TOWN OF GUADALUPE, ARIZONA Annual Financial Statements and Independent Auditors’ Report June 30, 2014 TABLE OF CONTENTS INDEPENDENT AUDITORS’ REPORT ............................................................................... 1 Required Supplementary Information – Management’s Discussion and Analysis ................... 5 Government-wide Statements Statement of Net Position ................................................................................................... Statement of Activities ........................................................................................................ 16 17 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 ...................................... 18 19 20 21 Proprietary Funds Statement of Net Position ............................................................................................. Statement of Revenue, Expenses, and Changes in Fund Net Position ......................... Statement of Cash Flows .............................................................................................. 22 23 24 Notes to Financial Statements .................................................................................................. 26 Other Required Supplementary Information Budgetary Comparison Schedules ...................................................................................... Notes to Budgetary Comparison Schedules ........................................................................ Schedule of Funding Progress............................................................................................. 44 46 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 ............................................................................... 51 Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 ............................................................................................................. 53 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 ....................................................................... 55 56 57 59 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, each major fund, and the aggregate remaining fund information of the Town of Guadalupe, Arizona, as of and for the year ended June 30, 2014, 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, each major fund, and the aggregate remaining fund information of the Town of Guadalupe, Arizona, as of June 30, 2014, 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, budgetary comparison information, and schedule of funding progress on pages 5 to 14, 44 to 46, and page 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 accompanying schedule of expenditures of federal awards on page 55 is presented for purposes of additional analysis as required by U.S. Office of management and Budget circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements. Such information 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. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain 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 accepted in the United -2- 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 December 12, 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 the Town of Guadalupe, Arizona’s internal control over financial reporting and compliance. Other Reporting Required by Arizona Revised Statutes 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. December 12, 2014 -3- -4- TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2014 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, 2014. 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 -5- TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2014 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 18-21 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 22-25 of this report. Notes to the basic financial statements. The notes to the financial statements (pages 26-41) 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. -6- TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2014 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 $16,605,318 (net position). Of this amount $78,351 is restricted for capital asset acquisition, $104,184 is restricted for highways and streets, $851,578 is restricted for the HOME program, $14,726,072 is invested in capital assets, net of related debt, $3,482 is restricted for community development activities and $841,651 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, the Town of Guadalupe, Arizona’s governmental funds reported combined ending fund balances of $1,061,802 resulting in an increase of $578,940 in comparison with prior year. The increase is the result of an exceptional year for both local sales taxes and transient occupancy tax and the savings in refinancing Town debt. While the General Fund reflects an increase in fund balance of $624,712, capital projects were completed causing other fund balances to decrease by $45,772.  At the end of the current fiscal year, unassigned fund balance for the General Fund reflects a surplus of $875,785. The Town’s General Fund revenues fell short of estimates and were 40% lower than budgeted due to grants budgeted but not received. Local sales tax and state-shared revenues received were greater than or equal to amounts budgeted. General Fund expenditures and transfers to other funds were $3,601,129 less than budgeted in large part due to grants budgeted but not received. Because the Town has no property tax, it relies heavily on the current economy for its revenues. With a fair improvement in the economy and a very aggressive grant proposal program, the Town budgeted revenues and transfers in for fiscal year 2014 to be $3,178,928 higher than prior year actual mostly all in hopeful grant funded projects. Likewise budgeted expenditures and transfers out were $3,372,977 higher than prior year. The local economy in Guadalupe did well with an increase of 24% over budget. Of that increase transient occupancy tax alone was over budget by 32%. Low interest rates on investments continued to yield very low interest revenues as compared to years past. Other than local sales taxes the General Fund experienced several onetime revenues that improved the fund balance