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Washington State Auditor .
Brian Sonntag
(360) 902-0370
FAX (360} 753-0646
TDD Relay 1..S00--833-6388
http://www.wa.gov/sao/
Olympia, Washington 98504-0021
0
February 6, 1998
I am pleased to report the results of our audit of the City of Pasco, Franklin County, Washington, fo:r
the period January 1, 1996, through December 31, 1996. The audit was conducted under the State
Auditor's authority in Chapter 43.09 RCW.
Our audit gives an independent, accurate assessment of the city's financial condition, internal controls,
and compliance with laws and regulations during the period we reviewed. I hope it is used as a
constructive management tool to help the city improve its operations.
Copies transmitted to:
The Honorable Charles Kilbury, Mayor
Gary Crutchfield, City Manager
Daniel Underwood, City Clerk/Finance Director
Attorney, City of Pasco
Steve M. Lowe, County Prosecuting Attorney
Wayne H. Donaldson, Audit Director, State Department of Transportation
Mike Young, TransAid Division, State Department of Transportation
Richard Struna, Administrative Officer, Transportation Improvement Board
Elizabeth Mettler, Audit Review Manager, Department of Community, Trade, and Economic
Development
Janis Kingery, Accounting Manager, Department of Ecology
Stan Finkelstein, Executive Director, Association of Washington Cities
Laurie Fortier, State Publication Distribution, Washington State Library
The Honorable Christine 0. Gregoire, Attorney General, Office of the Attorney General
Internal Audit Manager, Operations Review and Consultation, Department of Social
and Health Services
. CITY OF PASCO
Franklin County, Washington
January 1, 1996 Through December 31, 1996
Independent Auditor's Report On Internal Control Structure
At The Financial Statement Level
City Council
City of Pasco
Pasco, Washington
We have audited the general-pmpose financial statements of the City of Pasco, Franklin County,
Washington, as of and for the fiscal year ended December 31, 1996, and have issued our report
thereon dated December 5, 1997.
We conducted our audit in accordance with generally accepted auditing standards and 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 of material misstatement.
The management of the city is responsible for establishing and maintaining an internal cotitrol
structure. In fulfilling this responsibility, estimates and judgments by management are required
to assess the expected benefits and related costs of internal control structure policies and
procedures. The objectives of an internal control structure are to provide management with
reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized
use or disposition, and that transactions are executed in accordance with management's
authorization and recorded properly to permit the preparation of financial statements in accordance
with generally accepted accounting principles. Because of inherent limitations in any internal
control structure, errors or irregularities may nevertheless occur and not be detected. Also,
projection of any evaluation of the structure to future periods is subject to the risk that procedures
may become inadequate because of changes in conditions or that the effectiveness of the design
and operation of policies and procedures may deteriorate.
In planning and performing our audit of the financial statements of the city, we obtained an
understanding of the internal control structure. With respect to the internal control structure, we
obtained an understanding of the design of relevant policies and procedures and whether they have
been placed in operation, and we assessed control risk in order to determine our auditing
procedures for the purpose of expressing our opinion on the financial statements and not to
provide an opinion. on the internal control structure. Accordingly, we do not express such an
opinion.
Our consideration of the internal control structure would not necessarily disclose all matters in the
internal control strucrure that might be reportable conditions and, accordingly, would not
necessarily disclose all reportable conditions that are also considered to be material weaknesses.
