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2006 CAFR rl r _ _ ~=-- -~ AEn 'AESCA YIL6ACE lIAE,l; _ _ `r.: - - _ i I~ i ~ _i ~I h. _ ~ _ ~ -- -- The Village of North Palm Beach, Florida COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended September 30, 2006 . ~ ~ - , ......-t.. - ~-- -- ~ _ - ~--.4:. .~,:,- ~ , _ _ w ~ 'mss -~ ~ _ RW The Village of North Palm Beach, Florida ~ ~ ~ ~'~L~~ ~- t COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended September 30, 2006 Prepared by: Finance Department Samia Janjua Director of Finance THE VILLAGE OF NORTH PALM BEACH, FLORIDA FINANCIAL STATEMENTS SEPTEMBER 30, 2006 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal .................................................................................................................................... i List of Principal Village Officials ............................................................................................................. vii Organization Chart ................................................................................................................................... viii GFOA Certificate of Achievement for Excellence in Financial Reporting ............................................... ix FINANCIAL SECTION Independent Auditors' Report ......................................................................................................................1 Management's Discussion and Analysis ......................................................................................................3 BASIC FINANCIAL STATEMENTS: Government-wide Financial Statements: Statement of Net Assets .......................................................................................................................11 Statement of Activities ........................................................................................................................12 Fund Financial Statements: Balance Sheet - Governmental Funds ..................................................................................................14 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Assets .......................................................................................................15 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds ...........................................................................................16 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities ...................................17 Statement of Net Assets - Proprietary Fund ........................................................................................18 Statement of Revenues, Expenses, and Changes in Net Assets - Proprietary Fund ..............................................................................................................19 Statement of Cash Flows - Proprietary Fund .......................................................................................20 Statement of Fiduciary Net Assets - Fiduciary Funds .........................................................................21 Statement of Changes in Fiduciary Net Assets – Fiduciary Funds ......................................................22 Notes to Basic Financial Statements ..........................................................................................................23 REQUIRED SUPPLEMENTARY INFORMATION: Schedule of Funding Progress - General Employees Retirement Fund ...............................................58 Schedule of Employer and State Contributions ...................................................................................59 Notes to the Trend Data .......................................................................................................................60 Schedule of Revenues, Expenditures, and changes in Fund Balances - Budget and Actual - General Fund ................................................................................................61 Notes to the Budgetary Required Supplementary Information ............................................................62 THE VILLAGE OF NORTH PALM BEACH, FLORIDA FINANCIAL STATEMENTS SEPTEMBER 30, 2006 TABLE OF CONTENTS (Continued) OTHER SUPPLEMENTARY INFORMATION: Schedule of Departmental Expenditures- Budget and Actual – General Fund.....................................63 Combining Balance Sheet – Nonmajor Governmental Funds..............................................................65 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Nonmajor Governmental Funds......................................................................66 Combining Statement of Net Assets - Fiduciary Funds .......................................................................67 Combining Statement of Changes in Net Assets - Employee Retirement Funds ................................68 Combining Statement of Agency Net Assets ......................................................................................69 Combining Schedule of Changes in Agency Net Assets and Liabilities..............................................70 Schedule of Departmental Expenses – Budget and Actual – Country Club Fund................................71 STATISTICAL SECTION Net Assets by Component ....................................................................................................................72 Changes in Net Assets .........................................................................................................................73 Fund Balances, Governmental Funds ..................................................................................................75 Changes in Fund Balances, Governmental Funds ...............................................................................76 Net Assessed Value and Estimated Actual Value of Taxable Property ...............................................77 Property Tax Rates - Direct and Overlapping Governments................................................................78 Principal Property Taxpayers ...............................................................................................................79 Property Tax Levies and Collections ...................................................................................................80 Ratios of Outstanding Debt by Type....................................................................................................81 Direct and Overlapping Governmental Activities Debt........................................................................82 Demographic and Economic Statistics.................................................................................................83 Principal Employers .............................................................................................................................84 Full-Time Equivalent Village Government Employees by Function...................................................85 Operating Indicators by Function/Program .........................................................................................86 Capital Asset Statistics by Function/Program......................................................................................87 REQUIRED REPORTS Independent Auditors' Report on Internal Control Over Financial Reporting And on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards..................................88 Report on Compliance with Requirements Applicable to Each Major Program And On Internal Control Over Compliance in Accordance with OMB Circular A-133..................90 Schedule of Expenditures of Federal Awards ......................................................................................92 Schedule of Findings and Questioned Costs ........................................................................................93 Management Letter in Accordance with the Rules of the Auditor General of the State of Florida ................................................................................................................................95 INTRODUCTORY SECTION THE VILLAGE OF NORTH PALM BEACH VILLAGE HALL, 501 U.S. HIGHWAY 1, North Palm Beach, FL 33408 Telephone: (561) 841-3380 FAX (561) 848-3344 March 22, 2007 The Honorable Mayor and Members of the Village Council Village of North Palm Beach North Palm Beach, Florida The Finance Department and Village Manager's Office are pleased to submit the Comprehensive Annual Financial Report for the Village of North Palm Beach, Florida for the fiscal year ended September 30, 2006. This report is published to provide the Village Council, Village staff, our citizens, our lenders, and other interested parties with detailed information concerning the financial condition and activities of the Village government. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the Village. To the best of our knowledge and belief, the enclosed data is accurate in all material respects, and is organized in a manner designed to fairly present the financial position and results of operations of the Village as measured by the financial activity of its various funds. We also believe that all disclosures necessary to enable the reader to gain the maximum understanding of the Village's financial affairs have been included. THE REPORT This report is presented in three sections: Introductory, Financial and Statistical. The introductory section includes this transmittal letter, a listing of the Village Officials, and an organizational chart of the Village. The financial section includes Management's Discussion and Analysis (MD&A), basic financial statements, required supplementary information, and combining and individual fund statements and schedules, as well as the independent auditor's report on the basic financial statements. The MD&A is a narrative introduction, overview, and analysis to accompany the basic financial statements. This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The Village of North Palm Beach's MD&A can be found immediately following the report of the independent auditors. The statistical section includes financial and demographic information, usually presented on a multi- year basis; that is relevant to a financial statement reader. The financial section described above is prepared in accordance with generally accepted accounting principles for governments as prescribed by the Governmental Accounting Standards Board (GASB) and other professional associations, as applicable. i VILLAGE PROFILE The Village The Village of North Palm Beach is primarily a residential community, having been incorporated as a political subdivision of the State of Florida in 1956. The registered population of the Village is approximately 13,000 which increase to approximately 18,000 during the winter months by residents who list their northern homes as their official place of residence. Residents are generally in the middle to upper income brackets. Located in the northeastern quadrant of Palm Beach County, Florida, the Village has an abundant amount of waterfront property created by a number of lakes, canals, and the Atlantic Ocean. The governing body of the Village consists of a five member Village Council, each of whom is elected to two-year overlapping terms. The Mayor is selected by majority vote of the Council and serves for a term of one year. Day to day affairs of the Village are under the leadership of a Village Manager who is appointed by the Council. FINANCIAL DATA Financial Reporting System and Budgetary Controls The Village's financial records for its general governmental operations are maintained on the modified accrual basis, which means that revenues are recorded when available and measurable, and expenditures are reported when goods and services are received and the related liabilities are incurred; depreciation expense is not included. Financial reporting for its Enterprise Fund (i.e., the Country Club operation) is presented using the full accrual basis of accounting required by GAAP for its annual financial report. The Country Club annual budget is adopted using a modified accrual basis of accounting (identical to the general government operations mentioned above) which is consistent with how general ledger financial records are maintained throughout the year by the Village administration. In developing and evaluating the Village's financial and accounting system, consideration is given to the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding: (a) the safeguarding of assets against loss from unauthorized use or disposition; and (b) the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that: (a) the cost of a control should not exceed the benefits likely to be derived; and (b) the evaluation of costs and benefits requires estimates and judgments by management. All internal control evaluations occur with the above framework. We believe that the Village's internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. The Village of North Palm Beach maintains budgetary controls through the annual budget public hearing and approval process of GAAP based budgets. The formal budget approval for each fiscal year is accomplished in a manner to comply with Florida State Statute 200.065, commonly referred to as Truth-in-Millage (TRIM). ii Budget amendments require Village Council approval at public meetings. Budgetary control is maintained at the department level within Fund by the encumbrance of estimated purchase amounts prior to the release of purchase orders to vendors. Purchase orders, which result in an overrun of approved departmental appropriations within fund, are not released until additional appropriations are made available. Encumbered amounts lapse at year-end; however they are re-appropriated as part of the following year’s budget. ECONOMIC OUTLOOK Property Values The Village obtains a major portion of its annual general fund financial resources (56%) from ad valorem property taxes. Gross assessed property values have increased substantially over the past four years (67% between 2002 and 2006) rising $225 million dollars, or 15% in 2006 alone, to a total of $1,661,199,249. The Village anticipates a slower pace of planned new growth since most vacant property within the municipal limits has already been developed. The Village also anticipates a more moderate increase in annual property values from that of the previous year, resulting primarily from the sale, transfer and redevelopment of existing properties.There is an obvious softening of the real-estate market significantly impacting both home values and sales. Political discussions regarding portability of Florida’s “Save Our Homes” property values and other alternative taxations make future forecasts of Village property tax valuation uncertain.The Village will continue to pursue annexation of surrounding unincorporated areas that compliment and enhance the services and values of our existing community. The focus of Village annexation efforts will be toward providing exemplary municipal services that are revenue “neutral” to both the annexed areas and to the Village. Personnel Costs The Village will continue to face challenges primarily in areas of increased employee personnel costs for both salaries and benefits as well as increased insurance and energy costs. In past years, several retirement plan amendments were implemented by the Village and then followed by significant salary adjustments that magnified the impact and cost of the retirement changes. The combination of these changes resulted in significant increases to - and continuing requirements for - annual Village pension costs. The Village annual contribution rates for its General Employee Plan have increased from 9% in 1999… to 16% in 2004… to 23% in 2006 but have decreased to 15.5% for 2007. In the Police Fire Plan, contribution rates increased from 6% in 1999… to 16% in 2004… to 20% in 2006 but also decreased in year 2007 to 16%. Significant increases in annual health insurance costs have also been encountered during the past few years. In 2005, the Village transitioned away from its self-insured health program to a contractual fixed fee Health/Dental program. This new health program more accurately reflects and contains annual Village health costs while re-establishing a cost sharing partnership with employees by adjusting the amount of their annual contribution for health coverage. Agreements for all three of the Village’s collective bargaining units (police, fire, and public service workers) expired on September 30, 2006 but have since been successfully negotiated and ratified through vote of the respective Unions and Village Council. All three collective bargaining agreements were transitioned from single to three year contracts thus giving the Village a more accurate means by which to calculate future year salaries and benefit costs. The impacts of personnel salaries and benefits in the coming years will have a large and continuing effect on future Village financing and service priorities in areas of staffing, public services and public projects. iii INITIATIVES AND FUTURE PROJECTS Country Club Tennis Facility The Village Country Club Tennis Facility has passed its expected useful life. Council has provided for a “temporary” building (trailer) while engaging an architect to design and prepare the necessary construction documents for a permanent facility. Historically, tennis is a revenue neutral component of the Country Club budget. Given the current financial environment and liabilities of the newly renovated golf course, other options, both managerial and financial will be discussed during this upcoming budgetary process. An option would be to relocate the tennis component from the Country Club enterprise fund to the general fund under Parks and Recreation. Tennis activities customarily fall within Parks & Recreational departments in municipal entities. Under this option the Village would be eligible to seek outside grant funding for structural and non-structural improvements, an option not currently available to the Village under the enterprise fund. Should the decision be made to stay with the status quo, a financial advisor and loan legal counsel can assist in obtaining loan financing for this project. The construction loan’s annual repayment will be paid by the Club’s annual golf and tennis revenues over the 15- 30 year useful life of the new facility. Groundbreaking for the permanent facility is anticipated in early 2008. Public Safety North Substation The Village continues to move forward with the final stages of design of the new Public Safety sub-station located on the newly acquired parcel of land along Carolinda Drive. Both the small scale comprehensive plan and rezoning have been completed. Once the building’s engineering design is completed the construction project will be placed out for bid with hopes of ground breaking sometime in the winter of 2007. Public Safety Radio Communication System The Village Public Safety VHF radio communication system is both old and antiquated. The current system does not provide the basic interagency capabilities which are essential in a metropolitan environment. The need for communications interoperability was never more exemplified as during the Gulf Coast hurricane that crippled municipal infrastructure requiring responses from bordering public safety agencies. The migration to the 800 MHz system is a Palm Beach County, State of Florida and Federal initiative. North Palm Beach is currently a member of the Countywide Communications Consortium which has also made way for supplementary funding through revenue from traffic citations. Northlake Boulevard Corridor Task Force An initial $500,000 grant from the State DOT allowed the Village to award a local company the bid for construction of Phase 1 of the Northlake Blvd. streetscape improvement. This first phase provided sidewalk widening and median / swale area landscaping improvements from US1 westward to Southwind Drive in the Village. Replacement of deficient vegetation was completed in February 2007 with only minor aesthetic issues to be addressed; once this is accomplished a final inspection can be conducted. The Task Force will begin to work on the implementation of Phase II in 2008. Phase II extends from Southwind Drive westward to Alternate A1A. iv Prosperity Farms Roadway Improvements The Prosperity Farms Road improvement project was funded by a County grant to the Village. The construction project was awarded by the Village to a Broward County firm in June 2005. Work on this project was impacted by the strike of Hurricane Wilma in October 2005. Substantial completion of this roadway project was achieved in December 2005 but the contractor experienced difficulties in both providing and installing the required landscaping materials as specified. This project was expected to be competed during 2006 however contractual disputes have placed the Village in litigation. It is the hope and desire to mediate those disputes and complete this improvement project prior to the end of fiscal year 2007. Earman River Water Supply Line The existing irrigation system for the Country Club and Golf Course, U.S. 1 Median and Village Parks are supplied by the Earman River. This supply line runs from the Earman River to the th Lake on the 13 Fairway and is beginning to show signs of deterioration. Your Village Staff has obtained estimates for replacing a portion of the line that has shown signs of leaking. The initial repairs should be considered in this year’s budget (2007-2008) with the remaining line replaced over the next few years. Canal Dredging One of the noted development signatures of the Village is its intricate network of canals and waterways. The canals and waterways enhance the property values of the Village and give it character as a boating community. The canals were built in the 1950's as part of the original development of North Palm Beach. However, the canals have not been maintained by the Village in that length of time, and, as a result, have silted up and created navigational problems for boaters. In order to alleviate this problem, the Village has been going through an extensive dredging program to upgrade the quality of the canals and the North Palm Beach waterways. The dredging program was developed and implemented as a four-phase program with the first and second phases being completed in 2004 and phase three reaching completion in 2005. Federal and State environmental agencies are working diligently to resolve some inter-agency divergence which has significantly stalled the Village’s last Phase four permit application. Lighthouse Bridge Refurbishment: Public Works Staff has worked diligently with Village Engineer Keith Jackson (SFRN) and Allen Gerwig (Structural Engineer contracted by SFRN) on needed repairs to the Lighthouse Bridge. Technical specifications for the required work should be forthcoming and the required Bid manual prepared and sent out for contractor proposals. This item was anticipated and partial funding appropriated during fiscal year 2006/2007. Parks and Recreation/Village Facility Improvement Grants The Village has been awarded grants for projects at Anchorage Park, Village Pool and Lakeside Park. The Anchorage Park Improvements project has received a total of $945,450 in grant funds to which the Village will match $415,150 for a total of $1,360,600. The grants obtained are from Florida Recreation Development Assistance Program ($400,000), Transportation Enhancement Program ($500,000), and Urban & Community Forestry ($45,450). The grant project funds received for Lakeside Park total $194,990 and will include a Village match of $185,000 for a total of $379,990. Grant funds have been received from FIND Waterways Assistance Program v THE VILLAGE OF NORTH PALM BEACH, FLORIDA PRINCIPAL VILLAGE OFFICIALS SEPTEMBER 30, 2006 Title Name Mayor David B. Norris Vice Mayor Edward M. Eissey President Pro Tem William Manuel Council Member Darryl C. Aubrey Council Member Charles R. O’Meilia Interim Manager Chief Jimmy Knight Director of Finance Samia Janjua Village Clerk Melissa Teal vii FINANCIAL SECTION INDEPENDENT AUDITORS’ REPORT The Honorable Mayor and Members of the Village Council The Village of North Palm Beach, Florida 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 Village of North Palm Beach, Florida as of and for the year ended September 30, 2006, which collectively comprise the Village’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Village of North Palm Beach, Florida's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards 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 financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Village of North Palm Beach, Florida as of September 30, 2006, and the respective changes in financial position, thereof for the year then ended in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued our report dated February 28, 2007, on our consideration of the Village of North Palm Beach, Florida’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, 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 withGovernment Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Management’s Discussion and Analysis on pages 3 through 10 and the required supplementary information on pages 58 through 62 are not a required part of the basic financial statements but are supplementary information required by U.S. generally accepted accounting principles. 