Loading...
2007 CAFR ?i, t ; ~ it 0~ V v ~rl~ ~iu_,.~ ~s aJ~r~~ ~~JlJ~ J r1~~JJ~ COMPREHENSIVE ANNUAL FINANCIAL REPORT The Village of North Palm Beach, Florida ~~L~G~? ~ ~ ~ ~.~L~~' ~~- t COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended September 30, 2007 Prepared by: Finance Department Samia Janjua Director of Finance THE VILLAGE OF NORTH PALM BEACH, FLORIDA FINANCIAL STATEMENTS SEPTEMBER 30, 2007 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal .................................................................................................................................... i List of Principal Village Officials ............................................................................................................ viii Organization Chart ..................................................................................................................................... ix GFOA Certificate of Achievement for Excellence in Financial Reporting ................................................ x 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 .............................................................................................................61 Schedule of Employer and State Contributions ...................................................................................62 Notes to the Trend Data .......................................................................................................................63 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund ................................................................................................64 Notes to the Budgetary Required Supplementary Information ............................................................65 THE VILLAGE OF NORTH PALM BEACH, FLORIDA FINANCIAL STATEMENTS SEPTEMBER 30, 2007 TABLE OF CONTENTS (Continued) OTHER SUPPLEMENTARY INFORMATION: Schedule of Departmental Expenditures– Budget and Actual – General Fund....................................66 Combining Balance Sheet – Nonmajor Governmental Funds..............................................................69 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Nonmajor Governmental Funds......................................................................70 Combining Statement of Net Assets - Fiduciary Funds .......................................................................71 Combining Statement of Changes in Net Assets - Employee Retirement Funds ................................72 Combining Statement of Agency Net Assets ......................................................................................73 Combining Schedule of Changes in Agency Net Assets and Liabilities..............................................74 Schedule of Departmental Expenses – Budget and Actual – Country Club Fund................................75 STATISTICAL SECTION Net Assets by Component ....................................................................................................................76 Changes in Net Assets .........................................................................................................................77 Fund Balances, Governmental Funds ..................................................................................................79 Changes in Fund Balances, Governmental Funds ...............................................................................80 Net Assessed Value and Estimated Actual Value of Taxable Property ...............................................81 Property Tax Rates - Direct and Overlapping Governments................................................................82 Principal Property Taxpayers ...............................................................................................................83 Property Tax Levies and Collections ...................................................................................................84 Ratios of Outstanding Debt by Type....................................................................................................85 Direct and Overlapping Governmental Activities Debt........................................................................86 Pledged-Revenue Coverage..................................................................................................................87 Demographic and Economic Statistics.................................................................................................88 Principal Employers .............................................................................................................................89 Full-Time Equivalent Village Government Employees by Function...................................................90 Operating Indicators by Function/Program .........................................................................................91 Capital Asset Statistics by Function/Program......................................................................................92 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..................................93 Management Letter in Accordance with the Rules of the Auditor General of the State of Florida ................................................................................................................................96 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 24, 2008 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, 2007. 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 Nowlen, Holt & Miner, P.A., Certified Public Accountants, have issued an unqualified (“clean”) opinion on the Village of North Palm Beach’s financial statements for the year ended September 30, 2007. The independent auditor’s report is located at the front of the financial section of this report. Management’s discussion and analysis (MD&A) immediately follows the independent auditor’s report and provides a narrative, overview, and analysis of the basic financial statements. MD&A complements this letter of transmittal and should be read in conjunction with it. The CAFR’s role is to assist in making economic, social and political decisions and to assist in assessing accountability to the citizenry by: comparing actual financial results with the legally adopted budget, where appropriate; assessing financial condition and results of operations; assisting in determining compliance with finance related laws, rules and regulations; assisting in evaluation the efficiency and effectiveness of Village operations. 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. 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. ii 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). 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 (60%) from ad valorem property taxes. Gross assessed property values had increased substantially (67%) between the years of 2002 thru 2006 but slowed significantly in 2007. The Village does not anticipate a change in the pace of planned new growth since most vacant property within the municipal limits has already been developed. The Village anticipates a very moderate increase, if any, 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. With the passing of Amendment One (Property Tax Reform) in January of this year the Village’s property tax valuation will assuredly be negatively impacted but to what extent has yet to be fully determined. Three primary factors play a role on the actual impact, doubling the Homestead exemptions to fifty thousand dollars, capping of assessed property values for those homes not currently homesteaded and Portability. The latter two factors can not be easily measured but the doubling of the Homestead Exemption on the Villages Homesteaded properties alone will have a negative consequence of roughly $673,745 on our annual tax revenues. Political discussions continue regarding other alternative taxations which make future forecasts of Village property tax valuation uncertain.The Village will continue to pursue annexation of surrounding unincorporated areas that complement 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. Investment Revenues: The softening of the Money Markets and the decision to reduce investment in the Local Government Investment Pool following an unprecedented “Run” on that Fund has had significant adverse effects on to the Village’s investment revenues for fiscal year 2007/2008. The Village has made a conscious decision to modify its investment strategies towards the Treasury Market to better protect and ensure the availability of Village’s investment balances. The Village has adopted a policy to secure 1/12 of its annual operating budget in an interest bearing Commercial Bank account so as not to impede operations should liquidity be temporary reduced. iii 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. 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) have been successfully negotiated and ratified through vote of the respective th Unions and Village Council and will run through September 30 2009. 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. 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. As was suggested in last year’s report the Tennis component was relocated from the Country Club enterprise fund to the general fund under Parks and Recreation. Under this option the Village is eligible to seek outside grant funding for structural and non-structural improvements, an option that was not available to the Village under the enterprise fund. Village Council has appropriated $250,000 for the construction of a new facility to be located on the same site. Groundbreaking for the permanent facility is anticipated in early 2008; the Facility will likely not be completed until FY2009. Public Safety North Substation: The Village has placed the proposed North Sub-station on hold principally due to increased level of service standards which were imposed and met by partnering with Palm Beach Gardens and Palm Beach County Fire Rescue services. Calls for service and level of care to residents north of the Parker Bridge will continue to be monitored. Administration anticipates discussions during the upcoming budgetary session concerning alternative uses for the newly acquired parcel of land along Carolinda Drive. iv 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. It is anticipated that the Village will begin this migration during FY2008 but will likely not be fully operational until next year. 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. The Task Force has begun to work on the implementation of Phase II which extends from Southwind Drive westward to Alternate A1A. 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 placed the Village in litigation which was subsequently settled. The completion of this improvement project should occur prior to the end of fiscal year 2008. Earman River Water Supply Line: The existing irrigation system for the Country Club/Golf Course, U.S. 1 Median and Village Parks is supplied by the Earman River. This supply line runs from the Earman River to the Lake th 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 were provided for in 2007 with the remaining line to be replaced over the next few years. This remains an active and ongoing project. 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 v second phases being completed in 2004 and phase three reaching completion in 2005. The Johnson’s completion of the remaining two canals has been stalled due to the identification of sea-grass which is a natural food source for the manatee population and as such is highly regulated by various Federal and State agencies. The Village has and continues to actively pursue the necessary permits required for the dredging of these two remaining canals in hopes that the dredging project will be moved forward and completed. Lighthouse Road 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 Road 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 originally anticipated to begin during fiscal year 2006/2007 but has been delayed until fiscal year 2008. Osborne Park Facility renovations: The Village in 2006 appropriated $300,000 for the renovation of the Osborne Park gym facility. Construction Bids for the renovation were solicited, accepted and subsequently awarded to a local construction company. On July 2007 an additional $53,969 was appropriated for the project by Village Council. In late 2007 the contract between the Village and the contractor had to be terminated due to “failure to perform clauses.” The project has since undergone some th moderate structural modifications and necessitated re-bidding. On Wednesday March 12 2008 eleven submissions were received and as of this writing staff is performing comparative analysis so that the appropriate recommendation can be made to Council. It is anticipated that construction will begin sometime toward the end of May 2008. 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 been awarded a total of $1,600,000 in grant funds to which the Village will match $800,000 for a total of $2,400,000. The grant project funds awarded for Lakeside Park total $105,000 and will include a Village match of $105,000 for a total of $210,000. For Village Pool Improvements, The Village has been awarded $50,000 from Palm Beach County for Village Pool improvements with no match required by the Village. The Village has also been awarded a FRDAP Pool grant in the amount of $200,000, which the Village will match with $200,000 for a total of $400,000. OTHER INFORMATION Independent Audit Article 11, Section 2.18 of the Village Charter requires an annual audit of the books of account, financial records, and transactions of all administrative departments of the Village by independent certified public accountants selected by the Village Council. This requirement has been complied with, and the independent auditor's report has been included in this report. vi Certificate of Achievement The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement of Excellence in Financial Reporting to the Village of North Palm Beach for its Comprehensive Annual Financial Report for the fiscal year ending September 30, 2006. The Certificate of Achievement is a prestigious national award, recognizing conformance with the highest standards for preparation of state and local government financial reports. vii THE VILLAGE OF NORTH PALM BEACH, FLORIDA PRINCIPAL VILLAGE OFFICIALS SEPTEMBER 30, 2007 Title Name Mayor Edward M. Eissey Vice Mayor William Manuel President Pro Tem David B. Norris Council Member Darryl C. Aubrey Council Member T.R. Hernacki Village Manager Jimmy Knight Director of Finance Samia Janjua Village Clerk Melissa Teal viii Ä 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, 2007, 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, 2007, and the respective changes in financial position, thereof for the year then ended in conformity with U.S. generally accepted accounting principles. 1 In accordance with Government Auditing Standards, we have also issued our report dated March 24, 2008, 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 61 through 65 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 other supplemental information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. 