ACCT625

Case Study I

Case Study I will be completed as an individual effort.

Select a Comprehensive Annual Financial Report (CAFR) from your favorite state or local governmental

agency. Be sure to state which state or local governmental agency you are analyzing.

Analyze the CAFR that you selected. Prepare a report in your own words analyzing and explaining the

following:

1. Discuss what the main sections of the report are.

2. Discuss the introductory section of the CAFR:

a. Explain whether or not the CAFR has a certificate of achievement of excellent in financial

reporting

b. Explain the key issues addressed in the letter of transmittal.

3. Discuss the budget-to-actual comparisons of the major funds.

a. Explain the accounting basis used to prepare its annual operating budget.

b. Explain whether the actual amounts are on a GAAP or a budgetary basis.

4. Discuss the main sources of the government?s revenues, including those from both governmental and

business-type activities.

5. Discuss how the government classifies its governmental expenditures. Explain whether the

classifications are approximately the same in both the government-wide financial statements and the

fund statements.

6. Discuss what types of assets are reported and how they are reported for government-wide financial

statements and the fund statements.

7. Discuss what types of liabilities are reported and how they are reported for government-wide

financial statements and the fund statements.

8. Discuss whether or not you feel that the CAFR is easy to read and understand.

Discuss what recommendations regarding the CAFR you make to the governmental entity.

Prepare a report in your own words that shows in-depth critical thinking ? and support your answers

with analysis. There are many ways to do this, but in addition to the answering the questions you need

to analyze, explain or describe what you are doing as though you are presenting the work to a CEO,

Executive Officer, CFO or Board.

Provide a cover page (with your name and title of the work) and a bibliography (also remember that you

need to cite your sources within the paragraphs (body of your work). You should have a minimum of

five pages double spaced counting cover page and bibliography. Use Excel if there are calculations, but

use Word if no calculations are needed. You will be graded based on computational accuracy, critical

thinking, professionalism, communication and presentation - and you need to include a cover page with

your name on your work ? and remember to cite your sources.

