2008, 03-03 Financial Statements and Fed Single Audit 2006 Washington State Auditor's Office
Financial Statements and Federal Single Audit Report
City of Spokane Valley
Spokane County
Audit Period
January 1, 2006 through December 31, 2006
Report No. 74107
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Washington State Auditor
Brian Sonntag
March 3, 2008
Council
City of Spokane Valley
Spokane Valley, Washington
Report on Financial Statements and Federal Single Audit
Please find attached our report on the City of Spokane Valley's financial statements and compliance with
federal laws and regulations.
We are issuing this report in order to provide information on the City's financial condition.
In addition to this work, we look at other areas of our audit client's operations for compliance with state
laws and regulations. The results of that audit will be included in a separately issued accountability
report.
Sincerely,
4"-id(-71
BRIAN SONNTAG, CGFM
STATE AUDITOR
Insurance Building,P.O.Box 40021•Olympia,Washington 98504-0021•(360)902-0370•TDD Relay(800)833-6388
FAX(360)753-0646•http://www.sao.wa.gov
Table of Contents
City of Spokane Valley
Spokane County
January 1, 2006 through December 31, 2006
Federal Summary 1
Schedule of Audit Findings and Responses 2
Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance
and Other Matters in Accordance with Government Auditing Standards 5
Independent Auditor's Report on Compliance with Requirements Applicable to its Major Program
and Internal Control over Compliance in Accordance with OMB Circular A-133 7
Independent Auditor's Report on Financial Statements 9
Financial Section 11
Federal Summary
City of Spokane Valley
Spokane County
January 1, 2006 through December 31, 2006
The results of our audit of the City of Spokane Valley are summarized below in accordance with U.S.
Office of Management and Budget Circular A-133.
FINANCIAL STATEMENTS
An unqualified opinion was issued on the financial statements of the governmental activities, the
business-type activities, each major fund, and the aggregate remaining fund information.
Internal Control Over Financial Reporting:
• Significant Deficiencies: We identified deficiencies in the design or operation of internal control
over financial reporting that we consider to be significant deficiencies.
• Material Weaknesses: We identified significant deficiencies that we consider to be material
weaknesses.
We noted no instances of noncompliance that were material to the financial statements of the City.
FEDERAL AWARDS
Internal Control Over Major Programs:
• Significant Deficiencies: We reported no deficiencies in the design or operation of internal
control over major federal programs that we consider to be significant deficiencies.
• Material Weaknesses: We identified no significant deficiencies that we consider to be material
weaknesses.
We issued an unqualified opinion on the City's compliance with requirements applicable to its major
federal program.
We reported no findings that are required to be disclosed under OMB Circular A-133.
Identification of Major Programs:
The following was a major program during the period under audit:
CFDA No. Program Title
20.205 Highway Planning and Construction
The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by OMB
Circular A-133, was $300,000.
The City did not qualify as a low-risk auditee under OMB Circular A-133.
Washington State Auditor's Office
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Schedule of Audit Findings and Responses
City of Spokane Valley
Spokane County
January 1, 2006 through December 31, 2006
1. The City does not have adequate controls in place to ensure accurate
financial reporting.
Background
City management, the state Legislature, state and federal agencies and bondholders rely on the
information included in financial statements and reports to make decisions. It is the responsibility
of City management to design and follow internal controls that provide reasonable assurance
regarding the reliability of financial reporting. Controls must ensure that financial data is reliably
authorized, processed and reported. Our audit identified material weaknesses in controls that
adversely affect the City's ability to produce reliable financial statements.
Government Auditing Standards, prescribed by the Comptroller General of the United States,
require the auditor to communicate material weaknesses, as defined below in the Applicable
Laws and Regulations section, as a finding.
Description of Condition
We identified the following deficiencies in internal controls over financial reporting that, when
taken together, represent a material weakness:
• During 2004, the City changed its method for tracking capital assets from an automated
to manual system. When the assets were transferred to the manual system, the City
incorrectly depreciated the original value of the assets over the remaining useful lives.
There is no independent review of the manual calculation of depreciation. The City
prepared the financial statements using the incorrect amounts in the manual system.
This resulted in the net overstatement of capital assets.
• A Certified Public Accounting Firm (CPA) was contracted to compile the financial
statements based on accounting records provided by the City. City management was
required to review, approve and take responsibility for the work done by the CPA
contractor. The City performed a review of the financial statements, notes, required
supplemental information and supporting schedules. However, this review did not
identify all presentation errors and misstatements in the financial statements received.
Cause of Condition
The City did not have adequate internal controls in place to ensure the accuracy of capital asset
balances reported in the financial statements and notes. City management did not provide
adequate oversight to ensure the transfer of accounting information to the manual system was
complete and accurate. Although City personnel reviewed the CPA's work and noted some
errors, City management did not take responsibility and request correction of those errors before
submitting the financial statements for audit. City financial statements are the responsibility of
management. As part of this responsibility, management has the obligation to ensure internal
controls and processes are sufficient to report accurate and complete financial information.
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Effect of Condition
The City's accounting records and financial reports as prepared by the CPA firm contained errors
that were not detected or detected and not corrected by City management. During our review of
the City's financial statements, we found the following significant errors in the original financial
statements we received for audit. Other less significant errors were also identified. All significant
errors were subsequently corrected by the City.
• The Statement of Net Assets overstated capital assets for governmental activities by a
total of$3,287,790. The most significant error was the overstatement of infrastructure by
$3,047,596. In addition, the City understated its infrastructure balance by $294,581 for
business-type activities.
• Long-term debt was understated by $122,382.
• The capital asset and long-term debt note disclosures did not agree to the supporting
documentation.
• The Statement of Activities reported all taxes as property taxes and $22,859,018 should
have been classified as sales and use tax, excise tax and other taxes.
• The Statement of Activities overstated total expenditures by$1,491,420.
The deficiencies in internal controls make it reasonably possible that serious misstatements could
occur and not be prevented or detected by the City in the future.
Recommendation
We recommend City management institute appropriate internal controls and provide adequate
oversight of the manual asset management system to ensure this system produces accurate
reliable information. The City should take responsibility for the accuracy of the financial
statements as compiled by the contractor by performing a thorough review of the reports received
and consult with the State Auditor's Office Budgeting, Accounting and Reporting System Manual
to ensure financial statements are properly presented.
City's Response
Additional internal controls will be implemented to improve the accuracy of the financial
statements.
Auditor's Remarks
We recognize the City's efforts to correct the reported conditions and we look forward to
reviewing the improvements during our next audit.
Applicable Laws and Regulations
RCW 43.09.200 states:
The state auditor shall formulate, prescribe, and install a system of accounting
and reporting for all local governments, which shall be uniform for every public
institution, and every public office, and every public account of the same class.
The system shall exhibit true accounts and detailed statements of funds
collected, received, and expended for account of the public for any purpose
whatever, and by all public officers, employees, and other persons.
The accounts shall show the receipt, use, and disposition of all public funds
properly, and the income, if any, derived therefrom; all sources of public income,
and the amounts due and received from each source; all receipts, vouchers, and
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other documents kept, or required to be kept, necessary to isolate and prove the
validity of every transaction; all statements and reports made or required to be
made, for the internal administration of the office to which they pertain; and all
reports published or required to be published, for the information of the people
regarding any and all details of the financial administration of public affairs.
Budgeting Accounting and Reporting System Manual- Part 3, Accounting, Chapter 1. Accounting
Principles and General Procedures, Section C. Internal Control, states in part:
Internal control is a management process for keeping an entity on course in
achieving its business objectives, as adopted by the governing body. This
management control system should ensure that resources are guarded against
waste, loss and misuse; that reliable data is obtained, maintained, and fairly
disclosed in financial statement and other reports; and resource use is consistent
with laws, regulations and policies.
Each entity is responsible for establishing and maintaining an effective system of
internal control throughout their government.
Government Auditing Standards, July 2007 Revision -Section 5.11, states in part:
For all financial audits, auditors should report the following deficiencies in internal control:
a. Significant deficiency: a deficiency in internal control, or combination of
deficiencies, that adversely affects the entity's ability to initiate, authorize,
record, process or report financial data reliably in accordance with generally
accepted accounting principles such that there is a more than remote
likelihood that a misstatement of the entity's financial statements that is more
than inconsequential will not be prevented or detected.
b. Material weakness: a significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a material
misstatement of the financial statements will not be prevented or detected.
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Independent Auditor's Report on Internal
Control over Financial Reporting and on
Compliance and Other Matters in Accordance
with Government Auditing Standards
City of Spokane Valley
Spokane County
January 1, 2006 through December 31, 2006
Council
City of Spokane Valley
Spokane Valley, Washington
We have audited the financial statements of the governmental activities, the business-type activities, each
major fund and the aggregate remaining fund information of the City of Spokane Valley, Spokane County,
Washington, as of and for the year ended December 31, 2006, which collectively comprise the City's
basic financial statements, and have issued our report thereon dated February 20, 2008.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to the financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States.
INTERNAL CONTROL OVER FINANCIAL REPORTING
In planning and performing our audit, we considered the City's internal control over financial reporting as
a basis for designing our auditing procedures 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 City's internal
control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the
City's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the
preceding paragraph and would not necessarily identify all deficiencies in internal control over financial
reporting that might be significant deficiencies or material weaknesses. However, as discussed below,
we identified certain deficiencies involving the internal control over financial reporting that we consider to
be significant deficiencies.
A control deficiency 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
misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control
deficiencies, that adversely affects the City's ability to initiate, authorize, record, process or report
financial data reliably in accordance with generally accepted accounting principles such that there is more
than a remote likelihood that a misstatement of the City's financial statements that is more than
inconsequential will not be prevented or detected by the City's internal control over financial reporting.
We consider the deficiency described in the accompanying Schedule of Audit Findings and Responses to
be a significant deficiency in internal control over financial reporting, and is reported as Finding 1.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in
more than a remote likelihood that a material misstatement of the financial statements will not be
prevented or detected by the City's internal control. Our consideration of the internal control over financial
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reporting was for the limited purpose described in the first paragraph of this section and would not
necessarily identify all deficiencies in the internal control that might be significant deficiencies and,
accordingly, would not necessarily disclose all significant deficiencies that are also considered to be
material weaknesses. However, of the significant deficiencies described above, we consider Finding 1 to
be material weaknesses.
COMPLIANCE AND OTHER MATTERS
As part of obtaining reasonable assurance about whether the City's financial statements are free of
material misstatement, we performed tests of the City's 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.
The City's response to the finding identified in our audit is described in the accompanying Schedule of
Audit Findings and Responses. We did not audit the City's response and, accordingly, we express no
opinion on it.
This report is intended for the information and use of management, the Council, federal awarding
agencies and pass-through entities. However, this report is a matter of public record and its distribution is
not limited. It also serves to disseminate information to the public as a reporting tool to help citizens
assess government operations.
BRIAN SONNTAG, CGFM
STATE AUDITOR
February 20, 2008
Washington State Auditor's Office
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Independent Auditor's Report on Compliance
with Requirements Applicable to its Major
Program and Internal Control over Compliance
in Accordance with OMB Circular A-133
City of Spokane Valley
Spokane County
January 1, 2006 through December 31, 2006
Council
City of Spokane Valley
Spokane Valley, Washington
COMPLIANCE
We have audited the compliance of the City of Spokane Valley, Spokane County, Washington, with the
types of compliance requirements described in the U.S. Office of Management and Budget (OMB)
Circular A-133 Compliance Supplement that are applicable to its major federal program for the year
ended December 31, 2006. The City's major federal program is identified in the Federal Summary.
Compliance with the requirements of laws, regulations, contracts and grants applicable to its major
federal program is the responsibility of the City's management. Our responsibility is to express an opinion
on the City's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the
United States of America; the standards applicable to the 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 City'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. Our audit does not provide a legal determination on the City's compliance with those
requirements.
In our opinion, the City complied, in all material respects, with the requirements referred to above that are
applicable to its major federal program for the year ended December 31, 2006.