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. March 24, 2008 West Palm Beach, Florida 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, 2007. 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 20072006(Decrease)Page # Total net assets$22.28$17.83$4.4511 Unrestricted net assets available for future use$9.43$7.55$1.8811 Governmental net assets$19.93$15.42$4.5111 Total revenues from all sources$24.85$22.48$2.3712 Governmental revenues$21.34$20.13$1.2112 Total cost of all Villageprograms$20.40$18.53$1.8712 Governmental revenues over (under) expenses$4.52$3.76$0.7613 General fund revenues over (under) expenses$2.39$2.67($0.28)16 General fund unreserved fund balance$8.18$7.02$1.1614 As a percent of general fund expenditures46.50%41.96%4.54% Country Club revenues over (under) expenses($0.07)$0.19($0.26)19 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 year's revenues and expenses are taken into account, regardless of when cash is received or paid. 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 14-17 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 pages14-17 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 $22.28 million at the close of the most recent fiscal year. A significant portion of the Village's net assets (57.16%) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment); less any related debt used to acquire those assets that is still outstanding. The Village uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Village's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Village of North Palm Beach Net Assets (In Thousands) GovernmentalBusiness ActivitiesActivitiesTotal 200720062007200620072006 Assets: Current and other assets12,160$ 9,138$ 1,078$ 2,658$ 13,238$ 11,796$ Capital assets14,906 13,270 7,275 6,690 22,181 19,960 Total assets27,066 22,408 8,353 9,348 35,419 31,756 Liabilities: Current liabilities1,306 859 914 1,613 2,220 2,472 Long-term debt outstanding5,822 6,127 5,092 5,320 10,914 11,447 Total liabilities7,128 6,986 6,006 6,933 13,134 13,919 Net assets: Invested in capital assets, net of debt10,544 8,119 2,196 1,999 12,740 10,118 Restricted113 160 113 160 Unrestricted9,281 7,143 151 416 9,432 7,559 Total net assets19,938$ 15,422$ 2,347$ 2,415$ 22,285$ 17,837$ Governmental Activities Governmental activities increased the Village's net assets by $4.51 million, thereby accounting for 100% of the total increase in the net assets of the Village. An increase in Governmental Capital Assets ($1.63m) is due to an increase in capital improvement projects. Key elements of this increase are as follows: 5 Village of North Palm Beach Changes in Net Assets (In Thousands) GovernmentalBusiness ActivitiesActivitiesTotal 200720062007200620072006 Revenues: Program revenues: Charges for services2,121$ 2,392$ 3,464$ 2,167$ 5,585$ 4,559$ Operating grants and contributions170 998 - 68 170 1,066 Capital grants and contributions1,455 462 - - 1,455 462 General revenues: Property taxes12,076 10,882 12,076 10,882 Local option gas taxes292 307 292 307 Utility service taxes2,001 2,001 2,001 2,001 Sales and use taxes1,208 1,416 1,208 1,416 Franchise taxes1,340 1,151 1,340 1,151 Grants and contributions not restricted to specific programs - Investment earnings650 477 44 113 694 590 Miscellaneous9 53 9 53 Contribution-Support Our Troops15 - 15 - Gain (loss) on asset disposals(7) - (7) Total revenues $ 20,13221,337$ 3,508$ 2,348$ 24,845$ 22,480$ The Village's programs include General Government, Public Safety, Public Works, Community Development and Planning, 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 Changes in Net Assets (In Thousands) GovernmentalBusiness Activities ActivitiesTotal 200720062007200620072006 Expenses: Program expenses: General government2,698$ 1,777$ $ $ 2,698$ 1,777$ Public safety6,6717,036 6,671 7,036 Public Works3,7334,131 3,733 4,131 Community development and planning737657 737 657 Leisure services2,7822,563 2,782 2,563 Reserves and other-2 - 2 Interest on long-term deb205242 205 242 t Country club3,571 2,125 3,571 2,125 Total expenses16,826 16,408 3,571 2,125 20,397 18,533 Transfers5 36 (5) (36) Increase (decrease) in net assets4,516 3,760 (68) 187 4,448 3,947 Net assets - beginning of year15,422 11,662 2,414 2,228 17,836 13,890 Net assets - end of yea$ 15,42219,938$ 2,346$ 2,415$ 22,284$ 17,837$ r 20072006 Total CostNet CostTotal CostNet Cost of Servicesof Servicesof Servicesof Services General government2,698$ (2,475)$ 1,777$ (1,619)$ Public safety6,671 (6,240)7,036 (6,337) Public works3,733 (3,510)4,131 (2,840) Community development and planning737 234657 518 Leisure services2,782 (885)2,563 (2,034) Reserves and other- 2 (2) Interest on long-term debt205 (205)242 (242) $ (13,081)16,826$ 16,408$ (12,556)$ The cost of all governmental activities this year was $16.8 million. Costs for the Public Safety Department decreased by $0.36 million due to the implementation of a step plan and reduced pension cost. Costs for the Public Works Department decreased by $0.39 million due to the realignment of administrative responsibilities and flattening of the organization hierarchy. The Leisure Services department experienced an increase of $0.21 million due to the transfer of the pool from the Business- Type Activities to the Leisure Services Department. As shown on the Statement of Activities, those who directly benefited from the programs paid for $2.12 million of this cost and $17.59 million was financed through general revenues. The Village added $4.51 million to fund balance during 2007. 7 Business Type Activities Business Type Activities were affected due to the Golf Course Renovation. Charges for Services increased from the prior year by $1.3m and the expenses increased by $1.44m due to the re-opening of the Golf Course. Net assets of the Proprietary Fund (Country Club) at September 30, 2007, were $2.34 million. Net assets decreased by $68,353. 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 $9.12 million, a $1.79 million increase over the 2006 fund balance of $7.33 million. This was a planned event, since the Village planned to increase general fund balance in the current year to support planned future expenditures. Approximately 91% of the combined ending fund balance ($9.08 million) constitutes unreserved fund balance, which is available for spending at the government's discretion. The remainder of fund balance ($0.94 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 $8.18 million, while total fund balance was $9.12 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 46% of total general fund expenditures, while total fund balance represents 52% of that same amount. General Fund Budgetary Highlights Differences between the original budget and the final amended budget were $979,053 and can be briefly summarized as follows: Funding for capital projects ($591,865) Grant Match ($105,000) Library Gift Account Appropriation ($28,697) Fiscal Year 2005-2006 General Employees Pension under-funding ($100,454) Fiscal Year 2005-2006 Open Purchase Order Carryover ($153,037) 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, 2007 and 2006 amounts to $22.18 million and $19.96 million (net of accumulated depreciation). The total increase in the Village's investment in capital assets for the current fiscal year was $2.22 million. Village of North Palm Beach Capital Assets (In Thousands) GovernmentalBusiness ActivitiesActivitiesTotal 200720062007200620072006 Land2,151$ 2,151$ 1,051$ 1,051$ 3,202$ 3,202$ Construction in progress2,143 2,530 - 4,382 2,143 6,912 Buildings and improvements13,422 11,107 1,7011,50015,123 12,607 Improvements other than buildings6,960 6,375 4074077,367 6,782 Improvements - golf course6,7251,6046,725 1,604 Furniture, fixtures and equipment580741580 741 Total assets24,676 22,163 10,464 9,685 35,140 31,848 Less accumulated depreciation(9,770) (8,893) (3,189)(2,995)(12,959) (11,888) Net assets14,906$ 13,270$ 7,275$ 6,690$ 22,181$ 19,960$ 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 $9.44 million. None of this amount comprises debt backed by the full faith and credit of the government. Village of North Palm Beach Outstanding Debt (In Thousands) GovernmentalBusiness ActivitiesActivitiesTotal 200720062007200620072006 Loans payable4,281$ 4,942$ 5,027$ 5,186$ 9,308$ 10,128$ Capital leases81 209 52 72 133 281 Total4,362$ 5,151$ 5,079$ 5,258$ 9,441$ 10,409$ Additional information on the Village's debt can be found in Note 6 on page 40 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 $8.18 million during the current 2007 fiscal year. The Village is now ready to address the economic challenges anticipated in the next few years. Beginning in the FY 2008 Budget, the economic outlook for the primary revenue source for Florida municipalities will be challenging, as cities are facing state mandated reductions of property taxes. In an effort to provide tax relief and spur the slumping housing market, the State legislature focused on property tax reform in the 2007 session. House Bill 1B was enacted to limit the authority of local governments to levy ad valorem taxes for the FY 2008 budget years and beyond. Further reductions of ad valorem revenues have been mandated for budget years beyond 2008 resulting from an agenda pursued by the State legislature to create more tax breaks for homeowners and cap local government spending. On January 29, 2008, the Florida electorate approved an amendment (referred to as Amendment 1) to the Florida Constitution relative to property taxation. Amendment 1 becomes effective October 1, 2008. (See Note 18 on subsequent events in the notes to the financial statements for more details on Amendment 1). To address the impact of the legislation and continuing increases in the cost of employee compensation and benefits, the Village will need to continue to prioritize essential services and desired levels of service to allocate sufficient funding in future budget years. 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, 2007 GovernmentalBusiness-type ActivitiesActivitiesTotal Assets Cash and cash equivalents9,668,408$ 1,014,221$ 10,682,629$ Accounts receivable534,338 52,093 586,431 Inventories18,855 12,115 30,970 Prepaids619,492 619,492 Due from other governements848,261 848,261 Restricted assets: Cash and cash equivalents113,269 113,269 Net pension assets358,096 358,096 Capital assets: Nondepreciable4,294,361 1,051,311 5,345,672 Depreciable (net of depreciation)10,611,368 6,223,410 16,834,778 Total assets 8,353,15027,066,448 35,419,598 Liabilities Accounts payable712,649 84,592 797,241 Accrued liabilities357,412 357,412 Accrued interest payable40,200 102,120 142,320 Deposits17,500 17,500 Deferred revenue186,543 709,676 896,219 Retainage payable9,207 9,207 Noncurrent liabilities: Due within one year1,664,004 298,970 1,962,974 Due in more than one year4,158,206 4,793,657 8,951,863 Total liabilities 6,006,5157,128,221 13,134,736 Net Assets Invested in capital assets, net of related debt10,543,788 2,195,630 12,739,418 Restricted for: Library26,275 26,275 Recreation28,500 28,500 Public safety43,781 43,781 Other purposes14,713 14,713 Unrestricted9,281,170 151,005 9,432,175 Total net assets $ 2,346,63519,938,227$ 22,284,862$ See notes to the financial statements. 11 THE VILLAGE OF NORTH PALM BEACH, FLORID A Statement of Activities For the Year Ended September 30, 2007 Charges for Functions/ProgramsExpensesActivities Government: Governmental activities General government2,698,187$ 122,455$ Public safety6,671,490 345,731 Public works3,733,815 217,972 Community development and planning737,165 938,188 Leisure services2,781,658 496,679 Interest on long-term debt204,666 Total governmental activities16,826,9812,121,025 Business-type activities - country club3,570,6833,463,524 Total business-type activities3,570,6833,463,524 Totalovernment$ 5,584,54920,397,664$ g 12 Program RevenuesNet Expense (Revenue) and OperatingCapitalChanges in Net Assets Grants andGrants and Governmental Business-type ContributionsContributionsActivitiesActivitiesTotal $ 100,182$ (2,475,550)$ $ (2,475,550)$ 36,79348,534(6,240,432) (6,240,432) 5,552(3,510,291) (3,510,291) 33,414234,437 234,437 1,400,440(884,539) (884,539) (204,666)(204,666) 170,3891,454,526(13,081,041)(13,081,041) (107,159)(107,159) (107,159)(107,159) $ 1,454,526170,389$ (13,081,041) (107,159) (13,188,200) General Revenues: Taxes: Property taxes12,076,184 12,076,184 Local option gas taxes292,332 292,332 Utility service taxes2,001,443 2,001,443 Franchise taxes1,207,552 1,207,552 Sales and use taxes1,339,893 1,339,893 Investment income650,022 43,917 693,939 Miscellaneous8,836 8,836 Contributions for support our troops15,502 15,502 Transfers (5,111)5,111 Totalgeneral revenues and transfers 38,80617,596,875 17,635,681 Change in net assets (68,353)4,515,834 4,447,481 Net assets, beginning of year 2,414,98815,422,393 17,837,381 Net assets, end of ear y $ 2,346,63519,938,227$ 22,284,862$ See notes to the financial statements. 13 THE VILLAGE OF NORTH PALM BEACH, FLORID A Balance Shee t Governmental Fund s Setember 30, 2007 p NonmajorTotal Governmenta Governmenta ll GeneraFundsFunds l Assets Cash and cash equivalents8,725,670$ 942,738$ 9,668,408$ Accounts receivable 534,338534,338 Inventories 18,85518,855 Prepaids619,492 619,492 Due from other funds 31,09431,094 Due from other governments 771,16577,096 848,261 Restricted cash and cash equivalents113,269 113,269 Total asset$ 1,713,90310,119,814$ 11,833,717$ s Liabilities and fund balances Liabilities Accounts payabl$ 339,437373,212$ 712,649$ e Accrued liabilities357,412 357,412 Due to other funds31,094 31,094 Deferred revenu 445,203263,640 708,843 e Total liabilities994,264815,7341,809,998 Fund balances Reserved for: Inventories and prepaid638,346638,346 s Encumbrance194,276194,276 s Librar26,27526,275 y Recreatio28,50028,500 n Public safet43,78143,781 y Other purposes14,71314,713 Unreserved Special revenue funds224,937224,937 Undesignated8,179,659673,2328,852,891 Total fund balances9,125,550898,16910,023,719 Total liabilities and fund balances10,119,814$ 1,713,903$ 11,833,717$ 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, 2007 Fund balances - total governmental funds10,023,719$ 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 assets24,675,732$ Less accumulated depreciation(9,770,003) 14,905,729 Revenue is recognized when earned in the government-wide statements, regardless of activity. Governmental funds report based on modified accrual, i.e., both measurable and available Grant revenues522,300 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.358,096 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(40,200) Retainage payable(9,207) Notes payable(4,280,842) Capital leases payable(81,100) Claims settlement(250,000) Insurance liability(174,821) Accrued compensated absences(1,035,447) (5,871,617) Net assets of governmental activitie$19,938,227 s See notes to the financial statements. 