Reportable conditions involve matters coming to our attention relating to significant deficiencies
in the design or operation of the internal control structure that, in our judgment. could adversely
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~ ; )> C 0. ;::. 0 ,. .. 0 " ~ Ula> > a ~-f s. n "' .. CITY OF PASCO Combined Balance Sheet -All Fund Types And Account Groups As Of December 31, 1996 FIDUCIARY GOVERNMENTAL FUND TYPES PROPRIETARY FUND TYPES FUND TYPES SPECIAL DEBT CAPITAL INTERNAL TRUST AND GENERAL REVENUE SERVICE PROJECTS ENTERPRISE SERVICE AGENCY LIABILITIES, EQUITY AND OTHER CREDITS LIABILITIES: Out:.landing Checks Payablo $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 39,735 Accoonls Payable 208,796 53,578 1,197 0 560,18• 18,967 137,626 Matured Bonda Payable 0 0 5,000 0 0 0 0 Malured lnlaresl Payable 910 0 2,400 0 0 0 0 Retalnaga Payable 0 0 0 2,687 •3,1t6 0 0 lllleilund loans Payable (Nole 13) 164,159 905,600 72,200 0 0 100,000 0 Dua lo Olher Govemmenlal Unlla 31,515 300,000 0 0 13,300 14 30,000 Accrued lnlerasl Payable 0 0 10,127 0 99,675 0 0 Accrued Emplo11aa Banalils (Nola I) 0 0 0 0 52,315 14,019 0 Oeposlls Payable 63,900 1,320 0 0 16,598 0 0 G. 0. Bond$ Payable (Nola 10) 0 0 0 0 0 0 0 Revenue Bonds Pavable (Nole 10) 0 0 0 0 9,600,000 0 0 ouier long T e,m llabillllas ' 0 2,376,659 0 17,704,302 0 0 Delened AevllllUG 229,625 12,893 2,181,665 0 344,416 0 35,044 Oolenod Compenaallon (Nola 6) 0 0 0 0 0 0 1,097,683 Tolal Uabllillea 698,905 1,213,389 4,649,1•8 2,687 28,453,906 133,000 1,340,088 EQUITY AND OTHER CREDITS: Investment In General Fixed Assets 0 0 0 0 0 0 0 Coolllbuled C8pllal (Nola 14) 0 0 0 0 10,610,824 0 0 Relahllld Eamlngs: (Nola 14) Re&aived 0 0 0 0 230,681 2,180,735 2,233,3(19 Uorasaived 0 0 0 0 16,469,219 38,214 0 fund Balancell : (Nole 14) Rasaived 1127,350 600,931 (368,223, (31,106) 0 «. 0 Unresaivad·Oaalgnated 0 0 0 0 Q q 0 U111eseived·Undaslgnated • 1,544,690 790,•I09 0 0 0 0 0 T olal Equltv and Other C11Kf111 , g,472,040 1,291,340 {366,223) f31,1061 27.330,70! 2,216,949 g.233,369 TOTAL LIABILITIES, EQUITY AND OTHER CREDITS .I a11101845 £21564i729 £4,2821936 I 120.4101 J 66.78418101 12.:551.949 131673,467 The Accompanying Notes Are An Integral Part Of This Statemenf. ACCOUNT GROUPS TOTALS GENERAL GENERAL fMEMORANDUM OHL YI FIXED LONG-TERM ASSETS DEBT 1996 1995 $ 0 $ 0 $ 39,735 $ et.585 0 0 1,000,346 1,301,496 0 0 5,000 65,000 0 0 3,310 3.248 0 0 45,803 314,733 0 0 1,241,959 1,072,707 0 0 374.629 371,098 0 0 109,802 105,691 0 866,401 932,735 823,800 0 0 81,818 74,254 0 10,100.000 10,100.000 10,600,000 0 0 11,600,000 10,281,560 0 10,018 20,090,979 . 9,599,638 0 0 2,803,543 864,912 0 0 -1,_097,683 ___,!!?8,514 0 10,976,419 47,527,542 36,538,328 18,825,411 0 19,825,411 · 19,983,473 0 0 10,610,824 . 9,056,509 0 0 •,644,765 2,327,771 0 0 18,627,433 13,846,435 0 0 1,030,952 · 1,526,346 0 0 0 660 0 0 2,335,099 1.&26,628 19.825.411 0 54197414B4 48.367c720 ! J918251•11 ! 1019781419 J 10216021028 I 8419061048,
.. CITY OF PASCO
Notes To Financial Statements
January 1, 1996 Through December 31, 1996
NOTE 1 -SOMMARY OP' S:tGNJ:P'ICAN'l' ACCOON'l':cNG POLICIES
The financial statements of the City of Pasco haye been prepared in
confonnity with generally accepted accounting principals (GAAP) as
applied to government units. The Governmental Accounting Standards
Board (GASB) is the accepted standard-setting body for establishing
goverr.mental accounting and financial reporting principles. The more
significant of the City's accounting policies are described below.
A. REl?ORT:ING ENTITY
The City of Pasco was incorporated on May 4, 1891 and operates
under the laws of the State of Washington applicable to a Non-
Charter Code City with a council/manager form of government. As
required by the generally accepted accounting principles the
financial statements present the City of Pasco -the primary
gove~ent -and its component units.
