COMPREHENSIVE ANNUAL FINANCIAL REPORT - · PDF fileStatement of Cash Flows ... Required Supplementary Information ... Comprehensive Annual Financial Report Year Ended December 31,

COMPREHENSIVE ANNUALFINANCIAL REPORT

City of Leavenworth, KansasFor the Year Ended December 31, 2007

CityofLeavenworth, Kansas

Comprehensive Annual Financial Report

Year Ended December 31, 2007

Table of Contents

Introductory Section

Page

Letter of Transmittal............................................................................................................ iList of Elected and Appointed Officials ........................................................................... viiOrganizational Chart........................................................................................................ viiiGFOA Certificate of Achievement.................................................................................... ix

Financial Section

Independent Auditors'Report..............................................................................................!

Management's Discussion and Analysis .............................................................................3

Basic Financial Statements

Government-wide Financial Statements:Statement of Net Assets............................................................................................... 15Statement of Activities.................................................................................................16

Fund Financial Statements:Balance Sheet - Governmental Funds .........................................................................17Combining Statement of Revenues, Expenditures and Changes in Fund

Balances -Governmental Funds ..............................................................................18Reconciliation of the Statement of Revenues, Expenditures and Changes

in Fund Balances of Governmental Funds to the Statement of Activities................19Statement of Revenues, Expenditures and Changes in Fund Balances -

Budget and Actual - General Fund...........................................................................20Statement of Net Assets - Proprietary Funds ..............................................................21Statement of Revenues, Expenses and Changes in Fund Net Assets -

Proprietary Funds......................................................................................................22Statement of Cash Flows - Proprietary Funds.............................................................23Statement of Fiduciary Net Assets-Fiduciary Funds.................................................24Statement of Changes in Fiduciary Net Assets - Fiduciary Funds..............................25

Notes to Basic Financial Statements...............................................................................26

City of Leavenworth, Kansas



Table of Contents(Continued)

Required Supplementary Information

Schedule of Employer Contributions...........................................................................62Schedule of Funding Progress .....................................................................................63

Supplementary Information

Combining and Individual Fund Statements and Schedules........................................65Combining Balance Sheet -Nonmajor Governmental Funds............................... 68Combining Statement of Revenues, Expenditures and Changes in FundBalances-Nonmajor Governmental Funds..........................................................72

Schedules of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual:

Debt Service Fund..................................................................................................76Recreation Fund.....................................................................................................77Special Fuel Fund ..................................................................................................78Countywide Sales Tax Fund..................................................................................79

Combining Statement of Changes in Assets and Liabilities -All Agency Funds .....................................................................................................81

Statistical Section (Unaudited)

Net Assets by Component............................................................................................84Changes in Net Assets .................................................................................................85Fund Balances of Governmental Funds.......................................................................88Changes in Fund Balances of Governmental Funds....................................................90Tax Revenues of Governmental Funds by Source.......................................................92Assessed Value and Estimated Actual Value of Taxable Property .............................94Property Tax Rates Direct and Overlapping Governments .........................................96Principal Property Taxpayers.......................................................................................98Property Tax Levies and Collections...........................................................................99Ratios of Outstanding Debt by Type ......................................................................... 100Ratios of General Bonded Debt Outstanding.............................................................101

City of Leaven-worth, Kansas



Table of Contents(Continued)

Page

Direct and Overlapping Governmental Activities Debt.............................................102Legal Debt Margin Information................................................................................. 104Demographic and Economic Statistics ......................................................................106Principal Employers...................................................................................................107Full-time Equivalent City Government Employees by Function ..............................108Operating Indicators by Function..............................................................................110Capital Asset Statistics by Function ..........................................................................112

Single Audit of Expenditures of Federal Awards

Schedule of Expenditures of Federal Awards............................................................116Notes to Schedule of Expenditures of Federal Awards .............................................120Report on Internal Control Over Financial Reporting and on Compliance and

Other Matters Based on an Audit of Financial Statements Performed inAccordance with Government Auditing Standards................................................. 125

Report on Compliance with Requirements Applicable to Each Major Program andInternal Control Over Compliance in Accordance with 0MB Circular A-13 3...... 127

Schedule of Findings and Questioned Costs..............................................................129Summary Schedule of Prior Audit Findings..............................................................132

Introductory Section

June 20, 2008

To the City Commission and theCitizens of the City of Leavenworth:

We are pleased to present the Comprehensive Annual Financial Report (CAFR) of the City ofLeavenworth, Kansas (the City) for the year ended December 31, 2007. Kansas statutes requirethe City to issue an annual report on its financial position and activity, and that this report beaudited by an independent firm of certified public accountants. The CAFR is prepared inaccordance with the principles and standards for financial reporting set forth by the Govern-mental Accounting Standards Board (GASB), accounting principles generally accepted (GAAP)in the United States of America, and audited in accordance with auditing standards generallyaccepted (GAAS) in the United States of America.

This report consists of management's representations concerning the finances of the City.Consequently, management assumes full responsibility for the completeness and reliability ofall the information presented in this report. To provide a reasonable basis for making theserepresentations, management of the City has established a comprehensive internal controlframework that is designed both to protect the City's assets from loss, theft, or misuse and tocompile sufficient reliable information for the preparation of the City's financial statements inconformity with GAAP. Because the cost of internal controls should not outweigh their benefits,the City's comprehensive framework of internal controls has been designed to provide reasona-ble rather than absolute assurance that the financial statements will be free from materialmisstatement. As management, we assert that, to the best of our knowledge and belief, thisfinancial report is complete and reliable in all material respects.

The City's financial statements have been audited by Berberich Trahan 8s Co., P.A., a firm oflicensed certified public accountants. The goal of the independent audit was to provide reason-able assurance that the financial statements are free of material misstatement. The indepen-dent audit involved examining, on a test basis, evidence supporting the amounts and disclo-sures in the financial statements; assessing the accounting principles used and significantestimates made by management; and evaluating the overall financial statement presentation.The independent auditor concluded, based upon the audit, that there was a reasonable basisfor rendering unqualified opinions that the City's financial statements for the fiscal year endedDecember 31, 2007, are fairly presented in conformity with GAAP. The independent auditors'report is presented as the first component of the financial section of this report.

The independent audit of the financial statements of the City was part of a broader, federallymandated "Single Audit" designed to meet the special needs of federal grantor agencies. Thestandards governing Single Audit engagements require the independent auditor to report notonly on the fair presentation of the financial statements, but also on the City's internal con-trols, and compliance with legal requirements, with special emphasis on internal controls andcompliance with legal requirements involving the administration of federal awards. Thesereports are available in the Single Audit section of this report.

100 N. 5th Street • Leavenworth, Kansas 66048-1970 * (913)682-9201www.lvks.org

GAAP require that management provide a narrative introduction,., overview, and analysis toaccompany the basic financial statements in the form of Management's Discussion and Analy-sis (MD&A). This letter of transmittal is designed to complement MD&A and should be read inconjunction with it. The City's MD&A can be found immediately following the report of theindependent auditors.

Profile of the Government

The City of Leavenworth, Kansas was established in 1854 and incorporated by the first Kansasterritorial legislature in 1855. The City is a legally constituted city of the First Class and thecounty seat of Leavenworth County. It sits on the west bank of the Missouri River approximate-ly 28 miles northwest of Kansas City, Missouri and 45 miles northeast ofTopeka, Kansas. TheCity has a population of 35,213 and covers an area of approximately 23.5 square miles.

The City is empowered to levy a property tax on both real and personal properties locatedwithin its boundaries. It is also empowered by state statute to extend its corporate limits byannexation, which occurs periodically when deemed appropriate by the governing body.

The City has operated under the commission-manager form of government since 1969. Policy-making and legislative authority are vested in the City Commission, which consists of fiveCommissioners. The City Commission is responsible for passing ordinances, adopting theannual budget and capital improvements program, appointing committees, and hiring the CityManager. City Commissioners are elected at large and on a non-partisan basis. Every twoyears, three Commissioners are elected; the two Commissioners with the highest vote totalsreceive four year terms while the Commissioner with the third highest vote total receives a twoyear term. Each year, a Mayor is selected by a majority vote of the Commissioners. The CityManager is responsible for carrying out the policies and ordinances of the City Commission,overseeing the day-to-day operations of the City, and appointing the heads of the City's de-partments.

The City's financial reporting entity includes all funds of the primary government (the City ofLeavenworth) and of its component unit—the Public Library. A component unit is a legallyseparate entity for which the primary government is financially accountable. Additional infor-mation on this legally separate entity can be found in Note l.A in the notes to the financialstatements.

The City provides a full range of services, including:

• Public safety: police and fire protection, animal control, and parking enforcement.

• Public works: sewer, refuse, stormwater management, building inspection, airport, and theconstruction and maintenance of streets, bridges and other infrastructure.

• Housing and urban redevelopment: planning and zoning, code enforcement, and a range ofhousing and community development programs supported by federal grants.

• Culture and recreation: parks, recreation, community center, and performing arts.

• General governmental and administrative services.

The annual budget serves as the foundation for the City's financial planning and control.Applicable Kansas statutes require that annual budgets be legally published and adopted forall funds (including Proprietary Funds) unless exempted by a specific statute. Statutoryexemptions currently exist for all Capital Project Funds, Fiduciary Funds, certain SpecialRevenue Funds and certain Proprietary Funds. Applicable Kansas statutes require the use ofan encumbrance system as a management control technique to assist in controlling expendi-tures.

The statutes provide for the following sequence and timetable in adoption of budgets:

(a) Preparation of the budget for the succeeding calendar year on or before August 1 of eachyear.

(b) Publication of proposed budget on or before August 15 of each year.

(c) A minimum of 10 days' notice of public hearing, published in local newspaper, on orbefore August 15 of each year.

(d) Adoption of the final budget on or before August 25 of each year.

Budgets are prepared by fund, department, and activity. City management may make transfersof appropriations at the department and activity level of a fund without seeking the approval ofthe governing body; however, management cannot amend the total budget of a fund withoutapproval of the governing body. The legal level of budgetary control is the fund level and is thelevel at which the governing body must approve any overexpenditures of appropriations ortransfers of appropriated amounts. Kansas statutes prohibit creating expenditures in excess ofthe total amount of the adopted budget of expenditures of individual funds. Such statutespermit original fund expenditure budgets to be increased for previously unbudgeted increasesin revenue other than ad valorem property taxes. The City must first publish a notice of publichearing to amend the expenditure budget of a fund. Ten days after publication, a publichearing is held and the City Commission may amend the expenditure budget of the fund atthat time.

Factors Affecting Financial Condition

The information presented in the financial statements is perhaps best understood when it isconsidered from the broader perspective of the specific environment within which the Cityoperates.

Local economy

The City of Leavenworth is known nationally as the home of the Leavenworth Federal Peniten-tiary. Several other federal institutions, including Fort Leavenworth, the Command and Gener-al Staff College of the U.S. Army, and the U.S. Disciplinary Barracks make the City an impor-tant site for governmental and military purposes. These federal institutions provide employ-ment for nearly 2,830 civilians. The Veterans Administration—which operates a full servicemedical center and employs approximately 600 civilians—is another federal agency that has asignificant presence in the City. Also, a privately-owned corrections facility serving the federalMarshall's Service employs approximately 180 people.

111

The City enjoys a strong, almost recession-proof economy, and local indicators suggest contin-ued stability. Over recent years, population and tax base trends indicate moderate but steadygrowth and the City's median family income and housing values remain above those of thestate as a whole. This economic stability is primarily due to the presence of the federal institu-tions and several large private sector firms including Hallmark Cards (employing 650 people),Capital Electric, and Armed Forces Insurance Corporation.

Long-term financial planning

The City Commission recently approved a five-year capital improvements program (2008 -2012) that contains $49.5 million in identified projects. The following table identifies thespending requirements by category:

InfrastructureStreets $18,908,740Bridges 2,889,580Sidewalks, curbs, gutters 2,110,450

Sewer and stormwater 6,161,455Economic development 6,127,456Buildings 8s equipment 4,583,579Parks 2,816,986Other 5,927,305

To the extent possible, these projects are funded on a pay-as-you-go basis with City sales taxproceeds or other operating sources. In fact, approximately $26,261,000, or 53%, of identifiedprojects are funded in this manner. An additional $10,262,000, or 21%, of identified projectsare funded by federal and state grants for street and bridge construction.

Finally, approximately $13,000,000, or 26%, of identified projects are funded with long-termcapital financing. It is expected that the debt service associated with bonds issued to financethese projects will have a minimal impact on the City's mill levy rates for the next five years.

Cash management policies and practices

The City follows Kansas statutory requirements regarding the investment of idle funds. Theserequirements protect the assets of the City by ensuring proper collateral and by restricting thetype of securities the City can purchase. Generally, deposits must be secured by the pledging ofsecurities whose market value is equal to 100% of the deposit less FDIC coverage.

Cash temporarily idle during the year was invested in certificates of deposit, repurchaseagreements, and the Kansas Municipal Investment Pool. The maturities of the investmentsgenerally ranged from 3 to 6 months, with the average maturity being 3 months. The averageyield on investments was 5.17% and the City earned interest revenue of $756,315 on theseinvestments.

Active funds were also held in interest-bearing accounts during the year, earning interestrevenue of $71,117 at an average annual interest rate of 3.98%.

IV

Risk management

The City is exposed to various risks of loss related to torts; theft of, damage to, and destructionof assets; errors and omissions; injuries to employees; and natural disasters. These risks arecovered by commercial insurance purchased from independent third parties. There has beenno significant change in insurance coverage from the previous fiscal year. Settled claims fromthese risks have not exceeded commercial insurance coverage for the past three years.

For its workers compensation insurance, the City is a participant in the Kansas EasternRegional Insurance Trust (KERIT), a not-for-profit public entity risk pool established by a groupof city and county governmental entities in the eastern region of Kansas. As of December 31,2007, the membership of KERIT included eleven cities and two counties.

The City pays an annual premium to KERIT for this workers compensation insurance. KERITmembers are subject to additional premium assessments in the event of deficiencies and mayreceive dividends from those claims years when revenues exceed expenses. KERIT providescoverage for its members within a self-insured retention limit of $400,000 in accordance withState statutes and obtains independent coverage for insured events up to an annual aggregatelimit of $5 million.

Pension and postemployment benefits

The City participates in the Kansas Public Employees Retirement System (KPERS) and theKansas Police and Firemen's Retirement System (KP&F). Both are part of a cost-sharingmultiple-employer defined benefit pension plan. KPERS and KP&F provide retirement benefits,life insurance, disability income benefits, and death benefits. Kansas law establishes andamends benefit provisions.

As of December 31, 2007, no active City employees participate in the Police and Fire PensionPlan (the Local Plan), a single-employer defined benefit pension plan previously sponsored bythe City. In 1971, when the City affiliated with KP&F, all members were given the option ofjoining KP&F or remaining with the Local Plan. As of December 31, 2007, there were eightretirees and beneficiaries receiving benefits. The City is required to contribute at an actuariallydetermined amount based on the latest actuarial report. The City provides for pension ex-penses by levying ad valorem property taxes each year.

The City also provides postretirement health and dental care benefits, as per the requirementsof an adopted personnel policy, for certain retirees.

Additional information on the City's pension arrangements and postemployment benefits canbe found in Notes 5.B-C in the notes to the financial statements.

Awards and Acknowledgements

The Government Finance Officers Association of the United States and Canada (GFOA)awarded a Certificate of Achievement for Excellence in Financial Reporting to the City ofLeavenworth for its comprehensive annual financial report in the fiscal year ended December31, 2006. This was the 13th consecutive year that the government has achieved this presti-gious award. In order to be awarded a Certificate of Achievement, a government must publishan easily readable and efficiently organized comprehensive annual financial report. This reportmust satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our currentcomprehensive annual financial report continues to meet the Certificate of AchievementProgram's requirements and we are submitting it to the GFOA to determine its eligibility foranother certificate.

Our appreciation is extended to the Mayor and City Commission for their unfailing support formaintaining the highest standard of professionalism in the management of the City's finances.We would also like to acknowledge the staff of the Finance Department and City Clerk's Officefor their assistance during the preparation of this report. Finally, we would like to recognize theaccounting firm of Berberich Trahan & Co., P.A. for their assistance in the preparation of thisreport.

^Â^yJ.'Scott Miller Daniel L. WilliamsonCity Manager Finance Director

VI

City ofLeavenworth, KansasList of Elected and Appointed Officials

December 31,2007

Elected Officials Position

Larry D. Dedeke

Lisa Weakley

Shay Baker

Ken Bower

Laura Janas Gasbarre

Mayor

Mayor Pro-Tern

Commissioner

Commissioner

Commissioner

Appointed Officials Position

J. Scott Miller

Robert Beall

Robyn Stewart

Megan Scheldt

Lona Lanter

Karen Logan

Daniel Williamson

William Katzenberger

Jerry Gies

Michael McDonald

Lee Doehring

Steve Moody

City Manager

City Attorney

Assistant City Manager

Public Information Officer

Human Resources Director

City Clerk

Finance Director

Director of Parks & Community Activities

Director of Community Development & Planning

Director of Public Works

Police Chief

Fire Chief

Vll

City of Leavenworth

Human Relations commissionCivil service CommissionBuilding codesElectricalPlumbingMechanicalzoning

1

City Clerk Personnel |

Revie

Planning & |Community |

Development |

Planning &Zoning

CodeEnforcement

Housing

communityDevelopment

EconomicDevelopment

w Boards

City Attorney

|

Police

PoliceAdministration

PoliceOperations

Animal Control

ParkingEnforcement

Citizens

city Commission

City Manager

Public Works

Engineering

inspection

Refuse

sewer

Garage

Streets

Airport

stormDrainage

AssistantCity

Manager

Advisory B

Parks &Community

Activities

Par

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Aqu

PerfoAr

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rks

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Park & comnCommunityHousingStormwaterPlanning cor

PublicInformation

Officer

Fire

FireAdministration

Fire Fighting

FirePrevention

nunity ActivitiesDevelopment

-nmission

Finance

Accounting

Budget

MunicipalCourt

informationServices

Certificate ofAchievementfor Excellencein FinancialReporting

Presented to

City ofLeavenworthKansas

For its Comprehensive Annual

Financial Report

for the Fiscal Year Ended

December 31,2006

A Certificate of Achievement for Excellence in FinancialReporting is presented by the Government Finance Officers

Association of the United States and Canada togovernment units and public employee retirement

systems whose comprehensive annual financialreports (CAFRs) achieve the higheststandards in government accounting

and financial reporting.

President

Executive Director

IX

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x

Financial Section

BT Co.B E R B E R I C H T R A H A N f f C O . , P . A .

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INDEPENDENT AUDITORS' REPORT

The Honorable Mayor and City CommissionCity ofLeavenworth, Kansas:

We have audited the accompanying financial statements of the governmental activities, thebusiness-type activities, the discretely presented component unit, each major fund, and theaggregate remaining fund information of the City of Leavenworth, Kansas (the City), as of andfor the year ended December 31, 2007, which collectively comprise the City's basic financialstatements as listed in the table of contents. These financial statements are the responsibility ofthe City's management. Our responsibility is to express opinions on these financial statementsbased on our audit. We did not audit the financial statements of the Leavenworth Public Library,the discretely presented component unit. Those financial statements were audited by otherauditors whose report thereon has been furnished to us, and our opinion, insofar as it relates tothe amounts included for the Leavenworth Public Library, is based on the report of the otherauditors.

We conducted our audit in accordance with auditing standards generally accepted in the UnitedStates of America, and the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States, and applicableprovisions of the Kansas Municipal Audit Guide. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are freeof material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the ac-counting principles used and significant estimates made by management, as well as evaluatingthe overall financial statement presentation. We believe that our audit and the report of otherauditors provides a reasonable basis for our opinions. The financial statements of the Leaven-worth Public Library were not audited in accordance with Government Auditing Standards.

In our opinion, based on our audit and the report of other auditors, the financial statementsreferred to above present fairly, in all material respects, the respective financial position of thegovernmental activities, the business-type activities, the discretely presented component unit,each major fund, and the aggregate remaining fund information of the City of Leavenworth,Kansas as of December 31, 2007, and the respective changes in financial position and cashflows, where applicable, thereof and the respective budgetary comparison for the general fundfor the year then ended in conformity with accounting principles generally accepted in the UnitedStates of America.

RSMMcGladrey Network\ An Independently Owned Member

In accordance with Government Auditing Standards, we have also issued our report datedJune 20, 2008 on our consideration of the City's internal control over financial reporting and onour tests of its compliance with certain provisions of laws, regulations, contracts and grantagreements and other matters. The purpose of that report is to describe the scope of our testingof internal control over financial reporting and compliance and the results of that testing, and notto provide an opinion on the internal control over financial reporting or on compliance. Thatreport is an integral part of an audit performed in accordance with Government Auditing Stan-dards and should be considered in assessing the results of our audit.

The management's discussion and analysis on pages 3 through 13 and the schedules of employeecontributions and funding progress on pages 62 - 63 are not a required part of the basic financialstatements but are supplementary information required by accounting principles generallyaccepted in the United States of America. We have applied certain limited procedures, whichconsisted principally of inquiries of management regarding the methods of measurement andpresentation of the required supplementary information. However, we did not audit the informa-tion and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements thatcollectively comprise the City's basic financial statements. The combining and individualnonmajor fund financial statements and other schedules, listed in the table of contents assupplementary information, are presented for purposes of additional analysis and are not arequired part of the basic financial statements. The accompanying schedule of expenditures offederal awards is also presented for purposes of additional analysis as required by the U.S. Officeof Management and Budget Circular A-133, Audit of States, Local Governments, and Non-Pro fitOrganizations, and is not a required part of the basic financial statements. Such information hasbeen subjected to the auditing procedures applied in the audit of the basic financial statementsand, in our opinion, is fairly stated in all material respects in relation to the basic financialstatements taken as a whole.

The accompanying introductory and statistical sections, as listed in the table of contents, havenot been subjected to the auditing procedures applied in the audit of the basic financial state-ments and, accordingly, we express no opinion on them.

June 20, 2008

Management's Discussion and Analysis

As management of the City of Leavenworth, Kansas, (the City) we offer readers of the City'sfinancial statements this narrative overview and analysis of the financial activities of the Cityfor the fiscal year ended December 31, 2007. We encourage readers to consider the informationpresented here in conjunction with additional information that we have furnished in our letterof transmittal, which can be found on pages i - vi of this report.