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 conducted for the purpose of forming opinions on the financial statements that collectively comprise the Village of North Palm Beach, Florida’s basic financial statements. The introductory section, other supplemental information, and statistical data listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements of the Village of North Palm Beach, Florida. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements of the Village of North Palm Beach, Florida. The schedule of expenditures of federal awards and other supplemental information have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. Ò±©´»²ô Ø±´¬ô ú Ó·²»®ô Ðòß February 28, 2007 2 MANAGEMENT'S DISCUSSION AND ANALYSIS The Village of North Palm Beach, Florida (Village) Administration offers readers of the Village's financial statements this narrative overview and analysis of the financial activities of the Village for the fiscal year ended September 30, 2006. Please read it in conjunction with the accompanying transmittal letter beginning on page i, and the accompanying basic financial statements. FINANCIAL HIGHLIGHTS (in millions) September 30,Increase/Statement 20062005(1)(Decrease)Page # Total net assets$17.83$13.89$3.9411 Unrestricted net assets available for future use$7.55$5.86$1.6911 Governmental net assets$15.42$11.66$3.7611 Total revenues from all sources$22.48$21.01$1.4712 Governmental revenues$20.13$18.34$1.7912 Total cost of all Village programs$18.53$17.10$0.7812 Governmental revenues over (under) expenses$3.76$2.94$0.8213 General fund revenues over (under) expenses$2.67$2.77($0.10)16 General fund unreserved fund balance$7.02$5.93$1.0914 As a percent of general fund expenditures41.96%38.11%3.85% Country Club revenues over (under) expenses$0.19$0.06$0.1319 Change in total long-term debt for the Village$3.92($0.65) (1) Throughout this narrative, amounts for fiscal year ended September 30, 2005, have been restated for the effects of the prior period adjustments discussed in Note 16, on page 56. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The three components of the financial statements are: (1) Government-wide financial statements that include the Statement of Net Assets and the Statement of Activities. These statements provide information about the activities of the Village as a whole. (2) Fund financial statements tell how these services were financed in the short term, as well as what remains for future spending. Fund financial statements also report the Village's operations in more detail than the government wide statements by providing information about the Village's most significant funds. (3) Notes to the basic financial statements expand upon information reported in the government- wide and governmental fund statements. REPORTING THE VILLAGE AS A WHOLE Statement of Net Assets and the Statement of Activities (Government-wide) A frequently asked question regarding the Village's financial health is whether the year's activities contributed positively to the overall financial well being. The Statement of Net Assets and the Statement of Activities report information about the Village as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current 3 These two statements report the Village's net assets and changes therein. Net assets, the difference between assets and liabilities, are one way to measure the Village's financial health, or financial position. Over time, increases or decreases in net assets are an indicator of whether the financial health is improving or deteriorating. The Statement of Net Assets and the Statement of Activities present information about the following: Governmental activities - All of the Village's basic services are considered to be governmental activities, including general government, community development, public safety, public services, library, and recreation. Property taxes, sales taxes, utility taxes, and franchise fees finance most of these activities. Proprietary activities/Business type activities - The Village charges a fee to customers to cover all or most of the cost of the services provided. The Village's Country Club is reported in this category. REPORTING THE VILLAGE'S MOST SIGNIFICANT FUNDS Fund Financial Statements The fund financial statements provide detailed information about the most significant funds - not the Village as a whole. Some funds are required to be established by State law. However, management establishes other funds, which aid in the management of money for particular purposes or meet legal responsibilities associated with the usage of certain taxes, grants, and other money. The Village's three kinds of funds, governmental, proprietary, and fiduciary, use different accounting approaches as explained below. Governmental funds - Most of the Village's basic services are reported in governmental funds. Governmental funds focus on how resources flow in and out, with the balances remaining at year- end that are available for spending. These funds are reported using an accounting method called the modified accrual accounting method, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Village's general government operations and the basic services it provides. Governmental fund information shows whether there are more or fewer financial resources that can be spent in the near future to finance the Village's programs. The basic governmental fund financial statements can be found on pages 11-17 of this report. Proprietary funds - The Village's only proprietary fund is the Country Club fund, which charges customers for the services it provides. These services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Assets and the Statement of Activities. The basic proprietary fund financial statements can be found on pages 18-20 of this report. Fiduciary funds - Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the Village's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on pages 21-22 of this report. Special Revenue funds - Special Revenue funds are used to account for the proceeds of specific revenue sources that are restricted to expenditure for specified purposes. The Village has four 4 funds in this category: Public Safety Fund, Northlake Boulevard Fund, On-Behalf Pension Contribution Fund and the Recreation Fund. The basic fund financial statements can be found on pages 14-16 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the Village, assets exceeded liabilities by $17.8 million at the close of the most recent fiscal year. A significant portion of the Village's net assets (56.7%) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment); less any related debt used to acquire those assets that is still outstanding. The Village uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Village's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Village of North Palm Beach Net Assets (In Thousands) GovernmentalBusiness ActivitiesActivitiesTotal 200620052006200520062005 Assets: Current and other assets9,138$ 7,591$ 2,658$ 453$ 11,796$ 8,044$ Capital assets13,270 11,936 6,690 2,412 19,960 14,348 Total assets22,408 19,527 9,348 2,865 31,756 22,392 Liabilities: Current liabilities859 933 1,613 122 2,472 1,055 Long-term debt outstanding6,127 6,932 5,320 515 11,447 7,447 Total liabilities6,986 7,865 6,933 637 13,919 8,502 Net assets: Invested in capital assets, net of debt8,119 5,905 1,999 1,958 10,118 7,863 Restricted160 168 160 168 Unrestricted7,143 5,589 416 270 7,559 5,859 Total net assets15,422$ 11,662$ 2,415$ 2,228$ 17,837$ 13,890$ Governmental Activities Governmental activities increased the Village's net assets by $3.76 million, thereby accounting for 95% of the total increase in the net assets of the Village. An increase in Governmental Capital Assets ($1.3m) is due to the reclassification of pool assets and an increase in capital improvement projects. Key elements of this increase are as follows: 5 Village of North Palm Beach Changes in Net Assets (In Thousands) GovernmentalBusiness ActivitiesActivitiesTotal 200620052006200520062005 Revenues: Program revenues: Charges for services2,392$ 2,020$ 2,167$ 2,658$ 4,559$ 4,678$ Operating grants and contributions998 1,393 68 1,066 1,393 Capital grants and contributions462 462 General revenues: Property taxes10,882 10,071 10,882 10,071 Local option gas taxes307 320 307 320 Utility service taxes2,001 1,955 2,001 1,955 Sales and use taxes1,416 957 1,416 957 Franchise taxes1,151 890 1,151 890 Grants and contributions not restricted to specific programs421 421 Investment earnings477 197 113 13 590 210 Miscellaneous53 112 53 112 Gain (loss) on asset disposals(7) (7) Total revenues $ 18,33620,132$ 2,348$ 2,671$ 22,480$ 21,007$ The Village's programs include General Government, Public Safety, Public Services, and Leisure Services. Each program's net cost (total cost, less revenues generated by the activities) is presented below. The net cost shows the extent to which the Village's general taxes support each of the Village's programs. 6 Village of North Palm Beach Governmental Activities (In Thousands) GovernmentalBusiness ActivitiesActivitiesTotal 200620052006200520062005 Expenses: Program expenses: General government1,777$ 1,637$ $ $ 1,777$ 1,637$ Public safety7,0366,039 7,036 6,039 Public services4,1314,665 4,131 4,665 Community development and planning657657 Leisure services2,5632,062 2,563 2,062 Reserves and other2843 2 843 Interest on long-term deb242151 242 151 t Country Club2,125 2,570 2,125 2,570 Total expenses16,408 15,397 2,125 2,570 18,533 17,967 Transfers36 (36) Increase (decrease) in net assets3,760 2,939 187 101 3,947 3,040 Net assets - beginning of year11,662 8,723 2,228 2,127 13,890 10,850 Net assets - end of year15,422$ 11,662$ 2,415$ 2,228$ 17,837$ 13,890$ 20062005 Total CostNet CostTotal CostNet Cost of Servicesof Servicesof Servicesof Services General government1,777$ (1,619)$ 1,637$ (1,352)$ Public safety7,036 (6,337)6,039 (5,653) Public services4,131 (2,840)4,665 (2,015) Community development and planning657 518 Leisure services2,563 (2,034)2,062 (1,971) Reserves and other2 (2)843 (843) Interest on long-term debt242 (242)151 (151) $ (12,556)16,408$ 15,397$ (11,985)$ The cost of all governmental activities this year was $16.4 million. Costs for the Public Safety Department increased by $1.0 million due to an increase in personnel costs. Costs for the Public Services Department decreased by $0.50 million due to department reclassification (creation of the Community Development & Planning Department) and more street maintenance in the prior year. The Leisure Services department experienced an increase of $0.50 million due to the transfer of the pool from the 7 Business-Type Activities to the Leisure Services Department. Also, the Reserves & Other decreased by $0.8 million due to the fact that there were less hurricane related expenses in the current year. As shown on the Statement of Activities, those who directly benefited from the programs paid for $2.39 million of this cost and $16.32 million was financed through general revenues. The Village added $3.76 million to fund balance during 2006. Business Type Activities Business Type Activities were affected due to the transfer of the Pool to the General Fund and the Golf Course Renovation. An increase in the Business-type activities Capital Assets ($4.3m) is due to the Golf Course Renovation Construction Project. Also, the Business-type activities Long-Term Debt increased by $4.8m due to the financing for the Golf Course Renovation Project. Charges for Services decreased from the prior year by $0.49m and the expenses decreased by $0.42m due to the closure of the Golf Course. Net assets of the Proprietary Fund (Country Club) at September 30, 2006, were $2.41 million. Net assets increased by $187,441. FINANCIAL ANALYSIS OF THE VILLAGE'S FUNDS As noted earlier, the Village uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental Funds - The focus of the Village's governmental funds is to provide information on near- term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Village's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the Village's general fund reported an ending fund balance of $7.33 million, a $1.20 million increase over the 2005 restated fund balance of $6.13 million. Approximately 96% of the combined ending fund balance ($7.82 million) constitutes unreserved fund balance, which is available for spending at the government's discretion. The remainder of fund balance ($0.30 million) is reserved to indicate that it is not available for new spending because it has already been committed for a variety of other restricted purposes. The general fund is the chief operating fund of the Village. At the end of the current fiscal year, unreserved fund balance of the general fund was $7.02 million, while total fund balance was $7.33 million. As a measure of the general fund's liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance is 42% of total general fund expenditures, while total fund balance represents 44% of that same amount. The capital projects fund has a total fund balance of $397,233, all of which is reserved for capital outlay projects. The net increase in fund balance during the current year in the capital projects fund was $0.38 million, and is the result of transfers in from the general fund ($1.1 million) that were greater than expenditures for capital outlay/maintenance ($0.69 million). General Fund Budgetary Highlights Differences between the original budget and the final amended budget were $1,662,628 and can be briefly summarized as follows: Funding for capital projects ($1,290,000) Fiscal Year 2004-2005 Open Purchase Order Carryover ($372,628) 8 CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The capital assets of the Village are those assets that are used in the performance of Village functions. Capital assets include equipment, buildings, land, and park facilities etc. The Village has elected to retroactively apply the capitalization requirements of GASB Statement No 34 to major general infrastructure assets acquired in fiscal years ending after June 30, 1980, or that were significantly reconstructed or improved during that multiyear period. The Village's investment in capital assets for its governmental and business-type activities as of September 30, 2006 and 2005 amounts to $19.96 million and $14.35 million as restated (net of accumulated depreciation). The total increase in the Village's investment in capital assets for the current fiscal year was $5.61 million. Village of North Palm Beach Capital Assets (In Thousands) GovernmentalBusiness ActivitiesActivitiesTotal 200620052006200520062005 Land2,151$ 2,056$ 1,051$ 1,051$ 3,202$ 3,107$ Construction in progress2,530 1,469 4,382 6,912 1,469 Buildings and improvements11,107 10,441 1,5001,477 12,607 11,918 Improvements other than buildings6,375 5,943 407574 6,782 6,517 Improvements - golf course1,6041,604 1,604 1,604 Furniture, fixtures and equipment741757 741 757 Total assets22,163 19,909 9,685 5,463 31,848 25,372 Less accumulated depreciation(8,893) (7,973) (2,995)(3,051) (11,888) (11,024) Net assets13,270$ 11,936$ 6,690$ 2,412$ 19,960$ 14,348$ Additional information on the Village's capital assets can be found in Note 5 on page 38 of this report. 9 Debt Currently, the Village uses debt financing on an as needed basis each year. At the end of the current fiscal year, the Village had total debt of $10.4 million. None of this amount comprises debt backed by the full faith and credit of the government. Village of North Palm Beach Outstanding Debt (In Thousands) GovernmentalBusiness ActivitiesActivitiesTotal 200620052006200520062005 Loans payable4,942$ 5,755$ 5,186$ 354$ 10,128$ 6,109$ Capital leases209 276 72 100 281 376 Total5,151$ 6,031$ 5,258$ 454$ 10,409$ 6,485$ Additional information on the Village's debt can be found in Note 6 on page 40-45 of this report. NEXT YEAR'S BUDGET AND ECONOMIC FACTORS The Village’s Unappropriated Fund Balance is viewed by the Administration as a measurement of Village financial stability. Unreserved general fund balance increased to $7.02 million during the current 2006 fiscal year. The Village is now ready to address the economic challenges anticipated in the next few years. This would include a further lowering of the millage rate which was decreased from 6.80 mills in 2005-06 to 6.30 in 2006-07. The Village Council and management maintained an awareness of balancing the many levels of municipal service with the valuable and scarce financial resources in developing the Village’s fiscal year 2006-2007 budgets. The budgetary goals were to ensure quality of life in the Village, to improve the utilization and operation of the Country Club for the benefit of all Village residents, to enhance the spirit and participation of the community, to improve the overall appearance of the Village and to improve the operation and effectiveness of Village departments. Continuing increases in the cost of employee compensation and benefits is a major economic challenge that the Village Administration is addressing. CONTACTING THE VILLAGE'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the Village's finances and to show the Village's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Village's Finance Department, at the Village of North Palm Beach, 501 U.S. Highway 1, North Palm Beach, Florida 33408. 10 BASIC FINANCIAL STATEMENTS THE VILLAGE OF NORTH PALM BEACH, FLORIDA Statement of Net Assets September 30, 2006 GovernmentalBusiness-type ActivitiesActivitiesTotal Assets Cash and cash equivalents8,245,879$ 1,190,974$ 9,436,853$ Accounts receivable523,159 69,950 593,109 Inventories12,152 20,267 32,419 Prepaids3,479 3,479 Restricted assets: Cash and cash equivalents160,168 1,376,495 1,536,663 Net pension assets193,274 193,274 Capital assets: Nondepreciable4,680,920 5,433,125 10,114,045 Depreciable (net of depreciation)8,588,842 1,256,814 9,845,656 Total assets 9,347,62522,407,873 31,755,498 Liabilities Accounts payable331,460 89,383 420,843 Accrued liabilities347,917 347,917 Accrued interest payable42,623 96,411 139,034 Deposits17,500 17,500 Deferred revenue136,785 600,171 736,956 Payable from restricted assets Retainage payable809,511 809,511 Noncurrent liabilities: Due within one year1,412,149 210,915 1,623,064 Due in more than one year4,714,546 5,108,746 9,823,292 Total liabilities 6,932,6376,985,480 13,918,117 Net Assets Invested in capital assets, net of related debt8,118,773 1,999,123 10,117,896 Restricted for: Library95,293 95,293 Recreation28,500 28,500 Public safety34,491 34,491 Other purposes1,884 1,884 Unrestricted7,143,452 415,865 7,559,317 Total net assets $ 2,414,98815,422,393$ 17,837,381$ See notes to the financial statements. 11 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Statement of Activities For the Year Ended September 30, 2006 Charges for Functions/ProgramsExpensesActivities Government: Governmental activities General government1,777,300$ 158,160$ Public safety7,036,117 388,671 Public services4,131,500 140,923 Community development and planning657,111 1,175,252 Leisure services2,562,627 528,983 Other government2,049 Interest on long-term debt241,996 Total governmental activities16,408,7002,391,989 Business-type activities - country club2,124,9272,167,089 Total business-type activities2,124,9272,167,089 Totalgovernment$ 4,559,07818,533,627$ 12 Program RevenuesNet Expense (Revenue) and OperatingCapitalChanges in Net Assets Grants andGrants and Governmental Business-type ContributionsContributionsActivitiesActivitiesTotal $ $ (1,619,140)$ $ (1,619,140)$ 310,374(6,337,072) (6,337,072) 688,199462,394(2,839,984) (2,839,984) 518,141518,141 (2,033,644)(2,033,644) (2,049)(2,049) (241,996)(241,996) 998,573462,394(12,555,744)(12,555,744) 68,883111,045111,045 68,883111,045111,045 $ 462,3941,067,456$ (12,555,744)$ 111,045$ (12,444,699)$ General Revenues: Taxes: Property taxes10,881,501$ 10,881,501$ Local option gas taxes307,043 307,043 Utility service taxes2,001,164 2,001,164 Franchise taxes1,150,974 1,150,974 Sales and use taxes1,415,917 1,415,917 Investment income477,420 112,841 590,261 Miscellaneous53,263 53,263 Loss on disposal of capital assets(7,228) (7,228) Transfers36,445 (36,445) Total general revenues 76,39616,316,499 16,392,895 Change in net assets 187,4413,760,755 3,948,196 Net assets, beginning of year, as restated 2,227,54711,661,638 13,889,185 Net assets, end of year $ 2,414,98815,422,393$ 17,837,381$ See notes to the financial statements. 