City of
Revere, Massachusetts
Notes to
General Purpose Financial Statements
1. Summary
of Significant Accounting Policies
The accounting
policies of the City of Revere, Massachusetts (the City) conform to generally accepted
accounting principles (GAAP) as applicable
to governmental
units, except as indicated in Note 2. The
following is a summary of the more significant policies:
A.
Reporting Entity
The government
is a municipal corporation governed by an elected
Mayor and City
Council. As required by generally accepted
accounting principles, these financial statements present the government and applicable
component units for which the government is considered to
be financially
accountable. In fiscal year 1999, it was
determined that
no entities met
the required GASB-14 criteria of component units.
B. Basis of Presentation -
Fund Accounting
For reporting
purposes, the financial activities of the City of Revere are accounted for through the use
of several funds and account groups.
Each fund is a
separate accounting entity with self-balancing accounts.
The following types of funds and account groups are used by the City
of Revere:
Governmental
Fund Types
Governmental
funds are those through which most governmental functions of the City are financed. The acquisition, use and balances of the City's
expendable financial resources and the related liabilities (except those accounted for in
fiduciary and proprietary funds) are accounted
for through
governmental funds. The measurement focus is
based
upon
determination of changes in financial position, rather than upon
net income
determination. The following are the City's
governmental
fund types:
General Fund
- To account for all financial activities of the City, except those required to be
accounted for in another fund. Most revenues
and expenditures of a general governmental nature are accounted for in this fund.
Special Revenue
Funds - To account
for the proceeds of specific revenue sources (other than expendable trusts or for major
capital projects) that are legally restricted to expenditures for special purposes.
Capital Project
Funds -
Transactions related to resources obtained and used for the acquisition, construction, or
improvement of major capital facilities are accounted for in capital project funds. Such resources are derived principally from
proceeds of general obligation bond issues and from Federal and State grants.
Fiduciary
Fund Types
Fiduciary funds
are used to account for assets held by the City in a trustee capacity. The City maintains the following fiduciary fund
types:
Expendable
Trust Funds - These funds are accounted for in essentially the same manner as
governmental funds.
Pension
Trust Fund - This fund is used to account for the accumulation of assets used to fund
current and future pension benefits.
Agency Funds
- These funds are custodial in nature (assets equal liabilities) and do not involve
measurement of results of operations.
Account
Groups
Account groups
are used to establish accounting control and accountability for the City’s general
long-term obligations. The following account
group is maintained by the City.
General
Long-Term Debt Account Group - This
account group is used
to account for
all long-term obligations of the City.
C. Basis of Accounting
The basis of
accounting used for each fund is as follows:
Modified
Accrual Basis (Governmental, Expendable Trust and Agency Funds)
The accounting
and financial reporting treatment applied to a fund is determined by its measurement
focus. All governmental and expend-
able trust
funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets
and current liabilities generally are included on the balance sheet. Operating statements of these funds present
increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures
and other financing uses) in net current assets.
The modified
accrual basis of accounting is applied in all governmental, expendable trust and agency
fund types. Accordingly, revenues are
recorded when susceptible to accrual, that is, both measurable and available to finance
expenditures of the current period. Available
means collectible within the current period or soon enough thereafter to be used to pay
liabilities of the current period. The City
considers property tax revenue available if received within 60 days after the close of the
fiscal year. All other amounts not received
during that period are deferred and recognized in future accounting periods.
In applying the
susceptible to accrual concept to intergovernmental revenues, the legal and contractual
requirements of the numerous individual programs are used as guidance. There are essentially two types of
these revenues: (1) revenues recognized based upon the
expenditures recorded, and (2) revenues recognized at the time of receipt or earlier,
if the
susceptible to accrual criteria is met.
Other revenues
(except investment earnings) are recorded as revenues when received in cash because they
are generally not measurable until actually received.
Investment earnings are recorded as earned since
they are
measurable and available.
Expenditures,
except for interest on long-term debt which is recorded when due, and vacation, sick and
pension costs because these amounts are not expected to be relieved within the current
accounting period, are recorded when the related fund liability is incurred.
Accrual Basis
(Pension Trust Funds)
Pension trust
funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and
liabilities associated with the operation of these funds are included on the balance
sheet.
The accrual
basis of accounting is used by pension trust funds.
Their revenues are recognized when they are earned, and their expenses are
recognized when they are incurred.
D. Cash and Cash Equivalents
Cash balances
from all funds, except those required to be segregated
by law, are
combined to form a consolidation of cash. Cash
balances
are invested to
the extent available, and interest earnings are recognized in the General Fund. Certain special revenue funds and fiduciary funds
segregate cash, and investment earnings become a part of those funds.
Deposits with
financial institutions consist primarily of demand deposits, certificates of deposits, and
savings accounts. The City maintains a
cash and
investment pool that is available for use by all funds.