Financial Highlights

• The assets of the City exceeded its liabilities at the close of the most recent fiscal year by$56,997,612 (net assets). Of this amount, $11,068,462 (unrestricted net assets) may beused to meet the City's ongoing obligations to citizens and creditors.

• The City's total net assets increased by $6,654,109, an increase of 13.2 percent over theprior year.

• At the close of the current fiscal year, the City's governmental funds reported combinedending fund balances of $12,166,108, an increase of $4,927,196 over the prior year. Ap-proximately 86 percent of this amount, $10,501,585, is available for spending at the City'sdiscretion (unreserved fund balance).

• At the end of the current fiscal year, the unreserved fund balance for the General Fund was$3,705,627, or 23.6 percent of total General Fund expenditures.

• The City's total bonded debt declined by $1,115,000 (five percent) during the current fiscalyear. The key factor in this decrease was the retirement of $2,645,000 of previously existingdebt. However, $1,530,000 of general obligations bonds were issued during the year to pro-vide permanent financing for infrastructure improvements.

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to the City's basic finan-cial statements. The City's basic financial statements consist of three components: 1) govern-ment-wide financial statements, 2) fund financial statements, and 3) notes to the financialstatements. This report also contains other supplementary information in addition to the basicfinancial statements themselves.

Government-wide financial statements

The government-wide financial statements are designed to provide readers with a broad over-view of the City's finances in a manner similar to a private-sector business.

The statement of net assets presents information on all of the City's assets and liabilities, withthe difference between the two reported as net assets. Over time, increases or decreases in netassets may serve as a useful indicator of whether the financial position of the City is improvingor deteriorating.

The statement of activities presents information showing how the City's net assets changedduring the most recent fiscal year. All changes in net assets are reported as soon as theunderlying event giving rise to the change occurs, regardless of the timing of related cashflows.Thus, revenues and expenses are reported in this statement for some items that will only resultin cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacationleave).

Both of the government-wide financial statements distinguish functions of the City that areprincipally supported by taxes and intergovernmental revenues (governmental activities) fromother functions that are intended to recover all or a significant portion of their costs throughuser fees and charges (business-type activities). The governmental activities of the City includegeneral government, public safety, public works, culture and recreation, and housing andurban redevelopment. The business-type activities of the City include a Sewer Fund and aRefuse Fund.

The government-wide financial statements include not only the City itself (known as theprimary government), but also a legally separate public library for which the City is financiallyaccountable. Financial information for this component unit is reported separately from thefinancial information presented for the primary government itself.

Complete financial statements for the Public Library are available from their offices at 417Spruce Street, Leavenworth, Kansas 66048.

The government-wide financial statements can be found on pages 15 - 16 of this report.

Fund financial statements

A fund is a grouping of related accounts that is used to maintain control over resources thathave been segregated for specific activities or objectives. The City, like other state and localgovernments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories:governmental funds, proprietary funds, and fiduciary funds.

Governmental funds are used to account for essentially the same functions reported asgovernmental activities in the government-wide financial statements. However, unlike thegovernment-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resourcesavailable at the end of the fiscal year. Such information may be useful in evaluating a govern-ment's near-term financing requirements.

Because the focus of governmental funds is narrower than that of government-wide financialstatements, it is useful to compare the information presented for governmental funds withsimilar information presented for governmental activities in the government-wide financialstatements. By doing so, the reader may better understand the long-term impact of the gov-ernment's near-term financing decisions. Both the governmental fund balance sheet and thegovernmental fund statement of revenues, expenditures, and changes in fund balances providea reconciliation to facilitate this comparison between governmental funds and governmentalactivities.

The City maintains thirteen individual governmental funds. Information is presented separatelyin the governmental fund balance sheet and in the governmental fund statement of revenues,expenditures, and changes in fund balances for the General Fund, Debt Service Fund and theCapital Projects Fund, all of which are considered to be major funds. Data from the other tengovernmental funds are combined into a single, aggregated presentation. Individual funds datafor each of these nonmajor governmental funds is provided in the form of combining statementselsewhere in this report.

The City adopts an annual appropriated budget for the General and Debt Service Funds. Abudgetary comparison statement has been provided for each of these funds to demonstratecompliance with these budgets.

The basic governmental fund financial statements can be found on pages 17 - 20 of this report.

The City maintains one type of proprietary fund. Enterprise funds are used to report the samefunctions presented as business-type activities in the government-wide financial statements.The City uses enterprise funds to account for its sewer and refuse operations.

Proprietary fund financial statements provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statementsprovide separate information for the Sewer and Refuse Funds, both of which are considered tobe major funds of the City.

The basic proprietary fund financial statements can be found on pages 21 - 23 of this report.

Fiduciary funds are used to account for resources held for the benefit of parties outside thegovernment. Fiduciary funds are not reflected in the government-wide financial statementsbecause the resources of those funds are not available to support the City's own programs. Theaccounting used for fiduciary funds is much like that used for proprietary funds.

The basic fiduciary fund financial statements can be found on pages 24 - 25 of this report.

The notes to the financial statements provide additional information that is essential to afull understanding of the data provided in the government-wide and fund financial statements.The notes to the financial statements can be found on pages 26 - 60 of this report.

In addition to the basic financial statements and accompanying notes, this report also presentscertain required supplementary information concerning the City's progress in funding itsobligations to provide pension benefits to certain of its employees. Required supplementaryinformation can be found on pages 61 - 63 of this report.

The combining statements referred to earlier in connection with nonmajor governmental fundsare presented immediately following the required supplementary information on pensions.Combining and individual fund statements and schedules can be found on pages 6 5 - 8 1 ofthis report.

Government-wide Financial Analysis

As noted earlier, net assets may serve over time as a useful indicator of a government's finan-cial position. In the case of the City, assets exceeded liabilities by $56,997,612 at the close ofthe most recent fiscal year.

By far the largest portion of the City's net assets (80 percent) reflects its investment in capitalassets (e.g., land, buildings, machinery and equipment, and infrastructure), less any relateddebt used to acquire those assets that is still outstanding. The City uses these capital assets toprovide services to citizens; consequently, these assets are not available for future spending.Although the City's investment in capital assets is reported net of related debt, it should benoted that the resources needed to repay this debt must be provided from other sources, sincethe capital assets themselves cannot be used to liquidate these liabilities.

City of Leavenworth's Net Assets

Current and other assets

Capital assets

Total assets

Long-term liabilities

outstanding

Other liabilities

Total liabilities

Net assets:

Invested in capital assets,

net of related debt

Unrestricted

Total net assets

Governmental

Activities

Business-type

Activities Total

2007 2006 2007 2006 2007 2006

$23,205,749 $18,739,713 $4,232,054 $6,260,817 $27,437,803 $25,000,530

54,726,544 53,714,137 15,835,278 12,120,703 70,561,822 65,834,840

77,932,293

16,612,234

14,801,577

31,413,811

37,580,320

8,938,162

$46,518,482

72,453,850

17,206,157

13,789,910

30,996,067

35,022,203

6,435,580

$41,457,783

20,067,332

4,531,898

5,056,304

9,588,202

8,348,830

2,130,300

$10,479,130

18,381,520

4,833,758

4,662,042

9,495,800

7,487,307

1,398,413

$8,885,720

97,999,625

21,144,132

19,857,881

41,002,013

45,929,150

11,068,462

$56,997,612

90,835,370

22,039,915

18,451,952

40,491,867

42,509,510

7,833,993

$50,343,503

The balance of unrestricted net assets ($11,068,462) may be used to meet the City's ongoingobligations to citizens and creditors.

At the end of the current fiscal year, the City is able to report positive balances in both catego-ries of net assets, both for the government as a whole, as well as for its separate governmentaland business-type activities.

The City's net assets increased $6,654,109 during the current fiscal year. The City's invest-ment in capital assets net of related debt increased $3,419,640, or approximately eight percent.Unrestricted net assets increased $3,234,469, or approximately 41 percent, resulting fromoperating revenues exceeding operating expenses on an ongoing basis. These unrestricted netassets may be used to meet the City's ongoing obligations to citizens and creditors.

Governmental activities

Governmental activities increased the City's net assets by $5,060,699, thereby accounting for76 percent of the total growth in net assets of the City. Key elements of this increase are asfollows:

• Charges for services declined by $193,430 (four percent) during the year. Municipal Courtrevenues declined $144,256 reflecting reduced traffic enforcement efforts by the Police De-partment during the year; revenues from charges for construction inspection services in theEngineering Department declined $126,605; and investment earnings in the Debt ServiceFund declined $40,602. Also, in 2006, the City received $58,913 from the sale of state his-toric tax credits related to the renovation of City Hall while no such revenues were receivedin the current year.

However, the City received several miscellaneous revenues during the year, including$51,971 of enhanced 911 wireless fees from the Local Collection Point Administrator, anunanticipated $60,624 premium reimbursement from the City's workers compensation in-surance carrier, and a $40,000 legal settlement for a defective air conditioning system.

• Operating grants and contributions increased $114,349 (three percent) during the year.Federal financial assistance from FEMA to reimburse the City for operating costs incurredduring a flood event increased $89,478, while transient guest tax revenues received fromthe State of Kansas also increased $39,503.

• Capital grants and contributions increased $3,750,744 (1,214 percent) during the year. TheState of Kansas contributed $3,734,245 for road improvement projects during the year,while such contributions in the prior year were minimal.

• Revenues from taxes increased $371,709 (two percent) during the year. This growth resultsfrom a $545,800 increase in property taxes due to a six percent increase in the assessedvaluation of the City, while the mill levy rate remained essentially unchanged. However,sales tax revenues declined $116,451 from the prior year.

• Revenues from unrestricted investment earnings increased $125,370 (19 percent) duringthe year. The average yield on investments of idle cash was 5.17% during the year com-pared to 4.92% in the prior year.

• Generally, increases in expenses closely paralleled inflation and growth in the demand forservices. In the governmental activities, General government expenses increased $232,431,or nearly eight percent, during the year due to an unexpected $45,000 donation made to acivic organization, a $39,503 increase in the transient guest tax pass through payment tothe Convention & Tourism Board, and to a $74,401 increase in personnel expenses inPlanning & Zoning. During the prior year, a high-level position in the department had beenvacant for much of the year.

Public safety expenses declined $312,337, or nearly three percent, due to the elimination ofa $634,645 rental payment made in the prior year for the Police Department's occupancy inthe County Justice Center. This decline is partially offset, however, by inflationary increas-es in expenses of $220,672, or nearly four percent, for Police activities and $109,009, ornearly three percent, for Fire activities.

Infrastructure assets increased $7,658,473 during the year and, as a result, the unallo-cated depreciation expense in governmental activities increased $369,046; or 13 percent,over the prior year. However, interest on long term debt declined $74,127, or seven percent,from the prior year.

City of Leavenworth's Changes in Net Assets

Revenues:

Program revenues:

Charges for services

Operating grants and

contributions

Capital grants and

contributions

General revenues:

Property taxes

Other taxes

Grants and contributions not

restricted to specific programs

Other

Total revenues

Expenses:

General government

Public safety

Public works

Culture and recreation

Housing and urban

redevelopment

Unallocated depreciation

expense

Interest on long-term debt

Sewer

Refuse

Total expenses

Change in net assets before

transfers

Transfers

Change in net assets

Net assets - beginning

Net assets - ending

Goverr

Actr

2007

$4,625,967

3,536,854

4,059,674

9,167,590

9,547,316

79,947

779,944

31,797,292

3,175,737

10,601,555

3,913,371

2,577,644

2,403,603

3,109,795

954,888

0

0

26,736,593

5,060,699

0

5,060,699

41,457,783

$46,518,482

imental

/ities

2006

$4,819,397

3,422,505

308,930

8,621,790

9,721,407

83,461

654,574

27,632,064

2,943,306

10,913,892

3,900,142

2,512,337

2,356,794

2,740,749

1,029,015

0

0

26,396,235

1,235,829

0

1,235,829

40,221,954

$41,457,783

Busine;

Activ

2007

$4,936,039

106,054

1,050,402

0

0

0

0

6,092,495

0

0

0

0

0

0

0

2,969,198

1,529,887

4,499,085

1,593,410

0

1,593,410

8,885,720

$10,479,130

is-type

ities

2006

$4,774,454

168,498

884,555

0

0

0

0

5,827,507

0

0

0

0

0

0

0

3,080,666

1,441,822

4,522,488

1,305,019

0

1,305,019

7,580,701

$8,885,720

To

2007

$9,562,006

3,642,908

5,110,076

9,167,590

9,547,316

79,947

779,944

37,889,787

3,175,737

10,601,555

3,913,371

2,577,644

2,403,603

3,109,795

954,888

2,969,198

1,529,887

31,235,678

6,654,109

0

6,654,109

50,343,503

$56,997,612

tal

2006

$9,593,851

3,591,003

1,193,485

8,621,790

9,721,407

83,461

654,574

33,459,571

2,943,306

10,913,892

3,900,142

2,512,337

2,356,794

2,740,749

1,029,015

3,080,666

1,441,822

30,918,723

2,540,848

0

2,540,848

47,802,655

$50,343,503

Business-type activities

Business-type activities increased the City's net assets $1,593,410, accounting for 24 percentof the total growth in the City's net assets. Key elements of this increase are as follows:

• Sewer Fund revenues increased $196,538, or nearly five percent, over the prior year.Revenues from charges for services increased $96,222, or nearly three percent, due to athree percent utility rate increase enacted at the beginning of the year. Revenues from capi-tal grants and contributions increased $165,847 due a rise in FEMA payments to the Cityfor flood mitigation projects that were ultimately capitalized as construction in progress.However, revenues from operating grants and contributions declined $65,531 due to a de-crease in FEMA payments to the City for operating activities.

Sewer Fund expenses declined $111,468, or nearly four percent, from the prior year despitea $289,395 increase in depreciation expense resulting from the addition of $4,403,021 ofdepreciable capital assets during the year. However, personnel costs declined $164,545 dueto position vacancies throughout the year. Finally, other expenses declined $228,322 dueprimarily to a reduction in operating costs relating to flood mitigation projects during theyear.

• Refuse Fund revenues from charges for services increased $65,363, or approximately fourpercent, due to a utility rate increase enacted at the beginning of the year, while expensesincreased $88,065, or approximately six percent, over the prior year.

Financial Analysis of the Government's Funds

As noted earlier, the City uses fund accounting to ensure and demonstrate compliance withfinance-related legal requirements.

Governmental funds

The focus of the City's governmental funds is to provide information on near-term inflows,outflows, and balances of spendable resources. Such information is useful in assessing theCity's financing requirements. In particular, unreserved fund balance may serve as a usefulmeasure 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 City's governmental funds reported combinedending fund balances of $12,166,108, an increase of $4,927,196 over the prior year. Approx-imately 86 percent of this amount ($10,501,585) constitutes unreserved fund balance, which isavailable for spending at the government's discretion. The remainder of the balance is reservedto indicate that it is not available for new spending because it has already been committed toliquidate contracts and purchase orders of the prior period ($1,664,523).

The General Fund is the chief operating fund of the City. At the end of the current fiscal year,the unreserved fund balance of the General Fund was $3,705,627, while total fund balancereached $3,771,161. As a measure of the General Fund's liquidity, it may be useful to compareboth unrestricted fund balance and total fund balance to total fund expenditures. Unreservedfund balance represents 23.6 percent of total General Fund expenditures, while total fundbalance represents 24.0 percent of total General Fund expenditures.

The fund balance of the City's General Fund increased $346,775 during the current fiscal year.The primary reasons for the General Fund's surplus mirror those highlighted in the analysis ofgovernmental activities. Other factors in the change in fund balance include:

• Revenues from licenses and permits declined $96,958 (18 percent) from the prior year dueto a decline in the number of building permits and occupational licenses issued during thecurrent year.

• Intergovernmental revenues increased $54,646 (23 percent) due to a $39,366 increase infederal financial support for police activities and to a $39,503 increase in transient guesttax revenues. However, federal financial support for fire activities declined $26,333.

The Debt Service Fund had an unreserved fund balance of $254,675 at the end of the currentyear, a decline of $171,729 from the prior year. Other financing sources declined by$1,236,765 from the prior year as transfers from other funds to support payments on specificbonds were eliminated for the current year. Principal retirement declined $1,870,000 from theprior year due, in part, to the retirement of $800,000 of refunded bonds from escrowed cash inthe prior year. Interest expenditures also declined by $128,135 from the prior year. The declinein fund balance during the year was accommodated by a drawdown of available cash in theFund.

At the end of the year, the fund balance of the Capital Projects Fund was $5,089,149, anincrease of $4,111,708 over the prior year. This increase reflects the accumulation of funds inanticipation of future capital expenditures. Specifically, total revenues and other financingsources increased $3,700,778 over the prior year while expenditures declined $670,498.

Proprietary funds

The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail.

Unrestricted net assets of the Sewer Fund at the end of the year amounted to $2,861,217, andthose for the Refuse Fund amounted to $(730,917). In comparison with the prior year, unre-stricted net assets for the Sewer Fund increased $888,414 while unrestricted net assets for theRefuse Fund declined $156,527. Factors concerning the finances of these two funds havealready been addressed in the discussion of the City's business-type activities.

General Fund Budgetary Highlights

The City's final General Fund budget did not differ from the original budget since the budgetwas not amended during fiscal year 2007.

During the year, revenues were $526,374 greater than budgetary estimates due to:

• Franchise and compensating use tax revenues exceeded budgetary expectations by$156,956 and $50,504, respectively. However, sales tax revenues were $102,718 below ex-pectations.

• Revenues from investment earnings were $361,944 over budgetary expectations.

• Revenues from intergovernmental sources were $45,195 over budgetary expectations dueprimarily to the unanticipated receipt of $37,145 of Federal grants in support of Police pro-grams.

• Miscellaneous revenues were $126,034 over budgetary expectations due to the unexpectedreceipt of $51,971 of enhanced 911 wireless fees from the Local Collection Point Adminis-trator. Further, an unanticipated premium reimbursement of $60,624 was received fromthe City's workers compensation insurance carrier.

10

• Revenues from Municipal Court fines were $109,121 below budgetary expectations due toreduced traffic enforcement efforts by the Police Department during the year.

During the year, expenditures were $416,609 less than budgetary estimates due to:

• General government expenditures were $108,322 below budgetary expectations due tosavings of $74,789 in City Manager's Office personnel costs resulting from position vacan-cies throughout the year. Further, miscellaneous expenditures from contingency fundswere $41,968 below budgetary expectations. However, an unexpected $45,000 donationwas made to a civic organization during the period.

• Public safety expenditures were $331,582 below budgetary expectations due to savings of$432,043 in Police personnel costs resulting from position vacancies throughout the year.However, gasoline and diesel fuels costs for Police and Fire exceeded budget by $30,885,Fire personnel costs exceeded budget by $30,572 due to a reorganization of personnelshifts, and an unexpected payment of $51,957 was made by Police to pass through en-hanced 911 wireless fees to the County government.

• Public works expenditures were $54,635 over budgetary expectations due to increasedexpenditures in the Airport operation since the City assumed operational control of the fa-cility for much of the year. Airport expenditures exceeded expectations by $80,064. How-ever, Engineering personnel costs were $28,439 below expectations due to position vacan-cies throughout the year.

• Culture and recreation expenditures were $53,983 below budgetary expectations due tosavings of $32,034 in Parks personnel costs resulting from position vacancies throughoutthe year. Further, expenditures for park supplies were $13,573 below budgetary expecta-tions.

During the year, revenues exceeded budgetary estimates and expenditures were less thanbudgetary estimates, thus eliminating the need to draw upon existing fund balance.

Capital Asset and Debt Administration

Capital assets

The City's investment in capital assets for its governmental and business-type activities as ofDecember 31, 2007, amounts to $70,561,822 (net of accumulated depreciation). This invest-ment in capital assets includes land, buildings, improvements, machinery and equipment, parkfacilities, streets, and bridges. The total increase in the City's investment in capital assets forthe current fiscal year was 7.2 percent (a 1.9 percent increase for governmental funds and a30.6 percent increase for business-type activities).

Major capital asset events during the current fiscal year included the following:

• Several street and bridge reconstruction projects were completed at a cost of $7,407,183. Avariety of street and bridge reconstruction projects continued; construction in progress forsuch projects as of the close of the fiscal year had reached $713,976.

• In the business-type activities, a major project to improve and expand the sewer treatmentplant was completed at a cost of $3,696,548. Several projects to improve the sewer collec-tion system were also completed at a cost of $692,222.

A streambed reconstruction project to protect elements of the sewer collection system con-tinued; construction in progress as of the close of the fiscal year had reached $1,015,819.

11

City ofLeavenworth's Capital Assets

(net of depreciation)

Land

Buildings

Improvements other than

buildings

Machinery and equipment

Infrastructure

Construction in progress

Total

Goverr

Actn

2007

$2,265,890

10,932,429

3,836,073

2,744,396

33,326,617

1,621,139

$54,726,544

imental

/ities

2006

$2,265,890

11,444,066

4,137,121

2,558,848

28,777,939

4,530,273

$53,714,137

Busine

Actii

2007

$58,634

7,112,552

5,817,422

934,476

0

1,912,194

$15,835,278

ss-type

/ities

2006

$58,634

4,012,802

5,399,849

771,931

0

1,877,487

$12,120,703

To

2007

$2,324,524

18,044,981

9,653,495

3,678,872

33,326,617

3,533,333

$70,561,822

tal

2006

$2,324,524

15,456,868

9,536,970

3,330,779

28,777,939

6,407,760

$65,834,840

Additional information on the City of Leavenworth's capital assets can be found in note 4.B onpages 43 - 46 of this report.

Long-term debt

At the end of the year, the City had total bonded debt outstanding of $21,055,000, all of whichis debt backed by the full faith and credit of the City. Of this amount, $16,995,000 relates togovernmental activities while $4,060,000 relates to business-type activities.

The City's total bonded debt declined $1,115,000 (five percent) during the current fiscal year.General obligation bonds totaling $1,530,000 were issued for governmental activities to providepermanent financing for general infrastructure improvements. However, $2,645,000 of pre-viously existing debt for governmental and business-type activities was retired during the year.

The City maintains an "Al" rating from Moody's for general obligation debt.

State statutes limit the amount of general obligation debt a governmental entity may issue to30 percent of its total equalized assessed valuation. The current debt limit for the City is$68,435,717, which is significantly in excess of the City's outstanding general obligation debt.

Additional information on the City's long-term debt can be found in Note 4.D on pages 47 - 50of this report.