13 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Balance Sheet Governmental Funds September 30, 2006 NonmajorTotal Caital Governmenta Governmenta pll GeneraProectsFundsFunds lj Assets Cash and cash equivalents7,443,859$ 402,020$ 400,000$ 8,245,879$ Accounts receivable523,159 523,159 Inventories12,152 12,152 Prepaids3,479 3,479 Restricted cash and cash equivalents160,168 160,168 Total assets8,142,817$ 402,020$ 400,000$ 8,944,837$ Liabilities and fund balances Liabilities Accounts payable326,673$ 4,787$ 331,460$ Accrued liabilities347,917 347,917 Deferred revenue136,785 136,785 Total liabilities811,3754,787816,162 Fund balances Reserved for: Reserved for inventories and prepaids15,63115,631 Reserved for encumbrances133,037133,037 Reserved for restricted assets160,168160,168 Unreserved Special revenue funds400,000400,000 Undesignated7,022,606397,2337,419,839 Total fund balances7,331,442397,233400,0008,128,675 Total liabilities and fund balances8,142,817$ 402,020$ 400,000$ 8,944,837$ See notes to the financial statements. 14 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Assets Governmental Funds September 30, 2006 Fund balances - total governmental funds8,128,675$ 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: Governmental capital assets22,162,446$ Less accumulated depreciation(8,892,684) 13,269,762 Net pension assets related to defined benefit pension plans are not available to pay for current-period expenditures and, therefore, are not reported as assets in the governmental funds.193,274 Long-term liabilities, including notes and bonds payable, are not due and payable in the current period and therefore are not reported in the governmental funds. Long term liabilities at year-end consist of: Accrued interest payable(42,623) Notes payable(4,941,765) Capital leases payable(209,224) Accrued compensated absences(975,706) (6,169,318) Net assets of governmental activities15,422,393$ See notes to the financial statements. 15 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended September 30, 2006 NonmajorTotal Capital GovernmentalGovernmental GeneralProjectsFundsFunds Revenues Taxes14,340,682$ $ $ 14,340,682$ Licenses and permits1,128,658 1,128,658 Intergovernmental2,161,412 752,645 2,914,057 Charges for services1,003,660 1,003,660 Fines and forfeitures165,496 165,496 Interest477,421 477,421 Miscellaneous130,514 130,514 Total revenues19,407,843 752,645 20,160,488 Expenditures Current General government1,648,131 1,648,131 Public safety6,204,327 290,251 6,494,578 Public service4,180,575 4,180,575 Community development & planning651,331 651,331 Leisure services - recreation2,209,650 2,209,650 Other government2,049 2,049 Capital outlay760,859 694,124 462,394 1,917,377 Debt service Principal payments879,527 879,527 Interest paid on debt199,373 199,373 Total expenditures16,735,822 694,124 752,645 18,182,591 Excess (deficiency) of revenues over (under) expenditures2,672,021 (694,124) 1,977,897 Other financing sources (uses) Transfers in1,071,529 400,000 1,471,529 Transfer out(1,471,529) (1,471,529) Total other financing sources (uses)(1,471,529) 1,071,529 400,000 Net change in fund balances1,200,492 377,405 400,000 1,977,897 Fund balances Beginning of year, as restated6,130,950 19,828 6,150,778 End of year7,331,442$ 397,233$ 400,000$ 8,128,675$ See notes to the financial statements. 16 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities For the Year Ended September 30, 2006 Net change in fund balances - total governmental funds1,977,897$ Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of capital assets is allocated over their estimated useful lives and reported as depreciation expense: Expenditures for capital assets2,301,895 Transfer of assets from country club36,445 Less: asset dispositions(27,478) Less: current year depreciation(976,741) 1,334,121 Repayment of long-term debt is reported as an expenditure on the governmental funds, but a reduction of long-term liabilities in the statement of net assets.879,527 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. Accrued interest expense(42,623) Change in long-term compensated absences(74,691) (117,314) Expenses that do not use current financial resources are not reported on the governmental funds but are included in the statement of activities. Change in net pension asset of defined benefit pension plans(313,476) Change in net assets3,760,755$ See notes to the financial statements. 17 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Statement of Net Assets Proprietary Fund September 30, 2006 Enterprise Assets Current assets Cash and cash equivalents1,190,974$ Accounts receivable69,950 Inventories20,267 Restricted assets Cash and cash equivalents1,376,495 Total current assets2,657,686 Non-current assets Land, buildings, and equipment, net6,689,939 Total assets9,347,625 Liabilities Current liabilities Accounts payable and other liabilities89,383 Accrued interest96,411 Deposits17,500 Deferred income600,171 Compensated absences - current portion31,091 Capital leases - current portion19,625 Loans payable - current portion160,199 Payable from restricted assets Contracts payable809,511 Total current liabilities1,823,891 Non-current liabilities Compensated absences30,770 Capital leases52,197 Loans payable5,025,779 Total non-current liabilities5,108,746 Total liabilities6,932,637 Net Assets Invested in capital assets, net of related debt1,999,123 Unrestricted415,865 Total net assets2,414,988$ See notes to the financial statements. 18 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Fund For the Year Ended September 30, 2006 Enterprise Operating revenue Greens fee/cart rentals/membership fees1,632,232$ Tennis revenues93,957 Golf shop revenues115,685 Driving range revenues168,389 Restaurant revenues110,000 Operating grants68,883 Miscellaneous46,826 Total operating revenues2,235,972 Operating expenses Golf course maintenance expenses888,221 Clubhouse grounds expenses175,290 Tennis expenses115,744 Golf shop expenses425,259 Food & beverage expenses28,386 Administrative and general253,791 Insurance23,949 Depreciation174,719 Total operating expenses2,085,359 Operating income (loss)150,613 Nonoperating revenues (expenses) Interest revenue112,841 Interest expense(39,568) Transfers out(36,445) Total nonoperating revenues (expenses)36,828 Change in net assets187,441 Net assets - beginning, as restated2,227,547 Net assets - ending2,414,988$ See notes to the financial statements. 19 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Statement of Cash Flows Proprietary Fund For the Year Ended September 30, 2006 Enterprise Cash flows from operating activities: Receipts from customers2,812,141$ Payments to suppliers for goods or services(1,682,855) Payments to employees for services(252,454) Net cash provided (used) by operating activities876,832 Cash flows from capital and related financing activities: Proceeds from debt issuance4,893,673 Principal paid on long term debt(90,004) Interest paid on debt(16,932) Acquisition of capital assets(3,606,513) Net cash provided (used) by capital and related financing activities1,180,224 Cash flows from investing activities: Interest and dividends on investments112,841 Net increase (decrease) in cash and cash equivalents2,169,897 Cash and cash equivalents at beginning of year397,572 Cash and cash equivalents at end of year2,567,469$ Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income$ 150,613 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation 174,719 Change in assets and liabilities Increase in accounts receivable(34,502) Increase in accounts payable and other current liabilities584,665 Increase in compensated absences1,337 Total adjustments726,219 Net cash provided by operating activities876,832$ Non cash capital and financing activities: Construction contracts payable809,511$ Assets transferred to governmental funds36,445$ Book value of assets disposed1,190,974$ See notes to the financial statements. 20 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Statement of Fiduciary Net Assets Fiduciary Funds September 30, 2006 Employee RetirementAgency FundsFunds Assets Cash and cash equivalents749,372$ 304,770$ Investments: Corporate stock5,303,557 U.S. Government and agency securities 1,390,902 Corporate bonds822,376 Asset backed securities980,896 Equity mutual funds430,589 Common trust funds4,554,573 Fixed annuity funds62,393 Equity annuity funds7,755 Interest receivable47,464 Accounts receivable288,667 Total assets14,638,544 304,770 Liabilities Accounts payable and other liabilities Due to others304,770 Total liabilities304,770 Net Assets Held in trust for pension benefits14,638,544$ $ See notes to the financial statements. 21 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the Year Ended September 30, 2006 Employee Retirement Funds Additions Contributions Employer1,390,705$ Plan members233,641 State on-behalf payments269,970 Total contributions1,894,316 Investment income Interest304,499 Net increase in fair value of investments649,283 Total investment income 953,782 Investment expenses(79,385) Total net investment income874,397 Total additions2,768,713 Deductions Benefits61,444 Administrative expense477,977 Total deductions539,421 Net increase2,229,292 Net assets held in trust for pension benefits Net assets - beginning, as restated12,409,252 Net assets - ending14,638,544$ See notes to the financial statements. 22 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The Village of North Palm Beach, Florida (“the Village”) was incorporated in 1956 pursuant to Chapter 31481, Laws of Florida, Extraordinary Session 1956. The Village is located in the northeast portion of Palm Beach County, Florida. Its municipal area comprises approximately 1,900 acres of land and 1,200 acres of lakes, canals and lagoons. The Village’s nonseasonal population consists of approximately 13,000 residents, which increases during the winter months to approximately 18,000 people. The Village operates under the Council-Manager form of government and provides the following services to its residents: public safety, planning and zoning, sanitation, library, parks, marinas, and a country club. The Village Council (the “Council”) is responsible for legislative and fiscal control of the Village. In accordance with Statement 14 of the Government Accounting Standards Board, the underlying concept of the governmental financial reporting entity is that governmental organizations are responsible to elected governing officials; therefore, financial reporting should report the elected officials' accountability for those organizations. Furthermore, the financial statements of the reporting entity should allow users to distinguish between the primary government and its component units, if any, by communicating information about the component units and their relationships with the primary government. A component unit is a legally separate organization for which the elected officials of the primary government are financially accountable. Determining factors of financial accountability includes appointment of a voting majority, imposition of will, financial benefit or burden on a primary government, or fiscal dependency. In addition, component units can be other organizations for which the nature and significance of their relationship with a primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. Based on the application of these criteria, management has determined that no component units exist which would require inclusion in this report. Further, the Village is not aware of any entity that would consider the Village to be a component unit. B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the non-fiduciary activities of the Village. For the most part, the effect of interfund activities has been removed from these statements. Governmental activities, which are normally 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. 23 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Government-wide and Fund Financial Statements (Continued) 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 instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and the major individual enterprise fund are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements and proprietary fund financial statements are reported using the accrual basis of accounting and the economic resources measurement focus. Fiduciary funds use the accrual basis of accounting and, except for agency funds, the economic resources measurement focus. Agency funds do not have a measurement focus. Revenues are recorded when earned 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 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 collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Village considers revenues to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Village considers revenues to be available if they are collected within 60 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 and claims and judgments, are recorded only when payment is due. Property taxes, sales taxes, franchise taxes, licenses, interest associated with the current fiscal period and all other revenue items are all considered to be susceptible to accrual and so have been recognized as revenue of the current fiscal period. 24 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued) The Village reports the following major governmental funds: General Fund The general fund is the primary operating fund and is used to account for all financial resources applicable to the general operations of the Village except those required to be accounted for in another fund. Capital Projects Fund The capital projects fund is used to account for the cost acquiring, constructing, and placing into service those capital improvements which are associated with activities in the General Fund and are financed by long-term debt issues which are repaid by the recurring operating revenues in the General Fund. The Village reports the following major (and only) proprietary fund: Country Club Enterprise Fund The fund accounts for the activities related to the Country Club. Additionally, the Village reports the following fund types: Special Revenue Funds The special revenue funds are used to account for the proceeds of specific revenue sources (for major capital projects) that are legally restricted to expenditures for specified purposes. The Village has four special revenue funds, Public Safety Fund, Northlake Boulevard Fund, Recreation Fund, and On-Behalf Pension Contributions. Employee Retirement Funds The pension trust fund account for the activities of the General Employees Retirement Fund, the Fire and Police Officers Retirement Fund and the Volunteer Firemen’s Length of Service Award Pension Fund, which accumulate resources for pension benefits to qualified employees. 25 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued) Agency Funds The agency funds account for assets that are held for other parties and cannot be used to finance the Village’s own programs. The two agency funds are the Northlake Boulevard Task Force, which is for the streetscape improvement of Northlake Boulevard, and the Manatee Protection Fund, in which the assets are held in trust for the protection of manatees through the enforcement of boat speed zones on the intracoastal and inland waterways. Private sector 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 GASB. 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 Village has elected not to follow subsequent private sector guidance. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the government’s country club and various other functions of the Village. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Proprietary fund distinguish operating revenues and expenses from non-operating 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 principal operating revenues of the Village’s country club enterprise fund are charges to customers for sales and services. Operating expenses for the enterprise fund include that cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the Village’s policy to use restricted resources first, then unrestricted resources as they are needed. D. Assets, Liabilities, and Net Assets or Equity Cash and Cash Equivalents All short-term investments that are highly liquid are considered to be cash equivalents. Cash equivalents are readily convertible to a known amount of cash, and at the day of purchase, have a maturity date no longer than three months. 26 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Assets or Equity (Continued) Accounts Receivable Accounts receivable of the General Fund, Water and Sewer Fund, and Garbage and Solid Waste Fund consists of billed and unbilled receivables. Concentration of Credit Risk The Village performs ongoing credit evaluations of its customers and does not require collateral. The Village maintains an allowance for uncollectible accounts at a level which management believes is sufficient to cover potential credit losses. Investments Investments are reported at fair value, which is determined by using various third party pricing sources. The Local Government Surplus Funds Trust is a “2a-7 like” pool and, thus, these investments are valued using the pooled share price. Investments in the Local Government Surplus Funds Trust are reported as cash and cash equivalents. Interfund Transactions Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.” Any residual balance outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. Transfers and interfund balances totally within governmental activities and those that are totally within business-type activities are eliminated and not presented in the government wide financial statements. Transfers and balances between governmental and business-type activities are presented in the government-wide financial statements. Inventories Inventories are valued at cost determined on a first-in, first-out basis. Inventories in the general fund consist of expendable supplies held for consumption. The initial cost is recorded as an asset at the time the individual inventory items are purchased and are charged against operations in the period when used. 27 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Assets or Equity (Continued) Capital Assets and Depreciation Capital assets, which include property, plant, and equipment, are reported in the applicable governmental or business-type activities column in the government-wide financial statements. The Village defines capital assets as assets with an initial individual cost of $1,000 or more and an estimated life in excess of one year. The Village has elected to retroactively apply the capitalization requirements of GASB Statement No. 34 to major general infrastructure assets acquired in fiscal years ending after June 30, 1980, or that were significantly reconstructed or improved during that multi-year period. The accounting and reporting treatment applied to the capital assets associated with a fund are determined by its measurement focus. General capital assets are assets of the Village as a whole. When purchased, such assets are recorded as expenditures in the governmental funds and capitalized as assets in the government-wide statement of net assets. General capital assets are carried at historical cost. Where cost cannot be determined from the available records, estimated historical cost has been used to record the estimated value of the assets. Assets acquired by gifts or bequests are recorded at their fair value at the date of acquisition. Capital assets of the enterprise fund are capitalized in the fund. The valuation basis for enterprise fund capital assets is the same as those used for general capital assets. Additionally, net interest cost is capitalized on enterprise fund projects during the construction period. Additions, improvements, and other capital outlay that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation has been provided over the estimated useful lives using the straight-line method of depreciation. The estimated lives for each major class of depreciable fixed assets are as follows: Buildings and improvements 5-30 years Golf course improvements 5-30 years Machinery & Equipment 3-15 years Vehicles 3-20 years 28 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Assets or Equity (Continued) Deferred Revenue The government reports deferred revenue on its government wide statement of net assets, proprietary statement of net assets, and governmental funds balance sheet. Deferred revenues arise when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when the government receives resources before it has a legal claim to them, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, the liability for deferred revenue is removed and revenue is recognized. Compensated Absences The Village’s employees are granted compensated absence pay for vacation and sick leave in varying amounts based on length of service. Unused compensated absences are payable upon separation from service. Vacation is accrued as a liability when the employee earns benefits. This means that the employee has rendered services that give rise to a vacation liability and it is probably that the Village will compensate the employee in some manner, e.g., in cash or paid time-off, now or upon termination or retirement. The Village uses the vesting method in accruing sick leave liability. Under the vesting method, the liability for sick leave is accrued for employees who are eligible to receive termination payments upon separation. Compensated absences are accrued when incurred in the government-wide and proprietary financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations or retirements. For the governmental funds, compensated absences are liquidated by the general fund. Long-Term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. 