2015 Comprehensive Annual Financial Report CITY OF LYNNWOOD WASH I NG TON CITY OF LYNNWOOD, WASHINGTON COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended December 31, 2015 Prepared by: Accounting Manager, Jeannie Brown, CPA Finance Director, Sonja Springer, CPA. Finance Supervisors Kim Koronko and Sherri Gordon, CPA Budget Coordinator, Marilou Moore, CPA This page intentionally left blank CITY OF LYNNWOOD, WASHINGTON COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2015 TABLE OF CONTENTS INTRODUCTORY SECTION (Unaudited) Letter of Transmittal .............................................................................................................................. 1 Elected Officials, City Council and Appointed Officials ...................................................................... 5 City of Lynnwood Organizational Chart ............................................................................................... 7 FINANCIAL SECTION Independent Auditor's Report ......................................................................................................... 10-12 Management's Discussion and Analysis......................................................................................... 15-27 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Position ........................................................................................................ 30 Statement of Activities ............................................................................................................ 31 Fund Financial Statements Governmental Funds Balance Sheet .......................................................................................................................... 32 Reconciliation of the Balance Sheet - Governmental Funds to the Governmental Wide Statement of Net Position .......................................................... 33 Statement of Revenues, Expenditures, and Changes in Fund Balances ...................................................................................................................... 34 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ............................................................................................... 35 Proprietary Funds Statement of Net Position ........................................................................................................ 36 Statement of Revenues, Expenses, and Changes in Fund Net Position................................................................................................................. 37 Statement of Cash Flows .................................................................................................... 38-39 Fiduciary Funds Statement of Fiduciary Net Position........................................................................................ 40 Statement of Changes in Fiduciary Net Position ..................................................................... 41 Notes to the Basic Financial Statements ......................................................................................... 44-87 Required Supplementary Information Schedule of Revenues-Budget and Actual-General Fund ............................................................. 90 Schedule of Expenditures-Budget and Actual-General Fund ........................................................ 91 i CITY OF LYNNWOOD, WASHINGTON COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2015 Schedule of Proportionate Share of the Net Pension Liability/Asset-Multi-Employer Plans .......................................................................... 92 Schedule of Employer Contributions-Multi-Employer Plans........................................................ 93 Schedule of Proportionate Share of the Net Pension Liability/Asset Law Enforcement Officers' and Firefighters Retirement Plan 2 .................................. 94 Schedule of Employer Contributions Law Enforcement Officers' and Firefighters Retirement Plan 2 .................................. 95 Schedule of Changes in Net Pension Liability and Related Ratios Firemens' Pension ......................................................................................................... 96 Schedule of Employer Contributions-Firemen's Pension ............................................................. 97 Schedule of Investment Returns-Firemen's Pension ..................................................................... 98 Schedule of Funding Progress-LEOFF 1 Retiree Medical and LT Care Benefits ......................... 99 SUPPLEMENTARY FINANCIAL INFORMATION Combining and Individual Fund Statements and Schedules Nonmajor Governmental Funds Combining Balance sheet - by Fund Type .................................................................................. 102 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - by Fund Type ............................................................................................. 103 General Fund Comparative Balance Sheet ......................................................................................................... 104 Comparative Statement of Revenues, Expenditures, and Changes in Fund Balances ....................................................................................................................... 105 Nonmajor Special Revenue Funds Combining Balance Sheet..................................................................................................... 106-107 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ............. 108-109 By Fund Comparative Balance Sheets, Comparative Statements of Revenues, Expenditures and Changes in Fund Balances, and Schedule of Revenues, Expenditures, and Changes in Fun Balances - Budget to Actual ...................... 110-146 Nonmajor Debt Service Funds Combining Balance Sheet............................................................................................................ 147 Combining Statement of Revenues, Expenditures and Changes in Fund Balances .................... 148 By Fund Comparative Balance Sheets, Comparative Statements of Revenues, Expenditures and Changes in Fund Balances, and Schedule of Revenues, Expenditures, and Changes in Fun Balances - Budget to Actual ...................... 149-165 ii CITY OF LYNNWOOD, WASHINGTON COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2015 Nonmajor Capital Project Funds Combining Balance Sheet..................................................................................................... 166-168 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ............. 169-171 By Fund Comparative Balance Sheets, Comparative Statements of Revenues, Expenditures and Changes in Fund Balances, and Schedule of Revenues, Expenditures, and Changes in Fun Balances - Budget to Actual ...................... 172-213 Proprietary Funds Water, Sewer, and Storm Water Utility Fund Comparative Statement of Net Position ...................................................................................... 214 Comparative Statement of Revenues, Expenses, and Changes in Net Position ........................................................................................................................... 215 Comparative Statement of Cash Flows ................................................................................. 216-217 Golf Course Fund Comparative Statement of Net Position ...................................................................................... 218 Comparative Statement of Revenues, Expenses, and Changes in Net Position ........................................................................................................................... 219 Comparative Statement of Cash Flows ................................................................................. 220-221 Internal Service Funds Combining Statement of Net Position ......................................................................................... 