Economic Factors and Next Year's Budgets and Rates

During the early 2000's, preparation of City operating budgets occurred in the midst of difficulteconomic times. However, as a result of the actions taken by the City Commission in response tothese times, and as economic conditions improved, the City's financial position recovered.

The 2008 operating budget anticipates a continuation of the financial stability recently enjoyed bythe City. Revenues are growing, fund balances are growing, and the assessed valuation of the City isgrowing. Accordingly, the City has more resources available with which to achieve its goals.

The 2008 budget continues progress toward the goals that have guided the budget process for thepast several years:

12

• Improve the ability of the City to deliver essential services

While the City experienced economic difficulties, operating budgets were prepared with the in-tent of avoiding reductions in service levels No attempt was made to improve City services inany significant manner Resources simply were not available to pursue such improvements

However, given the stability of the City's financial position and the steady growth in revenue andassessed valuation, it is now possible to contemplate selected improvements to City servicesTherefore, the 2008 operating budget includes a variety of Supplemental Requests designed toimprove City services to its citizens $283,245 of these requests is proposed in the Tax Fundsand $195,225 is proposed in the Non-Tax Funds

• Provide meaningful salary increases to employees

The 2008 operating budget includes an average salary increase of 5% for employees This level ofsalary increase is consistent with data compiled by the Mid-America Regional Council (MARC) inits annual salary survey of local governments in the region

The budget continues the compensation system implemented in 2005 whereby employees re-ceive a Commission approved salary increase (CASI) at the beginning of the year and a perfor-mance recognition increase on the anniversary date of employment or promotion The budget isbased upon a 2 5% Commission approved salary increase (CASI) at the beginning of the yearand an average performance recognition increase of 2 5%

• Improve the City's reserve position

The budget increases the non-appropriated reserve in the General Fund by $48,335 to$759,830 This level of reserve is 4 0% of budgeted expenditures and, as such, achieves theCity's recently approved goal for the non-appropriated reserve

• Do not raise property taxes

The 2008 City operating budget does not raise the mill levy In fact, the 2008 City mill levy de-clines by 0 038 mills to 52 141 mills

The 2008 operating budget is optimistic that additional resources will be available to accomplish thebudgetary goals of the City The past several years have been troublesome and the City sufferedthrough a difficult financial period However, the City's financial position is—once again—stableThe proposed budget seeks an appropriate balance by allocating limited resources among severalcompeting goals improving services, improving salaries for employees, improving the reserveposition, and not increasing property taxes In fact, the budget reduces the City's mill levy rate by0 038 mills

Requests for Information

This financial report is designed to provide a general overview of the City's finances for all thosewith an interest in the government's finances Questions concerning any of the informationprovided in this report or requests for additional financial information should be addressed tothe Finance Department, 100 North 5th Street, Leavenworth, Kansas, 66048

13

Basic Financial Statements

14

City ofLeavenworth, Kansas

Statement of Net Assets

December 31,2007

ASSETSCash and cash equivalentsDeposits restricted for tenant

deposit refundsReceivables (net ofuncollectibles)

InterestProperty taxSpecial assessment taxSales taxDue from other governmentsAccounts receivable

Capital assets (net of accumulateddepreciation):LandBuildings and systemsImprovements other than buildingsMachinery and equipmentInfrastructureConstruction in progress

Total assets

LIABILITIESAccounts payableAccrued compensationAccrued interest payableTenant depositsUnearned revenueBond anticipation notes payableLong-term liabilities

Due within one yearDue in more than one year

Total liabilities

NET ASSETSInvested in capital assets, net of

related debtUnrestricted

Total net assets

Primary Government ComponentGovernmental

Activities

$ 11,756,374

23,956

75,3329,226,900

250,0331,137,722

154,274581,158

2,265,89010,932,4293,836,0732,744,396

33,326,6171,621,139

77,932.293

491,569622,183291,81223,956

9,226,9001,905,000

2,240,15716,612,234

31.413.811

37,580,3208,938.162

Business-typeActivities

$ 2,759,622

-

---

978,466493,966

58,6347,112,5525,817,422

934,476-

1,912,194

20,067,332

857,18254,48249,942

--

3,795,000

299,6984.531.898

9.588,202

8,348,8302.130.300

UnitTotal Library

$ 14,515,996 $ 555,936

23,956

75,3329,226,900

250,0331,137,7221,132,740 866,4351,075,124

2,324,52418,044,9819,653,4953,678,872 705,820

33,326,6173,533,333

97,999,625 2.128,191

1,348,751 32676,665341,754

23,9569,226,900 866,4355,700,000

2,539,85521,144,132

41,002,013 866467

45,929,150 705,82011068,462 555.904

S 46,518,482 $ 10,479,130 S 56,997.612 S 1.261.724

See accompanying notes to basic financial statements.

15

City of Leaven worth, Kansas

Statement of Activities

For tlie Year Ended December 31, 2007

Functions/ProgramsPrimary government:Govern mental activities:

General governmentPublic safelyPublic worksCulture and recreationHousing and uiban redevelopmentUnallocated depreciation expenseInterest on long term debt

Total governmental activities

Business-type activities.SewerRefuse

Total business-type activitiesTotal primary government

Component unit:Library

Program RevenuesOperating Capital

Charges forExpenses Services

$ 3,175,737 $ 1,600,42510,601,555 626,3493,913,37) 1,306,3152,577,644 664,6382,403,603 428,2403,109,795

954,88826,736,593 4,625,967

2,969,198 3,338,9721,529,887 1,597,0674,499,085 4,936,039

$ 31,235,678 $ 9,562,006

$ 1,054,183 $ 33,045

General revenues:Taxes:

Property taxesPayment in lieu of property taxesSales taxesTax increment sales taxesCompensating use taxesFranchise taxesMotor vehicle taxes

Intergovernmental revenue not restricted to specific programsMiscellaneousUnrestricted investment earnings

Total general revenuesChange in net assetsTotal net assets - beginningTotal net assets - ending

Grants and Grants andContributions Contributions

$ 158,978 $ 255,95570,813

1,258,199 3,734,24556,978 54,000

1,991,886 15,474--

3,536,854 4,059,674

102,967 1,050,4023,087

106,054 1,050,402$ 3,642,908 $ 5,110,076

$ 26,720 $

$ 46,518,482 $ 10,479,130 $

Net (Expense) Rc^Change in Net

Primary GovernineiilGovernmental Business-Type

Activities Activities

$ (1,160,379) $ - $(9,904,393)2,385,388

(1,802,028)31,997

(3,109,795)(954,888)

(14,514,098)

1,523,14370,267

1,593,410(14,514,098) 1,593,410

9,167,5903,169

5,469,786184,683725,640

2,146,9561,017,082

79,947-

779,94419,574,7975,060,699 1,593,410

41,457,783 8,885,720

'ciiiic andAssets

ComponentUnit

Total Library

(1,160,379) $(9,904,393)2,385,388

(1,802,028)31,997

(3,109,795)(954,888)

(14,514,098)

1,523,14370,267

1,593,410(12,920,688)

(994,418)

9,167,590 891,7413,169

5,469,786184,683725,640

2,146,9561,017,082

79,947 50,6836,313

779,944 25,49719,574,797 974,2346,654,109 (20,184)

50,343,503 1,281,90856,997,612 $ 1,261,724


ASSETSCash and cash equivalentsDeposits restucted for tenant

deposit refundsReceivables (net ofuncollectibles)

Special assessmentsInterestProperty taxSales taxDue from other governmentsDue from other fundsAccounts receivable

Total assets

LIABILITIES AND FL'ND BALANCESLiabilities

Accounts payableAccrued compensationDue to other fundsBond anticipation notes payableTenant depositsDeferred revenue

Total liabilities

Fund balancesReserved for encumbrancesUnreserved, reported in

General fundSpecial revenue fundsDebt service fundCapital projects fund

Total fund balancesTotal liabilities and fund balances


Balance Sheet

Governmental Funds

December 31,2007

GeneralDebt

ServiceCapitalProjects

OtherNonmajor Total

Governmental GovernmentalFunds Funds

S 3,097,606 $ 254,675 $ 5,730,998 S 2,673,095 $ 11.756,374

23,956 23,956

36,13573,760

7,142,950656,93325,63231,858

581,158S 11,646,032 S 2,121,223 S 5,742.548 S 3,727,804 $ 23,237,607

S 155,919 S539,867

---

7,179,0857,874,871

65,534

3,705.6272,965,968

254,675-

3,771,161

213,898-

1,652,650----

$----

1,866.5481,866,548

1,513,834

-

-254.675

---

11,550--

228,399 S--

425,000--

653,399

-

3,575.3155,089.149

1,572431,300480,789117,092

--

107,25182,31631,858

-23,956

431,300676,681

85,155

-

-3,051,123

250,03375,332

9,226,9001,137,722

154,27431,858

581,158

S 491,569622,183

31,858425,000

23,9569,476,933

11,071,499

1,664,523

3,705,6272,965,968

254,6753,575,315

12,166,108S 11,646,032 S 2.121,223 S 5.742.548 S 3,727,804

Amounts reported for governmental activities in the statement of net assets aredifferent because

Capital assets used in governmental activities aie not financialresources and, therefore, are not reported in the funds 54,726,544

Other long-term assets are not available to pay for currentperiod expenditures and. therefore, are deterred in the funds 250 033

Long-term liabilities, including bonds payable, are not due andpayable in the current period and theretbie aie not reported (20.624,203)in the funds

Net assets of governmental activities S 46.518.482


17


Combining Statement of Revenues, Expenditures, and Changes in Fund Balances

Governmental Funds

For the Year Ended December 31, 2007

REVENUESTaxesIntergovernmentalLicenses and permitsCharges for servicesFines and forfeituresInvestment earningsMiscellaneous

Total revenues

EXPENDITURESCurrent:

General governmentPublic safetyPublic worksCulture and recreationHousing and urban redevelopment

Debt service:Principal retirementInterest and fiscal charges

Capital outlayTotal expenditures

Excess (deficiency) of revenues over(under) expenditures

OTHER FINANCING SOURCES (USES)Capital leasesBond anticipation notes issuedGeneral obligation bonds issuedTransfers inTransfers out

Total - other financing sources (uses)

Net change in fund balances

Fund balances - beginning

Fund balances - ending

General

S 13,595,195 S289,195435,025

1,722,882990,879779,944129,784

17,942,904

3,034,9159,901,9822,117,741

634,861-

-752,445

42,54315,732.042

2,210,862

1,480,0001,530,000

-(1,864,087)(1,864.087)

346,775

3,424.386

S 3,771,161 S

DebtService

2,179,240----

5,219-

2,184,459

----

2,380,000

2,115,9983,132,445

(947,986)

776,257(266,311)

776.257

(171,729)

426,404

254,675

CapitalProjects

S188,072

-4,775

-828

140,718334,393

86,93519,455

135,98040,506

165,073

-10,795

2,574,742

(2,240,349)

285,247

3,323,121

6,352,057

4,111,708

977,441

S 5.089,149

OtherNonmajor

GovernmentalFunds

$ 3,224,5663,155,009

-995,894

80,94344,30344,878

7,545,593

98,5271,253,8081,376,8281,983,591

-192,77830,639

4,936,171

2,609,422

166,312(2,135,292)(1,968,980)

640,442

2,410.681

S 3,051,123

TotalGovernmental

Funds

$ 18,999,0013,632,276

435,0252,723,5511,071,822

830,294315,380

28,007,349

3,121,85010,019,9643,507,5292,052,1952,148,664

2,380,000956,018

2,189,18026,375,400

1,631,949

285,2471,480,0001,530,0004,265,690

(4,265,690)3,295,247

4,927,196

7,238,912

S 12,166,108


18


Reconciliation of the Statement of Revenues,Expenditures and Changes in Fund Balances of Governmental Funds

to the Statement of Activities


Amounts reported for governmental activities (page 16) are different because:

Net change in fund balances - total governmental funds (page 18) $ 4,927,196

Governmental funds report capital outlays as expenditures. However, in the statement ofactivities, the cost of those assets is allocated over their estimated useful lives and reportedas depreciation expense. This is the amount by which depreciation exceeded capital outlaysin the current period. (2,778,732)

The net effect of various miscellaneous transactions involving capital assets (i.e., sales,trade-ins, and donations) is to increase net assets. 3,791,139

Revenues in the statement of activities that do not provide current financial resourcesare not reported as revenues in the funds. (1,196)

The issuance of long-term debt (e.g., bonds, leases) provides current financial resources togovernmental funds, while the repayment of the principal of long-term debt consumes thecurrent financial resources of governmental funds. Neither transaction, however, has anyeffect on net assets. Also, governmental funds report the effect of issuance costs, premiums,discounts, and similar items when debt is first issued, whereas these amounts are deferredand amortized in the statement of activities. This amount is the net effect of these differencesin the treatment of long-term debt and related items. . (915,247)

Some expenses reported in the statement of activities do not require the use of currentfinancial resources and, therefore, are not reported as expenditures in the governmentalfunds. 37,539

Change in net assets of governmental activities (page 16) $ 5,060,699


19


General Fund

Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual


REVENUESTaxesIntergovernmentalLicenses and permitsCharges for servicesFines and forfeituresInvestment earningsMiscellaneous

Total revenues


General governmentPublic safetyPublic worksCulture and recreationCapital outlayTotal expenditures

Excess of revenues over expenditures

OTHER FINANCING SOURCES (USES)Transfers out


Fund balances - beginningPrior year encumbrances relieved

Fund balances - endine

Budgete

Original

$ 13,454,610244,000441,300

1,754,8701,100,000

418,0003,750

17,416,530

3,178,65510,244,8302,078,950

691,85019,900

16,214,185

1,202,345

(1,893,500)

(691,155)

1,402,650-

S 711,495

d Amounts

Final

S 13,454,610244,000441,300

1,754,8701,100,000

418,0003,750

17,416,530

3,178,65510,244,8302,078,950

691,85019,900

16,214,185

1,202,345

(1,893,500)

(691,155)

1,402,650-

S 711,495

ActualAmounts

S 13,595,195289,195435,025

1,722,882990,879779,944129,784

17,942,904

3,070,3339,913,2482,133,585

637,86742,543

15,797,576

2,145,328

(1,864,087)

281,241

3,397,06727,319

S 3.705,627

Variance withFinal Budget -

Positive(Negative)

S 140,58545,195(6,275)

(31,988)(109,121)361,944126,034526,374

108,322331,582(54,635)53,983

(22,643)416,609

942,983

29,413

972,396

1,994,41727,319

S 2,994,132


20


Statement of Net Assets

Proprietary Funds

December 31,2007

Business-type Activities - Enterprise Funds

Sewer Refuse Total

ASSETSCurrent assets:

Cash and cash equivalentsDue from other governmentsAccounts receivable

Total current assets

Noncurrent assets:Capital assets:

LandBuildings and systemImprovements other than buildingsMachinery and equipmentConstruction in progress

Less accumulated depreciationTotal capital assets (net of

accumulated depreciation)Total noncurrent assetsTotal assets

LIABILITIESCurrent liabilities:

Accounts payableAccrued compensationAccrued compensated absencesBond anticipation notes payableBonds payableAccrued interest payableAccrued landfill closure/postclosure

care costsTotal current liabilities

Noncurrent liabilities:Accrued compensated absencesBonds payableAccrued landfill closure/postclosure

care costsTotal noncurrent liabilitiesTotal liabilities

NET ASSETSInvested in capital assets, net of related debtUnrestrictedTotal net assets

S

3,935,678

14,00011,725,1247,794,2132,130,4381,912,194

(8,241,335)

19,270,312

4,948,413

57,4963,555,000

7,848,1862,861,217

S

2,594,498975,379365,801

15,334,63415,334,634

832,81832,8706,063

3,795,000235,00046,662

3.612.4968.560,909

10,709,403

S

S

165,1243,087

128,165296,376

44,63424,751

1,007,773

(576,514)

500,644500,644797,020

24,36421,612

3,635

35,0003,280

20,000107,891

34,465235,000

649,937919,402

1,027,293

500,644(730,917)(230,273)

S

$

2,759,622978,466493,966

4,232,054

58,63411,749,8757,794,2133,138,2111,912,194

(8,817,849)

15,835,27815,835,27820,067,332

857,18254,482

9,6983,795,000

270,00049,942

20.0005,056,304

91,9613,790,000

649,9374.531,8989,588,202

8,348,8302,130.300

10.479,130


21


Statement of Revenues, Expenses, and Changes in Fund Net Assets

Proprietary Funds



Sewer Refuse Total

Operating revenues:Charges for servicesMiscellaneous

Total operating revenues

Operating expenses:Personal servicesContractual servicesCommoditiesDepreciation

Total operating expenses

Operating income

Nonoperating revenues (expenses):Gain on sale of capital assetsOperating grantsInterest and fiscal charges

Total nonoperating revenues (expenses)

Income before contributions

Capital contribution


Total net assets - beginning

Total net assets - endins

$ 3,331,765 $ 1,583,559 S 4,915,3247,207 1,008 8,215

3,338,972

792,522962,523119,201949,947

2,824,193

514,779

102,967(145,005)(42,038)

472,741

1,050,402

1,523,143

9,186,260

1,584,567

554,165732,282160,65172,161

1,519,259

65,308

12,5003,087

(10,628)4,959

70,267

70,267

(300,540)

4,923,539

1,346,6871,694,805

279,8521,022,1084,343,452

580,087

12,500106,054

(155,633)(37.079)

543,008

1,050,402

1,593,410

8,885,720

S 10,709,403 $ (230.273) S 10,479,130


22


Statement of Cash Flows

Proprietary Funds



Sewer Refuse Total

1,580,092 S 4,897,700(902,216) (1,431,033)(547,168) (1,372.874)

CASH FLOWS FROM OPERATING ACTIVITIESReceipts from customers and users S 3,317,608 $Payments to suppliers (528,817)Payments to employees ____(825,706)__________

Net cash provided by operating activities 1,963,085 —130,708 2,093,793

CASH FLOWS FROM NONCAPITAL FINANCINGACTIVITIES

Subsidy from federal grant 6,875 - 6,875

CASH FLOWS FROM CAPITAL AND RELATED FINANCINGACTIVITIES

Capital contributionsPurchases of capital assetsProceeds from sale of capital assetsPrincipal paid on capital debtInterest paid on capital debt

Net cash used by capital and related financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents, January 1

Cash and cash equivalents, December 31 S 2,594,498 S

126,510(4,437,728)

-(230,000)(147,718)

(4,688,936)

(2,718,976)

5,313,474

-(298,955)

12,500(35,000)(11,037)

(332,492)

(201,784)

366,908

126,510(4,736,683)

12,500(265,000)(158,755)

(5,021,428)

(2,920,760)

5,680,382

165,124 S 2,759,622

Reconciliation of operating income to net cash providedby operating activities

Operating incomeAdjustments to reconcile operating income to net cash provided

by operating activitiesDepreciation expense(Increase) decrease in receivablesIncrease (decrease) in accounts payableIncrease (decrease) in accrued compensationIncrease (decrease) in compensated absencesIncrease (decrease) in due to other fundsIncrease (decrease) in accrued landfill closure'

postclosure care costsNet cash provided by operating activities

514,779 65,308 580,087

949,947(21.364)567,109

(4,594)(28,590)(14,202)

S 1,963,085 S

72,161(4,475)

(683)3,3913,606

-

(8,600)130.708 S

1,022,108(25,839)566,426

(1,203)(24,984)(14,202)

(8.600)2.093,793

See accompanying notes to basic fniancial statements.

23


Statement of Fiduciary Net Assets

Fiduciary Funds

December 31,2007

Pension AgencyTrust Funds

ASSETSCash and cash equivalentsInterest receivableProperty tax receivable

Total assets

LIABILITIESAccounts payableDeferred revenueAmounts due other parties

Total liabilities

NET ASSETSHeld in trust for pension benefitsand other purposes

$ 576,233 $3,158

148,320 866,435727,711 866,435

36148,320

$ 579,355 $


24

866,435148,356 866,435


Statement of Changes in Fiduciary Net Assets

Fiduciary Funds


ADDITIONSEmployer contributionsInterest

Total additions

DEDUCTIONSBenefits

Total deductions


Net assets - beam-line

Net assets - endins

PensionTrust

170,23830,717

200,955

191,693191,693

9,262

570,093

579,355


25

Notes to Basic Financial Statements

26

City ofLeavenworth, KansasNotes to Basic Financial Statements

December 31.2007

1. Summary of significant accounting policies

A. Reporting entity

The City ofLeavenworth, Kansas, a city of the first class, was incorporated in 1855. The Cityoperates under a Commission-Manager form of government. The City is governed by anelected five-member board. As required by accounting principles generally accepted in theUnited States of America (GAAP), these financial statements present the City (the primarygovernment) and its component unit, an entity for which the City is considered to be finan-cially accountable. The discretely presented component unit is presented in a separate col-umn in the government-wide financial statements to emphasize that it is legally separate fromthe primary government.

Discretely presented component unit

The Leavenworth Public Library (the Library) is reported as a discretely presented compo-nent unit of the City since its board is appointed by the City Commission and it imposes afinancial burden on the City. Specifically, the City issued debt to construct the library facilityand has assumed responsibility for principal and interest payments on the debt.

Complete financial statements for the Public Library are available from their offices at 417Spruce Street, Leavenworth, Kansas 66048.

B. Government-wide and fund financial statements

The government-wide financial statements (i.e., the statement of net assets and the statementof activities) report information on all of the nonfiduciary activities of the primary govern-ment and its component unit. Governmental activities, which normally are supported by taxesand intergovernmental revenues, are reported separately from business-type activities, whichgenerally rely upon fees and charges for support. Likewise, the primary government is re-ported apart from the legally separate component unit for which the primary government isfinancially accountable.

(continued)

27


(continued)

1. Summary of significant accounting policies (continued)

B. Government-wide and fund financial statements (continued)

The statement of activities demonstrates the degree to which expenses of a given function oractivity are offset by program revenues. Direct expenses are those that are clearly identifiablewith a specific function or activity. Program revenues include 1) charges to customers or ap-plicants who purchase, use, or directly benefit from goods, services, or privileges providedby a given function or activity, and 2) grants and contributions that are restricted to meetingthe operational or capital requirements of a particular function or activity. Taxes and otheritems not properly included among program revenues are reported instead as general reve-nues.