29 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Assets or Equity (Continued) Long-Term Obligations (Continued) In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources, while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Net Assets Equity in the government-wide statement of net assets and the proprietary fund is displayed in three categories: 1) invested in capital assets net of related debt, 2) net pension asset, 3) restricted, and 4) unrestricted. Net assets invested in capital assets net of related debt consists of capital assets reduced by accumulated depreciation and by any outstanding debt incurred to acquire, construct, or improve those assets. Net pension asset represent pension contributions above the actuarially required amount. Net assets are reported as restricted when there are legal limitations imposed on their use by Village legislation or external restrictions by other governments, creditors, or grantors. Unrestricted net assets consist of all net assets that do not meet the definition of either of the other three components. Fund Equity In the fund financial 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. Unreserved fund balance amounts that are reported as designations of fund balances represent tentative plans for financial resource utilization in a future period. The following is a description of the reserves and designations used by the Village. Reserved for capital outlay – Restricted for expenditures related to capital projects. Reserved for inventories, prepaid items and deposits – Indicates that a portion of fund balance is segregated since these items do not represent “available spendable resources.” Reserved for restricted assets – Restricted for expenditures related solely to law enforcement, library, recreation facilities, and a memorial fund. 30 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Assets or Equity (Continued) Use of Estimates The financial statements and related disclosures are prepared in conformity with accounting principles generally accepted in the United States. Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the period reported. These estimates include the collectibility of accounts receivable, the use and recoverability of inventory, the useful lives and impairment of tangible assets, and the realization of net pension assets, among others. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary. Actual results could differ from those estimates. NOTE 2 - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Budgetary Data Formal budgetary integration is employed as a management control device during the year for the General Fund and the Enterprise Fund. All budgets are legally enacted. The annual appropriated budget for the General Fund is adopted on a basis consistent with generally accepted accounting principles. Except for budgeting capital expenditures and not budgeting for depreciation, the annual appropriated budgets for the enterprise funds are adopted on a basis consistent with generally accepted accounting principles. For budgeting purposes, current year encumbrances are not treated as expenditures. The procedures for establishing budgetary data are as follows: In July of each year, the Village Manager submits a proposed operating budget to the st Council for the next fiscal year commencing the following October 1. The proposed budget includes expenditures and the means of financing them. During the third week of July, the Council holds public meetings to obtain taxpayer comments. Upon completion of the public hearings and prior to October 1, a final operating budget is legally enacted through the passage of an ordinance. Estimated beginning fund balances are considered in the budgetary process. 31 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 2 - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (Continued) A. Budgetary Data (Continued) The Village Manager is authorized to transfer budgeted amounts up to $5,000 within a department. Any change to capital outlay or to the total departmental expenses, excluding capital outlay, must be approved by the Village Council. Appropriations along with encumbrances lapse on September 30th. Budgeted amounts are as originally adopted, or as amended by appropriate action. During the year several supplementary appropriations were necessary. Encumbrance accounting is employed in governmental funds. Encumbrances (e.g. purchase orders, contracts) outstanding at year end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be reappropriated and honored during the subsequent year. The department entitled Other was over budget by $223,116, which was due to unbudgeted expenditures relating to Hurricane costs. B. Property Taxes Under Florida law, the assessment of all properties and the collection of all county, municipal and school board property taxes are consolidated in the offices of the County Property Appraiser and the County Tax Collector. All property is reassessed according to its fair market value on January 1 of each year and each assessment roll is submitted to the State Department of Revenue for review to determine if the assessment rolls meet all of the appropriate requirements of State law. The laws of the State regulating tax assessment are also designed to assure a consistent property valuation method statewide. State Statutes permit municipalities to levy property taxes at a rate of up to 10 mills. The tax levy of the Village is established by the Council prior to October 1 of each year during the budget process. The Palm Beach County Property Appraiser incorporates the Village’s millage into the total tax levy, which includes the County, County School Board, and special district tax requirements. The millage rate assessed by the Village for the year ended September 30, 2006, was 6.8000 ($6.80 for each $1,000 of assessed valuation). Taxes may be paid less a 4% discount in November or at declining discounts each month through the month of February. All unpaid taxes become delinquent on April 1 following the year in which they are assessed. Delinquent taxes on real property bear interest at 18% per year. On or prior to June 1 following the tax year, certificates are offered for sale for all delinquent taxes on real property. 32 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 2 - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (Continued) B. Property Taxes (Continued) After sale, tax certificates bear interest at 18% per year or at any lower rate bid by the buyer. The certificate holder may make application for a tax deed on any unredeemed tax certificate after a period of two years. The County holds unsold certificates. Delinquent taxes on personal property bear interest at 18% per year until the tax is satisfied either by seizure and sale of the property or by the five-year statute of limitations. At September 30, 2006, unpaid delinquent taxes are not material and have not been recorded by the Village. C. Pension Contributions The actuarial required contributions for the General Employees and Fire and Police Pensions Plans for the fiscal year ended September 30, 2006, were $1,007,695 and $690,186, respectively. The actual contributions made were $894,109 and $633,796 resulting in an underfunding of $113,586 in the General Employees Pension and $56,390 in the Fire and Police Pension. The underfunding was caused by a calculation error in arriving at the employer portion of the cost. The Village subtracted the estimated employee contribution from the amount calculated in the actuarial report, however, the amount calculated was already net of the estimated employee contribution. NOTE 3 – DEPOSITS AND INVESTMENTS Deposits As of September 30, 2006, the carrying amount of deposits (including fiduciary funds) were $(122,543) and the bank balances were $50,542. The carrying amount is negative due to $864,000 that is included as an investment as it is an overnight sweep account used to maximize investment earnings, the account was not overdrawn. The Village also had $2,455 of petty cash. In addition to insurance provided by the Federal Depository Insurance Corporation, deposits are held in banking institutions approved by the State Treasurer of the State of Florida to hold public funds. Under Florida Statutes Chapter 280, Florida Security for Public Deposits Act, the State Treasurer requires all Florida qualified public depositories to deposit with the Treasurer or other banking institution eligible collateral. In the event of failure of a qualified public depository, the remaining public depositories would be responsible for covering any resulting losses. The Village’s deposits at year end are considered insured for custodial credit risk purposes. 33 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 3 – DEPOSITS AND INVESTMENTS (Continued) Investments As of September 30, 2006, the Village held the following investments: Weighted CreditFairAverage RatingValueMaturity State Board of Administration Investment Pool N/R $10,554,114 32 days Repurchase agreements N/R 864,000 3 days Money market funds Aaa 607,540 N/A Money market funds N/R 122,092 N/A U.S. Government and agency securities Aaa 1,390,902 9.11 yrs. Corporate debt securities Aa1 to A3 822,376 10.17 yrs. Asset backed securities N/R 980,896 12.94 yrs. Domestic corporate stocks N/R 5,303,557 N/A Equity mutual funds N/R 430,589 N/A Common trust funds N/R 4,554,573 N/A Fixed annuity funds N/R 62,393 N/A Equity funds N/R 7,755 N/A Total investments $25,700,787 All the investments other than the State Board of Administration and the repurchase agreements are held in the fiduciary funds. The credit ratings are Moody’s. Interest rate risk – Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Generally, the longer the time to maturity, the greater the exposure to interest rate risks. The Village limits its exposure to fair value losses resulting from rising interest rates by structuring the investment portfolio so that the securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity; and investing operating funds primarily in short-term securities, money market mutual funds, or similar investment pools unless it is anticipated that long-term securities can be held to maturity without jeopardizing the liquidity requirements. The Retirement Funds does not have a formal investment policy that limits investment maturities as a means of managing exposure to fair value losses arising from increasing interest rates. The Village’s investment in asset backed securities consist of mortgage pass-through securities based on pools of residential home mortgage loans which are subject to prepayments and therefore highly sensitive to changes in interest rates. 34 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 3 – DEPOSITS AND INVESTMENTS (Continued) Investments (Continued) Custodial credit risk – For an investment, custodial credit is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments that are in the possession of an outside party. At September 30, 2006 all investments were insured or collateralized, except the Village’s three pension funds, in which the underlying securities are held by counterparty, or by its trust department or agent but not in the City’s name and is uninsured and unregistered. However, all securities are registered in the funds’ names. Concentrations of credit risk – Concentration of credit risk is defined as the risk of loss attributed to the magnitude of an investment in a single user. The Village places no limit on the amount they may invest in any one issuer, except those in the Fire and Police Retirement Fund. Not more than then (10) percent of the Fund’s assets shall be invested in the common stock or capital stock of any one issuing company, nor shall more than five (5) percent of the Fund’s assets shall be invested in preferred stock. The U.S. government and agency securities, money market mutual funds, bonds, stocks, asset backed securities and mutual and common trust funds are owned by the Pension Trust Funds. The Village the General Employees’ Retirement Fund is authorized to invest its funds as follows: 1.Interest-bearing checking or savings accounts in qualified public depositories, as defined in Chapter 280, Florida Statutes; 2.Interest-bearing time deposits in qualified public depositories, as defined in Chapter 280, Florida Statutes; 3.The Local Government Surplus Funds Trust Fund or any intergovernmental investment pool authorized pursuant to the Florida Interlocal Cooperation Act, as provided in Chapter 163, Florida Statutes; 4.Securities and Exchange Commission registered money market funds with the highest credit quality rating from a nationally recognized rating agency; 5.Direct obligations of the United States Treasury; 6.Federal agencies and instrumentalities; 35 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 3 – DEPOSITS AND INVESTMENTS (Continued) Investments (Continued) 7.Securities of, or interest in, any open-end or closed-end management-type investment company or investment trust registered under the Investment Company Act of 1940, 15 U.S.C. sections 80a-1 et seq., as amended from time to time, provided that the portfolio of such investment company or investment trust is limited to obligations of the United States Government or any agency or instrumentality thereof and to repurchase agreements fully collateralized by such United States Government obligations, and provided that such investment company or investment trust takes delivery of such collateral either directly or through an authorized custodian; 8.Other investments authorized by law or by ordinance by the Village. Investments of the Fire and Police Retirement Fund can consist of the following: 1.Time, savings, and money market deposits accounts of a national bank, a state bank insured by the Federal Deposit Insurance Corporation or its successor, or a Savings and Loan institution insured by the Federal Savings and Loan Insurance Corporation or its successor, provided the amount deposited does not exceed the insured amount. 2.Obligations of the United States Government or obligations guaranteed as to principal and interest by the United States Government or any agency thereof. 3.Stocks, bonds or other evidence of indebtedness issued or guaranteed by a corporation organized under the laws of the United States or any state of the United States or the District of Columbia and domiciled therein, provided: a.Equities will be traded on one or more of the recognized national exchanges b.The security meets any one of the following rating criteria: i.Fixed income: Standard & Poor’s AAA, AA or Moody’s Aaa, Aa, A. ii.Equities: Value Line Investment Survey Rank for Safety, 1, 2, 3, or Standard & Poor’s A+, A, A-. iii.Money Market Instruments: Standard & Poor’s AI or Moody’s P1. c.Not more than then (10) percent of the Fund’s assets shall be invested in the common stock or capital stock of any one issuing company d.Not more than five (5) percent of the Fund’s assets shall be invested in preferred stock. 36 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 3 – DEPOSITS AND INVESTMENTS (Continued) Investments (Continued) 4.Commingled stock, bond, money market or mutual funds are permitted, provided their investments are restricted to securities meeting the above criteria. A reconciliation of deposit and investments as shown on the statement of net assets and statement of fiduciary net assets for the Village is as follows: By Category: $ (122,543) Deposits 2,455 Petty cash 25,700,787 Investments $25,580,699 Total deposits and investments Presented in the statement of net assets Governmental activities Cash and cash equivalents $ 8,245,879 Restricted cash and cash equivalents 160,168 Business-type activities Cash and cash equivalents 1,190,974 Restricted cash and cash equivalents 1,376,495 Total statements of net assets 10,973,516 Presented in the statement of fiduciary net assets Pension trust funds Cash and cash equivalents 749,372 Investments 13,553,041 Agency funds Cash and cash equivalents 304,770 Total fiduciary funds 14,607,183 Total deposits and investments $25,580,699 37 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 4 – RECEIVABLES Receivables at September 30, 2006, were as follows: GeneralCountry FundClub Total Fines $ 4,133 $ $ 4,133 State shared revenues 145,941 145,941 Utility Taxes 307,524 307,524 Other accounts receivable 12,01469,950 81,964 Total accounts receivable 469,612 69,950 539,562 Wabash Drive assessment 400 400 Conroy Drive assessment 53,147 53,147 Total accounts receivable $523,159$69,950 $593,109 NOTE 5 – CAPITAL ASSETS Capital Assets activity for the year ended September 30, 2006, was as follows: Primary Government Beginning Ending Governmental Activities: Balance (1) Additions Deletions Balance Capital assets not being depreciated: Land $ 2,055,889 $ 95,200 $ $ 2,151,089 Construction in progress 1,468,513 1,061,318 2,529,831 Capital assets being depreciated: Buildings 9,011,271 15,116 (15,000) 9,011,387 Improvements 1,429,759 665,160 2,094,919 Machinery and equipment 2,667,109 319,852 (136,116) 2,850,845 Vehicles 3,276,266 396,787 (148,678) 3,524,375 Total at historical cost: 19,908,807 2,553,433 (299,794) 22,162,446 Less accumulated depreciation for: Buildings (2,859,744) (313,305) 15,000 (3,158,049) Improvements (1,014,867) (310,033) (1,324,900) Machinery and equipment (2,115,226) (244,173) 123,327 (2,236,072) Vehicles (1,983,329) (324,323) 133,987 (2,173,665) Total accumulated depreciation (7,973,166) (1,191,834) 272,314 (8,892,686) Governmental activities capital assets, net $ 11,935,641 $ 1,361,599 ($ 27,480) $ 13,269,760 38 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 5 – CAPITAL ASSETS (Continued) Primary Government (Continued) Beginning Ending Business-type activities: Balance (1) Additions Deletions Balance Capital assets not being depreciated: Land $ 1,051,311 $ $ $ 1,051,311 Construction in progress 4,381,814 4,381,814 Capital assets being depreciated: Buildings and improvements 2,051,030 26,353 ($170,832) 1,906,551 Improvements – golf course 1,603,940 1,603,940 Machinery and equipment 632,660 68,482 (81,997) 619,145 Vehicles 123,568 13,150 (14,757) 121,961 Total at historical cost: 5,462,509 4,489,799 (267,586) 9,684,722 Less accumulated depreciation for: Buildings and improvements (1,218,319) (92,059) 165,403 (1,144,975) Improvements – golf course (1,280,172) (21,325) (1,301,497) Machinery and equipment (469,465) (51,801) 50,981 (470,285) Vehicles (83,249) (9,534) 14,757 (78,026) Total accumulated depreciation (3,051,205) (174,719) 231,141 (2,994,783) Business-type activities capital assets, net $2,411,304 $ 4,315,080 ($ 36,445) $ 6,689,939 (1) As restated, see Note 15. Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government $ 81,244 Public safety 445,618 Public services 142,034 Community development 2,793 Leisure services 305,052 Total depreciation expense governmental activities $976,741 For the year ended September 30, 2006, the Village had $73,775 of capitalized interest cost in the Country Club fund. The total interest expense incurred for the Country Club fund for the year ended September 30, 2006, was $113,343. 39 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 5 – CAPITAL ASSETS (Continued) Construction Commitments Contracts awarded but not yet completed were as follows: Project Description Estimated Costs Golf Course Renovation $ 402,570 Northlake Blvd., Streetscape 51,377 $ 453,947 NOTE 6 – LONG TERM DEBT Change in Long-Term Liabilities Long-term liability activity for the year ended September 30, 2006, was as follows: BalanceBalanceAmount Due October 1, September 30, Within 2005 Additions Reductions 2006 One Year Governmental activities Loans payable $5,630,680 $ $ (688,915) $4,941,765 $ 661,978 Capital leases 399,837 (190,613) 209,224 93,326 Compensated absences payable 901,015 411,258 (336,567) 975,706 656,845 Total $6,931,532 $411,258 $(1,216,095) $6,126,695 $1,412,149 Business-type activities: Loans payable 354,131 $4,893,673 $ (61,826) $5,185,978 $ 160,199 Capital leases 100,000 (28,178) 71,822 19,625 Compensated absences payable 60,523 56,964 (55,626) 61,861 31,091 Total $ 514,654 $4,950,637 $ (145,630) $5,319,661 $ 210,915 Loans Payable $860,000 Promissory Note The Village Council adopted Resolution No. 71-2000 authorizing the execution of a loan agreement in the amount of $860,000 for the purpose of refinancing an existing loan incurred for the renovation of the Village’s Country Club restaurant and for capital expenditures in the general fund. The general fund portion has been repaid. Franchise fees and public service taxes 40 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 6 – LONG TERM DEBT (Continued) $860,000 Promissory Note (Continued) of the Village secure the loan. Principal and interest payments are due quarterly, with a final maturity date of November 15, 2010. The interest rate on the loan is 5.22%. The interest rate will be adjusted by either of the following events: a change in the maximum corporate tax rate, or the event of taxability of the interest on this note. As of September 30, 2006, the principal amount outstanding was $292,305 and was for the purpose of business-type activities. Annual debt service requirements to maturity are as follows: Business-type activities: Year Ending Principal Interest Total 2007 $ 63,314 $ 14,230 $ 77,544 2008 66,684 10,842 77,526 2009 70,234 7,215 77,449 2010 73,972 3,425 77,397 2011 18,101 241 18,342 $ 292,305 $ 35,953 $ 328,258 $2,800,000 Promissory Note The Village Council adopted Resolution No. 46-2001 authorizing the execution of a note in the principal amount of $2,800,000 to finance the construction of various capital projects. Franchise fees and public service taxes secure the promissory note. Principal and interest payments are due semi-annually, with a final maturity date of May 31, 2011. The note bears interest at a variable rate, adjusted semi-annually, equal to the London InterBank Offered Rate (“LIBOR”) plus .585%. The interest rate will be adjusted by either of the following events: a change in the maximum corporate tax rate, or the event of taxability of the interest on this note. The effective rate at September 30, 2006 was 3.695% and this approximates the rate that was used to calculate the debt service requirements to maturity. Annual debt service requirements to maturity, which are payable by the general fund, are as follows: Year Ending Principal Interest Total 2007 $ 283,404 $ 53,430 $ 336,834 2008 293,007 42,871 335,878 2009 302,934 31,954 334,888 2010 313,198 20,667 333,866 2011 323,810 8,998 332,808 $ 1,516,354 $ 157,920 $ 1,674,273 41 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 6 – LONG TERM DEBT (Continued) $6,560,000 