TOWN OF GUADALUPE, ARIZONA Annual Financial Statements and Independent Auditors’ Report June 30, 2013 TABLE OF CONTENTS INDEPENDENT AUDITORS’ REPORT ............................................................................... 1 Required Supplementary Information – Management’s Discussion and Analysis ................... 4 Government-wide Statements Statement of Net Position ................................................................................................... Statement of Activities ........................................................................................................ 15 16 Fund Statements Governmental Funds Balance Sheet ................................................................................................................ Reconciliation of the Balance Sheet to the Statement of Net Position ......................... Statement of Revenue, Expenditures, and Changes in Fund Balances ......................... Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities ...................................... 17 18 19 20 Proprietary Funds Statement of Net Position ............................................................................................. Statement of Revenue, Expenses, and Changes in Fund Net Position ......................... Statement of Cash Flows .............................................................................................. 21 22 23 Notes to Financial Statements .................................................................................................. 25 Other Required Supplementary Information Budgetary Comparison Schedules ...................................................................................... Notes to Budgetary Comparison Schedules ........................................................................ 43 47 Single Audit Section Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Governmental Auditing Standards ............................................................................... 49 Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 ............................................................................................................. 51 Schedule of Expenditures of Federal Awards ..................................................................... Notes to Schedule of Expenditures of Federal Awards ...................................................... Schedule of Findings and Questioned Costs ...................................................................... Summary Schedule of Prior Audit Findings ....................................................................... 53 54 55 56 Independent Auditors’ Report on Compliance with Requirements Applicable to the Uses of Highway User Revenue Fund Monies in Accordance with ARS Title 28, Chapter 18, Article 2 ....................................................... 57 INDEPENDENT AUDITORS’ REPORT To the Town Council Town of Guadalupe, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, and each major fund of Town of Guadalupe, Arizona, as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility 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 of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. -1- We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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, and each major fund of the Town of Guadalupe, Arizona, as of June 30, 2013, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison information on pages 4 to 14 and 43 to 47 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town of Guadalupe, Arizona’s basic financial statements. The schedule of expenditures of federal awards, as required by the Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations is presented for purposes of additional analysis and is not a required part of the basic financial statements. The schedule of expenditures of federal awards is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally -2- accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 4, 2014, on our consideration of the Town of Guadalupe, Arizona’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Town of Guadalupe, Arizona’s internal control over financial reporting and compliance. February 4, 2014 -3- TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2013 Management’s Discussion and Analysis We (the Town of Guadalupe, Arizona) are pleased to provide an overview of our financial activities for the fiscal year ended June 30, 2013. The intended purpose of the Management Discussion and Analysis (MD&A) is to provide an introduction to the basic financial statements and notes, that provides an objective and easy to read analysis of our financial activities based on currently known facts, decisions, and conditions, by providing an easily readable summary of operating results and reasons for changes, which will help to determine if our financial position improved or deteriorated over the past year. This report addresses current operational activities, the sources, uses, and changes in resources, adherence to budget, service levels, limitations, significant economic factors, and the status of infrastructure and its impacts on our debt and operation. When referring to prior year data in this analysis we will be drawing upon information from last year’s audited financial reports. Overview of the Financial Statements The financial section of the Annual Financial Report (AFR) for the Town of Guadalupe, Arizona consists of this discussion and analysis, the basic financial statements and the required supplementary schedules presented after the basic financial statements. The basic financial statements include the government-wide financial statements, fund financial statements, including the budgetary statements for the general fund and major special revenue funds and notes to the basic financial statements. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the Town of Guadalupe, Arizona’s finances, in a manner similar to private-sector business. The statement of net position presents information on all of the Town of Guadalupe, Arizona’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Town of Guadalupe, Arizona is improving or deteriorating. The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position 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., earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the Town of Guadalupe, Arizona that are principally supported by taxes and intergovernmental revenues (governmental activities) from 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 the Town of Guadalupe, Arizona include general government, public safety, public works and streets, culture and recreation, community development, health and welfare and debt -4- TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2013 service-interest. The business-type activities include the Town’s refuse, sewer operations and a commercial center. The government-wide financial statements can be found on pages 15 and 16 of this report. Fund financial statements. Also presented are the traditional financial statements for governmental funds. The fund financial statements now focus on major funds of the Town, rather than fund type used in the old model. 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. The Town of Guadalupe, Arizona, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Town of Guadalupe, Arizona can be divided into two categories: governmental funds and proprietary 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 balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near term financing requirements. Since the governmental fund financial statements focus on near-term spendable resources, while the governmental activities on the government-wide financial statements have a matching focus, a reconciliation of the differences between the two is provided with the fund financial statements. The basic governmental fund financial statements can be found on pages 17-20 of this report. Proprietary funds. The Town of Guadalupe, Arizona maintains three different proprietary funds. Proprietary funds, also known as enterprise funds, are used to report the same functions presented as business-type activities in the government-wide financial statements. The Town of Guadalupe, Arizona uses enterprise funds to account for its refuse, sewer and commercial center operations. 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 refuse, sewer and commercial center operations. All three funds are considered to be major funds of the Town of Guadalupe, Arizona. The basic proprietary fund financial statements can be both found on pages 21-24 of this report. Notes to the basic financial statements. The notes to the financial statements (pages 25-42) provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements and should be read with the financial statements. -5- TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2013 Required supplementary information other than MD&A. Governments have an option of including the budgetary comparison statements for the general fund and major special revenue funds as either part of the fund financial statements within the basic financial statements, or as required supplementary information after the footnotes. The Town has chosen to present these budgetary statements as supplementary information after the footnotes. Financial Highlight  The assets of the governmental activities of the Town of Guadalupe, Arizona exceeded its liabilities at close of the most recent fiscal year by $15,899,460 (net position). Of this amount $72,226 is restricted for capital asset acquisition, $109,985 is restricted for highways and streets, $762,062 is restricted for the HOME program, $14,771,393 is invested in capital assets, net of related debt, $10,715 is restricted for community service programs, $38,863 is restricted for community development activities and $134,216 is unrestricted and is available to be used to meet the government’s ongoing obligations to citizens and creditors.  As of the close of the current fiscal year, Town of Guadalupe, Arizona’s governmental funds reported combined ending fund balances of $482,862 resulting in a decrease of $158,043 in comparison with prior year. The decrease is entirely the result of capital projects being completed in the amount of $216,646, while the general fund reflects an increase in fund balance of $72,970.  