INTERNAL CONTROL OVER COMPLIANCE
The management of the City is responsible for establishing and maintaining effective internal control over
compliance with requirements of laws, regulations, contracts and grants applicable to federal programs.
In planning and performing our audit, we considered the City's internal control over compliance with the
requirements that could have a direct and material effect on a major federal program in order to
determine our auditing procedures for the purpose of expressing our opinion on compliance and to test
and report on internal control over compliance, 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 City's internal control over compliance.
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A control deficiency in an entity's internal control over compliance 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 noncompliance with a type of compliance requirement of a federal program
on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies,
that adversely affects the entity's ability to administer a federal program such that there is a more than
remote likelihood that noncompliance with a type of compliance requirement of a federal program that is
more than inconsequential will not be prevented or detected by the entity's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in a
more than remote likelihood that material noncompliance with a type of compliance requirement of a
federal program will not be prevented or detected by the entity's internal control.
Our consideration of internal control over compliance was for the limited purpose described in the first
paragraph of this section and would not necessarily identify all deficiencies in internal control that might
be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control
over compliance that we consider to be material weaknesses, as defined above.
This report is intended for the information of management, the Council, federal awarding agencies and
pass-through entities. However, this report is a matter of public record and its distribution is not limited. It
also serves to disseminate information to the public as a reporting tool to help citizens assess
government operations.
BRIAN SONNTAG, CGFM
STATE AUDITOR
February 20, 2008
Washington State Auditor's Office
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Independent Auditor's Report on Financial
Statements
City of Spokane Valley
Spokane County
January 1, 2006 through December 31, 2006
Council
City of Spokane Valley
Spokane Valley, Washington
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 City of Spokane Valley,
Spokane County, Washington, as of and for the year ended December 31, 2006, which collectively
comprise the City's basic financial statements as listed on page 11. These financial statements are the
responsibility of the City's management. Our responsibility is to express opinions on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States 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 of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities, each major fund
and the aggregate remaining fund information of the City of Spokane Valley, as of December 31, 2006,
and the respective changes in financial position and, where applicable, cash flows thereof for the year
then ended in conformity with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report on our consideration
of the City'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 the internal control over financial reporting
or on compliance. That report is an integral part of an audit performed in accordance with Government
Auditing Standards and should be considered in assessing the results of our audit.
The management's discussion and analysis on pages 12 through 19 and budgetary comparison
information on pages 47 through 49 are not a required part of the basic financial statements but are
supplementary information required by the Governmental Accounting Standards Board. We have applied
certain limited procedures, which consisted principally of inquiries of management regarding the methods
of measurement and presentation of the required supplementary information. However, we did not audit
the information and express no opinion on it.
Our audit was performed for the purpose of forming an opinion on the financial statements that
collectively comprise the City's basic financial statements. The accompanying Schedule of Expenditures
of Federal Awards is presented for purposes of additional analysis as required by U.S. Office of
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Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations. This schedule is not a required part of the basic financial statements. Such information
has been subjected to the auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as
a whole.
BRIAN SONNTAG, CGFM
STATE AUDITOR
February 20, 2008
Washington State Auditor's Office
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Financial Section
City of Spokane Valley
Spokane County
January 1, 2006 through December 31, 2006
REQUIRED SUPPLEMENTAL INFORMATION
Management's Discussion and Analysis—2006
BASIC FINANCIAL STATEMENTS
Statement of Net Assets—2006
Statement of Activities—2006
Balance Sheet—Governmental Funds—2006
Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Assets —2006
Statement of Revenue, Expenditures and Changes in Fund Balance—Governmental Funds—
2006
Reconciliation of the Combined Statement of Revenues, Expenditures and Changes in Fund
Balances of Governmental Funds to the Statement of Activities—2006
Statement of Net Assets— Proprietary Funds—2006
Statement of Revenues, Expenses and Changes in Fund Net Assets— Proprietary Funds—2006
Statement of Cash Flows— Proprietary Funds—2006
Notes to Financial Statements —2006
REQUIRED SUPPLEMENTAL INFORMATION
Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget and Actual—
General Fund—2006
Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget and Actual—
Street Fund —2006
Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget and Actual—
Service Level Stabilization Fund —2006
SUPPLEMENTAL INFORMATION
Schedule of Expenditures of Federal Awards—2006
Notes to the Schedule of Expenditures of Federal Awards —2006
Washington State Auditor's Office
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City of Spokane Valley
Management's Discussion and Analysis
This section of the City of Spokane Valley's (the City) annual financial report provides a narrative overview of
the City's financial activities for the fiscal year ended December 31,2006, and fmancial position as of December
31,2006. This information should be read in conjunction with the preceding letter of transmittal,the financial
statements, and notes to the fmancial statements that follow.
FINANCIAL HIGHLIGHTS
• Net assets,the amount by which total assets exceed total liabilities,equal$89.2 million. A total of 60%
or$53.9 million,of total net assets is invested in capital assets, such as streets,land, and buildings. Of
the remaining net assets, $35.3 million is available to meet the government's ongoing activities and
obligations.
• The government's net assets increased by$7.8 million in 2006. This increase was a result of higher than
anticipated revenues and lower than appropriated expenditures and prior period adjustments.
• Governmental fund balances at year end were $31.5 million.
• Unreserved fund balance in the general fund was$8.7 million in 2006. This represents an increase of
$1.7 million over the December 31,2005,unreserved fund balance.
• Total City debt increased by$1.3 million to $10.5 million during the current fiscal year. The City entered
into a capital lease agreement for the police precinct building.
OVERVIEW OF THE FINANCIAL STATEMENTS
The City's basic financial statements are presented in three parts: 1)government-wide financial statements,2)
fund financial statements, and 3)notes to the financial statements. This section of the management's discussion
and analysis is intended to introduce and explain the basic financial statements. The City's financial position
improved during the year as revenues exceeded estimates and expenses were less than budget.
Government-wide financial statements
The government-wide financial statements are designed to give the reader a picture of the financial condition and
activities of the City as a whole. This broad overview is similar to the financial reporting of the private sector
businesses. The government-wide fmancial statements have separate columns for governmental activities and
business-type activities. Governmental activities of the City include general government(finance,executive,
human resources),public safety(police),physical environment,economic environment,transportation,mental
and physical health, and culture and recreation. The City's business-type activities consist of the stormwater
utility.
The statement of net assets presents information on all of the City's assets and liabilities,with the difference
reported as net assets. This statement is similar to the balance sheet of a private sector business. Over time,
increases or decreases in net assets may serve as a useful indicator of improvement or deterioration in the City's
overall financial position.
The statement of activities presents information showing how the government's net assets changed during the
most recent fiscal year. This statement distinguishes revenue generated by specific functions from revenue
provided by taxes and other sources not related to a specific function. The revenue generated by the specific
functions(charges for services,grants, and contributions)is compared to the expenses for those functions to show
how much each function either supports itself or relies on taxes and other general funding sources for support.
All activity on the statement is reported on the accrual basis of accounting,requiring that revenues are reported
when they are earned and expenses are reported when they are incurred,regardless of when cash is received or
disbursed. Items such as uncollected taxes,unpaid vendor invoices for goods or services received during the year,
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and earned but unused vacation leave are included in the statement of activities as revenue and expenses even
though no cash has changed hands.
The government-wide financial statements can be found immediately following this Management Discussion and
Analysis(MD&A).
Fund financial statements
The annual fmancial report includes fund financial statements in addition to the government-wide fmancial
statements. While the government-wide statements present the City's fmances based on the type of activity,
general government versus business-type,the fund financial statements are presented by fund type such as the
general fund, special revenue funds,and proprietary funds. A fund is a fiscal and accounting entity with a self-
balancing set of accounts used to account for specific activities or meet certain objectives. Funds are often set up
in accordance with special regulations,restrictions,or limitations. The City of Spokane Valley,like other state
and local governments,use fund accounting to ensure and show compliance with finance-related legal
requirements. The City's funds are divided into two categories,governmental and proprietary.
Governmental funds are used to account for essentially the same functions as are reported as governmental
activities in the government-wide financial statements. The basis of accounting is different between the
governmental fund statements and the government-wide financial statements. The governmental fund statements
focus on near-term revenues/financial resources and expenditures while the government-wide financial statements
include both near-term and long-term revenues/fmancial resources and expenses. The information in the
governmental fund statements can be used to evaluate the City's near-term financing requirements and immediate
fiscal health. Comparing the governmental fund statements with the government-wide statements help the reader
better understand the long-term impact of the City's current year financing decisions. To assist in this
comparison,reconciliations between the governmental fund statements and the government-wide financial
statements are included with the governmental fund balance sheet and the governmental fund statement of
revenues,expenditures, and changes in fund balances.
The City of Spokane Valley maintains nineteen individual governmental funds. The City's seven major
governmental funds,the general fund, street fund, service level stabilization reserve fund,capital projects fund,
special capital projects fund, street capital projects fund, and capital grants fund are presented separately in the
governmental fund balance sheet and the governmental fund statement of revenues,expenditures, and changes in
fund balances. The remaining governmental funds are combined into a single column labeled other governmental
funds. Individual fund data for each of the other governmental funds can be found in the combining statements
later on in this report.
The City maintains budgetary control over its operating funds through the adoption of an annual budget. Budgets
are adopted at the fund level according to state law. A budgetary comparison statement is presented for the major
funds as a basic fmancial statement. Other budgetary comparison schedules are included following the other
governmental funds' combining statements in this report.
Proprietary funds are used by governments to account for their business-type activities. Business-type activities
provide specific goods or services to a group of customers that are paid for by fees charged to those customers.
There is a direct relationship between the fees paid and services received.
The City of Spokane Valley has two types of proprietary funds,enterprise funds, and internal service funds.
Enterprise funds are used to account for goods and services provided to citizens. Internal service funds are used
to account for goods and services provided internally to various City departments.
Enterprise funds of the City are used to report the same functions presented as business-type activities in the
government-wide statements with the fund statements providing more detail then is reported in the government-
wide statements. The enterprise fund statements provide information for the City's stormwater utility—a major
fund.
Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's
various functions. The City uses internal service funds to account for its fleet of vehicles,computer equipment,
Washington State Auditor's Office
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and insurance claims. Internal service fund assets and liabilities are predominantly governmental and have been
included in the governmental activities column of the government-wide statement of net assets.
Notes to the financial statements
The notes to the financial statements provide additional information that is important to a full understanding of the
data in the government-wide and fund fmancial statements. The notes are located immediately following the
basic financial statements.
Other information
The combining statements for other governmental funds and internal service funds are presented immediately
following the required supplementary information.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
Statement of net assets
The statement of net assets can serve as a useful indicator of the City's financial position. The City's financial
position improved during the year ended December 31,2006, as net assets increased by$7.8 million(see also
prior period adjustments). The City of Spokane Valley's net assets at December 31,2006 total$91,129,396.
Following is a condensed version of the government-wide statement of net assets.
Table 1
City of Spokane Valley's Net Assets
(in thousands)
Governmental Business-Type Total Primary
Activities Activities Government
2006 2005 2006 2005 2006 2005
Current and other assets $ 38,629 $ 28,168 $ 1,756 $ 1,397 $ 40,385 $ 29,565
Capital assets (net of depreciation) 64.201 65.326 328 - 64.529 65.326
Total assets $102,830 $ 93,494 $ 2,084 $ 1,397 $104,419 $ 94,891
Long-term liabilities $ 10,502 $ 9,298 $ - $ - $10,502 $ 9,298
Other liabilities 3,140 2,207 143 119 3,283 2,326
Total liabilities $ 13,642 $ 11,505 $ 143 $ 119 $ 13,785 $ 11,624
Net assets:
Invested in capital assets,
net of related debt $ 53,865 $ 56,029 $ 327 $ - $ 54,192 $ 56,029
Restricted 13,358 7,248 - - 13,358 7,248
Unrestricted 21,965 18,712 1,614 1,277 23,579 19,989
Total net assets $ 89,188 $ 81,989 $ 1,941 $ 1,278 $ 91,129 $ 83,266
The largest component of the City's net assets, 59%or$53.8 million,is its investment in capital assets net of any
related outstanding debt issued to acquire those assets. These capital assets such as streets,bridges,parks,and
buildings and equipment, are used to provide services to the citizens. Consequently,these assets are not available
to sell and convert to cash for future spending. The majority of these assets were donated by Spokane County at
the time of incorporation.