15 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Statement of Revenues, Expenditures, and Chanes in Fund Balances g Governmental Funds For the Year Ended September 30, 2007 NonmajorTotal GovernmentalGovernmental GeneralFundsFunds Revenues Taxes15,577,511$ $ 15,577,511$ Licenses and permits880,266 880,266 Intergovernmental1,465,713 1,284,308 2,750,021 Charges for services1,082,569 1,082,569 Fines and forfeitures132,158 132,158 Interest650,022 650,022 Miscellaneous194,716 194,716 Total revenues19,982,955 1,284,308 21,267,263 Expenditures Current General government2,304,654 2,304,654 Public safety6,235,305 374,496 6,609,801 Public works3,558,264 3,558,264 Community development & planning735,155 735,155 Leisure services - recreation2,356,971 73,432 2,430,403 Capital outlay1,408,478 1,329,327 2,737,805 Debt service Principal payments789,048 789,048 Interest paid on debt207,088 207,088 Total expenditures17,594,963 1,777,255 19,372,218 Excess (deficiency) of revenues over (under) expenditures2,387,992 (492,947) 1,895,045 Other financing sources (uses) Transfers in593,884 593,884 Transfer out(593,884) (593,884) Total other financing sources (uses)(593,884) 593,884 Net change in fund balances1,794,108 100,937 1,895,045 Fund balances Beginning of year7,331,442 797,232 8,128,674 End of year9,125,550$ 898,169$ 10,023,719$ 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, 2007 Net change in fund balances - total governmental funds1,895,045$ 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 assets2,825,943$ Transfer of assets from country club5,111 Less: current year depreciation(1,134,832) 1,696,222 Gains and losses on disposal of capital assets are reported in the statement of activities, whereas in the governmental funds the proceeds from the sale increases financial resources. The difference is the net book value of the assets retired. (60,256) Governmental Funds report revenues when earned and available. However, in the Statement of Activities, revenues are recognized when earned, regardless of availability. Palm Beach County Pool Improvement grant50,000 Palm Beach County Northlake Boulevard grant180,629 Florida Recreation Development Assistance Program grant260,000 FEMA grant31,671 522,300 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.789,047 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. Change in accrued interest expense2,423 Change in long-term compensated absences(59,741) (57,318) 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 plans164,822 Retainage payable(9,207) Claims settlement(250,000) Insurance liability(174,821) (269,206) Change in net assets4,515,834$ See notes to the financial statements. 17 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Statement of Net Assets Proprietary Fund September 30, 2007 Enterprise Assets Current assets Cash and cash equivalents1,014,221$ Accounts receivable52,093 Inventories12,115 Total current assets1,078,429 Non-current assets Land, buildings, and equipment, net7,274,721 Total assets8,353,150 Liabilities Current liabilities Accounts payable and other liabilities84,592 Accrued interest102,120 Deposits17,500 Deferred income709,676 Compensated absences - current portion12,173 Capital leases - current portion20,329 Loans payable - current portion266,468 Total current liabilities1,212,858 Non-current liabilities Compensated absences1,362 Capital leases31,868 Loans payable4,760,427 Total non-current liabilities4,793,657 Total liabilities6,006,515 Net Assets Invested in capital assets, net of related debt2,195,630 Unrestricted151,005 Total net assets2,346,635$ 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, 2007 Enterprise Operating revenue Greens fee/cart rentals/membership fees2,610,674$ Tennis revenues306,066 Golf shop revenues167,161 Driving range revenues192,407 Restaurant revenues118,000 Miscellaneous69,216 Total operating revenues3,463,524 Operating expenses Golf course maintenance expenses1,433,777 Clubhouse grounds expenses158,224 Tennis expenses322,417 Golf shop expenses668,682 Food & beverage expenses50,089 Administrative and general257,824 Insurance100,608 Depreciation391,954 Total operating expenses3,383,575 Operating income (loss)79,949 Nonoperating revenues (expenses) Interest revenue43,917 Interest expense(187,070) Loss on disposal of fixed assets(38) Total nonoperating revenues (expenses)(143,191) Transfers out(5,111) Change in net assets(68,353) Net assets - beginning2,414,988 Net assets - ending2,346,635$ 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, 2007 Enterprise Cash flows from operating activities: Receipts from customers3,528,026$ Payments to suppliers for goods or services(1,402,359) Payments to employees for services(1,592,868) Net cash provided (used) by operating activities532,799 Cash flows from capital and related financing activities: Principal paid on long term debt(178,707) Interest paid on debt(213,798) Acquisition of capital assets(1,737,459) Net cash provided (used) by capital and related financing activities(2,129,964) Cash flows from investing activities: Interest and dividends on investments43,917 Net increase (decrease) in cash and cash equivalents(1,553,248) Cash and cash equivalents at beginning of year2,567,469 Cash and cash equivalents at end of year1,014,221$ Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income$ 79,949 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation 391,954 Non-cash donations(21,500) Change in assets and liabilities Decrease in accounts receivable17,857 Decrease in inventory8,152 (Decrease) in accounts payable(4,792) (Decrease) in compensated absences payable(48,326) Increase in deferred revenue109,505 Total adjustments452,850 Net cash provided by operating activities532,799$ Non cash capital and financing activities: Contributions of capital assets to governmental funds5,111$ See notes to the financial statements. 20 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Statement of Fiduciary Net Assets Fiduciary Funds September 30, 2007 Employee RetirementAgency FundsFunds Assets Cash and cash equivalents913,493$ 329,549$ Investments: Corporate stock6,599,258 U.S. Government and agency securities 1,263,951 Corporate bonds864,456 Asset backed securities1,023,528 Equity mutual funds876,517 Common trust funds5,735,814 Fixed annuity funds67,005 Equity annuity funds8,285 Interest receivable50,533 Accounts receivable528,439 Total assets17,931,279 329,549 Liabilities Deferred village contributions138,200 Due to others329,549 Total liabilities138,200 329,549 Net Assets Held in trust for pension benefits17,793,079$ $ 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, 2007 Employee Retirement Funds Additions Contributions Employer1,449,818$ Plan members234,078 State on-behalf payments325,962 Total contributions2,009,858 Investment income Interest344,449 Net increase in fair value of investments1,621,657 Total investment income 1,966,106 Investment expenses(88,229) Total net investment income1,877,877 Total additions3,887,735 Deductions Benefits625,558 Administrative expense107,642 Total deductions733,200 Net increase3,154,535 Net assets held in trust for pension benefits Net assets - beginning14,638,544 Net assets - endin$17,793,079 g See notes to the financial statements. 22 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 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, 2007 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, 2007 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. 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: 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. 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, 2007 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, 2007 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 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, 2007 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, infrastructure, 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 $2,500 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. Infrastructure is reported in buildings and improvements. 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 capital assets are as follows: Buildings, improvements & infrastructure 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, 2007 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 probable 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, 2007 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, 2007 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. Statement of Cash Flows For purposes of the statement of cash flows, the Village considers all short-term investments that are highly liquid 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. 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. 31 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 2 - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (Continued) A. Budgetary Data (Continued) 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. 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. 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, 2007, was 6.3000 ($6.30 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, 2007 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, 2007, unpaid delinquent taxes are not material and have not been recorded by the Village. NOTE 3 – DEPOSITS AND INVESTMENTS Deposits As of September 30, 2007, the carrying amount of deposits (including fiduciary funds) were $553,841 and the bank balances were $196,011. The Village also had $2,765 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. The Village pools idle cash from all funds for the purpose of increasing income through investment activities. Investment income from the pool is allocated back to the respective funds based on each fund’s equity in the pool with the exception of the capital projects fund and the special revenue funds. 33 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 3 – DEPOSITS AND INVESTMENTS (Continued) Investments As of September 30, 2007, the Village held the following investments: Weighted CreditFairAverage RatingValueMaturity State Board of Administration Investment Pool N/R $10,587,757 34 days Repurchase agreements N/R 173,000 3 days Money market funds Aaa 601,746 N/A Money market funds N/R 119,831 N/A U.S. Gov. Notes & Bonds Aaa 415,247 26.02 yrs. U.S. Gov. Agency Notes Aaa 848,704 7.98 yrs. Corporate debt securities Aaa to A3 864,456 7.83 yrs. Asset backed securities N/R 1,023,528 17.86 yrs. Domestic corporate stocks N/R 6,599,258 N/A Equity mutual funds N/R 876,517 N/A Common trust funds N/R 5,735,814 N/A Fixed annuity funds N/R 67,005 N/A Equity funds N/R 8,285 N/A Total investments $27,921,148 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 do 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, 2007 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 Village will not be able to recover the value of its investments that are in the possession of an outside party. At September 30, 2007 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 Village’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 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, 2007 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 ten (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, 2007 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: $ 553,841 Deposits 2,765 Petty cash 27,921,148 Investments $28,477,754 Total deposits and investments Presented in the statement of net assets Governmental activities Cash and cash equivalents $9,668,408 Restricted cash and cash equivalents 113,269 Business-type activities Cash and cash equivalents 1,014,221 Total statements of net assets 10,795,898 Presented in the statement of fiduciary net assets Pension trust funds Cash and cash equivalents 913,493 Investments 16,438,814 Agency funds Cash and cash equivalents 329,549 Total fiduciary funds 17,681,856 Total deposits and investments $28,477,754 37 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 4 – RECEIVABLES Receivables at September 30, 2007, were as follows: GeneralCountry FundClub Total Fines $ 4,823 $ $ 4,823 State shared revenues 169,808 169,808 Utility Taxes 309,594 309,594 Other accounts receivable 13,32352,093 65,416 Total accounts receivable 497,548 52,093 549,641 Wabash Drive assessment 400 400 Conroy Drive assessment 36,390 36,390 Total accounts receivable $534,338$ 52,093 $586,431 NOTE 5 – CAPITAL ASSETS Capital Assets activity for the year ended September 30, 2007, was as follows: Primary Government Beginning Ending Governmental Activities: Balance Additions Deletions Balance Capital assets not being depreciated: Land $ 2,151,089 $ $ $ 2,151,089 Construction in progress 2,529,831 930,693 (1,317,252) 2,143,272 Capital assets being depreciated: Buildings 9,011,387 6,651 9,018,038 Improvements and infrastructure 2,094,919 2,309,888 (1,500) 4,403,307 Machinery and equipment 2,850,845 569,117 (222,454) 3,197,508 Vehicles 3,524,375 366,976 (128,833) 3,762,518 Total at historical cost: 22,162,446 4,183,325 (1,670,039) 24,675,732 Less accumulated depreciation for: Buildings (3,158,049) (300,173) (3,458,222) Improvements (1,324,900) (301,230) 1,500 (1,624,630) Machinery and equipment (2,236,072) (239,089) 193,030 (2,282,131) Vehicles (2,173,663) (329,357) 98,000 (2,405,020) Total accumulated depreciation (8,892,684) (1,169,849) 292,530 (9,770,003) Governmental activities capital assets, net $ 13,269,762 $ 3,013,476 ($ 1,377,509) $ 14,905,729 38 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 5 – CAPITAL ASSETS (Continued) Beginning Ending Business-type activities: Balance Additions Deletions Balance Capital assets not being depreciated: Land $ 1,051,311 $ $ $ 1,051,311 Construction in progress 4,381,814 739,478 (5,121,292) Capital assets being depreciated: Buildings and improvements 1,906,551 201,009 2,107,560 Improvements – golf course 1,603,940 5,121,292 6,725,232 Machinery and equipment 619,145 41,399 (165,782) 494,762 Vehicles 121,961 (37,126) 84,835 Total at historical cost: 9,684,722 6,103,178 (5,324,200) 10,463,700 Less accumulated depreciation for: Buildings and improvements (1,144,975) (122,921) (1,267,896) Improvements – golf course (1,301,497) (212,158) (1,513,655) Machinery and equipment (470,285) (46,984) 171,331 (345,938) Vehicles (78,026) (9,891) 26,427 (61,490) Total accumulated depreciation (2,994,783) (391,954) 197,758 (3,188,979) Business-type activities capital assets, net $6,689,939 $ 5,711,224 ($ 5,126,442) $ 7,274,721 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government $ 119,219 Public safety 455,932 Public services 197,559 Community development Leisure services 362,122 Total depreciation expense, governmental activities 1,134,832 Accumulated depreciation of assets transferred from the Country Club fund 35,017 Total additions to accumulated depreciation $1,169,849 For the year ended September 30, 2007, the Village had $32,437 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, 2007, was $219,507. 