222 Combining Statement of Revenues, Expenses, and Changes in Net Position ........................................................................................................................... 223 Combining Statement of Cash Flows ................................................................................... 224-225 Equipment Rental Reserve Fund Comparative Statement of Net Position ...................................................................................... 226 Comparative Statement of Revenues, Expenses, and Changes in Net Position ........................................................................................................................... 227 Statement of Cash Flows ...................................................................................................... 228-229 Self Insurance Fund Comparative Statement of Net Position ...................................................................................... 230 Comparative Statement of Revenues, Expenses, and Changes in Net Position ........................................................................................................................... 231 Statement of Cash Flows ...................................................................................................... 232-233 Resource Retirement Contribution Fund Comparative Statement of Net Position ...................................................................................... 234 Comparative Statement of Revenues, Expenses, and Changes in Net Position ........................................................................................................................... 235 Statement of Cash Flows ...................................................................................................... 236-237 iii CITY OF LYNNWOOD, WASHINGTON COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2015 Fiduciary Funds Recreation Scholarship Fund Comparative Statement of Net Position ...................................................................................... 238 Comparative Statement of Revenues, Expenses, and Changes in Fiduciary Net Position ........................................................................................................... 239 Court Trust Fund Comparative Statement of Net Position ...................................................................................... 240 Comparative Statement of Revenues, Expenses, and Changes in Fiduciary Net Position ........................................................................................................... 241 Firemen's Pension Trust Fund Comparative Statement of Net Plan Position .............................................................................. 242 Comparative Statement of Revenues, Expenses, and Changes in Fiduciary Net Position ........................................................................................................... 243 Agency Funds Combining Statement of Changes in Assets and Liabilities ........................................................ 244 Schedule of Expenditures of Federal Awards .................................................................................... 245 Notes to the Schedule of Federal Awards .......................................................................................... 246 STATISTICAL SECTION Introduction to the Statistical Section ..........................................................................................248 Financial Trends Government-wide Net Position - By Category ..................................................................... 249 Chart-Total Government-wide Net Position ......................................................................... 250 Changes in Net Position-Governmental Activities................................................................ 251 Changes in Net Position-Business-type Activities ................................................................ 252 Changes in Net Position-Total............................................................................................... 253 Fund Balances-Governmental Funds (2006-2010)................................................................ 254 Fund Balances-Governmental Funds (2011-2015) ............................................................... 255 General Governmental Revenues by Source (Unaudited)..................................................... 256 Tax Revenues by Source-Governmental Funds (Unaudited) ................................................ 257 General Government Expenditures by Function (Unaudited) ............................................... 258 General Governmental Current Expenditures by Function (Unaudited) ............................... 259 Summary of Changes in Fund Balances-Governmental Funds (Unaudited) ........................ 260 Revenue Capacity Taxable Assessed Value of Property ..................................................................................... 261 Direct and Overlapping Property Tax Rates ......................................................................... 262 iv Property Tax Levies and Collections .................................................................................... 263 CITY OF LYNNWOOD, WASHINGTON COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2015 Principal Property Taxpayers ................................................................................................ 264 Direct and Overlapping Sales Tax Rates ............................................................................... 265 Principal Sales Tax Payers .................................................................................................... 266 Debt Capacity Ratio of Outstanding Debt by Type (Fiscal year).................................................................. 267 Ratio of Total Debt Outstanding by Type (Calendar year) .................................................. 268 Direct and Overlapping Debt................................................................................................. 269 Legal Debt Margin (Voted Debt Capacity) .......................................................................... 270 Legal Debt Margin (Non-voted Debt Capacity) ................................................................... 271 Legal Debt Margin (General purpose with a Vote) .............................................................. 272 Legal Debt Margin-Utility Purposes ..................................................................................... 273 Legal Debt Margin-Open Space, Park and Capital Facilities (Voted) .................................. 274 Pledged Revenue Coverage .................................................................................................. 275 Demographic and Economic Information Demographic and Economic Statistics .................................................................................. 276 Principal Employers .............................................................................................................. 277 Operating Information City Employees by Function/Program .................................................................................. 278 Operating Statistics by Program ............................................................................................ 279 Capital Asset and Infrastructure Statistics by Function/Program ............................................ 