At the end of the current fiscal year, unassigned fund balance for the general fund reflects a surplus of $251,073. The Town’s general fund revenues fell short of estimates and were 16% lower than budgeted due to grants budgeted but not received. Local sales tax and state share revenues received were greater than or equal to amounts budgeted. General fund expenses and transfers to other funds were $995,405 less than budgeted. Because the Town has no property tax, it relies heavily on the current economy for its revenues. With a slight improvement in the economy, the Town budgeted revenues and transfers in for fiscal year 2013 to be $657,554 higher than prior year actual. Likewise budgeted expenses and transfers out were $1,259,649 higher than prior year. Due to job growth the state shared personal income taxes received increased by 21%, or $98,017. Low interest rates on investments continued to yield very low interest revenues as compared to years past. The Town also saw significant increases over prior year in Transient Occupancy and State Sales Taxes. General fund revenues do appear to be rebounding. However, the Town’s management and budgetary committees will continue to be conservative after the experience of the past couple of years. Excess revenues over expenditures were $435,212 higher than budgeted in the general fund for fiscal year 2013. -6- TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2013 Government-Wide Financial Analysis Net position may serve over time as a useful indicator of a government’s financial position. The following table reflects the condensed Statement of Net Position of the Town for June 30, 2013 showing that assets exceeded liabilities by $17,869,271. Town of Guadalupe, Arizona Condensed Statement of Net Position As of June 30, 2013 and 2012 ASSETS Current and other assets Capital assets Non-depreciable Depreciable (net) Governmental Activities Business-Type Activities $ $ Total assets 2,706,231 1,411,793 Total $ 4,118,024 Prior Year June 30, 2012 $ 4,153,550 7,039,174 10,049,237 84,703 536,417 7,123,877 10,585,654 7,123,877 9,875,390 19,794,642 2,032,913 21,827,555 21,152,817 LIABILITIES Other liabilities Non-current liabilities Due within one year Due in more than one year 1,578,164 63,102 1,641,266 1,641,798 2,018 2,315,000 - 2,018 2,315,000 4,611 2,522,018 Total liabilities 3,895,182 63,102 3,958,284 4,168,427 14,771,393 621,120 15,392,513 14,472,638 72,226 109,985 10,715 38,863 762,062 134,216 1,348,691 72,226 109,985 10,715 38,863 762,062 1,482,907 256,205 210,820 661,658 1,383,069 NET POSITION Invested in capital assets, net of related debt Restricted for: Capital acquisitions Highways and streets Community Service Community Development HOME program Unrestricted (deficit) Total net position $ 15,899,460 $ 1,969,811 $ 17,869,271 $ 16,984,390 The unrestricted net position of the Governmental Activities for the Town of Guadalupe, Arizona has increased to a surplus of $134,216 from the prior year of $103,128. -7- TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2013 Comparative Analysis of Government-Wide Revenues and Expenses For the year ended June 30, 2013 and 2012 Governmental Activities Business-Type Activities $ $ Total Prior Year June 30, 2012 REVENUE Program revenue: Charges for services Grants and contributions 452,270 2,440,174 523,700 - $ 975,970 2,440,174 $ 1,034,900 2,449,816 2,892,444 523,700 3,416,144 3,484,716 Sales taxes Franchise tax Bed taxes Rest aurant tax State sales tax revenue sharing Auto lieu tax revenue sharing State revenue sharing Int erest income Gain (loss) on disposal of assets Miscellaneous 1,149,402 23,402 334,351 316,354 452,068 184,396 564,163 16,652 5,326 2,198 - 1,149,402 23,402 334,351 316,354 452,068 184,396 564,163 18,850 5,326 1,140,834 24,605 316,824 321,734 431,569 176,888 466,145 8,774 (20,025) 32,657 Total gen eral revenue 3,046,114 2,198 3,048,312 2,900,005 Total revenue 5,938,558 525,898 6,464,456 6,384,721 916,202 2,326,743 718,789 96,261 681,651 286,987 - 88,505 182,813 281,624 916,202 2,326,743 718,789 96,261 681,651 286,987 88,505 182,813 281,624 911,725 2,337,477 684,409 82,881 951,021 320,627 108,920 161,394 289,982 5,026,633 552,942 5,579,575 5,848,436 884,881 536,285 16,984,390 16,448,105 Total program reven ue General revenue: EXPENSE General government Public safety Public works and streets Culture and recreati on Community Development Health and welfare Sewer Tiangui s Refuse Total expenses Change in net position 911,925 Beginning net position 14,987,535 Ending net position $ 15,899,460 -8- (27,044) 1,996,855 $ 1,969,811 $ 17,869,271 $ 16,984,390 TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2013 Financial Analysis of the Town’s Funds Governmental Funds. The focus of the Town’s governmental funds is to provide information on near-term inflows, outflows, and balances of resources that are available for spending. Such information is useful in assessing the Town’s financing requirements. In particular, unassigned fund balance may serve as a useful measurement of a government’s net resources available for spending at the end of the fiscal year. Types of governmental funds reported by the Town include the general fund, special revenue funds, debt service funds and capital projects funds. At the end of the current fiscal year, the Town’s governmental funds reported combined ending fund balances of $482,862, a decrease of $158,043 in comparison with the prior year. The decrease is directly related to the completion of capital projects such as Solarez improvements and the Senior Center Roof repair. General fund expenses were increased by $82,607 over prior year and revenues decreased over prior year by $4,417. General fund balance increased by $72,970 with a total fund balance of $251,073. Local sales taxes declined from prior year by $6,800. However, state shared revenues increased from prior year by $126,024 covering the local short fall and generating an increase over all in the fund balance. This trend indicates the importance of encouraging local commercial development and promoting current local businesses. While it appears that the state and local economy are improving the Town continues to budget conservatively. Fund General Fund HURF/LTAF B alance at Increase/(Decrease) June 30, 2013 From 2011-12 $ $ 251,073 109,985 72,970 (100,835) Comm. Dev. Grants 38,863 43,086 Comm. Serv. Grants 10,715 10,715 Capital Project s F und 72,226 (183,979) The general fund is the chief operating fund of the Town of Guadalupe, Arizona. At the end of the current fiscal year, the fund balance of the general fund was a surplus of $251,073, while the balance of all governmental funds declined to $482,862. The fund balance of the Town of Guadalupe, Arizona’s general fund increased by $72,970 during the current fiscal year. Key factors in this change are as follows:   Most general fund revenues were over or at budget with the exception of budgeted grants that were not received. Transient Occcupancy Tax, Restaurant/Bar, State Sales Tax, Fines and Forfeitures and Rents and Concessions were over budget by a total of $75,198. However, grants budgeted but not received were under budget by $878,212. One time revenues are revenues that are not anticipated nor budgeted. Those one time revenues that attributed to the surplus in the general fund included $39,556 for wildland fires with related expenses of approximately 60% of that amount. -9- TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2013   At year end, the general fund revenues and other financing sources exceeded expenditures by $443,125. However, transfers from the general fund to pay the bond payment and interest in the amount of $316,531, from the general fund to the Senior Center in the amount of $30,205, from the general fund to the Community Action Program in the amount of $23,421 and resulted in general fund revenues and other financing sources exceeding transfers and expenditures by $72,970. As a result, the general fund ended the year with a surplus of $251,073. No departments were materially over budget. Proprietary Funds. The Town of Guadalupe, Arizona’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Net position of the Refuse, Sewer and Commercial Center Funds at the end of the year amounted to $204,618, $1,543,265, and $221,928, respectively. The total change in net position for the three funds was $39,607, $(2,056) and $(64,595), respectively. General Fund Budgetary Highlights The Town’s annual budget is the legally adopted expenditure control document of the Town. Budgetary comparison statements are required for the general fund and all major special revenue funds and may be found on pages 43-47. These statements compare the original adopted budget, the budget if amended during the fiscal year, and the actual revenues and expenditures. General fund revenues of $3,719,472 were less than budgeted revenues of $4,410,559 by $691,087 while expenditures of $3,276,345 were less than budgeted expenses of $4,402,644 by $1,126,299. The primary cause in the difference between the actual revenues and expenditures and the budgeted revenues and expenditures was the result of budgeted grants that were not received or spent and planned capital projects that were suspended. Capital Asset and Debt Administration The Town’s capital assets for its governmental and business-type activities as of June 30, 2013 amounted to $17,709,531 (net of accumulated depreciation). For government-wide financial statement presentation, all depreciable capital assets were depreciated from acquisition date to the end of the current fiscal year. Fund financial statements record capital asset purchases as expenditures. See Note 5 in the Notes to the Basic Financial Statements for further information regarding capital assets. The current year capital asset additions were as follows:  The Town in partnership with the Salt River Municipal Aesthetics Program began work on the Highline Canal Improvements Project that will extent a recreational path along the canal that is on the east side of Town and runs from the north side of Avenida del Yaqui south to Mineral Road and will eventually connect to the recreational path in Tempe. The expenditures as of June 30, 2013 amounted to $28,398. - 10 - TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2013  The Guadalupe Fire Department in partnership with the Tempe Fire Department received a FEMA grant to purchase digital portable radios. Guadalupe’s portion of the grant award for the purchase was $35,077 and the Town match was $9,469 for a total of $44,546.  