Promissory Note The Village Council adopted Resolution No. 8-97 authorizing the issuance of a note in the principal amount of $6,560,000 to finance the acquisition, construction, equipping, and improving of a public safety building, a community center, and a recreation building. A portion of the proceeds was also used to refinance an existing loan incurred to make improvements to the Country Club. Franchise fees and public service taxes of the Village secure the promissory note. Principal payments of $190,000 are due semi-annually on January 1 and August 1, with a final maturity date of February 1, 2017. The interest rate is at the London InterBank Offered Rate (“LIBOR”), and adjusted as of the first day of each month. The interest rate will be adjusted by either of the following events: a change in the maximum corporate tax rate, or the event of taxability of the interest on this note. The effective rate at September 30, 2006 was 4.01% and this approximates the rate that was used to calculate the debt service requirements to maturity. As of September 30, 2006, the principal amount outstanding was $3,150,000 and was for the purpose of government activities. Annual debt service requirements to maturity are as follows: Year Ending Principal Interest Total 2007 $ 300,000 $ 127,228 $ 427,228 2008 300,000 114,818 414,818 2009 300,000 102,408 402,408 2010 300,000 89,998 389,998 2011 300,000 77,588 377,588 2012-2016 1,500,000 201,790 1,701,790 2017-2021 150,000 3,128 153,128 $ 3,150,000 $ 716,958 $ 3,866,958 $271,000 and $132,000 Promissory Notes In January 2003, the Village Council adopted Resolution No. 8-2003 authorizing the issuance of promissory notes of $271,000 and $132,000 to finance various capital expenditures. The notes are payable from the Village’s non-ad valorem tax revenues. The $132,000 note had a final maturity in January 2006 and was paid off by the Country Club. The $271,000 note bears interest at 3.82% and is payable in 14 semi-annual payments of $22,286, beginning July 2003 and with final maturity in January 2010. Annual debt service requirements to maturity for this note, which are payable from the general fund, are as follows: 42 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 6 – LONG TERM DEBT (Continued) $271,000 and $132,000 Promissory Notes (Continued) Year Ending Principal Interest Total 2007 $ 39,422 $ 5,150 $ 44,572 2008 40,943 3,630 44,573 2009 42,521 2,051 44,572 2010 21,689 413 22,102 $ 144,575 $ 11,244 $ 155,819 $230,000 Promissory Note In January 2005, the Village Council adopted Resolution No. 7-2004 authorizing the issuance of a promissory note to finance various capital expenditures. The note is payable from the Village’s non-ad valorem tax revenues and franchise fees. The note bears interest at a fluctuating rate at all times equal to the London InterBank Offered Rate (“LIBOR”) that is defined as 75% of the rate of interest published as one-month LIBOR on the first day of each month, plus 73 basis points and is payable in five semi-annual payments of $22,787, beginning August 2004 and with final maturity in January 2009. The effective rate at September 30, 2006 was 5.3% and this approximates the rate that was used to calculate the debt service requirements to maturity. Annual debt service requirements to maturity for this note, which are payable by the general fund, are as follows: Year Ending Principal Interest Total 2007 $ 39,152 $ 6,422 $ 45,574 2008 41,254 4,320 45,574 2009 43,470 2,104 45,574 2010 6,960 154 7,114 $ 130,836 $ 13,000 $ 143,836 $4,893,673 Promissory Note The Village Council adopted Resolution No. 23-2006 authorizing the issuance of a note in the amount of $4,893,673 to finance certain capital expenditures relating to the municipal golf course and country club. Pledged revenues secure the loan. Principal and interest payments are due semi-annually in the amount of $197,450, with a final maturity date of April 1, 2024. The interest rate on the loan is 4.11% and is subject to adjustment in the event of taxability of the interest on this note. As of September 30, 2006, the principal amount outstanding was $4,893,673 and was for the purpose of business-type activities. 43 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 6 – LONG TERM DEBT (Continued) $4,893,673 Promissory Notes (Continued) Annual debt service requirements to maturity are as follows: Business-type activities: Year Ending Principal Interest Total 2007 $ 96,885 $ 100,565 $ 197,450 2008 199,784 195,116 394,900 2009 208,080 186,821 394,900 2010 216,720 178,181 394,900 2011 225,718 169,182 394,900 2012-2016 1,277,207 697,295 1,974,502 2017-2021 1,565,324 409,178 1,974,502 2022-2026 1,103,955 80,748 1,184,703 $ 4,893,673 $ 2,017,086 $ 6,910,759 $588,000 Capital Leases The Village entered into a seven year $588,000 capital lease agreement as lessee for financing the acquisition of machinery and equipment for governmental activities with a purchase price of $640,332 in 2002. There are fourteen semi-annual payments required of principal and interest beginning September 22, 2002. Interest will be a fluctuating rate at all times equal to 111% of the London InterBank Offered Rate (“LIBOR”) that is defined as 75% of the rate of interest published as one-month LIBOR on the first day of each month. The lease contains a purchase option. At September 30, 2006, the net book value of machinery and equipment was $334,024. Lease payments will be made from the general fund. The rate used to impute interest was 5.32%. The future minimum lease obligations and the net present value of these minimum lease payments as of September 30, 2006, were as follows: Year Ending Principal Interest Total 2007 $ 69,086 $ 1,945 $ 71,031 2008 34,286 904 35,190 2009 17,142 182 17,324 $ 120,514 $ 3,031 $ 123,545 44 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 6 – LONG TERM DEBT (Continued) $223,500 Capital Leases The Village Council adopted Resolution No. 03-2005 authorizing the execution of a five year capital lease agreement for the purpose of financing the lease-purchase of $123,500 of equipment for the General Fund and $100,000 of equipment for the Country Club. Principal and interest payments are due semi-annually, with a final maturity date of February 15, 2010. At September 30, 2006, the net book value of the equipment was $113,724. The rate used to impute interest was 3.55%. Amounts currently outstanding on the note are as follows: Purpose Amount Governmental activities $ 88,710 Business-type activities 71,822 $160,532 Annual debt service requirements to maturity are as follows: Governmental activities: Year Ending Principal Interest Total 2007 $ 24,240 $ 2,939 $ 27,179 2008 25,109 2,070 27,179 2009 26,009 1,170 27,179 2010 13,352 237 13,589 $ 88,710 $ 6,416 $ 95,126 Business-type activities: Year Ending Principal Interest Total 2007 $ 19,625 $ 2,379 $ 22,005 2008 20,329 1,676 22,005 2009 21,058 947 22,005 2010 10,810 192 11,002 $ 71,822 $ 5,194 $ 77,016 NOTE 7 – RISK MANAGEMENT The Village is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. 45 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 7 – RISK MANAGEMENT (Continued) The Village currently reports all of its risk management activities in the general fund. Claims expenditures and liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported. Employee Benefits Group The Village was self-insured to provide group medical coverage through June 30, 2005. A third party administered the group medical coverage for the Village. The Village funds its losses based on actual claims. The liability for unpaid claims, if any, is estimated using an industry average that is based on actual claims paid. The following is a reconciliation of changes in the aggregate liability for the current and prior fiscal years. Claims and Claims Year Ended Claims Liability Changes in Claim Liability September 30 Beginning of Year Estimates Payments End of Year 2005 $342,000 $ $(261,805) $80,195 2006 80,195 (34,643) 45,552 Property and Casualty Group The Village also participates in Southeast Risk Management Association (SERMA), a quasi- governmental agency created by an interlocal agreement, as authorized by Chapter 163, Florida Statues. SERMA administers the property and casualty coverage for the Village. The Village and other participating members pool their resources so as to provide a comprehensive risk management program, including insurance coverage, whose cost is less than the cost of each municipality obtaining insurance separately. The members are subject to supplemental assessments in the event of deficiencies, except that to the extent that deficiencies result from a specific claim against a member in excess of the reinsurance available, such deficiency is solely the responsibility of that member. SERMA reinsures for workers compensation and property claims in excess of $250,000. The Village is also covered by Florida Statutes under the Doctrine of Sovereign Immunity which effectively limits the amount of liability of municipalities to individual claims of $100,000/$200,000 for all claims relating to the same incident. There were no changes in insurance coverage from the prior year and the amount of settlements did not exceed insurance coverage for the last three years. At September 30, 2006, there were no liabilities recorded for property and casualty, based on a recent actuarial valuation, which indicated that the reserve for incurred but not yet reported losses was adequately funded, and no additional contributions are required. NOTE 8 – EMPLOYEE RETIREMENT PLANS The Village maintains the following two separate single employer defined benefit plans: Village of North Palm Beach Fire and Police Retirement Fund, covering firefighters and police officers, and Village of North Palm Beach General Employees Retirement Fund, covering substantially 46 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 8 – EMPLOYEE RETIREMENT PLANS (Continued) all other full-time Village employees. Both plans are reported as pension trust funds and included as part of the Village’s reporting entity. The Police and Fire Fund will issue separate financial statements for the year ended September 30, 2006; the General Employees Plan will not issue separate financial statements. Additional information on these plans can be found beginning on page 58. Each plan has its own board that acts as plan administrator and trustee: Board of Trustees (for the Fire and Police Retirement Fund) and General Employees Retirement Board. Each plan’s assets may only be used for the payment of benefits to the members and beneficiaries of the plan in accordance with the terms of each plan document. The costs of administering each plan are financed in the appropriate pension trust fund. The Florida Constitution requires local governments to make the actuarially determined contribution. The Florida Division of Retirement reviews and approves each local government’s actuarial report prior to its being appropriated for use for funding purposes. Additionally, the State collects two locally authorized insurance premium surcharges (one for the Police Pension on casualty insurance policies and one for the Fire Pension Plan on certain real and personal property insurance policies within the corporate limits) which can only be distributed after the State has ascertained that the local government has met its actuarial funding requirement for the then most recently completed fiscal year. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES All Retirement Plans Basis of Accounting. The retirement plans are reported on the accrual basis of accounting. Plan member and state contributions are recognized as revenues in the period that the contributions are due. Employer contributions to each plan are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of each plan. Method Used to Value Investments. Investments are reported at fair value and are managed by third party money managers. The Village’s independent custodians and individual money managers price each instrument using various third party pricing sources. Investments Concentrations The following investments represent concentrations of 5% or more of net plan assets in investments that are not issued or guaranteed by the U.S. government. General Employees Retirement Fund No nongovernmental investments exceed 5% of net plan assets. Fire and Police Retirement Fund No nongovernmental investments exceed 5% of net plan assets. 47 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 8 – EMPLOYEE RETIREMENT PLANS (Continued) PLAN DESCRIPTION AND CONTRIBUTION INFORMATION The following schedule is provided for general information purposes only and is derived from the respective actual reports and Village information for the two retirement plans as of October 1, 2005, the date of the latest actuarial valuation. Plan participants should refer to the appropriate source documents for more complete information on the plans. General Employees Fire and Police Plan Description: Authority Village Ordinance Village Ordinance/State Asset Valuation: Reporting Fair Value Fair Value Legal Reserves None None Long-Term Receivable None None Internal/Participant Loans None None Membership of each plan consisted of the following at October 1, 2005, the date of the latest actuarial valuation: GERF F&P Active Participants: Vested 59 25 Non-vested 25 15 Retirees and Beneficiaries receiving benefits 13 3 Terminated vested members receiving benefits 42 13 Total 139 56 General Employees' Retirement System Plan Description. The plan provides retirement benefits as well as death benefits. All full time general employees who are not sworn police officers or firefighters shall become members of the st system on October 1 following completion of 12 months of employment as a condition of employment. Three percent cost of living adjustments (COLA) are provided for employees who retired before February 1, 1982. Employees hired before October 1, 2000, may choose to contribute an extra 2% in order to receive a 3% COLA. Employees hired after September 30, 2000, are required to contribute the extra 2% for the 3% COLA. Authority to establish and amend the benefit provisions of the plan rests with the Village Commission. All benefits vest based on the following years of credited service. Years of Credited Service Vested % Under 5 0% 5 or 6 50% 7 or 8 75% 9 or more 100% 48 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 8 – EMPLOYEE RETIREMENT PLANS (Continued) Employees become eligible for normal retirement benefits after attaining the age of 60 and completing nine years of credited service, or attaining the age of 65 (depending on employee contribution rate. The normal retirement benefit consists of a life annuity, options available, (subject to cost of living adjustments not to exceed 3% a year), of either 2%, 2.25%, or 2.5% (depending on employee contribution rate) of AME times credited service up to 20 years plus 1% of AME times credited service over 20 years. Early retirement benefits can be received at age 55. The benefit is determined as for normal retirement and payable at normal retirement date or payable immediately after reduction by 5% for each year by which the benefit commencement date precedes the normal retirement date. If an active member dies, his beneficiary receives a refund of member contributions without interest. For a member who is age 55 and has at least five years of service but who dies before commencement of retirement benefits, a monthly is payable to the designated beneficiary; the benefit is calculated as though the member had retired on his date of death and payable according to option elected by the employee. For an active member who has at least five years of service credited service and dies prior to reaching normal retirement date, a benefit equal to his vested accrued benefit will be paid to his beneficiary for ten years. If an employee terminates his employment, he is entitled to the following: - With less than five years of credited service, a refund of member contributions without interest and no other benefit. - With five or more years of credited service, a refund of member contributions, the vested accrued benefit payable at normal retirement date or at any time after age 55 is attained, with the benefit being subject to the same reduction as for early retirement benefits. The vesting schedule is listed above. "Average monthly earnings" is the average during the five years within the last ten years of employment which produces the highest average. "Credited service" consists of the total number of years and fractional parts of years of actual service with the Village and shall apply to an employee whose employment is terminated with the Village and who recommences fulltime employment within two years from the date of termination. Contributions. General employees may contribute 6%, 4%, 2% or 0% of earnings as elected by the employee, with the retirement benefit received being based on the amount contributed. The Village is required to contribute the amount necessary to fund the Plan properly according to the Plans actuary. Contribution requirements of plan members and the Village are established and may be amended by the Village Commission. 49 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 8 - EMPLOYEE RETIREMENT SYSTEMS (Continued) Fire and Police Retirement System Plan Description. The plan provides retirement benefits as well as death and disability benefits. All benefits vest after ten years of credited service. All fulltime police officers or firefighters st shall become members of the system on October 1 following completion of 12 months of employment as a condition of employment. Cost of living adjustments (COLA) are provided annually each October 1, to reflect changes in CPI (subject to maximum increases or decreases of 3% per year). Authority to establish and amend the benefit provisions of the plan rests with the Village Commission. Employees become eligible for normal retirement benefits after attaining the age of 55. The normal retirement benefit consists of ten years certain and life thereafter, with other options available, (subject to cost of living adjustments not to exceed 3% a year), of 2.5% of AME times the years of credited services, with a maximum benefit of 60% of AME. Members are eligible for non-service connected disability, after ten years of credited service and a total and permanent disability. For service connected disability, a total and permanent disability with no service requirement. The disability benefit consists of a ten year certain and life annuity that can be provided by the single-sum value of the member’s accrued pension benefit, but is at least 42% of AME for service connected disability and at least 25% of AME for non-service connected disability. See the description of the general employees’ retirement system for the remainder of the benefits, except that early retirement and termination benefits for vested member can be received at age 50. Contributions. Members are required to contribute 5% of their basic compensation to the plan. The state makes a contribution from the Casualty Insurance Premium Tax. The City is required to contribute the remaining amount to fund the plan using the Frozen Entry Age Actuarial Cost Method. Contribution requirements of plan members and the City are established and may be amended by the City Commission. All Retirement Plans Annual Pension Cost and Net Pension Obligation. The Village's 2006 annual pension cost and actual contributions for each plan are shown below. The required contributions were determined as part of the October 1, 2004 actuarial valuation for each plan. State law allows the Village to use a portion of the State contribution to offset the Village’s pension cost. Annual Required Eligible Pension Village State Cost Contribution Contribution General Employees Retirement Fund $1,014,112 $1,007,695 N/A Fire and Police Retirement Fund 699,092 551,986 138,200 50 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 8 – EMPLOYEE RETIREMENT PLANS (Continued) Components of Annual Pension Cost and Net Pension Obligation The following schedule was determined as part of the October 1, 2005, actuarial valuation for the General and Fire and Police Retirement Plans. General Employees Fire and Police Annual required contribution (ARC) $1,007,695 $ 690,186 Interest on net pension obligation (NPO) (14,882) (16,279) Adjustment to ARC 21,299 25,185 Annual pension cost 1,014,112 699,092 Actual contributions 894,109 633,796 Increase in NPO 120,003 65,296 NPO at beginning of year (175,080) (203,493) NPO at end of year $ (55,077) $(138,197) Three-Year Trend Information Annual Percentage Net Pension Year Pension Annual of APC Obligation Ended Cost (APC) Contribution Contributed (Asset) General Employees 9/30/03 $ 509,594 $ 503,220 98.7% $ (187,499) 9/30/04 529,645 524,000 98.9% (181,854) 9/30/05 669,011 662,237 99.0% (175,080) Fire and Police 9/30/03 $ 372,967 $ 369,642 99.1% $ (106,668) 9/30/04 387,647 388,200 100.1% (107,221) 9/30/05 513,792 610,064 118.7% (203,493) 51 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 8 – EMPLOYEE RETIREMENT PLANS (Continued) The following are the actuarial methods and significant actuarial assumptions: General Employees Fire and Police 10/1/2005 10/1/2005 Valuation date Frozen Entry Age Aggregate Actuarial Cost Method Level percent closed N/A (1) Amortized Method Remaining Amortization 30 years N/A (1) Period Asset Valuation Method Difference between actual and expected return recognized over give years. Five year smooth market. Administrative Costs Expenses paid out of the Expenses paid out of the fund other than investment fund other than investment related expenses are assumed related expenses are assumed to be equal to the average of to be equal to the average of actual expenses over the actual expenses over the previous two years. previous two years. Investment rate of return* 8% up to retirement, 5.25% thereafter. 8% 5.5% 6% Projected salary increase* 4% 4% *Includes inflation at Cost of living adjustments 3% for those retired before 2/1/82 or who contribute 3% an extra 2%. (1)The aggregate actuarial cost method does not identify or separately amortize unfunded actuarial liabilities. 