Washington State Auditor's Office
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Other functions of the City may access the remaining net assets of$35.3 million to meet ongoing obligations to
citizens and creditors. Examples of other City obligations which these net assets may be used for are public
safety,employee salaries,park maintenance,and ongoing street maintenance (street sweeping,lane striping,
resurfacing).
At the end of the fiscal year,the City of Spokane Valley reported positive balances in all three categories of net
assets,for the government as a whole, as well as for the separate governmental and business-type activities.
Changes in net assets
The changes in net assets table illustrates the increases or decreases in net assets of the City resulting from its
operating activities. The City of Spokane Valley's net assets increased approximately$7.8 million in 2006 (see
also prior period adjustments).
Following is a condensed version of the City's changes in net assets. The table shows the revenues,expenses,and
related changes in net assets in tabular form for the governmental activities separate from the business-type
activities.
Table 2
Change in City of Spokane Valley's Net Assets
(in thousands)
Governmental Business-Type Total Primary
Activities Activities Government
2006 2005 2006 2005 2006 2005
Revenues:
Program Revenues:
Charges for services $ 4,360 $ 4,803 $ 1,558 $ 1,252 $ 5,918 $ 6,055
Operating grants and contributions - 84 - - - 84
Capital grants and contributions 8,039 1,393 - - 8,039 1,393
General Revenues:
Property taxes 8,727 9,549 - - 8,727 9,549
Sales taxes 18,842 18,648 - - 18,842 18,648
Excise taxes 3,106 5,741 - - 3,106 5,741
Other taxes 911 1,534 - - 911 1,534
Extraordinary gain (loss) 7 (62) - - 7 (62)
Capital Contributions 87 87
Investment interest 1,253 562 58 36 1,311 598
Total revenues 45.332 42.252 1.616 1.288 46.948 43.540
Expenses:
General government 4,903 3,471 - - 4,903 3,471
Public safety 15,742 15,934 - - 15,742 15,934
Physical environment 1,485 986 - - 1,485 986
Transportation 13,260 14,944 - - 13,260 14,944
Economic environment 1,867 2,020 - - 1,867 2,020
Mental and physical health - 44 - - - 44
Culture and recreation 1,884 3,785 - - 1,884 3,785
Interest on long-term debt 409 450 - - 409 450
Stormwater management - - 1.102 1.022 1.102 1.022
Total expenses 39,550 41,634 1,102 1,022 40,652 42,656
Washington State Auditor's Office
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Governmental Business-Type Total Primary
Activities Activities Government
2006 2005 2006 2005 2006 2005
Increase in net assets before transfers $ 5,783 $ 618 $ 514 $ 266 $ 6,297 $ 884
Transfers 30 258 (30) (258) - -
Increase in net assets 5,813 876 484 8 6,297 884
Net assets,beginning 83.375 81.113 1.457 1.270 84.832 82.383
Total net assets $ 89,188 $ 81,989 $ 1,941 $ 1,278 $ 91,129 $ 83,267
Governmental activities contributed$5.8 million of the total change in net assets of$6.3 million. Key elements
of the increase are as follows:
• Sales taxes accounted for approximately$18.8 million in revenues in year 2006. The City received$8.7
million in property taxes. Other taxes received were real estate excise taxes($2.5 million),motor vehicle
fuel taxes($1.98 million),and hotel/motel room taxes($417 thousand).
• This being the fourth year of incorporation the City aggressively monitored contract service costs and
staffing levels. The net result was a fourth year unreserved balance of$23.2 million for governmental
activities.
Business-type activities of the City's stormwater utility increased the City of Spokane Valley's net assets by $484
thousand, accounting for.08 %of the total growth in the government's net assets.
Key element of this increase is as follows:
• The Stormwater Management fund accounted for the entire increase of$484 thousand. The primary
revenue source is a stormwater management fee imposed upon real property.
FINANCIAL ANALYSIS OF THE CITY'S FUNDS
As discussed earlier,the City of Spokane Valley uses fund accounting to ensure and demonstrate compliance with
finance-related legal requirements.
Governmental funds
The purpose of the City's governmental funds is to report on near-term revenues/financial resources and
expenditures. This information helps determine the City's financial requirements in the near future. In particular,
unreserved fund balance is a good indicator of the City's resources available for spending at the end of the year.
At the end of the current year,the City's combined ending governmental fund balance was$31.5 million. Of the
total ending fund balance, $9.3 million resides with special revenue funds, and the General fund has an
unreserved fund balance of$8.7 million.
Major governmental funds
The General fund is the primary operating fund of the City through which all receipts and payments of ordinary
City operations are processed,unless they are required to be accounted for in another fund. Sales taxes are the
major revenue source. At the end of 2006,the fund balance of the General fund was$8.7 million.
Washington State Auditor's Office
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The General fund increased fund balance by $1.7 million for the year ended December 31,2006. Revenues
exceeded projections by $1.7 million primarily from increased sales tax revenues. Expenditures were $6.1
million less than budget primarily in the area of general government functions.
The Street fund has a fund balance of$4.7 million, an increase of$786 thousand for the year. The primary source
of revenue for the Street fund is motor fuel tax. Road maintenance costs were $769 thousand under the original
budget projection.
The Capital Projects fund has a fund balance of$3.5 million, an increase of$1.2 million for the year. The
primary source of revenue for the capital projects fund is a real estate excise tax,which was approximately $200
thousand over the original budget projection.
The Special Capital Projects fund has a fund balance of$3.7 million,an increase of$1.3 million for the year. The
primary source of revenue for this fund is the real estate excise tax,which was approximately $200 thousand over
the original budget projection.
The Street Capital Projects fund has an ending negative fund balance of($171)thousand. Construction costs
were approximately $1.3 million for the year. Grant revenue was approximately $5.7 million less than budgeted.
These projects were mostly funded with grant funds and transfers from other City Funds.
The Street Capital Grant Projects fund has a zero fund balance. Construction costs were approximately $3.6
million for the year. Grant revenue was approximately$3.0 million. These projects were mostly funded with
grant funds and transfers from other City Funds.
The Service Level Stabilization fund has a fund balance of$4.6 million. The primary source of funding for the
service level stabilization fund is transfers from the General Fund which was approximately$2.1 million this
year.
Proprietary funds
The City of Spokane Valley's Proprietary fund statements provide the same type of information found in the
government-wide financial statements,but in more detail. Factors concerning the finances of the City's
proprietary funds have already been addressed in the discussion of the City's business-type activities.
The Stormwater fund has a Net Asset balance of$1.9 million, an increase of$664 thousand for the year. The
primary source of revenue for the Stormwater fund are stormwater fees. Operating expenses were $456 thousand
under the budget projection.
GENERAL FUND BUDGETARY HIGHLIGHTS
The City Council amended the revenue and expenditure budgets during 2006. The amendments recognized
additional unrestricted fund balance carried over from 2005,a service fee from building permits/planning fees,
grant proceeds,and additional sales tax receipts. Expenditure appropriations increased for street projects,
CenterPlace construction, and for the creation of reserves for CenterPlace operations,parks capital improvements,
civic facilities,extraordinary winter weather operations,and a service level stabilization fund.
Actual revenues were $1.7 million higher than the final 2006 revenue budget. The largest portion of this positive
variance was licenses and permits of$1.57 million more than the final budget. Actual expenditures were $6.1
million less than the fmal 2006 expenditure budget. General government expenditures of$3.1 million less than
the budgeted amount account for the largest portion of this positive variance. Overall,there was a positive
variance of$7.8 million (see also prior period adjustments)over the final 2006 budget.
Washington State Auditor's Office
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CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital assets
The City of Spokane Valley's investment in capital assets,including construction in progress, for its
governmental type activities as of December 31,2006,amounts to $64.2 million,net of accumulated depreciation.
This investment in capital assets includes land,buildings,improvements,machinery and equipment,construction
in progress, and infrastructure. The year-end balance represents a net decrease (additions less retirements and
depreciation)of$1.1 million from the end of last year. Additional information can be found in note 5 of this
report.
Major additions to capital assets during the fiscal year included the following:
• Police Precinct Building $2,403,337
• Infrastructure $1,648,906
• Construction in Progress $5,331,210
The following table provides a listing of the capital assets(net of accumulated depreciation) at December 31,
2006.
Governmental
Activities
Land $ 2,978,847
Buildings 11,643,239
Other improvements 836,296
Infrastructure 36,781,595
Machinery and equipment 466,272
Construction in progress 11,494,406
Total $ 64,200,656
Long-Term Debt
At the end of the current fiscal year,the City of Spokane Valley has total bonded debt outstanding of$8,945,000.
This amount is backed by the full faith and credit of the City(general obligation bonds)with debt service funded
by general government revenues and contributions from Public Facilities District.
Under State of Washington statutes general obligation indebtedness for general purposes pursuant to a vote of the
electorate is limited to 2.5% of actual value of taxable property located within the City. Non-voted general
purpose indebtedness is limited to 1.5% of assessed valuation and the combination of voted and non-voted general
purpose indebtedness cannot exceed 2.5%of assessed valuation.
The assessed valuation of the City for the year 2006,for purposes of determining the legal debt margin,is
$5,056,991,058. Remaining debt capacities for the City for general voted and non-voted purposes (2.5%)is
limited to $117,317,938.
The City of Spokane Valley maintains an A3 rating from Moody's for its non-voted general obligation debt.
Additional information regarding the debt limitations and capacities can be found in note 10.
ECONOMIC FACTORS AND NEXT YEARS' BUDGETS AND RATES
Several factors that affect the economic climate in the City of Spokane Valley were considered when preparing
the City's 2007 budget. The outlook for the regional economy was weighed in relation to its expected impact on
Washington State Auditor's Office
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the City of Spokane Valley. The character of the City,including its current and future business activity and its
attraction as a place to live,was evaluated. Based on the budget analysis,the City's future is promising.
Healthy economic numbers emerged in 2006,including 7,100 new jobs in Spokane County,with the
unemployment rate dropping to 5.0%. Single family dwelling permits in the Spokane area dropped to 2,192 while
the number of single family dwelling sales topped 7,792.
The City of Spokane Valley's assessed value climbed 12%to $5.06 billion in 2006. An increase of another 10%
is expected during 2007. The City of Spokane Valley's 2007 property tax rate is expected to remain very close to
the 2006 level of$1.60/thousand dollars of assessed value.
A county wide real estate excise tax generated$2.5 million in receipts for city capital projects during 2006.
Sales tax receipts are expected to grow at a 2%rate in 2007. The City received$18.8 million in sales tax in 2006.
The City contracts with Spokane County for a majority of city services including public safety and street
maintenance. Parks maintenance is provided by a private landscape maintenance firm. This has allowed the City,
with a population of 85,010,to hold the number of full-time employees at 64. A moderate cost increase is
expected in service contracts in 2007.
These factors were considered when the City adopted the 2007 budget. No general fund tax increases were made
in 2006,nor were any anticipated in the 2007 budget. Expenditures were budgeted at levels to maintain services
at the 2006 level.
REQUESTS FOR FINANCIAL INFORMATION
This financial report is designed to provide a general overview of the City of Spokane Valley's finances and to
demonstrate the City's accountability. If you have questions about this report or would like to request additional
information,contact the City's Finance Department, 11707 E. Sprague Ave., Suite 106, Spokane Valley,
Washington 99206.