but these revenues may not reoccur and therefore cannot be budgeted next year. Therefore, 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 $513,434 higher than budgeted in the General Fund for fiscal year 2014. -7- TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2014 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, 2014 showing that assets exceeded liabilities by $18,540,871. Town of Guadalupe, Arizona Condensed Statement of Net Position As of June 30, 2014 and 2013 Governmental Activities Business-Type Activities $ $ Total Prior Year June 30, 2013 4,225,261 $ ASSETS Current and other assets Capital assets Non-depreciable Depreciable (net) Total assets 2,798,541 1,426,720 $ 4,118,024 7,039,174 10,076,682 84,703 468,904 7,123,877 10,545,586 7,123,877 10,585,654 19,914,397 1,980,327 21,894,724 21,827,555 863,630 36,169 899,799 1,518,324 308,818 7,745 316,563 112,666 2,136,631 860 2,137,491 2,327,294 3,309,079 44,774 3,353,853 3,958,284 14,726,072 553,607 15,279,679 15,392,513 LIABILITIES Other liabilities Non-current liabilities Due within one year Due in more than one year Total liabilities 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 $ 78,351 - 78,351 72,226 104,184 - - 104,184 - 109,985 10,715 3,482 851,578 841,651 1,381,946 3,482 851,578 2,223,597 38,863 762,062 1,482,907 16,605,318 $ 1,935,553 $ 18,540,871 $ 17,869,271 The unrestricted net position of the Governmental Activities for the Town of Guadalupe, Arizona has increased to a surplus of $841,651 from the prior year of $134,216. -8- TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2014 Comparative Analysis of Government-Wide Revenues and Expenses For the year ended June 30, 2014 and 2013 Governmental Activities Business-Type Activities Total Prior Year June 30, 2013 REVENUE Program revenue: Charges for services Grants and contributions $ Total program revenue 421,962 1,512,422 $ 1,934,384 547,313 - $ 547,313 969,275 1,512,422 $ 975,970 2,440,174 2,481,697 3,416,144 General revenue: Sales taxes 1,418,766 - 1,418,766 1,149,402 Franchise tax Bed taxes 25,417 388,407 - 25,417 388,407 23,402 334,351 Restaurant tax State sales tax revenue sharing 316,354 480,737 - 316,354 480,737 316,354 452,068 Auto lieu tax revenue sharing State revenue sharing 196,774 615,609 - 196,774 615,609 184,396 564,163 9,619 3,811 1,033 - 10,652 3,811 18,850 5,326 Total general revenue 3,455,494 1,033 3,456,527 3,048,312 Total revenue 5,389,878 548,346 5,938,224 6,464,456 Interest income Gain (loss) on disposal of assets Miscellaneous EXPENSE General government P ublic safety P ublic works and streets Culture and recreation Community Development Health and welfare Interest on general long-term debt Sewer 799,320 - 799,320 916,202 2,432,569 674,721 - 2,432,569 674,721 2,326,743 718,789 111,287 270,243 313,133 - 111,287 270,243 313,133 96,261 681,651 286,987 82,747 - 118,431 82,747 118,431 88,505 - 170,540 293,633 170,540 293,633 182,813 281,624 4,684,020 582,604 5,266,624 5,579,575 Change in net position 705,858 (34,258) 671,600 884,881 Beginning net position 15,899,460 1,969,811 17,869,271 16,984,390 Tianguis Refuse Total expenses Ending net position $ 16,605,318 -9- $ 1,935,553 $ 18,540,871 $ 17,869,271 TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2014 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 $1,061,802, an increase of $578,940 in comparison with the prior year. The increase is directly related to the an increase in local sales taxes and bond refinancing. General Fund expenditures increased by $88,505 over prior year and revenues increased over prior year by $407,890. General Fund balance increased by $624,712 with a total fund balance of $875,785. Local sales taxes increased over prior year by $224,351. State-shared revenues increased from prior year by $95,494 generating an increase over all in the fund balance. This trend indicates the importance of continuing to 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. Balance at June 30, 2014 Fund General Fund Comm. Dev. Grants $ HURF/LTAF (non-major) Comm. Serv. Grants (non-major) Capital P rojects Fund (non-major) 875,785 Increase/(Decrease) F rom 2012-13 $ 624,712 3,482 104,184 (35,381) (5,801) 78,351 (10,715) 6,125 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 $875,785, while the balance of all governmental funds increased to $1,061,802. The fund balance of the Town of Guadalupe, Arizona’s General Fund increased by $624,712 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. Local Sales Tax, Franchise Tax, Transient Occupancy Tax, Restaurant/Bar and Fines and Forfeitures were over budget by a total of $408,293. However, grants budgeted but not received were under budget by $3,135,966. 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 a sales tax audit and revenues from debt refinancing. - 10 - TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2014   At year end, the General Fund revenues exceeded expenditures by $762,512. However, transfers from the General Fund to pay the bond payment and interest in the amount of $44,073, from the General Fund to the Senior Center in the amount of $44,911, from the General Fund to the Community Action Program in the amount of $73,760 and resulted in General Fund revenues and other financing sources exceeding transfers and expenditures by $624,712. As a result, the General Fund ended the year with a surplus of $875,785. 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 Tianguis Economic Development Funds at the end of the year amounted to $234,224, $1,506,805, and $194,524, respectively. The total change in net position for the three funds was $29,606, $(36,460) and $(27,404), 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 44-46. 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 $4,127,362 were less than budgeted revenues of $6,898,400 by $2,771,038 while expenditures of $3,364,850 were less than budgeted expenditures of $6,649,322 by $3,284,472. 