39 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 5 – CAPITAL ASSETS (Continued) Construction Commitments Contracts awarded but not yet completed were as follows: Project Description Estimated Cost Governmental activities Osborne Park $ 344,119 Seawall repairs 106,283 Lakeside Park 61,343 Anchorage Park 55,002 Prosperity Farms Road 51,963 Northlake Boulevard 20,450 Total Primary Government639,160 Country Club Golf Course Cart Path 159,947 Total construction commitments$ 799,107 NOTE 6 – LONG TERM LIABILITIES Change in Long-Term Liabilities Long-term liability activity for the year ended September 30, 2007, was as follows: BalanceBalanceAmount Due October 1, September 30, Within 2006 Additions Reductions 2007 One Year Governmental activities Loans payable $4,941,765 $ ($ 660,923) $4,280,842 $675,204 Capital leases 209,224 ( 128,124) 81,100 41,738 Claims and settlements 424,821 424,821 250,000 Compensated absences 975,706 632,333 ( 572,592) 1,035,477 697,062 payable Total $6,126,695 $1,057,154 ($1,361,639) $5,822,210 $1,664,004 Business-type activities: Loans payable $ 5,185,977 $ ($ 159,082) $5,026,895 $ 266,468 Capital leases 71,822 (19,625) 52,197 20,329 Compensated absences payable 61,861 12,173 (60,499) 13,535 12,173 Total $ 5,319,660 $ 12,173 ($ 239,206) $5,092,627 $298,970 40 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 6 – LONG TERM LIABILITIES (Continued) 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 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, 2007, the principal amount outstanding was $228,990 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 2008 $ 66,684 $ 10,842 $ 77,526 2009 70,234 7,215 77,449 2010 73,972 3,425 77,397 2011 18,100 241 18,341 $228,990 $ 21,723 $ 250,713 $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, 2007 was 4.89% and this approximates the rate that was used to calculate the debt service requirements to maturity. As of September 30, 2007, the principal amount outstanding was $1,232,949 and was for the purpose of government activities. 41 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 6 – LONG TERM LIABILITIES (Continued) $2,800,000 Promissory Note (Continued) Annual debt service requirements to maturity, which are payable by the general fund, are as follows: Year Ending Principal Interest Total 2008 $ 293,007 $ 42,871 $ 335,878 2009 302,934 31,954 334,888 2010 313,198 20,667 333,865 2011 323,810 8,998 332,808 $ 1,232,949 $ 104,490 $ 1,337,439 $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, 2007 was 4.16% and this approximates the rate that was used to calculate the debt service requirements to maturity. As of September 30, 2007, the principal amount outstanding was $2,850,000 and was for the purpose of government activities. Annual debt service requirements to maturity are as follows: Year Ending Principal Interest Total 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 300,000 65,178 365,178 2013-2017 1,350,000 139,740 1,489,740 $ 2,850,000 $ 589,730$ 3,439,730 42 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 6 – LONG TERM LIABILITIES (Continued) $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 2007 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. As of September 30, 2007, the principal amount outstanding was $105,229. Annual debt service requirements to maturity for this note, which are payable from the general fund, are as follows: Year Ending Principal Interest Total 2008 $ 40,943 $ 3,630 $ 44,573 2009 42,521 2,051 44,572 2010 21,765 413 22,178 $ 105,229$ 6,094$ 111,323 $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, 2007 was 6.2% and this approximates the rate that was used to calculate the debt service requirements to maturity. As of September 30, 2007, the principal amount outstanding was $92,664 and was for the purpose of government activities. Annual debt service requirements to maturity for this note, which are payable by the general fund, are as follows: Year Ending Principal Interest Total 2008 $ 41,254 $ 4,320 $ 45,574 2009 43,470 2,104 45,574 2010 7,940 154 8,094 $ 92,664$ 6,578$ 99,242 43 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 6 – LONG TERM LIABILITIES (Continued) $4,893,673 Promissory Notes 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, 2007, the principal amount outstanding was $4,797,905 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 2008 $ 199,784 $ 195,116 $ 394,900 2009 208,080 186,820 394,900 2010 216,720 178,180 394,900 2011 225,718 169,182 394,900 2012 235,091 159,809 394,900 2013-2018 1,630,326 739,074 2,369,400 2019-2024 2,082,186 288,332 2,370,518 $ 4,797,905 $ 1,916,513 $ 6,714,418 $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, 2007, the net book value of machinery and equipment was $317,088. Lease payments will be made from the general fund. The rate used to impute interest was 3.8%. The future minimum lease obligations and the net present value of these minimum lease payments as of September 30, 2007 is $16,629. Year Ending Principal Interest Total 2008 $ 16,629 $ 182 $ 16,811 44 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 6 – LONG TERM LIABILITIES (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, 2007, the net book value of the equipment was $94,181. The rate used to impute interest was 3.55%. Amounts currently outstanding on the note are as follows: Purpose Amount Governmental activities $ 64,471 Business-type activities 52,197 $116,668 Annual debt service requirements to maturity are as follows: Governmental activities: Year Ending Principal Interest Total 2008 $ 25,109 $ 2,070 $ 27,179 2009 26,009 1,170 27,179 2010 13,353 237 13,590 $ 64,471 $ 3,477 $ 67,948 Business-type activities: Year Ending Principal Interest Total 2008 $ 20,329 $ 1,676 $ 22,005 2009 21,058 947 22,005 2010 10,810 192 11,002 $ 52,197 $ 2,815 $ 55,012 45 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 6 – LONG TERM LIABILITIES (Continued) Claims and Settlements Subsequent to year end, the Village settled a dispute with Florida Blacktop, Inc., and paid $250,000 on February 15, 2008. The liability for the settlement is included in the current portion of long term governmental liabilities. (See related Note 17.) Effective October 1, 2006, the Village discontinued its participation in the Southeast Risk Management Association (SERMA) and joined the Florida Municipal Insurance Trust (FMIT). However, as a former participant in SERMA, the Village is liable for claims incurred through September 30, 2006. At September 30, 2007, there is a long-term governmental liability of $174,821 for pending claims activity for SERMA. (See related Note 7.) The liability is based on a recent (unaudited) valuation, which indicated that the reserve for incurred but not yet reported losses is inadequately funded and an additional contribution is required. The liability is payable in December 2008 and is included in governmental noncurrent liabilities due in more than one year in the Statement of Net Assets. SERMA, a quasi-governmental agency, was created by an interlocal agreement, as authorized by Chapter 163, Florida Statutes. 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 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. Activity in the pool is allocated to participating members based upon the cumulative contributions to the pool. The amount of settlements in SERMA exceeded insurance coverage in the current fiscal year. 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. 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. 46 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 7 – RISK MANAGEMENT (Continued) 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. At September 30, 2007, the Village is no longer liable for claims stemming from this policy. 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 2006 $80,195 $ ($34,643) $45,552 2007 $45,552 ($45,552) $ $ Property and Casualty Group Effective October 1, 2006, the Village discontinued its participation in the Southeast Risk Management Association (SERMA) and joined the Florida Municipal Insurance Trust (FMIT). However, as a former participant in SERMA, the Village is liable for claims incurred through September 30, 2006. At September 30, 2007, there is a long-term governmental liability of $174,821 for pending claims activity for SERMA. (See related Note 6.) 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. 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 all other full-time Village employees. The report may be obtained from the Village Clerk. 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, 2007; the General Employees Plan will not issue separate financial statements. Additional information on these plans can be found beginning on page 61. 47 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 8 – EMPLOYEE RETIREMENT PLANS (Continued) 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. 48 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 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, 2006, 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, 2006, the date of the latest actuarial valuation: GERF F&P Active Participants: Vested 60 15 Non-vested 30 29 Retirees and Beneficiaries receiving benefits 10 5 Terminated vested members receiving benefits 46 12 Total 146 61 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 Council. 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% 49 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 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 benefit 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 Plan’s actuary. Contribution requirements of plan members and the Village are established and may be amended by the Village Council. 50 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 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 Council. 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 Village 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 Village are established and may be amended by the Village Council. All Retirement Plans Annual Pension Cost and Net Pension Obligation. The Village's 2007 annual pension cost and actual contributions for each plan are shown below. The required contributions were determined as part of the October 1, 2006 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 $871,123 $866,069 N/A Fire and Police Retirement Fund 547,304 539,651 138,200 51 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 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, 2006, actuarial valuation for the General and Fire and Police Retirement Plans. General Employees Fire and Police Annual required contribution (ARC) $ 866,069 $ 539,651 Interest on net pension obligation (NPO) (13,473) (15,567) Adjustment to ARC 18,527 23,220 Annual pension cost 871,123 547,304 Actual contributions 873,872 539,651 (1) Increase in NPO (2,749) 7,653 NPO at beginning of year, revised (168,413) (194,587) (1) NPO at end of year $(171,162) $(186,934) (1) Part of the current year contributions reported as income was reclassified as a prior year contribution for actuarial purposes. Three-Year Trend Information Annual Percentage Net Pension Year Pension Annual of APC Obligation Ended Cost (APC) Contribution Contributed (Asset) General Employees 9/30/04 $ 529,645 $ 524,000 98.9% $ (181,854) 9/30/05 669,011 662,237 99.0% (175,080) 9/30/06 1,014,362 1,007,695 99.3% (168,413) Fire and Police 9/30/04 $ 387,647 $ 388,200 100.1% $ (107,221) 9/30/05 513,792 610,064 118.7% (203,493) 9/30/06 699,092 690,186 98.7% (194,587) 52 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 8 – EMPLOYEE RETIREMENT PLANS (Continued) The following are the actuarial methods and significant actuarial assumptions: General Employees Fire and Police 10/1/2006 10/1/2006 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 five 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. 53 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 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, 2007 Total General Employee VolunteerEmployeesRetirement Fire Pension PensionFunds ASSETS Cash and cash equivalents $ $ 119,831 $ 119,831 Investments: Equity mutual funds 876,517 876,517 Common trust funds 5,735,814 5,735,814 Fixed annuity funds 67,005 67,005 Equity annuity funds 8,285 8,285 Accrued interest and dividends 379379 Accounts receivable 58,522 58,522 Total assets 75,290 6,791,063 6,866,353 Net Assets Held in trust for pension benefits $ 75,290 $ 6,791,063 $ 6,866,353 54 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 9 – PENSION PLAN FINANCIAL INFORMATION (Continued) COMBINING STATEMENT OF CHANGES IN NET ASSETS EMPLOYEE RETIREMENT FUNDS For the Fiscal Year Ended September 30, 2007 Total General Employee VolunteerEmployeesRetirement Fire Pension PensionFunds Additions: Contributions: Employer $ 4,537 $ 987,440 $ 991,977 Plan members 171,126 171,126 Total contributions 4,537 1,158,566 1,163,103 Investment income: Interest and dividends 3,062 19,584 22,646 Net appreciation in fair value of Investments 530 733,250 733,780 Investment expense (42,488) (42,488) Total investment income 3,592 710,346 713,938 Total additions 8,129 1,868,912 1,877,041 Deductions: Administration 2,987 10,872 13,859 Benefits 227,092 227,092 Total deductions 2,987 237,964 240,951 Net increase (decrease) 5,142 1,630,948 1,636,090 Net assets held in trust for pension benefits, beginning of year 70,148 5,160,115 5,230,263 Net assets held in trust for pension benefits, end of year $ 75,290 $ 6,791,063 $ 6,866,353 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, 2007, $ 325,962 was recorded as revenues and expenditures in the On-Behalf Pension Contribution Special Revenue Fund relating to on-behalf payments received from the state. 55 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 11 – DEFINED CONTRIBUTION PLAN Effective October 1, 2006, all employees of the Village of North Palm Beach may participate in one of three Money Purchase Plans that are qualified Defined Contribution Plans adopted under the provisions of Internal Revenue Code Section 401(a). The three pension plans include Directors, General Employees, and Municipal Employees. The defined contribution plans are administered by International City/County Management Association and Retirement Corporation (ICMA-RC). The ICMA-RC is a nonprofit corporation organized and existing under the laws of the State of Delaware. The vesting period for each defined contribution plan is five years, with a vesting of zero percent in the first year, and a vesting of twenty-five percent for each year thereafter. While the plans will not provide for retroactive funding, the vesting period shall run from each employee’s original date of hire. No loans are permitted by the plan. The normal retirement age for the plan shall be age sixty. There is no waiting period for participation in the plan. The minimum age for participation is eighteen. The Village contributes 15% of participant earnings for the plan year. Earnings include regular and bonus compensation, but do not include overtime or commissions. Employee contributions are voluntary, after-tax contributions that are not matched by the Village. Employees may contribute 3%, 5%, 10%, or 15% of earnings to the plan. Contributions are remitted to the trusts every payroll period. The plan administration fee is .55% per annum of the amount of plan assets invested in the trust, based on average daily net plan assets. However, there was no administration fee for 2007. Because the Village has little administrative involvement and does not perform the investing function for funds in the plans, the Village’s activities do not meet the criteria for inclusion in the fiduciary funds of a government. Consequently, the plans are not included in the Village’s financial statements. At September 30, 2007, payroll expense for all employees was $9,286,649. Plan detail for participating employees at September 30, 2007 is listed below: GeneralMunicipal Director’s Total Employees Employees Covered Payroll $268,129$367,047$293,796 $928,972 Required employer 40,21955,05744,069 139,345 contributions Actual Village 42,60460,56550,365 153,534 contributions Village contributions as a 15.9%16.5%17.1% 16.6% % of covered payroll Employee contributions 11,05613,94812,196 37,200 56 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 12 – 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. NOTE 13 – 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 14 – 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 consists 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 $160,309 to Seacoast during the fiscal year for water and sewer service. 