An Air condition was replaced at the Town of Guadalupe Fire Department for $7,027.  The Fire Department’s fire engine LaFrance required a major repair/replacement of the truck engine that extended the life of the vehicle for another 5 years costing $9,023.  During the year the Town received gaming funds of $30,000 from Salt River Pima Maricopa Indian Community for the Fire Department to purchase radio communication equipment necessary for first responders.  The Town received CDBG grants in the amount of $316,750 for curbs and gutters in the Solarez Neighborhood. The Town also contributed an additional $169,515 in matching funds to total $486,265.  The Town also received CDBG grants in the amount of $602,439 for Street repaving for the La Cuarenta neighborhood area.  The Town used capital project funding to complete minor repairs to both streets and curbs and sidewalks to both of the following streets; Bella Vista and Guadalupe Rd/Sun Circle in the amount of $13,488.  The Town purchased a new Walker Mower for the Town’s parks and water basins for $12,210.  The Town’s John Deer Backhoe required a major repair that will extend the life another 10 years in the amount of $21,881.  The Town made repairs to the Senior Center roof for $44,801. The remaining repairs will be made during fiscal year 2014. - 11 - TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2013 The following table provides a breakdown of the capital assets of the Town at June 30, 2013: Capital Assets at June 30, 2013 and 2012 (Net of accumulated depreciation) Land $ Governmental Activities Business Type Act ivi ties 2013 2013 7,039,174 2012 $ 7,039,174 $ Total 2012 84,703 $ 2013 84,703 $ 7,123,877 2012 $ 7,123,877 Land and improvements Buildings and 177,933 improvements Infrastruct ure Street light s Machinery and equipment Curbs and gutters Total $ 198,016 - - 177,933 198,016 1,893,969 1,959,789 168,998 216,738 2,062,967 2,176,527 3,152,046 2,638,889 367,419 415,473 3,519,465 3,054,362 402,949 428,888 402,949 428,888 - - 497,799 523,244 - - 497,799 523,244 3,924,541 3,494,353 - - 3,924,541 3,494,353 17,088,411 $ 16,282,353 $ 621,120 $ 716,914 $ 17,709,531 $ 16,999,267 Long-term Debt At the end of the current fiscal year, the Town of Guadalupe, Arizona had total long-term obligations outstanding of $2,439,960. Of that amount $2,315,000 outstanding debt is secured by pledges of specific revenue sources of the Town. Capital leases payable amount to $2,018 and the remaining $122,942 is compensated absences payable to employees. The following schedule shows the outstanding debt of the Town (both current and long-term) as of June 30, 2013. Further detail on the Town’s outstanding debt may be found in Note 7 on pages 36-38. Outstanding Debt Revenue bonds $ Governmental Activities Business-type Activities 2013 2013 2,315,000 2012 $ 2,520,000 $ Total 2012 - $ 2013 - $ 2,315,000 2012 $ 2,520,000 Capital leases payable 2,018 6,629 116,857 160,246 - - 6,085 14,997 2,018 6,629 122,942 175,243 Compensated absences TOTAL $ 2,433,875 $ 2,686,875 $ 6,085 - 12 - $ 14,997 $ 2,439,960 $ 2,701,872 TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2013 Economic Factors and Next Year’s Budgets and Rates  Excluding grant revenue, State Shared Revenue makes up 34% of the Town’s general fund revenue. State Shared Revenue is expected to increase by 6.7% or $80,905 for fiscal year 2014. More than half of this increase is Urban Revenue Sharing (State Income Tax). Urban Revenue Sharing is distributed two years after the State collects the funds. Therefore, this increase indicates that job growth and pay rates increased by 9% in 2012 over 2013 as indicated in the 9% increase in Urban Revenue Sharing distributions. State Shared Sales Tax is forecasted to increase by 6% or by $27,870. All State Shared Revenue estimates increased by a rate less than half of last year indicating that the Arizona economy continues to grow but at a much slower pace. The Town of Guadalupe management and budget staff remain conservative in estimating revenues.  Local Tax Revenue, which makes up 33% of the general fund revenue, is expected to increase by 3% or $39,611.  Because of the slow growth rate of the economy the town council continued to make reductions in expenditures when the 2013-14 budget was prepared. Revenues did exceed expenses and transfers at fiscal year end 2013; therefore the council did increase budgeted expenses for capital outlays, parks improvements and computers systems and networks.  In an effort to generate additional revenues, the Town continues to participate in the State Wild Land Fire Program. As a result of participation in this program, the Town received $39,555 in additional revenues in 2013. After considering the related expenses of the program, approximately ¼ of the funds represent revenues exceeding related expenses and these funds are used by the fire department for equipment maintenance, replacement purchases and fire department operating expenses.  In efforts to promote businesses located in the Town’s Commercial Center, the Town Council and Town Manager have been holding numerous special events in and around the building. It does appear that sales have been picking up and there is also a spike in interest of the vacant suites. - 13 - TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2013 Financial contact This financial report is designed to provide a general overview of the Town’s finances for all of those with an interest in the government’s finances and to demonstrate accountability for the use of public funds. Questions about any of the information provided in this report, or requests for additional financial information should be addressed to: Town of Guadalupe, Arizona Finance Department 9241 South Avenida del Yaqui Guadalupe, AZ 85283 Or visit our website at: www.guadalupeaz.org - 14 - TOWN OF GUADALUPE, ARIZONA Statement of Net Position June 30, 2013 Governmental Activities Primary Government Business-type Activities Total $ 1,255,487 169,291 507,558 11,833 762,062 7,039,174 10,049,237 $ 1,243,511 4,307 162,461 1,514 84,703 536,417 $ 2,498,998 4,307 169,291 670,019 13,347 762,062 7,123,877 10,585,654 19,794,642 2,032,913 21,827,555 606,942 32,216 101,311 720,838 - 36,341 959 19,717 643,283 33,175 101,311 720,838 19,717 105,171 11,686 5,477 608 110,648 12,294 ASSETS Cash and cash equivalents Accounts receivable - net Taxes receivable - net Due from other governments Prepaid expenses Notes receivable - net Capital assets, not being depreciated Capital assets, being depreciated, net Total assets LIABILITIES Accounts payable Accrued expenses Court bonds payable Deferred revenue Refundable deposits Compensated absences Due within 1 year Due in more than 1 year Noncurrent liabilities Due within 1 year Due in more than 1 year 2,018 2,315,000 - 2,018 2,315,000 Total liabilities 3,895,182 63,102 3,958,284 14,771,393 621,120 15,392,513 72,226 109,985 10,715 38,863 762,062 134,216 1,348,691 72,226 109,985 10,715 38,863 762,062 1,482,907 $ 15,899,460 $ 1,969,811 $ 17,869,271 NET POSITION Invested in capital assets, net of related debt Restricted for: Capital acquisitions Highways and streets Community service Community development HOME program Unrestricted (deficit) Total net position The accompanying notes are an integral part of these financial statements. - 15 - TOWN OF GUADALUPE, ARIZONA Statement of Activities Year Ended June 30, 2013 Fun ctions / Pr ogra ms Prima ry g overnment : Governm ental activities General governm ent Public safety Public works and str eets Culture and recreation Community developm ent Health and welfare Tot al governmental activit ies Ex penses $ Business-type activities Sewer Tianguis Ref use Tot al business-type activit ies Tot al pr imary government Ch arges for Ser vices 916,202 2,326,743 718,789 96,261 681,651 286,987 5,026,633 $ 88,505 182,813 281,624 552,942 $ 5,579,575 212,016 236,200 4,054 452,270 Pr ogr am Revenue Operating Grants and Contributions $ 84,251 118,218 321,231 523,700 $ General revenue: Taxes: Sales taxes Franchise taxes Bed taxes Sta te sales tax revenue sharing Auto lieu tax rev en ue sharing Sta te revenu e shar ing Interest incom e Miscellaneous Total general revenue Change in net position Net position, beg in ning of year Net position, end o f year 975,970 11 1,68 5 2 4,23 0 31 8,42 9 75 8,98 8 21 5,79 8 1,42 9,13 0 $ $ 1,42 9,13 0 Net (Expen ses) Revenue and Changes in Net Positio n Primar y Government Governmental Business- type Activities Activities To tal Capital Grants and Contributions 1 6,40 8 2 1,93 0 4,28 7 3,87 5 96 4,54 4 1,01 1,04 4 $ $ (576,093) ( 2,044,383) (396,073) (88,332) 1,041,881 (71,189) ( 2,134,189) $ - 1,01 1,04 4 $ - $ (576 ,093 ) (2,044 ,383 ) (396 ,073 ) ( 88 ,332 ) 1,041 ,881 ( 71 ,189 ) (2,134 ,189 ) (4,254) (64,595) 39,607 (29,242) (4 ,254 ) ( 64 ,595 ) 39 ,607 ( 29 ,242 ) ( 2,134,189) (29,242) (2,163 ,431 ) 1,465,756 23,402 334,351 452,068 184,396 564,163 16,652 5,326 3,046,114 911,925 14,987,535 15,899,460 2,198 2,198 (27,044) 1,996,855 1,969,811 The accompanying notes are an integral part of these financial statements. - 16 - $ $ 1,465 ,756 23 ,402 334 ,351 452 ,068 184 ,396 564 ,163 18 ,850 5 ,326 3,048 ,312 884 ,881 16,984 ,390 17,869 ,271 TOWN OF GUADALUPE, ARIZONA Balance Sheet Governmental Funds June 30, 2013 Community Community Development Service Capital Debt Total General HURF/LTAF Grants Grants Projects Service Governmental Fund Fund Fund Fund Fund Fund Funds ASSETS Cash and cash equivalents $ Taxes receivable - net Miscellaneous receivables Due from other governments Prepaid expenses Total assets 912,447 $ 92,080 148,921 - 223 - 48,302 7,474 $ 114,553 $ - 42,300 $ 94,107 $ - $ 1,255,487 - - - 148,921 762,476 - - - 762,699 28,488 424,395 26,106 - - 527,291 3,296 180 883 - - 11,833 $ 1,117,367 $ 123,864 $ 1,301,604 $ $ 109,239 $ 11,535 $ 454,536 $ 69,289 $ 94,107 $ 9,751 $ 21,881 $ - $ 2,706,231 - $ 606,942 LIABILITIES AND FUND BALANCES Liabilities Accounts payable Accrued expenses 26,386 2,344 Court bonds payable 101,311 - Deferred revenue 629,358 - 866,294 13,879 Total liabilities 760 2,726 - - 32,216 - - - 101,311 807,445 46,097 - - 1,482,900 1,262,741 58,574 21,881 - 2,223,369 109,985 - Fund balances Restricted for: Highways and streets - - - - - Community development - - 38,863 - - - 38,863 Community service - - - 10,715 - - 10,715 - - - - 72,226 - 72,226 - - - - - 251,073 38,863 10,715 72,226 - 482,862 Capital acquisition Unassigned 109,985 251,073 251,073 Total fund balances Total liabilities and fund balances $ 1,117,367 109,985 $ 123,864 $ 1,301,604 $ 69,289 $ 94,107 $ The accompanying notes are an integral part of these financial statements. - 17 - - $ 2,706,231 TOWN OF GUADALUPE, ARIZONA Reconciliation of the Balance Sheet to the Statement of Net Position Governmental Funds June 30, 2013 Fund balances--total governmental funds Amounts r eported for governmental activities in the Statement of Net Position are different because: $ Capital assets used in governmental activities are not financial resources and therefore, are not reported in the funds. 