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 such as the Highline Canal Beautification Project that was budgeted at 2.5 million dollars. Capital Asset and Debt Administration The Town’s capital assets for its governmental and business-type activities as of June 30, 2014 amounted to $17,669,463 (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 for fiscal year June 30, 2014 amounted to $56,630 and total expenditures for the project thru June 30, 2014 were $85,028. - 11 - TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2014  During fiscal year 2013 the Guadalupe Fire Department in partnership with the Tempe Fire Department received a FEMA grant to purchase digital portable radios. Guadalupe’s final purchases during fiscal year 2014 amounted to $12,572.  The Fire Department’s fire engine LaFrance required a major repair/replacement of the truck engine and hydraulics that extended the life of the vehicle for another five years costing $17,271.  The Town received CDBG grants in the amount of $365,095 for repaving Gastello Street which is west of Avenida del Yaqui.  The Guadalupe Senior Center received funding from the Area Agency on Aging to purchase two Dell Towers for the office staff for $2,180.  The Town of Guadalupe was in the process of upgrading the computer servers, accounting software and operating systems for the entire Town staff that thru June 30, 2014 totaled $63,092. Town staff was able to install the software upgrades saving the Town thousands of dollars and acquiring donated computers from Maricopa County Association of Governments saving even thousands more.  There were two new heat pumps installed on the Town Hall building for $13,694.  The Guadalupe Municipal Court upgraded its sound system for $6,554.  Lastly, the Town replaced four air conditioning units on its commercial building “The Mercado” totaling $21,457. The following table provides a breakdown of the capital assets of the Town at June 30, 2014: Capital Assets at June 30, 2014 and 2013 (Net of accumulated depreciation) Governmental Activities 2014 2013 Land Land and $ 7,039,174 $ 7,039,174 Business Type Activities 2014 2013 $ 84,703 improvements Buildings and improvements 215,935 177,933 1,832,159 1,893,969 148,705 Infrastructure Street lights 3,410,686 378,041 3,152,046 402,949 320,199 - Machinery and equipment Curbs and gutters Total $ $ - Total 2014 84,703 $ - 7,123,877 2013 $ 7,123,877 215,935 177,933 168,998 1,980,864 2,062,967 367,419 - 3,730,885 378,041 3,519,465 402,949 447,101 497,799 - - 447,101 497,799 3,792,760 3,924,541 - - 3,792,760 3,924,541 17,115,856 $ 17,088,411 $ - 12 - 553,607 $ 621,120 $ 17,669,463 $ 17,709,531 TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2014 Long-term Debt At the end of the current fiscal year, the Town of Guadalupe, Arizona had total long-term obligations outstanding of $2,454,055. Of that amount $2,145,000 outstanding debt and the loan premium of $244,785 is secured by pledges of specific revenue sources of the Town. Compensated absences payable to employees is equal to $64,270. The following schedule shows the outstanding debt of the Town (both current and long-term) as of June 30, 2014. Further detail on the Town’s outstanding debt may be found in Note 7 on pages 36-37. Outstanding Debt Revenue bonds Loan payable Capital leases payable Compensated absences TOTAL $ Governmental Activities 2014 2013 $ 2,315,000 2,389,785 - 2,018 55,665 $ 2,445,450 $ 116,857 $ 2,433,875 $ Business-type Activities 2014 2013 $ - Total 2014 $ 2,389,785 - - - 8,605 6,085 64,270 8,605 $ 6,085 $ 2,454,055 $ 2013 2,315,000 2,018 122,942 $ 2,439,960 Economic Factors and Next Year’s Budgets and Rates  Excluding grant revenue, state-shared revenue makes up 31% of the Town’s General Fund revenue. State-shared revenue is expected to increase by 5% or $70,711 for fiscal year 2015. 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 2013 over 2012 as indicated in the 9% increase in urban revenue sharing distributions. State-shared sales tax is forecasted to increase by 4%, or $19,771. All state-shared revenue estimates increased by a rate less than last year indicating that the Arizona economy continues to grow but at a slower pace. The Town of Guadalupe management and budget staff remain conservative in estimating revenues.  Local tax revenue, which makes up 38% of the General Fund revenue (less grants), is expected to decrease by 22% or $381,970. This is in large part due to one time tax collections in the prior year.  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 expenditures and transfers at fiscal year end 2013; therefore the Council did increase budgeted expenditures for capital outlays, parks improvements and community outreach programs. - 13 - TOWN OF GUADALUPE, ARIZONA Management’s Discussion and Analysis June 30, 2014  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. 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 - BASIC FINANCIAL STATEMENTS - 15 - TOWN OF GUADALUPE, ARIZONA Statement of Net Position June 30, 2014 Governmental Activities Primary Government Business-type Activities Total $ 1,483,527 143,055 14,926 286,849 18,606 851,578 7,039,174 1 0,076,682 $ 1,346,645 8,104 70,529 1,442 84,703 468,904 $ 2,830,172 8,104 143,055 14,926 357,378 20,048 851,578 7,123,877 10,545,586 1 9,914,397 1,980,327 21,894,724 160,479 17,575 12,238 113,070 560,268 - 16,307 10,036 9,826 176,786 27,611 12,238 113,070 560,268 9,826 50,099 5,566 7,745 860 57,844 6,426 ASSETS Cash and cash equivalents Accounts receivable - net Taxes receivable - net Miscellaneous receivables Due from other governments Prep aid expenses Notes receivable - net Capital assets, not being depreciated Capital assets, being depreciated, net Total assets LIABILITIES Accounts payable Accrued expenses Accrued interest 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 258,719 2,131,065 - 258,719 2,131,065 Total liabilities 3,309,079 44,774 3,353,853 1 4,726,072 553,607 15,279,679 78,351 104,184 3,482 851,578 841,651 1,381,946 78,351 104,184 3,482 851,578 2,223,597 $ 1 6,605,318 $ 1,935,553 $ 18,540,871 NET POSITION Net investment in capital assets Restricted for: Capital acquisitions Highways and streets Community development HOME program Unrestricted (deficit) Total net position The accompanying notes are an integral part of these financial statements. - 16 - TOWN OF GUADALUPE, ARIZONA Statement of Activities Year Ended June 