Each fund’s portion of this pool is reflected on the combined financial
statements under the caption “cash and cash equivalents”. The interest earnings attributable to each fund
type is included under earnings on investments.
For the purpose
of the statement of cash flows, the proprietary funds and non-expendable trust funds
consider investments with original maturities of three months or less to be cash
equivalents.
E. Investments
Investments are
stated at market value in accordance with Governmental Accounting Standards Board
Statement 31.
State and local
statutes place certain limitations on the nature of deposits and investment available to
the City. Deposits in any financial
institution may not exceed certain levels within the financial institution. Non-fiduciary fund investments can be made in
securities issued by or unconditionally guaranteed by the U.S. Government or agencies that
have a maturity of less than one year from the date of purchase and repurchase agreements
guaranteed by such securities with maturity dates of no more than 90 days from the date of
purchase.
F. Property Tax Limitations
Legislation
known as "Proposition 2 1/2" limits the amount of revenue the City can derive
from property taxes. The prior fiscal year's
tax levy limit is used as a base and cannot increase by more than 2.5 percent (excluding
new growth), unless an override or debt exemption is voted.
The actual fiscal year 1999 tax levy reflected an excess capacity of approximately
$ 1,731,809.
G. Long-Term Obligations
The government
reports long-term debt of governmental funds at
face value in
the general long-term debt account group. Certain
other governmental fund obligations not expected to be financed with current available
financial resources are also reported in the general long-term debt account group. Long-term debt and other obligations financed by
proprietary funds are reported as liabilities in the appropriate funds.
H. Accrued Employee Benefits
City employees
are granted vacation and sick leave in varying amounts.
Upon retirement, termination, or death, certain employees are compen-sated for
unused sick and vacation leave which is (subject to certain limitations) at their then
current rates of pay.
I. Fund Equity
Reservations of
fund balance represent amounts that are not appropriable or are legally segregated for a
specific purpose.
J. Encumbrance Accounting
and Reporting
Encumbrance
accounting is employed in governmental funds. Encumbrances
(e.g., purchase orders, contracts) outstanding at year end are reported as reservations of
fund balances and do not constitute expenditures or liabilities.
K. Memorandum Only - Total
Columns
Total columns
on the general purpose financial statements are captioned as “memorandum only”
because they do not represent consolidated financial information and are presented only
to facilitate financial analysis. The
columns do not present information that reflects financial position, results of
operations, or cash flows in accordance with generally accepted accounting principles. Interfund eliminations have not been made in the
aggregation of this data.
2. Departures from Generally Accepted Accounting
Principles
The significant
departures of the City's financial statements from generally accepted accounting
principles are as follows:
·
General fixed
asset acquisitions are not capitalized in a general fixed asset group of accounts.
3. Stewardship, Compliance and Accountability
A. Budgetary Information
At a City
Council meeting in May, the Mayor presents an operating
and capital
budget for the proposed expenditures of the fiscal year commencing the following July 1. The budget, as enacted by the City Council, also
establishes that certain appropriations are to be funded by particular revenues. The original budget is amended during the fiscal
year at City Council meetings as required by changing conditions.
Departments are
limited to the line items as voted. Certain
items may exceed the line item budget as approved if it is for an emergency and for the
safety of the general public. These items are
limited by the Massachusetts General Laws and must be raised in the next year’s tax
rate.
Formal
budgetary integration is employed as a management control device during the year for the
General Fund. Effective budgetary control is
achieved for all other funds through provisions of the Massachusetts General Laws.
At year end,
appropriation balances lapse, except for certain unexpended capital items and encumbrances
which will be honored during the subsequent year.
B. Budgetary Basis
The General
Fund appropriation appearing on page 5 of the financial statements represents the final
amended budget of the City and was authorized as follows:
1999 annual
appropriations
$ 83,658,328
Teachers’
deferral
693,333
Other uses
legally required to be raised
194,020
Total Appropriation
$ 84,545,681
C. Budget/GAAP
Reconciliation
The budgetary
data for the general fund is based upon accounting principles that differ from generally
accepted accounting principles (GAAP). Therefore,
in addition to the GAAP basis financial statements, the results of operations of the
general fund are presented in accordance with budgetary accounting principles to provide a
meaningful comparison
with budgetary
data.
The following
is a summary of adjustments made to the actual revenues and other sources, and
expenditures and other uses, to conform to the budgetary basis of accounting.