Washington State Auditor's Office
19
City of Spokane Valley
Statement of Net Assets December 31, 2006
Primary Government
Governmental Business-Type
Activities Activities Totals
Assets
Cash $ 1,389,939 $ 339,460 $ 1,729,399
Deposits and investments 30,560,771 1,251,426 31,812,197
Receivables,net:
Taxes 4,972,245 44,825 5,017,070
Accounts 667,222 - 667,222
Due from other governments 314,707 7,049 321,756
Internal balances 724,622 113,816 838,438
Capital assets(not being depreciated):
Land 2,978,847 - 2,978,847
Construction in progress 11,643,239 - 11,643,239
Capital assets,net of accumulated depreciation:
Building and system 11,494,406 - 11,494,406
Improvements other than buildings 836,296 - 836,296
Machinery and equipment 466,272 13,384 479,656
Infrastructure 36,781,595 314,151 37,095,746
Total assets $102,830,161 $ 2,084,111 $104,914,272
Liabilities
Accounts payable $ 1,251,710 $ 31,995 $ 1,283,705
Taxes payable 838 - 838
Internal balances 816,110 22,328 838,438
Accrued liabilities 242,168 10,861 253,029
Bonds and deposits payable 89,800 - 89,800
Other liabilities 739,199 77,619 816,818
Special assessment debt with governmental commitment:
Due within one year 284,416 - 284,416
Due in more than one year 10,217,832 - 10,217,832
Total liabilities $ 13,642,073 $ 142,803 $ 13,784,876
Net Assets
Invested in capital assets,net of related debt 53,865,089 327,535 54,192,624
Restricted for:
Capital Projects 8,003,901 - 8,003,901
Center Place operating 321,297 - 321,297
Other 5,032,503 5,032,503
Unrestricted 21,965,298 1,613,773 23,579,071
Total net assets $ 89,188,088 $ 1,941,308 $ 91,129,396
The notes to the financial statements are an integral part of this statement.
Washington State Auditor's Office
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Washington State Auditor's Office
21
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Washington State Auditor's Office
22
City of Spokane Valley
Reconciliation of the Governmental Funds
Balance Sheet to the Statement of Net Assets December 31, 2006
Total fund balances as shown on the governmental funds balance sheet. $31,499,553
Amounts reported for governmental activities in the statement of net assets
are different because:
Capital assets used in governmental activities are not financial
resources and,therefore are not reported in the governmental
funds balance sheet. 63,943,093
These assets consist of:
Land $ 2,978,847
Construction in progress 11,643,239
Buildings 12,339,003
Improvements other than buildings 2,123,571
Machinery and equipment,general government 372,789
Infrastructure 209,517,754
Less accumulated depreciation (175,032,110)
Certain taxes will be collected after year-end and will not be
available after year-end to pay for current year expenditures
and are reported as deferred revenue. 2,422,207
These revenues consist of:
Sales and use tax $ 1,989,213
Excise tax 228,896
Other taxes 197,849
Charges for services -
Investment earnings 6,249
Long-term liabilities,including bonds payable are not due and
payable in the current period and therefore are not reported
in the funds. (9,823,625)
These long-term liabilities consist of:
Bonds payable $ (8,945,000)
Note Payable (1,222,540)
Premium on bond issuance (172,870)
Accrued interest (16,772)
Compensated absences (161,838)
Deferred revenue 695,395
Internal service funds are used by management to charge costs of various support services
such as equipment rental,self-insurance,information technology and facility services to
individual funds. The assets and liabilities of the internal service fund are included in
governmental activities in the statement of net assets. 1,146,860
Current assets $ 893,725
Capital assets 257,563
Total liabilities (4,428)
Total net assets of governmental activities as shown on
the statement of net assets,as restated $89,188,088
The notes to the financial statements are an integral part of this statement.
Washington State Auditor's Office
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Washington State Auditor's Office
24
City of Spokane Valley
Reconciliation of the Combined Statement of Revenues,
Expenditures, and Changes in Fund Balances of Year Ended
Governmental Funds to the Statement of Activities December 31, 2006
Net change in fund balances-total governmental funds. $ 9,020,133
Amounts reported for governmental activities in the statement of activities
are different because:
Governmental funds report capital outlays as expenditures. The entity wide statement of
activities reports capital outlay as depreciation expense over the life of the asset. This is
amount by which depreciation exceeded capital outlays in the current period. (2,444,225)
Depreciation $(10,773,877)
Capital outlay 8,365,569
Transfer of governmental capital assets to Stormwater (123,045)
Donated capital assets 87,128
The book basis of assets destroyed in fire,gross proceeds from insurance settlement
$109,317,which resulted in a gain of$7,698 (101,619)
Revenues in the statement of activities that do not provide current financial resources are not
reported as revenues in the funds. 431,150
This is comprised of:
Property taxes $ (120,138)
Sales and use tax 210,408
Excise tax 217,896
Other taxes 17,668
Charges for services 103,203
Investment earnings 2,113
Bond proceeds provide current financial resources to governmental funds,but issuing debt
increases non-current liaiblities in the statement of net assets. Repayment of non-current
debt is an expenditure in the governmental funds but on the statement of net assets it
reduces the liability. (1,042,004)
Principal repayment $ 213,370
Debt borrowings (1,260,910)
Amortization of premium 5,536
Some expenses reported in the statement of activities do not require the use of current
financial resources and,therefore,are not reported as expenditures in governmental funds:
Compensated absences (38,662)
Internal service funds are used by management to charge the cost of certain activities,such as
equipment rental,self-insurance,information technology and facility services to the
individual funds. The net revenue(expense)of these internal service funds is reported
with governmental activities. (11,694)
Changes in net assets of governmental activities $ 5,813,079
The notes to the financial statements are an integral part of this statement.
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City of Spokane Valley
Statement of Net Assets - Proprietary Funds December 31, 2006
Governmental
Activities
Internal
Stormwater Service
Management Funds
Assets
Current assets:
Cash $ 339,460 $ 37,719
Deposits and investments 1,251,426 810,579
Assessment receivables(net) 44,825 -
Due from other funds 113,816 45,427
Due from other governments 7,049 -
Total current assets 1,756,576 893,725
Capital assets:
Machinery and equipment 13,511 786,004
Infrastructure 323,199
Less accumulated depreciation (9,175) (528,441)
Total capital assets(net of depreciation) 327,535 257,563
Total assets $ 2,084,111 $ 1,151,288
Liabilities
Current liabilities:
Accounts payable $ 31,995 $ 1,068
Accrued wages and benefits payable 10,861 -
Due to other funds 22,328 -
Due to other governments - 3,153
Deposits and other payables 32,100 207
Deferred revenue 45,519 -
Total liabilities 142,803 4,428
Net Assets
Invested in capital assets,net of related debt 327,535 257,563
Unrestricted 1,613,773 889,297
Total net assets 1,941,308 1,146,860
Total liabilities and net assets $ 2,084,111 $ 1,151,288
The notes to the financial statements are an integral part of this statement
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City of Spokane Valley
Statement of Revenues, Expenses, and Changes
in Fund Net Assets - Proprietary Funds Year Ended December 31, 2006
Governmental
Activities
Internal
Stormwater Service
Management Funds
OPERATING REVENUE:
Charges for goods and services(net of returns and allowances) $ 1,557,916 $ 161,522
OPERATING EXPENSES:
Operations 1,093,171 169,033
Depreciation 9,175 174,384
Total operating expenses 1,102,346 343,417
INCOME(LOSS)FROM OPERATIONS 455,570 (181,895)
NONOPERATING REVENUE:
Investment income 57,460 37,069
Other miscellaneous revenue 561 -
Loss on disposal of assets - -
Total nonoperating revenues 58,021 37,069
Income (loss)before contributions and operating transfers 513,591 (144,826)
CONTRIBUTIONS AND TRANSFERS:
Transfers in 123,045 133,132
Transfers out (152,438) -
Capital contributions - -
Total contributions and transfers (29,393) 133,132
INCREASE(DECREASE)IN NET ASSETS 484,198 (11,694)
NET ASSETS, BEGINNING OF YEAR 1,277,396 661,615
PRIOR PERIOD ADJUSTMENT 179,714 496,939
NET ASSETS, BEGINNING OF YEAR 1,457,110 1,158,554
NET ASSETS, END OF YEAR $ 1,941,308 $ 1,146,860
The notes to the financial statements are an integral part of this statement
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City of Spokane Valley
Statement of Cash Flows - Proprietary Funds Year Ended December 31, 2006
Governmental
Activities
Internal
Stormwater Service
Management Funds
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers and users $ 1,576,522 $ 22,442
Receipts from interfund services provided - 161,523
Payments to suppliers and for services (1,069,555) (169,898)
Net cash provided by operating activities 506,967 14,067
CASH FLOWS FROM CAPITAL
AND RELATED FINANCING ACTIVITIES:
Proceeds from sale of capital assets - 45,428
Operating transfers net (29,393) -
Purchases of capital assets (156,997) -
Net cash(used in)provided by operating activities (186,390) 45,428
CASH FLOWS FROM INVESTING ACTIVITIES:
Interest received 58,021 37,069
NET INCREASE IN CASH AND CASH EQUIVALENTS 378,598 96,564
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,212,287 751,734
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,590,885 $ 848,298
Reconciliation of Operating Income (Loss) from Operations to Net
Cash Provided by Operating Activities:
Operating income (loss) $ 455,570 $ (181,895)
Adjustments to reconcile operating income (loss)from operations
to net cash provided by operating activities:
Depreciation 9,175 174,384
Decrease (increase)in assets:
Assessment receivable 25,655 -
Due from other funds - 22,442
Due from other governments (7,049) -
Increase (decrease)in liabilities:
Accounts payable 31,995 1,068
Accrued wages and benefits payable 2,956 -
Due to other funds 22,328 -
Due to other government (15,668) (2,139)
Deposits and other payables - 207
Deferred revenue (17,995) -
Total adjustments 51,397 195,962
Net cash provided by operating activities $ 506,967 $ 14,067
The notes to the financial statements are an integral part of this statement
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City of Spokane Valley
Notes to Financial Statements
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The City of Spokane Valley (the City)was incorporated on March 31,2003. The City operates under a Council–
Manager form of government. The City's major operations, as authorized under the laws of the State of
Washington applicable to a non-charter city code,include planning and zoning,public safety,public works,and
recreation and culture. On May 10,2005 an election was held that annexed library services to the Spokane
County Library District. The district assumed responsibility for all city library services on January 1,2006.
The accounting and reporting policies of the City relate to the funds included in the accompanying financial
statements which conform to generally accepted accounting principles(GAAP) applicable to state and local
governments. GAAP for local governments include those principles prescribed by the Governmental Accounting
Standards Board(GASB),the Financial Accounting Standards Board(FASB),when applicable, and the American
Institute of Certified Public Accountants(AICPA)pronouncements that have been made applicable by GASB
Statements or Interpretation.
A. Reporting entity
As required by GAAP the City's financial statements present the City of Spokane Valley–the primary
government. There are no component units(either blended or discretely presented)included in these statements.
B. Government-wide and fund financial statements
The City's basic financial statements include both government-wide (reporting the City as a whole)and fund
financial statements(reporting the City's major funds). Both the government-wide and fund financial statements
categorize primary activities as either government or business-type.
The government-wide fmancial statements(i.e.,the statement of net assets and the statement of activities)report
information on all of the non-fiduciary activities of the primary government. For the most part,the effect of
interfund activity has been removed from these statements. Governmental activities,which normally are
supported by taxes and intergovernmental revenues, are reported separately from business-type activities,which
rely to a significant extent on fees and charges for support.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment
are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or
segment. Program revenues include 1)charges to customers or applicants who purchase,use,or directly benefit
from goods, services,or privileges provided by a given function or segment and 2)grants and contributions that
are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and
other items not properly included among program revenues are reported as general revenues.
Separate financial statements are provided for governmental funds,proprietary funds, and fiduciary funds. The
City has no fiduciary funds. Major individual funds are reported as separate columns while the remaining funds
are combined for presentation purposes in the governmental funds statements and the proprietary funds
statements.
C. Measurement focus,basis of accounting, and financial statement presentation
The government-wide fmancial statements are reported using the economic resources measurement focus and the
accrual basis of accounting, as are proprietary funds. Under this approach,revenues are recorded when earned
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and expenses are recorded when a liability is incurred,regardless of the timing of related cash flows. Property
taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as
revenue as soon as all the eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus and
the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and
available. Revenues are considered to be available when they are collectable within the current period or soon
thereafter to pay liabilities of the current period. For this purpose,the government considers revenues to be
available if they are collected within 30 days of the end of the current fiscal period. Expenditures generally are
recorded when a liability is incurred, as under accrual accounting. However,debt service expenditures, as well as
expenditures related to compensated absences,claims, and judgments are recorded only when the payment is due.