The City is a general purpose government and provides police,
fire, court, ambulance services, and a public library. The City
also owns and operates a cemetery, a water system, and a sewer
system.
The City has contractual relationships with the following
governmental organizations which provide services within the
City, but are not included in the accompanying financial
statements because they do not meet the criteria for inclusion in
the reporting entity:
Benton/Franklin County Humane Society
Benton/Franklin Regional Conference
Benton/Franklin Public Health Department
Franklin County Jail
Franklin County District Court
Mid-Columbia Regional Library
Trade, Recreation, Agricultural Center
Other governmental entities operating within the City's
boundaries, but for which the City has no oversight
responsibility or financial connection include the following:
Ben Franklin Transit Authority
Franklin County Public Utility District
Pasco Housing Authority
Pasco School District
Port of Pasco
B. SA.SIS OF PRESENTATION -FOND ACCOtTNT:cNG
The accounts of the City of Pasco are organized on the basis of
funds and account groups, each of which is considered a separate
accounting entity. Each fund is accounted for with a separate
set of self-balancing accounts that comprise its assets,
liabilities, fund equity, revenues, and expenditures or expenses,
as appropriate. The City's resources are allocated to and
accounted for in individual funds depending on what they are to
be spent for and how they are controlled. The individual funds
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Vacation pay, which may be accumulated up to 36 days, is payable
upon resignation, retirement or death. Sick leave may accumulate
up to 960 hours. Twenty-five percent of outstanding sick leave
(using a maximum of 720 hours) is payable upon resignation,
retirement or death.
13. Other Accrued Liabilities
These accounts consist of accrued wages and other accrued
employee benefits.
14. Long-Term Debt -See Long-Term Debt Note 10.
15. Deferred Revenues
This account includes amounts recognized as receivables but: not
revenues in governmental funds because the revenue .recognition
criteria has not been met. (See Note 1-C.)
16. Other Credits
This account is used to account for gains that will be amortized
over succeeding fiscal periods in proprietary funds.
17. Contributed Capital -See Fund Equity Note 14 B.
18. Fund Reserves and Designations -See Fund Equity Note 14.
G. Revenues, Expenditures and Expenses
Under the modified-accrual basis of accounting:
Charges for-services, interest on investments, and rents are
generally considered measurable and available when earned in
governmental funds.
Taxes and federal or state entitlements or shared revenues that
have been collected but not remitted by an intermediary
collection agency to the City are considered measurable and
available.
Special assessments are considered measurable and available when
they become current.
Grants are considered measurable and available to the extent that
expenditures have been made. Other intergovernmental revenues
are considered measurable and available when earned.
Interfund revenues for goods and services-are considered
measurable and available when earned.
Proceeds from refunded debt are recognized as an other financing
source and the amount remitted to the refunding trustee is
recognized as an expenditure.
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NOTE 6 -FIXED ASSETS AND DEPRECllTION
A. General Policies
Major expenditures for fixed assets, including capital leases and
major repairs that increase useful lives, are capitalized.
Maintenance, repairs, and minor renewals are accounted for as
expenditures or expenses when incurred.
All fixed assets are valued at historical cost or estimated cost
where historical cost is not known.
B. General Fixed Assets
c.
General fixed assets are long-lived assets of the City as a whole.
When plirchased, leased, or constructed, such assets are recorded
as expenditures in the governmental funds and capitalized in the
general fixed assets account group. No depreciation has been
provided on general fixed assets, nor has interest been
capitalized.
General fixed assets purchased or constructed from special
assessment funds, and all infrastructure assets such as roads,
bridges, curbs, and sidewalks, are considered public property and
are not accounted for in the general fixed assets account group.
A summary of general fixed assets follows:
Equity in Joint Ventures
Land
Buildings & Structures
Improvements
Machinery & Equipment
Work-in-Progress
Total
$
Balance
Jan. 1,
1996
68,120
1,004,710
12,399,344
4,708,794
1,716,122
a6,Jag
$19.983.470
Proprietary Fund Fixed Assets
Additions Deletions
$ 6,065 $ 6,.770
0 0
127,083 0
25,220 235,440
97,969 85,806
82, J~Q
$ 256 • 337 s 414,396
$
Balance
Dec. 31,.
.ll.!§.
