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CITY OF FOLLY BEACH, SOUTH CAROLINA

CITY OF FOLLY BEACH, SOUTH CAROLINA. OVERVIEW OF AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2009. Understanding of Audits: The Financial Statements are the Responsibility of the City GF&H’s Responsibility is to Express an Opinion Reasonable Assurance, Not Absolute Assurance

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CITY OF FOLLY BEACH, SOUTH CAROLINA

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  1. CITY OF FOLLY BEACH, SOUTH CAROLINA OVERVIEW OF AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2009

  2. Understanding of Audits: The Financial Statements are the Responsibility of the City GF&H’s Responsibility is to Express an Opinion Reasonable Assurance, Not Absolute Assurance Materiality Independence Audit Opinion is Unqualified which is the Best Opinion the City can Receive. CITY OF FOLLY BEACH – FINANCIAL AUDIT – JUNE 30, 2009

  3. GENERAL FUND: The fund balance decreased to $4.14 million (or 12%) from $4.69 million in the prior year. The unreserved and undesignated fund balance for the General Fund of $1.75 million is approximately 41% of 2009 General Fund noncapital expenditures. GFOA most recent recommendation is 17% or two months of operating expenditures. Healthy fund balance at June 30, 2009. CITY OF FOLLY BEACH – FINANCIAL AUDIT – JUNE 30, 2009

  4. Major Reasons To Maintain An Adequate Fund Balance: Cash Flow Through Second Half of Calendar Year; Property Taxes and Business Licenses are Cyclical. Significant Emergencies and Unanticipated Expenditures. Save for Planned Expenditures. Flexibility for Discretionary Funding Needs. Potential for Better Interest Rates on Debt Issues (Save the City Money). CITY OF FOLLY BEACH – FINANCIAL AUDIT – JUNE 30, 2009

  5. GENERAL FUND: Total General Fund revenues increased $0.2m to $3.9m. Major changes: Property taxes were up $337k from prior year. Included in this the reallocation of LOST revenue that will be applied to offset a corresponding credit to be applied to the 09/10 property tax levy. Intergovernmental revenues were down $150k. Licenses, Permits and Fines were up $76k. Fines and Penalties were down $39k. Investment Income was and Other Revenues were down $65k. CITY OF FOLLY BEACH – FINANCIAL AUDIT – JUNE 30, 2009

  6. GENERAL FUND: Expenditures increased $1.5 million (36%) to $5.5 million. Major changes by function: General Government increased $395k (primarily planned reserved expenditures for the community center/boat removal). Public Safety increased $221k (primarily salaries and benefits). Public works expenditures were fairly consistent with the prior year. Capital Outlay increased $885k primarily due to new fire trucks. Debt Service decreased $64k due to two principal payments being made on the Lease Purchase for the City Park in the prior year (versus one for the current year). CITY OF FOLLY BEACH – FINANCIAL AUDIT – JUNE 30, 2009

  7. CITY OF FOLLY BEACH – FINANCIAL AUDIT – JUNE 30, 2009 (GENERAL FUND)

  8. General Fund Budget to Actual Highlights for FYE 2009: Revenues were greater than budget by approximately $191k primarily due to the following: Property Taxes - $200k greater than budget, Licenses, Permits & Fees - $41k greater than budget. Intergovernmental – very close to budget. Fines and Penalties - $30k less than budget. Investment Income & Other Revenue - $20k less than budget. Expenditures were less than budget by $561k primarily due to the following: General Government (primarily the reserves) - $310k less than budget. Public Safety (primarily salaries) - $154k less than budget. Public Works (primarily salaries) - $97k less than budget. CITY OF FOLLY BEACH – FINANCIAL AUDIT – JUNE 30, 2009

  9. Other Items of Note in General Fund: Salaries and benefits totaled approximately $2.4 million or 43% of total expenditures. Capital outlay expenditures were $1.23 million or 22% of total expenditures. Professional Services were $.37 million or 7% of total expenditures. Debt service expenditures were $.22 million or 4% of total expenditures. CITY OF FOLLY BEACH – FINANCIAL AUDIT – JUNE 30, 2009

  10. Water & Sewer Operations: Net assets had no significant change ($60k increase for Water and $26k decrease for Sewer). Water operating revenues increased about $29k (3%) with operating expenses decreasing about $34k (3%). Sewer operating revenues decreased about $5k (1%) with operating expenses decreasing about $45k (7%). Cash flow showed and increase of cash/cash equivalents of $101k for Water and a decrease of $20k for Sewer. CITY OF FOLLY BEACH – FINANCIAL AUDIT – JUNE 30, 2009

  11. Other Fund Highlights: State Accommodations Tax Fund – 4% decrease in total revenues (2% in Accommodations Taxes). Local Accommodations Tax Fund - 4% increase in total revenues. Local Hospitality Tax Fund – 15% increase in total revenues. Beach Renourishment Fund – 69% decrease in total revenues due to an Army Corps of Engineers reimbursement in 2008. Tourism Fund – 13% increase in total revenues. Primary fund balances: State Accommodations Tax Fund – $202 thousand – increased $112 thousand. Beach Renourishment Fund – $1.6 million – increased $200 thousand. CITY OF FOLLY BEACH – FINANCIAL AUDIT – JUNE 30, 2009

  12. Reporting under GASB #34 (Applicable Since 2003) Presents Financial Statements of the City on a Basis Consistent with Private Companies. Management’s Discussion & Analysis (“MD&A”). Budgetary Comparison Schedules. Government-Wide Financial Statements (Full Accrual). Depreciation of all Capital Assets Except Land and Construction in Progress. Purpose is to Show Financial Condition and Activity for the City as a Whole (Statements include all Long-term Assets and Liabilities). CITY OF FOLLY BEACH – FINANCIAL AUDIT – JUNE 30, 2009

  13. CITY OF FOLLY BEACH – FINANCIAL AUDIT – JUNE 30, 2009 City-Wide (GASB #34) • Assets-$16.2 M. • $7.9 M is capital assets. • $7.1 M is cash and investments. • $1.2 M in other assets. • Liabilities-$2.8 M. • $2.2 M in long-term obligations. • Accounts Payable and Other Accrued Liabilities of $0.6 M. • Net Assets - $13.4 M. • $5.9 M Net Invested in Capital Assets. • $0.3 M Restricted by Revenue Source. • $7.2 M Unrestricted. • Revenues-$6.5 M. • Expenses-$6.2 M. • - $0.5 M is non-cash depreciation.

  14. ACCOUNTING/AUDITING UPDATE: Recent Accounting Principles: GASB #43/45 – Other Post Employment Benefit (“OPEB”) Accounting (applicable for the City for FY 2010). GASB #54 “Fund Balance Reporting and Governmental Fund Type Definitions” will become effective for the City for FY 11. CITY OF FOLLY BEACH – FINANCIAL AUDIT – JUNE 30, 2009

  15. OTHER NOTES: Two Weaknesses/Issues Noted: Lack of Payroll Segregation of Duties. Capital Assets. If the City receives significant federal funds from the American Recovery and Reinvestment Act (“ARRA”) or from other federal sources, the City will need to be prepared for the expanded compliance, audit, and reporting requirements associated with these funds. MANAGEMENT LETTER: Accounting Policy and Procedure Manual. Wire Transfers. CITY OF FOLLY BEACH – FINANCIAL AUDIT – JUNE 30, 2009

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