Property taxes, franchise fees,licenses, and interest associated with the current fiscal period are all considered to
be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of
special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as
revenue of the current period. All other revenue items are considered to be measurable and available only when
cash is received by the government.
The city reports the following major governmental funds:
The General Fund is the City'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 Street Fund is responsible for the maintenance of all city streets and bridges.
The Service Level Stabilization Reserve Fund provides emergency revenue source to maintain service levels
in the event of a downturn in the local economy.
The Capital Projects Fund and the Special Capital Projects Fund are used as matching funs for construction
projects. These funds account for the collection and expenditure of the real estate excise tax levied on all
sales of real estate. The first quarter of real estate excise tax must be spent on capital improvements identified
in a capital improvements plan and is monitored through the Capital Projects Fund. The second quarter
percent of the real estate excise tax is levied by the City for planning under the Growth Management Act and
are used for capital projects monitored through the Special Capital Projects Fund.
The Street Capital Projects Fund and Capital Grants Fund accounts for monies used to fmance the six year
transportation improvement plan. Revenues are transfers from the Arterial Street Fund, Capital Projects
Fund, Special Capital Projects Fund and Street Bond Fund.
The Capital Grants Fund accounts for capital improvement projects funded partially by grant proceeds from
other governmental agencies, such as TIB, SRTC,and BRAC. Revenues are from grant proceeds and
transfers from other special revenue funds.
The city reports the following major proprietary fund:
The Stormwater Management Fund accounts for the receipt and expenditure of the stormwater management
fee. The expenditures are used for stormwater control construction and management.
Additionally,the government reports the following fund types:
Special revenue funds account for arterial street construction and maintenance,hotel/motel tax revenues and
expenditures, CenterPlace operating reserve,winter weather reserve, and revenues and expenditures for the
Paths and Trails Fund.
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Debt service funds account for the resources accumulated and payments made for principal and interest on
general government debt except those to be accounted for in another fund.
Capital project funds account for the acquisition or development of capital facilities for governmental
activities. Their major sources of revenues are from proceeds of general obligation bonds,grants from other
agencies, and contributions from other funds.
Internal service funds account for computer hardware/software,equipment,vehicle replacement, and risk
management services provided to other departments on a cost reimbursement basis.
Private-standards of accounting and financial reporting issued prior to December 1, 1989,generally are followed
in both the government-wide and proprietary fund financial statements to the extent that those standards do not
conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have
the option of following subsequent private-sector guidance for their business-type activities and enterprise funds,
subject to this same limitation. The City has elected not to follow subsequent private-sector guidance.
As a general rule interfund activity has been eliminated from the government-wide financial statements.
Exceptions are payments in lieu of taxes,external type transactions within internal service funds (revenues and
expenses for interest or services to other governmental organizations), and other charges for stormwater services.
Elimination of these charges would distort the direct cost and program revenues reported for these functions.
Amounts reported as program revenues include 1)charges to customers or applicants for goods, services,or
privileges provided,2)operating grants and contributions,and 3)capital grants and contributions,including
special assessments. Internally dedicated resources are reported as general revenues rather than program revenues.
Likewise,general revenues include all taxes.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and
expenses generally result from providing services and producing and delivering goods in connection with a
proprietary fund's principal ongoing operations. The principle operating revenues of the stormwater enterprise
fund is a stormwater assessment fee. Operating expenses of enterprise funds and internal service funds include
the cost of sales and services, administrative expenses,and depreciation on capital assets. All revenues and
expenses not meeting this definition are reported as nonoperating revenues and expenses.
When both restricted and unrestricted resources are available for use,it is the City's policy to use restricted
resources first, and then unrestricted resources as they are needed.
D. Assets,liabilities, and fund equity
1. Cash and cash equivalents
The City considers all highly liquid assets including demand deposits,money market accounts,CD's,investment
in the State Treasurer's Investment Pool, and short-term investments with a maturity of three months or less from
the date of acquisition as cash and cash equivalents. These amounts are classified on the balance sheet or in the
statement of net assets within cash and cash equivalents in the various funds. The interest on these investments is
prorated to the applicable funds.
2. Investments—Refer to Note 3
3.Receivables and payables
Taxes receivable consists of property taxes and related interest and penalties. Accrued interest receivable consists
of amounts earned on investments,notes, and contracts. Accrued interest payable consists of amounts owed on
notes,loans,and contracts.
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Customer accounts receivable/payable consist of amounts owed from/to private individuals or organizations for
goods and services including amounts owed. If the transactions are with another governmental unit,it is
accounted for within"due from/to other governments."
Receivables have been reported net of estimated uncollectible accounts. Because property taxes and special
assessments are considered liens on property,no estimated uncollectible amounts are established.
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the
fiscal year are referred to either"due to/from other funds"(i.e.,the current portion of interfund loans)or
"interfund loans receivable/payable"(i.e.,the non-current portion of interfund loans). All other outstanding
balances between the governmental activities and business-type activities are reported in the government-wide
financial statements as"internal balances.". (Refer to Note 8.)
Advances,between funds, as reported in the fund financial statements, are offset by a fund balance reserve
account in applicable governmental funds to indicate that they are not available for appropriation and are not
expendable available financial resources.
In the government-wide financial statements, and proprietary fund types in the fund fmancial statements,long-
term liabilities are reported in applicable governmental activities,business-type activities,or proprietary fund type
statement of net assets.
Wages and benefits payable represent wages earned at the end of the current fiscal year but not paid until the next
fiscal year.
4. Inventories and prepaid items
Reported inventories in governmental funds consist of expendable supplies held for consumption. The cost
thereof has been recorded as an expenditure at the time individual inventory items were purchased(purchase
method).
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid
items in both the government-wide and fund statements.
5. Capital assets and deprecation—Refer to Note 5
6. Long-term debt
Liabilities for long-term debt are recorded in the government-wide statement of net assets and in the governmental
funds balance sheet. The liabilities include bond premiums and discounts, as well as issuance costs, are deferred
and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or
discount. Issuance costs are reported as deferred charges. Long-term debt outstanding at year end is outlined in
Note 10.
For governmental funds financial statements,bond issuance costs are expended at the time of issuance. Bond
premiums and discounts are deferred and amortized over the life of the bonds. Bond proceeds are reported as an
other financing source net of the applicable premium or discount. Issuance costs,even if withheld from the actual
net proceeds received, are reported as debt service expenditures. The nature of debt in the governmental activity
is specific to a program and,therefore;debt service costs are not an allocated expense.
7.Deferred revenues
The deferred revenues account is used to offset receivables established in the governmental fund fmancial
statements for certain revenues that are measurable but not considered available to fmance payment of current
obligations, and,therefore,not susceptible to accrual on the modified accrual basis. When the receivable amounts
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are collected in future periods,this liability account is reduced and corresponding revenue is recorded. Deferred
revenues represented in this manner on the accompanying fmancial statements are uncollected property taxes
levied and uncollected road taxes levied.
8. Compensated absences
Compensated absences are absences for which employees will be paid, such as vacation and sick leave. Vacation
pay,which may be accumulated up to 360 hours,is payable upon resignation,retirement,or death. All vacation
pay is accrued when incurred in the government-wide,proprietary and fund financial statements. An additional
amount has been accrued for the city's share of Medicare taxes related to the vacation accrual. A liability for
these amounts is reported in the government fund statements only if they have matured,for example, as a result of
employee resignations and retirements
9.Fund balance designations and reservations
In the fund fmancial statements,governmental funds report reservations of fund balance for amounts that are not
available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations
of fund balance represent tentative management plans that are subject to change.
E. Revenues, expenditures, and expenses
1. Program revenues
Program revenues include charges for services to customers for goods or services provided,operating grants and
contributions, and nonoperating grants and contributions within the Government-wide statement of activities.
charges for services include business licenses,construction permits, and recreation program fees.
2. General revenues
Property taxes,retail taxes,business taxes,excise taxes, and associated penalties and interest, and interest and
investment earnings are classified as general revenues within the Government-wide statement of activities.
3. Interfund transfers
Permanent reallocations of resources between funds of the reporting entity are classified as interfund transfers.
For the purposes of the Government-wide Statement of Activities, all interfund transfers between individual
governmental funds have been eliminated.
4.Expenses/expenditures
Expenses in the Government-wide statement of activities are reported by function as a governmental activity
(general government, security of persons and property,physical environment,transportation,economic
environment,culture and recreation,or interest on long-term debt),or business-type activity(wastewater,or
stormwater). Certain indirect costs are included in program expenses by function. In the fund fmancial
statements,expenditures of governmental funds are classified current by function,debt service principle and
interest payments,or purchases of capital items. Proprietary expenditures are classified as operating or non-
operating
5. Operating and nonoperating revenues and expenses
Operating revenues and expenses for proprietary funds are those that result from providing services and producing
and delivering goods and/or services in connection to the proprietary fund's principal ongoing operations. It also
includes all revenue and expenses not related to capital and related financing,non-capital financing,or investing
activities. All revenue and expenses not meeting this defmition are nonoperating revenues and expense.
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NOTE 2—STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY:
A. Scope of budget
Annual appropriated budgets are adopted for all funds on a basis consistent with generally accepted accounting
principals. Legal budgetary control is established at the fund level. Subsidiary revenue and expenditure ledgers
are used to compare the budgeted amounts with actual revenues and expenditures. As a management control
device,the subsidiary ledgers are used to monitor expenditures for individual functions and activities by object
class.
B. Procedures for adopting the original budget
The City's budget procedures are mandated by the Revised Code of Washington 35A.33. The following are key
procedural steps in the City's budget development process. Note that the process and dates are for the 2007
budget process and may be changed for future processes:
• In April,the official"budget call"required by State law is made to all department directors or fund
managers. Budget development instructions and other materials are provided to the departments at this
time.
• In June departments submit revenue and expenditure estimates to the Finance department. The City
Council and City management staff discuss City goals and priorities and reaffirm overall City priorities,
vision, and mission at a mid-year retreat. Additional policy guidance is provided throughout the year.
• In July the Finance department submits the preliminary budget to the City Manager.
• In August the City Manager submits estimates on the current year's revenue and expenditures for the
upcoming year to the council.
• During September,preliminary budget documents were prepared,printed and filed with City Clerk. This
proposed budget is presented to the City Clerk and copies are made available to the public. The Council
set the dates of the preliminary and final budget hearings.
• Before December 31St the City Council,by a majority vote,will adopt the budget by ordinance,
establishing the budget appropriation for the year.
• The approved budget is published and distributed during the first quarter of the following year. Copies
are made available to the public.
• Quarterly budget monitoring reports are published by the Finance Department to report on actual
performance compared to budget estimates and to identify any remedial actions that may be needed.
C. Amending the budget
The budget, as adopted,constitutes the legal authority for expenditures. The City's budget is adopted at the fund
level, so that expenditures may not legally exceed appropriations at that level of detail. The City Manager is
authorized to transfer budgeted amounts within a fund; however, any revisions that alter the total expenditures of
a fund,or that effect the number of authorized employee positions, salary ranges,or other conditions of
employment must be approved by the City Council. When the City Council determines that it is in the best
interest of the City to increase or decrease the appropriation for a particular fund,it may do so by ordinance
approved by one more than the majority after holding a public hearing.
The City's budget was amended two times during the fiscal year. The financial statements contain the original
and final budget information. The original budget is the first complete appropriated budget. The final budget is
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the original budget adjusted by all reserves,transfers, allocations, supplemental appropriations, and other legally
authorized changes. All appropriations lapse at year end. Unexpended resources must be re-appropriated in the
subsequent period.
D. Compliance
There have been no material violations of finance-related legal or contractual provisions, and there have been no
expenditures exceeding legal appropriations in any of the funds with the exception of the Civics Building Capital
Projects Fund and Debt Service LTGO fund by $1,352,176 and$27,905 respectively.