57 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 15 – INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS The composition of interfund balances at September 30, 2007, is as follows: Receivable Fund Payable Fund Amount Northlake Boulevard Special General Fund $31,094 Revenue Fund The outstanding balance is the result of a deficit in the special revenue fund which will be funded by the general fund in the subsequent fiscal year. Interfund transfers during the year ended September 30, 2007 are as follows: Transfer In: Governmental Non-major Activities: Capital Governmental AssetsFunds Transfer out General Fund $593,884 Country Club Fund $5,111 The transfers from the General Fund to the non-major governmental funds were to move unrestricted general fund revenues to finance various programs that the government must account for in other funds in accordance with budgetary authorizations, including amounts provided as subsidies or matching funds for various grant programs. The transfer into the general fund was the net book value of assets transferred from the Country Club to governmental capital assets. NOTE 16 – DEFICIT FUND BALANCE The Northlake Boulevard Special Revenue Fund had a deficit fund balance of $31,094 at September 30, 2007. This deficit will be covered by a transfer in the subsequent year. NOTE 17 – CONTRACTS, COMMITMENTS AND CONTINGENCIES 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 $159,360 for the year ended September 30, 2007 under the terms of this lease agreement. Future minimum lease payments for the year ending September 30, 2008 are contingent upon sales and expenses of the operations of the lessee. At September 30, 2007, the cost of the leased assets was $74,896, net book value was $13,428 and depreciation expense was $5,166. 58 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 17 – CONTRACTS, COMMITMENTS AND CONTINGENCIES (Continued) 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 for all claims at this time. However, in a subsequent event, the Village reached a settlement with Florida Blacktop, Inc. and agreed to pay a sum of $250,000. Accordingly, a provision for the liability has been made in the accompanying financial statements. (See related Note 6.) NOTE 18– SUBSEQUENT EVENTS Property tax reform On January 29, 2008, the Florida electorate approved an amendment to the Florida Constitution relative to property taxation. This amendment (referred to as Amendment 1) was placed on the ballot by the Florida Legislature at a special session held in October 2007. With respect to homestead property, Amendment 1 increases the current $25,000 homestead exemption by another $25,000 (for property values between $50,000 and $75,000), except for school district taxes. Since the new $25,000 homestead exemption does not apply to school district taxes, this effectively amounts to a $15,000 increase to the existing homestead exemption, resulting in an estimated annual savings of $240 for an average homeowner. Amendment 1 also allows property owners to transfer (make portable) up to $500,000 of their Save Our Homes benefits to their next homestead when they move. Save Our Homes became effective in 1995 and limits (caps) the annual increase in assessed value for homestead property to three percent (3%) or the percentage change in the Consumer Price Index, whichever is less. With respect to non-homestead property, Amendment 1 limits (caps) the annual increase in assessed value for non-homestead property (businesses, industrial property, rental property, second homes, etc.) to ten percent (10%), except for school district taxes. The Amendment also provides a $25,000 exemption for tangible personal property. Amendment 1 becomes effective on October 1, 2008, with the exception of the ten percent (10%) assessment cap on non-homestead property which becomes effective on January 1, 2009. Based on information received from the Palm Beach County Property Appraiser's Office, the estimated annual loss of property tax revenues for the Village from the additional homestead exemption and the $25,000 exemption for tangible personal property is approximately $673,745. At present, there is no accurate way to determine the impact of the portability and assessment cap on non-homestead property provisions in terms of potential loss of property tax revenues. 59 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Basic Financial Statements September 30, 2007 NOTE 18– SUBSEQUENT EVENTS (Continued) Investments As discussed in Note 3, at September 30, 2007, the Village had $10,587,757 invested in the State Board of Administration's Local Government Surplus Funds Trust Fund Investment Pool (Pool). On November 29, 2007, the State Board of Administration implemented a temporary freeze on the assets held in the Pool due to an unprecedented amount of withdrawals from the Fund coupled with the absence of market liquidity for certain securities within the Pool. The significant amount of withdrawals followed reports that the Pool held asset-backed commercial paper that was subject to sub prime mortgage risk. On December 4, 2007, based on recommendations from an outside financial advisor, the State Board of Administration restructured the Pool into two separate pools. Pool A consisted of all money market appropriate assets, which was approximately $12 billion or 86% of Pool assets. Pool B consisted of assets that either defaulted on a payment, paid more slowly than expected, and/or had any significant credit and liquidity risk, which was approximately $2 billion or 14% of Pool assets. At the time of the restructuring, all current pool participants had their existing balances proportionately allocated into Pool A and Pool B. Currently, Pool A participants may withdraw 37% of their balance or $4 million, whichever is greater, without penalty. Withdrawals from Pool A in excess of the above limit are subject to a 2% redemption fee. New investments in Pool A are not subject to the redemption fee or withdrawal restrictions. Future withdrawal provisions from Pool A will be subject to further evaluation based on the maturities of existing investments and the liquidity requirements of the Pool. On December 21, 2007, Standard and Poor's Ratings Services assigned its "AAAM" principal stability fund rating to Pool A. Currently, Pool B participants are prohibited from withdrawing any amount from the Pool and a formal withdrawal policy has not yet been developed. Market valuations of the assets held in Pool B are not readily available. In addition, full realization of the principle value of Pool B assets is not readily determinable. As of February 28, 2008, the Village has $8,062,238 and $1,147,848 invested in Pool A and B, respectively. Additional information regarding the Local Government Surplus Funds Trust Fund may be obtained from the State Board of Administration. 60 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, 2007 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 10/01/016,312,447 8,150,125 1,837,67877.45%3,127,313 58.76% 10/01/026,193,676 8,594,442 2,400,76672.07%3,076,493 78.04% 10/01/036,759,012 10,404,349 3,645,33764.96%3,443,843 105.85% 10/01/046,578,832 12,084,785 5,505,95354.44%4,275,981 128.76% 10/01/053,817,605 9,116,599 5,298,99441.88%3,220,258 164.55% 10/01/065,283,023 10,490,332 5,207,30950.36%3,680,960 141.47% Fire and Police Retirement Fund (1) 10/01/015,718,291 5,304,774 (413,517) 107.80%1,517,524 -27.25% 10/01/025,963,256 6,565,654 602,398 90.83%1,921,532 31.35% 10/01/036,635,342 7,616,168 980,826 87.12%2,312,228 42.42% 10/01/046,771,959 8,546,754 1,774,79579.23%2,627,239 67.55% 10/01/057,600,134 8,692,747 1,092,61387.43%2,405,634 45.42% 10/01/068,312,363 10,294,848 1,982,48580.74%2,798,919 70.83% Fire and Police Retirement Fund (1) (1)Because this plan uses the Aggregate Actuarial 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. 61 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Required Supplemental Information September 30, 2007 Schedule of Employer and State Contributions Fiscal YearAnnual EndedRequiredActualStatePercentage September 30ContributionContributionContributionContributed General Employees Retirement Fund 2002108.7% 467,750430,411 N/A 2003100.1% 503,220502,855 N/A 2004100.2% 524,000523,127 N/A 2005100.0% 662,237662,237 N/A 2006100.0% 1,007,6951,007,695 N/A 2007100.9% 873,872866,069 N/A (1) Fire and Police Retirement Fund 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 2006100.0% 551,986690,186 138,200 2007100.0% 401,451539,651 138,200 (1) (1) Part of the current year contributions reported as income was reclassified as a prior year contribution for actuarial purposes. 62 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Trend Data September 30, 2007 General Employees Police and RetirementRetirement Fund Fund Contribution rates as of 9/30/06: Village22.86%24.59% Plan Members6.00%2.00% Actuarially Determined Contribution1,007,695551,986 Contributions Made1,007,695551,986 Valuation date10/01/0610/01/06 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. 63 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, 2007 Variance with Final Budget Budgeted AmountsActual Positive OriginalFinalAmounts(Negative) Revenues Taxes15,247,998$ 15,247,998$ 15,577,511$ 329,513$ Licenses and permits1,177,000 1,177,000 880,266 (296,734) Intergovernmental1,299,619 1,299,619 1,465,713 166,094 Charges for services1,140,975 1,140,975 1,082,569 (58,406) Fines and forfeitures121,913 121,913 132,158 10,245 Interest381,750 381,750 650,022 268,272 Miscellaneous19,378 36,478 194,716 158,238 Total revenues19,388,633 19,405,733 19,982,955 577,222 Expenditures Current General government2,364,459 2,394,179 2,277,831 116,348 Public safety6,848,635 6,800,900 6,235,305 565,595 Public service4,620,764 4,684,957 3,558,264 1,126,693 Community development & planning894,425 914,992 735,155 179,837 Leisure services - recreation2,583,356 2,641,415 2,356,971 284,444 Other government169,139 115,170 26,823 88,347 Capital outlay1,008,427 1,293,153 1,408,478 (115,325) Debt service Principal payments759,228 772,228 789,048 (16,820) Interest paid on debt190,200 223,908 207,088 16,820 Total expenditures19,438,633 19,840,902 17,594,963 2,245,939 Excess (deficiency) of revenues over (under) expenditures(50,000) (435,169) 2,387,992 2,823,161 Other financing sources (uses) Transfer out(593,884) (593,884) Total other financing sources (uses) (593,884) (593,884) et change in fund balances(50,000)$ (1,029,053)$ 1,794,108 2,823,161$ N Fund Balances Beginning of year7,331,442 End of yea$9,125,550 r 64 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Notes to the Budgetary Required Supplementary Information (RSI) General Fund September 30, 2007 Note 1 - Basis of Accountin g Generally accepted accounting principles (GAAP) serve as the budgetary basis of accounting. 65 OTHER SUPPLEMENTARY INFORMATION GENERAL FUND THE VILLAGE OF NORTH PALM BEACH, FLORIDA Schedule of Departmental Expenditures - Budget and Actual General Fund For the Year Ended September 30, 2007 Variance with Final Budget OriginalFinalPositivePercent BudgetBudgetActual(Negative)Variance Village Council Personal services43,633$ 43,633$ 42,236$ 1,397$ 3.20% Operating expenses89,820 89,820 85,482 4,338 4.83 Total Village Council133,453 133,453 127,718 5,735 4.30 Village Manager Personal services268,618 346,161 344,213 1,948 0.56 Operating expenses26,050 12,050 11,836 214 1.78 Total Village Manager294,668 358,211 356,049 2,162 0.60 Village Finance Personal services424,076 382,632 363,479 19,153 5.01 Operating expenses59,610 59,610 51,488 8,122 13.63 Total Village Finance483,686 442,242 414,967 27,275 6.17 Village Attorney Operating expenses170,000 170,000 151,924 18,076 10.63 Village Clerk Personal services201,649 206,726 206,726 0.00 Operating expenses37,855 36,345 19,891 16,454 45.27 Total Village Cler 243,071239,504 226,617 16,454 6.77 k Information Technology Personal services204,116 206,260 196,561 9,699 4.70 Operating expenses28,600 28,600 23,731 4,869 17.02 Total Information Technology232,716 234,860 220,292 14,568 6.20 Human Resources Personal services178,145 180,055 175,119 4,936 2.74 Operating expenses42,400 42,400 21,494 20,906 49.31 Contingencies2,250 2,250 2,250 100.00 Total Human Resources222,795 224,705 196,613 28,092 12.50 Police Personal services3,870,301 3,794,798 3,508,052 286,746 7.56 Operating expenses282,013 282,578 278,404 4,174 1.48 Total Police4,152,314 4,077,376 3,786,456 290,920 7.13 Fire Rescue Personal services2,371,595 2,398,798 2,145,978 252,820 10.54 Operating expenses197,421 190,806 168,951 21,855 11.45 Total Fire Rescue2,569,016 2,589,604 2,314,929 274,675 10.61 Public Works / Streets and Grounds Personal services302,871 305,756 261,123 44,633 14.60 Operating expenses31,900 34,385 19,760 14,625 42.53 Total Public Works334,771 340,141 280,883 59,258 17.42 (Continued) 66 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Schedule of Departmental Expenditures - Budget and Actual General Fund For the Year Ended September 30, 2007 Variance with Final Budget OriginalFinalPositivePercent BudgetBudgetActual(Negative)Variance (Continued) Building Personal services388,313$ 391,704$ 348,195$ 43,509$ 11.11% Operating expenses81,300 77,062 39,045 38,017 49.33 Total Public Works469,613 468,766 387,240 81,526 17.39 Sanitation Personal services1,418,661 1,435,990 1,305,287 130,703 9.10 Operating expenses398,960 398,960 262,935 136,025 34.09 Total Sanitation1,817,621 1,834,950 1,568,222 266,728 14.54 Facility Services Personal services347,815 352,938 305,679 47,259 13.39 Operating expenses208,865 216,540 187,432 29,108 13.44 Total Facility Services556,680 569,478 493,111 76,367 13.41 Street Maintenance Personal services787,178 798,747 683,609 115,138 14.41 Operating expenses (1)813,083 813,083 722,574 90,509 11.13 Total Street Maintenance1,600,261 1,611,830 1,406,183 205,647 12.76 Park Maintenance Personal services510,289 519,813 507,090 12,723 2.45 Operating expenses117,916 117,916 71,816 46,100 39.10 Total Park Maintenance628,205 637,729 578,906 58,823 9.22 Development, Licensing & Code Admin. Personal services356,612 359,588 289,435 70,153 19.51 Operating expenses68,200 86,638 58,481 28,157 32.50 Total Development, Licensing & Code424,812 446,226 347,916 98,310 22.03 Vehicle