52 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 9 – PENSION PLAN FINANCIAL INFORMATION Generally accepted accounting principles (GAAP) requires that financial statements for individual pension plans be presented in the notes to the financial statements of the primary government if separate GAAP financial reports have not been issued. The Volunteer Fire and General Employees pension funds do not have separate GAAP reports issued and the financial information for these is presented below. COMBINING STATEMENT OF FIDUCIARY NET ASSETS SEPTEMBER 30, 2006 Total General Employee VolunteerEmployeesRetirement Fire Pension PensionFunds ASSETS Cash and cash equivalents $ $ 122,092 $ 122,092 Investments: Equity mutual funds 430,589 430,589 Common trust funds 4,554,573 4,554,573 Fixed annuity funds 62,393 62,393 Equity annuity funds 7,755 7,755 Accrued interest and dividends 1,038 1,038 Accounts receivable 51,823 51,823 Total assets 70,1485,160,115 5,230,263 Net Assets Held in trust for pension benefits $ 70,148$5,160,115 $ 5,230,263 53 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 9 – PENSION PLAN FINANCIAL INFORMATION (Continued) COMBINING STATEMENT OF CHANGES IN NET ASSETS EMPLOYEE RETIREMENT FUNDS For the Fiscal Year Ended September 30, 2006 Total General Employee VolunteerEmployeesRetirement Fire Pension PensionFunds Additions: Contributions: Employer $ 1,000 $ 894,109 $ 895,109 Plan members 185,394 185,394 Total contributions 1,000 1,079,503 1,080,503 Investment income: Interest and dividends 2,854 14,406 17,260 Net appreciation in fair value of investments 240 326,856 327,096 Investment expense (38,536) (38,536) Total investment income 3,094 302,726 305,820 Total additions 4,094 1,382,229 1,386,323 Deductions: Administration 17,763 17,763 Benefits 62,088 62,088 Total deductions 79,851 79,851 Net increase (decrease) 4,094 1,302,378 1,306,472 Net assets held in trust for pension benefits, beginning of year, as restated 66,054 3,857,737 3,923,791 Net assets held in trust for pension benefits, end of year $ 70,148 $ 5,160,115 $ 5,230,263 NOTE 10 – ON-BEHALF PAYMENTS The state makes a contribution to the Fire and Police Officers’ Retirement System from the firefighters’ and police officers’ Insurance Premium Tax. For the fiscal year ended September 30, 2006, $233,641 was recorded as revenues and expenditures in the On-Behalf Pension Contribution Special Revenue Fund relating to on-behalf payments received from the state. 54 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 11 – CONTRACTS AND COMMITMENTS Operating Leases The Village is committed under a lease agreement as lessor of the food and beverage operators at the North Palm Beach Country Club. The lease is considered for accounting purposes to be an operating lease. As part of the lease agreement, the Village receives a percentage of sales of the lessee and reimbursements for utilities and financed assets. The Village received $140,524 for the year ended September 30, 2006 under the terms of this lease agreement. Future minimum lease payments for the year ending September 30, 2007 are contingent upon sales and expenses of the operations of the lessee. At September 30, 2006, the cost of the leased assets was $102,716, net book value was $15,344 and depreciation expense was $4,559. NOTE 12 – JOINTLY GOVERNED ORGANIZATION The Village, through an interlocal agreement with certain other municipalities and Palm Beach County, created the Seacoast Utility Authority (“Seacoast”) which provides water and sewer service to the citizens of each of the participating municipalities and a portion of Palm Beach County. Seacoast’s governing board is comprised of one member from each participating entity. Seacoast is an Independent Authority organized under the laws of the State of Florida, and the Village has no participating equity ownership in Seacoast. The Village paid $ 96,687 to Seacoast during the fiscal year for water and sewer service. NOTE 13 – POST EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS In addition to the pension benefits described in Note 8, the Village provides post-retirement health care and life insurance benefits, in accordance with State Statutes, to all employees who retire from the Village. The normal retirement age for police and firefighters is 55; the normal retirement age for all other Village employees is either age 60 or age 65, depending on the option selected by the employee. The employee’s required contribution is the full amount of the annual premium. Expenditures for post- retirement health care and life insurance benefits are recognized as expenditures as claims are paid. 55 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 14 – VOLUNTEER FIREFIGHTERS PENSION The Village maintains a Length of Service Award Pension Plan that covers substantially all volunteer firefighters in the Village of North Palm Beach. The plan is reported as a pension trust fund and is included as part of the Village’s reporting entity. The plan does not issue a stand- alone financial report. The plan’s financial statements are prepared using the accrual basis of accounting. The plan is noncontributory for members. Employer contributions to the plan are recognized when due and yearly contributions are required based on the most recent actuarial valuation. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Members are eligible to participate in the plan after attaining the age of 18, one year of completed service, completed the sponsor’s required probationary period and are entitled to receive benefits at age 60. One hundred percent vesting is achieved after ten years of service, with 40 percent vesting after four years, and additional 10 percent increments for years five through nine. The monthly retirement benefit is $10 times each year of completed service, with a maximum monthly benefit of $300 and a minimum of $50. The plan contains a death benefit that is the greater of $30,000 or the accrued benefit due at date of death. Plan assets are held by Hartford Life. NOTE 15 - COMMITMENTS AND CONTINGENCIES Contingencies The Village is involved in various litigations and claims arising in the course of operations. It is the opinion of legal counsel that the likelihood of unfavorable outcome and the amounts of potential losses cannot be reasonably determined at this time. Accordingly, no provision for any liability that may result has been made in the accompanying financial statements NOTE 16 – PRIOR PERIOD ADJUSTMENTS In the prior period financial statements, errors were made in accounting for construction work in progress, accounts receivable, and net pension assets in the governmental-wide financial statements, accounts receivable in the general fund, fixed assets in the country club and contributions in the Employee Retirement Funds. The errors had no effect on the current year change in net assets, the error in construction in progress caused the change in net assets to be understated by $490,045 in the government-wide financial statements in the prior year, and the accounts receivable and net pension assets had no effect in the prior year change in net assets. The understatement of accounts receivable in the general fund had no effect in the prior year change in net assets. The understatement of fixed assets in the country club fund caused the change in net asset to be understated by $37,979 in the prior year. The contributions in the Employee Retirement Funds were overstated by $128,620 in the prior year, which overstated the net increase in net assets held in trust for pension benefits by the same amount. 56 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2006 NOTE 16 – PRIOR PERIOD ADJUSTMENTS (Continued) Government-wide Beginning fund balance, as previously reported $10,210,413 Adjustment of construction work in progress 1,468,513 Adjustment in accounts receivable 162,103 Adjustment in net pension assets (179,391) Beginning fund balance, as corrected $11,661,638 General Fund Beginning fund balance, as previously reported $ 5,968,847 Adjustment in accounts receivable 162,103 Beginning fund balance, as corrected $ 6,130,950 Country Club Beginning fund balance, as previously reported $ 2,189,568 Adjustment in fixed assets 37,979 Beginning fund balance, as corrected $ 2,227,547 NOTE 17– SUBSEQUENT EVENT The Village Council adopted Resolution No. 73-2006 authorizing the execution of a three year capital lease agreement for the purpose of financing the lease-purchase of eighty golf and two utility carts for the Country Club for $274,800. 57 REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MD&A FIDUCIARY FUNDS Pension Trust Funds General Employees Pension Trust Fund Fire and Police Officers Pension Trust Fund THE VILLAGE OF NORTH PALM BEACH, FLORID A Required Supplemental Information September 30, 2006 Schedule of Funding Progress Actuarial AccruedUAAL as a ActuarialLiabilityUnfundePercentage d ActuarialValue of(AAL)-AALFundeCovereof Covere ddd ValuationAssetsEntry Age(UAAL)RatioPayrollPayroll Date(a)(b)(b -a)(a/b)(c)((b-a)/c) General Employees Retirement Fun d 10/1/20005,732,329$ 7,508,961$ 1,776,632$ 76.34%2,761,773$ 64.33% 10/1/20016,312,447 8,150,125 1,837,678 77.45%3,127,313 58.76% 10/1/20026,193,676 8,594,442 2,400,766 72.07%3,076,493 78.04% 10/1/20036,759,012 10,404,349 3,645,337 64.96%3,443,843 105.85% 10/1/20046,578,832 12,084,785 5,505,953 54.44%4,275,981 128.76% 10/1/20053,817,605 9,116,599 5,298,994 41.88%3,220,258 164.55% Fire and Police Retirement Fund (1) 10/1/20005,285,938$ 4,496,853$ (789,085)$ 117.55%1,493,357$ -52.84% 10/1/20015,718,291 5,304,774 (413,517) 107.80%1,517,524 -27.25% 10/1/20025,963,256 6,565,654 602,398 90.83%1,921,532 31.35% 10/1/20036,635,342 7,616,168 980,826 87.12%2,312,228 42.42% 10/1/20046,771,959 8,546,754 1,774,795 79.23%2,627,239 67.55% 10/1/20057,600,134 8,692,747 1,092,613 87.43%2,405,634 45.42% Fire and Police Retirement Fund (1) (1)Because this plan uses the Aggregate Acturial Cost Method for funding, the Schedule of Funding Process is not required per GASB No. 25. The Schedule is included in this report ecause the Plan and/or Employer believe the information would be useful to the users of b their financial statements. 58 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Required Supplemental Information September 30, 2006 Schedule of Employer and State Contributions Fiscal YearAnnual EndedRequiredActualStatePercentage September 30ContributionContributionContributionContributed General Employees Retirement Fund 2001$ 447,128415,152$ N/A107.7% 2002 467,750430,411 N/A108.7% 2003 503,220502,855 N/A100.1% 2004 524,000523,127 N/A100.2% 2005 662,237662,237 N/A100.0% 200688.7% 894,1091,007,695 N/A Fire and Police Retirement Fund 2001119.1% $ 25,06785,866$ 77,227$ 2002112.3% 57,825130,305 88,452 2003100.1% 235,339369,089 134,303 2004101.1% 250,000383,891 138,200 2005119.7% 471,864509,800 138,200 200691.8% 495,596690,186 138,200 59 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Trend Data September 30, 2006 General Employees Police and RetirementRetirement Fund Fund Contribution rates as of 9/30/05: City25.90%21.60% Plan Members6% (1)2.0% Actuarially Determined Contribution662,237371,600 Contributions Made662,237471,864 Valuation date10/1/200510/1/2005 Actuarial Cost MethodFrozen Entry AgeAggregate Amortized MethodLevel percentN/A (1) closed Remaining Amortization Period30 yearsN/A (1) Asset Valuation MethodDifference betweenFive year actual and expectedsmooth return recognized market over five years. Administrative CostsExpenses paid out of theExpenses paid out of the fund other than investmentfund other than investment related expenses arerelated expenses are assumed to be equal to theassumed to be equal to the average of actual expenses average of actual expenses over the previous two years.over the previous two years. Actuarial Assumption: Investment rate of return *8% up to retirement8% 5.25% thereafter. Projected salary increase *5.5%6% *Includes inflation at4%4% Cost of living adjustments3% for those retired3% before 2/1/82 or who contribute an extra 2%. (1) The aggregate actuarial cost method does not identify or separately amortize unfunded actuarial liabilities. 60 GENERAL FUND THE VILLAGE OF NORTH PALM BEACH, FLORIDA Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual General Fund For the Year Ended September 30, 2006 Variance with Final Budget Budgeted AmountsActual Positive OriginalFinalAmounts(Negative) Revenues Taxes13,845,051$ 13,845,051$ 14,340,682$ 495,631$ Licenses and permits1,050,000 1,050,000 1,128,658 78,658 Intergovernmental1,210,600 1,210,600 2,161,412 950,812 Charges for services1,348,857 1,348,857 1,003,660 (345,197) Fines and forfeitures99,323 99,323 165,496 66,173 Interest115,000 115,000 477,421 362,421 Miscellaneous19,569 19,569 130,514 110,945 Total revenues17,688,400 17,688,400 19,407,843 1,719,443 Expenditures Current General government1,830,726 1,884,798 1,648,131 236,667 Public safety6,593,485 6,597,325 6,204,327 392,998 Public service3,804,364 4,002,816 4,180,575 (177,759) Community development & planning761,877 762,806 651,331 111,475 Leisure services - recreation2,330,844 2,337,389 2,209,650 127,739 Other government252,074 227,074 2,049 225,025 Capital outlay1,391,142 1,524,932 760,859 764,073 Debt service Principal payments879,527 879,527 879,527 Interest paid on debt194,361 194,361 199,373 (5,012) Total expenditures18,038,400 18,411,028 16,735,822 1,675,206 Excess (deficiency) of revenues over (under) expenditures(350,000) (722,628) 2,672,021 3,394,649 Other financing sources (uses) Bank loan proceeds350,000 350,000 (350,000) Transfer out(1,290,000) (1,471,529) (181,529) Total other financing sources (uses)350,000 (940,000) (1,471,529) (531,529) Net change in fund balances $ (1,662,628)$ 1,200,492 2,863,120$ Fund Balances Beginning of year, as restated6,130,950 End of year7,331,442$ 61 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Budgetary Required Supplementary Information (RSI) General Fund September 30, 2006 Note 1 - Basis of Accounting Generally accepted accounting principles (GAAP) serve as the budgetary basis of accounting. Note 2 - Excess of expenditures over appropriations % of Department Variations Public Works/Streets and Grounds19,339$ 1.5% Vehicle Maintenance8,141 4.1% Debt Service5,012 0.5% Other223,116 45.6% Capital Outlay Facility Services952 2.8% Library1,916 2.0% 62 OTHER SUPPLEMENTARY INFORMATION GENERAL FUND THE VILLAGE OF NORTH PALM BEACH, FLORIDA Schedule of Departmental Expenditures - Budget and Actual General Fund For the Year Ended September 30, 2006 Variance with Final Budget OriginalFinalPositivePercent BudgetBudgetActual(Negative)Variance Village Council Personal services35,521$ 35,521$ 34,709$ 812$ 2.29% Operating expenses84,920 84,920 49,465 35,455 41.75 Total Village Council120,441 120,441 84,174 36,267 30.11 Village Manager Personal services397,767 397,767 371,061 26,706 6.71 Operating expenses82,403 107,809 51,816 55,993 51.94 Total Village Manager480,170 505,576 422,877 82,699 16.36 Village Finance Personal services565,102 565,102 521,779 43,323 7.67 Operating expenses53,799 57,965 47,566 10,399 17.94 Total Village Finance618,901 623,067 569,345 53,722 8.62 Village Attorney Operating expenses137,500 162,000 161,560 440 0.27 Village Clerk Personal services204,798 204,798 189,350 15,448 7.54 Operating expenses34,825 34,825 20,762 14,063 40.38 Total Village Cler 239,623239,623 210,112 29,511 12.32 k Police Personal services3,655,844 3,655,844 3,462,341 193,503 5.29 Operating expenses414,343 416,796 403,697 13,099 3.14 Total Police4,070,187 4,072,640 3,866,038 206,602 5.07 Fire Rescue Personal services2,313,368 2,313,368 2,196,838 116,530 5.04 Operating expenses209,930 211,317 141,451 69,866 33.06 Total Fire Rescue2,523,298 2,524,685 2,338,289 186,396 7.38 Public Works / Streets and Grounds Personal services786,999 786,999 786,560 439 0.06 Operating expenses488,350 488,350 508,128 (19,778) (4.05) Total Public Works1,275,349 1,275,349 1,294,688 (19,339) (1.52) Sanitation Personal services1,271,218 1,256,218 1,112,663 143,555 11.43 Operating expenses286,100 286,100 338,006 (51,906) (18.14) Total Sanitation1,557,318 1,542,318 1,450,669 91,649 5.94 Facility Services Personal services402,263 402,263 347,265 54,998 13.67 Operating expenses201,258 191,758 131,418 60,340 31.47 Total Facility Services603,521 594,021 478,683 115,338 19.42 (Continued) 63 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Schedule of Departmental Expenditures - Budget and Actual General Fund For the Year Ended September 30, 2006 Variance with Final Budget OriginalFinalPositivePercent BudgetBudgetActual(Negative)Variance (Continued) Development, Licensing & Code Admin. Personal services801,838$ 801,838$ 560,032$ 241,806$ 30.16% Operating expenses89,450 89,450 128,906 (39,456) (44.11) Total Development, Licensing & Code891,288 891,288 688,938 202,350 22.70 Vehicle Maintenance Personal services178,835 178,835 182,900 (4,065) (2.27) Operating expenses21,430 21,430 25,506 (4,076) (19.02) Total Vehicle Maintenance200,265 200,265 208,406 (8,141) (4.07) Leisure Services-Recreation Personal services1,160,714 1,160,714 1,112,396 48,318 4.16 Operating expenses585,328 591,873 562,440 29,433 4.97 Total Leisure Services-Recreation1,746,042 1,752,587 1,674,836 77,751 4.44 Library Personal services534,162 534,162 470,799 63,363 11.86 Operating expenses50,640 50,640 64,015 (13,375) (26.41) Total Library584,802 584,802 534,814 49,988 8.55 Debt Service1,073,888 1,073,888 1,078,900 (5,012) (0.47) Other Operating expenses290,574 489,455 712,571 (223,116) (45.58) Non-Departmental Operating expenses234,091 234,091 200,063 34,028 14.54 Capital Outlay Village Manager3,500 3,500 610 2,890 82.57 Finance68,458 68,458 7,091 61,367 89.64 Village Clerk25,945 27,245 3,365 23,880 87.65 Public Safety201,169 213,169 199,036 14,133 6.63 Fire Rescue41,470 41,470 39,182 2,288 5.52 Public Works (Streets)245,500 245,500 34,839 210,661 85.81 Sanitation154,100 273,601 241,713 31,888 11.65 Facility Services34,100 34,100 35,052 (952) (2.79) Development, Licensing, & Code Admin 47,50047,500 40,677 6,823 14.36 . Vehicle Maintenance121,600 121,600 15,944 105,656 86.89 Leisure Services314,500 314,500 38,121 276,379 87.88 Library97,000 97,000 98,916 (1,916) (1.98) Non-Departmental 36,300 37,289 6,313 30,976 83.07 Total Capital outlay1,391,142 1,524,932 760,859 764,073 50.11 Total expenditures18,038,400$ 18,411,028$ 16,735,822$ 1,675,206$ 9.10% 64 COMBINING FINANCIAL STATEMENTS NONMAJOR GOVERNMENTAL FUNDS Special Revenue Funds Public Safety Fund Northlake Boulevard Fund Recreation Fund On-Behalf Pension Contributions THE VILLAGE OF NORTH PALM BEACH, FLORIDA Combining Balance Sheet Nonmajor Governmental Funds September 30, 2006 Special Revenue FundTotal Nonmajor RecreatioGovernmental n FunFunds d Assets Cash and cash equivalents400,000$ 400,000$ Total assets400,000$ 400,000$ Fund balances Unreserve d Undesignate400,000400,000 d Total fund balances400,000$ 400,000$ 65 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2006 Special Revenue Fund s PublicNorthlakOn-BehalTotal Nonmajo efr SafetBoulevarRecreatioPensio Governmenta ydnnl FunFunFunContributionFunds ddds Revenue s Intergovernmental revenue$ 462,39456,610$ $ 233,641$ 752,645$ s Total revenue 462,39456,610 233,641 752,645 s Expenditure s Curren t Public safet 233,64156,610 290,251 y Capital outla 462,394462,394 y Total expenditure 462,39456,610 233,641 752,645 s Excess of revenues ove r (under) expenditure s Other financing sources (uses ) Transfers i 400,000400,000 n Total other financing sources (uses 400,000 400,000 ) Net changes in fund balance 400,000 400,000 s Fund balances - Beginnin g Fund balances - Endin$ $ 400,000$ $ 400,000$ g 66 FIDUCIARY FUNDS Pension Trust Funds Volunteer Fire Pension Trust Fund General Employees Pension Trust Fund Fire and Police Officers Pension Trust Fund THE VILLAGE OF NORTH PALM BEACH, FLORID A Combinin Statement of Fiduciar Net Assets gy September 30, 2006 Fire andTotal VolunteerGeneralPoliceEmployee FireEmployeesOfficersRetirement PensionPensionPensionFunds ASSETS Cash and cash equivalents $ 122,092$ 627,280$ 749,372$ Investments: Corporate stock 5,303,5575,303,557 U.S. Government and agency securities 1,390,9021,390,902 Corporate bonds 822,376822,376 Asset backed securities 980,896980,896 Equity mutual funds 430,589430,589 Common trust funds 4,554,5734,554,573 Fixed annuity funds 62,393 62,393 Equity annuity funds 7,755 7,755 Accrued interest and dividends 46,4261,038 47,464 Accounts Receivable 236,84451,823 288,667 Total assets 5,160,11570,148 9,408,281 14,638,544 Net Assets Held in trust for pension benefits70,148$ 5,160,115$ 9,408,281$ 14,638,544$ (1) A schedule of funding progress for the General Employees and Fire and Police Officers plans is presented on page 58. 