Separate financial statements are provided for governmental funds, proprietary funds, andfiduciary funds, even though the latter are excluded from the government-wide financialstatements. Major individual governmental funds and major individual enterprise funds arereported as separate columns in the fund financial statements.

C. Measurement focus, basis of accounting, and financial statement presentation

The government-wide financial statements are reported using the economic resources mea-surement focus and the accrual basis of accounting, as are the proprietary fund and non-agency fiduciary fund financial statements. The agency funds do not have a measurementfocus and use the accrual basis of accounting to report their financial statements. Revenuesare recorded when earned and expenses are recorded when a liability is incurred, regardlessof the timing of related cash flows. Property taxes are recognized as revenues in the year forwhich they are levied. Grants and similar items are recognized as revenue as soon as all eli-gibility requirements imposed by the provider have been met.

Governmental fund financial statements are reported using the current financial resourcesmeasurement focus and the modified accrual basis of accounting. Revenues are recognizedas soon as they are both measurable and available. Revenues are considered to be availablewhen they are collectible within the current period or soon enough thereafter to pay liabilitiesof the current period. For this purpose, the City considers revenues to be available if they arecollected within 60 days of the end of the current fiscal period. Expenditures generally arerecorded when a liability is incurred, as under accrual accounting. However, debt service ex-penditures, as well as expenditures related to compensated absences and claims and judg-ments, are recorded only when payment is due.

28

City of Leaven-worth, KansasNotes to Basic Financial Statements

(continued)


C. Measurement focus, basis of accounting, and financial statement presentation (con-tinued)

Property taxes, franchise taxes, sales taxes, licenses, and interest associated with the currentfiscal period are all considered to be susceptible to accrual and so have been recognized asrevenues of the current fiscal period. Only the portion of special assessments receivable duewithin the current fiscal period is considered to be susceptible to accrual as revenue of thecurrent period. All other revenue items are considered to be measurable and available onlywhen cash is received by the City.

The City reports the following major governmental funds:

The General Fund is the government's primary operating fund. It accounts for all finan-cial resources of the general government, except those required to be accounted for inanother fund.

The Debt Service Fund accounts for the resources accumulated and payments made forprincipal and interest on long-term general obligation debt of governmental funds.

The Capital Projects Fund accounts for capital improvements (except for those financedby proprietary funds) which are financed from the City's general obligation bonds, spe-cial assessments, and other specific receipts.

The City reports the following major proprietary funds:

The Sewer Fund accounts for all activities necessary to provide sewer services to the res-idents of the City.

The Refuse Fund accounts for all activities necessary to provide refuse collection anddisposal services to residents of the City.

29

City of Leavenworth, KansasNotes to Basic Financial Statements

(continued)



Additionally, the City reports the following fund types:

The Pension Trust Fund accounts for the activities of the City's Police and Firemen'sPension Plans.

The Agency Fund is custodial in nature (assets equals liabilities) and does not involvemeasurement of results of operations. It is used to account for assets held by the City asan agent for the Leavenworth Public Library system.

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 financialstatements to the extent that those standards do not conflict with or contradict guidance of theGovernmental Accounting Standards Board. Governments also have the option of followingsubsequent private-sector guidance for their business-type activities and enterprise funds,subject to this same limitation. The City has elected not to follow subsequent private-sectorguidance.

Generally, the effect of interfund activity has been eliminated from the government-wide fi-nancial statements. Exceptions to this general rule are charges between the City's sewer andrefuse function and various other functions of the government. Elimination of these chargeswould distort the direct costs and program revenues reported for the various functions con-cerned.

Amounts reported as program revenues include 1) charges to customers or applicants forgoods, services, or privileges provided, 2) operating grants and contributions, and 3) capitalgrants and contributions, including special assessments. Internally dedicated resources arereported as general revenues rather than as program revenues. Likewise, general revenuesinclude all taxes.

Proprietary funds distinguish operating revenues and expenses from nonoperating items.Operating revenues and expenses generally result from providing services and producing anddelivering goods in connection with a proprietary fund's principal ongoing operations. Theprincipal operating revenues of the Sewer Fund and the Refuse Fund are charges to custom-ers for sales and services. Operating expenses for enterprise funds include the cost of salesand services, administrative expenses, and depreciation on capital assets. All revenues andexpenses not meeting this definition are reported as nonoperating revenues and expenses.

30


(continued)



When both restricted and unrestricted resources are available for use, it is the City's policy touse restricted resources first, then unrestricted resources as they are needed.

D. Deposits and investments

The City's cash and cash equivalents are considered to be cash on hand, demand deposits andshort-term, highly-liquid investments with original maturities of three months or less fromthe date of acquisition.

According to the City's formal investment policy adopted by the governing body, the Citymay pool idle cash from all funds for the purpose of increasing income through temporaryinvestment activities. During the year, idle cash was invested in certificates of deposit, repur-chase agreements, and the Kansas Municipal Investment Pool (MIP) which is overseen bythe State of Kansas. The fair value of the City's position in the MIP is the same as the poolvalue of the shares. Certificates of deposit are carried at cost because they are not affected bymarket rate changes. The repurchase agreements are stated at cost because they are not nego-tiable or transferable and are not affected by market fluctuations.

Investment earnings are allocated to the funds required to accumulate interest. Other invest-ment earnings are allocated based on management discretion based on the average daily equi-ty balances. If a fund is not required to account for its own earnings by law or regulation, theearnings are allocated to the General Fund. For the fiscal year ended December 31, 2007, in-vestment earnings allocated to the various funds were approximately $827,432.

31


(continued)


E. Property taxes and other receivables

In accordance with governing state statutes, property taxes levied during the current year area revenue source to be used to finance the budget of the ensuing year. Taxes are assessed ona calendar year basis and become a lien on the property on November 1 of each year. TheCounty Treasurer is the tax collection agent for all taxing entities within the County. Propertyowners have the option of paying one half or the full balance of the taxes levied on or beforeDecember 20 during the year levied with the balance to be paid on or before May 10 of theensuing year. State statutes prohibit the County Treasurer from distributing the taxes col-lected in the year levied prior to January 1 of the ensuing year. Consequently, for revenuerecognition purposes, taxes levied during the current year are not due until the ensuing year.At December 31, 2007, such taxes are a lien on the property and are recorded as taxes receiv-able, net of anticipated delinquencies of $307,251, with a corresponding amount recorded asdeferred revenue on the balance sheets of the appropriate funds. Delinquent taxes held by theCounty Treasurer at December 31, 2007 are not significant.

F. Special assessments

Kansas statutes require projects financed in part by special assessments to be financedthrough the issuance of general obligation bonds that are secured by the full faith and creditof the City. Special assessments received prior to the issuance of general obligation bonds arerecorded as revenue in the appropriate project fund. Special assessments and related interestreceived after the issuance of the general obligation bonds are recorded as revenue in theDebt Service Fund. Further, state statutes require levying additional general ad valorem taxesin the City's Debt Service Fund to finance delinquent special assessments receivable. Accor-dingly, special assessments receivable are accounted for within the City's Debt Service Fund.Special assessments are levied over a 10- or 20-year period, and annual installments are dueand payable with annual ad valorem taxes. The City may foreclose liens against property be-nefited by special assessments when delinquent assessments are two years in arrears. At De-cember 31, 2007, the special assessment taxes levied are a lien on the property and theamount due in 2007 is recorded in the fund financial statements as special assessments re-ceivable, net of anticipated delinquencies of $32,085, in the Debt Service Fund with a cor-responding amount recorded as deferred revenue.

32

CityofLeavenworth, KansasNotes to Basic Financial Statements

(continued)


F. Special assessments (continued)

State statutes and City ordinances allow special assessments to be levied against a property toreimburse the City for costs incurred for involuntary blight removal and lot clean-up. Suchspecial assessments are levied over a one year period and are due and payable with annual advalorem property taxes. At December 31, 2007, the amount due for such assessments is rec-orded in the fund financial statements as special assessments receivable, net of anticipateddelinquencies of $5,420, in the General Fund with a corresponding amount recorded as de-ferred revenue.

G. Capital assets

Capital assets, which include property, plant, equipment, and infrastructure assets (e.g.,roads, bridges, sidewalks, and similar items), are reported in the applicable governmental orbusiness-type activities column in the government-wide financial statements. Capital assetsare defined by the government as assets with an individual cost of more than $500 and anestimated useful life in excess of one year. Such assets are recorded at historical cost or esti-mated historical cost if actual historical cost is not available. Donated capital assets are rec-orded at estimated fair market value at the date of donation.

The costs of normal maintenance and repairs that do not add to the value of an asset or mate-rially extend an asset's useful life are not capitalized.

Major outlays for capital assets are capitalized as projects are constructed.

Depreciation of all capital assets is calculated using the straight-line method over the follow-ing estimated useful lives:

BuildingsImprovements other than buildingsMachinery and equipmentInfrastructure

15 to 30 years15 to 30 years5 to 15 years

15 to 30 years

33


(continued)


H. Compensated absences

All permanent full-time and permanent part-time employees with 90 days of employment areeligible for vacation benefits in varying annual amounts. Employees are allowed to accumu-late and carry forward 240 hours of vacation, except for fire fighters and police officers whoare allowed to accumulate and carry forward 333.5 and 255 hours of vacation, respectively.Hours accumulated and not taken in excess of these amounts at December 31 of each year arelost by employees unless proper approvals are given. Sick leave benefits accrue to all full-time employees at the rate of one working day per month. There is no maximum amount ofsick leave that can be accumulated. Upon retirement, an employee will receive 40% of sickleave. Upon resignation in good standing, an employee will receive 20% of sick leave. Allemployer related costs of vacation and sick leave are accrued and recorded when earned inthe government-wide and proprietary fund financial statements. A liability for these amountsis reported in governmental funds only if they have matured, for example, as a result of em-ployee resignations and retirements.

I. Long-term obligations

In the government-wide financial statements, and proprietary funds types in the fund finan-cial statements, long-term debt and other long-term obligations are reported as liabilities inthe applicable governmental activities, business-type activities, or proprietary fund typestatement of net assets. Bond premiums and discounts, as well as issuance costs, are deferredand amortized over the life of the bonds using the effective interest method. Bonds payableare reported net of the applicable bond premium or discount. Bond issuance costs are re-ported as deferred charges and amortized over the term of the related debt.

In the fund financial statements, governmental funds recognize bond premiums and dis-counts, as well as bond issuance costs, during the current period. The face amount of the debtissued is reported as other financing sources. Premiums received on debt issuance are re-ported as other financing sources while discounts on debt issuance are reported as other fi-nancing uses. Issuance costs, whether or not withheld from the actual debt proceeds received,are reported as debt service expenditures.

34


(continued)


J. Fund equity

In the fund financial statements, governmental funds report reservations of fund balance foramounts that are not available for appropriation or are legally restricted by outside parties foruse for a specific purpose. Designations of fund balance represent tentative managementplans that are subject to change.

K. Use of estimates

The preparation of financial statements in conformity with GAAP requires management tomake estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosures of contingent assets and liabilities at the date of the financial statements and thereported amounts of revenues and expenses during the reporting period. Actual results coulddiffer from those estimates.

L. Pending Governmental Accounting Standards Board Statements

At December 31, 2007, the Governmental Accounting Standards Board (GASB) had issuedseveral statements not yet implemented by the City. The statements that could impact theCity are as follows:

GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postem-ployment Benefits Other Than Pensions, was issued in June 2004. This statement establishesstandards for the measurement, recognition and display of other postemployment benefits(OPEB) expense/expenditures and related liabilities (assets), note disclosures, and, if appli-cable, required supplementary information in the financial reports of state and local govern-mental employers. The term "other postemployment benefits" refers to postemployment ben-efits other than pension benefits and includes (a) postemployment healthcare benefits and, (b)other types of postemployment benefits (i.e., life insurance) if provided separately from apension plan. The provisions of this statement are effective for periods beginning after De-cember 15,2007.

35


(continued)


L. Pending Governmental Accounting Standards Board Statements (continued)

GASB Statement No 51, Accounting and Financial Reporting/or Intangible Assets, was is-sued in June 2007. This statement establishes standards for when and whether intangible as-sets should be considered capital assets for financial reporting purposes. It requires that allintangible assets not specifically excluded by its scope provisions be classified as capital as-sets. Accordingly, existing authoritative guidance related to the accounting and financial re-porting for capital assets should be applied to these intangible assets, as applicable. ThisStatement also provides authoritative guidance that specifically addresses the nature of theseassets. Such guidance should be applied in addition to the existing authoritative guidance forcapital assets. The provisions of this statement are effective for periods beginning afterJune 15,2009.

2. Reconciliation of government-wide and fund financial statements

A. Explanation of certain differences between the governmental fund balance sheet andthe government-wide statement of net assets

The governmental fund balance sheet includes a reconciliation between fund balance - totalgovernmental funds and net assets - governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains that "long-term lia-bilities, including bonds payable, are not due and payable in the current period and thereforeare not reported in the funds." The details of this $20,624,203 difference are as follows:

Bonds payableBond anticipation notes payableCapital leases payableAccrued interest payableAccrued compensated absencesNet pension obligation

$16,995,0001,480,000

285,247291,812

1,298,141274,003

Net adjustment to decrease fund balance - total governmentalfunds to arrive at net assets - governmental activities $20,624,203

36


(continued)

2. Reconciliation of government-wide and fund financial statements (continued)

B. Explanation of certain differences between the governmental fund statement of reve-nues, expenditures, and changes in fund balances and the government-wide state-ment of activities

The governmental fund statement of revenues, expenditures, and changes in fund bal-ances includes a reconciliation between net change in fund balances - total governmentalfunds and change in net assets of governmental activities as reported in the government-wide statement of activities. One element of the reconciliation explains that "Governmen-tal funds report capital outlays as expenditures. However, in the statement of activitiesthe cost of those assets is allocated over their estimated useful lives and reported as de-preciation expense." The details of this $2,778,732 difference are as follows:

Capital outlayDepreciation expense

$2,189,180(4,967,912)

Net adjustment to decrease net change in fund balances - totalgovernmental funds to arrive at change in net assets ofgovernmental activities $(2,778,732)

Another element of that reconciliation states that "The issuance of long-term debt (e.g.,bonds, leases) provides current financial resources to governmental funds, while the re-payment of the principal of long-term debt consumes the current financial resources ofgovernmental funds. Neither transaction, however, has any effect on net assets. Also, go-vernmental funds report the effect of issuance costs, premiums, discounts, and similaritems when debt is first issued, whereas these amounts are deferred and amortized in thestatement of activities." The details of this $915,247 difference are as follows:

Debt issued or incurred:Issuance of general obligation bondsProceeds from capital leasesIssuance of bond anticipation notes

Principal repayments:General obligation debt

$(1,530,000)(285,247)

(1,480,000)

2,380,000

Net adjustment to decrease net change in fund balances - totalgovernmental funds to arrive at change in net assets ofgovernmental activities $ (915,247)

37


(continued)

2. Reconciliation of government-wide and fund financial statements (continued)

B. Explanation of certain differences between the governmental fund statement of rev-enues, expenditures, and changes in fund balances and the government-wide state-ment of activities (continued)

Another element of that reconciliation states that "Some expenses reported in the state-ment of activities do not require the use of current financial resources and therefore arenot reported as expenditures in governmental funds." The details of this $37,539 differ-ence are as follows:

Accrued interest $ 1,130Compensated absences 3,367Net pension obligation - public safety 33,042

Net adjustment to increase net change in fund balances - totalgovernmental/finds to arrive at change in net assets ofgovernmental activities $ 37,539

3. Stewardship, compliance, and accountability

A. Budgetary information

Applicable Kansas statutes require that annual budgets be legally published and adopted forall funds (including Proprietary Funds) unless exempted by a specific statute. Statutory ex-emptions currently exist for all Capital Project Funds, Fiduciary Funds, and certain SpecialRevenue Funds (the Tax Increment - Home Depot, Police Seizure, Police Grants, Housing,Community Development, Earl R. Harmon, and Special Park Gift Funds).

The statutes provide for the following sequence and timetable in adoption of budgets:

(a) Preparation of the budget for the succeeding calendar year on or before August 1 of eachyear.

(b) Publication of proposed budget on or before August 15 of each year.

(c) A minimum of 10 days' notice of public hearing, published in local newspaper, on or be-fore August 15 of each year.

(d) Adoption of the final budget on or before August 25 of each year.

38


(continued)

3. Stewardship, compliance, and accountability (continued)

A. Budgetary information (continued)

Budgets are prepared by fund, department, and activity. City management may make trans-fers of appropriations at the department and activity level of a fund without seeking the ap-proval of the governing body; however, management cannot amend the total budget of a fundwithout approval of the governing body. The legal level of budgetary control is the fund leveland is the level at which the governing body must approve any overexpenditures of appropri-ations or transfers of appropriated amounts. Kansas statutes prohibit creating expenditures inexcess of the total amount of the adopted budget of expenditures of individual funds. Suchstatutes permit original fund expenditure budgets to be increased for previously unbudgetedincreases in revenue other than ad valorem property taxes. The City must first publish a no-tice of public hearing to amend the expenditure budget of a fund. Ten days after publication,a public hearing is held and the City Commission may amend the expenditure budget of thefund at that time. During the year, several budgets were amended in accordance with Kansasstatutes.

Control over spending in funds that are not subject to legal budgets is maintained by use ofinternal spending limits established by management. Applicable Kansas statutes require theuse of an encumbrance system as a management control technique to assist in controlling ex-penditures. For budget purposes, unencumbered cash balances are determined by deductingliabilities and encumbrances from cash.

Accordingly, the actual data presented in the budgetary comparison statements include en-cumbrances and, consequently, differ from the expenditure data presented in the governmen-tal fund financial statements prepared in conformity with GAAP.

39


(continued)

3. Stewardship, compliance, and accountability (continued)

A. Budgetary information (continued)

A reconciliation of the General Fund budgetary basis statement to the governmental fundstatement as of December 31, 2007 is as follows:

GovernmentalFunds

Expenditures and other financing sources anduses and encumbrances (Basis of budgeting) $ 17,661,663

Add 2006 encumbrances 27,319Less 2007 encumbrances (65,534)Less 2006 encumbrances relieved (27,319)Expenditures and other financing sources

and uses (GAAP Basis) " $ 17,596,129

B. Deficit fund equity

The Enterprise Funds have combined total net assets of $10,479,130 as of December 31,2007. This amount is comprised of net assets of $10,709,403 and $(230,273) in the Sewerand Refuse Funds, respectively. The negative net asset position in the Refuse Fund resultsprimarily from the generally accepted accounting treatment of recording depreciation ex-pense and from the recognition of landfill closure and postclosure care costs.

40


(continued)

4. Detailed notes on all funds

A. Deposits and investments

Deposits

Custodial credit risk

Custodial credit risk is the risk that, in the event of a bank failure, the City's deposits may notbe returned to it. The City does not have a formal depository policy, but Kansas statutes re-quire that deposits be collateralized, and that collateral pledged must have a fair market valueequal to 100% of the deposits and investments, less insured amounts. At December 31, 2007,the City's carrying amount of deposits was $13,075,247 and the bank balance was$13,460,942. Of the bank balance, $400,000 was covered by Federal depository insuranceand $13,060,942 was covered by collateral held by the City or its agent in the City's name.

K.S.A. 9-1401 establishes the depositories which may be used by the Public Library. Thestatute requires banks eligible to hold the Public Library's funds have a main or branch bankin the county in which the Public Library is located and the banks provide an acceptable rateof return on funds. In addition, K.S.A. 9-1402 requires the bank to pledge securities for depo-sits in excess ofFDIC coverage.

At December 31, 2007, the Public Library's carrying amount of deposits was $555,936 andthe bank balance was $606,984. Of the bank balance, $585,755 was covered by federal depo-sitory insurance, $17,856 was collateralized with securities held by the pledging financialinstitutions' agents in the Public Library's name, and $3,373 was unsecured.

Investments

At December 31, 2007, the City had the following investments:

___Maturities______Fair ValueRepurchase agreements 1 - 89 days $2,000,000State investment pool 1 - 89 days _____ 40,938Total investments ____$2,040,938

The investment in the state investment pool is in an external investment pool. The securitiesunderlying the repurchase agreements are guaranteed by the U. S. Government and their fairvalue exceeds that of the repurchase agreements.

41


(continued)

4. Detailed notes on all funds (continued)

A. Deposits and investments (continued)

Credit risk

The City's investment policy parallels state statutes and allows for idle funds to be investedin temporary notes issued by the governing body, certificates of deposits, time deposits, re-purchase agreements and United States treasury bills or notes. Inactive funds may also beinvested in the state investment pool, if local financial institutions are not willing to pay aninterest rate at least equal to the weekly "investment rate", which is the equivalent yield onU.S. government securities with maturities comparable to that of the investment being of-fered. The City's investments in the state investment pool were rated AAAf/Sl+ by Standard& Poor's.

Custodial credit risk

Custodial credit risk is the risk that, in the event of the failure of the counterparty, the Citywill not be able to recover the value of its investments. The City has no formal policy regard-ing custodial credit risk. The City is not exposed to custodial credit risk.

Interest rate risk

Interest rate risk is the risk that changes in interest rates will adversely affect the fair marketvalue of an investment. The City's formal investment policy does not limit investment matur-ities as a means of managing its exposure to fair value losses arising from rising interestrates, but state statutes do establish a two-year limitation on investment maturities. In prac-tice, the City does not exceed a one year maturity when investing idle funds. The City is notexposed to significant interest rate risk.