Maintenance Personal services284,616 288,794 225,100 63,694 22.06 Operating expenses26,815 26,815 23,696 3,119 11.63 Total Vehicle Maintenance311,431 315,609 248,796 66,813 21.17 Reserves Contingency169,139 128,119 40,977 87,142 68.02 Total Reserves169,139 128,119 40,977 87,142 68.02 Leisure Services-Recreation Personal services604,732 612,972 576,903 36,069 5.88 Operating expenses (2)286,059 287,320 273,413 13,907 4.84 Total Leisure Services-Recreation890,791 900,292 850,316 49,976 5.55 Library Personal services611,874 613,484 528,802 84,682 13.80 Operating expenses100,940 134,061 134,277 (216) (0.16) Total Library712,814 747,545 663,079 84,466 11.30 (Continued) 67 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Schedule of Departmental Expenditures - Budget and Actual General Fund For the Year Ended September 30, 2007 Variance with Final Budget OriginalFinalPositivePercent BudgetBudgetActual(Negative)Variance (Continued) Pool Personal services191,643$ 192,720$ 190,168$ 2,552$ 1.32% Operating expenses78,603 78,603 44,576 34,027 43.29 Total Pool270,246 271,323 234,744 36,579 13.48 Debt Service949,428 996,136 996,136 Other Operating expenses714,942 721,557 717,571 3,986 0.55 721,557714,942 717,571 3,986 0.55 Non-Departmental Operating expenses81,300 84,526 84,525 1 84,52681,300 84,525 1 Capital Outlay Finance9,000 1,500 1,492 8 0.53 Information Technology49,000 17,000 16,448 552 3.25 Human Resources9,000 9,000 7,782 1,218 13.53 Police203,327 220,427 207,063 13,364 6.06 Fire Rescue2,500 2,500 2,500 Building12,500 25,519 22,596 2,923 11.45 Sanitation135,000 155,000 145,068 9,932 6.41 Development, Licensing, & Code Admin 5,5005,500 1,647 3,853 70.05 . Street Maintenance (1 135,25940,000 121,401 13,858 10.25 ) Park Maintenanc 421,150252,000 118,777 302,373 71.80 e Vehicle Maintenance46,000 46,000 44,522 1,478 3.21 Leisure Services57,000 68,300 47,566 20,734 30.36 Pool83,600 83,600 77,084 6,516 7.79 Library (2)91,000 91,000 85,170 5,830 6.41 Other1,624 1,624 100.00 Non-Departmental 13,000 9,774 1,677 8,097 82.84 Total Capital outlay1,008,427 1,293,153 900,793 392,360 30.34 Total expenditures19,438,633$ 19,840,902$ 17,594,963$ 2,245,939$ 11.32% (1)Adjusted for $453,085 of capital expenditures budgeted under operating expenditures. (2)Adjusted for $54,600 of capital expenditures budgeted under operating expenditures. 68 COMBINING FINANCIAL STATEMENTS NONMAJOR GOVERNMENTAL FUNDS Capital Projects Fund Special Revenue Funds Public Safety Fund Northlake Boulevard Fund Recreation Fund On-Behalf Pension Contributions THE VILLAGE OF NORTH PALM BEACH, FLORIDA Combining Balance Sheet Nonmajor Governmental Funds September 30, 2007 Special Revenue Funds CapitalPublicNorthlakeOn-BehalfTotal Nonmajor Projects SafetBoulevarRecreatioPensio Governmenta ydnnl FunFunFunFunContributionsFunds dddd Assets Cash and cash equivalents674,237$ $ $ 268,501$ $ 942,738$ Due from other governments380,629 64,574 325,962 771,165 Total assets1,054,866$ $$333,075$ 325,962$ 1,713,903$ Liabilitie s Accounts Payabl$ $ $ 12,4701,005$ 325,962$ 339,437$ e Due to other funds31,094 31,094 Deferred Revenu 64,574445,203380,629 e Total liabilties381,634 31,094 77,044 325,962 815,734 Fund balances Unreserve d Undesignate (31,094)256,031898,169673,232 d Total fund balances (Deficit)673,232 (31,094) 256,031 898,169 Total liabilities and fund balances1,054,866$ $ $ 333,075$ 325,962$ 1,713,903$ 69 THE VILLAGE OF NORTH PALM BEACH, FLORID A Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2007 Special Revenue Funds Capital PublicNorthlakeOn-BehalfTotal Nonmajor ProjectsSafetyBoulevardRecreationPensionGovernmental FundFundFundFundContributionsFunds Revenues Intergovernmental revenues$ 48,534872,206$ 37,606$ $ 325,962$ 1,284,308$ Total revenues 48,534872,206 37,606 325,962 1,284,308 Expenditures Current Public safety 325,96248,534 374,496 Leisure Services73,43273,432 Capital outlay 68,7001,085,090 175,537 1,329,327 Total expenditures1,085,090 48,534 68,700 248,969 325,962 1,777,255 Excess of revenues over (under) expenditures (31,094)(212,884) (248,969) (492,947) Other financing sources (uses) Transfers in488,884105,000 593,884 Total other financing sources (uses) 105,000488,884 593,884 Net changes in fund balances (31,094)276,000 (143,969) 100,937 Fund balances - Beginning 400,000397,232 797,232 Fund balances - Ending (Deficit) 673,232$ $ (31,094)$ 256,031$ $ 898,169$ 70 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 Net Assets - Fiduciar Funds gy September 30, 2007 Fire andTotal VolunteerGeneralPoliceEmployee FireEmployeesOfficersRetirement PensionPensionPensionFunds ASSETS Cash and cash equivalents $ 119,831$ 793,662$ 913,493$ Investments: Corporate stock 6,599,2586,599,258 U.S. Government and agency securities 1,263,9511,263,951 Corporate bonds 864,456864,456 Asset backed securities 1,023,5281,023,528 Equity mutual funds 876,517876,517 Common trust fund s 5,735,8145,735,814 Fixed annuity funds 67,005 67,005 Equity annuity funds 8,285 8,285 Accrued interest and dividends 50,154379 50,533 Accounts Receivable 469,91758,522 528,439 Total assets 6,791,06375,290 11,064,926 17,931,279 LIABILITIES Deferred village contributions 138,200138,200 Total liabilities 138,200138,200 Net Assets Held in trust for pension benefits75,290$ 6,791,063$ 10,926,726$ 17,793,079$ (1) A schedule of funding progress for the General Employees and Fire and Police Officers plans is presented on page 61. 71 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Combining Statement of Changes in Net Assets Employee Retirement Funds For the Year Ended September 30, 2007 Fire andTotal VolunteerGeneralPoliceEmployee FireEmployeesOfficersRetirement PensionPensionPensionFunds Additions: Contributions: Village4,537$ 987,440$ 457,841$ 1,449,818$ State of Florida 325,962325,962 Plan members171,126 62,952 234,078 Total contributions4,537 1,158,566 846,755 2,009,858 Investment income: Interest and dividends3,062 19,584 321,803 344,449 Net appreciation in fair value of investments530 733,250 887,877 1,621,657 Investment expense(42,488) (45,741) (88,229) Total investment income3,592 710,346 1,163,939 1,877,877 Total additions 1,868,9128,129 2,010,694 3,887,735 Deductions: Administration2,987 10,872 93,783 107,642 Benefits227,092 398,466 625,558 Total deductions2,987 237,964 492,249 733,200 Net increase (decrease)5,142 1,630,948 1,518,445 3,154,535 Net assets held in trust for pension benefits, Beginning of year70,148 5,160,115 9,408,281 14,638,544 Net assets held in trust for pension benefits, End of ea yr $ 6,791,06375,290$ 10,926,726$ 17,793,079$ 72 AGENCY FUNDS Manatee Protection Agency Northlake Boulevard Task Force THE VILLAGE OF NORTH PALM BEACH, FLORIDA Combining Statement of Agency Net Assets September 30, 2007 Agency Funds Manatee NorthlakeTotal ProtectionBoulevardAgency AgencyTask ForceFunds ASSETS Cash and cash equivalents $ 66,521263,028$ 329,549$ LIABILITIES Due to others $ 66,521263,028$ 329,549$ 73 THE VILLAGE OF NORTH PALM BEACH, FLORIDA Combining Schedule of Changes in Agency Net Assets and Liabilities For the Year Ended September 30, 2007 October 1, 2006AdditionsDeductionsSeptember 30, 2007 Manatee Protection Agency Assets Cash and cash equivalents $ 13,165249,863$ $ 263,028$ Liabilities Due to others $ 13,165249,863$ $ 263,028$ Northlake Boulevard Task Force Assets Cash and cash equivalents $ 28,71454,907$ 17,100$ 66,521$ Liabilities Due to others $ 28,71454,907$ 17,100$ 66,521$ Total All Agency Funds Assets Cash and cash equivalents $ 24,779304,770$ 17,100$ 312,449$ Total assets $ 24,779304,770$ 17,100$ 312,449$ Liabilities Due to others $ 41,879304,770$ 17,100$ 329,549$ 74 PROPRIETARY FUND (ENTERPRISE FUND) Country Club Fund THE VILLAGE OF NORTH PALM BEACH, FLORID A Schedule of Departmental Expenses - Budget and Actual Country Club Fund - Budgetary Basis For the Year Ended September 30, 2007 Variance with Final Budget OriginalFinalPositivePercent BudgetBudgetActual(Negative)Variance Golf Maintenance Personal services802,335$ 802,335$ 837,596$ (35,261)$ -4.39% Operating expenses537,732 537,732 542,173 (4,441) -0.83 Capital outlay99,100 99,100 99,100 100.00 Total Golf Maintenance1,439,167 1,439,167 1,379,769 59,398 4.13 Golf Pro Shop and Range Personal services357,245 357,245 329,742 27,503 7.70 Operating expenses467,054 467,054 336,010 131,044 28.06 Capital outlay10,000 10,000 2,931 7,069 70.69 Total Golf Pro Shop and Range834,299 834,299 668,683 165,616 19.85 Tennis Personal services95,501 95,501 103,838 (8,337) (8.73) Operating expenses88,136 88,136 218,579 (130,443) (148.00) Total Tennis183,637 183,637 322,417 (138,780) (75.57) Food and Beverage Operating expenses37,605 37,605 50,089 (12,484) -33.20 Capital outlay15,000 15,000 4,250 10,750 71.67 Total Food and Beverage52,605 52,605 54,339 (1,734) (3.30) Administration Personal services181,398 181,398 185,290 (3,892) -2.15 Operating expenses90,309 90,309 72,534 17,775 19.68 Capital outlay 7,6437,643 91,095 (83,452) -1091.87 Total Administration 279,350279,350 348,919 (69,569) -24.90 Clubhouse and Grounds Personal services113,238 113,238 88,075 25,163 22.22 Operating expenses71,457 71,457 70,148 1,309 1.83 Capital outlay6,500 6,500 132,627 (126,127) (1940.42) Total Clubhouse and Grounds191,195 191,195 290,850 (99,655) (52.12) Insurance and General Liability Operating expenses100,000 100,000 100,608 (608) (0.61) Reserves Operatin 7,0007,000 12,688 (5,688) (81.26) g Contingency283,934 283,934 49,319 234,615 82.63 Total Reserves290,934 290,934 62,007 228,927 78.69 Total expenses on the budgetary basis$ 3,371,1873,371,187$ 3,227,592 143,595$ 4.26% Adjustments to reconcile to the GAAP Basis Less capital outlay costs capitalized(235,971) Add depreciation expense391,954 Total operating expenses$3,383,575 75 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 Component76 Changes in Net Assets77 Fund Balances, Governmental Funds79 Changes in Fund Balances, Governmental Fund80 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 Property81 Property Tax Rates Direct and Governments82 Principal Property Tax Payers83 Property Tax Levies and Collections84 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 Type85 Direct and Overlapping Governmental Activities Debt86 Pledged-Revenue Coverage87 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 Statistics88 Principal Employers89 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 Function90 Operating Indicators by Function/Program91 Capital Asset Statistics by Function/Program92 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 20032004200520062007 Governmental Activities: Invested in capital assets, net of related debt3,563,142$ 3,762,961$ 3,535,596$ 8,118,773$ 10,543,788$ Restricted613,459470,15519,828154,073113,269 Unrestricted2,350,3423,527,8656,654,9897,143,4529,281,170 Total governmental activities net assets6,526,9437,760,98110,210,41315,416,29819,938,227 Business-Type Activities: Invested in capital assets, net of related debt2,165,5292,131,3671,919,1941,999,1232,195,630 Restricted Unrestricted(65,937)(5,195)270,374415,865151,005 Total business-type activities net assets2,099,5922,126,1722,189,5682,414,9882,346,635 Primary government: Invested in capital assets, net of related debt5,728,6715,894,3285,454,79010,117,89612,739,418 Restricted613,459470,15519,828154,073113,269 Unrestricted2,284,4053,522,6706,925,3637,559,3179,432,175 Total primary government net asset$ 9,887,1538,626,535$ 12,399,981$ 17,831,286$ 22,284,862$ 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. 76 VILLAGE OF NORTH PALM BEACH CHANGES IN NET ASSETS LAST FIVE FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Unaudited Fiscal Year 20032004200520062007 Expenses Governmental activities: General government2,781,333$ 3,174,460$ 2,127,009$ 1,784,528$ 2,698,187 Public safety5,195,338 5,294,399 6,038,846 7,036,117 6,671,490 Public works3,482,975 3,549,178 5,091,305 4,131,500 3,733,815 Community development and planning- - - 657,112 737,165 Leisure services1,539,771 1,280,483 1,635,784 2,562,627 2,781,658 Other government- - 842,561 2,049 - Interest on long-term debt128,507 40,580 151,233 241,995 204,666 Total governmental activities expenses13,127,924 13,339,100 15,886,738 16,415,928 16,826,981 Business-type activities: Country club2,676,883 2,567,690 2,607,712 2,124,927 3,570,683 Total business-type activities2,676,883 2,567,690 2,607,712 2,124,927 3,570,683 Total primary government expenses15,804,807$ 15,906,790$ 18,494,450$ 18,540,855$ 20,397,664$ Program Revenues Governmental activities: Charges for services: General government342,936$ 355,118$ 285,386$ 158,160$ 122,455$ Public safety258,723 273,391 329,081 388,671 345,731 Public services727,016 895,291 1,326,820 140,923 217,975 Community development and planning- - - 1,175,252 938,188 Leisure services174,589 147,773 78,475 528,983 496,679 Other government- - - - - Operating grants and contributions82,134 89,362 1,392,729 998,573 170,389 Capital grants and contributions102,560 - - 462,394 1,454,526 Total governmental activities program revenues1,687,958 1,760,935 3,412,491 3,852,956 3,745,943 Business-type activities: Charges for services: Country club2,510,258 2,548,259 2,658,468 2,167,089 3,463,524 Operating grants and contributions- - - 68,883 - Capital grants and contributions10,000 - - - - Total business-type activities program revenues2,520,258 2,548,259 2,658,468 2,235,972 3,463,524 Total primary government program revenues4,208,216$ 4,309,194$ 6,070,959$ 6,088,928$ 7,209,467$ (continued) 77 VILLAGE OF NORTH PALM BEACH CHANGES IN NET ASSETS (continued) LAST FIVE FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Unaudited Fiscal Year 20032004200520062007 Net (Expense)/Revenue Governmental activities(11,439,966)$ (11,578,165)$ (12,474,247)$ (12,562,972)$ (13,081,041)$ Business-type activities(156,625) (19,431) 50,756 111,045 (107,159) Total primary government net expense(11,596,591)$ (11,597,596)$ (12,423,491)$ (12,451,927)$ (13,188,200)$ General revenues and other changes in net assets: Governmental activities: Taxes: Property taxes6,365,000$ 8,451,783$ 10,070,977$ 10,881,501$ 12,076,184$ Local option gas taxes- - - 307,043 292,332 Utility service taxes1,755,153 1,830,339 1,955,403 2,001,164 2,001,443 Franchise taxes890,285 861,708 890,297 1,150,974 1,207,552 Sales and use taxes1,148,210 1,230,803 1,277,124 1,415,917 1,339,893 Unrestricted grants and contributions276,302 291,710 421,254 - - Investment earnings75,023 53,600 196,699 477,420 650,022 Miscellaneous54,875 92,260 111,927 53,264 8,836 Contributions for Support Our Troops- - - - 15,502 Transfers- - - 36,445 5,111 Total governmental activities10,564,848 12,812,203 14,923,681 16,323,728 17,596,875 Business-type activities: Investment earnings4,586 3,450 12,640 112,841 43,917 Miscellaneous99,553 42,560 - - - Transfers- - - (36,445) (5,111) Total business-type activities104,139 46,010 12,640 76,396 38,806 Total primary government$ 12,858,21310,668,987$ 14,936,321$ 16,400,124$ 17,635,681$ Change in net assets Governmental activities(875,118)$ 1,234,038$ 2,449,434$ 3,760,756$ 4,515,834$ Business-type activities(52,486) 26,579 63,396 187,441 (68,353) Total primary government (927,604)$ 1,260,617$ 2,512,830$ 3,948,197$ 4,447,481$ 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. 