28 v This page intentionally left blank INTRODUCTORY SECTION December 12, 2016 Honorable Mayor Nicola Smith, Lynnwood City Council, and Citizens of the City of Lynnwood I am pleased to transmit to you the Comprehensive Annual Financial Report (CAFR) for the fiscal year ending December 31, 2015. The accompanying CAFR confirms that the City of Lynnwood's financial standing is strong and that our fiduciary oversight is diligent. State Law (RCW 43.09.230) requires that Washington's local governments prepare and publish a CAFR for each preceding fiscal year. These financial statements are developed according to the Generally Accepted Accounting Principles (GAAP) as set forth by the Government Accounting Standards Board (GASB), and under the audit authority of the Washington State Auditor's Office (SAO). The enclosed CAFR Statements include all Governmental, Proprietary and Fiduciary funds. In addition, the Financial Statements include reports the Lynnwood Public Facilities District (PFD), the City's discrete component unit, and the City of Lynnwood Transportation Benefit District (TBD), the City's blended component unit. While undertaking Lynnwood's fiscal responsibilities, rigorous standards, procedures, and controls used to protect and account for municipal assets and liabilities. The City employs internal controls to protect publicly-owned assets from loss, theft, or misuse -- and to prepare the City's financial statements in full conformity with GAAP. GAAP requires that the CAFR include a narrative introduction, general overview, and detailed analysis in the form of Management's Discussion and Analysis (MD&A). This transmittal letter is intended to complement and supplement the MD&A. COMMUNITY PROFILE On April 23, 1959, Lynnwood incorporated as a non-charter, optional code city with a MayorCouncil form of government. Lynnwood benefits from its enviable geographic location in Snohomish County-- just 10 miles north of Seattle and 9 miles south of Everett. Lynnwood's setting at the junction of I-5, I-405 and SR 525 made it the ideal location for the Alderwood Mall and the many retail and professional service businesses nearby. A suburban community at the time of incorporation, Lynnwood is becoming a Regional Growth Center--as called for by the Puget Sound Regional Council's Vision 2040. Regional Growth Centers have or will have high-density residential and employment density served by regionally-significant infrastructureincluding the Lynnwood Link segment of Sound Transit's light rail system (commencing service 2023). It is believed that Lynnwood's residential population of 36,590 is considerably less than the City's daytime population. The City encompasses 7.86 square miles, and is planning for a 2035 population within that area of 54,000. In addition, Lynnwood is expected to grow in both size and population through annexation of adjacent unincorporated areaswith a total 2035 population of approximately 85,000. 19100 44TH Ave W | PO Box 5008 | Lynnwood, WA 98046-5008 | Phone: 425-670-5000 | www.ci.lynnwood.wa.us 2015 Comprehensive Annual Financial Report Letter of Transmittal Page 2 December 12, 2016 2016 The Mayor and City Council are elected at-large for staggered four-year terms. The City Council is responsible for establishing the general direction and policies for the City and for the allocation of resources via an adopted budget. As the chief executive officer, the Mayor is responsible for carrying out the policies and direction set by the City Council. This includes the administration of laws and ordinances, the execution of contracts and agreements, and the delivery of municipal services. The City provides a full range of local government services including public safety; criminal justice, planning and zoning; parks and recreation; economic development; streets and traffic management; and water, wastewater and stormwater utilities. Lynnwood has adopted financial management policies to guide budgeting and accounting practices. The City Council adopts a biennial budget each even-numbered year for the subsequent two years. The budget process includes a detailed, six-year financial forecast, which serves as the foundation for the City of Lynnwood's financial planning. One or more times during the biennium, budget adjustments are brought forward to the City Council. LOCAL ECONOMY Relative to other Washington counties, Snohomish County has experienced high growth rates during the past two decades. The State Office of Financial Management (OFM) projects an additional 300,000 Snohomish County residents by the year 2025. Lynnwood's designation as the Regional Growth Center lead to ambitious population and employment growth targets for Lynnwood, as set for by the Snohomish County Countywide Planning Policies. Meanwhile, Washington State's economy continues to outperform the national economy. Washington State Economic and Revenue Forecast Council expects Washington's economy to continue to grow. As a regional employment center and a retail shopping destination, Lynnwood is recognized as key catalyst for the economic health of Snohomish County. In 2015, the City issued nearly 4,500 business licenses. Value-added new construction during 2015 exceeded $160 million, and is projected to exceed $103 million during 2016. Local businesses employ more than 21,700 people here. The City has one of the lowest property tax levy rates in the Puget Sound region. For 2015, the rate was $2.45 per $1,000 of assessed valuation [which includes a special levy of $0.47 for Emergency Medical Service (EMS)]. Alderwood Mall is located in the heart of the City and is the third-largest shopping center in the Puget Sound area, offering extensive shopping, restaurant, and entertainment experiences. This retail center is anchored by national department stores (Nordstrom's, JC Penny, and Macy's), an AMC Loews Theater, and the Alderwood Village lifestyle center. Alderwood Mall continues to foster new investment in its environs. Stores within walking distance of Alderwood Mall include: Target, Kohl's, Total Wine, Toys R Us, Marshalls, TJ Max, Ross, Nordstrom Rack, Best Buy, Video Only, Whole Foods, Barnes & Noble, Babies R Us, and Costco. To the west of Alderwood Mall, Highway 99 is an important transportation and commercial corridor serving Lynnwood and the region. Community Transit's Swift Rapid Bus Service travels along Highway 99. Lynnwood's segment of Highway 99 is experiencing new investment and 2015 Comprehensive Annual Financial Report Letter of Transmittal Page 3 December 12, 2016 2016 redevelopmentas evidenced by the Lynnwood Crossroads retail center (anchored by LA Fitness). Lynnwood's automobile dealerships (along Highway 99 and elsewhere) include: Ford, Toyota, Lexus, Mazda, Infinity, Mercedes, Acura, Jaguar/Land Rover, and Volvo. A regional CarMax dealership is under construction at Highway 99 and 212th Street SW. Automobile sales and service are a strong presence on Highway 99, but the City has zoned other properties along the corridor for mid-rise, mixed-use development. As described further below, Edmonds Community College (EdCC) enjoys convenient access from Highway 99. With an inventory of more than 1,000 rooms, Lynnwood's lodging industry serves both Snohomish County and King County. In 2015, Lynnwood received a lodging tax distribution of $827,000, a 13-percent increase over 2014. Visitors to Lynnwood contribute to the local economy, generating economic activity, employment and general tax revenues. The City's Economic Development Action Plan identifies goals and strategies for continued growth as Lynnwood transitions from a suburban-scale community to a dense, urban center. In particular, Lynnwood's City Center will become a regional node for population and employment growth, with excellent transportation access via I-5, light-rail transit, bus rapid transit, the regional Interurban Trail, and a robust arterial street network. The Lynnwood Public Facilities District (PFD) owns and operates the Lynnwood Convention Center. The City provides a guarantee for the PFD's bonded debt for the Convention Center. Now celebrating its 10th year of service, the Convention Center has an earned reputation for excellence. In Lynnwood and several nearby communities, public K-12 education is provided by the Edmonds School District. With nearly 12,000 student enrollments per quarter, Edmonds Community College (located in Lynnwood) offers associate degrees and certificate programs in a variety of disciplines. Four-year degrees are also offered through the CWU University Center located there. Public library services are provided by the Sno-Isle Regional Library District. LONG-TERM FINANCIAL PLANNING AND GUIDING FINANCIAL POLICIES Stewardship of public resources is one of the most-critical responsibilities borne by elected officials and administrative staff. The City of Lynnwood follows local statutes and adopted policies--in addition to the myriad of State and Federal requirementsto ensure that our fiduciary practices are sound, prudent and transparent. The City maintains a long-term Capital Facilities Plan (CFP) in accordance with the State Growth Management Act. This CFP guides decision-making regarding the prioritization and funding of infrastructure projects, which are itemized in the City's Strategic Investment Plan (SIP), which is adopted as part of the biennial budget. Together, these Plans allow the City to accurately forecast capital needs consistent with the Community Vision and the 20-year Comprehensive Plan. The City Council, and its Finance Committee, regularly review financial policies, budget performance, and long-term financial forecasts. This oversight allows the Council to consider budget activity relative to historical performance, forecasts, and adopted policies. 