42


(continued)


B. Capital assets

Capital assets activity for the year ended December 31, 2007 was as follows:

Primary government

Governmental activities:Capital assets, not being depreciatedLandConstruction in progressTotal capital assets, not being depreciated

Capital assets, being depreciatedBuildingsImprovements other than buildingsMachinery and equipmentInfrastructureTotal capital assets, being depreciated

Less accumulated depreciation for:BuildingsImprovements other than buildingsMachinery and equipmentInfrastructureTotal accumulated depreciation

Total capital assets, being depreciated, net

Beginning EndingBalance Increases Decreases Balance

$ 2,265,890 $ - $ - $ 2,265,8904,530,273 903,403 (3,812,537) 1,621,1396 , 7 9 6 , 1 6 3 9 0 3 , 4 0 3 ( 3 , 8 1 2 , 5 3 7 ) 3 , 8 8 7 , 0 2 9

23,868,079 301,036 - 24,169,1157,473,089 112,209 - 7,585,2989,205,941 818,841 (292,964) 9,731,818

55,347,409 7,658,473 - 63,005,88295,894,518 8,890,559 (292,964) 104,492,113

12,424,013 812,673 - 13,236,6863,335,968 413,257 - 3,749,2256,647,093 632,187 (291,858) 6,987,422

26,569,470 3,109,795 - 29,679,26548,976,544 4,967,912 (291,858) 53,652,598

46,917,974 3,922,647 (1,106) 50,839,515

Governmental activities capital assets, net $53,714,137 $4,826,050 S (3,813,643) $54,726,544

43


(continued)


B. Capital assets (continued)

Business-type activities:Capital assets, not being depreciated

LandConstruction in progress

Total capital assets, not being depreciated

Capital assets, being depreciatedBuildingsImprovements other than buildingsMachinery and equipmentTotal capital assets, being depreciated

Less accumulated depreciation for:BuildingsImprovements other than buildingsMachinery and equipmentTotal accumulated depreciation

Total capital assets, being depreciated, net

Business-type activities capital assets, net

Beginning EndingBalance Increases Decreases Balance

$ 58,634 $ - $ - $ 58,6341,877,487 1,034,222 (999,515)___1,912,1941 , 9 3 6 , 1 2 1 1 , 0 3 4 , 2 2 2 ( 9 9 9 , 5 1 5 ) 1 , 9 7 0 , 8 2 8

8,053,327 3,696,548 - 11,749,8757,101,991 692,222 - 7,794,2133.030,790 313,206 (205,785) 3,138,211

1 8 , 1 8 6 , 1 0 8 4 , 7 0 1 , 9 7 6 ( 2 0 5 , 7 8 5 ) 2 2 , 6 8 2 , 2 9 9

4,040,525 596,798 - 4,637,3231,702,142 274,649 - 1,976,7912,258,859____150,661 (205,785) 2,203,7358 , 0 0 1 , 5 2 6 1 , 0 2 2 , 1 0 8 ( 2 0 5 , 7 8 5 ) 8 , 8 1 7 , 8 4 9

10,184,582 3,679,868 - 13,864,450

$ 12,120,703 $ 4,714,090 $ (999,515) $ 15,835,278

44


(continued)



Depreciation expense was charged to functions/programs of the primary government as fol-lows:

Governmental activities:General governmentPublic safetyPublic worksCulture and recreationHousmg and urban redevelopmentUnallocated depreciation expense (depreciation of infrastructure assets)

Total depreciation expense - governmental activities

Business-type activities:SewerRefuse

Total depreciation expense - business-type activities

Construction commitments

The City has active construction projects as of December 31, 2007. The projects include wi-dening and improvements of streets and bridges, improvements of buildings, improvementsof parks, and improvements of sewer system facilities. At year end the City's commitmentswith contractors are as follows:

$ 59,178598,617403,070543,862253,390

3,109,795" $ 4 , 9 6 7 , 9 1 2

$ 949,947_____72.161"$1 ,022 ,108

ProjectRemaining

Spent-to-Date Commitments

Street improvementsBuilding improvementsSewer system improvementsStormwater improvementsPark impiovementsSidewalk improvementsTotal

941,276 S 883,099109,569 246,829

4,693,698 819,38484,445 9,03683,176 145,777

204,242 20,184S 6,116,406 S 2,124,309

45


(continued)



Discretely presented component unit

Capital assets, being depreciated:Machinery and equipment

Total capital assets, beingdepreciated

Less accumulated depreciationFor:

Machinery and equipment

Public Library capital assets, net

1

S

S

BeginningBalance

3,064,420

3,064,420

2,339,006

725,414

I:

$

S

ncreases

148,827

148,827

151,819

(2,992)

r

S

$

)ecreases

(62,700)

(62,700)

(46,098)

(16,602)

S

S

EndingBalance

3,150,547

3,150,547

2,444,727

705,820

C. Interfund receivables, payables, and transfers

The composition ofinterfund balances as of December 31, 2007, is as follows:

Due to/from other funds:

Receivable Fund Payable Fund Amount

General Nonmajor governmental $31,858

These interfund balances result from the time lag between the dates that (1) transactions arerecorded in the accounting system, and (2) payments between funds are made.

46


(continued)


C. Interfund receivables, payables, and transfers (continued)

Interfund transfers for the year ended December 31, 2007, are as follows:

Interfund transfers:

Fund Transfers In Transfers OutMajor funds

General FundDebt Service FundCapital Projects Fund

Nonmajor governmental fundsTotal transfers

$ - $ 1,864,087776,257

3,323,121 266,311______166,312_______2,135,292" " $ 4 , 2 6 5 , 6 9 0 $ 4 , 2 6 5 , 6 9 0

During the year, a non-routine transfer of $250,000 occurred from the Capital Projects Fundto the Debt Service Fund to call certain outstanding bonds for redemption and payment priorto their stated maturity.

D. Long-term debt

General obligation bonds

The government issues general obligation bonds to provide funds for the acquisition and con-struction of major capital facilities. General obligation bonds are direct obligations andpledge the full faith and credit of the City. During the year, general obligation bonds totaling$1,530,000 were issued for governmental activities to provide permanent financing for gen-eral infrastructure improvements.

47


(continued)


D. Long-term debt (continued)

General obligation bonds (continued)

General obligation bonds currently outstanding are as follows:

Governmental activitiesTraffic & Internal ImprovementsTraffic & Internal ImprovementsTraffic & Internal ImprovementsTraffic & Internal ImprovementsTraffic & Internal ImprovementsGO Refunding & Internal ImprovementsGO Refunding & Internal ImprovementsGO Refunding & Internal ImprovementsTraffic & Internal ImprovementsTraffic & Internal ImprovementsTraffic & Internal Improvements

Business-type activitiesSewer System ImprovementsLandfill ClosureSewer System Improvements

Series

1997'A2000A2001A2002A2002B2002C2003A2004A2005A2006A2007A

2003A2004A2005A

InterestRates

4.90% - 5.25%5.15%-5.75%4.00% - 4.50%3.90% - 5.00%3.90%-5.00%3.30% - 5.00%2.38% - 3.25%3.00%-4.10%3.50%-5.00%3.75%-4.50%3.95%-4.25%

2.38%-4.13%3.00%-4.10%3.50%-5.00%

FinalMaturity

Date

09/01/1709/01/2009/01/1109/01/2209/01/2209/01/2209/01/1309/01/1409/01/1509/01/1609/01/17

09/01/1809/01/1409/01/15

OutstandingDecember 31,

2007

$ 650,000910,000470,000

2,750,0002,395,0003,060,000

900,000915,000

2,175,0001,240,0001,530,000

16,995,000

1,560,000270,000

2,230,0004,060,000

Total S 21,055,000


(continued)



General obligation bonds (continued)

Annual debt service requirements to maturity for general obligation bonds are as follows:

Governmental activities200820092010201120122013-20172018-2022

Business-type activities200820092010201120122013-20172018-20222023 - 2027

Total

Principal_____Interest______Total

$ 2,025,000 $ 720,811 $ 2,745,8111,845,000 630,361 2,475,3611,790,000 559,572 2,349,5721,835,000 488,904 2,323,9041,750,000 414,735 2,164,7355,945,000 1,068,025 7,013,0251,805,000 265,360 2,070,360

16,995,000 4,147,768 21,142,768

270,000 149,413 419,413270,000 140,419 410,419275,000 131,781 406,781285,000 122,881 407,881285,000 113,400 398,400

1,350,000 416,080 1,766,080835,000 188,556 1,023,556490,000 39,800 529,800

4,060,000 1,302,330 5,362,330

$21,055,000 $ 5,450,098 $26,505,098

At December 31, 2007, the statutory limit on indebtedness for general obligation bonds andbond anticipation notes is $68,435,717 which, after reduction of outstanding debt of$15,442,547, provides a debt margin of $52,993,170. General obligation bonds of$11,312,453 for trafficway, sewer and refuse improvements and refundings issued underK.S.A. 10-427 are exempt from this calculation.

49


(continued)



Conduit debt obligations

From time to time, the City has issued Industrial Revenue Bonds to provide financial assis-tance to private-sector entities for the acquisition and construction of industrial and commer-cial facilities deemed to be in the public interest. The bonds are secured by the property fi-nanced and are payable solely from payments received on the underlying mortgage loans.

Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance.

Neither the City, the State, nor any political subdivision thereof is obligated in any mannerfor repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the ac-companying financial statements. As of December 31, 2007 there were six series of Industri-al Revenue Bonds outstanding, with an aggregate principal amount payable of approximately$11,465,448.

E. Capital leases

The City has entered into a lease agreement as lessee for financing the acquisition of a firetruck with a down payment of $110,500. This lease agreement qualifies as a capital lease foraccounting purposes and, therefore, has been recorded at the present value of its future mini-mum payments as of the inception date.

Assets acquired through capital leases are as follows:

Asset:Machinery and equipmentLess: accumulated depreciation

Total

GovernmentalActivities

$ 395,747(19,787)

$ 375,960

50


(continued)


E. Capital leases (continued)

The future minimum lease obligations and the net present value of these minimum leasepayments as of December 31, 2007, were as follows:

Year Ending December 31:200820092010

Total minimum lease paymentsLess: amount representing interestPresent value of minimum lease payments

GovernmentalActivities

$ 101,579101,579101,579304,737(19,490)

$ 285,247

Amortization on assets acquired through capital leases is included in depreciation expense.

F. Bond anticipation notes

Kansas statutes permit the issuance of bond anticipation notes to finance certain capital im-provement projects that will be refinanced with general obligation bonds. During the year,bond anticipation notes totaling $1,905,000 were issued for governmental activities to pro-vide temporary financing for general infrastructure improvements. Bond anticipation notesissued for general governmental activities for which all legal steps have been taken to refin-ance the notes and for which the City's intent is supported by an ability to consummate refi-nancing on a long-term basis at December 31 are payable as follows:

Final OutstandingInterest Maturity December 31,

Series Rate Date 2007Governmental activitiesInternal improvements

Total

2007A 4.12% 12/01/08 $ 1,480,000

$ 1,480,000

51


(continued)


F. Bond anticipation notes (continued)

Bond anticipation notes issued for governmental activities for which all legal steps and theability to consummate refinancing have not been met are reported as a fund liability in thefund receiving proceeds. The following bond anticipation notes are reported as fund liabili-ties at December 31, 2007:

Final OutstandingInterest Maturity December 31,

Series Rates Date 2007Governmental activitiesInternal ImprovementsBusiness-type activitiesSewer plant improvements

Total

2007B 4.05% 07/01/09 $ 425,000

2006A 4.00% 06/01/08 3,795,000

$ 4,220,000

G. Changes in long-term liabilities

Long-term liability activity for the year ended December 31, 2007, was as follows:

Beginning Ending Due WithinBalance Additions Reductions Balance One Year

Governmental activitiesGeneral obligation bonds $17,845,000 $1,530,000 $2,380,000 $16,995,000 $2,025,000Capital leases - 285,247 - 285,247 91,314Net pension obligation 307,045 - 33,042 274,003Compensated absences 1,301,508 983,385 986,752 1,298,141 123,843Total $19,453,553 $2,798,632 $3,399,794 $18,852,391 $2,240,157

Business-type activitiesGeneral obligation bonds $ 4,325,000 $ - $ 265,000 $ 4,060,000 $ 270,000Compensated absences 126,643 110,092 135,076 101,659 9,698Accrued landfill closure

postclosure care costs 678,537 - 8,600 669,937 20,000Total $ 5 , 1 3 0 , 1 8 0 $ 1 1 0 , 0 9 2 $ 4 0 8 , 6 7 6 $ 4 , 8 3 1 , 5 9 6 $ 299,698

52


(continued)


G. Changes in long-term liabilities (continued)

For the governmental activities, compensated absences are generally liquidated by the Gen-eral Fund.

5. Other information

A. Risk management

The City is exposed to various risks of loss related to torts; theft of, damage to, and destruc-tion of assets; errors and omissions; injuries to employees; and natural disasters. These risksare covered by commercial insurance purchased from independent third parties. There hasbeen no significant change in insurance coverage from the previous fiscal year. Settledclaims from these risks have not exceeded commercial insurance coverage for the past threeyears.

For its workers compensation insurance, the City is a participant in the Kansas Eastern Re-gional Insurance Trust (KERIT), a not-for-profit public entity risk pool established by agroup of city and county governmental entities in the eastern region of Kansas. As of De-cember 31, 2007, the membership of KERIT included eleven cities and two counties.

The City pays an annual premium to KERIT for this workers compensation insurance.KERIT members are subject to additional premium assessments in the event of deficienciesand may receive dividends from those claims years when revenues exceed expenses. KERITprovides coverage for its members within a self-insured retention limit of $400,000 in accor-dance with State statutes and obtains independent coverage for insured events up to an annualaggregate limit of $5 million.

A Comprehensive Annual Financial Report for KERIT is available from their offices at 600Broadway, Suite 300, Kansas City, Missouri 64105-1554.

53


(continued)

5. Other information (continued)

B. Pension plans

Kansas Public Employees Retirement System

Plan Description

The City participates in the Kansas Public Employees Retirement System (KPERS) and theKansas Police and Firemen's Retirement System (KP&F). Both are part of a cost-sharingmultiple-employer defined benefit pension plan as provided by K.S.A. 74-4901, et seq.KPERS and KP&F provide retirement benefits, life insurance, disability income benefits, anddeath benefits. Kansas law establishes and amends benefit provisions. KPERS and KP&Fissue a publicly available financial report (only one is issued) that includes financial state-ments and required supplementary information. Those reports may be obtained by writing toKPERS (611 S. Kansas Avenue, Suite 100; Topeka, KS 66603-3803) or by calling 1-888-275-5737.

Funding Policy

K.S.A. 74-4919 establishes the KPERS member-employee contribution rate at 4% of coveredsalary. K.S.A. 74-4975 establishes the KP&F member-employee contribution rate at 7% ofcovered salary. The employer collects and remits member-employee contributions accordingto the provisions of section 414(h) of the Internal Revenue Code. State law provides that theemployer contribution rates be determined annually based on the results of an annual actuari-al valuation. KPERS and KP&F are funded on an actuarial reserve basis. State law sets a li-mitation on annual increases in the employer contribution rates. The KPERS employer rateestablished by statute for calendar year 2007 was 5.31%. Employer contributions to KPERSfor the years ending December 31, 2007, 2006, and 2005 were $274,321, $240,042, and$206,998, respectively, equal to the statutory required contributions for each year. The KP&Funiform participating employer rate established for fiscal years beginning in 2007 was14.1%. Employers participating in KP&F also make contributions to amortize the liability forpast service costs, if any, which is determined separately for each participating employer.Employer contributions to KP&F for the years ending December 31, 2007, 2006, and 2005were $781,554, $716,486, and $640,904, respectively, equal to the statutory required contri-butions for each year.

54


(continued)


B. Pension plans (continued)

Police and Fire Pension Plan

As of December 31, 2007, no active City employees participate in the Police and FirePension Plan (the Local Plan), a single-employer defined benefit pension plan. m 1971, whenthe City affiliated with Kansas Police and Firemen (KP&F), all members were given the op-tion of joining KP&F or remaining with the Local Plan. Separate financial reports are notprepared by the pension plan.

Summary of Significant Accounting Policies and Plan Asset Matters

Basis of AccountingThe Local Plan is reported as a pension trust fund in the City's financial statements and usesthe accrual basis of accounting. Employee and employer contributions are recognized whendue, pursuant to formal commitments, as well as statutory or contractual requirements. Ben-efits and refunds are recognized when due and payable in accordance with the terms of theplan.

Methods Used to Value InvestmentsThe Local Plan's cash and investments are pooled with the City ofLeavenworth's cash andinvestments which consist of checking accounts, certificates of deposit, repurchase agree-ments, and the Kansas Municipal Investment Pool (MIP). Cost approximates market for theCity's cash and investments.

Management of Plan AssetsThe Local Plan assets are managed by the City of Leavenworth. Costs of administering theplan are absorbed by the General Fund of the City.

Reserves and ConcentrationsThere are no assets legally reserved for purposes other than the payment of the plan memberbenefits. The Local Plan held no individual investments whose market value exceeds fivepercent or more of net assets available for benefits. There are no long-term contracts for con-tributions.

55


(continued)



Police and Fire Pension Plan (continued)

Plan Description

The Local Plan was established to provide retirement income benefits for all employees in-cluded in the plan. The Local Plan was established by City ordinance in 1945 and becameclosed to new entrants during 1971. Plan provisions may be amended by the City governingbody. At December 31,2007, the Local Plan's membership consisted of:

Current employeesVestedNonvested ___;

Total current employees

Retirees and beneficiaries currently receiving benefitsTerminated employees entitled to benefits but not yet

receiving themTotal membership

Funding Policy

The contribution requirements of plan members and the reporting entity are established byCity ordinance and may be amended by the governing body. The City is required to contri-bute at an actual-tally determined amount based on the latest actuarial report. The City pro-vides for pension expenses by levying ad valorem property taxes each year.

56


(continued)




Funding Policy (continued)

As of the latest actuarial study, no active City employees participated in the Local Plan.Therefore, there is no covered payroll for the Local Plan for the year ended December 31,2007. Pursuant to legislation enacted in 1976 and 1977, the City is required to fund the LocalPlan on an actuarial reserve basis. The City must make contributions to the Local Plan basedon the results of actuarial valuations prepared every three years as required by Kansas statute.The most recent actuarial valuation was prepared as of December 31, 2003, and was based onthe same assumptions as those used in the actuarial valuation of KP&F, including the aggre-gate cost with supplemental liabilities funding method, an 8% interest rate assumption, pro-jected salary increases of 5.7 - 7.6%, the level percent closed amortization method, and the1983 Group Annuity Mortality Table without margins. As of December 31, 2003, the LocalPlan had a total actuarial liability of $2,212,019, actuarially projected plan assets of $692,010(expected value plus 1/3 of difference between market and expected value) and an unfundedactuarial liability of $1,520,009. The contribution requirement for retired employees is$143,349 for 2005 through 2007 as calculated by the Local Plan's actuaries using the sameactuarial assumptions used to compute the actuarial liability. The contributions are requireddue to amortization of the unfunded accrued actuarial liability of both active as well as re-tired members. The unfunded actuarial liability is being amortized over a period of not morethan 40 years from January 1, 1978 for active members and 20 years from January 1, 1978for retired members using the level dollar method. The City accounts for the Local Plan inthe Pension Trust Fund. The actual employer contribution to the Local Plan during the yearended December 31, 2007 was $200,955.

57


(continued)




Funding Policy (continued)

Annual pension cost is made up of the following for the year ended December 31, 2007:

Annual required contribution (ARC)Interest on net pension obligation (NPO)Adjustment to ARCAnnual pension costContributions madeDecrease in NPONPO at beginning of yearNPO at end of year

$ 169,065*24,564

(25,716)167,913

(200,955)(33,042)307,045

$ 274,003

* Includes the amortization of the cumulative difference between the annual pension costand the employer's contribution.

Three year trend information:

Fiscal Year Ending Annual Pension Percent of APC Net PensionDecember 31,2007_____Cost (APC)______Contributed______Obligation

2005 $ 173,793 123.5% $ 339,6692006 170,522 119.1 307,0452007 167,913 119.7 274,003

C. Postemployment benefits

The City provides postretiremen! health and dental care benefits, as per the requirements ofan adopted personnel policy, for certain retirees. Retirees may purchase health and dentalbenefits through the City's group plans at 100% of the City's cost. Certain retirees are eligi-ble for assistance with their monthly premiums through a Health Benefit Account. Eligibleemployees are those who meet KPERS, KP&F, or Local Plan retirement criteria and whohave completed a minimum of 20 years of service with the City, or who are approved for dis-ability benefits under KPERS or KP&F.

58


(continued)


C. Postemployment benefits (continued)

Retiring employees currently receive 40% of their unused sick leave in a lump sum paymentupon retirement. For eligible employees, the remaining 60% of unused sick leave is con-verted to a cash value which establishes the amount of the retiree's Health Benefit Account(a memorandum account). The City shall pay 50% of the retiree's actual monthly health anddental premiums on a pay-as-you-go basis from this memorandum account as long as a bal-ance remains in the retiree's Health Benefit Account. The remaining 50% of the monthlypremiums must be paid by the retiree. When the retiree's Health Benefit Account is ex-hausted, all City premium payments cease. Retirees may not convert the benefit into an in-lieu payment.

As of December 31, 2007, there were 26 retirees with active Health Benefit Accounts withtotal balances of $688,152. For the fiscal year ended December 31, 2007, the City incurred$72,911 of expenditures, net of retiree contributions, in the General Fund for retirees underthis postretirement benefit.

D. Closure and postclosure care costs

State and federal laws and regulations require the City's sanitary landfill to place a final cov-er on the landfill site and to perform certain maintenance and monitoring functions for thirtyyears after closure. Although closure and postclosure care costs will be paid in future periods,the City reports these closure and postclosure care costs as an operating expense in each pe-riod based upon landfill capacity used as of the balance sheet date. The $669,937 reported aslandfill closure and postclosure care liability in the Refuse Fund at December 31, 2007represents 100% of the estimated liability as the landfill is no longer accepting waste. Theestimated liability is based upon what it would cost to perform all closure and postclosurecare costs in 2007. Actual costs may be different than those estimated due to inflation,changes in technology or changes in regulations.

E. Commitments and contingencies

Normal commitments have been made for future expenditures related to the City's capitalprojects program.

59


(continued)


E. Commitments and contingencies (continued)

The City is a defendant in various legal actions pending or in process for property damage,personal injuries, zoning matters and other miscellaneous claims. The ultimate liability thatmight result from the final resolution of the above matters is not presently determinable.While certain lawsuits involve substantial amounts, in the opinion of management and coun-sel, such litigation will have no material effect on the basic financial statements of the City.

The City receives significant financial assistance from numerous Federal, state and local go-vernmental agencies in the form of grants. Grantor agencies reserve the right to conduct addi-tional audits of the City's grant programs for economy, efficiency and program results whichmay result in disallowed costs to the City. However, City management does not believe suchaudits would result in any disallowed costs that would be material to the City's financial po-sition as of December 31, 2007.

F. Subsequent events

Subsequent to year end, the City issued $5,460,000 in General Obligation Bonds, Series2008A, to finance the construction of various sewer plant and other internal improvements ofthe City. The bonds are dated May 15, 2008 with interest rates ranging between 2.850% and4.750% and maturities ranging from 2009 through 2023.