67 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Combining Statement of Changes in Net Assets Employee Retirement Funds For the Year Ended September 30, 2006 Fire andTotal VolunteerGeneralPoliceEmployee FireEmployeesOfficersRetirement PensionPensionPensionFunds Additions: Contributions: Employer1,000$ 894,109$ 495,596$ 1,390,705$ State of Florida 233,641233,641 Plan members185,394 84,576 269,970 Total contributions1,000 1,079,503 813,813 1,894,316 Investment income: Interest and dividends2,854 14,406 287,239 304,499 Net appreciation in fair value of investments240 326,856 322,187 649,283 Investment expense(38,536) (40,849) (79,385) Total investment income3,094 302,726 568,577 874,397 Total additions 1,382,2294,094 1,382,390 2,768,713 Deductions: Administration17,763 43,681 61,444 Benefits62,088 415,889 477,977 Total deductions79,851 459,570 539,421 Net increase (decrease)4,094 1,302,378 922,820 2,229,292 Net assets held in trust for pension benefits, beginning of year, as restated 3,857,73766,054 8,485,461 12,409,252 Net assets held in trust for pension benefits, end of ea yr$ 5,160,11570,148$ 9,408,281$ 14,638,544$ 68 AGENCY FUNDS Manatee Protection Agency Northlake Boulevard Task Force THE VILLAGE OF NORTH PALM BEACH, FLORIDA Combining Statement of Agency Net Assets September 30, 2006 Agency Funds Manatee NorthlakeTotal ProtectionBoulevardAgency AgencyTask ForceFunds ASSETS Cash and cash equivalents $ 54,907249,863$ 304,770$ LIABILITIES Due to others $ 54,907249,863$ 304,770$ 69 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Combinin Schedule of Chanes in Aenc Net Assets and Liabilities gggy For the Year Ended Setember 30, 2006 p October 1, 2005AdditionsDeductionsSeptember 30, 2006 Manatee Protection Agency Assets Cash and cash equivalent s$ 11,522238,341$ $ 249,863$ Liabilities Due to other s $ 11,522238,341$ $ 249,863$ Northlake Boulevard Task Force Assets Cash and cash equivalents $ 27,77227,135$ $ 54,907$ Accounts receivable 638638 Total assets $ 27,77227,773$ 638$ 54,907$ Liabilities Due to other s $ 27,13427,773$ $ 54,907$ Total All Agency Funds Assets Cash and cash equivalents$ 39,294265,476$ $ 304,770$ Accounts receivable638638 Total assets $ 39,294266,114$ 638$ 304,770$ Liabilities Due to other $ 38,656266,114$ $ 304,770$ s 70 PROPRIETARY FUND (ENTERPRISE FUND) Country Club Fund THE VILLAGE OF NORTH PALM BEACH, FLORIDA Schedule of Departmental Expenses - Budget and Actual Country Club Fund - Budgetary Basis For the Year Ended September 30, 2006 Variance with Final Budget OriginalFinalPositivePercent BudgetBudgetActual(Negative)Variance Golf Maintenance Personal services608,062$ 605,062$ 583,671$ 21,391$ 3.54% Operating expenses316,345 316,345 293,695 22,650 7.16 Total Golf Maintenance924,407 921,407 877,366 44,041 4.78 Golf Pro Shop and Range Personal services361,869 361,869 252,366 109,503 30.26 Operating expenses242,145 198,145 172,893 25,252 12.74 Total Golf Pro Shop and Range604,014 560,014 425,259 134,755 24.06 Tennis Personal services86,116 86,116 86,766 (650) (0.75) Operating expenses28,359 28,359 28,978 (619) (2.18) Total Tennis114,475 114,475 115,744 (1,269) (1.11) Food and Beverage Operating expenses30,835 30,835 28,385 2,450 7.95 Administration Personal services165,879 165,879 159,006 6,873 4.14 Operating expenses 110,92060,920 83,078 27,842 25.10 Total Administratio 276,799226,799 242,084 34,715 12.54 n Clubhouse and Grounds Personal services85,498 85,498 84,303 1,195 1.40 Operating expenses61,993 61,993 101,145 (39,152) (63.16) Total Clubhouse and Grounds147,491 147,491 185,448 (37,957) (25.74) Insurance and General Liability Operating expenses38,279 38,279 23,949 14,330 37.44 Reserves Operatin 5,0005,000 9,179 (4,179) (83.58) g Contingency386,051 57,846 57,846 100.00 Total Reserves391,051 62,846 9,179 53,667 85.39 Capital Outlay Golf Maintenance60,000 60,000 35,554 24,446 40.74 Golf Pro Shop and Range1,000 1,000 1,000 100.00 Administration38,600 38,600 59,461 (20,861) (54.04) Clubhouse and Grounds149,000 149,000 16,198 132,802 89.13 Total Capital Outlay248,600 248,600 111,213 137,387 55.26 Total expenses on the budgetary basis2,725,951$ 2,400,746$ 2,018,627 382,119$ 15.92% Adjustments to reconcile to the GAAP Basis Less capital outlay costs capitalized(107,987) Add depreciation expense174,719 Total operating expenses2,085,359$ 71 STATISTICAL SECTION STATISTICAL SECTION This part of the Village of North Palm Beach's comprehensive annual financial report presents detailed unaudited information as a context for understanding what the information in the financial statement, note disclosures, and required supplementary information says about the Village's overall financial health. ContentsPage Financial Trends These schedules contain trend information to help the reader understand how the Village's financial performance and well-being have changed over time. These schedules include: Net Assets by Component72 Changes in Net Assets73 Fund Balances, Governmental Funds75 Changes in Fund Balances, Governmental Fund76 Revenue Capacity These schedules contain information to help the reader assess the Village's most significant local revenue source, the property tax. Net Assessed Value and Estimated Actual Value of Taxable Property77 Property Tax Rates Direct and Overlapping Property Tax Rates78 Principal Property Tax Payers79 Property Tax Levies and Collections80 Debt Capacity These schedules present information to help the reader assess the affordability of the Village's current levels of outstanding debt and the Village's ability to issue additional debt in the future. Ratios of Outstanding Debt by Type81 Direct and Overlapping Governmental Activities Debt82 Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the Village's financial activities take place. Demographic and Economic Statistics83 Principal Employers84 Operating Information These schedules contain service and infrastructure data to help understand how the information in the Village's financial report relates to the services the Village provides and the activities it performs. Full-Time Equivalent Village Government Employees by Function/Program85 Operating Indicators by Function/Program86 Capital Asset Statistics by Function/Program87 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. VILLAGE OF NORTH PALM BEACH NET ASSETS BY COMPONENT LAST FIVE FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Unaudited Fiscal Year 20022003200420052006 Governmental Activities: Invested in capital assets, net of related debt2,247,206$ 3,563,142$ 3,762,961$ 3,535,596$ 8,118,771$ Restricted2,058,096613,459470,15519,828160,168 Unrestricted2,792,8932,350,3423,527,8656,654,9897,137,359 Total governmental activities net assets7,098,1956,526,9437,760,98110,210,41315,416,298 Business-Type Activities: Invested in capital assets, net of related debt2,151,5102,165,5292,131,3671,919,1941,999,124 Restricted Unrestricted568(65,937)(5,195)270,374415,864 Total business-type activities net assets2,152,0782,099,5922,126,1722,189,5682,414,988 Primary government: Invested in capital assets, net of related debt4,398,7165,728,6715,894,3285,454,79010,117,895 Restricted2,058,096613,459470,15519,828160,168 Unrestricted2,793,4612,284,4053,522,6706,925,3637,553,223 Total primary government net assets$ 8,626,5359,250,273$ 9,887,153$ 12,399,981$ 17,831,286$ Note: Data not available prior to fiscal 2002 implementation of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. 72 VILLAGE OF NORTH PALM BEACH CHANGES IN NET ASSETS LAST FIVE FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Unaudited Fiscal Year 20022003200420052006 Expenses Governmental activities: General government1,474,645$ 2,781,333$ 3,174,460$ 2,127,009$ 1,777,300$ Public safety5,179,278 5,195,338 5,294,399 6,038,846 7,036,117 Public services4,240,543 3,482,975 3,549,178 5,091,305 4,131,500 Community development and planning- - - - 657,112 Leisure services1,464,072 1,539,771 1,280,483 1,635,784 2,562,627 Other government- - - 842,561 2,049 Interest on long-term debt173,488 128,507 40,580 151,233 241,995 Total governmental activities expenses12,532,026 13,127,924 13,339,100 15,886,738 16,408,700 Business-type activities: Country club2,602,160 2,676,883 2,567,690 2,607,712 2,124,927 Total business-type activities2,602,160 2,676,883 2,567,690 2,607,712 2,124,927 Total primary government expenses15,134,186$ 15,804,807$ 15,906,790$ 18,494,450$ 18,533,627$ Program Revenues Governmental activities: Charges for services: General government4,689$ 342,936$ 355,118$ 285,386$ 158,160$ Public safety307,690 258,723 273,391 329,081 388,671 Public services640,498 727,016 895,291 1,326,820 140,923 Community development and planning- - - - 1,175,252 Leisure services175,382 174,589 147,773 78,475 528,983 Other government- - - - - Operating grants and contributions94,252 82,134 89,362 1,392,729 998,573 Capital grants and contributions92,461 102,560 - - 462,394 Total governmental activities program revenues1,314,972 1,687,958 1,760,935 3,412,491 3,852,956 Business-type activities: Charges for services: Country club2,447,220 2,510,258 2,548,259 2,658,468 2,167,089 Operating grants and contributions- - - - 68,883 Capital grants and contributions- 10,000 - - - Total business-type activities program revenues2,447,220 2,520,258 2,548,259 2,658,468 2,235,972 Total primary government program revenues3,762,192$ 4,208,216$ 4,309,194$ 6,070,959$ 6,088,928$ (continued) 73 VILLAGE OF NORTH PALM BEACH CHANGES IN NET ASSETS (continued) LAST FIVE FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Unaudited Fiscal Year 20022003200420052006 Net (Expense)/Revenue Governmental activities(11,217,054)$ (11,439,966)$ (11,578,165)$ (12,474,247)$ (12,555,744)$ Business-type activities(154,940) (156,625) (19,431) 50,756 111,045 Total primary government net expense(11,371,994)$ (11,596,591)$ (11,597,596)$ (12,423,491)$ (12,444,699)$ General revenues and other changes in net assets: Governmental activities: Taxes: Property taxes5,369,381$ 6,365,000$ 8,451,783$ 10,070,977$ 10,881,501$ Local option gas taxes- - - - 307,043 Utility service taxes1,715,637 1,755,153 1,830,339 1,955,403 2,001,164 Franchise taxes846,178 890,285 861,708 890,297 1,150,974 Sales and use taxes1,123,319 1,148,210 1,230,803 1,277,124 1,415,917 Occupational licenses245,307 - - - - Unrestricted grants and contributions- 276,302 291,710 421,254 - Investment earnings396,025 75,023 53,600 196,699 477,420 Miscellaneous139,923 54,875 92,260 111,927 53,264 Gain/(Loss) on disposal of capital assets(151,279) - - - (7,228) Transfers- - - - 36,445 Total governmental activities9,684,491 10,564,848 12,812,203 14,923,681 16,316,500 Business-type activities: Investment earnings123,429 4,586 3,450 12,640 112,841 Miscellaneous5,390 99,553 42,560 - - Transfers(26,549) - - - (36,445) Total business-type activities102,270 104,139 46,010 12,640 76,396 Total primary government9,786,761$ 10,668,987$ 12,858,213$ 14,936,321$ 16,392,896$ Change in net assets Governmental activities(1,532,563)$ (875,118)$ 1,234,038$ 2,449,434$ 3,760,756$ Business-type activities(52,670) (52,486) 26,579 63,396 187,441 Total primary government (1,585,233)$ (927,604)$ 1,260,617$ 2,512,830$ 3,948,197$ Note: Data not available prior to fiscal 2002 implementation of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. 74 VILLAGE OF NORTH PALM BEACH FUND BALANCES, GOVERNMENTAL FUNDS LAST FIVE FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) Unaudited 20022003200420052006 General Fund Reserved566,908$ 354,396$ 218,882$ 197,163$ 308,836$ Unreserved2,879,837 1,654,593 2,883,855 5,771,684 7,022,606 Total general fund3,446,745$ 2,008,989$ 3,102,737$ 5,968,847$ 7,331,442$ All other Governmental Funds Reserved2,058,096$ 613,459$ 470,155$ 19,828$ -$ Unreserved, reported in: Special revenue funds- - - - 400,000 Capital projects funds- - Capital projects funds- - - - 397,233 Total all other governmental fund$ 613,4592,058,096$ 470,155$ 19,828$ 797,233$ s Note: Data not available prior to fiscal 2002 implementation of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. 75 VILLAGE OF NORTH PALM BEACH CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST FIVE FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) Unaudited Fiscal Year 20022003200420052006 Revenues: Taxes8,197,886$ 9,292,822$ 11,439,823$ 13,236,952$ 14,340,682$ Licenses and Permits648,873 686,548 712,184 1,131,903 1,128,658 Intergovernmental1,349,831 1,280,228 1,350,104 2,804,985 2,914,057 Charges for services521,660 665,496 719,589 647,915 1,003,660 Fines and forfeitures168,995 113,391 122,407 234,513 165,496 Investment earnings139,923 75,023 53,600 196,699 477,421 Miscellaneous123,574 139,354 175,431 83,205 130,515 Total revenues11,150,742 12,252,862 14,573,138 18,336,172 20,160,489 Expenditures General government1,344,492 1,360,072 1,532,561 2,061,545 1,648,131 Public safety4,263,883 4,758,982 5,019,361 5,713,904 6,494,578 Public services3,265,242 3,285,603 3,280,274 5,019,739 4,708,196 Community development and planning651,331 Leisure services1,081,833 1,216,156 1,256,066 1,376,950 1,682,030 Other government434,199 1,298,492 1,186,730 817,293 2,049 Capital outlay2,252,088 2,542,819 581,938 - 1,917,377 Debt service Principal828,975 939,396 955,184 903,225 879,527 Interest196,072 136,676 40,580 151,233 199,373 Total expenditures13,666,784 15,538,196 13,852,694 16,043,889 18,182,592 Excess of revenues over (under) expenditures(2,516,042) (3,285,334) 720,444 2,292,283 1,977,897 Other financing sources (uses) Transfers in271,340 1,471,529 Transfers out(271,340) (1,471,529) Capital lease588,000 Proceeds from debt issuance403,000 230,000 123,500 Premium on bonds issued Discount on bonds issued Sale of capital assets11,229 Capital leases Miscellaneous(56) Total other financing sources (uses)599,229 402,944 230,000 123,500 - et change in fund balances(1,916,813)$ (2,882,390)$ 950,444$ 2,415,783$ 1,977,897$ N Debt service as a percentage of noncapital expenditures9.87%9.03%8.11%7.03%7.10% 76 VILLAGE OF NORTH PALM BEACH NET ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Real Property Fiscal Year Total Net Ended Sept Tax Role ResidentialCommercialPersonalMarket - Total Direct 30YearPropertyPropertyPropertyAssessed ValueTax Rate 19971996603,600,525 92,371,112 31,398,755727,370,392 5.06 19981997620,048,03297,758,10535,879,717753,685,8545.40 19991998625,385,715109,456,29935,742,548770,584,5625.60 20001999653,605,011113,851,15636,071,964803,528,1315.60 20012000745,237,484122,793,25040,169,760908,200,4945.75 20022001823,286,154124,216,20242,791,419990,293,7755.60 20032002963,091,506128,216,55244,276,4991,135,584,5575.80 200420031,092,433,722147,927,93344,914,1241,285,275,7796.80 200520041,180,028,585208,240,33849,767,2861,438,036,2097.27 200620051,441,249,707179,827,66544,422,8171,665,500,1896.80 Note: Assessed values are established by the Palm Beach Property Appraiser's office as of January 1, each year. Assessments were increased to 100% of market value as of 1980. Property in the Village is reassessed each year. Property is assessed at actual value, therefore the assessed values are equal to actual value. Tax rates are per $1,000 of assessed value. Source:Palm Beach County Property Appraiser 77 VILLAGE OF NORTH PALM BEACH PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS Unaudited Overlapping Rates (1) Village ofPalm BeachTotal N. Palm BeachCountyPalm Special Direct and Fiscal Tax RollGeneralSchoolBeachDistrictsOverlapping Year YearOperationsDistrictCountyRates 199719965.069.794.522.28621.653 199819975.409.564.872.36022.184 199919985.609.684.862.23422.374 200019995.608.924.942.26221.716 200120005.758.924.942.26321.867 200220015.608.954.942.45621.939 200320025.808.784.812.48821.875 200420036.808.574.792.55622.718 200520047.278.434.772.52622.996 200620056.808.114.722.50422.129 Note:All millage rates are based on $1 for every $1,000 of assessed value. Source:North Palm Beach: Notice of Ad Valorem Taxes and Non-Ad Valorem Assessments (1)Overlapping rates are those of local and county governments that apply to property owners within the Village of North Palm Beach. Not all overlapping rates apply to all Village of North Palm Beach property owners (i.e. The rates for special districts apply only to the proportion of the government's property owners whose property is located within the geographic boundaries of the special district.) 78 VILLAGE OF NORTH PALM BEACH PRINCIPAL PROPERTY TAX PAYERS CURRENT YEAR AND 1999 Unaudited 20061999 PercentagePercentage of Totalof Total Village NetVillage Net TaxableTaxableTaxableTaxable AssessedAssessedAssessedAssessed TaxpayersValueRankValueValue 1998RankValue Greater Fla Inv Co &25,530,387$ 11.53%$ Domani Development, LLC22,867,125 21.37% Olen Residential Realty16,800,000 31.01%9,148,828 11.18% Crystal Tree NPB16,465,781 40.99% Sanctuary Bay Trust Corporation13,200,300 50.79% Wolfchase Associates, L.L.C.10,000,000 60.60% Old Port Cove Development11,242,451 70.68% Greater Florida Investment Company5,840,000 3.76% Riverside National Bank of Florida6,153,244 80.37% Village Shoppers at US 1 LLC5,500,000 90.33% Transcontinental Atrium, Inc.4,200,000 5.54% 701 US One, Inc.5,160,153 100.31% Pavilion Office Center5,130,000 110.31%2,900,000 9.38% PaineWebber Equity Partners 17,600,000 2.98% WCI Communities Limited Partnership4,335,950 4.56% Morse, Edward J., Inc 6.48%3,702,146 Roschman, M. Elaine TR3,300,000 7.43% Pulte Home Corporation3,120,000 8.40% DeSantis, Conrad J. TR2,787,200 10.36% Total138,049,441$ 8.29%46,934,124$ 6.07% Source: Palm Beach Country Appraiser Note : Assessed values are established by thethe Palm Beach Property Appraiser's offices as of January 1, each year. 79 VILLAGE OF NORTH PALM BEACH PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN CALENDAR YEARS Unaudited Collected within the Fiscal YearTotal Collections Fiscal YearTotal TaxesCollections in of the Levyto Date EndingTax Roll Levied for Percent Subsequent Percent Sept 30,YearFiscal YearAmountof LevyYearsAmountof Levy 199719963,701,075$ 3,574,562$ 96.58%4,379$ 3,578,941$ 96.70% 199819974,105,193 3,961,574 96.50%5,861 3,967,435 96.64% 199919984,327,943 4,166,035 96.26%6,721 4,172,756 96.41% 200019994,512,027 4,335,668 96.09%23,074 4,358,742 96.60% 200120005,196,021 5,013,269 96.48%4,687 5,017,956 96.57% 200220015,562,239 5,357,206 96.31%12,175 5,369,381 96.53% 200320026,597,909 6,359,478 96.39%5,522 6,365,000 96.47% 200420038,825,061 8,441,383 95.65%10,401 8,451,784 95.77% 2005200410,463,873 10,059,478 96.14%9,476 10,068,954 96.23% 2006200511,329,648 10,690,869 94.36%172,744 10,863,613 95.89% Source: Palm Beach Country Property Appraiser 80 VILLAGE OF NORTH PALM BEACH RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Business-type Governmental ActivitiesActivities Fiscal Year Percent of Ended LoansCapitalLoansPersonalPer September 30,PayableLeasesPayableTotalIncome (1)Capita (1) 19975,850,000$ 475,427$ 520,000$ 6,845,427$ N/AN/A 19985,550,000 419,498 440,000 6,409,498 N/AN/A 19995,795,386 360,592 398,179 6,554,157 N/A520.92 20005,481,150 298,552 280,000 6,059,702 11.33%502.30 20018,067,736 245,059 785,781 9,098,576 N/A745.91 20027,334,853 736,967 651,058 8,722,878 N/A715.11 20036,947,633 587,792 513,472 8,048,897 N/A659.85 20046,376,387 433,855 411,573 7,221,815 N/A592.05 20055,754,677 275,840 454,131 6,484,648 N/A513.31 20064,941,765 209,224 5,185,978 10,336,967 17.20%786.20 Note:Details regarding the Village's outstanding debt may be found in the notes to the financial statements. (1)See the Schedule of Demographic and Economic Statistics on page 83 for personal income and population data. N/AData not available. 81 VILLAGE OF NORTH PALM BEACH DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT SEPTEMBER 30, 2006 PercentageAmount NetApplicable to Applicable to Debtthe Village ofthe Village of Government UnitOutstandingNorth Palm Beach (1) North Palm Beach Debt repaid with property taxes: Palm Beach County336,020,000 1.28%4,297,648 Palm Beach County School Board54,275,000 1.28%694,170 Other Debt: Palm Beach County690,193,893 1.28%8,827,482 Palm Beach County School Board43,715,000 1.28%559,109 Subtotal, Overlapping Debt14,378,408 Village of North Palm Beach Direct Debt100%5,150,989 Total Direct and Overlapping Debt19,529,397$ Sources: Palm Beach County Tax Appraiser's Office Palm Beach County School Board Palm Beach County Clerk & Comptroller Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the Village. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the Village of North Palm Beach. This process recognizes that, when considering the Village's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. (1)For debt repaid with property taxes, the percentage of overlapping debt applicable is estimated using taxable assessed property values. Value that is within the Village's boundaries and dividing it by the County's and School Board's total taxable assessed value. This approach was also used for the other debt. 82 VILLAGE OF NORTH PALM BEACH DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN CALENDAR YEARS Median PersonalPerPalm Beach IncomeCapitaCounty (thousands CalendarPersonalUnemployment of dollars) (1) YearPopulation (1)Income (1)Rate (2) 1997- - - 6.5 1998- - - 5.8 199912,5825.3 200012,06453,48844,8694.2 200112,198- - 5.0 200212,198- - 6.0 200312,198- - 5.6 200412,198- - 5.0 200512,633- - 4.0 2006 (estimate)13,14860,10146,7263.3 Sources: Business Development Board US Census Bureau Note: (1)All information available at the current time is presented (2)North Palm Beach is not large enough to track unemployment rates. Palm Beach County rates are presented. 83 VILLAGE OF NORTH PALM BEACH PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO Unaudited 20061997 PercentagePercentage of Totalof Total EmployerEmployeesEmploymentEmployeesEmployment School Board21,616 3.40%School Board16,500 3.27% Palm Beach County6,594 1.04%State Government8,700 1.72% Columbia Healthcare Systems5,200 0.82%Palm Beach County8,600 1.70% Tenet Healthcare Corporation4,794 0.75%Pratt & Whitney Aircraft5,100 1.01% Florida Power & Light2,850 0.45%Columbia Palm Beach Health System4,000 0.79% Florida Atlantic University2,825 0.44%Intracoastal Health Systems, Inc.3,200 0.63% Boca Raton Resort & Club2,200 0.35%Flo Sun, Inc2,300 0.46% U.S. Sugar Corporation2,100 0.33%Florida Power & Light2,300 0.46% Florida Crystals2,000 0.31%Office Depot2,200 0.44% City of Boca Raton2,200 0.35%Boca Raton Community Hospital2,000 0.40% Total52,379 8.24%54,900 10.88% Source: Business Development Board of Palm Beach County * Employer: Palm Beach County Information is not available for the Village of North Palm Beach **Percentage of total employment is calculated using Palm Beach County's available labor force in each of the respective years presented. 