17,088,411 Some r eceivables are not available to pay for current-period expenditures and therefore, are deferred in the funds. Notes receivable - net Some liabilities, including bonds payable, are not due and payable in the current period and therefore, are not reported in the funds Capital leases payable Compensated absences Bonds paya ble 482,862 762,062 (2,018) (116,857) (2,315,000) ( 2,433,875) Net position of governmental activities $ 15,899,460 The accompanying notes are an integral part of these financial statements. - 18 - TOWN OF GUADALUPE, ARIZONA Statement of Revenue, Expenditures, and Changes in Fund Balance Governmental Funds Year Ended June 30, 2013 Revenue Inter governm ental Taxes Fines and forfeitur es Charges fo r services Other revenue Licenses an d per mits Inter est Total revenue $ Ex penditures Curr en t Pub lic safety Gener al govern men t Comm un ity developmen t Pub lic wo rks and streets Health and welf are Culture an d recr eation Debt Service Prin cipal In terest Capital outlay Total expenditures Service Capital Debt Total HURF/LTAF Grants Gran ts Pro jects Service Go vern mental Fund Fu nd Fund Fund Fund Fund Fund s 1,4 13,937 1,8 68,521 1 73,409 1 41,790 32,680 73,847 15,288 3,7 19,472 $ 1,497,10 5 61,99 6 1,559,10 1 $ 41 8,94 4 5,76 6 42 4,71 0 $ 31,8 95 7 72 32,6 67 $ - $ 19 8,19 7 26 9,42 4 - 1,1 14 1,1 42 10,2 30 1,3 72 5,0 13 4,611 837 53,916 3,2 76,345 64,120 4 19,855 963,81 4 1,516,01 5 46 7,62 1 1 97,7 75 2 16,6 46 2 05,000 1 11,531 3 16,531 43,08 6 (4 2,91 1) (1 83,9 79) (3 16,531) - 5 3,62 6 (1 00,835 ) 43,08 6 1 0,71 5 (1 83,9 79) - ( 158,04 3) 2 10,820 ( 4,22 3) - 2 56,2 05 - 640,90 5 (1 00,835 ) - 72,970 1 78,103 2 51,073 $ 1 09,985 $ 38,86 3 $ 1 0,71 5 - 3,648,41 5 1,900,41 6 173,40 9 141,79 0 100,44 2 73,84 7 16,65 1 6,054,97 0 552,20 1 - (3 70,157 ) $ 3 18,429 591 3 19,020 3 55,735 - Other financing sources ( uses) Tran sf ers Fund balances, e nd of year $ 2,2 29,404 8 60,423 29,017 12,346 85,791 4 43,127 Fund balances, beginning of year Commu nity General Excess ( deficienc y) of revenue ov er (under) expen ditur es Net chang e in fund balances Co mmu nity Developm ent - $ 72,2 26 2,230,51 8 861,56 5 789,64 5 369,45 3 269,42 4 90,80 4 209,61 1 112,36 8 1,279,62 5 6,213,01 3 ( 158,04 3) 3 16,531 $ The accompanying notes are an integral part of these financial statements. - 19 - - - $ 482,86 2 TOWN OF GUADALUPE, ARIZONA Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances to the Statement of Activities Governmental Funds Year Ended June 30, 2013 Net change in fund balances--total governmental funds Amounts reported for governmental activities in the Statement of Activities are different because: 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. Capital outlay Depreciation expense $ (158,043) $ 1,279,625 (498,509) 781,116 In the Statement of Activities, only the gain/loss on the sale of capital assets is reported whereas in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net position differ from the change in fund balance by the book value of the capital assets sold. Loss on disposal of assets Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. HOME note receivable additions Noncash grant of police equipment HOME grant Sales taxes (10,136) 100,404 35,078 (44,481) (45,013) 45,988 Debt proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the Statement of Net Position. Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Position. Debt principal repayments Net change in compensated absences 209,611 43,389 253,000 Change in net position of governmental activities $ The accompanying notes are an integral part of these financial statements. - 20 - 911,925 TOWN OF GUADALUPE, ARIZONA Statement of Net Position Proprietary Funds June 30, 2013 Business-type Activities--Enterprise Funds Tianguis Econ. Dev. Refuse Fund Fund Sewer Fund ASSETS Current assets Cash and cash equivalents Accounts receivable - net Due from other governments Prepaid expenses Due from other funds Total current assets $ $ 30,253 208 1,602 1,180,696 4,307 709 5,016 367,419 367,419 84,703 168,998 253,701 1,548,115 258,717 227,683 2,034,515 32 516 3,872 4,420 13,244 443 19,717 1,605 1,602 36,611 23,065 23,065 36,341 959 19,717 5,477 1,602 64,096 430 178 4,850 36,789 23,065 64,704 253,701 (31,773) 204,618 621,120 1,348,691 - Noncurrent assets Capital assets, net of accumulated depreciation, where applicable: Land Utilities systems, net Buildings, net Total noncurrent assets Total assets LIABILITIES Current liabilities Accounts payable Accrued expenses Refundable deposits Compensated absences - current portion Due to other funds Total current liabilities Noncurrent liabilities Compensated absences Total liabilities Net position Invested in capital assets, net of related debt Unrestricted (deficit) Total net position 1,148,633 367,419 1,175,846 $ 1,543,265 $ 221,928 $ 94,878 Total $ - 132,208 597 227,683 - 84,703 367,419 168,998 621,120 - $ 204,618 The accompanying notes are an integral part of these financial statements. - 21 - 1,243,511 4,307 162,461 1,514 1,602 1,413,395 608 $ 1,969,811 TOWN OF GUADALUPE, ARIZONA Statement of Revenue, Expenses, and Changes in Fund Net Position Proprietary Funds Year Ended June 30, 2013 S ewer Fund Operating revenues Charges for services Rents Total operatin g revenu es $ Operating expenses Professi onal services Depreciat ion Personnel Ut ilities Repairs and maintenance Insurance Materials and supplies Miscellaneous Total operatin g expenses Operatin g in come (loss) Nonoperating revenue Invest ment income Increase (decrease) in net position Total net position, beginning of year Total net position , end of year 84,251 84,251 Business-type Act ivi ties--Enterprise Funds Tianguis Econ. Dev. R efuse F und Fund $ $ 321,231 321,231 $ 405,482 118,218 523,700 250 48,054 36,864 323 1,325 535 1,154 88,505 820 47,740 27,503 63,301 35,982 3,285 3,220 962 182,813 279,932 1,692 281,624 281,002 95,794 64,367 63,624 37,307 5,512 4,374 962 552,942 (4,254) (64,595) 39,607 (29,242) 2,198 - - 2,198 (2,056) (64,595) 39,607 (27,044) 286,523 165,011 1,545,321 $ 118,218 118,218 Total 1,543,265 $ 221,928 $ 204,618 The accompanying notes are an integral part of these financial statements. - 22 - 1,996,855 $ 1,969,811 TOWN OF GUADALUPE, ARIZONA Statement of Cash Flows Proprietary Funds Year Ended June 30, 2013 S ewer Fund Cash flows from operating activi ties: Receipts from customers Payment s t o suppliers and providers of goods and services Payment s t o empl oyees Net cash provided (used ) by operating activiti es $ B usi ness-type Activities--Enterprise Funds Tianguis Econ. Dev. Refuse Fund Fund 58,060 $ 119,093 $ 216,088 Total $ 393,241 (17,702) (30,129) (108,439) (25,213) (282,351) - (408,492) (55,342) 10,229 (14,559) (66,263) (70,593) Cash flows from noncapital fi nancing activiti es: Int erfund l oans (1,602) 1,602 - - Cash flows from investing acti vi ties: Int erest recei ved on investments 2,198 - - 2,198 Net i ncrease (d ecrease) i n cash and cash equivalents 10,825 (12,957) (66,263) (68,395) Cash and cash equivalents, beginning of year 1,137,808 12,957 161,141 Cash and cash equivalents, end of year $ 1,148,633 $ - $ 94,878 The accompanying notes are an integral part of these financial statements. - 23 - 1,311,906 $ 1,243,511 TOWN OF GUADALUPE, ARIZONA Statement of Cash Flows Proprietary Funds Year Ended June 30, 2013 (Continued) S ewer Fund Reconcil iation of operating in come (loss) to net cash provided (used) b y operatin g activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used by) operating act ivi ties: Depreciat ion (Increase) decrease i n: Accounts receivable Due from other governments P repaid expenses Increase (decrease) i n: Accounts payable Accrued expenses Refundable deposits Compensated absences payable Net cash provid ed (used) by operating activities $ $ B usi ness-type Activities--Enterprise Funds Tianguis Econ. Dev. Refuse Fund Fund (4,254) $ (64,595) $ 39,607 Total $ 48,054 47,740 (26,191) (165) (2,344) (131) (105,143) (317) (2,344) (131,334) (613) (53) (145) (7,017) 3,614 (167) 3,219 (1,895) (410) - 3,151 (312) 3,219 (8,912) 10,229 $ (14,559) - (29,242) $ (66,263) The accompanying notes are an integral part of these financial statements. - 24 - 95,794 $ (70,593) TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the Town of Guadalupe, Arizona, conform to generally accepted accounting principles applicable to governmental units adopted by the Governmental Accounting Standards Board (GASB). A summary of the Town’s significant accounting policies are as follows: A. Reporting Entity The Town is a general purpose local government that is governed by a separately elected Town Council. The accompanying financial statements present the activities of the Town (the primary government) and its component units. Component units are legally separate entities for which the Town is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the Town’s operations. Therefore, data from these units is combined with data of the primary government. The component unit discussed below has a June 30 year-end. The Town of Guadalupe Municipal Property Corporation is an Arizona nonprofit corporation incorporated under the laws of the State of Arizona. The principal objective of the Corporation is to assist the Town of Guadalupe, Arizona, in acquiring, constructing, operating, improving or modifying public facilities for the benefit of all Town of Guadalupe, Arizona, residents. The Town of Guadalupe Municipal Property Corporation is a blended component unit. B. Basis of Presentation The basic financial statements include both government-wide