E. Deficit fund equity
At December 31,2006,the Street Capital Projects Fund had a deficit of($171,637)in their fund balance. The
deficit will be eliminated by the appropriation of future revenue from the general fund and other resources.
NOTE 3—DEPOSITS AND INVESTMENTS:
A.Deposits
The City's deposits and certificates of deposit are entirely covered by the federal depository insurance (FDIC) or
by collateral held in a multiple financial institution collateral pool administered by the Washington Public Deposit
Protection Commission(PDPC). The PDPC is a statutory authority established under Chapter 39.58 of the
Revised Code of Washington.
B.Investments
As required by state law, all investments of the City's funds are obligations of the U.S. Government,U.S. agency
issues,obligations of the State of Washington,general obligation of Washington State municipalities(the State
Treasurer's Local Government Investment Pool(LGIP),or certificate of deposit with Washington State banks and
savings and loan institutions.
The Washington Local Government Investment Pool operates in a manner consistent with the SEC's Rule 2a-7 of
the Investment Company Act of 1940. The fair value of the portfolio is calculated by the master custodian or by
an independent pricing service under contract with the State Treasurer's Office. The fair value of the City's
position in the State of Washington Local Government Investment Pool is the same as the value of the pool shares
Investments are shown on entity-wide Statement of Net Assets at fair market value or 2a7-like-pools at amortized
cost. Investments are reported within cash and investments of governmental activities and within cash and cash
equivalents of business-type activities.
The City's investments are categorized to give an indication of risk assumed at year-end. The following summary
shows the City's investments at year-end categorized by risk.
• Category 1 includes investments that are insured,registered,or held by the City or its agent in the City's
name.
• Category 2 includes uninsured and unregistered investments,which are held by the counterparty's trust
department or agent in the City's name.
• Category 3 includes uninsured and unregistered investments for which the securities are held by the
counterparty's trust department or agent,but not in the City's name.
The City had no Category 1,2,or 3 type investments in their investment portfolio as of December 31,2006.
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C.Deposit and investment reconciliation
Amounts reported in the fund statements are as follows:
Fair Value
Carrying Cash
Amount Investments Equivalents
State investment pool $ 30,240,643 $ - $ 30,240,643
Money market account 1,571,554 - 1,571,554
Total investments not subject to credit risk $ 31,812,197 $ - $ 31,812,197
NOTE 4—PROPERTY TAXES:
The County Treasurer acts as an agent to collect property taxes levied in the county for all taxing authorities. The
County Assessor is responsible for determining what the individual property taxes are,based upon the monies
requested by the taxing districts and the assessed valuation within these districts.
Taxes are levied annually on January 1st on property values listed as of the prior May 31St. Assessed values are
established by the County Assessor at 100% of fair market value. A revaluation of all property is required every
four years. Taxes are due in two equal installments on April 30th and October 31St. Tax liens are automatic at the
point the taxes are levied.
Property taxes levied for the current year are recorded as a receivable when levied,offset by deferred revenue.
During the year,property tax revenues are recognized when cash is collected. At year-end,property tax revenues
are recognized for collections to be distributed by the County Treasurer in January. No allowance for
uncollectible taxes is established because delinquent taxes are considered fully collectible.
The tax rate for general City operations is limited by State law (RCW 84.52.043)to $3.60 per$1,000 of assessed
valuation,deducting from there the levy of$1.50 by the Spokane County Fire Districts#1 and#8, and$.50 for
Library Districts which leaves the City with the authority to levy$1.60 for its own purposes. This amount may be
reduced for any of the following reasons:
(1) The Washington State Constitution limits the total regular property taxes to one percent of assessed valuation
or$10 per$1,000 of value. If the taxes of all districts exceed this amount,each is proportionately reduced
until the total is at or below the one-percent limit.
(2) Initiative 747 passed by the voters in November of 2001 limits the amount by which a taxing jurisdiction can
increase the amount of its regular property tax levy to the lesser of the Implicit Price Deflator(IPD)or one
percent,plus adjustments for new construction and annexations. Tax increases higher than one percent must
be approved by the voters at an election held according to RCW 84.55.050. A simple majority vote is
required.
(3) The City may voluntarily levy taxes below the legal limit.
For 2006,the City levied$8,084,062 on an assessed valuation of$5,056,991,058.
NOTE 5—CAPITAL ASSETS AND DEPRECIATION:
Capital assets,which include property,plant,equipment, and infrastructure assets (e.g.roads,bridges, sidewalks,
and similar items), are reported in the applicable governmental or business-type columns in the government-wide
financial statements. The City defines capital assets as assets with an initial,individual cost of more than $5,000
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and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated
historical cost if purchased or constructed. Other donated assets are recorded at estimated fair market value at the
date of donation.
The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets
lives are not capitalized.
Major outlays for capital assets and improvements are capitalized as projects are constructed.Interest incurred during the
construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets
constructed.
A summary of changes in governmental capital assets follows:
Donated capital assets received from Spokane County at the time of incorporation were recorded at cost and the
accumulated depreciation at the time of transfer. These assets are shown as capital contributions on the statement
of activities. The following schedule details the assets transferred during the year ended December 31,2003.
Capital Assets Donated From Spokane County
Historical Accumulated Depreciation
Cost Depreciation Cost
Infrastructure:
Roadways $ 187,732,531 $ 127,418,027 $ 60,314,504
Signs, signals,beacons 9,056,000 4,528,000 4,528,000
Crosswalks 130,084 13,008 117,076
Bridges 5,633,979 2,808,112 2,825,867
Total infrastructure 202,552,594 134,767,147 67,785,447
Parks:
Land 1,548,655 1,548,655
Buildings 898,729 609,824 288,905
Improvements other buildings 2,123,571 1,059,298 1,064,273
Machinery and equipment 3,337 3,003 334
Total parks 4,574,292 1,672,125 2,902,167
Total County assets donated $207,126,886 $ 136,439,272 $ 70,687,614
Capital asset activity for the year ended December 31,2006,is summarized as follows:
Beginning Ending
Balance Increase Decrease Balance
Governmental Activities:
Land(not being depreciated) $ 2,567,247 $ 411,600 $ - $ 2,978,847
Construction in progress 7,468,646 5,331,210 (1,156,617) 11,643,239
Buildings and leasehold improvements 10,580,288 2,077,866 (319,151) 12,339,003
Improvements other buildings 2,123,571 - - 2,123,571
Infrastructure 207,991,893 1,525,861 - 209,517,754
Machinery and equipment 931,356 227,437 - 1,158,793
Total capital assets 231,663,001 9,573,974 (1,475,768) 239,761,207
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Beginning Ending
Balance Increase Decrease Balance
Less accumulated depreciation for:
Buildings and leasehold improvements$ 737,871 $ 324,257 $ (217,531) $ 844,597
Improvements other buildings 1,215,759 71,516 - 1,287,275
Infrastructure 162,419,303 10,316,855 - 172,736,158
Machinery and equipment 456,889 235,632 - 692,521
Total accumulated depreciation 164,829,822 10,948,260 (217,531) 175,560,551
Capital assets,net of
accumulated depreciation $ 66,833,179 $ (1,374,286) $ (1,258,237) $ 64,200,656
Beginning Ending
Balance Increase Decrease Balance
Business-type Activities:
Infrastructure $ 179,713 $ 143,486 $ - $ 323,199
Machinery and equipment - 13,511 - 13,511
Total capital assets 179,713 156,997 - 336,710
Less accumulated depreciation for:
Infrastructure - 9,049 - 9,049
Machinery and equipment - 127 - 127
Total accumulated depreciation - 9,176 - 9,176
Capital assets,net of
accumulated depreciation $ 179,713 $ 147,821 $ - $ 327,534
Depreciation
Property,plant,and equipment of the primary government is depreciated using the straight line method over the
estimated service life as follows:
Buildings and improvements 10-60 years
Infrastructure 5-40 years
Light/Heavy Transportation Equipment 5-10 years
Other Equipment 2-20 years
Office Equipment 3-5 years
Computer Equipment 3-5 years
Depreciation expense was charged to functions/programs of the primary government as follows:
Governmental Business Type
General government services $ 310,288 $
Public safety 8,619
Physical environment 11,851 9,175
Transportation 10,299,826
Economic environment 14,006
Culture and recreation 129,287
Capital assets held by the government's internal
service funds are charged to the various
functions based on their usage of the assets 174,384 9,175
Total depreciation-governmental activities $10,948,261 $ 9,175
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Construction commitments
The City of Spokane Valley has active construction projects as of December 31,2006. The projects include
various street construction projects. At year end the City's commitments with contractors are as follows:
Remaining
Spent-to-Date Commitments
Various street construction projects $ 4,946,782 $ 1,537,381
The various street construction projects are being funded by state and local grants, as well as,existing resources in
various City Funds.
NOTE 6—PENSION PLANS:
Substantially all City of Spokane Valley full-time and qualifying part-time employees participate in one of the
following statewide retirement systems administered by the Washington State Department of Retirement Systems,
under cost-sharing multiple-employer public employee defined benefit and defmed contribution retirement plans.
The Department of Retirement Systems (DRS), a department with the primary government of the State of
Washington,issues a publicly available comprehensive annual financial report(CAFR)than includes financial
statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing
to: Department of Retirement Systems, Communications Unit,P.O.Box 48380, Olympia,WA 98504-8380. The
following disclosures are made pursuant to GASB Statement 27,Accounting for Pensions by State and Local
Government Employers.
Public Employees'Retirement System (PERS) Plans 1, 2, and 3
Plan Description
PERS is a cost-sharing multiple-employer retirement system comprised of three separate plans for membership
purposes; Plans 1 and 2 are defined benefit plans and Plan 3 is a combination defmed benefit/defined contribution
plan. Membership in the system includes;elected officials, state employees, employees of the Supreme,Appeals,
and Superior Courts(other than judges in a judicial retirement system),employees of legislative committees,
community and technical colleges,college and university employees(not in national higher education retirement
programs),judges of district and municipal courts, and employees of local governments. PERS participants who
joined the system by September 30, 1977 are Plan 1 members. Those joined on or after August 31,2002 for local
government employees, are Plan 2 members unless they exercise an option to transfer their membership to Plan 3.
PERS participants joining the system on or after September 1,2002 for local government employees have the
option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90
days of employment.An employee is reported in Plan 2 until a choice is made. Employees who fail to choose
within 90 days default to PERS Plan 3. PERS defined benefit retirement benefits are financed from a
combination of investment earnings and employer and employee contributions. Retirement benefit provisions are
established in state statute and may be amended by the State Legislature.
Plan 1 retirement benefits are vested after an employee completes five year of eligible service. Plan 1 members
are eligible for retirement at any age after 30 years of service,or at age 60 with five years of service or at the age
of 55 with 25 years of service. The annual pension is 2%of the average final compensation per year of service,
capped at 60%. The average final compensation is based on the greatest compensation during any 24 eligible
consecutive compensation months. If qualified, after reaching the age of 66 a cost-of-living allowance is granted
based on years of service and is capped at 3%annually.
Plan 2 retirement benefits are vested after an employee completes five years of eligible service. Plan 2 members
may retire at the age of 65 with five years of service,or at the age of 55 with 20 years of service,with an
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allowance of 2%of the average final compensation per year of service. The average final compensation is based
on the greatest compensation during any eligible consecutive 60-months period. Plan 2 retirements prior to the
age of 65 receive reduced benefits. If retirement is at age 55 or older with at least 30 years of service, a 3%per
year reduction applies; otherwise an actuarial reduction will apply. There is no cap on years of service credit; and
a cost-of-living allowance is granted(indexed to the Seattle Consumer Price Index),capped at 3%annually.