2015 Comprehensive Annual Financial Report Letter of Transmittal Page 4 December 1 2 , 2016 MAJOR INITIATIVES Lynnwood is currently deploying an integrated financial software system (Munis) in order to enhance the City's ability to manage its finances, complete its reporting requirements, and improve efficiency in all business areas. Lynnwood continues to invest in capital facilities needed to provide services to our community. Investments in general government capital facilities amounted to over $8.9 million in 2015. Projects completed or in progress in 2015 ranged from roadway construction and infrastructure improvements to significant trail and park improvements. Investments in capital assets of the City's utilities amounted to $7.9 million in 2015. Lynnwood Place, located across from the Alderwood Mall, is being constructed in two phases: 1) Costco Wholesale store, which opened in October 2015; and 2) mixed-used buildings with structured parking. A specific timeframe for Phase 2 is being developed. Final design is underway for Sound Transit's Lynnwood Link light rail service between Lynnwood and Seattle, Bellevue, and Sea-Tac International Airport. Beginning in 2023, the Lynnwood station, which will be the terminus of the northern route, is anticipated to serve 20,000 riders per day. The Lynnwood City Center, a long-term re-development strategy, is located within the boundary of the in Lynnwood Regional Growth Center. The City Center Subarea Plan envisions 9.1 million square feet of mixed-used development, nearly tripling its current square footage. Three new midrise developments that represent the birth of the City Center are or will be under construction imminently. ACKNOWLEDGEMENTS The preparation of the Comprehensive Annual Financial Report could not have been accomplished without the dedicated effort of Administrative Services staff. I appreciate the many contributions from Jeannie Brown, Sherri Gordon, Kim Koronko, Marilou Moore, Cyndie Eddy, and Julie Stanhope-as well as the many personnel from other departments who assisted in its preparation. Thank you to our department directors for embracing and realizing Our Community Vision, and their tireless delivery of community services. I also extend my thanks to the Washington State Auditor's Office for their professionalism and guidance in conducting the audit of the City's basic financial statements and note disclosures. Credit also must be given to the Mayor and City Council for their continued commitment, leadership, involvement, and support for maintaining the highest standards of governance in the management of Lynnwood's finances. CITY OF LYNNWOOD INTRODUCTORY SECTION _________________________________________________________________________________________________________ ELECTED OFFICIALS (in office as of December 31, 2015) MAYOR Nicola Smith Term Expires 2017 CITY COUNCIL Sid Roberts Council Vice-President Position 6-Term Expires 2015 Loren Simonds Council President Position 4Term Expires 2015 Ian Cotton Position 2Term Expires 2017 Ruth Ross Position 3Term Expires 2017 M. Christopher Boyer Position 1Term Expires 2017 Benjamin Goodwin Position 5Term Expires 2015 Van Aubuchon Position 7Term Expires 2015 EXECUTIVE STAFF & LEGAL COUNSEL Assistant City Administrator Art Ceniza Finance Director Sonja Springer Information Technology Director Jim Kelley Police Chief Steve Jensen Fire Chief Scott Cockrum Public Works Director William Franz Community Development Director Paul Krauss Parks and Recreation Director Lynn Sordel Human Resources DirectorInterim Lori Charles Economic Development Director David Kleitsch Court Administrator City Attorney Paulette Revoir Inslee, Best, Doezie & Ryder, P.S. _________________________________________________________________________________________________________ 2015 COMPREHENSIVE ANNUAL FINANCIAL REPORT PAGE 5 This page intentionally left blank Treasurer Employee Relations Compensation/Benefits Recruitment/Training Human Resources Lori Charles (interim) Planning Permits Accounting Budget Clerk Community Development Paul Krauss Administrative Services Sonja Springer City Council Van AuBuchon M. Christopher Boyer Benjamin Goodwin Ian Cotton Sid Roberts Loren Simmonds Operations Development Information Technology Jim Kelley Infractions Trials Probation Park / Golf Operations Capital Projects Recreation Programs / Police Steve Jensen Public Works Bill Franz Engineering Services Construction Services Building Operations & Maintenance Fire Suppression Inspections Medical Aid Emergency Fire Scott Cockrum Municipal Court Judge Stephen Moore Law Enforcement Animal Control Economic Strategies Programs & Projects Information & Marketing Economic Development David Kleitsch Chief Executive Public Information Public Relations Intergovernmental Affairs Community Parks & Recreation Lynn Sordel Court Paulette Revoir Citizen Advisory Boards Mayor Nicola Smith Citizens of Lynnwood 2015 Organizational Chart CITY OF LYNNWOOD INTRODUCTORY SECTION _________________________________________________________________________________________________________ ______________________________________________________________________________________________________ 2015 COMPREHENSIVE ANNUAL FINANCIAL REPORT PAGE 7 This page intentionally left blank FINANCIAL SECTION CITY OF LYNNWOOD FINANCIAL SECTION ________________________________________________________________________________________________________ Washington State Auditor's Office INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS December 12, 2016 Mayor and City Council City of Lynnwood Lynnwood, Washington REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate discretely presented component units and remaining fund information of the City of Lynnwood, Snohomish County, Washington, as of and for the year ended December 31, 2015, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness _________________________________________________________________________________________________________ 2015 COMPREHENSIVE ANNUAL FINANCIAL REPORT PAGE 10 CITY OF LYNNWOOD FINANCIAL SECTION ________________________________________________________________________________________________________ of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate discretely presented component units and remaining fund information of the City of Lynnwood, Snohomish County, Washington, as of December 31, 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Matters of Emphasis As described in Note 1, during the year ended December 31, 2015, the City has implemented the Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions - an amendment of GASB Statement No. 27 and Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an amendment of GASB Statement No. 68. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 15 through 27, budgetary comparison information on pages 90 through 91, pension plan information on pages 92 through 98 and information on postemployment benefits other than pensions on page 99 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying information listed as supplementary financial information on pages 102 through 246 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the _________________________________________________________________________________________________________ 2015 COMPREHENSIVE ANNUAL FINANCIAL REPORT PAGE 11 CITY OF LYNNWOOD FINANCIAL SECTION ________________________________________________________________________________________________________ financial statements. This information has been subjected to auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The information identified in the table of contents as the Introductory and Statistical Sections is presented for purposes of additional analysis and is not a required part of the basic financial statements of the City. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we will also issue our report dated December 12, 2016, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. That report will be issued under separate cover in the City's Single Audit Report. 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. Sincerely, TROY KELLEY STATE AUDITOR OLYMPIA, WA _________________________________________________________________________________________________________ 2015 COMPREHENSIVE ANNUAL FINANCIAL REPORT PAGE 12 This page intentionally left blank MANAGEMENT DISCUSSION AND ANALYSIS CITY OF LYNNWOOD MANAGEMENT'S DISCUSSION AND ANALYSIS ____________________________________________________________________________________________________________________ Within this section of the City of Lynnwood, Washington (\"the City\") comprehensive annual financial report (CAFR), the City's management is pleased to provide this narrative discussion and analysis of the financial activities of the City for the calendar year ended December 31, 2015. We discuss and analyze the City's financial performance within the context of the accompanying financial statements, schedules, and note disclosures following this section. Financial Highlights The City's assets exceeded its liabilities by $201,353,709 (net position) for the calendar year reported. Total net position is comprised of the following: (1) Net investment in capital assets, of $157,921,923 include property and equipment, net of accumulated depreciation, and reduced for outstanding debt related to the purchase or construction of capital assets. (2) Net position of $14,717,508 is restricted by constraints imposed from outside the City such as debt covenants, grantors, laws, or regulations. (3) Unrestricted net position of $28,714,278 represents the portion available to maintain the City's continuing obligations to citizens and creditors. In this fiscal year, the City implemented new pension accounting and financial reporting standards. As a result, the City now reports a net pension liability to all of its employees of over $14 million. This liability causes the total unrestricted net position to be reported as $28 million, rather than $42 million. The City's governmental funds reported a total ending fund balance of $32,908,782 this year. This compares to the prior year restated ending fund balance of $29,183,591, showing an increase of $3,725,191 or 12.8% during the current year. At the end of the current calendar year, unassigned fund balance for the General Fund was $11,493,349, or 23.4% of total General Fund expenditures. Overall, the City continues to maintain a strong financial position. The above financial highlights are explained in more detail in the \"financial analysis\" section of this document. Overview of the Financial Statements This Management Discussion and Analysis (MD&A) document introduces the City's basic financial statements. The basic financial statements include: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the basic financial statements. The City also includes in this report additional information to supplement the basic financial statements. Government-wide Financial Statements The City's annual financial report includes two government-wide financial statements. These statements provide both longterm and short-term information about the City's overall financial status. Financial reporting at this level uses a perspective similar to that found in the private sector with its basis in accrual accounting and the elimination or reclassification of activities between funds. The first of these government-wide statements is the Statement of Net Position. This is the government-wide statement of position presenting information that includes all of the City's assets and liabilities, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City as a whole is improving or deteriorating. Evaluation of the overall health of the City would extend to other nonfinancial factors such as diversification of the taxpayer base or the condition of City infrastructure, in addition to the financial information provided in this report. _____________________________________________________________________________________________________________________ 2015 COMPREHENSIVE ANNUAL FINANCIAL REPORT PAGE 15 CITY OF LYNNWOOD MANAGEMENT'S DISCUSSION AND ANALYSIS ____________________________________________________________________________________________________________________ The second government-wide statement is the Statement of Activities. This statement reports how the City's net position changed during the current calendar year. All current year revenues and expenses are included regardless of when the City receives or pays cash. An important purpose of the Statement of Activities is to show the financial reliance of the City's distinct activities or functions on revenues provided by the City's taxpayers. Governmental activities included in this statement are general government, judicial, public safety, physical environment, transportation, economic environment and culture and recreation. Business-type activities include water, sewer and storm water. Both government-wide financial statements distinguish governmental activities of the City that are principally supported by taxes from business-type activities that are intended to recover all or a significant portion of their costs through user fees and charges. The government-wide financial statements are pr esented on pages 30 and 31 of this report. Fund Financial Statements A fund is an accountability unit used to maintain control over resources segregated for specific activities or objectives. For example, the Street Fund accounts for dollars associated with street maintenance. The City uses funds to ensure and demonstrate compliance with finance-related laws and regulations. Within the basic financial statements, fund financial statements focus on the City's most significant funds rather than the City as a whole. Major funds are separately reported while all others are combined into a single, aggregated presentation. Individual fund data for nonmajor funds is provided in the form of combining statements in a later section of this report. The City has three kinds of funds: Governmental, Proprietary and Fiduciary Governmental funds are reported in the fund financial statements and encompass the same functions reported as governmental activities in the government-wide financial statements such as police, fire and administration. However, the focus is very different with fund statements providing a distinctive view of the City's governmental funds. These statements report short-term calendar accountability focusing on the use of spendable resources and balances of spendable resources available at the end of the year. They are useful in evaluating annual financing requirements of governmental programs and the commitment of spendable resources for the near-term. Since the government-wide focus includes the long-term view, comparisons between these two perspectives may provide insight into the long-term impact of short-term financing decisions. Both the governmental fund balance sheet and the