30, 2014 Program Revenue Expenses Fu nctions / Programs Primary government: Governmental activities General government Public safety Public works and streets Culture and recreation Community development Health and welfare Interest on gen eral long-term debt Total governmental activities $ Business-type activities Sewer Tianguis Refuse Total business-type activities Total primary go vernment Charges for Services 799,320 2,432,569 674,721 111,287 270,243 313,133 82,747 4,684,020 $ 118,431 170,540 293,633 582,604 1 76,915 2 39,266 5,781 4 21,962 Net (Expenses) Revenue and Changes in Net Position Operating Grants an d Contrib utions $ $ $ $ $ (363,864) (2, 187,474) (284,089) (104,731) 412,036 (138,767) (82,747) (2, 749,636) (35,291) (2, 784,927) General revenue: Taxes: Sales taxes Franchise taxes Bed taxes State sales tax revenue sharing 1,735,1 20 25,4 17 388,4 07 480,7 37 - 1, 735,120 25,417 388,407 480,737 Au to lieu tax revenue sharing State reven ue sharing Interest income Miscellaneous Total general revenue Chan ge in net position Net pos ition, b eginning of year Net pos ition, end of year 196,7 74 615,6 09 9,6 19 3,8 11 3,455,4 94 705,8 58 15,899,4 60 16,605,3 18 9 69,275 $ 1,066,164 $ - - Total (2,749,6 36) $ - (363,8 64) (2,187,4 74) (284,0 89) (104,7 31) 412,0 36 (138,7 67) (82,7 47) (2,749,6 36) Primary Government Business-type Activities (37,493) (27,404) 29,606 (35,291) 5,266,624 - 11,215 5,829 62,681 775 365,758 446,258 Governmental Activities (37,493) (27,404) 29,606 (35,291) $ 80,938 1 43,136 3 23,239 5 47,313 247,326 327,951 316,521 174,366 1,066,164 Capital Grants and Contributions 446,258 $ The accompanying notes are an integral part of these financial statements. - 17 - $ 1,033 1,033 (34,258) 1,969,811 1,935,553 $ 196,774 615,609 10,652 3,811 3, 456,527 671,600 17, 869,271 18, 540,871 TOWN OF GUADALUPE, ARIZONA Balance Sheet Governmental Funds June 30, 2014 Community Development Other Total General Grants Governmental Governmental Fund Fund Fu nds Funds ASSETS Cash and cash equivalents $ Taxes receivable - net 1,328,497 $ 143,055 Miscellaneous receivables - $ - - 155 ,030 $ 1,483,527 - 143,055 852,002 14 ,502 866,504 134,270 93,649 58 ,930 286,849 Prepaid expen ses 14,761 159 3 ,686 18,606 Due from other funds 16,827 - - 16,827 Due from other governments 1,637,410 945,810 232 ,148 2,815,368 Accounts payable 104,421 28,319 27 ,739 160,479 Accrued expenses 10,731 - 6 ,844 17,575 113,070 Tota l assets Liabilities Court bonds payable 113,070 Due to other funds - - 3,358 13 ,469 16,827 533,403 25,304 1 ,561 560,268 761,625 56,981 49 ,613 868,219 885,347 - 885,347 2 ,875 17,795 101 ,309 101,309 - Unearned revenue Tota l liabilities Deferred inflows of resources Unavailable revenue - Fund balances Nonspendable 14,761 159 Restricted for: Highways an d streets - - Commun ity development - 3,323 - 3,323 Capital acquisition - - 78 ,351 78,351 861,024 - - 861,024 875,785 3,482 Unassigned Tota l fund balances Tota l liabilities, deferred revenue, and fund balances $ 1,637,410 $ 945,810 182 ,535 $ 232 ,148 1,061,802 $ The accompanying notes are an integral part of these financial statements. - 18 - 2,815,368 TOWN OF GUADALUPE, ARIZONA Reconciliation of the Balance Sheet to the Statement of Net Position Governmental Funds June 30, 2014 Fund balances--total governmental funds Amounts reported for governmental activities in the Statement of Net Position are different because: $ 1,061,802 Capital assets used in governmental activities are not financial resources and therefore, are not reported in the funds. Some receivables are not available to pay for current-period expenditures and therefore, are deferred in the funds. Notes receivable - net Grant receivables 17,115,856 851,578 33,769 885,347 Some liabilities, including bonds payable, are not due and payable in the current period and therefore, are not reported in the funds Accrued interest Compensated absences Unamortized loan premium Loan payable (12,238) (55,665) (244,784) (2,145,000) (2,457,687) Net position of governmental activities $ 16,605,318 The accompanying notes are an integral part of these financial statements. - 19 - TOWN OF GUADALUPE, ARIZONA Statement of Revenue, Expenditures, and Changes in Fund Balance Governmental Funds Year Ended June 30, 2014 General Fund Revenue Intergovernmen tal Taxes Fines and forfeitures Charges for s ervices Other revenue Licenses and p ermits Interest Tota l revenue $ Expendi tures Current Public safety General governmen t Public work s and s treets Commun ity development Health and welfare Cultu re and recreation Debt Service Principal Interest Debt is suance costs Capital outlay Tota l expenditures Excess (deficiency) of revenue over (under) expenditures Other financing sources (uses ) Face amount of loan proceeds Loan prem ium Transfers Debt s ervice-principal Tota l other financing sources (uses ) Net change in fund balances Fun d balances, b eginning of year Fund balances, end of year $ 1,540,446 2,148,944 239,266 153,140 8,804 27,998 8,764 4,127,362 Community Development Grants Fund $ 595,037 42,570 637,607 Other Governmental Fu nds $ 600 ,960 17 ,819 6 ,182 855 625 ,816 Total Governmental Funds $ 2,736,443 2,166,763 239,266 153,140 57,556 27,998 9,619 5,390,785 2,337,521 709,764 12,450 27,913 105,334 293,979 - 204 397 ,445 50 ,848 290 ,856 2 ,315 2,337,725 709,764 409,895 372,740 290,856 107,649 2,018 36 169,814 3,364,850 365,095 659,074 170 ,000 70 ,473 48 ,384 2 ,180 1,032 ,705 172,018 70,509 48,384 537,089 5,056,629 762,512 (21,467 ) (406 ,889) (137,800) - (13,914 ) - 2,145 ,000 244 ,784 151 ,714 (2,145 ,000) (137,800) (13,914 ) 396 ,498 244,784 624,712 (35,381 ) (10 ,391) 578,940 251,073 38,863 192 ,926 482,862 875,785 $ 3,482 $ 182 ,535 334,156 2,145,000 244,784 (2,145,000) $ The accompanying notes are an integral part of these financial statements. - 20 - 1,061,802 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, 2014 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 $ $ 578,940 537,089 (509,644) 27,445 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 Unavailable grant revenues 89,516 33,769 123,285 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 service-principal