67,415
1,004,710
12,526,427
4,498,574
1,728,285
g
$19, 825 :411
Fixed assets of proprietary funds are capitalized in their
respective balance sheets.
During 1996, the city capitalized $358,360 of interest costs for
funds borrowed to finance the construction of proprietary fund
fixed assets.
Depreciation expense is charged to operations of proprietary funds
to allocate the cost of fixed assets over their estimated useful
lives, using the straight-line method with useful lives of 2 ta SO
years.
A summary of proprietary fixed assets follows:
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!re:z:m o~
Seryice
20+
10-20
5-10
Percent
0:f J!'ina.1 Avena 2.0t 1.St
1.0%
The final average salary is based on salary received during the
last 2 years of service. Substantial disability and death
benefits are provided by the plan. Retirement benefits are
indexed to the Seattle area consumer price index.
Plan II participants are eligible to retire at the age of 50 with
20 years of service or at 55 with 5 years of service. Retirement
benefits prior to age 55 are actuarially reduced. The benefit is
2 percent of average salary per year of service. The average
salary is based on the highest 5-year period. Retirement benefits
are indexed to the consumer price index with a cap of 3 percent
annually. Death and disability benefits are also provided. These
benefit provisions were established under the authority of
legislative statute.
·Employer and employee contribution rates for Plan II are developed
by the Office of State Actuary to fully fund the system. Plan II
employers and employees are· required to ·pay at the level
established by the legislature. Plan I employers and employees
are required to contributed at a rate of 6 percent and the state
is responsible for the balance of the funding. The methods used
to determine the contribution requirements were established under
the authority of the legislative statute.
During the 1996 legislative session, a benefit of $150,000 was
provided for duty · related deaths for members of LEOFF I and II.
The death benefit will increase LEOFF II employer contribution
rates . 01 percent and LEOFF II employee contribution rat.es • 02
percent.·
The City of Pasco• s current-year covered· payroll for the fiscal·
year ended December 31, 1996 was $3,647,785. The City's total
current-year payroll for all e.~ployees was $7,731,157.
The City's contribution rates expressed as a percentage of covered
payroll, for the year ending December 31, 1996 were:
Plan I Plan t;t
:Required lctual, :Required JletuaJi
Employer 6.00% 6.00!1 5.091 5.061
Employee ...s.,..Q.Q.% ..a:..Q.Q_t .JL.!§.1 a.4JI
Total ~' ~' u..iZ,t l.J.4~1
The City of Pasco's actuarially determined contribution
requirement and actual contribution for t.he year ending December
31, 1996 were:
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The City is self-insured for medical and dental coverage for. its
employees • All claims for reimbursement are processed by a third
party administrator, NCAS -Northwest, Inc.. The third party
administrator provides utilization management services and requires
pre-authorization for all non-emergency hospital confinements; It is
the City's policy to maintain at least four months of average monthly
claims in cash reserves. To limit the exposure for large claims, the
City purchases individual. stop-loss·· coverage from a commercial
insurance carrier that limits the City's exposure for claim loss to
$50,000 per individual or •$725,000 aggregate per year.
NOTE 10 -LONG-TERM DEBT AND CAPJ:TAL LEASES
A. Long-Term. Debt
The Schedule of
outstanding debt
transactions for
outstanding debt,
are as follows.
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
TOTAL
General
Obligation
:Bonded Debt
1,280,562
1,276,981
1,003,412
990,456
1,001,669
987,797
994,091
993,613
991,804
993,339
997,747
994,589
999,194
990,416
994,576
990,423
993,350
992,810
604,148
s12, p-ro, nz
Long-Term Debt provides a listing of the
of the City and summarizes the City's Debt
1996. The annual requirements to amortize
including interest and capital lease payments,
General
Obligation
Other Debt
5,931
10,018
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$15 ,949
Revenue
Bonded Debt
1,206,057
1,222,550
1,245,021
879,566
800,053
801,501
801,421
799,856
801,728
806,708
794,940
796,373
800,358
801,536
799,680
795,160
798,080
802,960
799,800
$1 §,55 J,J4 a
Revenue
Other debt
85,570
83,723
81,876
80,029
78,182
76,335
74,488
72,641
70,794
68,947
67,.100
65,253
63,406
0
0
0
0
0
0
$~68 ,JA.4.