Revenues Expenditures
and Other and Other
Financing Sources Financing Uses
General Fund
Revenues/Expenditures
(GAAP basis) $ 84,915,917
$ 81,591,382
Other financing
sources/uses
(GAAP basis)
222,894
-
Adjust tax
revenue to
accrual basis ( 1,369,345) -
Reverse
beginning of year
appropriation
carryforwards
from
expenditures -
( 2,385,500)
Add end of year
appropriation
carryforwards
to expenditures -
5,222,986
To record
raising of prior
year’s
deficits -
194,020
To record State
and County
assessment
over/under -
( 327,787)
To record
timing differences -
( 329,626)
To record the
use of
Free Cash
847,523
-
To record
funding of teachers’
deferral 640,000
693,333
Court
judgements raised
- ( 225,952)
Budgetary basis $ 85,450,784 $ 84,432,856
D. Deficit Fund Equity
The following
fund had a deficit as of June 30, 1999:
General Fund:
Court Judgements $ (225,952)
Special Revenue Funds:
Street Improvement $ (106,977)
Chapter
90 Highway Aid $
(369,240)
Universal Hiring Grant $ (57,876)
Capital Projects Funds:
Sewer
Improvement Loan Project $
(140,897)
MWRA
I/I Local Finance $
(148,035)
Deficits will
be eliminated through future intergovernmental and departmental revenues, and/or budget
transfers.
4. Cash and Cash Equivalents
The carrying amount of the City's and Retirement System’s deposits
with financial institutions at June 30, 1999 and December 31, 1998 was $ 11,305,083 and $ 2,399,943, respectively. The bank balances, which
do not include reconciling items such as deposits in transit and outstanding checks, are categorized as follows (in thousands):
Retirement
System
City Deposits Deposits
June
30, 1999 December 31, 1998
Amount
insured by the FDIC
and
DIFM, or collateralized
with
securities held by the
City
in its name $
215,929
$ 200,000
Uncollateralized
10,392,083
1,594,040
State investment pool 1,760,725 -
Total Bank
Balance
$ 12,368,737 $ 1,794,040
5. Investments
The City’s
investments are categorized into the following three categories of credit risk:
(1) Insured
or registered, or securities held by the City or its agent in the City’s name.
(2) Uninsured
and unregistered, with securities held by the counterparty’s trust department or
agent in the City’s name.
(3) Uninsured
and unregistered, with securities held by the counterparty, or by its trust department or
agent but not in the City’s name.
At December 31, 1998, the Revere Retirement System’s investment balances were as follows (in thousands):
_
Category
1
2
3
Total
Corporate bonds $ 25 $ - $ - $ 25
Not
Subject to Categorization:
PRIT Fund Pool
55,094
Total
$ 55,119
6.
Taxes Receivable
Real and
personal property taxes are based on assessed values as of the previous January 1 and are
normally due on a quarterly basis. By law,
all taxable property must be assessed at 100% of fair cash value. Taxes due and unpaid after the due dates are
subject to interest and penalties. The
City has an
ultimate right to foreclose on property for unpaid taxes.
The following
is a summary of the property tax calendar used for the 1999
tax levies:
June 30, 1998:
First quarterly
real estate tax bills are mailed to taxpayers. This
bill is approximately equal to one quarter of the prior year’s tax levy.
August 3, 1998:
First quarter
preliminary tax bills are due. All bills paid
after this date are charged interest at the rate of 14% from the due date.
September 30,
1998:
The second
quarter real estate tax bills are mailed to taxpayers.
This bill is approximately equal to one quarter of the prior year’s tax levy.
November 2,
1998:
The second
quarter preliminary tax bills are due. All
bills paid after this date are charged interest at the rate of 14% from the due date.
December 31,
1998:
The third
quarter real estate and personal property tax bills are mailed to taxpayers. This bill is approximately equal to one half of
the current tax levy less preliminary payments.
February 1,
1999:
The third
quarter tax bills are due. All bills paid
after this date are charged interest at the rate of 14% from the due date.
March 31, 1999:
The fourth
quarter real estate and personal property tax bills are mailed to taxpayers. This is for the remainder of the tax levy.
May 3, 1999:
The fourth
quarter tax bills are due. All bills paid
after this date are charged interest at the rate of 14% from the due date.
Fourteen days
after the due date for the fourth quarter tax bill for real estate taxes, a demand notice
may be sent to the delinquent taxpayer. Fourteen
days after the demand notice has been sent, the tax collector may proceed
to file a lien
against the delinquent taxpayers’ property.
Taxes
receivable at June 30, 1999 consist of the following:
Real Estate
Prior
$ 64,679
1996
8,898
1997
17,202
1998
93,141
1999
1,370,456
1,554,376
Personal Property
Prior
176,959
1996
25,813
1997
27,427
1998
27,002
1999
55,557
312,758
Tax Liens
2,260,816
Total
$ 4,127,950
7.
From
Other Governments
This balance represents reimbursements requested from Federal and State agencies for expenditures incurred in fiscal 1999.
8. Warrants
Payable
Warrants
payable represent 1999 expenditures paid by July 15, 1999 as permitted by law.
9. Deferred
Revenue
The balance of
the General Fund deferred revenues account is equal to
the total of all June 30, 1999 receivable balances, except real and personal property taxes that are accrued for subsequent 60 day collections. The City’s statutory “allowance for abatements and exem