The City also issued $4,250,000 of General Obligation Temporary Notes, Series A2008, toprovide temporary financing for the construction of various trafficway and internal im-provements of the City. The notes are dated May 15, 2008 with an interest rate of 2.600%and maturing in 2010.

60

Required Supplementary Information

61

City ofLeavenworth, KansasPolice and Fire Pension Plan

Schedule of Employer ContributionsDecember 31,2007

Historical trend information which shows the plan's progress in accumulating sufficient assetsto pay benefits when due is as follows:

Schedule of Employer Contributions

Fiscal Year Ending

12/31/9512/31/9612/31/9712/31/9812/31/9912/31/0012/31/0112/31/0212/31/0312/31/0412/31/0512/31/0612/31/07

Annual RequiredContribution*

$ 152,065235,487243,574250,687278,398204,968205,827207,176208,383210,180175,220171,797169,065

PercentageContributed

100.0%59.165.168.754.294.491.692.489.196.2122.5118.2118.9

* After adjustment for amortization of the cumulative difference between the annual pensioncost and the employer's contribution.

62

City ofLeavenworth, KansasPolice and Fire Pension PlanSchedule of Funding Progress

December 31,2007

Schedule of Funding Progress

Actuarial ActuarialActuarial Value of Accrued Unfunded Annual Percentage ofValuation Plan Liability (AAF; AAL Funded Covered Covered

Date____Assets Entry Age (UAAL) Ratio Payroll Payroll

12/31/88 $530,700 $1,464,500 $933,800 3 6 . 2 % $ 77,100 1,211.2%12/31/91 533,600 1,471,900 938,300 36.3 64,664 1,451.012/31/94 544,326 1,588,386 1,044,060 34.3 73,694 1,416.812/31/97 668,199 2,368,143 1,699,944 28.2 33,251 5,112.512/31/03 692,010 2,212,019 1,520,009 31.3 - NA

63

(This page intentionally left blank.)

64

Combining and Individual FundStatements and Schedules

65


Nonmajor Governmental Funds

December 31,2007

Special Revenue Funds

Fund Descriptions

Recreation Fund

To account for recreational program expenditures. Resources are generated by a tax levy andprogram user fees.

Special Fuel Fund

To account for the operational expenditures of the Street Department. Resources are mainlyfrom a state fuel tax.

County-wide Sales Tax Fund

To account for the receipt and disbursement of sales tax revenue resulting from a one-centcounty-wide sales tax enacted by Leavenworth County.

Tax Increment Fund - Home Depot

To account for the receipt and disbursement of sales tax revenues related to the 2001 tax incre-ment financing project.

Police Seizure Fund

To account for expenditures relating to the operation of police drug abuse abatement programs.Resources are generated from proceeds of the sale of assets confiscated or seized during thecourse of drug enforcement activities.

Police Grants Fund

To account for the receipt and disbursement of federal and state grants for various police pro-grams.

Housing Fund

To account for monies relating to the maintenance and operation of the public housing facilityand housing programs for low income persons. Financing is provided by user fees and federalfinancial assistance.

66


Nonmajor Governmental Funds(Continued)

Fund Descriptions

Community Development Fund

To account for monies expended for community development block grant programs and variousother community improvements. Financing is provided by federal financial assistance.

Earl R. Harmon Fund

To account for monies to be used for the construction and maintenance of a public memorialbuilding which is to be in the nature of a rest station providing sanitary facilities for the publicand to bear the name of the donor. Earl R. Harmon.

Special Park Gift Fund

To account for public contributions for improvements to city parks.

67


Combining Balance Sheet


December 31,2007

Recreation

ASSETSCash and cash equivalentsDeposits restricted for tenant deposit refundsInterest receivableProperty tax receivableSales tax receivableDue from other governments

Total assets

LIABILITIESAccounts payableAccrued compensationDue to other fundsTenant depositsDeferred revenue

Total liabilities

FUND BALANCESReserved for encumbrancesUnreserved, undesignated

Total fund balances

Total liabilities and fund balances

$ 55,740

431,300

" $ 4 8 7 , 0 4 0

$ 10.74927,173

431,300469,222

4,35813,46017,818

$ 487,040

68

Special Revenue

Special Countywide Tax Increment PoliceFuel_________Sales Tax______Home Depot_______Seizure

$ 304,720 $ 1,107,333 $

33,774450,273

66,047 $

362

30,516

96,925 $

229,915

527

230,442$ 338,494 $ 1,557,606 $

$ 44,982 $ - $ - $40,154

85,136

59,800193,558253,358

$ 338,494 $

1,557.6061,557,606

1,557,606 $

96,92596,925

96,925 S

1,635228,807230,442

230,442

(continued)

69


Combining Balance Sheet(Continued)


December 31,2007

PoliceGrants________Housing

ASSETSCash and cash equivalents $Deposits restricted for tenant deposit refundsInterest receivableProperty tax receivableSales tax receivableDue from other governments

Total assets $

LIABILITIESAccounts payableAccrued compensationDue to other fundsTenant depositsDeferred revenue

Total liabilities

FUND BALANCESReserved for encumbrancesUnreserved, undesignated

Total fund balances

Total liabilities and fund balances

2,424 $ 726,75123,956

50 6,122$ 2,474 $ 756,829

$ - $ 9,37711,844

23,956

45,177

16,8232,474 694,8292,474 711,652

$ 2,474 $ 756,829

70

Special Revenue

NonmajorCommunity

Development

$ 221 $-

683 - 1,572--

77,146$ 77,367 $

$ 42,143 $3,145

31,858--

77,146

2,168(1,947)

221

$ 77,367 $

Total

Earl R. Special GovernmentalHarmon Park Gift Funds

124,753 $ 55,191 S 2,673,09523,956

431,300480,789117,092

125,436 $ 55,191 $ 3,727,804

- $ - $ 107,25182,31631,85823,956

431,300676,681

371 85,155125,436 54,820 2,965,968125,436 55,191 3,051,123

125,436 S 55,191 $ 3,727,804

71


Combining Statement of Revenues, Expenditures and Changes in Fund Balances



Recreation

REVENUESTaxesIntergovernmentalCharges for servicesFines and forfeituresInvestment earningsMiscellaneous

Total revenues


Public safetyPublic worksCulture and recreationHousing and urban redevelopment

Debt serviceInterest and fiscal charges



OTHER FINANCING SOURCES (USES)Transfers inTransfers out





467,24151,903

632,458

2,3671,153,969

1,371,610

5461,372,156

(218,187)

150,000

150,000

(68,187)

86,005

$ 17,818

72

Special Revenue

Special Countywide Tax Increment PoliceFuel__________Sales Tax_______Home Depot________Seizure

$ - $ 2,572,642 $1,156,218

283

3,179

184,683 $

3,95080,9435,807

10686,8561,159,680 2,572,642 188.633

1,253,808

192,778

83,148

1,3191,253,808 - 192,778 84,467

(94,128) 2,572.642 (4,145) 2,389

16,312(2,135,292)(2.118.980)

(94,128) 453,662 (4,145) 2,389

347.486 1,103,944 101,070 228,053

S 253,358 S 1,557,606 $ 96,925 $ 230,442

(continued)

73


Combining Statement of Revenues, Expenditures and Changes in Fund Balances(Continued)



PoliceGrants

REVENUESTaxesIntergovernmentalCharges for servicesFines and forfeituresInvestment earningsMiscellaneous

Total revenues


Public safetyPublic worksCulture and recreationHousing and urban redevelopment

Debt serviceInterest and fiscal charges








- $25,619

25,619

15,379

Housing

1,564,845361,508

28,36019,225

1,973,938

1,582,460

15,059 12,02030,438 1,594,480

(4,819) 379,458

-

-

(4,819) 379,458

7,293 332,194

S 2,474 $ 711,652

74

Special Revenue

CommunityDevelopment

$356,424

1,645-

6,1862,000

360,069

-5,218

401,131

-700

401,831

(41.762)

-(1,968,980)

(41,762)

41,983

$ 221

Earl R.Harmon

$ - $

-

-6,186

-

--

6,186

-

6,186

119,250

$ 125,436 S

SpecialPark Gift

- $

-

18,00118,001

-

-995

6,213

11,788

-

11,788

43,403

55,191 $

TotalNonmajor

GovernmentalFunds

3,224,5663,155,009

995,89480,94344,30344,878

7,545,593

98,5271,253,8081,376,8281,983,591

192,77830,639

4,936,171

2,609,422

166,312(2.135,292)

640,442

2,410,681

3,051,123

75


Debt Service Fund

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual


REVENUESTaxesInvestment earnings

Total revenues

EXPENDITURESDebt service:

Principal retirementInterest and fiscal chargesTotal expenditures

Deficiency of revenues under expenditures

OTHER FINANCING SOURCESTransfers in




Budgeted Amounts

Original Final


Actual PositiveAmounts (Negative)

$ 2,180,755 $ 2,180,755 S 2,179,240 $ (1,515)5,000 5,000 5,219 219

2,185,755

2,130,000752,325

2.882,325

(696,570)

525,955

(170,615)

370,615

2,185,755 2,184,459

2,380,000752,325

2,380,000752,445

3,132,325 3,132,445

(946,570) (947,986)

775,955 776,257

(170,615)

370,615

(171,729)

426.404

$ 200,000 $ 200,000 $ 254,675 S

(1,296)

(120)(120)

(1,416)

302

(1,114)

55,789

54,675

76


Recreation Fund



REVENUESTaxesIntergovernmentalCharges for servicesMiscellaneous

Total revenues


Culture and recreationCapital outlay

Total expenditures

Deficiency of revenues under expenditures

OTHER FINANCING SOURCESTransfers in



Fund balances - endine

Budgeted

Original

$ 467,71060,000

659,2501,900

1,188,860

1,386,395

1.386,395

(197.535)

150,000

(47,535)

47,535

$

Amounts

Final

$ 467,71060,000

659,2501,900

1,188,860

1,386,395

1,386,395

(197,535)

150.000

(47,535)

47,535

$

ActualAmounts

$ 467,24151,903

632,4582,367

1,153,969

1,375,968546

1,376,514

(222,545)

150,000

(72,545)

81,6254,380

S 13,460

VariaFinal

PC(Ne

$

10,427(546)

(25,010)

34,0904,380

$

ince withBudget -isitivegative)

(469)(8,097)

(26,792)467

(34,891)

9.881

(25,010)

13,460

77


Special Fuel Fund



REVENUESIntergovernmentalCharges for servicesMiscellaneous

Total revenues


Public works




Budgeted Amounts

Original Final



$ 1,145,790 $ 1,145,790 $ 1,156,218 $ 10,428283 283

500 500 3,179 2,6791,146,290 1,146.290 1.159.680

1,225,380 1,225,380 1,313,608

(79,090)

288,010

(79,090)

288,010

(153,928)

312,71334,773

$ 208,920 S 208,920 $ 193,558 $

13,390

(88,228)

(74,838)

24,70334,773

(15.362)

78


Countywide Sales Tax Fund



REVENUESTaxes






Budgeted Amounts

Original Final



$ 2,579,730 $ 2,579,730 $ 2,572,642 $ (7,088)

(2,515,225)(2,515,225)

64,505

128,040

(2,515,225)(2,515,225)

64,505

128,040

16,312(2,135,292)(2,118,980)

453,662

1,103,944

16,312379,933396.245

389,157

975.904

S 192,545 $ 192,545 $ 1,557,606 $ 1,365,061

79


Agency Funds

December 31,2007

Fund Description

Library Fund

To account for ad valorem and other taxes levied and receipted on behalf of the LeavenworthPublic Library. Tax monies collected are received by the City and then distributed to the Li-brary.

80


Combining Statement of Changes in Assets and Liabilities

All Agency Funds


Library

Assets:Property tax receivable

LiabilitiesAmounts due other parties

Balance BalanceJanuary 1, December 31,

2007 Additions Deductions 2007

S 784,650 $ 866,435 $ 784,650 $ 866,435

S 784,650 $ 866.435 $ 784,650 $ 866.435

Total - All Agency Funds

Assets:Property tax receivable

LiabilitiesAmounts due other parties

$ 784,650 $ 866,435 $ 784,650 $ 866,435

$ 784,650 $ 866,435 $ 784,650 $ 866,435

81


82

Statistical Section

Statistical Section

This part of the City of Leaven-worth's comprehensive annual financial report presents detailedinformation as a context for understanding what the information in the financial statements, notedisclosures, and required supplementary information says about the City's overall financialhealth.

Contents Page

Financial Trends 84 - 93These schedules contain trend information to help the reader understand howthe City 's financial performance and well-being have changed over time.

Revenue Capacity 94 - 99The schedules contain information to help the reader assess the City 's mostsignificant local revenue source, the property tax.

Debt Capacity 100-105The schedules present information to help the reader assess the affordability ofthe City 's current levels of outstanding debt and the City 's ability to issueadditional debt in the future.

Demographic and Economic Information 106 - 107These schedules offer demographic and economic indicators to help the readerunderstand the environment within which the City 's financial activities takeplace.

Operating Information 108 - 113These schedules contain service and infrastructure data to help the readerunderstand how the information in the City 's financial report relates to theservices the City provides and the activities it performs.

Sources: Unless otherwise noted, information in these sections is derived from the comprehen-sive annual financial reports for the relevant year.

83

City of Leavenworth, KansasNet Assets by Component

Last Five Fiscal Years(accrual basis of accounting)

Governmental activitiesInvested in capital assets, net of related debtRestrictedUnrestricted

Total governmental activities net assets

Fiscal Year2003 2004 2005 2006 2007

S 29,470,266 $ 33,347,461 $ 33,814,164 S 35,022,203 S 37,580,320812,217 796,280 796,280

5,235,807 5,087,110 5,611,510 6,435,580 8,938,162S 35,518,290 S 39,230,851 $ 40,221,954 S 41,457,783 $ 46,518,482

Business-type activitiesInvested in capital assets, net of related debtUnrestricted

Total business-type activities net assets

$ 4,454,010 $ 6,464,661 $ 6,430,044 $ 7,487,307 $ 8,348,8302,318,972 622,829 1,085,657 1,398,413 2,130,300

S 6,772,982 S 7,087,490 S 7,515,701 S 8,885,720 $ 10,479,130

Primary governmentInvested in capital assets, net of related debtRestrictedUnrestricted

Total primary government net assets

35,382,451 $ 39,812,122 $ 40,244,208 $ 42,509,510 S 45,929,150812,217 796,280 796,280

7,554,779 5,709,939 6,697,167 7,833,993 11,068,46243,749,447 46,318,341 $ 47,737,655 S 50,343,503 S 56,997,612

Note The city began to report accrual information when it implemented GASB Statement 34 in fiscal year 2003

84

City ofLeavenworth, KansasChanges in Net AssetsLast Five Fiscal years

(accrual basis of accounting)

ExpensesGovernmental activities

General governmentPublic safety (1)Public works (2)Culture and recreationHousing and urban ledevelopmentUnallocated depreciation expenseInterest on long-term debt

Total governmental activities expenses

Business-type activitiesSewerRefuse

Total business-type activities expenses

Total primary government expenses

Program RevenuesGovernmental activities

Charges for servicesGeneral governmentPublic safetyPublic works (2)Culture and recreationHousing and urban redevelopment

Operating grants and contributionsCapital grants and contubutions (3)

Total governmental activities progiam revenues

Business-type activitiesCharges foi services

SewerRefuse

Operating grants and contributionsCapital grants and contributions

Total business-type activities progiam revenues

Total pi imary government pi ogi am revenues

Fiscal Year2003

S 2,803,732 S9,148,5642,139,4822,379,1132,910,8462,580,9251,397,414

23 360.076

2,657,2181,286,4403,943,658

S 27,303,734 S 29,149,879 $ 30,519,580 S 30,918,723 S 31,235.678

S 1,494,817 $149,855513,581639,603333,557

3,829,259560,503

7,521,175

2,911,9411,380,222

--

4292163

S 11,813.338 $ 14,037,758 S 13,929.856 S 14,378,339 S 18,314,990

2004

3,081,134 S9,498,5033,236,7202,385,1303,001,6562,637,7311,213,381

25,054,255

2,455,4171,640,2074,095,624

1,401,192 $185,183

1,343,309612,525364,281

3,963,9771,742,7539,613,220

2,949,9991,390,849

-83,690

4 424.538

2005

3,064,64310,515,7883,627,5202,424,0442,838,9762,706,7541,108,752

26,286,477

2,836,6551,396,4484.233,103

1,661,362483,197

1,748,978686,609372,431

3,696,749672,930

9,322,256

3,051,4621,399,674

156,464-

4 607 600

2006

S 2,943,30610,913,8923,900,1422,512,3372,356,7942,740,7491,029,015

26,396,235

3,080,6661,441,8224,522,488

$ 1,766,943535,029

1,417,151713,869386,405

3,422,505308,930

8,550,832

3,255,2501,519,204

168,498884.555

5 827 507

2007

$ 3,175,73710,601,5553,913,3712,577,6442,403,6033,109,795

954,88826 736.593

2,969,1981,529,8874,499.085

S 1,600,425626,349

1,306,315664,638428,240

3,536,8544,059,674

12,222,495

3,338,9721,597,067

106,0541,050,4026,092 495

(continued)

85

City ofLeavenworth, KansasChanges in Net AssetsLast Five Fiscal years

(accmal basis of accounting)(continued)

Fiscal Year2003 2004 2005 2006 2007

Net (E.xpense)/RevenueGovernmental activitiesBusiness-type activities

Total primary government net expense

General Revenues and Other Changes inNet Assets

Governmental activitiesTaxes

Property taxesFranchise taxes (4)Sales taxesMotor vehicle taxesOther taxes

Intergovernmental revenue not restricted tospecific programs

Payments in lieu of property taxesInvestment earningsMiscellaneousTransfers

Total governmental activities

Business-type activitiesMiscellaneousTiansfers

Total business-type activities

Total pnmary government

S (15,838,901) S (15,441,035) $ (16,964,221) $ (17,845,403) $ (14,514,098)348.505_____328,914_____374,497 1,305,019 1,593,410

S (15,490,396) S (15,112,121) S (16,589,724) S (16,540,384) S (12,920,688)

S

5,360,058

534,612

15,417,467

$

7,335,6811,223,540

968,172

80,52035,442

180,653737

(301,948)

34,403301,948336,351

15,753,818

$

5,521,2701,031,921

$

7,985,127 S1,899,131

976,889

90,1384,909

147,539-

38,49717,695,421

24,091(38,497)(14,406)

17,681,015 $

8,281,9902,025,7185,432,1641,036,188

835,020

85,8536,494

305,611-

(53,714)17,955,324

53,71453,714

18,009,038

$2,155,6745,586,2371,029,514

19,081,232

$

8,621,790

936,532

83,46113,450

654,574--

--

19,081,232

S

910,323

79,947

779,944

$

9,167,5902,146,9565,469,7861,017,082

3,169

--

19,574,797

--

19,574,797

Change in Net AssetsGovernmental activitiesBusiness-type activities

Total pnmary government

$ (421,434) S 2,254,386 $ 991,103 S 1,235,829 $ 5,060,699684.856 314,508 428,211 1,305,019 1,593,410

$ 263,422 S 2,568,894 S 1,419,314 $ 2,540,848 S 6,654,109

(1) The increase in 2005 public safety expenses fiom the prior period was caused by a substantial increase in fire manpower costs incurred topiovide fire piotection services to the Veterans Administration campus under a new contract

(2) The inciease in 2004 public works levenues and expenses fiom the prior period was caused by accounting for the central gaiage functionin the General Fund in 2004 instead of as an internal service fund as was true in prior periods

(3) The increases in 2004 and 2007 capital grants and contributions from the prior period were caused by the receipt of substantial grantsfrom the State of Kansas and Leavenworth County for road impiovements

(4) The increase in 2004 hanchise taxes from the prior period was caused by the implementation of significant increases in the tax rates forgas, electric and telephone fianchises

86


87

City of Leaven-worth, KansasFund Balances of Governmental Funds

Last Ten Fiscal Years(modified accrual basis of accounting)

General FundReservedUnreserved

Total general fund

All Other Governmental FundsReservedUnreserved, reported in:

Special revenue fundsCapital projects funds (1)Debt service funds

Total all other governmental funds

1998 1999 2000

$ 60,418 S 33,760 $ 21,0961.189.663 1,257,069 1,491,807

$ 1,250,081 $ 1,290,829 $ 1,512,903

$ 1,001,308 $ 3,992,309 S 2,288,522

2,265,910 2,349,877 2,882,252(1,930,707) (5,306,252) (10,554,666)

______570_____13,044_____29,332$ 1,337,081 S 1,048,978 $ (5,354,560)

(1) The deficit unreserved fund balances in the capital projects fund result from the recognition of bond anticipa-tion notes as a fund liability since all legal steps and the ability to consummate refinancing had not been met.