A:m:1.ual. IJebt:
Service
2,578,120
2,593,272
2,330,309
1,950,051
l,879,904
1,865,633
l.,870,000
1,866,110
l.,864,326
1.,868,994
l.,859,787
1,856,215
1,862,958
1,791,952
1,794,256
1,785,583
1,791,430
1,795,770
L 403,948
§3§,§98,518
In proprietary funds, unamortized debt issue costs are recorded as
deferred charges and bonds are displayed net of premium or
discount; annual interest expense is decreased by amortization of
debt premium and increased by the amortization of debt issue costs
and discount.
In 1994, the City began drawing from a $3,802,779 revolving loan
with the Washington State Department of Ecology. The loan amount
was increased to $15,386,979 in 1995 and to $23,700,000 in 1996.
The loan is for a term of twenty years and bears interest at 3.5%
per annum. Repayment will begin when the project is completed.
The interest rate may be adjusted pending further loans.
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3. Contributions to the capital .of enterprise or internal service
funds, (transfers between those funds and the general fixed
assets account group) transfers to establish or reduce working
capital in other funds, and transfers of remaining balances
when funds are closed are classified as residual equity
transfers and reported as direct additions to or deductions
from fund equity. J
4. Loans between funds are classified as interfund loans
receivable and payable or as advances to and from other funds
on the combined balance sheet depending on the time period for
which the loan was made. Interfund loans do not affect total
fund equity, but advances to other funds are offset by a
reservation of fund equity.
The following table displays interfund loans/advances activity
during 1996:
:t:p.terfund Loa.ns!Advances Payable
Borrowing-Lending Ba1ance Ba1anca
.l3ms Fund 1/1/96 Hew Loans laments 12131,/96
010 620 184,406 0 20,247 154,lS!J
191 010 0 320,600 0 320,600 ·
195 010 500,000 0 0 500,000
196 195 86,000 0 86,000 a
196 515 205,000 0 120,000 85,000
S20 010 0 100,000 0 100,000
720 605 19,500 0 19,500 0
721 620 56,300 0 a 56,300
722 620 13,900 0 2,900 ll,000 ·
723 120 7,§09 0 ~,700 4,299
$ ,,012,709 $ .120,2°0 ns 1,3.iz gt.24 1.2s2
NO'l'E 14 -FOND EQtrJ:'rIES
A. Governmental Fund 'l'ypes
Reservations of Fund Balance
Fund balance in governmental fund types is reserved for two
purposes: ( 1) Where certain amounts are legally committed for
specific future uses, such as outstanding purchase orders
(encumbrances), continuing appropriations, capital projects, or
debt service; and (2) where assets are not available for
appropriation, because they have been expended as inventories or
prepayments.
B. Proprietary Fund 'l'ypes
Contributed Capital
Contributed capital in internal service funds records the amounts
of working capital and fixed assets received from other funds.
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• Federal financial assistance programs are managed in compliance with applicable law.s
and regulations.
Because of inherent limitations in any internal control structure, errors, irregularities. or instances
of noncompliance may nevertheless occur and not be detecte:d. Also, projection of any evaluation
of the structure to future periods is subject to the risk that procedures may become inadequate
because of changes in conditions or that the effectiveness of the design and operation of policies
and procedures may deteriorate.
For the purpose of this report, we have classified the significant internal control structure policies
and procedures used in administering federal financial assistance programs in the following
categories:
• Accounting Controls
• Cash receipts
• Cash disbursements
• Receivables
• Accounts payable
• Purchasing and receiving
• Payroll
• Property, plant, and equipment
• General ledger
• General Requirements
• Political activity
• Davis-Bacon Act
• Civil rights
• Cash management
• Relocation assistance and real property acquisition
• Federal financial reports
• Drug-Free Workplace Act
• Administrative requirements, including subrecipient monitoring
• Specific Requirements
• Types of services
• Matching, level of effort, earmarking
• Reporting
• Special requirements
• Claims For Advances And Reimbursements
• Amounts Claimed Or Used For Matching
For all of the applicable internal control structure categories listed above, we obtained an
understanding of the design of relevant policies and procedures and determined whether they have
been placed in operation, and we assessed control risk.
The following internal control structure categories were determined to be insignificant to federal
:financial assistance programs:
• Accounting Controls
• Inventory control
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