Debt principal repayments Net change in compensated absences Net change in accrued interest Loan premium Face amount of loan proceeds 2,145,000 172,018 61,192 (12,238) (244,784) (2,145,000) (23,812) Change in net position of governmental activities $ The accompanying notes are an integral part of these financial statements. - 21 - 705,858 TOWN OF GUADALUPE, ARIZONA Statement of Net Position Proprietary Funds June 30, 2014 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 P repaid expenses Due from other funds Total current assets $ $ 13,726 130 22,698 1,203,897 8,104 901 9,005 320,199 320,199 84,703 148,705 233,408 1,524,096 242,413 236,516 2,003,025 25 8,661 7,745 16,431 13,990 1,375 9,826 22,698 47,889 2,292 2,292 16,307 10,036 9,826 7,745 22,698 66,612 - - 17,291 47,889 2,292 67,472 320,199 1,186,606 233,408 (38,884) 234,224 553,607 1,381,946 - 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 860 Total liabilities Net position Net investment in capital assets Unrestricted (deficit) Total net position 1,167,343 $ 1,506,805 $ 194,524 $ 179,302 Total $ - 56,803 411 236,516 - $ 234,224 The accompanying notes are an integral part of these financial statements. - 22 - 1,346,645 8,104 70,529 1,442 22,698 1,449,418 84,703 320,199 148,705 553,607 860 $ 1,935,553 TOWN OF GUADALUPE, ARIZONA Statement of Revenue, Expenses, and Changes in Fund Net Position Proprietary Funds Year Ended June 30, 2014 Sewer Fund Operating revenues Charges for services Rents Total operating revenues $ Operating expenses P rofessional services P ersonnel Depreciation Utilities Repairs and maintenance Insurance Materials and supplies Miscellaneous Total operating expenses Operating income (loss) Nonoperating revenue Investment income Increase (decrease) in net position Total net position, beginning of year Total net position, end of year 80,938 80,938 Business-type Activities--Enterprise Funds Tianguis Econ. Dev. Refuse Fund Fund $ $ 323,239 323,239 $ 404,177 143,136 547,313 298 69,809 47,220 342 645 117 118,431 1,463 38,657 41,750 58,183 22,199 3,377 3,960 951 170,540 291,705 1,928 293,633 293,466 108,466 88,970 58,525 22,199 5,950 3,960 1,068 582,604 (37,493) (27,404) 29,606 (35,291) 1,033 - - (36,460) (27,404) 29,606 (34,258) 221,928 204,618 1,969,811 1,543,265 $ 143,136 143,136 Total 1,506,805 $ 194,524 $ 234,224 The accompanying notes are an integral part of these financial statements. - 23 - 1,033 $ 1,935,553 TOWN OF GUADALUPE, ARIZONA Statement of Cash Flows Proprietary Funds Year Ended June 30, 2014 Business-type Activities--Enterprise Funds Tianguis Econ. Dev. Refuse Fund Fund Sewer Fund Cash flows from operating activities: Receipts from customers Payments to suppliers and providers of goods and services Payments to employees Net cash provided (used) by operating activities $ $ (19,714) (38,978) Cash flows from capital and related financing activities: Acquisition of capital assets Cash flows from investing activities: Interest received on investments Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year $ 129,448 $ (101,273) (27,814) 38,773 Cash flows from noncapital financing activities: Interfund loans Cash and cash equivalents, end of year 97,465 361 398,644 Total $ 625,557 (314,220) - (435,207) (66,792) 84,424 123,558 (21,096) 21,096 - - - (21,457) - (21,457) 1,033 - - 1,033 18,710 - 84,424 103,134 1,148,633 - 94,878 1,243,511 1,167,343 $ - $ 179,302 The accompanying notes are an integral part of these financial statements. - 24 - $ 1,346,645 TOWN OF GUADALUPE, ARIZONA Statement of Cash Flows Proprietary Funds Year Ended June 30, 2014 (Continued) Sewer Fund Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used by) operating activities: Depreciation (Increase) decrease in: Accounts receivable Due from other governments Prepaid expenses Increase (decrease) in: Accounts payable Accrued expenses Refundable deposits Compensated absences payable Net cash provided (used) by operating activities $ (37,493) Business-type Activities--Enterprise Funds Tianguis Econ. Dev. Refuse Fund Fund $ $ 29,606 $ (35,291) 47,220 41,750 - 88,970 16,527 78 (3,797) (192) 75,405 186 (3,797) 91,932 72 746 932 (9,891) (1,783) (20,773) - (20,034) 9,077 (9,891) 2,520 (7) 8,145 4,303 $ (27,404) Total 38,773 $ 361 $ 84,424 The accompanying notes are an integral part of these financial statements. - 25 - $ 123,558 TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 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. - 26 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 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. - 27 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued 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 Community Development Grants Fund accounts for specific grant revenue sources that are legally restricted to expenditures for community development. 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. - 28 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 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, 2014 for the Tianguis Economic Development Fund was $60,258. The amount recorded as uncollectible at June 30, 2014 for notes receivable in the Governmental Activities was $1,421,734 (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 Threshold Depreciation Method Estimated 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 - 29 - 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, 2014 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. - 30 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 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 March 2012, the GASB issued Statement 65, Items Previously Reported as Assets and Liabilities. GASB 65 establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. This statement is effective for periods beginning after December 15, 2012. In June 2012, the GASB issued Statement 68, Accounting and Financial Reporting for Pensions—an amendment of GASB Statement No. 27. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions with regard to providing decision-useful information, supporting assessments of accountability and interperiod equity, and creating additional transparency. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2014. Upon implementation, it is anticipated that this statement will cause a restatement of beginning net position of the Governmental Activities, Business-type Activities, and proprietary funds. 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. - 31 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 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, 2014, the carrying amount of the Town’s total nonpooled cash in bank was $331,869, and the bank balance was $333,214. 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, 2014, the investments consisted of the following. Investment Rating Organization Credit Rating Reported Amount Fair Value S&P AAA $ 2,480,959 $ 2,480,959 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 Federal Government State of Arizona Maricopa County Other governments $ 4 9,242 8 5,028 $ 13 4,270 HURF/LTAF Fund (non-major) $ 29,233 - Community Development Grants Fund $ 12,485 19,833 60,849 482 Community Service Grants Fund (non-major) $ 29,697 $ $ $ 29,233 93,649 29,697 Due from other governments for the Sewer and Refuse Funds consisted of amounts due from the City of Tempe totaling $13,726 and $56,803, respectively. - 32 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 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, 2014 consisted of $2,273,312 of which $1,421,734 are expected to be forgiven. The notes receivable balance – net totaled $851,578. NOTE 5 – CAPITAL ASSETS Capital asset activity for the year ended June 30, 2014, was as follows: Balance July 1, 20 13 Governmental activities: Capital assets not being depreciated : Land Total capital assets not being depreciated $ 7,039,174 Increases $ 7,039,174 - Decreases $ - Balance June 3 0, 2014 - $ 7,039,174 - 7,039,174 Capital assets being depreciated: Building and build ing improvements Land improvements Equipment Street lights Streets Curbs and gutters Total 4,041,094 642,315 2,023,353 472,427 4,355,202 4,594,274 16,128,665 13,694 56,630 101,670 365,095 537,089 (3,638) (3,638) 4,054,788 695,307 2,125,023 472,427 4,720,297 4,594,274 16,662,116 Less accumulated depreciation for: Building and build ing improvements Land improvements Equipment Street lights Streets Curbs and gutters Total (2,147,127) (464,382) (1,525,555) (69,477) (1,203,154) (669,733) (6,079,428) (75,502) (18,628) (152,367) (24,909) (106,457) (131,781) (509,644) 3,638 3,638 (2,222,629) (479,372) (1,677,922) (94,386) (1,309,611) (801,514) (6,585,434) Total capital assets being deprecia ted, net 10,049,237 27,445 - 10,076,682 - $ 17,115,856 Go vernmental activities capital assets, net $ 17,088,411 - 33 - $ 27,445 $ TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 NOTE 5 – CAPITAL ASSETS – Continued Balance July 1, 20 13 Business-ty pe activities: Capital assets not being depreciated : Land Total capital assets not being depreciated $ $ 84,703 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 3 0, 2014 $ 84,703 - - 84,703 1,819,472 27,401 25,000 545,693 2,417,566 21,457 21,457 - 1,819,472 27,401 25,000 567,150 2,439,023 (1,452,053) (27,401) (25,000) (376,695) (1,881,149) (47,220) (41,750) (88,970) - (1,499,273) (27,401) (25,000) (418,445) (1,970,119) (67,513) - 536,417 Total capital assets being deprecia ted, net Business-type activities capital assets, net 84,703 Increases 621,120 $ (67,513) $ 468,904 - $ $ 285,224 115,240 61,570 22,277 21,695 3,638 Total governmental activities depreciation expense $ 509,644 Business-type activities: Tianguis center Sewer $ 41,750 47,220 Total business-type activities depreciation expense $ 88,970 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 - 34 - 553,607 TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 NOTE 6 – UNEARNED 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 unearned revenue that will be recognized as revenue over the life of the contract. The amount deferred for the billboard contract at June 30, 2014 is $467,500. The remaining balance of unearned revenue in the governmental funds consists of grant advances in which the Town had not yet fulfilled contract requirements to recognize revenue. NOTE 7 – LONG-TERM LIABILITIES Loans – The Town’s loans payable consist of a loan of $2,145,000 received through the Greater Arizona Development Authority (GADA). The loan requires principal payments annually beginning July 1, 2014 with interest payments of 2.00 percent paid semiannually on July 1 and January 1 with the first interest payment due July 1, 2014. Total loan net proceeds of $2,389,785 were used to refinance a prior loan through GADA. State-shared General Fund revenues are used as security for the loan payable. Loans payable at June 30, 2014, were as follows: Description Loan payable Face Value Maturity Ranges Interest Rate Outstanding June 30, 20 14 $ 2,145,000 2014-2022 2.00% $ 2,145,000 The following schedule details the Town’s long-term liability and obligation activity for the year ended June 30, 2014. Balance July 1, 2013 Governmental activities: Compensated absences Capital leases payable Loans payable Loan premium Governmental activities long-term liabilities Business-type activities: Compensated absences Business-type activities long-term liabilities $ 116,857 2,018 2,315,000 - Additions $ 2,145,000 244,785 Reductions $ 61,192 2,018 2,315,000 - Balance June 30, 2014 $ Due within 1 year 55,665 2,145,000 244,785 $ 50,099 220,000 38,719 $ 2,433,875 $ 2,389,785 $ 2,378,210 $ 2,445,450 $ 308,818 $ 6,085 $ 2,520 $ - $ 8,605 $ 7,745 $ 6,085 $ 2,520 $ - $ 8,605 $ 7,745 - 35 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 NOTE 7 – LONG-TERM LIABILITIES – Continued The following schedule details debt service requirements to maturity for the Town’s loan payable at June 30, 2014. Year Governmental Activities Loan Payable Ending June 30 Principal Premium Amortization 2015 $ 220,000 2016 2017 2018 2019 2020-23 Total $ 38,719 Interest $ 44,081 210,000 215,000 220,000 235,000 1,045,000 41,878 40,381 35,530 29,192 59,084 36,722 29,619 23,470 18,058 19,616 $ 2,145,000 $ 244,784 $ 171,566 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, 2014, outstanding defeased revenue bonds totaled $635,000. 