Plan 3 has a dual benefit structure. Employer contributions fmance a defined benefit component, and member
contributions finance a defined contributions component. The defmed benefit portion provides a benefit
calculated at 1%of the average final compensation per year of service. The average final compensation is based
on the greatest compensation during any eligible consecutive 60-month period. Effective June 7,2006,Plan 3
members are vested in the defmed benefit portion of their plan after ten years of service; or five if twelve months
that were earned after age 44; or after five service credit years earned in PERS Plan 2 prior to June 1,2003. Plan
3 members are immediately vested in the defined contribution portion of their plan. Vested Plan 3 members are
eligible to retire with full benefits at age 65,or at age 55 with 10 years of service. Retirements prior to age 65
receive reduced benefits. If retirement is at age 55 or older with at least 30 years of service,a 3%per year
reduction applies; otherwise an actuarial reduction will apply. The benefit is also actuarially reduced to reflect the
choice of a survivor option. There is no cap on years of service credit; and Plan 3 provides the same cost-of-
living allowance as Plan 2. The defined contribution portion can be distributed in accordance with an option
selected by the member,either as a lump sum or pursuant to other options authorized by the Employee Retirement
Benefits Board.
There are 1,181 participating employers in PERS. Membership in PERS consisted of the following as of the
latest actuarial valuation date for the plans of September 30,2005:
Retirees and beneficiaries receiving benefits 68,609
Terminated plan members entitled to but not yet receiving benefits 22,567
Active plan members vested 104,574
Active plan members nonvested 51,004
Total 246,754
Funding Policy
Each biennium,the state Pension Funding Council adopts Plan 1 employer contribution rates,Plan 2 employer
and employee contribution rates, and Plan 3 employer contribution rates. Employee contribution rates for Plan 1
are established by statute at 6%for state agencies and local government unit employees, and 7.5% for state
government elected officers. The employer and employee contribution rates for Plan 2 and the employer
contribution rate for Plan 3 are developed by the Office of the State Actuary to fully fund Plan 2 and defined
benefit portion of Plan 3. All employers are required to contribute at the level established by the Legislature.
PERS Plan 3 defmed contribution is a non-contributing plan for employers. Employees who participate in the
defmed contribution portion of PERS Plan 3 do not contribute to the defined benefit portion of PERS Plan 3. The
Employee Retirement Benefits Board set Plan 3 employee contribution rates. Six rate options are available
ranging from 5 to 15 percent;two of the options have graduated rates dependant on the employee's age. The
methods used to determine the contribution requirements are established under state statute in accordance with
chapters 41.40 and 41.45 RCW.
PERS Plan 1 PERS Plan 2 PERS Plan 3
Employer* 3.69% 3.69% 3.69%**
Employee 6.00% 3.50% ***
* The employer rates include the employer administrative expense fee currently set at 0.19%.
** Plan 3 defined benefit portion only.
***Variable form 5.0%minimum to 15.0%maximum based on rate selected by PERS 3 member.
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Both the City of Spokane Valley and the employees made the required contributions. The City of Spokane Valley
required contributions for the years ending December 31 were as follows.
PERS Plan 1 PERS Plan 2 PERS Plan 3
2006 Employer Contributions $3,238 $63,233 $24,919
2005 Employer Contributions 1,765 33,018 10,185
2004 Employer Contributions 1,284 18,910 7,315
2003 Employer Contributions 276 10,567 3,448
NOTE 7—RISK MANAGEMENT:
The City of Spokane Valley is exposed to financial loss resulting from City-caused damage to property or
persons,bodily injuries or illness of employees, and unemployment compensation. The City is insured by the
Washington Cities Insurance Authority(WCIA) for general liability and property damage coverage. The City uses
the Washington State Department of Labor and Industries Insurance Services for coverage to pay for medical care
for job-related injuries and illnesses,and wage replacement when the injury or illness is serious enough to miss
work. The City is self-insured for unemployment compensation benefits.
The Risk Management Fund is used to account for, and finance the liability and unemployment insurance costs.
All departments of the City make payments through interfund assessments to the fund on estimates of the amounts
needed to pay prior and current year claims.
The Washington Cities Insurance Authority(WCIA)was originally formed on January 1, 1981,utilizing Chapter
48.62 RCW(self-insurance regulation) and Chapter 39.34 RCW(Interlocal Cooperation Act)for the purpose of
providing a pooling mechanism for jointly purchasing insurance,jointly self-insuring, and/or jointly contracting
for risk management services. WCIA has a total of 108 members. New members initially contract for a three-
year term, and thereafter automatically renew on an annual basis. A one-year withdrawal notice is required before
membership can be terminated. Termination does not relieve a former member from its unresolved loss history
incurred during membership.
Liability coverage is written on an occurrence basis,without deductibles. Coverage includes general,automobile,
police professional,public officials' errors and omissions, stopgap,and employee benefits liability. Limits are $3
million per occurrence self insured layer, and$11 million per occurrence in the re-insured excess layer with no
annual aggregate except$10 million per member for public officials errors and omissions. The excess layer is
insured by the purchase of reinsurance and insurance. Total limits are $14 million per occurrence. The Board of
Directors determines the limits and terms of coverage annually.
Insurance coverage for property, automobile physical damage,fidelity,inland marine, and boiler and machinery
are purchased on a group basis. Various deductibles may apply by type of coverage.Property insurance and auto
physical damage are self-funded from the members' deductible to $250,000 and$500,000 effective July 1,2004
for all perils other than flood and earthquake and insured above that amount by the purchase of reinsurance. In-
house services include risk management consultation,loss control field services,claims and litigation
administration and loss analyses. WCIA contracts for the claims investigation consultants for personnel issues
and land use problems,insurance brokerage and lobbyist services.
WCIA is fully funded by its members,who make annual assessments on prospectively rate basis, as determined
by an outside independent actuary. The assessments cover loss,loss adjustment, and administrative expenses.As
outlined in the Interlocal,WCIA retains the right to additionally assess the membership for any funding shortfall.
An investment committee,using investment brokers produces additional revenue by investment of WCIA's assets
in financial instruments which comply with State guidelines. These revenues directly offset portions of the
membership's annual assessment.
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A Board of Directors governs WCIA which is comprised of one designated representative from each member.
The Board elects an Executive Committee and appoints a Treasurer to provide general policy direction for the
organization. The WCIA Executive Director reports to the Executive Committee and is responsible for
conducting the day to day operations of the WCIA.
The City is self-insured on a reimbursement basis for unemployment compensation. The City incurred$3,153 in
claims for unemployment compensation in 2006.
NOTE 8—INTERFUND BALANCES AND TRANSFERS:
Interfund Balances
Due to other funds and due from other funds result from goods issued,work performed or services rendered to or
for the benefit of another fund of the same government. The amount of interfund loans payable within one year is
also included in due to and due from other funds.
Due to other fund and due from other fund balances at December 31,2006 were:
Due From Due To
Other Funds Other Funds
General Fund $ 444,715 $ 77,821
Street Fund - 31,325
Capital Projects Fund - 52,609
Street Capital Projects Fund 134,983 -
Capital Grants Fund 68,652 476,974
Nonmajor governmental funds 30,845 177,381
Proprietary funds 113,816 22,328
Internal service funds 45,427 -
Total government wide $ 838,438 $ 838,438
Interfund transfers are the flow of assets with a reciprocal return of assets,goods,or services in return. The City
uses transfers to(1)move revenues from the fund that stature or budget requires to collect them to the fund that
statute or budget requires to expend them, (2)move receipts restricted to debt service from the funds collecting
the receipts to the debt service fund as debt service payments become due, and(3)use unrestricted revenues
collected in the general and street funds to finance various programs accounted for in other funds in accordance
with budgetary authorizations.
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Interfund transfer activity for the year is as follows:
Transfers In Transfers Out
General Fund $ 74,300 $7,539,050
Street Fund 2,000,000 111,645
Arterial Street Fund - 126,422
Service Level Stabilization Fund 2,105,000 -
Debt Service Fund 183,290 -
Capital Projects Fund - 144,254
Special Capital Projects Fund - 91,645
Street Capital Projects Fund 790,782 -
Street Bond Fund - 1,058,330
CD Block Grant Fund 1,475 -
Capital Grant Fund 585,805 -
Park Capital Project Fund 750,000 -
Civic Building Fund 2,600,000 -
Stormwater Fund 123,045 152,438
Transfer of capital assets from 123,045
governmental funds
Internal service Funds 133,132 -
Total government wide $9,346,829 $9,346,829
NOTE 9—SHORT-TERM DEBT:
As of December 31,2006,the City had no short-term debt.
NOTE 10—LONG-TERM DEBT AND LEASES:
General Obligation Bonds
The City issues general obligation bonds to provide funds for the acquisition and construction of major capital
facilities. General obligation bonds have been issued for governmental-type activities.
General obligation bonds are direct obligations and pledge the full faith and credit of the government. General
obligation bonds are either created by 315th majority vote of the people and,therefore,financed by a special tax
levy; or created by ordinance, adopted by the City Council, and normally financed from general revenues
(councilmanic bonds). General obligation bonds currently outstanding are as follows:
In 2003,the City issued$9,430,000 in councilmanic bonds to finance the construction of the CenterPlace
Community Center and for various street construction projects. The City does expect to receive
intergovernmental payments from the Spokane Public Facilities District pursuant to an interlocal agreement dated
as of July 2003,which if and when received by the City will be available for debt service associated with the
Center for up to $7 million of bonds.
General obligation bonds currently outstanding are as follows:
Debt
Name of Issuance Purpose Interest Rate Outstanding
2003 LTGO Bonds Governmental Activities 2.00%- 5.00% $8,945,000
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The annual debt service requirements to maturity for general obligation bonds are as follows:
Governmental Activities
Total
Principal Interest Requirements
2007 $ 185,000 $ 411,035 $ 596,035
2008 190,000 406,872 596,872
2009 205,000 401,173 606,173
2010 210,000 395,022 605,022
2011 225,000 386,622 611,622
2012-2016 1,350,000 1,786,113 3,136,113
2017-2021 1,995,000 1,458,423 3,453,423
2022-2026 2,580,000 884,750 3,464,750
2027-2031 1,585,000 320,750 1,905,750
2032-2033 420,000 32,500 452,500
$ 8,945,000 $ 6,483,260 $15,428,260
Long-term debt on the Statement of Net Assets is presented net of any premium/discount incurred at the time of
issuance. The 2003 LTGO Bonds were sold at a premium of$189,974 and were reported at the net amount of
$9,619,974. The premium will be amortized over the life of the bonds.
Changes in Long-Term Liabilities
During the year ended December 31,2006,the following changes occurred in long-term liabilities:
Governmental Balance Balance Due Within
Activities Jan. 1,2006 Additions Reductions Dec. 31,2006 One Year
General obligation bonds $ 9,120,000 $ - $ 175,000 $ 8,945,000 $ 185,000
Premium 175,343 - 7,316 168,027 7,316
Note payable - 1,260,910 38,370 1,222,540 92,100
Compensated absences 123,176 38,662 - 161,838 -
Governmental activity
Long-term liabilities $ 9,418,519 $ 1,299,572 $ 220,686 $10,497,405 $ 284,416
Legal Debt Margin
RCW 39.36.020 provides cities with three segments of debt capacity,each equal to two and one-half percent of
the city's assessed valuation,for a total debt capacity of seven and one-half percent.
The assessed valuation of the City for the year 2006 for purposes of determining the legal debt margin is
$5,056,991,058. Under State of Washington statutes general obligation indebtedness pursuant to a vote of the
electorate is limited to 2.5%of actual value of taxable property located within the City. Indebtedness without a
vote of the people is limited to 1.5%of actual value subject to the limitation that total general purpose
indebtedness may not exceed 2.5%of total valuation. There is a 2.5% limitation each for utility purposes and
open space and park facilities purposes.
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The remaining debt capacities of the City are as follows:
Amount
General Purposes Voted and Non-voted Debt—2.5%(1) $ 117,317,938
Utility Voted Debt—2.5% 126,424,776
Open Space and Park Facilities Voted Debt-2.5% 126,424,776
Total Remaining Debt Capacity $370,167,490
(1)Includes$66,748,028 debt capacity for non-voted debt.