84 VILLAGE OF NORTH PALM BEACH VILLAGE EMPLOYEES LAST TEN FISCAL YEARS (*) Unaudited 2000200120022003200420052006 Number of Employees: General Government Village Manager - Full-Time1111111 Assistant Village Manager - Full-Time1111110 Systems Specialist - Full -Time1111112 Executive Secretary - Full-Time1111111 Human Resources2 Village Clerk - Full-Time000033 Finance Full-time4455555 Part-Time1100000 Public Works Full-time61616161616254 Part-Time4448863 Public Safety Full-time60636366666166 Part-Time13121214141514 Community Development and Planning Full-time0000000 Part-Time0000000 Leisure Services Library Full-time8999987 Part-Time9887778 Recreation Full-time55566515 Part-Time6141414141531 Other Government - Country Club Full-time24222425252418 Part-Time28343627272724 Total Number of Employees Budgeted FY Ending227241245246246242254 * Variance exists due to the employment of seasonal and part-time employees **Information is not available prior to fiscal year 2000 Source:Village of North Palm Beach Budget Report 85 VILLAGE OF NORTH PALM BEACH OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (1) Unaudited Fiscal Year 1997199819992000200120022003200420052006 FUNCTION/PROGRAM GENERAL GOVERNMENT Number of Residential Units- - - 7,349 - - - - - - PUBLIC WORKS Street Maintenance (No. of lane miles maintained)31.15531.15531.15531.15531.15531.15531.15531.15531.15531.155 Sanitation (Tons of Refuse Collected)- - - - 11,63312,99613,13618,84214,037(2) No. of collection units for solid waste (residential) - 7,0727,0277,0197,2417,3287,4347,4707,5197,558 Number of vehicles maintained93939393939595959595 Number of repair overlays completed - - - 0.6620.6622.8403.7875.5872.4622.935 PUBLIC SAFETY Number of arrests by police officers290234161272381246320315331410 Number of traffic citations issued3,8252,0553,1295,5066,5023,9362,5643,1105,7434,272 EMS average response times (minutes)- - 4.003.045.433.332.944.423.984.69 Number of EMS calls- - 5037448128539221,0669651,056 COMMUNITY DEVELOPMENT & PLANNING Building Department - Number of Permits119135121251278205224201201(3) Number of code enforcement violations- - - - - - - - - 1,767 Number of code violations brought to board (Calendar Yr End)- - - - - 101120145165144 RECREATION Number of community events presented- 121313131314152221 Number of registrants in athletic programs1,8901,9252,0852,1002,1852,1851,7501,5751,4001,520 LIBRARY Library - Number of Volumes41,517 41,908 42,637 44,686 45,700 47,339 47,960 47,531 54,074 47,371 OTHER GOVERNMENT Country Club Number of Golf Members- - - - - - - - - 365 Number of Tennis Members- - - - - - - - - 136 (1)Available information for fiscal years 1997 through 2006 is presented (2)Tons of refuse collected for 2006 will not be available until April 1, 2007 (3)An accurate number of building permits issued for 2006 is not available - computer systems crash Source: Village of North Palm Beach U.S. Census Bureau 86 VILLAGE OF NORTH PALM BEACH CAPITAL STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS Unaudited Fiscal Year 1997199819992000200120022003200420052006 Function/Program: General Government No. of General Government Buildings12121211111111111111 Public Works Square Miles5.185.185.185.185.185.185.185.185.185.18 Miles of Streets36.0036.0036.0036.0036.0036.0036.0036.0036.0036.00 Number of Street Lights425425425425425425425425425425 Public Safety Fire: Number of Stations1111111111 Number of Substations----000111 Number of Fireman & Officers555558888- Number of Fireman/Paramedics---------23 Police/EMS Protection: Number of Stations2222221111 Number of Substations- - --001111 Number of Policemen & Officers43414156563335353533 EMS Protection- 1212121213131313- Leisure Services Recreation Number of Parks4444444444 Public Tennis Courts5555444442 Swimming Pool1111111111 Number of marinas1111111111 Library Number of Libraries1111111111 Number of Volumes41,517 41,908 42,637 44,686 45,700 47,339 47,960 47,531 54,074 47,371 Other Government Country Club Golf Course1111111111 Driving Range1111111111 Tennis Courts10101010101010101010 Source: Village of North Palm Beach 87 OTHER REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Honorable Mayor and Members of the Village Council North Palm Beach, Florida We have audited the financial statements of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of the Village of North Palm Beach, Florida, as of and for the year ended September 30, 2006, which collectively comprise the Village of North Palm Beach’s basic financial statements and have issued our report thereon dated February 28, 2007. We conducted our audit in accordance with U.S. generally accepted auditing standards and the standards applicable to 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 Village of North Palm Beach, Florida's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Village of North Palm Beach, Florida's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported underGovernment Auditing Standards. We noted certain matters that we reported to the management of the Village of North Palm Beach, Florida in the attached management letter dated February 28, 2007. This report is intended solely for the information and use of the Village of North Palm Beach, Florida’s management, audit committee, members of the Village Council and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than those specified parties. Ò±©´»²ô Ø±´¬ô ú Ó·²»®ô Ðòßò February 28, 2007 89 REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 The Honorable Mayor and Members of the Village Council North Palm Beach, Florida Compliance We have audited the compliance of the Village of North Palm Beach, Florida, 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 each of its major federal programs for the year ended September 30, 2006. The Village of North Palm Beach, Florida's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of the major federal programs is the responsibility of the Village of North Palm Beach, Florida's management. Our responsibility is to express an opinion on the Village of North Palm Beach, Florida's compliance based on our audit. We conducted our audit of compliance in accordance with U.S. generally accepted auditing standards; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Village of North Palm Beach, Florida'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 Village of North Palm Beach, Florida's compliance with those requirements. In our opinion, the Village of North Palm Beach, Florida, complied, in all material respects, with the requirements referred to above that are applicable to each of the major federal programs for the year ended September 30, 2006. Internal Control Over Compliance The management of the Village of North Palm Beach, Florida 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 Village of North Palm Beach, Florida's internal control over compliance with 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 in accordance with OMB Circular A-133. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the Village of North Palm Beach, Florida’s management, audit committee, members of the Village Council and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than those specified parties. Ò±©´»²ô Ø±´¬ô ú Ó·²»®ô Ðòßò February 28, 2007 91 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Schedule of Expenditures of Federal Awards For the Fiscal Year Ended September 30, 2006 Agency or Federal Grantor/Pass-ThroughCFDA Pass-ThroughFederal Grantor/Program Title Number Number Expenditures Major Federal Programs: U.S. Department of Homeland Security Passed through Florida Department of Community Affairs - Disaster Grants - Public Assistance (Presidentially Declared Disasters)97.036645,272$ U.S. Department of Transportation Passed through Florida Department of Transportation Highway Planning and Construction20.205462,394 Other Federal Programs: U.S. Department of Justice Local Law Enforcement Block Grant 16.5924,993 Total federal awards1,112,659$ NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES This schedule of expenditures of federal awards is a summary of the activity of the Village's federal award programs presented on the accrual basis of accounting in accordance with generally accepted accounting principles. 92 THE VILLAGE OF NORTH PALM BEACH Schedule of Findings and Questioned Costs September 30, 2006 Section I—Summary of Auditors’ Results Financial Statements Type of auditors’ report issued: Unqualified Internal control over financial reporting: yes Xno Material weakness identified? Reportable condition identified that is not considered to be a material yes Xnone reported weakness? Noncompliance material to financial statements noted? yes Xno Federal Awards Internal control over major programs: yes Xno Material weakness identified? Reportable condition identified that is not considered to be a material yes Xnone reported weakness? Type of auditors’ report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133? yes Xno Identification of Major Programs CFDA Numbers Name of Federal Program or Cluster DEPARTMENT HOMELAND SECURITY 97.036 Disaster Grants – Public Assistance DEPARTMENT TRANSPORTATION 20.205 Highway Planning and Construction Dollar threshold used to distinguish between type A and type B programs: $300,000 Auditee qualified as low-risk auditee? X yesno 93 THE VILLAGE OF NORTH PALM BEACH Schedule of Findings and Questioned Costs September 30, 2006 SECTION II - FINANCIAL STATEMENTS FINDINGS No material weaknesses were identified during the audit of the financial statements nor were any instances of noncompliance material to the financial statements of the Village of North Palm Beach, Florida disclosed during the audit. SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS DEPARTMENT OF HOMELAND SECURITY Disaster Grants – Public Assistance CFDA No. 97.036 DEPARTMENT OF TRANSPORTATION Highway Planning and Construction CFDA No. 20.205 No material weaknesses in internal control were disclosed by the audit of the major federal award programs, nor were any audit findings relative to the major federal award programs identified that are required to be reported under OMB Circular A-133. SECTION IV—SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS No matters were reported in the prior period. 94 MANAGEMENT LETTER The Honorable Mayor and Members of the Village Council Village of North Palm Beach, Florida We have audited the basic financial statements of the Village of North Palm Beach, Florida, as of and for the year ended September 30, 2006, and have issued our report thereon dated February 28, 2007. We conducted our audit in accordance with United States generally accepted auditing standards, and Government Auditing Standards issued by the Comptroller General of the United States. We have issued our Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards. Disclosures in that report, which is dated February 28, 2007, should be considered in assessing the results of our audit. Additionally, our audit was conducted in accordance with the provisions of Chapter 10.550, Rules of the Auditor General, which require that we address certain compliance and other matters in the management letter, if not already addressed in the auditor’s report on internal control over financial reporting and on compliance and other matters. In planning and performing our audit of the basic financial statements of the Village of North Palm Beach, Florida, as of and for the year ended September 30, 2006, we considered the Village’s internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the basic financial statements and not to provide an opinion on the internal control. While our purpose was not to provide an opinion on internal control, certain matters came to our attention that we want to report to you. We do not wish to imply that they cover every possible weakness or strength. Nevertheless, we do think they deserve your careful evaluation. The status of these comments will be reviewed during the next audit engagement. We have already discussed these comments with the Village’s management and we will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. PRIOR YEAR COMMENTS The Rules of the Auditor General require that we address in the management letter, if not already addressed in the auditor’s report on compliance and internal controls or schedule of findings and questioned costs, whether or not recommendations made in the preceding annual financial audit report have been followed. We noted that all prior year comments in the management letter were addressed by the village and no longer apply. CURRENT YEAR COMMENTS Country Club Accounts Receivable – Member charges At September 30, 2006, we noted that the country club household balance report (detailed member charge subsidiary ledger), monthly member statements and the accounts receivable for member charges posted in the general ledger do not agree with each other. There appears to be a computer program error in the Village’s point of sale system (POS) system causing it to not recognize certain transactions. These transactions and reports are generated from the same computer program (POS system) and should be reconciled monthly so that an accurate recap of the accounts receivable can be easily obtained. We recommend that management continue their efforts, and take the necessary steps to ensure that all member charges, payments and adjustments processed through the POS system are reflected in the end of the month reports, statements and general ledger and develop procedures to ensure that differences are identified, researched, and resolved on a timely basis to complete the reconciliation process. Management Response: The difference between the Monthly POS System reports and the general ledger continues to be an issue. Staff is working with Vermont Systems on developing a report that consistently and accurately reflects the Country Club activity. The daily accounting function for the Country Club has been relocated to the Finance Department where it can be closely monitored and statements reconciled. Golf Shop Inventory We noted that golf shop merchandise inventory have not been counted and reconciled to the detailed accounting records at year end. The golf shop merchandise and subsidiary accounting detail reconciliation is important in maintaining control over inventory and to discover errors and irregularities. We recommend that a perpetual inventory system be established through the point of sale system and periodic physical counts should be made of these items, and the physical counts should be reconciled to the perpetual records and the general ledger be adjusted accordingly. This will improve the efficiency of the inventory process and will provide a test of the accuracy of both systems, determine the causes for the differences so that procedural weaknesses may be investigated and resolved. 96 Management Response: Country club management has implemented procedures to track inventory through the point of sale system and perform a monthly physical count of the golf shop merchandise that reconciles the POS system with the actual physical counts and adjusting the general ledger inventory to the actual balance. Monthly inventory th reports to be received by Finance Department by the 5 of each month. Employees’ Pension Funds We noted that the yearly pension activity for contributions, benefits, administrative fees, investment fees, and investment earnings was not recorded into the Employees’ Pension Funds. There were no policies and procedures to address receiving the monthly statements from the custodian and recording the activity into the general ledger. We recommend that the Village implement procedures to ensure that custodial monthly and/or quarterly statements are received timely and that all activity is recorded into the Village’s financial records. Management Response : During this reporting period there was a change in Plan Administration and required monthly statements were not received. This has been since rectified and statement activity is being posted into the general ledger. This function will also be included in the Village’s regulatory calendar to ensure proper recording. Required Employer Contributions to Employees’ Pension Funds We noted that the actuarial required contributions for the General Employees and Fire and Police Pensions Plans for the fiscal year ended September 30, 2006, were $1,007,695 and $690,189, however the actual contributions made were $894,109 and $633,796 resulting in an under funding of $113,586 in the General Employees Pension and $56,390 in the Fire and Police Pension. The under funding was caused by a calculation error in arriving at the employer portion of the cost. The Village subtracted the estimated employee contribution from the amount calculated in the actuarial report; however, the amount calculated was already net of the estimated employee contribution. We recommend that the Village follow the annual required contribution per the latest actuarial report and confirm this amount with the Village’s actuary if there are any questions. Management Response : This was an error by previous management and will be corrected by implementing the above recommendation to prevent future occurrences, and the proper payment will be made to correct the underpayment based upon the advice of the Village actuary. 97 Use of Developer’s Fees We noted that Developer’s Fees were collected for development of two separate properties. Resolution 2006-75 was passed authorizing the use of the funds for landscaping of the Village Hall and Prosperity Farms Road. In addition, a contractual arrangement was made to reduce the fees paid by one developer in exchange for the developer paving a driveway that was the obligation of the Village. Village ordinance Section 36-23 stipulates that such funds collected shall “be utilized for parks and recreational purposes as determined by the village council.” We did not see any documentation with Resolution 2006-75, showing that a determination was made that the uses of the funds approved by the Village Council were for parks and recreational purposes as required by the ordinance. We recommend that in the future, as developer’s fees are spent, the resolution cite the ordinance and explain how the use of the funds complies with the ordinance. Management Response : An agreement between the Village Council and the developer for the acceptance of a payment of fair market value of land in lieu of land dedication had been agreed upon. The above Resolution (2006-75) was approved by Council indicating “Development Fees” being transferred to Village Hall and Prosperity Farms Landscaping. All future Development fee appropriations will be disbursed in accordance with Village Ordinance. Purchasing Policy Violations We have noted below instances in which Village purchasing policies were not followed. These violations involved purchases made without prior approval, purchases made without properly requesting bids or quotes, and improper authorization of sole source purchases. Specific examples are noted below: 1.Fertilizer was purchased from a vendor for the Country Club in which the purchase order was signed after the invoice date and no vendor bids or quotes were noted. (A letter of reprimand from the Country Club Director to the employee at fault was attached to the supporting documentation for check number 055552 and referenced repeated violations of purchasing policy.) 2.A generator was rented from a vendor without a signed purchase order. (A memo was attached to the invoice from the Golf Course Superintendent to the Project Manager acknowledging he was unaware that the generator had been rented.) 3.A check was written to a vendor for $34,800 on May 12, 2006 for Heritage Day amusement rides. No other bids or quotes were noted. The check was issued based upon the proposal received. There was no vendor invoice included in the documentation provided by the Village. 98 4.An invoice dated December 1, 2005 for $12,653 was received from a vendor for hurricane debris removal services. No bids or quotes were noted. The vendor proposal supplied by the Village was dated June 21, 2005 and was valid for ninety days. The contract for services was signed by Village Council on January 12, 2006. 5.Defibrillators were purchased for $22,694 as a sole source item and approved by the Village Manager. The purchase was in excess of the $10,000 threshold, requiring Village Council approval. Failure to adhere to purchasing policies compromises the ability of the Village to ensure fiscal accountability. Management Response :All of the above purchasing policy violations and irregularities have been addressed. Violations were documented and corrective action taken. Administrative routing procedures have been revised requiring budgetary oversight and verification by the Finance Department prior to receiving final approval. These newly implemented administrative procedures will more closely monitor and ensure compliance. OTHER MATTERS Oversight Unit and Component Units The Village of North Palm Beach, Florida, is a municipal corporation incorporated in 1956 pursuant to Chapter 31481, Laws of Florida, Extraordinary session 1956. Based upon the application of criteria defined in publications cited in Chapter 10.553, Rules of the Auditor General, the Village has determined that there are no component units related to the Village. Consideration of Financial Emergency Criteria As required by the Rules of the Auditor General, our audit included a review of whether or not the village has met one or more of the conditions described in Section 218.503(1), Florida Statutes. The results of our procedures did not indicate that the Village of North Palm Beach, Florida is in a state of financial emergency as a consequence of the conditions described in Section 218.503(1). Financial Condition Assessment Procedures As required by Rules of the Auditor General Section 10.554(1)(h)6.c, we applied financial condition assessment procedures for the Village of North Palm Beach, Florida. It is management’s responsibility to monitor the City’s financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by management. The results of our procedures did not disclose any maters that are required to be reported. 99 Annual Financial Report In connection with our audit, we reviewed the Annual Financial Report of Units of Local Government filed by the Village of North Palm Beach, Florida with the Florida Department of Banking and Finance pursuant to Section 218.32(1)(a), Florida Statutes, for the year ended September 30, 2006. We noted that the amounts reported in the Annual Financial Report were in substantial agreement with the annual financial audit report for the year ended September 30, 2006. Investment of Public Funds As required by the Rules of the Auditor General, our audit included a review of the Village’s compliance with Section 218.415, Florida Statutes. The results of our procedures did not disclose any instances of noncompliance with Section 218.415 Florida Statutes by the Village of North Palm Beach, Florida for the year ended September 30, 2006. However, our audit does not provide a legal determination on the City’s compliance with this requirement. Excess of Expenditures Over Appropriations As indicated on page 62 in Note 2 to the Budgetary Required Supplementary Information for the year ended September 30, 2006, there were departments that had expenditures in excess of appropriations contrary to Section 166.241(2) Florida Statutes. Other Current Year Comments The rules of the Auditor General require disclosure in the management letter of the following matters if not already addressed in the auditor’s report on internal control over financial reporting and on compliance and other matters: (1) violations of laws, rules, regulations, and contractual provisions that have occurred, or are likely to have occurred; (2) improper or illegal expenditures; (3) improper or inadequate accounting procedures; (4) failures to properly record financial transactions; and (5) other inaccuracies, shortages, defalcations, and instances of fraud discovered by, or that come to the attention of the auditor. Our audit as of and for the year ended September 30, 2006 did not disclose any such items that are required to be reported under Chapter 10.554(1)(h), Rules of the Auditor General and are not already addressed in our management letter. 100 This report is intended for the information of management, members of the Village Council, federal awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than the specified parties. Ò±©´»²ô Ø±´¬ô ú Ó·²»®ô Ðòßò February 28, 2007 101