governmental fund operating statement provide a reconciliation to assist in understanding the differences between these two perspectives. The basic governmental fund financial statements are presented on pages 32 - 35 of this report. Individual fund information for nonmajor governmental funds is found in combining statements in a later section of this report. Proprietary funds are reported in the fund financial statements and generally report services for which the City charges customers a fee such as water, sewer and storm water. The City's proprietary funds are classified as enterprise funds and an internal service fund. These enterprise funds essentially encompass the same functions reported as businesstype activities in the government-wide statements. The internal service fund is an equipment rental fund. The basic enterprise fund financial statements are presented on pages 36 - 39 of this report. Fiduciary fund type represents funds held in trust, and includes the firemen's pension trust fund and five agency funds. The statements for these funds are presented on pages 40 and 41. _____________________________________________________________________________________________________________________ 2015 COMPREHENSIVE ANNUAL FINANCIAL REPORT PAGE 16 CITY OF LYNNWOOD MANAGEMENT'S DISCUSSION AND ANALYSIS ____________________________________________________________________________________________________________________ Notes to the Basic Financial Statements The accompanying notes to the financial statements provide information essential to a full undrstanding of the governmentwide and fund financial statements. The notes to the basic financial statements begin on page 44 of this report. Required Supplementary Information This section includes the budgetary schedules for the general fund and the street construction fund. We present other budgetary schedules in the supplementary information section on pages 90 - 101. Supplementary Information Combining and comparative individual statements and schedules for some major and nonmajor funds are presented as supplementary information in this report beginning on page 104. (This page continued on the subsequent page) _____________________________________________________________________________________________________________________ 2015 COMPREHENSIVE ANNUAL FINANCIAL REPORT PAGE 17 CITY OF LYNNWOOD MANAGEMENT'S DISCUSSION AND ANALYSIS ____________________________________________________________________________________________________________________ Financial Analysis of the City as a Whole The City's net position at calendar year-end was $201,353,709. The following table provides a summary of the City's net position: Summary of Net Position at December 31, Governmental Activities Restated 2014 2015 Assets: Current Capital assets Other $ Total assets 44,248,422 148,477,473 9,872,668 $ 202,598,563 Deferred outflows of resources Business-type Activities $ 181,461,913 2,049,947 Restated 2014 2015 45,744,279 135,717,634 - 14,670,054 55,099,504 24,448,443 $ 94,218,001 - Total 17,561,675 51,140,427 - $ 68,702,102 254,109 Restated 2014 2015 58,918,476 203,576,977 34,321,111 $ 296,816,564 - 63,305,954 186,858,061 250,164,015 2,304,056 - Liabilities: Current Non-current 6,997,641 44,404,631 3,606,612 34,963,244 4,321,172 38,400,340 1,677,085 12,298,350 11,318,813 82,804,971 5,283,697 47,261,594 Total liabilities 51,402,272 38,569,856 42,721,512 13,975,435 94,123,784 52,545,291 Deferred inflows of resources 3,288,278 - 354,849 - - - Net position: Net investment in capital assets Restricted Unrestricted 122,437,252 13,138,440 14,382,268 108,229,455 12,090,347 22,572,255 35,484,671 1,579,068 14,332,010 39,110,662 3,143,597 12,472,406 157,921,923 14,717,508 28,714,278 147,340,117 15,233,944 35,044,661 Total net position 149,957,960 142,892,057 51,395,749 54,726,665 201,353,709 197,618,722 Correction to 2014 reporting errors Restatement of beginning net position - pension reporting Restated net position $ - 1,984,675 - - (8,178,468) - 149,957,960 $ 136,698,264 $ 51,395,749 70,293 (2,610,301) $ 52,186,657 $ - 2,054,968 - (10,788,769) 201,353,709 $ 188,884,921 The City continues to maintain a high current ratio. The current ratio compares current assets to current liabilities and is an indication of the ability to pay current obligations. The current ratio for governmental activities is 6.3 to 1 as compared to 12.7 to 1 at December 31, 2014. The current ratio for the business-type activities at December 31, 2015 is 3.4 to 1 as compared to 10.5 to 1 at December 31, 2014. For the City overall, the current ratio is 5.2 to 1 as compared to 12 to 1 at December 31, 2014. These ratios are strong. The City reported positive balances in net position for both governmental and business-type activities. Net position increased $13,259,696 for governmental activities and decreased by $790,908 for business-type activities. The City's overall financial position increased during calendar year 2015 by $12,468,788. Note that 81.6% of the governmental activities' net position is committed to in capital, such as building, infrastructure, vehicles and equipment. The City uses these capital assets to provide services to its citizens. However, with business-type activities, the City has spent 69% of its net position. Capital assets in the business-type activities also provide water, sewer and storm water services and the golf course, but they also generate revenues for these funds. Overall, 78.4% of the City's total net position is included in capital assets. _____________________________________________________________________________________________________________________ 2015 COMPREHENSIVE ANNUAL FINANCIAL REPORT PAGE 18 CITY OF LYNNWOOD MANAGEMENT'S DISCUSSION AND ANALYSIS ____________________________________________________________________________________________________________________ The following table provides a summary of the City's changes in net position: Summary of Changes in Net Position Governmental Activities Restated 2015 2014 Revenues: Program: Charges for services Operating grants and contributions Capital grants and contributions General: Property taxes Sales taxes Other taxes Other revenues $ 14,160,228 $ 18,637,738 1,219,077 2,587,992 11,921,777 6,495,186 11,514,783 21,129,570 10,030,887 923,589 Total revenues Business-type Activities Restated 2015 2014 $ 19,504,877 $ 18,354,807 Restated 2014 2015 $ 33,665,105 $ 36,992,545 170,000 1,219,077 2,757,992 111,009 822,722 12,032,786 7,317,908 11,510,488 19,856,302 9,878,436 181,488 18,088 62,593 11,514,783 21,129,570 10,030,887 941,677 11,510,488 19,856,302 9,878,436 244,081 70,899,911 69,147,630 19,633,974 19,410,122 90,533,885 88,557,752 Program Expenses: General government Economic environment Judicial Natural environment Culture and recreation Public safety Social services Transportation Utilities Interest on long-term debt Disposition of capital assets Water/sewer/storm utility Golf Course 11,731,113 2,873,825 1,080,402 282,648 6,793,092 29,037,752 460,061 6,109,663 82,566 1,057,627 - 13,937,566 4,230,397 997,957 110,007 6,832,934 26,272,183 417,515 8,843,355 294,984 1,110,496 (246,692) - 17,441,554 1,114,794 500,194 (475) 14,416,735 1,018,535 11,731,113 2,873,825 1,080,402 282,648 6,793,092 29,037,752 460,061 6,109,663 82,566 1,057,627 17,441,554 1,114,794 13,937,566 4,230,397 997,957 110,007 6,832,934 26,272,183 417,515 8,843,355 294,984 1,610,690 (247,167) 14,416,735 1,018,535 Total expenses 59,508,749 62,800,702 18,556,348 15,934,989 78,065,097 78,735,691 Revenues over (under) expenses 11,391,162 6,346,928 1,077,626 3,475,133 12,468,788 9,822,061 1,868,534 1,737,442 (1,868,534) (1,737,442) 13,259,696 8,084,370 (790,908) Beginning net position, as restated 136,698,264 134,807,687 Ending net position 149,957,960 142,892,057 Transfers Changes in net position Correction to 2014 reporting errors Restatement of beginning net position - pension reporting Restated net position $ - Total 12,468,788 9,822,061 52,186,657 52,988,974 188,884,921 187,796,661 