Note Payable—The City entered into a purchase agreement with Spokane County for purchase of the Spokane
Valley Precinct Building. The balance of$1,260,910 as of June 1,2006,will be paid as a credit by the City to the
County in the form of tenant use of Premises by the County. A monthly payment of$7,675 of principal and
interest is due monthly for 2006. The payment is adjusted on a yearly basis. The purchase agreement is to be paid
in full by December 31,2017,however,either party may terminate the agreement for any reason whatsoever upon
six months written notice to the other Party.
Leases
Operating Leases—The City entered into a six year operating lease agreement with Northwest Christian Schools
for the rental of office space. The lease commenced on February 1,2003. Rental rates vary between$15.15 and
$16.75 per square foot per annum. Lease payments for the year ended December 31,2006 amounted to $296,412.
Schedule of Minimum Future Rental Payments
Year Ended Dec. 31 Amount
2007 $ 352,821
2008 365,116
2009 376,708
2010 98,079
Total minimum future rental payments $1,192,724
NOTE 11—SUBSEQUENT EVENT:
In January 2007,the City hired an architectural firm to begin renovation on the three City of Spokane Valley
pools. Renovations were started in fall of 2007 and are expected to be completed in Spring 2008. The estimated
costs for construction of the project are between $1.6 to $1.9 million.
On September 1,2007,the City of Spokane Valley paid off the balance owing on the Precinct Building.
NOTE 12—CONTINGENCIES AND LITIGATION:
In the normal course of governmental operations the City has claims filed against it for various losses related to
tort actions for such things as wrongful acts,injuries,or damages for which a civil action can be brought, and
other routine legal proceedings. At any given point in time,there is a recurring volume of tort and other claims for
compensation and damages against the City,which could impact expenditures. The City's Risk Management fund
provides for these claims, and insurance is available to pay a portion of damages for certain types of claims. The
collective impact of these claims is not likely to have a material impact on the City's financial position.
The City participates in a number of federal-and-state assisted programs. These grants are subject to audit by the
grantors or their representatives. Such audits could result in requests for reimbursement to grantor agencies for
expenditures disallowed under the terms of the grants. City management does not believe that such disallowances,
if any,will be material.
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NOTE 13—PRIOR PERIOD ADJUSTMENT:
The City discovered that revenue was inadvertently recorded as deferred revenue in the Equipment Rental and
Replacement Fund instead as revenue for the year ending December 31,2005. Income was understated in the
applicable fund by $496,939. The effect of the adjustment gives the City a net prior period adjustment of
$496,939,for the year ended December 31,2005.
During 2006 the City performed reconciliations of the capital assets accounts and noted that capital assets of
$4,814,140 were omitted from the government-wide financial statements for the year ended December 31,2005.
The impact on the prior year statement of activities has not been determined. A prior period correction was
made in 2006 on the books for$496,939,however the 2005 financial statement were overstated by an additional
$496,939 so the net effect in 2006 on net assets was zero.
The result on the above adjustments to net assets is as follows: Governmental Business-Type
Net assets as reported at December 31,2005 $ 81,988,710 $ 1,277,396
Correction of Premium on Bonds (120,711)
Correction of capital assets 4,814,140 179,714
Correction of Accumulated Depreciation (3,307,132) -0-
Total prior period adjustment 1,386,297 179,714
Net assets at December 31,2005, as restated $ 83,375,007 $ 1,457,110
The effect upon operating income in prior years due to the above adjustments has not been determined.
NOTE 14—IMPAIRED ASSETS:
In February of 2006 a fire broke out burning approximately half of the stables and causing water damage to
another structure. After consulting with an engineering firm management decided not to rebuild or repair the
structures that were damaged.
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City of Spokane Valley
Schedule of Revenues, Expenditures,
and Changes in Fund Balance -
Budget and Actual - General Fund Year Ended December 31, 2006
Approved Approved Difference
Original Revised (Uncollected)/
Budget Budget Actual (Unspent)
REVENUE:
Taxes $ 24,491,000 $ 26,713,000 $ 27,578,547 $ 865,547
Licenses and permits 681,750 681,750 2,253,318 1,571,568
Intergovernmental revenues 1,121,000 1,121,000 1,889,556 768,556
Charges for services 1,600,000 1,685,000 682,465 (1,002,535)
Fines and forfeitures 1,350,000 1,250,000 582,872 (667,128)
Investment income 131,300 231,300 312,722 81,422
Miscellaneous 348,016 348,016 459,198 111,182
Total revenue 29,723,066 32,030,066 33,758,678 1,728,612
EXPENDITURES:
Current:
General government 7,266,170 7,286,170 4,211,163 (3,075,007)
Public safety 17,647,913 18,347,913 15,733,006 (2,614,907)
Physical environment 980,192 980,192 1,423,904 443,712
Transportation - - - -
Economic environment 2,136,700 2,286,700 1,556,178 (730,522)
Culture and recreation 1,854,666 1,924,666 1,755,015 (169,651)
Total current expenditures 29,885,641 30,825,641 24,679,266 (6,146,375)
Capital outlay - - 64,867 64,867
Debt service:
Principal payments - - - -
Interest expense - - - -
Total expenditures 29,885,641 30,825,641 24,744,133 (6,081,508)
EXCESS OF EXPENDITURES OVER REVENUES (162,575) 1,204,425 9,014,545 7,810,120
OTHER FINANCING SOURCES(USES):
Debt proceeds - - -
Extraordinary gain,fire proceeds - - 109,317 109,317
Operating transfers in 80,000 80,000 74,300 (5,700)
Operating transfers out - (3,607,000) (7,539,050) (3,932,050)
Total operating financing sources(uses) 80,000 (3,527,000) (7,355,433) (3,828,433)
NET CHANGE IN FUND BALANCES (82,575) (2,322,575) 1,659,112 3,981,687
FUND BALANCE,BEGINNING OF YEAR 4,784,250 7,024,250 7,047,500 23,250
FUND BALANCE,END OF YEAR $ 4,701,675 $ 4,701,675 $ 8,706,612 $ 4,004,937
The notes to the financial statements are an integral part of this statement
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City of Spokane Valley
Schedule of Revenues, Expenditures,
and Changes in Fund Balance -
Budget and Actual - Street Fund Year Ended December 31, 2006
Approved Approved Difference
Original Revised (Uncollected)/
Budget Budget Actual (Unspent)
REVENUE:
Taxes $ - $ - $ 115,589 $ 115,589
Licenses and permits - - - -
Intergovernmental revenues 1,753,000 1,812,600 1,999,312 186,712
Charges for services - - - -
Fines and forfeitures - - - -
Investment income 60,000 105,000 210,918 105,918
Miscellaneous - - 38,484 38,484
Total revenue 1,813,000 1,917,600 2,364,303 446,703
EXPENDITURES:
Current:
General government - - - -
Public safety - - - -
Physical environment - - - -
Transportation 4,131,256 4,211,856 2,957,753 (1,254,103)
Economic environment - - - -
Culture and recreation - - - -
Total current expenditures 4,131,256 4,211,856 2,957,753 (1,254,103)
Capital outlay - 24,000 508,639 484,639
Debt service:
Principal payments - - - -
Interest expense - - - -
Total expenditures 4,131,256 4,235,856 3,466,392 (769,464)
EXCESS OF EXPENDITURES OVER REVENUES (2,318,256) (2,318,256) (1,102,089) 1,216,167
OTHER FINANCING SOURCES(USES):
Debt proceeds - - -
Operating transfers in 2,000,000 2,000,000 2,000,000 -
Operating transfers out - - (111,645) (111,645)
Total operating financing sources(uses) 2,000,000 2,000,000 1,888,355 (111,645)
NET CHANGE IN FUND BALANCES (318,256) (318,256) 786,266 1,104,522
FUND BALANCE,BEGINNING OF YEAR 3,100,000 3,100,000 3,908,002 808,002
FUND BALANCE,END OF YEAR $ 2,781,744 $ 2,781,744 $ 4,694,268 $ 1,912,524
The notes to the financial statements are an integral part of this statement
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City of Spokane Valley
Schedule of Revenues, Expenditures,
and Changes in Fund Balance - Budget and Actual -
Service Level Stabilization Fund Year Ended December 31, 2006
Approved Approved Difference
Original Revised (Uncollected)/
Budget Budget Actual (Unspent)
REVENUE:
Taxes $ - $ - $ - $ -
Licenses and permits - - - -
Intergovernmental revenues - - - -
Charges for services - - - -
Fines and forfeitures - - - -
Investment income - - 179,316 179,316
Miscellaneous - - - -
Total revenue - - 179,316 179,316
EXPENDITURES:
Current:
General government - - - -
Public safety - - - -
Physical environment - - - -
Transportation 1,000,000 1,000,000 - (1,000,000)
Economic environment - - - -
Culture and recreation - - - -
Total current expenditures 1,000,000 1,000,000 - (1,000,000)
Capital outlay - - - -
Debt service:
Principal payments - - - -
Interest expense - - - -
Total expenditures 1,000,000 1,000,000 - (1,000,000)
EXCESS OF EXPENDITURES OVER REVENUES (1,000,000) (1,000,000) 179,316 1,179,316
OTHER FINANCING SOURCES(USES):
Debt proceeds - - -
Operating transfers in - - 2,105,000 2,105,000
Operating transfers out - - -
Total operating financing sources(uses) - - 2,105,000 2,105,000
NET CHANGE IN FUND BALANCES (1,000,000) (1,000,000) 2,284,316 3,284,316
FUND BALANCE,BEGINNING OF YEAR 1,000,000 1,000,000 2,335,706 1,335,706
FUND BALANCE,END OF YEAR $ - $ - $ 4,620,022 $ 4,620,022
The notes to the financial statements are an integral part of this statement
Washington State Auditor's Office
49
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Washington State Auditor's of
50
City of Spokane Valley
Notes to the Schedule of Expenditures of Federal Awards
Note 1 - Basis of Accounting
The Schedule of Expenditures of Federal Awards is prepared on the same basis of
accounting as the City's financial statements. The accrual basis of accounting is used for
all funds except for the governmental funds which use the modified accrual basis of
accounting.
Note 2 - Program Costs
The amounts shown as current expenditures represent only the federal portion of program
costs. Actual program costs, including the City's portion, may be more than shown.
Washington State Auditor's Office
51
o' ter.
J r
ABOUT THE STATE AUDITORS OFFICE '
r►rti6
The State Auditor's Office is established in the state's Constitution and is part of the executive
branch of state government. The State Auditor is elected by the citizens of Washington and serves
four-year terms.
Our mission is to work in cooperation with our audit clients and citizens as an advocate for
government accountability. As an elected agency, the State Auditor's Office has the independence
necessary to objectively perform audits and investigations. Our audits are designed to comply with
professional standards as well as to satisfy the requirements of federal, state, and local laws.
The State Auditor's Office has 300 employees who are located around the state to deliver our
services effectively and efficiently. Approximately 65 percent of our staff are certified public
accountants or hold other certifications and advanced degrees.
Our regular audits look at financial information and compliance with state,federal and local laws on
the part of all local governments, including schools, and all state agencies, including institutions of
higher education. We also perform fraud and whistleblower investigations. In addition,we have the
authority to conduct performance audits of state agencies and local governments.
The results of our audits are widely distributed through a variety of reports, which are available on
our Web site. We continue to refine our reporting efforts to ensure the results of our audits are
useful and understandable.
We take our role as partners in accountability seriously. We provide training and technical
assistance to governments and have an extensive program to coordinate audit efficiency and to
ensure high-quality audits.
State Auditor Brian Sonntag, CGFM
Chief of Staff Ted Rutt
Chief Policy Advisor Jerry Pugnetti
Director of Administration Doug Cochran
Director of Audit Chuck Pfeil, CPA
Director of Performance Audit Linda Long, CPA, CGFM
Director of Special Investigations Jim Brittain, CPA
Director for Legal Affairs Jan Jutte
Local Government Liaison Mike Murphy
Communications Director Mindy Chambers
Public Records Officer Mary Leider
Main number (360) 902-0370
Toll-free hotline for government efficiency (866) 902-3900
Web Site www.sao.wa.gov
(SAO FACTS.DOC-Rev.07/07)