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. - 36 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 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, 2014, active ASRS members and the Town were each required by statute to contribute at the actuarially determined rate of 11.54 percent (11.30 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, 2014, 2013, and 2012, were $70,146, $80,675, and $69,610, respectively, which were equal to the required contributions for the year. - 37 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 NOTE 9 – RETIREMENT PLANS – Continued Agent plans – For the year ended June 30, 2014, active PSPRS members were required by statute to contribute 10.35 percent of the members’ annual covered payroll, and the Town was required to contribute at the actuarially determined rate of 22.19 percent, of which 1.26 percent was the health insurance premium portion. The contribution requirements for the year ended June 30, 2014, were established by the June 30, 2012 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 2014 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, 2012 Entry Age Normal Level percent-of-pay closed 24 years for underfunded actuarial liability, 20 years for overfunded 7-year smoothed market 8.00% 5.00% - 9.00% 5.00% - 38 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 NOTE 9 – RETIREMENT PLANS – Continued Trend Information – Annual pension cost information for the current and two preceding years follows for each of the agent plans. Year Ended June 30 Plan Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation Pension 2014 2013 2012 $ 59,999 57,704 72,876 100 % 100 100 $ - Health Insurance 2014 2013 2012 $ 3,514 3,529 4,593 34.15 % 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, 2014, and the previous two fiscal years. The fiscal year 2014 actuarial methods and assumptions used for the schedules are not significantly different than the fiscal year 2013 actuarial methods and assumptions. Pension Actuarial Value of Plan Assets (a) Actuarial Valuation Date 6/30/2 014 6/30/2 013 6/29/2 012 $ 798,666 764,790 701,209 Actuarial Accrued Liability (b) $ 1 ,407,245 1 ,221,566 1 ,136,760 Funding Liability (Excess) (b-a) $ 608,579 456,776 435,551 Annual Covered Payroll (c) Funded Ratio (a/b) 56.8 % 62.6 61.7 $ 261,990 262,193 252,982 Unfunded Liability as Percentage of Covered Payroll ([a-b]/c) 232.3 % 174.2 172.2 Health Insurance Actuarial Value of Plan Assets (a) Actuarial Valuation Date 6/30/2 014 6/30/2 013 6/29/2 012 $ 28,702 - Actuarial Accrued Liability (b) $ 51,313 48,005 44,185 Funding Liability (Excess) (b-a) $ 22,611 48,005 44,185 - 39 - Annual Covered Payroll (c) Funded Ratio (a/b) 55.9 % 0.0 0.0 $ 261,990 262,193 252,982 Unfunded Liability as Percentage of Covered Payroll ([a-b]/c) 8.6 % 18.3 17.5 TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 NOTE 10 – INTERFUND BALANCES AND ACTIVITY Interfund payables – Interfund payables for the year ended June 30, 2014, were as follows: Payable to General Fund Payable from Community Services Grants Fund (non-major) Tianguis Econ. Dev. Fund Community Develop ment Grants Fund Total Sewer Fund Total $ 13,469 3,358 $ 22,698 - $ 13,469 22,698 3,358 $ 16,827 $ 22,698 $ 39,525 The purpose of the interfund payables shown above were to temporarily fund the operations of the aforementioned departments/activities. Interfund transfers – Interfund transfers for the year ended June 30, 2014, were as follows: Transfer From Community Development General Grants Fund Fund Transfer To General Fund Community Services Grants Fund (non-major) Debt Service Fund (non-major) Total Total $ 107,641 44,073 $ 13,914 - $ 13,914 107,641 44,073 $ 151,714 $ 13,914 $ 165,628 The purpose of the interfund transfer shown above to the General Fund from the Community Development Grants Fund was to reimburse the Town for land owned by the Town used as part of a HOME project. 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). - 40 - TOWN OF GUADALUPE, ARIZONA Notes to Financial Statements June 30, 2014 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, 2014, were $261,456. 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 2015 $ Amount 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, 2014, the Town paid the County Sheriff $1,231,139 and has agreed to monthly installments of $115,280 for the 2015 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. - 41 - - 42 - REQUIRED SUPPLEMENTARY INFORMATION - 43 - TOWN OF GUADALUPE, ARIZONA Required Supplementary Information Budgetary Comparison Schedule General Fund Year Ended June 30, 2014 Budgeted Amounts Original Final Revenue Intergovernmental Taxes Fines and forfeitures Charges for services Other revenue Licenses and permits Interest $ 4,631,490 1,828,821 211,000 138,089 30,000 58,000 1,000 $ 4,631,490 1,828,821 211,000 138,089 30,000 58,000 1,000 Actual Amounts $ 1,540,446 2,148,944 239,266 153,140 8,804 27,998 8,764 Variance with Final Budget $ (3,091,044) 320,123 28,266 15,051 (21,196) (30,002) 7,764 6,898,400 6,898,400 4,127,362 (2,771,038) 2,349,506 1,377,269 14,840 13,613 93,132 2,349,506 1,377,269 14,840 13,613 93,132 2,337,521 709,764 27,913 12,450 105,334 11,985 667,505 (13,073) 1,163 (12,202) 8,599 2,792,363 8,599 2,792,363 2,018 36 169,814 6,581 (36) 2,622,549 6,649,322 6,649,322 3,364,850 3,284,472 Excess (deficiency) of revenue over expenditures 249,078 249,078 762,512 513,434 Other financing sources (uses) Transfers (454,457) (454,457) (137,800) 316,657 Total other financing sources (uses) (454,457) (454,457) (137,800) 316,657 Net changes in fund balances (205,379) (205,379) 624,712 830,091 251,073 251,073 251,073 Total revenue Expenditures Current Public safety General government Community development Public works and streets Culture and recreation Debt Service Principal Interest Capital outlay Total expenditures Fund balances, beginning of year Fund balances, end of year $ 45,694 $ 45,694 $ 875,785 See accompanying notes to budgetary comparison schedule. - 44 - $ 830,091 TOWN OF GUADALUPE, ARIZONA Required Supplementary Information Budgetary Comparison Schedule Community Development Grants Fund Year Ended June 30, 2014 Budgeted Amounts Original Final Revenue