statements and fund financial statements. The government-wide statements focus on the Town as a whole, while the fund financial statements focus on major funds. Each presentation provides valuable information that can be analyzed and compared between years and between governments to enhance the usefulness of the information. Government-wide statements – provide information about the primary government (the Town) and its component units. The statements include a statement of net position and a statement of activities. These statements report the financial activities of the overall government. They also distinguish between the governmental and business-type activities of the Town and between the Town and its discretely presented component units. Governmental activities generally are financed through taxes and intergovernmental revenues. Business-type activities are financed in whole or in part by fees charged to external parties. - 25 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued A statement of activities presents a comparison between direct expenses and program revenues for each function of the Town’s governmental activities and segment of its business-type activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. The Town does not allocate indirect expenses to programs or functions. Program revenues include:    charges to customers or applicants for goods, services, or privileges provided, operating grants and contributions, and capital grants and contributions, including special assessments. Revenues that are not classified as program revenues, including internally dedicated resources and all taxes, are reported as general revenues. Generally, the effect of interfund activity has been eliminated from the government-wide financial statements to minimize the double counting of internal activities. However, charges for interfund services provided and used are not eliminated if the prices approximate their external exchange values. Fund financial statements – provide information about the Town’s funds, including blended component units. Separate statements are presented for the governmental and proprietary fund categories. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as non-major funds. Proprietary fund operating revenues, such as charges for services, result from transactions associated with the fund’s principal activity in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from transactions in which the parties do not exchange equal values. Revenues generated by ancillary activities are also reported as nonoperating revenues. The Town reports the following major governmental funds: The General Fund is the Town’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The HURF/LTAF Fund accounts for specific revenue received from the State of Arizona Highway User Revenue Fund and from State of Arizona Local Transportation Assistance Fund which are legally restricted to expenditures for specified purposes. The Capital Projects Fund accounts for resources to be used for acquiring or constructing major capital facilities, other than those financed by proprietary funds. - 26 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued The Community Development Grants Fund accounts for specific grant revenue sources that are legally restricted to expenditures for community development. The Community Services Grants Fund accounts for specific grant revenue sources that are legally restricted to expenditures for community services. The Debt Service Fund accounts for resources to be set aside to meet current and future debt service requirements on general long-term debt. This fund is used to record the activity of the Town of Guadalupe Municipal Property Corporation. The Town reports the following major enterprise funds: The Sewer Fund, Tianguis Economic Development Fund, and Refuse Fund account for operations that are financed and operated in a manner similar to private business enterprises, in which the intent of the Town Council is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or for which the Town Council has decided that periodic determination of revenue earned, expenses incurred, or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. C. Basis of Accounting The government-wide and proprietary fund financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Grants and donations are recognized as revenue as soon as all eligibility requirements the provider imposed have been met. Governmental funds in the fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The Town considers all revenues reported in the governmental funds to be available if the revenues are collected within 60 days after year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they are due and payable. General capital asset acquisitions are reported as expenditures in governmental funds. Issuances of general long-term debt and acquisitions under capital lease agreements are reported as other financing sources. - 27 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued D. Cash and Investments For purposes of its statement of cash flows, the Town considers only those highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Nonparticipating interest-earning investment contracts are stated at cost. Money market investments and participating interest-earning investment contracts with a remaining maturity of 1 year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. E. Allowance for Uncollectible Accounts Allowances for uncollectible accounts receivable are estimated by the Town. The amount recorded as uncollectible at June 30, 2013 for the Tianguis Economic Development Fund was $60,258. The amount recorded as uncollectible at June 30, 2013 for notes receivable in the Governmental Activities was $1,574,904 (see Note 4). F. Capital Assets Capital assets are reported at actual cost. Donated assets are reported at estimated fair value at the time received. Capitalization thresholds (the dollar values above which asset acquisitions are added to the capital asset accounts), depreciation methods, and estimated useful lives of capital assets reported in the government-wide statements and proprietary funds are as follows: Land Construction in progress Buildings and building improvements Land improvements Equipment Streets Curbs and gutters Street lights Capitalization Thr eshold Depreciation Method Estima ted Useful Life $ n/a n/a Straight-line Straight-line Straight-line Straight-line Straight-line Straight-line n/a n/a 50 10 5 40 40 40 - 28 - 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued G. Investment Income Investment income is composed of interest, dividends, and net changes in the fair value of applicable investments. H. Compensated Absences Compensated absences consist of vacation leave earned by employees based on services already rendered. Employees may accumulate up to 240 hours of vacation depending on years of service, but any vacation hours in excess of the maximum amount that are unused at year-end are forfeited. Upon termination of employment, all unused vacation benefits are paid to employees. Accordingly, vacation benefits are accrued as a liability in the financial statements. Employees may accumulate up to 480 hours of sick leave hours but any sick hours in excess of the maximum amount that are unused at year-end are forfeited. Because sick leave benefits do not vest with employees, a liability for sick leave benefits is not accrued in the financial statements. I. Fund Balance Reporting The Governmental Accounting Standards Board (GASB) Statement No. 54 requires fund balances to be properly reported within one of the fund balance categories listed below: 1. Nonspendable fund balance includes amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact such as fund balance associated with inventories, prepaids, long-term loans and notes receivable (unless the proceeds are restricted, committed, or assigned), 2. Restricted fund balance includes amounts that can be spent only for the specific purposes stipulated by constitution provisions or enabling legislation, or external resource providers, 3. Committed fund balance includes amounts that can be used only for the specific purposes determined by a formal action of the Town’s Town Council, 4. Assigned fund balances are intended to be used by the Town for specific purposes but do not meet the criteria to be classified as restricted or committed, and 5. Unassigned fund balance is the residual classification for the Town’s governmental funds and includes all spendable amounts not contained in other classifications. The Town’s policy for committed fund balances is through formal Town resolutions passed through the elected town council. The process of rescinding a committed fund balance requires the same process. - 29 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued The Town’s policy for assigned fund balances is through motions passed by the elected town council. Assigned fund balances do not require a formal resolution. When expenditures incur for purposes for which both restricted and unrestricted (committed, assigned, or unassigned) amounts are available, the Town’s policy is to apply the expenditure first to restricted, and then to unrestricted in the following order of committed, assigned, and then unassigned. J. Impact of Recently Issued Accounting Principles In December 2010, the GASB issued Statement 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. GASB 62 incorporates into the GASB's authoritative literature certain accounting and financial reporting guidance that is included in the following pronouncements issued on or before November 30, 1989, which does not conflict with or contradict GASB pronouncements: Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins of the American Institute of Certified Public Accountants'(AICPA) Committee on Accounting Procedure. This statement is effective for periods beginning after December 15, 2011. The adoption of GASB 62 does not have any impact on the Town's financial statements. In June 2011, the GASB issued Statement 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. GASB 63 provides guidance for reporting deferred outflows of resources, deferred inflows of resources, and net position in a statement of financial position and related disclosures. The statement of net assets is renamed the statement of net position and includes four components: assets, deferred outflows of resources, liabilities, and deferred inflows of resources. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2011. NOTE 2 – DEPOSITS AND INVESTMENTS Arizona Revised Statutes (A.R.S.) authorize the Town to invest public monies in the State Treasurer’s investment pool; U.S. Treasury obligations; specified state and local government bonds; and interest-earning investments such as savings accounts, certificates of deposit, and repurchase agreements in eligible depositories. The statutes require collateral for demand deposits, certificates of deposit, and repurchase agreements at 101 percent of all deposits not covered by federal depository insurance. - 30 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 2 – DEPOSITS AND INVESTMENTS – Continued The Town has not formally adopted deposit and investment policies that limit the Town’s allowable deposits or investments and address the specific types of risk to which the Town is exposed. Deposits – At June 30, 2013, the carrying amount of the Town’s total nonpooled cash in bank was $609,709, and the bank balance was $992,213. Of the bank balance, $250,000 was covered by federal depository insurance; the remainder was covered by collateral held by the pledging financial institution’s trust department or agent in the Town’s name. Investments—At June 30, 2013, the investments consisted of the following. Investment Rating Organization Credit Rating Reported Amount Fair Value S&P AAA $ 1,879,538 $ 1,879,538 Arizona LGIP Pool 5 The State Board of Investment provides oversight for the State Treasurer’s pools, and the Local Government Investment Pool Advisory Committee provides consultation and advice to the Treasurer. The fair value of a participant’s position in the pool approximates the value of that participant’s pool shares. Those shares are not identified with specific investments and are not subject to custodial credit risk. NOTE 3 – DUE FROM OTHER GOVERNMENTS Due from other governments for each governmental fund consisted of the following: General Fund Fed eral G overnment State of Arizona Maricopa County Oth er governments $ 48,3 02 - H URF/LT AF Fund $ 28,488 - $ 48,3 02 $ 28,488 Community Development Grants Fund $ 21,626 402,769 - Community Service Grants Fund $ 1,918 24,188 $ $ 424,395 26,106 Due from other governments for the Sewer and Refuse Funds consisted of amounts due from the City of Tempe totaling $30,253 and $132,208, respectively. - 31 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 4 – NOTES RECEIVABLE On the government-wide statement of net position, the Town recognizes notes receivable from individuals who are part of the Home Investment Partnership Program (HOME). Through the HOME program, qualifying families receive grant funding towards buying a home and in return sign a note agreement payable to the Town. The Town places a lien on the property for the amount of the HOME funds the family receives. Note maturities vary from 10 to 30 years with interest rates that are below market. Proceeds from principal and interest payments are applied to other HOME program expenses. Some of the loans stipulate that the loan amount is forgiven over the life of the loan on a straight-line basis. The Town has recorded the loan balance net of amounts expected to be forgiven. Notes receivables at June 30, 2013 consisted of $2,336,966 of which $1,574,904 are expected to be forgiven. The notes receivable balance – net totaled $762,062. - 32 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 5 – CAPITAL ASSETS Capital asset activity for the year ended June 30, 2013, was as follows: Balance July 1, 2012 Governmental activities: Capital assets not being depreciated: Land Total capital assets not being depreciated $ 7,039,174 Increases $ 7,039,174 - Decreases $ - Balance June 30, 2013 - $ 7,039,17 4 - 7,039,17 4 (2,954 ) (31,036 ) (33,990 ) 4,041,09 6 642,31 5 2,023,35 4 472,42 6 4,355,20 0 4,594,27 4 16,128,66 5 Capital assets being depreciated: Building and building improvements Land improvements Equipment Street lights Streets Curbs and gutters Total 4,037,023 613,917 1,921,928 472,426 3,750,280 4,052,377 14,847,951 Less accumulated depreciation for: Building and building improvements Land improvements Equipment Street lights Streets Curbs and gutters Total (2,077,234) (415,901) (1,398,684) (43,539) (1,111,392) (558,025) (5,604,775) (72,847) (48,481) (147,773) (25,938) (91,762) (111,708) (498,509) 2,954 20,902 23,856 (2,147,12 7) (464,38 2) (1,525,55 5) (69,47 7) (1,203,15 4) (669,73 3) (6,079,42 8) 9,243,176 816,195 (10,134 ) 10,049,23 7 (10,134 ) $ 17,088,41 1 To tal capital assets being depreciated, net Governmental activities capital assets, net $ 16,282,350 - 33 - 7,027 28,398 132,462 604,920 541,897 1,314,704 $ 816,195 $ TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 5 – CAPITAL ASSETS – Continued Balance July 1, 2012 Business-type activities: Capital assets not being depreciated: Land Total capital assets not being depreciated $ Capital assets being depreciated: Utility systems Equipment Buildings Building improvements Total Less accumulated depreciation for: Utility systems Equipment Buildings Building improvements Total $ $ - Decreases $ - Balance June 30, 2013 $ 84,70 3 84,703 - - 84,70 3 1,819,472 27,401 25,000 545,693 2,417,566 - - 1,819,47 2 27,40 1 25,00 0 545,69 3 2,417,56 6 (1,403,999) (27,401) (25,000) (328,955) (1,785,355) (48, 054) (47, 740) (95, 794) - (1,452,05 3) (27,40 1) (25,00 0) (376,69 5) (1,881,14 9) (95, 794) - 632,211 To tal capital assets being depreciated, net Business-type activities capital assets, net 84,703 Increases 716,914 - 34 - $ (95, 794) $ - 536,41 7 $ 621,12 0 TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 5 – CAPITAL ASSETS – Continued Depreciation expense was charged to functions as follows: Governmental activities: Highways and streets Public safety General government Community development Health and welfare Culture and recreation $ 252,268 110,688 68,263 44,270 17,563 5,457 Total governmental activities depreciation expense $ 498,509 Business-type activities: Tianguis center Sewer $ 47,740 48,054 Total business-type activities depreciation expense $ 95,794 NOTE 6 – DEFERRED REVENUE The Town has received advanced contract payments for the lease of billboard space with a term of 20-years. The Town recognizes revenue annually at 1/20th of the contract price. The remaining amount is recorded as deferred revenue that will be recognized as revenue over the life of the contract. The amount deferred for the billboard contract at June 30, 2013 is $522,500. The remaining balance of deferred revenue in the General Fund consists of grant advances in which the Town had not yet fulfilled contract requirements to recognize revenue; and taxes unavailable because they were not collected within 60 days after year end. Deferred revenue in the Community Development Grants Fund and the Community Service Grants Fund consists of grant advances in which the Town had not yet fulfilled contract requirements to recognize revenue. - 35 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 7 – LONG-TERM LIABILITIES Bonds – The Town’s bonded debt consists of a 2002 revenue bonds issuance of $3,445,000 received through the Greater Arizona Development Authority. The revenue bonds require principal payments annually beginning August 1, 2008 with interest payments that vary from 2.25 percent to 4.75 percent paid semiannually on August 1, and February 1 with the first interest payment due August 1, 2003. Bond net proceeds of $3,218,300 were used to provide for an advanced refunding of $1,935,000 towards the Town’s Municipal Facilities Revenue Bond with the remaining proceeds to be used to finance capital improvements. State-shared general fund revenues are used as security for the revenue bonds. Bonds outstanding at June 30, 2013, were as follows: Description Revenue bonds Original Amount Maturity Ranges Interest Rates Outstanding June 30, 2013 $ 3,445, 000 2 008-2022 2.25 - 4.75% $ 2,315,000 The following schedule details the Town’s long-term liability and obligation activity for the year ended June 30, 2013. Balance July 1 , 2012 Governmental activities: Compensated absences Capital leases payable Bo nds payable Governmental activities long-term liabilities Business-type activities: Compensated absences Business-type activities long-term liabilities $ Additions Reductions Balan ce June 30, 2013 Due within 1 year 160, 246 6, 629 2 ,520, 000 $ - $ 43,389 4,611 205,000 $ 116,857 2,018 2,315,000 $ 105,171 2,018 - $ 2 ,686, 875 $ - $ 253,000 $ 2,433,875 $ 107,189 $ 14, 997 $ - $ 8,912 $ 6,085 $ 5,477 $ 14, 997 $ - $ 8,912 $ 6,085 $ 5,477 - 36 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 7 – LONG-TERM LIABILITIES – Continued The following schedule details debt service requirements to maturity for the Town’s bonds payable at June 30, 2013. Go vern mental Activities Year Ending Revenue Bonds Pay able June 30 201 4 Principal $ - Interest $ 107 ,431 201 5 201 6 215,000 225,000 99 ,031 90 ,063 201 7 201 8 235,000 245,000 80 ,400 70 ,047 1,395,000 169 ,717 2019-23 Total $ 2,315,000 $ 616 ,689 In prior years, the Town defeased a revenue bond by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bond. Accordingly, the trust account assets and the liability for these defeased bonds are not included in the Town’s financial statements. At June 30, 2013, outstanding defeased revenue bonds totaled $905,000. Capital leases – The Town has acquired equipment under the provisions of a long-term lease agreements classified as capital leases for accounting purposes because it provides for a bargain purchase option or a transfer of ownership by the end of the lease term. The assets acquired through capital lease are as follows: Governmental Activities Copier Less: accumulated depreciation $ 20,745 ( 19,362) Carrying value $ 1,383 - 37 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 7 – LONG-TERM LIABILITIES – Continued The following schedule details debt service requirements to maturity for the Town’s capital leases payable at June 30, 2013. Year Ending June 30 Governmental Activities 2014 Less amount representing interest $ 2,054 (36) Pre sent value of ne t minimum lease payments $ 2,018 Interest expense – The amount of interest expense incurred for all debt related to governmental activities has been allocated to the appropriate functional direct expense categories on the Statement of Activities as follows: General government Highways and streets $ 837 111,531 Total interest expense $ 112,368 NOTE 8 – RISK MANAGEMENT The Town is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Town carries commercial insurance for all such risks of loss, including workers’ compensation and employees’ health and accident insurance. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. - 38 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 9 – RETIREMENT PLANS Plan Descriptions – The Town contributes to the two plans described below. Benefits are established by state statute and generally provide retirement, death, long-term disability, survivor, and health insurance premium benefits. The retirement benefits are generally paid at a percentage, based on years of service, of the retirees’ average compensation. Long-term disability benefits vary by circumstance, but generally pay a percentage of the employee’s monthly compensation. Health insurance premium benefits are generally paid as a flat dollar amount per month towards the retiree’s health care insurance premiums, in amounts based on whether the benefit is for the retiree or for the retiree and dependents The Arizona State Retirement System (ASRS) administers cost-sharing multiple-employer defined benefit pension, health insurance premium, and long-term disability plans that cover employees of the State of Arizona and participating political subdivisions and school districts. The ASRS is governed by the Arizona State Retirement System Board according to the provisions of A.R.S. Title 38, Chapter 5, Article 2. The system issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained by writing to the Arizona State Retirement System, 3300 N. Central Ave., P.O. Box 33910, Phoenix, Arizona, 85067-3910 or by calling (602) 240-2000 or 1 (800) 6213778. The Public Safety Personnel Retirement System (PSPRS) administers agent multiple-employer defined benefit pension and health insurance premium plans that cover public safety personnel who are regularly assigned hazardous duty as employees of the State of Arizona or one of its political subdivisions. The PSPRS, acting as a common investment and administrative agent, is governed by a five-member board, known as The Fund Manager, and the participating local boards according to the provisions of A.R.S. Title 38, Chapter 5, Article 4. The PSPRS issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained by writing to the Public Safety Personnel Retirement System, 3010 East Camelback Road, Suite 200, Phoenix, Arizona 85016-4416, or by calling (602) 255-5575. Funding Policy – The Arizona State Legislature establishes and may amend active plan members’ and the Town’s contribution rates for both ASRS and PSPRS. Cost-sharing plans – For the year ended June 30, 2013, active ASRS members and the Town were each required by statute to contribute at the actuarially determined rate of 11.14 percent (10.90 percent for retirement and 0.24 percent for long-term disability) of the members’ annual covered payroll. The Town’s contributions to ASRS for the years ended June 30, 2013, 2012, and 2011, were $80,675, $69,610, and $65,772, respectively, which were equal to the required contributions for the year. Agent plans – For the year ended June 30, 2013, active PSPRS members were required by statute to contribute 9.55 percent of the members’ annual covered payroll, and the Town was required to - 39 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 9 – RETIREMENT PLANS – Continued contribute at the actuarially determined rate of 21.41 percent, of which 1.21 percent was the health insurance premium portion. The contribution requirements for the year ended June 30, 2013, were established by the June 30, 2013 actuarial valuations, and those actuarial valuations were based on the following actuarial methods and assumptions. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events in the future. Amounts determined regarding the funded status of the plans and the annual required contributions are subject to continual revision as actual results are compared to past expectations and new estimates are made. The required schedule of funding status presented below provides multiyear trend information that shows whether the actuarial value of the plans’ assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. Projections of benefits are based on 1) the plans as understood by the Town of Guadalupe, Arizona and plan members and include the types of benefits in force at the valuation date, and 2) the pattern of sharing benefit costs between the Town and plan members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The significant actuarial methods and assumptions used to establish the fiscal year 2013 contribution requirements are as follows: Actuarial valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Payroll growth June 30, 2013 Entry Age Normal Level percent-of-pay closed 23 years for underfunded actuarial liability, 20 years for overfunded 7-year smoothed market 7.85% 4.50% - 8.50% 4.50% Trend Information – Annual pension cost information for the current and two preceding years follows for each of the agent plans. - 40 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 9 – RETIREMENT PLANS – Continued Year Ended June 30 Plan Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation Pension 2013 2012 2011 $ 57,704 72,876 82,678 100 % 100 100 $ - Health Insurance 2013 2012 2011 $ 3,529 4,593 4,159 0% 0 0 $ - Schedules of Funded Status – Following are the schedules of funded status of the plans as of the most recent valuation date, June 30, 2013, and the previous two fiscal years. The fiscal year 2013 actuarial methods and assumptions used for the schedules are not significantly different than the fiscal year 2012 actuarial methods and assumptions. Pension Actuarial Value of Plan Assets (a) Actuarial Valuatio n Date 06/30/13 06/30/12 06/30/11 $ Actuarial Accrued Liability (b) 764,790 701,209 626,129 $ 1,221,566 1,136,760 1,078,529 Funding Liability (Excess) (b-a) $ 456,776 435,551 452,400 Annual Covered Payroll (c) Funded Ratio (a/b) 62.6 % 61.7 58.1 $ 262,193 252,982 264,524 Unfunded Liability as Percentage of Covered Payroll ([a-b]/c) 174. 2 % 172.2 171.0 Hea lth Insurance Actuarial Value of Plan Assets (a) Actuarial Valuatio n Date 06/30/13 06/30/12 06/30/11 $ Actuarial Accrued Liability (b) - $ 48,005 44,185 42,599 Funding Liability (Excess) (b-a) $ 48,005 44,185 42,599 - 41 - Annual Covered Payroll (c) Funded Ratio (a/b) 0.0 % 0.0 0.0 $ 262,193 252,982 264,524 Unfunded Liability as Percentage of Covered Payroll ([a-b]/c) 18. 3 % 17.5 16.1 TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2013 NOTE 10 – INTERFUND BALANCES AND ACTIVITY Interfund transfers – Interfund transfers for the year ended June 30, 2013, were as follows: T ransfer From General Fund Transfer To Community Service Grants Fund Debt Service Fund T otal $ 53,626 316,531 $ 370,157 The purpose of the interfund transfer shown above to the Community Service Grants Fund was to help pay for expenditures not reimbursable under grant contracts. The purpose of the transfer to the Debt Service Fund was to pay for debt service expenditures related to the GADA revenue bonds (see Note 7). NOTE 11 – COMMITMENTS Refuse Collection Contract – The Town has contracted with a waste management firm to provide trash, and rubbish collection services to certain designated areas. The contract period is March 1, 2010 through February 28, 2015. Payments under the current contract for the year ended June 30, 2013, were $261,317. Payments are based on the number of residences in the Town times a fixed monthly rate of $16.07. The total obligation under the contract for each fiscal year based on the current number of residences in the Town is as follows: Fiscal Year Ending June 30 2014 2015 $ Amount 271 ,904 181 ,270 Public Safety – The Town of Guadalupe entered into a contract with the Maricopa County Sheriff’s Department for public safety services for the next fiscal year. Based on this agreement, the rendition of police services, the standards of performance, the discipline of officers, and other matters incidental to the performance of such services, and the control of personnel so employed shall remain in the County Sheriff’s Department. For the year ending June 30, 2013, the Town paid the County Sheriff $1,168,098 and has agreed to monthly installments of $102,595 for the 2014 fiscal year. Under the contract, a notice of termination of contract may be given by either party 180 days prior to the date of intended termination. - 42 - TOWN OF GUADALUPE, ARIZONA Required Supplementary Information Budgetary Comparison Schedule General Fund Year Ended June 30, 2013 Bud geted Amounts Original Final Revenue Intergovernmental Taxes Fines and forfeitures Charges for services Other revenue Licenses and permits Interest $ Total revenue Expenditures Current Public safety General government Community development Public works and streets Culture and recreation Debt Service Principal Interest Capital o utlay Total expenditures Excess (d eficiency) of revenue over expenditures Other financing sources (uses) Transfers N et changes in fund balances Fund balances, beginning of year Fund balances, end of year $ 2,259,187 1,754,333 211,000 138,089 11,950 35,000 1,000 $ 2,259 ,187 1,754 ,333 211 ,000 138 ,089 11 ,950 35 ,000 1 ,000 Actual Amounts $ 1,413,937 1,868,521 173,409 141,790 32,680 73,847 15,288 Variance with Final Budget $ (845,250 ) 114,188 (37,591 ) 3,701 20,730 38,847 14,288 4,410,559 4,410 ,559 3,719,472 (691,087 ) 2,405,239 1,261,290 32,433 14,362 91,405 2,405 ,239 1,261 ,290 32 ,433 14 ,362 91 ,405 2,229,404 860,423 29,017 12,346 85,791 175,835 400,867 3,416 2,016 5,614 31,000 566,915 31 ,000 566 ,915 4,611 837 53,916 4,402,644 4,402 ,644 3,276,345 1,126,299 7,915 7 ,915 443,127 435,212 26,389 (837 ) 512,999 (239,265) (239 ,265) (370,157) (130,892 ) (231,350) (231 ,350) 72,970 304,320 178,103 178 ,103 178,103 (53,247) $ (53 ,247) $ 251,073 See accompanying notes to budgetary comparison schedule. - 43 - $ 304,320 TOWN OF GUADALUPE, ARIZONA Required Supplementary Information Budgetary Comparison Schedule HURF/LTAF Fund Year Ended June 30, 2013 Bud geted Amounts Original Final Revenue Intergovernmental Interest $ 1,383,559 500 $ 1,383 ,559 500 Actual Amounts $ 318,429 591 Variance with Final Budget $ (1,065,130 ) 91 Total