78 VILLAGE OF NORTH PALM BEACH FUND BALANCES, GOVERNMENTAL FUNDS LAST FIVE FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) Unaudited 20032004200520062007 General Fund Reserved354,396$ 218,882$ 197,163$ 308,836$ 945,891$ Unreserve 2,883,8551,654,593 5,771,684 7,022,606 8,179,659 d Total general fund2,008,989$ 3,102,737$ 5,968,847$ 7,331,442$ 9,125,550$ All other Governmental Fund s Reserved613,459$ 470,155$ 19,828$ -$ -$ Unreserved, reported in: Special revenue funds- - - 400,000 224,937 Capital projects funds- - - 397,233 673,232 Total all other governmental fund$ 470,155613,459$ 19,828$ 797,233$ 898,169$ s ote: Data not available prior to fiscal 2002 implementation of Governmental Accounting Standards Board Statement No. 34, N asic Financial Statements and Management's Discussion and Analysis for State and Local Governments. B 79 VILLAGE OF NORTH PALM BEACH CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST FIVE FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) Unaudite d Fiscal Year 20032004200520062007 Revenues: Taxes9,292,822$ 11,439,823$ 13,236,952$ 14,340,682$ 15,577,511$ Licenses and Permits686,548 712,184 1,131,903 1,128,658 880,266 Intergovernmenta 1,350,1041,280,228 2,804,985 2,914,057 2,750,021 l Charges for services665,496 719,589 647,915 1,003,660 1,082,569 Fines and forfeitures113,391 122,407 234,513 165,496 132,158 Investment earnings75,023 53,600 196,699 477,421 650,022 Miscellaneous139,354 175,431 83,205 130,515 194,716 Total revenues12,252,862 14,573,138 18,336,172 20,160,489 21,267,263 Exenditures p General governmen 1,532,5611,360,072 2,061,545 1,648,131 2,304,654 t Public safety4,758,982 5,019,361 5,713,904 6,494,578 6,609,801 Public works3,285,603 3,280,274 5,019,739 4,708,196 3,558,264 Community development and plannin 735,155651,331 g Leisure services - recreatio 1,256,0661,216,156 1,376,950 1,682,030 2,430,403 n Other governmen 1,186,7301,298,492 817,293 2,049 t Capital outla 581,9382,542,819 - 1,917,377 2,737,805 y Debt service Principal payments939,396 955,184 903,225 879,527 789,048 Interest paid on deb 40,580136,676 151,233 199,373 207,088 t Total expenditures15,538,196 13,852,694 16,043,889 18,182,592 19,372,218 Excess of revenues over (under) expenditure 720,444(3,285,334) 2,292,283 1,977,897 1,895,045 s Other financing sources (uses) Transfers in 593,8841,471,529 Transfers out (593,884)(1,471,529) Capital lease Proceeds from debt issuance403,000 230,000 123,500 Miscellaneous(56) Total other financing sources (uses)402,944 230,000 123,500 - - et change in fund balances(2,882,390)$ 950,444$ 2,415,783$ 1,977,897$ 1,895,045$ N Debt service as a percentage of noncapital expenditures9.03%8.11%7.03%7.29%6.41% 80 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 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 200720061,700,678,282235,776,76845,084,3351,981,539,3856.30 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 Appraise r 81 VILLAGE OF NORTH PALM BEACH PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS Unaudited Overlapping Rates (1) Village ofPalm BeachTotal . Palm BeachCountPalm Special Direct and Ny Fiscal Tax RollGeneralSchoolBeachDistrictsOverlapping Year YearOperationsDistricCountRates ty 199819975.4009.5574.8672.36022.184 199919985.6009.6824.8582.23422.374 200019995.6008.9184.9362.26221.716 200120005.7508.9184.9362.26321.867 200220015.6008.9484.9352.45621.939 200320025.8008.7794.8082.48821.875 200420036.8008.5714.7912.55622.718 200520047.2708.4324.7682.52622.996 200620056.8008.1064.7192.50422.129 200720066.3007.8704.4802.32520.975 ote:All millage rates are based on $1 for every $1,000 of assessed value. N Source:orth Palm Beach: Notice of Ad Valorem Taxes and Non-Ad Valorem Assessments N (1)Overlapping rates are those of local and county governments that apply to property owners within the Villag e of North Palm Beach. Not all overlapping rates apply to all Village of North Palm Beach property owners (i.e. The rates for special districts apply only to the proportion of the government's property owners whose roperty is located within the geographic boundaries of the special district.) p 82 VILLAGE OF NORTH PALM BEACH PRINCIPAL PROPERTY TAX PAYERS CURRENT YEAR AND 1998 Unaudited 20071998 PercentagePercentage of Totalof Total Village NetVillage Net TaxableTaxableTaxableTaxable AssessedAssessedAssessedAssessed TaxpayersValueRankValueValue 1999RankValue Domani Development, LLC$ 11.00%$ 19,818,175 Crystal Tree NPB17,681,121 20.89% Olen Residential Realty16,800,000 30.85%10,732,383 11.41% CF02 Palm Beach III LP14,273,652 40.72% Sanctuary Bay Trust Corporation13,200,300 50.67% Greater Fla Inv Co &11,080,697 60.56% Village Shoppers at US 1 LLC9,325,955 70.47% Riverside National Bank of Florida8,058,994 80.41% Old Port Cove Holding, Inc7,702,923 90.39% PaineWebber Equity Partners 17,600,000 21.00% MacArthur, John D. & Catherine6,110,455 30.80% Community Federal Savings & Loan Assoc6,088,124 40.80% Greater Fla Investment Company5,840,000 50.77% Northlake Storage, LLC5,655,868 100.29% U.S. Technology Trading, Ltd.3,600,000 60.47% Morse, Edward J., Inc 70.46%3,514,096 MacArthur, J.D. & Catherine T2,940,000 80.39% American Property Investors IX2,898,101 90.38% DeSantis, Conrad J. R 100.37%2,787,181 Total123,597,685$ 6.25%52,110,340$ 6.85% Source: Palm Beach Country Appraiser Note : Assessed values are established by the Palm Beach Property Appraiser's offices as of January 1, each year 83 VILLAGE OF NORTH PALM BEAC H 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 YearFiscal YearAmounof LevYearsAmounof Lev Sept 30, tyty 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% 2007200612,624,307 11,802,457 93.49%228,352 12,030,809 95.30% Source: Palm Beach Country Property Appraiser 84 VILLAGE OF NORTH PALM BEACH RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Business-typ e Governmental ActivitiesActivities Fiscal Year Percent of Ended LoansCapitalLoansPersonalPer September 30,PayableLeasesPayableTotalCapita (1) Income (1) 19985,550,000 419,498 440,000 6,409,498/A/A NN 19995,795,386 360,592 398,179 6,554,157/A520.92 N 20005,481,150 298,552 280,000 6,059,702 11.33%502.30 20018,067,736 245,059 785,781 9,098,576/A745.91 N 20027,334,853 736,967 651,058 8,722,878/A715.11 N 20036,947,633 587,792 513,472 8,048,897/A659.85 N 20046,376,387 433,855 411,573 7,221,815/A592.05 N 20055,754,677 275,840 454,131 6,484,648/A513.31 N 20064,941,765 209,224 5,185,978 10,336,967 17.20%786.20 20074,280,842 81,100 5,026,895 9,388,837 14.67%715.61 ote:Details regarding the Village's outstanding debt may be found in the notes to the N financial statements. (1)See the Schedule of Demographic and Economic Statistics on page 88 for personal income and population data. /AData not available. N 85 VILLAGE OF NORTH PALM BEACH DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT SEPTEMBER 30, 2007 PercentageAmount NetApplicable to Applicable to Debtthe Village othe Village o ff Government UnitOutstandingorth Palm Beach (1) orth Palm Beach NN Debt repaid with property taxes: Palm Beach Count$ 1.24%3,887,586313,515,000$ y Palm Beach County School Boar 1.24%344,28627,765,000 d Other Debt: Palm Beach Count 1.24%8,508,062686,134,000 y Palm Beach County School Boar 1.24%478,39238,580,000 d Subtotal, Overlapping Deb13,218,326 t Village of North Palm Beach Direct Debt100%4,361,942 Total Direct and Overlapping Debt17,580,268$ Sources: Palm Beach County Tax Appraiser's Office Palm Beach County School Boar d Palm Beach County Clerk & Comptrolle r ote: Overlapping governments are those that coincide, at least in part, with the geographic boundarie Ns of the Village. This schedule estimates the portion of the outstanding debt of those overlappin g governments that is borne by the residents and businesses of the Village of North Palm Beach. Thi s rocess recognizes that, when considering the Village's ability to issue and repay long-term debt, the p 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 taxabl e assessed property values. Value that is within the Village's boundaries and dividing it by the County's an d School Board's total taxable assessed value. This approach was also used for the other debt. 86 VILLAGE OF NORTH PALM BEACH Pledged - Revenue Coverage Country Club Bonds Last Ten Fiscal Years Fiscal GrossOperatingDebt Year Revenues (1) Expenses (2)Net RevenueService Coverage (3) (4) 20062,348,813$ 1,910,640$ 438,173$ 106,936$ 4.10(4) 20073,507,441 2,991,621 515,820 392,505 1.31 (1)Gross revenue includes interest revenue. (2)Operating expenses excludes depreciation. (3)Coverage should be not less than 1.00. (4)2006 was the first year the debt was outstanding, and was not a complete year. 87 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) 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 2007 (estimate)13,12063,98442,2244.1 Sources: Business Development Board US Census Burea u Note: (1)All information available at the current time is presente d (2)orth Palm Beach is not large enough to track unemployment rates. N Palm Beach County rates are presented. 88 VILLAGE OF NORTH PALM BEACH PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO Unaudited 20071998 PercentagePercentage of Totalof Total EmployeEmployeeEmploymenEmployeeEmploymen rstst School Board21,707 3.36%School Board16,800 3.23% Palm Beach County11,293 1.75%Palm Beach County9,000 1.73% Tenet Healthcare Corp4,500 0.70%State Government8,700 1.67% Hospital Corp of America3,411 0.53%Pratt & Whitney Aircraft5,100 0.98% Florida Power & Light3,250 0.50%Columbia Palm Beach Health System4,000 0.77% Florida Atlantic University2,923 0.45%Intracoastal Health Systems, Inc.3,200 0.62% The Breakers2,300 0.36%Flo Sun, Inc2,500 0.48% Office Depot (Headquarters)2,180 0.34%Florida Power & Light2,300 0.44% Boca Raton Community Hosp1,860 0.29%Motorola, Inc2,300 0.44% U.S. Sugar Corporation1,800 0.28%Boca Raton Community Hospital2,000 0.38% Tota 8.56%55,90055,224 10.74% l Source:Business Development Board of Palm Beach Count y *Employer: Palm Beach Count y Information is not available for the Village of North Palm Beac h **Percentage of total employment is calculated using Palm Beach County' s available labor force in each of the respective years presented. 89 VILLAGE OF NORTH PALM BEAC H Full-Time Equivalent Village Government Employees by Function LAST TEN FISCAL YEARS (*) Unaudited 20002001200220032004200520062007 Number of Employees: General Government Village Manager - Full-Time11111111 Assistant Village Manager - Full-Time11111100 Systems Specialist - Full -Time11111122 Executive Secretary - Full-Time11111111 Human Resources22 Village Clerk - Full-Time00000333 Finance Full-time44555555 Part-Time11000000 Public Works Full-time6161616161625447 Part-Time44488630 Public Safety Full-time6063636666616668 Part-Time1312121414151413 Community Development and Planning Full-time00000009 Part-Time00000001 Leisure Services Library Full-time89999877 Part-Time98877788 Recreation Full-time5556651515 Part-Time614141414153139 Other Government - Country Club Full-time2422242525241819 Part-Time2834362727272425 Total Number of Employees Budgeted FY Ending227241245246246242254265 * 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 90 VILLAGE OF NORTH PALM BEACH OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (1) Unaudited Fiscal Year 1998199920002001200220032004200520062007 FUNCTION/PROGRAM GENERAL GOVERNMENT Number of Residential Units- - 7,349 - - - - - - 7,564 PUBLIC WORKS Street Maintenance (No. of lane miles maintained)31.15531.15531.15531.15531.15531.15531.15531.15531.15531 Sanitation (Tons of Refuse Collected)- - - 11,63312,99613,13618,84214,03713,20312,085 No. of collection units for solid waste (residential) 7,0727,0277,0197,2417,3287,4347,4707,5197,5587,564 Number of vehicles maintained939393939595959595104 Number of repair overlays completed - - 0.6620.6622.8403.7875.5872.4622.9352 PUBLIC SAFETY Number of arrests by police officers234161272381246320315331410545 Number of traffic citations issued2,0553,1295,5066,5023,9362,5643,1105,7434,2724,269 EMS average response times (minutes)- 4.003.045.433.332.944.423.984.695 Number of EMS calls- 5037448128539221,0669651,0561,034 COMMUNITY DEVELOPMENT & PLANNING Building Department - Number of Permits135121251278205224201201(2)1,875 Number of code enforcement violations- - - - - - - - 1,7671,617 Number of code violations brought to board (Calendar Yr End)- - - - 10112014516514459 RECREATION Number of community events presented12131313131415222124 Number of registrants in athletic programs1,9252,0852,1002,1852,1851,7501,5751,4001,5201,600 LIBRARY Library - Number of Volumes41,908 42,637 44,686 45,700 47,339 47,960 47,531 54,074 47,371 42,372 OTHER GOVERNMENT Country Club Number of Golf Members- - - - - - - - 365579 Number of Tennis Members- - - - - - - - 136171 (1)Available information for fiscal years 1998 through 2007 is presented (2)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 91 VILLAGE OF NORTH PALM BEACH CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS Unaudited Fiscal Year 1998199920002001200220032004200520062007 Function/Program: General Government No. of General Government Buildings12121111111111111111 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---0001111 Number of Fireman & Officers55558888-- Number of Fireman/Paramedics--------2323 Police/EMS Protection: Number of Stations2222211111 Number of Substations- --0011111 Number of Policemen & Officers41415656333535353332 EMS Protection1212121213131313-0 Leisure Services Recreation Number of Parks4444444444 Public Tennis Courts5554444422 Swimming Pool1111111111 Number of Marinas1111111111 Library Number of Libraries1111111111 Number of Volumes41,908 42,637 44,686 45,700 47,339 47,960 47,531 54,074 47,371 42,372 Other Government Country Club Golf Course1111111111 Driving Range1111111111 Tennis Courts10101010101010101010 Source: Village of North Palm Beach 92 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, the business-type activities, each major fund, and the aggregate remaining fund information of Village of North Palm Beach, Florida, as of and for the year ended September 30, 2007, which collectively comprise the Village of North Palm Beach, Florida’s basic financial statements and have issued our report thereon dated March 24, 2008. 