Fiscal Year2001 2002 2003 2004 2005 2006 2007

$ 14,864 $ 7,990 $ 7,635 $ 29,353 $ 9,007 $ 27,319 $ 65,5342,648,060 2.131.260 1,553.261 2.163,605 2.756.068 3,397,067 3.705.627

S 2.662.924 S 2,139,250 $ 1,560.896 $ 2,192,958 S 2,765,075 $ 3.424,386 S 3.771,161

$ 1,513,734 $ 2,721,104 $ 2,932,082 $ 992,413 $ 1,996,622 $ 918,331 $ 1,598,989

4,361,161 3,968,337 3,309,399 2,799,445 1,837,331 2,336,612 2,965,968(2,973,799) (14,305) (1,888,625) (882,418) 152,889 133,179 3,575,315

320.758____670.091____648.162____743,251____568,866____426,404____254,675S 3,221,854 S 7,345,227 $ 5,001,018 S 3,652,691 $ 4,555,708 $ 3,814,526 $ 8,394,947

89

City ofLeavenworth, KansasChanges in Fund Balances of Governmental Funds


Revenues

TaxesIntergovernmentalLicenses and permitsCharges for servicesFines and forfeituresInvestment earningsOther revenuesTotal revenues

Expenditures

General governmentPublic safetyPublic worksCulture and recreationHousing and urban redevelopmentCapital outlayDebt service

PrincipalInterest

Total expenditures

Excess of revenues over (under)expenditures

Other Financing Sources (Uses)

Bonds issuedRefunding bonds issuedBond anticipation notes issuedCapital leasesSale of capital assetsPayments to escrow agentTransfers inTransfers outTotal other fmancing sources (uses)


Debt service as a percentage ofnoncapital expenditures

1998 1999 2000

$ 12,114,886 $ 12,722,292 $ 13,382,0204,388,901 4,148,134 4,388,906

279,098 361,705 305,3071,028,741 1,050,444 1,153,869

956,070 883,249 759,175431,883 556,822 949,599184,616 159,619 615,892

19,384,195 19,882,265 21,554,768

2,725,531 2,562,090 1,890,1416,430,657 6,768,790 7,389,9391,970,310 2,070,818 2,136,4221,163,583 1,322,283 1,422,5921,721,948 1,510,030 1,765,6363,288,880 6,167,545 9,675,740

4,325,529 3,395,197 4,718,078999,113 925,378 871,130

22,625,551 24,722,131 29,869,678

(3,241,356) (4,839,866) (8,314,910)

2,125,000 971,000 2,205,000

3,533,000

175,104 289,929

2,116,104 3,726,110 3,729,676(2.100,462) (3,927.528) (3.801.230)2.315,746 4.592,511 2,133.446

S (925.610) $ (247,355) S (6.181.464)

27.5% 23.3% 27.7%

90

Fiscal Year2001 2002 2003 2004 2005 2006 2007

$ 15,571,058 $ 14,575,915 $ 15,782,105 $ 17,716,880 $ 17,933,007 $ 18,615,349 $ 18,999,0014,217,461 4,383,513 4,203,198 5,083,803 3,909,915 3,545,613 3,632,276

327,430 359,988 476,196 586,980 527,553 531,983 435,0251,359,150 1,400,281 1,395,731 2,096,031 3,090,801 2,786,286 2,723,5511,066,957 1,143,707 968,552 904,031 1,143,927 1,209,261 1,071,822

701,436 308,765 194,293 178,371 329,482 724,375 830,294636,390 184,627 253,327 281,293 202,732 214,767 315,380

23,879,882 22,356,796 23,273,402 26,847,389 27,137,417 27,627,634 28,007,349

2,018,959 2,076,386 2,528,289 2,861,869 2,894,791 2,883,680 3,121,8508,120,387 8,466,960 8,567,322 8,918,650 9,894,743 10,395,531 10,019,9642,168,846 2,172,285 1,849,544 2,997,078 3,214,075 3,505,401 3,507,5291,566,873 1,596,806 1,749,401 1,737,654 1,912,708 1,989,408 2,052,1951,991,681 2,288,328 2,693,281 2,735,746 2,590,039 2,089,383 2,148,6644,787,860 4,765,859 5,057,933 4,729,921 3,223,693 2,702,015 2,189,180

2,266,563 8,389,638 3,667,426 3,668,430 3,496,040 4,406,747 2,380,0001,468.718 2,032,759 1.552.229 1,258.121 1.092.909 1.077.340____956,018

24,389.887 31.789,021 27.665,425 28,907,469 28,318,998 29,049.505 26,375,400

(510,005) (9,432,225) (4,392,023) (2,060,080) (1,181,581) (1,421,871) 1,631,949

9,547,000 12,315,000 1,165,000 985,000 2,625,000 1,340,000 1,530,0003,205,205 1,301,207 1,080,000 500,000

655,000 - - . . . 1,480,000217,240 158,977 - - 285,247

67,664 - - - 85,000(3,156,639) (434,370) (1,075,000) (495,000)2,570,114 3,892,946 4,110,365 4,934,221 4,524,279 3,784,498 4,265,690

(2.651.904) (4.042.859) (4,028.145) (4.739.383) (4.577.564) (3.784.498) (4,265.690)10,236,440 13.031.924 1.469,460 1,343.815 2.656,715 1.340.000 3.295,247

S 9.726,435 $ 3,599,699 $ (2.922,563) $ (716,265) S 1,475,134 S (81,871) S 4,927,196

19.1% 38.6% 23.1% 20.4% 18.3% 20.8% 13.8%

91

City of Leavenworth, KansasTax Revenues of Governmental Funds by Source


FiscalYear

1998199920002001200220032004200520062007

Property Tax

$ 4,872,0145,340,0545,775,1776,663,9376,745,1137,335,6807,985,1278,281,9908,621,7909,167,590

IDPro

$

Taxicrementiperty Tax

145,716155,124165,842174,197175,795174,490168,796

---

Sa

$

lies Tax (1)

4,928,2994,984,6125,185,9706,349,5935,202,5495,157,3765,521,2705,432,1645,586,2375,469,786

COB1

$

npensatingJse Tax

205,486267,486258,975264,742277,977400,455628,767653,637744,886725,640

Change 1998-2007 00 ^50/0(5.270 11.0% 253.1%

(1) Implementation ofGASB Statement 33 resulted in the recognition of an additional $994,999 ofsales tax revenues recorded as receivables in 2001. The Statement required the recording ofsales tax revenues at the time of the underlying transaction.

92

Tax SpecialIncrement Franchise Motor Assessment OtherSales Tax_____Tax____Vehicle Tax____Tax______Tax______Total

$ - S 927,697 $ 851,481 S 162,886 $ 21,307 $ 12,114,885923,481 836,864 182,072 32,599 12,722,292

1,002,887 814,856 157,582 20,731 13,382,0201,098,523 872,763 123,352 23,951 15,571,058

58,435 1,076,666 904,161 105,155 30,064 14,575,915162,349 1,223,540 968,172 324,600 35,443 15,782,105179,326 1,899,131 1,031,921 297,633 4,909 17,716,880181,383 2,025,718 1,036,188 315,433 6,494 17,933,007191,646 2,155,674 1,029,514 272,152 13,450 18,615,349184,683 2,146,956 1,017,082 284,095 3,169 18,999,001

131.4% 19.4% 74.4% (85.1%) 56.8%

93

City ofLeavenworth, KansasAssessed Value and Estimated Actual Value of Taxable Property

Last Ten Fiscal Years

FiscalYear

EndedDecember 31

ResidentialProperty

Real PropertyCommercial

Property TotalPersonalProperty

1998199920002001200220032004200520062007

NANANANANANANANA

114,378,605 $122,445,583

NANANANANANANANA

45,658,39448,878,622

$ 100,245,141103,814,057107,279,163113,377,183121,006,493125,487,888137,425,121146,532,015160,036,999171,324,205

$ 11,015,79111,287,29811,791,52612,439,91313,622,87312,879,38114,521,86714,394,33014,048,91214,604,867

Source: Leavenworth County Clerk

Note: Residential and commercial real property is estimated by city management based upon proportional dataprovided by the County Clerk. Data for tax exempt property is unavailable.

94

StateAssessedUtilities

S 8,807,4878,212,3158,289,2098,659,3149,397,5709,246,3069,413,2029,934,571

10,383,2699,780,603

Less:Tax Exempt

Real Property

NANANANANANANANANANA

Total TaxableAssessed

Value

$ 120,068,419123,313,670127,359,898134,476,410144,026,936147,613,575161,360,190170,860,916184,469,180195,709,675

TotalDirect

Tax Rate

$ 47.40748.41451.18354.25954.26455.07554.53454.31652.24552.245

EstimatedActual

TaxableValue

$ 808,779,767837,830,832864,989,498908,593,602962,346,388999,078,788

1,096,734,7051,165,146,6501,266,340,1071,266,340,107

AssessedValue as a

Percentage ofActual Value

14.8 %14.714.714.815.014.814.714.714.615.5

95

City ofLeavenworth, KansasProperty Tax Rates

Direct and Overlapping GovernmentsLast Ten Fiscal Years

FiscalYear

1998199920002001200220032004200520062007

Ci)

OperatingMillage

34.56434.41038.09440.77340.03342.11343.50044.48243.19643.290

ty of LeavenworDebt

ServiceMillage

12.84314.00413.08913.48614.23112.96211.0349.8349.0498.888

thTotalCity

Millage

47.40748.41451.18354.25954.26455.07554.53454.31652.24552.178

i

OperatingMillage

27.64625.39132.12432.03140.42038.17438.68137.66733.98926.509

OverlappingLeavenworth

DebtServiceMillage

0.8562.3360.0000.0000.7541.9632.3411.2011.9621.672

Source: Leavenworth County Clerk

96

RatesCounty

TotalCountyMillage

28.50227.72732.12432.03141.17440.13741.02238.86835.95128.181

OperatingMillage

36.23935.07437.20043.36243.46443.17441.17742.92144.95844.692

School DistrictDebt

ServiceMillage

2.81511.17110.3358.8147.6307.0597.1136.1115.8366.089

TotalSchoolMillage

39.05446.24547.53552.17651.09450.23348.29049.03250.79450.781

SpecialDistricts

1.5001.5001.5001.5001.5001.5001.5001.5001.5001.500

TotalDirect &

OverlappingRates

116.463123.886132.342139.966148.032146.945145.346143.716140.490132.640

97

City ofLeavenworth, KansasPrincipal Property Taxpayers

Current Year and Nine Years Ago

Taxpayer

Corrections Corporation of AmericaWestar EnergyHallmark CardsSouthwestern Bell TelephoneDevelopment, Inc.Greenamyre RentalsThe Home DepotKansas Gas ServiceWal-MartSelect ProductsLeaven-worth Plaza

2007Percentage of

Taxable Total TaxableAssessed Assessed

Value Rank Value

S

3,873,319

2,226,166

1,112,740

6,193,9254,394,390

2,898,588

1,513,0241,476,6501,316,9261,173,451

12345678910

3.2 %2.22.01.51.10.80.80.70.60.6

TaxableAssessed

Value

S 3,682,76811,056,1993,243,3387,277,543

1998

Rank

3142

Percentage ofTotal Taxable

AssessedValue

3.1 %9.22.76.1

1,351,025220,639

1,258,3940.21.0

S 26,179,179 13.4 % S 28,089,906 23.4 %

Source: Leaven-worth County Clerk

98

City of Leaven-worth, KansasProperty Tax Levies and Collections


FiscalYear

1998199920002001200220032004200520062007

Total TaxLevy For

Fiscal Year

S 5,607,0265,962,4226,523,2817,289,2087,633,7348,120,9728,754,4379,236,8549,589,814

10,235,584

Collected'Fiscal Year

Amount

55,343,1005,717,1336,319,7897,124,7347,360,2927,872,8918,621,8248,959,5929,344,6589,955,759

within theof the Lew

Percentageof Levy

95.3 %95.996.997.796.496.998.597.097.497.3

Collections inSubsequent

Years

S 158,278189,967142,033292,102191,584162,482187,476150,21426,108

-

Total Colled

Amount

55,501,3785,907,1006,461,8227,416,8367,551,8768,035,3738,809,3009,109,8069,370,7669,955,759

:ions to DatePercentage

of Lew

98.1 %99.199.1

101.898.998.9

100.698.697.797.3

Source: Leavenworth County Treasurer

Note: Data for abated taxes in subsequent years by levy year is unavailable and, therefore, total collections as a percentageof levy exceed 100% in some years.

99

City ofLeavenworth, KansasRatios of Outstanding Debt by Type


Governmental Activities

FiscalYear

1998199920002001200220032004200520062007

GeneralObligation

Debt

$17,188,00021,111,00028,239,00026,485,00027,705,00027,120,00024,320,00022,080,00019,270,00018,900,000

CapitalLeases

$220,454125,25025,623

-217,240307,787156,747

-285,247

Business-TypeActivitiesGeneral

ObligationDebt

2,200,0002,200,0002,200,0002,950,0002,890,0002,365,0004,570,0008,120,0007,855,000

TotalPrimary

Government

$17,188,00023,531,45430,564,25028,710,62330,655,00030,227,24026,992,78726,806,74727,390,00027,040,247

Percentageof

PersonalIncome (1)

2.6 %3.54.64.24.34.23.63.53.53.3

PerCapita (1)

$ 436601863809859852765761778773

Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements.

(1) See the schedule of Demographic and Economic Statistics on page 106 for personal income and population data

100

City of Leaven-worth, KansasRatios of General Bonded Debt Outstanding


FiscalYear

1998199920002001200220032004200520062007

GeneralObligation

Debt

S 17,188,00021,111,00028,239,00026,485,00027,705,00027,120,00024,320,00022,080,00019,270,00018,900,000

Less: AmountsAvailable inDebt Service

Fund

57013,04429,332

320,7581,487,5131,460,3791,539,5311,365,146

426,404254,675

Total

17,187,43021,097,95628,209,66826,164,24226,217,48725,659,62122,780,46920,714,85418,843,59618,645,325

Percentage ofEstimated

Actual TaxableValue of

Property (1)

2 12 53 3292 72 62 11 81 514

%

Note Details regarding the city's outstanding debt can be found in the notes to the financial statements

(1) See the schedule of Assessed Value and Estimated Actual Value of Taxable Property for property value data

(2) See the schedule of Demographic and Economic Statistics on page 106 for population data

101

City of Leavenworth, KansasDirect and Overlapping Governmental Activities Debt

As of December 31,2007

Governmental Unit

EstimatedDebt Percentage

Outstanding Applicable (1)

EstimatedShare of

Direct andOverlapping

Debt

Debt repaid with property taxes

School District #453Leavenworth County

Other debt

School District #453 (2)

Subtotal, overlapping debt

City direct debt

Total direct and overlapping debt

$ 13,905,0003,760,000

4,310,550

97.1 % $ 13,497,02536.8 1,383,246

86.2 3,713,703

18,593,974

18,900,000

$ 37,493,974

Source: Debt outstanding data and assessed value data used to estimate applicable percentagesprovided by the Leavenworth County Clerk.

Notes: Overlapping governments are those that coincide, at least m part, with the geographicboundaries of the city. This schedule estimates the portion of outstanding debt of those overlappinggovernments that is borne by the residents and businesses of the city. This process recognizes that,when considering the city's ability to issue and repay long-term debt, the entire debt burden borne bythe residents and businesses should be taken into account. However, this does not imply that everytaxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government.

(1) The percentage of overlapping debt applicable is estimated using taxable assessed property values,Applicable percentages were estimated by determining the portion of another governmental unit'staxable assessed value that is within the city's boundaries and dividing it by each unit's total taxableassessed value.

(2) A portion of Unified School District 453's overlapping debt will be paid by the State of Kansaspursuant to current percentages for Bond and Interest Fund State Aid Payments. The currentpercentage for reimbursement for the Unified School District 453 is 30% for bonds issued after July1,2002.

102


103

City ofLeavenworth, KansasLegal Debt Margin Information


1998 1999 2000

Debt Limit

Total net debt applicable to limit

Legal debt margin

Total net debt applicable to the limitas a percentage of debt limit

$ 42,707,256 $ 43,915,205 $ 45,192,789

6,197,194 6.300.282 13,671,822

$ 36,510,062 $ 37,614,923 $ 31,520,967

14 5% 14 3% 30 3%

Note According to state statute, the city's outstanding general obligation debt should not exceed 30% of totaladjusted equalized assessed valuation, which is the total of property assessed valuation and motor vehiclevaluation

104

Fiscal Year2001 2002 2003 2004 2005 2006 2007

$ 47,114,599 $ 50,154,260 $ 51,212,002 $ 55,512,597 $ 58,805,063 $ 64,387,542 S 68,435,717

10.472.005 17.273.211 16,414.323 15.930,811 15,388,144 14.969.146 15.442.547

$ 36.642,594 S 32,881,049 S 34,797.679 S 39,581,786 S 43,416.919 S 49,418,396 S 52.993,170

22.2% 34.4% 32.1% 28.7% 26.2% 23.2% 22.6%

Legal Debt Margin Calculation for Fiscal Year 2007

Adjusted equalized assessed valuation $228,119,057

Debt limit (30% of total equalized assessed value) 68,435,717

Debt applicable to limit 15.442,547

Legal debt manmi $ 52,993,170

105

City of Leaven-worth, KansasDemographic and Economic Statistics


FiscalYear

1998199920002001200220032004200520062007

Population (1)

39,43139,12335,42035,47335,68035,47335,28535,21335,21334,993

PersonalIncome

Per CapitaIncome (2)

$650,421,125681,294,236665,364,700689,630,030710,594,668719,978,308743,328,559767,845,456791,671,522810,429,363

16,49517,41418,78519,44119,91620,29721,06621,80622,48223,160

School Enrollment (3)Public

4,2654,2714,3384,2534,3724,2524,1704,1474,1664,201

Private

768749703678605553528528521439

Total

5,0335,0205,0414,9314,9774,8054,6984,6754,6874,640

(1) Kansas Statistical Abstract

(2) U.S. Bureau of Economic Analysis, REIS; 2006 and 2007 estimated by City management

(3) Kansas Department of Education

(4) U.S. Department of Labor, Bureau of Labor Statistics

106

CityofLeavenworth, KansasPrincipal Employers

Current Year and Nine Years Ago

2007 1998

Taxpayer

Percentage of Percentage ofTotal City Total City

Employees Rank Employment Employees Rank Employment

Fort Leavenworth - MilitaryFort Leavenworth - CivilianU.S.D. 453Hallmark Cards, Inc.Veterans AdministrationNorthrop GrummanLeavenworth Federal PenitentiaryCubic Defense Applications GroupLeavenworth CountyGushing Memorial HospitalCapital ElectricSt. John Hospital

3,144 1 17.3 %2,279 2 12.5

829 3 4.6647 4 3.6600 5 3.3589 6 3.2550 7 3.0380 8 2.1370 9 2.0350 10 1.9326292

4,005 1 22.0 %2,607 2 14.3

800 5 4.4840 4 4.6

1,143 3 6.3

560 6 3.1

342 7 1.9300 9 1.6326 8 1.8280 10 _1.5__

10,356 53.5 % 11,203 61.5%

Source: Kansas Department of Human Resources

107

City ofLeavenworth, KansasFull-time Equivalent City Government Employees by Function


Function

General governmentPublic safety

PoliceFire

Public worksCulture and recreationHousing and urban redevelopmentSewerRefuse

Total

1998 1999 2000

25 26 26

77493233

81813

85493230

81813

85493329

81813

255 261 261

108

Full-time Equivalent Employees as of December 312001 2002 2003 2004 2005 2006 2007

26 27 26 27 27 28 28

85493329

71813

89513429

71813

88513333

91813

88513133

92013

89573234

92013

885732337

2013

91573233

72013

260 268 271 272 281 278 281

109

City of Leaven-worth, KansasOperating Indicators by Function


Function/Program

Public safetyPolice

Physical arrestsTraffic violationsParking violations

FireCalls answeredInspections conducted

Housing and urban redevelopmentCertificates/vouchers for low-income

rental assistanceSewer

Daily average treatment (thousands of gallons)Refuse

Refuse disposed (tons)

1998 1999 2000

3,719 3,290 3,25512,247 10,750 8.7682,439 903 939

736 736 9071,352 1.352 1,423

254 254 254

3,222 3,341 3,121

11,705 11,705 11,600

Sources: Various city departments

Note: No operating indicators are available for the general government, public works orculture/recreation functions.

110

Fiscal Year2001 2002 2003 2004 2005 2006 2007

3,026 3,226 2,698 2,520 3,263 3,191 2,94512,160 11,638 7,742 7,062 10,278 10,313 7,963

389 972 822 808 809 630 588

907 831 831 1,068 1,121 1,676 1,9571,423 915 915 900 900 917 901

254 254 339 339 339 339 339

4,118 3,350 3,166 3,180 3,548 3,039 3,757

12,649 12,232 12,393 12,877 12,710 12,379 12,001

111

City of Leaver-worth, KansasCapital Asset Statistics by Function


Function/Program

Public safetyPolice

StationsFire

StationsPublic works

Miles of street:ImprovedUnimprovedControlled intersections

Culture and recreationCommunity centersParksPark acreageSwimming poolsTennis courtsBaseball fields

Housing and urban redevelopmentElderly high-rise occupancy (units)

SewerSanitary sewer (miles)Treatment plantsTreatment capacity (thousands of gallons)

1998 1999 2000

1 1 1

3 3 3

151.7 151.7 151.70.4 0.4 0.441 41 41

1 1 121 21 21

424 424 4242 2 2

11 11 119 9 9

105 105 105

130 130 1301 1 1

6,880 6,880 6,880

Sources: Various city departments

Note: No capital asset indicators are available for the general government or refuse functions.

112

Fiscal Year2001 2002 2003 2004 2005 2006 2007

1 1 1 1 1 1 1

3 3 3 3 3 3 3

151.7 151.7 151.7 151.7 151.7 151.7 151.70.4 0.4 0.4 0.4 0.4 0.4 0.441 41 41 41 41 41 41

1 1 1 1 1 1 121 21 21 21 21 21 21

424 424 424 424 424 424 4242 2 2 2 2 2 2

11 11 11 11 8 8 89 9 9 9 9 9 9

105 105 105 105 105 105 105

130 130 130 130 130 130 1301 1 1 1 1 1 1

6,880 6,880 6,880 6,880 6,880 6,880 6,880

113


114

Single Audit of

Federal Financial Assistance


115


Schedule of Expenditures of Federal Awards

Year Ended December 31, 2007(With Unaudited Cumulative Totals from Inception of the Project)

Federal Grantor/Program Title

Catalog ofFederal Domestic

AssistanceNumber

U.S. Department of Housing and Urban Development

Low-Income Housing Assistance ProgramSection 8 - Housing Choice VouchersSection 8 - Housing Choice Vouchers

Community Development Block GrantCommunity Development Block Grant:2003 Community Development Block Grant-Entitlement2004 Community Development Block Grant-Entitlement2005 Community Development Block Grant-Entitlement2006 Community Development Block Grant-Entitlement2007 Community Development Block Grant-Entitlement

Homeless GrantPassed through the Kansas Housing Resources Corporation:

2006 Emergency Shelter Grant2007 Emergency Shelter Grant

Community Planning and DevelopmentShelter Plus Care

Low-Income Housing Assistance ProgramPublic HousingCapital Funds ProgramCapital Funds ProgramCapital Funds ProgramCapital Funds Program

Total U.S. Department of Housing and Urban Development

14.87114.871

14.21814.21814.21814.21814.218

14.23114.231

14.238

14.85014.87214.87214.87214.872

116

Reported Expenditures

Pass-ThroughGrantor'sNumber

$ 1,541,265

S-06-DC-20-001S-07-DC-20-001

KS01C607004

KS16P06850104KS16P06850105KS16P06850106KS16P06850107

$ 6.405,294

CumulativeAwards Through

December 31,2007 (Unaudited)

1,388,6252,929,890

444,000435,000411,756370,330369,552

2,030,638

36,94736,95073,897

746,400

160,746124,808120,320106,432112,163624,469

2006 (Unaudited)

$ 1,312,934 $

1,312,934

319,020339,502270,749

997,011

115,456

S 2,431,881 $

Cumulative 1Through '

December 31, D

-

67,740 *-

6,480-

6,480

-

---

115.456

'otal for theSêar endedecember 31,

2007

228,331933,525

1,161,856

15,51267,712

214,98560..056

358,265

30,4678,670

39,137

2,889

160,7464,650

10,824--

176,2201.738.367

CumulativeThrough

December 31,2007

$ 1,541,265933,525

2,474,790

319,020355,014338,461282,725

60,0561,355,276

36,9478,670

45,617

2,889

160,746120,106

10,824--

291,676$ 4,170,248

(continued)

117


Schedule of Expenditures of Federal Awards(Continued)

Year Ended December 31, 2007(With Unaudited Cumulative Totals from Inception of the Project)

Federal Grantor/Program Title

Catalog ofFederal Domestic

AssistanceNumber

U.S Department of the InteriorPassed through the Kansas State Historical Society:Historic Preservation FundHistoric Preservation Fund

15.90415.904

U.S. Department of JusticePassed through the Kansas Bureau of Investigation:High Intensity Drug Trafficking Area Grant

Bulletproof Vest Partnership ProgramEdward Byme Memorial Justice Assistance Grant ProgramPassed through tke Kansas Governor's Office:

Edward Byme Memorial Justice Assistance Grant Program

07.99916.60716.738

16.738

U.S. Department of TransportationPassed through the Kansas Department of Transportation:Transportation Enhancement ProgramOccupant Protection Traffic Safety (STEP)Occupant Protection Traffic Safety (STEP)Highway Safety Project (Checkpoint)Highway Safety Project (Checkpoint)

20.21920.60020.60020.60020.600

U.S. Environmental Protection AgencyBrownfields Assessment and Cleanup Grant

Department of Homeland SecurityPassed through Kansas Department of Emergency Management-Disaster Grants - Public Assistance

Total expenditures of federal awards

* Award amended

See accompanying notes to schedule of expenditures of federal awards.