revenue 1,384,059 1,384 ,059 319,020 (1,065,039 ) Expenditures Current Public works and streets Capital o utlay 1,461,850 - 1,461 ,850 - 355,735 64,120 1,106,115 (64,120 ) 1,461,850 1,461 ,850 419,855 1,041,995 Total expenditures N et changes in fund balances Fund balances, beginning of year Fund balances, end of year $ (77,791) (77 ,791) (100,835) (23,044 ) 210,820 210 ,820 210,820 - 133,029 $ 133 ,029 $ 109,985 See accompanying notes to budgetary comparison schedule. - 44 - $ (23,044 ) TOWN OF GUADALUPE, ARIZONA Required Supplementary Information Budgetary Comparison Schedule Community Development Grants Fund Year Ended June 30, 2013 Bud geted Amounts Original Final Revenue Intergovernmental Other revenue $ 2,616,549 611,791 $ Actual Amounts 2,616 ,549 611 ,791 $ 1,497,105 61,996 Variance with Final Budget $ (1,119,444 ) (549,795 ) Total revenue 3,228,340 3,228 ,340 1,559,101 Expenditures Current Community development Capital o utlay 1,766,815 1,462,396 1,766 ,815 1,462 ,396 552,201 963,814 1,214,614 498,582 3,229,211 3,229 ,211 1,516,015 1,713,196 43,086 43,957 (4,223) - Total expenditures N et changes in fund balances Fund balances, beginning of year Fund balances, end of year $ (871) (871) (4,223) (4 ,223) (5,094) $ (5 ,094) $ See accompanying notes to budgetary comparison schedule. - 45 - 38,863 (1,669,239 ) $ 43,957 TOWN OF GUADALUPE, ARIZONA Required Supplementary Information Budgetary Comparison Schedule Community Service Grants Fund Year Ended June 30, 2013 Bud geted Amounts Original Final Revenue Intergovernmental Other revenue $ 678,284 57,495 $ Actual Amounts 678 ,284 57 ,495 $ 418,944 5,766 Variance with Final Budget $ (259,340 ) (51,729 ) Total revenue 735,779 735 ,779 424,710 (311,069 ) Expenditures Current Community development Health and welfare 597,871 300,525 597 ,871 300 ,525 198,197 269,424 399,674 31,101 898,396 898 ,396 467,621 430,775 (162,617) (162 ,617) (42,911) 119,706 119,386 119 ,386 53,626 (65,760 ) (43,231) (43 ,231) 10,715 53,946 - - - - Total expenditures Excess (d eficiency) of revenue over expenditures Other financing sources (uses) Transfers N et changes in fund balances Fund balances, beginning of year Fund balances, end of year $ (43,231) $ (43 ,231) $ See accompanying notes to budgetary comparison schedule. - 46 - 10,715 $ 53,946 TOWN OF GUADALUPE, ARIZONA Required Supplementary Information Notes to Budgetary Comparison Schedules June 30, 2013 NOTE 1 – BUDGETING AND BUDGETARY CONTROL Arizona Revised Statutes (A.R.S.) require the Town to prepare and adopt a balanced budget annually for each governmental fund. The Town Council must approve such operating budgets on or before the third Monday in July. A.R.S. prohibit expenditures or liabilities in excess of the amounts budgeted. Expenditures may not legally exceed appropriations at the department level. In certain instances, transfers of appropriations between departments or from the contingency account to a department may be made upon the Town Councils’ approval. NOTE 2 – BUDGETARY BASIS OF ACCOUNTING The Town’s budget is prepared on a basis consistent with generally accepted accounting principles. - 47 - SINGLE AUDIT ACT REPORTS SECTION INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Town Council Town of Guadalupe, Arizona We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, and each major fund of Town of Guadalupe, Arizona, as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise Town of Guadalupe, Arizona’s basic financial statements and have issued our report thereon dated February 4, 2014. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Town of Guadalupe, Arizona’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Town of Guadalupe, Arizona’s internal control. Accordingly, we do not express an opinion on the effectiveness of Town of Guadalupe, Arizona’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. - 49 - Compliance and Other Matters As part of obtaining reasonable assurance about whether Town of Guadalupe, Arizona’s financial statements are free from 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 or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. February 4, 2014 - 50 - INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 To the Town Council Town of Guadalupe, Arizona Report on Compliance for Each Major Federal Program We have audited the Town of Guadalupe, Arizona’s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the Town of Guadalupe, Arizona’s major federal programs for the year ended June 30, 2013. The Town of Guadalupe, Arizona’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the Town of Guadalupe, Arizona’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Town of Guadalupe, Arizona’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Town of Guadalupe, Arizona’s compliance. - 51 - Opinion on Each Major Federal Program In our opinion, the Town of Guadalupe, Arizona complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2013. Report on Internal Control Over Compliance Management of the Town of Guadalupe, Arizona is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Town of Guadalupe, Arizona’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Town of Guadalupe, Arizona’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. February 4, 2014 - 52 - TOWN OF GUADALUPE, ARIZONA Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2013 Federal Grantor/Pass Through Grantor/Program Title U.S. Department of Health and Human Services Passed through Area Agency on Aging: Aging Cluster: Title III - Part B Title III - Part C Nutrition Services Incentive Program Federal CFDA Number Pass through Grantor's Number 93.044 93.045 93.053 2013-23-GUA 2013-23-GUA 2013-23-GUA Disbursements/ Expenditures $ Total Aging Cluster 47,232 50,422 13,335 110,989 Social Services Block Grant 93.667 2013-23-GUA 2,412 Total U.S. Department Health and Human Services 113,401 U.S. Department of Labor Youthbuild 17.274 U.S. Department of Agriculture Rural Self-Help Housing Technical Assistance 10.420 U.S. Department of Housing and Urban Development Passed through Maricopa County Community Development: Home Investment Partnerships Program Home Investment Partnerships Program 14.239 14.239 UC1107A UC1107 190,076 86,815 Passed through Arizona Department of Housing: Home Investment Partnerships Program 14.239 309-11 82,395 Passed through Maricopa County Community Development: CDBG - Entitlement Grants Cluster: Community Development Block Grants Community Development Block Grants Community Development Block Grants Community Development Block Grants 14.218 14.218 14.218 14.218 DG1204 DG1210 DG1203 DG1105 182,031 263,231 339,208 180,074 YB-19062-09-60-A-4 55,431 106,278 Total CDBG - Entitlement Grants Cluster 964,544 Total U.S. Department of Housing and Urban Development Total Federal Assistance The accompanying notes are an integral part of this schedule. - 53 - 1,323,830 $ 1,598,940 TOWN OF GUADALUPE, ARIZONA Notes to Schedule of Expenditures of Federal Awards June 30, 2013 NOTE 1 – BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Town of Guadalupe, Arizona, and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. - 54 - TOWN OF GUADALUPE, ARIZONA Schedule of Findings and Questioned Costs June 30, 2013 Summary Of Auditors’ Results Section 1 Financial Statements 1. Type of auditor’s report issued 2. Internal control over financial reporting: a. Material weaknesses? b. Significant deficiencies identified not considered to be material weaknesses? c. Noncompliance material to the financial statements noted? Unmodified No No No Federal Awards 1. Internal control over major program: a. Material weaknesses identified? b. Significant deficiencies identified not considered to be material weaknesses? 2. Type of auditor’s report issued on compliance for major program: 3. Any audit findings disclosed that are required to be reported in accordance with Circular OMB A-133, Section 510 (a)? 4. Identification of major program: Name of Federal Program CDBG – Entitlement Grants Cluster: Community Development Block Grants 5. Dollar threshold used to distinguish between Type A and Type B programs: 6. Auditee qualified as a low-risk auditee under OMB Circular A-133, Section 530? Financial Statement Findings None Federal Award Findings and Questioned Costs None - 55 - No No Unmodified No CFDA Number 14.218 $ 300,000 No TOWN OF GUADALUPE, ARIZONA Summary Schedule of Prior Audit Findings June 30, 2013 The status of audit findings from the prior year is as follows: Item: 12-01 Youthbuild – CFDA #: 17.274; Grant year ended June 30, 2012 Condition: We noted during our audit that participant files lacked any evidence of a review of the eligibility determination. We also noted that certain documentation was missing to support eligibility. Status: The Town has updated it policies and procedures to ensure that documentation supporting eligibility is retained and reviewed. Item: 12-02 Youthbuild – CFDA #: 17.274; Grant year ended June 30, 2012 Condition: We noted during our audit that the Town would not meet program matching requirements of $4,541,000. Status: The Department of Labor has reviewed the prior year’s finding and has granted the Town a waiver from the original matching obligation of $4,541,000. - 56 - INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO THE USES OF HIGHWAY USER REVENUE FUND MONIES IN ACCORDANCE WITH ARS TITLE 28, CHAPTER 18, ARTICLE 2 To the Town Council Town of Guadalupe, Arizona We have audited, in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, business-type activities, and each major fund of the Town of Guadalupe, Arizona as of and for the year ended June 30, 2013, which collectively comprise the Town’s basic financial statements, and have issued our report thereon dated February 4, 2014. In connection with our audit, nothing came to our attention that caused us to believe that the Town failed to use highway user revenue fund monies received by the Town pursuant to Arizona Revised Statutes Title 28, Chapter 18, Article 2 and any other dedicated state transportation revenues received by the Town solely for the authorized transportation purposes. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. This report is intended solely for the information and use of management and the members of the Arizona State Legislature and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record, and its distribution is not limited. February 4, 2014 - 57 -