51,395,749 54,726,665 201,353,709 197,618,722 1,984,675 - - (8,178,468) - $ 136,698,264 $ - 1,737,691 - 149,957,960 - 51,395,749 70,293 (2,610,301) $ 52,186,657 $ - 2,054,968 - (10,788,769) 201,353,709 $ 188,884,921 GOVERNMENTAL ACTIVITIES-REVENUES The total 2015 tax revenues were $1,430,014 or 3.5% more than those reported in 2014. Sales taxes increased $1,273,268 or 6.4%. The economy is improving in the City; not only have we seen an increase in retail sales, but there has also been an increase in sales tax generated by new construction activities in the City. _____________________________________________________________________________________________________________________ 2015 COMPREHENSIVE ANNUAL FINANCIAL REPORT PAGE 19 CITY OF LYNNWOOD MANAGEMENT'S DISCUSSION AND ANALYSIS ____________________________________________________________________________________________________________________ In total, taxes make up 60.2% of the total revenues stream as compared to 59.6% in 2014. Property taxes make up 15.6% of revenues, as compared to 16.6% in 2014 and sales taxes make up 28.9% of total revenues as compared to 28.7% in 2014. The operating grants and contributions for general government of $269,429 included the following: Public Hospital District No 2 agreements for Move 60 and Bicycle Improvement Programs - $123,500 Snohomish County Housing share of operating Lynnwood Senior Center - $11,000 Lynnwood's share of ESCA closing - $74,500 The operating grants for public safety of $633,568 included the following: State shared revenues and entitlements - $258,493 State Department of Transportation Grant SR99 and SR 524 safety improvement project - $177,830 Snohomish County Housing Authority - Police Services - $110,445 Homeland Security Disaster Grants, August 2015 wind storm - $57,925 Washington Traffic Safety Commission safe roads program - $10,121 Department of Justice Bullet Proof Vest Program - $8,220 The operating grants and contributions for transportation of $285,716 included the Public Utility District Privilege Tax for $262,475. The capital grants and contributions for general government of $501,181 included the LID 93-1 I-5 and 196th Project funded by special assessment. The capital grant and contributions for culture and recreation of $6,019,946 to purchase land which included $5 million funded by Snohomish County. The capital grants for transportation included the following: Washington State Department of Transportation for 33rd Avenue Extension: ($1,251,000) Washington State Department of Transportation for 204th Street Extension and Improvements: ($1,551,000) United States Department of Transportation Federal Highway Administration indirect grants through Washington State DOT for: o o o o 204th Street Extension ($890,000) Poplar Way Bridge Extension ($762,000) 35th and 36th Avenue West Roadway ($250,000) 99 and SR 524 Safety Project ($121,000) Note that program revenues cover 45.9% of governmental operating expenses. This means that the taxpayers and the City's other general governmental revenues cover the remaining 54.1% of the governmental expenses. As a result, the general economy and the success of City businesses have a major impact on the City's revenue streams. _____________________________________________________________________________________________________________________ 2015 COMPREHENSIVE ANNUAL FINANCIAL REPORT PAGE 20 CITY OF LYNNWOOD MANAGEMENT'S DISCUSSION AND ANALYSIS ____________________________________________________________________________________________________________________ GOVERNMENTAL FUNCTIONAL EXPENSES Of the City's governmental activities functions, 48.8% of the total costs relates to public safety in 2015 as compared to 41.7% in 2014. General government expenses make up 19.7% as compared to 22.1% in 2014. This table presents the cost of each of the City's programs, including the net costs (i.e., total cost less revenues generated by the activities). The net costs illustrate the financial burden that was placed on the City's taxpayers by each of these functions. Governmental Activities Total Cost of Services Net Cost of Services 2015 2014 2015 2014 General government Judicial Public safety Utilities Transportation Natural environment Economic environment Social services Culture and recreation Interest on debt $ 11,731,113 1,080,402 29,037,752 82,566 6,109,663 282,648 2,873,825 460,061 6,793,092 1,057,627 $ 13,937,566 997,957 26,272,183 294,984 8,843,355 110,007 4,230,397 417,515 6,832,934 1,110,496 $ Total $ 59,508,749 $ 63,047,394 $ 32,207,667 5,698,794 (364,442) 24,217,817 82,566 423,082 282,648 2,220,754 222,122 (1,633,301) 1,057,627 $ 7,519,667 (4,334,663) 23,608,220 272,293 596,345 106,182 2,795,555 384,142 3,268,241 1,110,496 $ 35,326,478 BUSINESS-TYPE ACTIVITIES ANALYSIS The City maintains two enterprise funds, each of these funds reported the following operating income or (loss) for the last two calendar years: Operating Income Fund 2015 2014 % Change Water/sewer/storm utility Golf course $ 1,727,122 101,457 $ 3,469,679 120,581 -50% 16% Total $ 1,828,579 $ 3,590,260 -49% _____________________________________________________________________________________________________________________ 2015 COMPREHENSIVE ANNUAL FINANCIAL REPORT PAGE 21 CITY OF LYNNWOOD MANAGEMENT'S DISCUSSION AND ANALYSIS ____________________________________________________________________________________________________________________ The following analysis is provided for the major enterprise funds. Sewer/Water/Storm Utility Fund - Operating revenues increased $1,057,551 or 6.1% in 2015 over that of 2014. Water charges for services increased $501,309 or 9.6% because of a 6% water rate increase and higher water use and warmer and dryer Spring and Summer in 2015. Sewer charges for services increased $469,249 or 5.2% because of a 6% rate increase. Total operating expenses increased $2,800,108 or 20.3% above the 2014 amount. Depreciation expense increased $884,076 or 43.4% in 2015. At December 31, 2015, net position totals $48,504,991. Of this amount, $31,610,925 or 65.2% is tied up in capital assets. The various expenses changed from 2014 as follows: Administration and general - water - $272,361 or 22.6%. Administration and general - sewer - $739,992 or 100.7% Maintenance and operations - water - $630,463 or 24.2% Maintenance and operations - sewer (reduction) - ($506,796) or 8.7% Maintenance and operations - storm - $736,566 or 99.4% Much of the changes in all categories between years are due to reallocation of costs between functions in 2015 to accommodate specific utility projects completed during the year. Net transfers out of this fund are related to capital projects currently in progress with utility components: 196 th Street Improvements, 204th and SR 99-68 Ave West, Poplar Way Bridge Extension, 33 rd Avenue West Extension. In this fiscal year, contributions were reduced from $822,721 to $111,009. The 2014 contributions were higher primarily due to an agreement made with developer in 2014 to pay the City $730,000 in lieu of constructing storm water detention facility required by the City and install an alternative storm water facility consistent with Department of Ecology requirements. Golf Course Fund - Revenues from charges for services increased $80,558 or 8.1%. During 2014, the City began contracting with private company (Premier Golf Company) to manage its golf course. This company made significant efforts to promote and market the course which resulted in an increase in number of rounds sold in 2015 from 2014, or an increase of 45,973 over 42,034. Total operating expenses increased just $119,570 or 12%, over the 2014 amount. The operating income decreased from a gain of $120,581 in 2014 to a $101,457 operating gain in 2015. At December 31, 2015, the net position totaled $2,977,530. Financial Analysis of the City's Funds Governmental Funds As discussed, governmental funds are reported in the fund statements with a focus on short-term inflow and outflow of spendable resources. This information is useful