Intergovernmental Other revenue $ 3,008,340 220,000 $ Actual Amounts 3,008,340 220,000 $ 595,037 42,570 Variance with Final Budget $ (2,413,303) (177,430) Total revenue 3,228,340 3,228,340 637,607 (2,590,733) Expenditures Current Community development Capital outlay 2,256,494 971,846 2,256,494 971,846 293,979 365,095 1,962,515 606,751 3,228,340 3,228,340 659,074 2,569,266 Total expenditures Excess (deficiency) of revenue over expenditures - - (21,467) (21,467) Other financing sources (uses) Transfers - - (13,914) (13,914) - - (35,381) (35,381) 38,863 38,863 38,863 - Net cha nges in fund balances Fund balances, beginning of year Fund balances, end of yea r $ 38,863 $ 38,863 $ See accompanying notes to budgetary comparison schedule. - 45 - 3,482 $ (35,381) TOWN OF GUADALUPE, ARIZONA Required Supplementary Information Notes to Budgetary Comparison Schedules June 30, 2014 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. - 46 - TOWN OF GUADALUPE, ARIZONA Required Supplementary Information Schedule of Funding Progress June 30, 2014 Pension Actuarial Value of Plan Assets (a) Actuarial Valuation Date 6/30/2 014 6/30/2 013 6/29/2 012 $ 798,666 764,790 701,209 Actuarial Accrued Liability (b) $ 1 ,407,245 1 ,221,566 1 ,136,760 Funding Liability (Excess) (b-a) $ 608,579 456,776 435,551 Annual Covered Payroll (c) Funded Ratio (a/b) 56.8 % 62.6 61.7 $ 261,990 262,193 252,982 Unfunded Liability as Percentage of Covered Payroll ([a-b]/c) 232.3 % 174.2 172.2 Health Insurance Actuarial Value of Plan Assets (a) Actuarial Valuation Date 6/30/2 014 6/30/2 013 6/29/2 012 $ 28,702 - Actuarial Accrued Liability (b) $ 51,313 48,005 44,185 Funding Liability (Excess) (b-a) $ 22,611 48,005 44,185 - 47 - Annual Covered Payroll (c) Funded Ratio (a/b) 55.9 % 0.0 0.0 $ 261,990 262,193 252,982 Unfunded Liability as Percentage of Covered Payroll ([a-b]/c) 8.6 % 18.3 17.5 - 48 - SINGLE AUDIT ACT REPORTS SECTION - 49 - - 50 - 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, each major fund, and the aggregate remaining fund information of the Town of Guadalupe, Arizona, as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Town of Guadalupe, Arizona’s, basic financial statements, and have issued our report thereon dated December 12, 2014. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the 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 the Town of Guadalupe, Arizona's internal control. Accordingly, we do not express an opinion on the effectiveness of the 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 and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did identify a certain deficiency in internal - 51 - control labeled as 14-01, described in the accompanying schedule of findings and questioned costs that we consider to be a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Town of Guadalupe, Arizona’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance 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. December 12, 2014 - 52 - 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, 2014. 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. - 53 - 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, 2014. 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. December 12, 2014 - 54 - TOWN OF GUADALUPE, ARIZONA Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2014 F ederal Grantor/Pass Through Grantor/Program Title U.S. Department of Health and Human Services Passed through Area Agency on Aging: Aging Cluster: Special Programs for the Aging_Title III, Part B Special Programs for the Aging_Title III, Part C Nutrition Services Incentive Program Federal CFDA Number 93.044 93.045 93.053 P ass through Grantor's Number 2014-23-GUA 2014-23-GUA 2014-23-GUA Disbursements/ Expenditures $ Total Aging Cluster 42,755 64,855 7,653 115,263 Social Services Block Grant 93.667 2014-23-GUA 3,136 Total U.S. Department Health and Human Services U.S. Department of Agriculture Community Facilities Loans and Grants Cluster: Community Facilities Loans and Grants Rural Self-Help Housing Technical Assistance 118,399 10.766 47,874 10.420 54,879 Total U.S. Department of Agriculture U.S. Department of Housing and Urban Development Passed through Maricopa County Community Development: Home Investment Partnerships Program 102,753 14.239 UC1107 102,685 Passed through Arizona Department of Housing: Home Investment Partnerships Program 14.239 307-13 76,880 Passed through Maricopa County Community Development: CDBG - Entitlement Grants Cluster: Community Development Block Grants 14.218 DG1303 365,758 Total U.S. Department of Housing and Urban Development Total Federal Assistance The accompanying notes are an integral part of this schedule. - 55 - 545,323 $ 766,475 TOWN OF GUADALUPE, ARIZONA Notes to Schedule of Expenditures of Federal Awards June 30, 2014 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. - 56 - TOWN OF GUADALUPE, ARIZONA Schedule of Findings and Questioned Costs June 30, 2014 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 Yes 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 Home Investment Partnerships Program 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? - 57 - No No Unmodified No CFDA Number 14.218 14.239 $ 300,000 No TOWN OF GUADALUPE, ARIZONA Schedule of Findings and Questioned Costs June 30, 2014 Financial Statement Findings Item: 14-01 Subject: Misstatements requiring audit adjustments. Condition: During our audit we noted misstatements that were not identified by the Town’s finance department which required us to propose adjusting journal entries. Recommendation: We recommend that management review all audit entries to help in identifying areas in the accounting system that required adjustment. The finance department should ensure that these areas are complete before each audit. Response: Management agrees with this finding and will work on improving the accounting reconciliations to ensure that there are less audit adjustments. Federal Award Findings and Questioned Costs None - 58 - TOWN OF GUADALUPE, ARIZONA Summary Schedule of Prior Audit Findings June 30, 2014 The status of audit findings from the prior year is as follows: No prior year audit findings. - 59 -