion thereon. Miami, Florida February 17, 2006 -2- Goho-z &Ha1tz Accountants s Advisors