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 as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Village of North Palm Beach, Florida’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Village of North Palm Beach, Florida’s internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Village of North Palm Beach, Florida’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Village of North Palm Beach, Florida’s financial statements that is more 93 than inconsequential will not be prevented or detected by the Village of North Palm Beach, Florida’s internal control. We consider the deficiencies described below to be significant deficiencies in internal control over financial reporting. Grant Administration The Village has procedures in place that one person is to oversee all grants and to act as the primary contact person for the contracted grants administrator. However, in performing our testing of the Village’s grant programs, staff had difficulties in locating grant agreements and supporting documents and in ascertaining the current status of some of the grants. We also noted that reimbursement requests were filed late and transactions were not being timely recorded. To ensure accountability and proper record-keeping, we recommend that the Village Clerk maintain copies of all existing contracts and agreements for the Village. We further recommend that the Finance Director receive copies of all grant activity. A standard set of written policies and procedures should be developed for monitoring grant administration and compliance requirements. These procedures should include a review process, periodic status reports and the development checklists of grant administration and compliance requirements, deadlines, and the person/department responsible for the grant. In a related issue, we noted that not all expenditures recorded as grant expenditures are reimbursable due to limitations on administrative costs. We recommend that non- qualifying expenditures be tracked or otherwise recorded separately from qualifying expenditures to ensure that no unqualified expenditures are submitted for reimbursement and to more accurately report the Village’s out-of-pocket expense for budgetary purposes. While we noted several grants in which expenditures were made in multiple funds, we also noted another instance in which expenditures for multiple grants were recorded in one general ledger account. We suggest that management consistently record grant transactions, which will enable management to better track expenses and ensure that there is no duplication or missed reimbursements. Capital Assets The Village has procedures in place to record the expense for capital acquisitions in capital outlay and to capitalize expenditures for assets with an acquisition cost in excess of $2,500 and an estimated life over one year. However, at September 30, 2007, we noted a number of exceptions to these procedures: a.Significant additions to capital assets were recorded in other expense accounts. b.Completed projects were recorded as construction in progress and not added to depreciable capital assets. c.Non-capital expenditures were included in the acquisition cost of the asset. 94 We recommend that capital asset additions be reconciled to capital outlay at least annually, and preferably quarterly given the volume of additions. This will also ensure that the capital outlay accounts are adequately funded for budgetary purposes and provide a control against duplication of capital additions. A review of expenditure accounts, such as repairs and maintenance, for transactions in excess of the capitalization threshold of $2,500 will also help to identify reporting errors. We also recommend that assets that are substantially completed should be added to depreciable fixed assets and depreciated from the date of completion. Capitalization of assets should be considered distinct from planning issues related to Village projects. The Village might also want to consider setting the capitalization threshold based on the class of asset. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Village of North Palm Beach, Florida’s internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in the internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that none of the significant deficiencies described above is a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether 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 have reported to management of the Village of North Palm Beach, Florida in the attached management letter dated March 24, 2008.. The Village of North Palm Beach, Florida’s response to the findings identified in our audit is described in the attached management letter dated March 24, 2008. We did not audit the Village of North Palm Beach, Florida’s response and, accordingly, we express no opinion on it. This report is intended solely for the information and use of management, the audit committee, 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 these specified parties. March 24, 2008 West Palm Beach, Florida 95 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, 2007, and have issued our report thereon dated March 24, 2008. We conducted our audit in accordance with U.S. 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 withGovernment Auditing Standards. Disclosures in that report, which is dated March 24, 2008, 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, The Village of North Palm Beach, Florida’s responses to the findings identified in our audit are described below. We did not audit Village of North Palm Beach, Florida’s response and, accordingly, we express no opinion on it. PRIOR YEAR COMMENTS The Rules of the Auditor General require that we address in the management letter whether or not recommendations made in the preceding annual financial audit report have been followed. Other than the following comment, all prior year recommendations have been implemented. 96 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. Management Response There were significant changes made in the administration of the North Palm Beach Country Club, Golf Operations at year end in an effort to rectify administrative deficiencies such as noted in this report. A complete merchandise inventory has been completed in this fiscal year (2008) and will be conducted at least quarterly from this point forward. Management will explore the implementation of a perpetual inventory system through the Point of Sale system as recommended. CURRENT YEAR COMMENTS Grant Administration The Village has procedures in place that one person is to oversee all grants and to act as the primary contact person for the contracted grants administrator. However, in performing our testing of the Village’s grant programs, staff had difficulties in locating grant agreements and supporting documents and in ascertaining the current status of some of the grants. We also noted that reimbursement requests were filed late and transactions were not being timely recorded. To ensure accountability and proper record-keeping, we recommend that the Village Clerk maintain copies of all existing contracts and agreements for the Village. We further recommend that the Finance Director receive copies of all grant activity. A standard set of written policies and procedures should be developed for monitoring grant administration and compliance requirements. These procedures should include a review process, periodic status reports and the development checklists of grant administration and compliance requirements, deadlines, and the person/department responsible for the grant. In a related issue, we noted that not all expenditures recorded as grant expenditures are reimbursable due to limitations on administrative costs. We recommend that non- qualifying expenditures be tracked or otherwise recorded separately from qualifying 97 expenditures to ensure that no unqualified expenditures are submitted for reimbursement and to more accurately report the Village’s out-of-pocket expense for budgetary purposes. While we noted several grants in which expenditures were made in multiple funds, we also noted another instance in which expenditures for multiple grants were recorded in one general ledger account. We suggest that management consistently record grant transactions, which will enable management to better track expenses and ensure that there is no duplication or missed reimbursements. Management Response It had been the responsibility of the respective department director for which department the grant application was originally submitted, to serve as the primary contact person for the contracted grant administrator. This procedure historically had been both efficient and procedurally sound given the limited number of grants obtained at any given period. The Village recognizing the increased administrative requirements associated with multiple grant acquisitions has engaged the services of a grant management firm (R.M.P.K.) to assist with the reconciliation of qualifying expenses and reimbursement submissions. The Village acknowledges that reimbursement submissions should be billed promptly to maximize Village financial resources and to more closely match expenditures with related revenues. To rectify noted deficiencies the responsibility for grant administration has been transferred from the individual department to the Finance Department to more directly oversee grant billing, related activity, and financial recording which will ensure compliance and accuracy. Capital Assets The Village has procedures in place to record the expense for capital acquisitions in capital outlay and to capitalize expenditures for assets with an acquisition cost in excess of $2,500 and an estimated life over one year. However, at September 30, 2007, we noted a number of exceptions to these procedures: a.Significant additions to capital assets were recorded in other expense accounts. b.Completed projects were recorded as construction in progress and not added to depreciable capital assets. c.Non-capital expenditures were included in the acquisition cost of the asset. We recommend that capital asset additions be reconciled to capital outlay at least annually, and preferably quarterly given the volume of additions. This will also ensure that the capital outlay accounts are adequately funded for budgetary purposes and provide a control against duplication of capital additions. A review of expenditure accounts, such as repairs and maintenance, for transactions in excess of the capitalization threshold of $2,500 will also help to identify reporting errors. We also recommend that assets that are substantially completed should be added to depreciable fixed assets and depreciated from the date of completion. Capitalization of assets should be considered distinct from planning issues related to Village projects. The Village might also want to consider setting the capitalization threshold based on the class of asset. 98 Management Response: This comment was identified at last years audit and was addressed in this current fiscal year’s (2008) accounting procedures. Changes were made subsequent to the prior year audit to record capital expenditures in capital outlay. This was an interpretation issue as to whether projects such as street overlays and sidewalk repairs should be categorized as Repair & Maintenance items thus recorded in expense accounts or carried as major infrastructure improvements and carried as Capital. There was an additional interpretation issue as to when a “project” should be added as a fixed asset. Historically, the Village capitalizes projects when they were fully completed. In acknowledgment of the U.S. generally accepted accounting principles, Management will revise this policy to capitalize assets that have reached “substantial” completion at year-end. Substantial completion for this purpose shall be defined as, any component or sub-component of said project that has reached full completion and can stand alone as an asset in accordance with the prevailing capitalization thresholds. Management has through Council action increased the capitalization threshold in an effort to reduce the volume of fixed asset additions and will explore the implementation of “classed asset” scale for infrastructure improvements so as to further enhance accounting efficiencies. Management understands the need to reconcile capital outlay to fixed assets and will ensure compliance through newly implemented quality control mechanisms. OTHER MATTERS Excess of Expenditures Over Appropriations There were no departments that had expenditures in excess of appropriations. 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 Section 10.554(1)(i)7.a., Rules of the Auditor General, requires a statement be included as to whether or not the local government entity has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, the results of our procedures did not disclose that the Village of North Palm Beach, Florida has met any of the conditions described in Section 218.503(1) during the fiscal year ended September 30, 2007. 99 Financial Condition Assessment Procedures Sections 10.554(1)(i)7.c.and 10.556(7), Rules of the Auditor General, require that we apply financial condition assessment procedures. In connection with our audit, we applied financial condition assessment procedures. It is management’s responsibility to monitor the Village’s financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provide by management. The results of our procedures did not disclose any matters that are required to be reported. Annual Financial Report Section 10.554(1)(i)7.b., Rules of the Auditor General requires that we determine whether the annual financial report for the Village of North Palm Beach, Florida for the fiscal year ended September 30, 2007, filed with the Florida Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 20, 2007. In connection with our audit, we noted that the two reports were in substantial agreement. Investment of Public Funds Section 10.554(1)(i)2., Rules of the Auditor General, requires our audit to include a review of the Village’s compliance with Section 218.415, Florida Statutes, regarding the investment of public funds. 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, 2007. Violations of Contracts and Grant Provisions or Abuse Section 10.554(1)(i)4., Rules of the Auditor General, requires that we address violations of provisions of contracts and grant agreements or abuse that have an effect on the financial statements that is less than material but more than inconsequential. In connection with our audit for the fiscal year ended September 20, 2007, we did not have any such findings. Matters Inconsequential to the Financial Statements Section 10.554(1)(i)5., Rules of the Auditor General, requires based on professional judgment, the reporting of the following matters that are inconsequential to the financial statements, considering both quantitative and qualitative factors: (1) violations of laws, rules, regulations, and contractual provisions or abuse that have occurred, or were likely to have occurred, and would have an immaterial effect on the financial statements; (2) improper expenditures or illegal acts that would have an immaterial effect on the financial statements; and (3) control deficiencies that are not significant deficiencies, including, but not limited to; (a) improper or inadequate accounting procedures; (b) failures to properly record financial transactions; and (c) other inaccuracies, shortages, defalcations, and instances of fraud discovered by, or that come to the attention of, the auditor. In connection 100 with our audit for the fiscal year ended September 30, 2007, we did not have any such findings. Response to Management Letter The Village of North Palm Beach, Florida’s response to the findings identified in our audit is detailed above. We did not audit Village of North Palm Beach, Florida’s response and, accordingly, we express no opinion on it. 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. March 24, 2008 West Palm Beach, Florida 101