66.818

97.036

118

Reported Expenditures

Pass-ThroughGrantor'sNumber

20-06-21519-00620-06-21519-007

I7PMWP566

2006DJBX0665

08-JAG-31

TEA-T020(101)OP-1008-07OP-1008-08AL-9100-07AL-9100-08

BF-98762801-0

CumulativeAwards Through


$

917,214

100,000

2,035,766

S

3,0001,6504,650

23,08532,43121,362

12,70089,578

893,3496,5007,0005,0465,319

9.552,502

18,70020,773

$ 3,470.650 $ 2,891,189

CumulativeThrough


$

39,473

674

674

20,879

977,743

Total for theYear ended

December 31,2007

$ 3,0001,6504,650

18,2496,278

587

12,69637,810

5,8201,5105,031

56312,924

39,415

1,058.023

CumulativeThrough

December 31,2007

S 3,0001,6504,650

18,24924,97821,360

12,69677,283

6,4941,5105,031

56313,598

60,294

2,035,766

S 6.361.839

119


Notes to Schedule of Expenditures of Federal Awards

December 31,2007

1. Organization and basis of presentation

Organization

The City of Leaven-worth, Kansas (the City) is the recipient of several federal grants. Grants areaccounted for within Governmental Fund and Enterprise Fund types.

Basis of presentation

Federal award expenditures are presented on a modified accrual basis, whereby expenditures arerecognized in the accounting period in which the liability is incurred, if measurable. For reim-bursement-type grants, only the reimbursable expenditures are shown as federal expenditures.The basis of presentation is the same as that for the basic financial statements; however, expendi-tures are classified in a different manner.

2. Purposes of Federal programs

A brief description of the purpose of each federal program follows:

Low-Income Housing Assistance Program - Section 8 - Housing Choice Vouchers

The purpose of this program is to assist local governments in providing aid to low incomefamilies to obtain decent, safe and sanitary housing through a system of rental subsidies;promote economically-mixed, existing, newly constructed, moderately rehabilitated andsubstantially rehabilitated housing; and upgrade substandard rental properties.

Community Development Block Grant

The purpose of this program is to assist local governments in the development of viableurban communities, decent housing, a suitable living environment and expanded eco-nomic opportunities to be achieved through eligible activities which benefit low andmoderate income persons, aid in the prevention or elimination of slums or blight, or meetother community development needs deemed to pose a serious and immediate threat tothe health or welfare of the community.

Homeless Grant

The purpose of this program is to assist local governments in the delivery of services tohomeless persons and families. Services include rehabilitation and operations of facili-ties, health care, employment and homeless prevention.

120


Notes to Schedule of Expenditures of Federal Awards(Continued)

2. Purposes of Federal programs (continued)

Shelter Plus Care

The purpose of this grant is to provide rental assistance, in connection with supportiveservices funded from sources other than this program, to homeless persons with disabili-ties and their families.

Public Housing

The purpose of this program is to provide decent, safe and sanitary housing and relatedfacilities for eligible low income families and the elderly through an authorized PublicHousing Agency.

Capital Funds Program

The purpose of this program is to improve the physical condition and upgrade the man-agement and operation of existing public housing projects.

Historic Preservation Fund

The purpose of this grant is to assist in the implementation of historic preservation activi-ties that includes survey, planning, developing, acquisitions and National Register nomi-nations. These activities will then aid business and property owners to enhance the his-toric character of a building or district, creating sustainable commercial and residentialdistricts.

High Intensity Drug Trafficking Area Grant (HIDTA)

The purpose of this grant is to reduce the amount of illegal drugs imported, manufacturedand consumed in the State of Kansas through a coordinated strategy involving aggressiveenforcement, prosecution and demand reduction programs.

Bulletproof Vest Partnership Program

The purpose of this program is to save lives of law enforcement officers by helpingstates, units of local government, and tribal governments equip their officers with armorvests.

121



2. Purposes of Federal programs (continued)

Edward Byrne Memorial Justice Assistance Grant Program

The purpose of this program is to make funding available to provide additional personnel,equipment, supplies, contractual support, training, technical assistance, and informationsystems for criminal justice.

Transportation Enhancement Program

The purpose of this program is to assist local governments in the construction and rehab-ilitation of public areas within the local park facilities.

Occupant Protection Traffic Safety

The purpose of this program is to promote highway safety improvement, which includesspecial enforcement programs, such as the use of safety belts.

Highway Safety Project

The purpose of this program is to provide a coordinated national highway safety programto reduce traffic accidents, deaths, injuries and property damage.

Brownfields Assessment and Cleanup Grant

The purpose of this program is to assess real property for which the expansion, redevel-opment, or reuse may be complicated by the presence of or potential presence of a haz-ardous substance, pollutant, or contaminant and provide funding to assist with cleanup ef-forts.

Disaster Grants - Public Assistance

The purpose of this grant is to assist State and local governments in recovering from dis-asters by providing assistance for debris removal, emergency protective measures and therepair, restoration, reconstruction or replacement of public facilities or infrastructuredamaged or destroyed.

122



3. Local government contributions

Local cost sharing is required by certain federal grants. The amount of cost sharing varies witheach program. Only the federal share of expenditures is presented in the schedule of expendi-tures of federal awards.

4. Additional audits

Grantor agencies reserve the right to conduct additional audits of the City's grant programs foreconomy, efficiency and program results which may result in disallowed costs to the City.However, City management does not believe such audits would result in any disallowed coststhat would be material to the City's financial position at December 31, 2007.

123


124

BT Co.B E R B E R l C H T R A H A N a - C O . , P . A .

Ceftifisfl Public Accountants

Report on Internal Control Over Financial Reporting and on Compliance and Other MattersBased on an Audit of Financial Statements Performed in Accordance

With Government Auditing Standards

The Honorable Mayor and City CommissionCity ofLeavenworth, Kansas:

We have audited the basic financial statements of the governmental activities, the business-typeactivities, the discretely presented component unit, each major fund, and the aggregate remainingfund information of the City of Leavenworth, Kansas (the City) as of and for the year endedDecember 31, 2007, and have issued our report thereon dated June 20, 2008. We did not auditthe financial statements of the Leavenworth Public Library, the discretely presented componentunit. Those financial statements were audited by other auditors whose report thereon has beenfurnished to us, and our opinion, insofar as it relates to the amounts included for the Leaven-worth Public Library, is based on the report of the other auditors. We conducted our audit inaccordance with auditing standards generally accepted in the United States of America and thestandards applicable to financial audits contained in Government Auditing Standards, issued bythe Comptroller General of the United States. The financial statements of the LeavenworthPublic Library were not audited in accordance with Government Auditing Standards, and accor-dingly, this report does not extend to that component unit.

Internal Control Over Financial Reportingin planning and performing our audit, we considered the City's internal control over financialreporting as a basis for designing our auditing procedures for the purpose of expressing ouropinions on the financial statements, but not for the purpose of expressing an opinion on theeffectiveness of the City's internal control over financial reporting. Accordingly, we do notexpress an opinion on the effectiveness of the City's internal control over financial reporting.

A control deficiency exists when the design or operation of a control does not allow managementor employees, in the normal course of performing their assigned functions, to prevent or detectmisstatements on a timely basis. A significant deficiency is a control deficiency, or combinationof control deficiencies, that adversely affects the City's ability to initiate, authorize, record,process, or report financial data reliably in accordance with generally accepted accountingprinciples such that there is more than a remote likelihood that a misstatement of the City'sfinancial statements that is more than inconsequential will not be prevented or detected by theCity's internal control.

RSMMcGladrey NetworkAn Independently Owned Member

125

A material weakness is a significant deficiency, or combination of significant deficiencies, thatresults in more than a remote likelihood that a material misstatement of the financial statementswill not be prevented or detected by the City's internal control.

Our consideration of the internal control over financial reporting was for the limited purposedescribed in the first paragraph of this section and would not necessarily identify all deficienciesin the internal control that might be significant deficiencies or material weaknesses. We did notidentify any deficiencies in internal control over financial reporting that we consider to bematerial weaknesses, as defined above.

Compliance and Other MattersAs part of obtaining reasonable assurance about whether the City's financial statements are freeof 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 andmaterial effect on the determination of financial statement amounts. However, providing anopinion 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 noncom-pliance or other matters that are required to be reported under Government Auditing Standards.

This report is intended solely for the information and use of the City Commission, management,pass-through entities and federal awarding agencies and is not intended to be and should not beused by anyone other than these specified parties.

June 20, 2008

126

BT Co.B E R B E R I C H TRAHAN <-! CO. P.A.

Certified Public Accountants

Report on Compliance with Requirements Applicable to EachMajor Program and on Internal Control Over Compliance

in Accordance With 0MB Circular A-133

The Honorable Mayor and City CommissionCity of Leavenworth, Kansas:

ComplianceWe have audited the compliance of the City of Leavenworth, Kansas (the City) with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB)Circular A-13 3 Compliance Supplement that are applicable to its major federal programs for theyear ended December 31, 2007. The City's major federal programs are identified in the summaryof auditor's results section of the accompanying schedule of findings and questioned costs.Compliance with the requirements of laws, regulations, contracts and grants applicable to itsmajor federal programs is the responsibility of the City's management. Our responsibility is toexpress an opinion on the City's compliance based on our audit.

We conducted our audit of compliance in accordance with auditing standards generally acceptedin the United States of America; the standards applicable to financial audits contained in Gov-ernment Auditing Standards, issued by the Comptroller General of the United States; and 0MBCircular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Thosestandards and 0MB Circular A-133 require that we plan and perform the audit to obtain reason-able assurance about whether noncompliance with the types of compliance requirements referredto above that could have a direct and material effect on a major federal program occurred. Anaudit includes examining, on a test basis, evidence about the City's compliance with thoserequirements and performing such other procedures as we considered necessary in the circums-tances. We believe that our audit provides a reasonable basis for our opinion. Our audit does notprovide a legal determination on the City's compliance with those requirements.

In our opinion, the City complied, in all material respects, with the requirements referred toabove that are applicable to each of its major federal programs for the year ended December 31,2007. However, the results of our auditing procedures disclosed instances of noncompliancewith those requirements, which are required to be reported in accordance with 0MB Circular A-133 and which are described in the accompanying schedule of findings and questioned costs asFindings No. 2007-1 and 2007-2.

RSMMcGladrey NetworkAn Independently Owned Membef

127

Internal Control Over ComplianceThe management of the City is responsible for establishing and maintaining effective internalcontrol over compliance with requirements of laws, regulations, contracts and grants applicableto federal programs. In planning and performing our audit, we considered the City's internalcontrol over compliance with requirements that could have a direct and material effect on amajor federal program in order to determine our auditing procedures for the purpose of express-ing our opinion on compliance, but not for the purpose of expressing an opinion on the effective-ness of internal control over compliance. Accordingly, we do not express an opinion on theeffectiveness of the City's internal control over compliance.

A control deficiency in a City's internal control over compliance exists when the design oroperation of a control does not allow management or employees, in the normal course of per-forming their assigned functions, to prevent or detect noncompliance with a type of compliancerequirement of a federal program on a timely basis. A significant deficiency is a control defi-ciency, or combination of control deficiencies, that adversely affects the City's ability to admi-nister a federal program such that there is more than a remote likelihood that noncompliancewith a type of compliance requirement of a federal program that is more than inconsequentialwill not be prevented or detected by the City's internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, thatresults in more than a remote likelihood that material noncompliance with a type of compliancerequirement of a federal program will not be prevented or detected by the City's internal control.

Our consideration of internal control over compliance was for the limited purpose described inthe first paragraph of this section and would not necessarily identify all deficiencies in the City'sinternal control that might be significant deficiencies or material weaknesses. We did notidentify any deficiencies in the internal control over compliance that we consider to be materialweaknesses, as defined above.

The City's responses to the findings identified in our audit are described in the accompanyingschedule of findings and questioned costs. We did not audit the City's responses and, according-ly, we express no opinion on them.

This report is intended solely for the information and use of the City Commission, management,pass-through entities and federal awarding agencies and is not intended to be and should not beused by anyone other than these specified parties.

û^cl̂ ^^L^ ^ &., PA-June 20, 2008

128


Schedule of Findings and Questioned Costs


Section I - Summary of Independent Auditors' Results

Financial Statements

Type of auditors' report issued

Internal control over financial reporting.

Material weaknesses identified-

Significant deficiencies identified that are not consideredto be material weaknesses:

Noncompliance material to financial statements:

Federal Awards

Internal control over major programs:

Material weaknesses identified:

Significant deficiencies identified that are not consideredto be material weaknesses'

Type of auditors' report issued on compliance for major programs:

Any audit findings that are required to be reported in accordancewith Section 510(a) of Circular A-133:

Identification of major programs.

CFDA Number

14.218

14.871

97.036

Unqualified

None

None reported

None

No

No

Unqualified

Yes

Name of Federal Program

Community DevelopmentBlock Grant - Entitlement

Section 8 - Housing ChoiceVouchers

Disaster Grants - PublicAssistance

(continued)

129


Schedule of Findings and Questioned Costs(Continued)

Dollar threshold used to distinguish between Type A andType B programs: $ 300,000

Auditee qualified as a low-risk auditee: No

Section II - Financial Statement Findings

No matters reported.

Section III - Federal Award Findings and Questioned Costs

Finding No. 2007-1 (Repeated from Prior Year)

Federal Program - Public Assistance Grants (CFDA 97.036), U.S. Department of Homeland Security,passed through the Kansas Department of Emergency Management

Cause and Condition - During cash management testwork for the 2006 audit, we noted that a largeamount of federal funds was received several weeks in advance of corresponding city expenditures. Thefunds were placed in interest bearing accounts. However, the City did not monitor the amount of interestearned to ensure that amounts earned in excess of$ 100 were reported and/or returned to the grantor. Ourfollow-up procedures and testwork in 2007 found that the City did not develop a process to monitorinterest earned on any funds received in advance of corresponding City expenditures. As such, thisfinding is repeated.

Criteria - When Federal funds are received in advance of expenditures, the City is required to monitor theinterest earned on the Federal monies. Interest earned m excess of $ 100 on advances is required to bereported and/or submitted to the grantor.

Effect - Any interest earned in excess of $ 100 was not reported and returned to the grantor as required

Questioned Costs - Unknown

Recommendation - The City should deposit all federal funds received m advance of City expenditures ina non-interest bearing account or develop a process that would monitor the interest earned on Federalfunds and report and/or return the interest owed to the grantor in a timely fashion.

Management's Response/Corrective Action Plan (Unaudited) - All funds received by the City aredeposited into interest bearing accounts The City has systems in place to allocate interest to a federalproject. Subject to the requirements of the grantor, the City will submit interest earnings in excess of$100 to the Federal government on a quarterly basis.

130


Schedule of Findings and Questioned Costs(Continued)

Finding INo. 2007-2 (Repeated from Prior Year)

Federal Program - Disaster Grants - Public Assistance (CFDA 97 036), U S Department of HomelandSecurity, passed through the Kansas Department of Emergency Management

Cause and Condition - During the 2006 audit, we noted that the City did not check the Excluded PartiesList System (EPLS) or have a certification signed for covered transactions to determine whether or not theCity was contracting with a suspended or debarred party For the contract tested in our sample, wechecked the EPLS and the party was not listed Our follow-up procedures in 2007 found that the City hadamended its Purchasing Policies and Procedures to include a requirement that the EPLS be checked priorto the award of any City contract that is equal to or exceeds $ 15,000 However, during testwork in 2007,we noted that the City was not maintaining documentation to support that the new procedures were beingperformed For the contract tested in our sample, we checked the EPLS and the party was not listed

Criteria - For contracts funded by Federal grants, the City is required to check the EPLS or have acertification signed by all parties with whom the City contracts if the goods or services are expected toequal or exceed $ 25,000

Effect - The City could have contracted with and paid federal funds to a suspended or debarred party


Recommendation - The City should maintain documentation to support the City's identification ofcontracts in excess of $ 25,000 for which federal funds are used and that the City has checked the EPLS,which states that the party is not suspended or debarred

Management's Response/Corrective Action Plan (Unaudited) - The City will implement a system toassure documentation supporting compliance with the policy to check the Excluded Parties List System asappropriate

131


Summary Schedule of Prior Audit Findings


Finding No. 2006-1

Federal Program - Section 8 - Housing Choice Vouchers (CFDA No. 14.871), U.S. Department ofHousing and Urban Development

Cause and Condition - During testwork in 2005, we noted that the utility allowance schedules had notbeen updated in at least ten years. Updated allowance schedules were not in effect prior to December 31,2006.

Criteria - A PHA must review its schedule of utility allowances each year, and must revise its allowancefor a utility category if there has been a change of 10 percent or more in the utility rate since the last timethe utility allowance schedule was revised. (Code of Federal Regulation 24 CFR 982.517)

Effect - As utility costs continue to rise, the allowance payments to tenants may not reflect actual costs.

Questioned Costs - None.

Recommendation - m 2005, we recommended that Housing Authority personnel implement standardprocedures to review utility rate data for each utility category on a yearly basis and adjust the allowanceschedules accordingly.

Follow up - The Housing Authority performed extensive research to update the utility allowance sche-dules and began using them in March 2007. This finding will not be repeated for the fiscal year endingDecember 31,2007.

Finding No. 2006-2

Federal Program - Disaster Grants - Public Assistance (CFDA 97.036), U.S. Department of HomelandSecurity, passed through the Kansas Department of Emergency Management

Material Weakness - We noted a lack of control over the tracking of expenditures for the projects fundedunder this grant. Information, such as detail expenditure transactions, source of funds, and progress ofprojects, was not tracked appropriately by respective projects. The City erroneously submitted a vendorcredit memo as documentation of City expenditures. Also, the City erroneously submitted informationfor the same vendor more than once and submitted some of the same expenditures for multiple projectsand was reimbursed by the grantor.

Criteria - According to 0MB Circular A-87, "Cost Principles for State, Local, and mdian Tribal Gov-ernments," the City is required to submit only allowable expenditures for reimbursement as determinedby the project award. These allowable expenditures should be tracked by project.

Effect - The City erroneously requested and received reimbursement for unallowable expenditures.

132


Summary Schedule of Prior Audit Findings(Continued)

Questioned Costs - Questioned costs are $ 12,130 for Project 87, $ 12,525 for Project 108, and $ 32,518for Project 188. Total questioned costs are $ 57,173.

Recommendation - The City should develop a process for tracking information by project. Such informa-tion should include but is not limited to the approved project award, the expenditures that relate to eachproject scope, expenditures that have been submitted for reimbursement under the related project, andthose expenditures that need to be submitted. In addition, there should be more than one City employeeinvolved in the process to provide a level of review of project activity.

Management's Response/Corrective Action Plan (Unaudited) - The City agrees that the costs questionedabove resulted from a lack of appropriate controls over the projects funded under this grant. The fundsidentified as questioned costs will be returned to the grantor immediately.

Effective January 1, 2007, the responsibility for the financial administration of FEMA projects wastransferred from the City Public Works Department to the City Finance Department. The FinanceDepartment understands—and administers daily—financial activities of the City with an emphasis uponappropriate internal control mechanisms for all phases of the financial flow process.

Follow-up - The City issued a check to the State of Kansas for the questioned State and Federal costs onJuly 30, 2007. Our testwork for the year ended December 31, 2007 did not identify instances ofnoncom-pliance; therefore, this finding will not be repeated.

Finding No. 2006-3

Federal Program - Disaster Grants - Public Assistance (CFDA 97.036), U.S. Department of HomelandSecurity, passed through the Kansas Department of Emergency Management

Significant Deficiency - We noted that the City did not check the Excluded Parties List System (EPLS) orhave a certification signed for covered transactions to determine whether or not the City was contractingwith a suspended or debarred party. For the contract tested in our sample, we checked the EPLS and theparty was not listed.

Criteria - For contracts funded by Federal grants, the City is required to check the EPLS or have acertification signed by all parties with whom the City contracts if the goods or services are expected toequal or exceed $ 25,000.

Effect - The City could have contracted with and paid federal funds to a suspended or debarred party.

Questioned Costs - Unknown.

133



Recommendation - The City should develop a process that would include identifying contracts m excessof $ 25,000 for which federal funds are used and checking the EPLS or requiring a certification to besigned by the party providing the goods or services, which states that the party is not suspended ordebarred.

Management's Response/Corrective Action Plan (Unaudited) - The City will amend its PurchasingPolicies and Procedures to include a requirement that the Excluded Parties List System (EPLS) bechecked prior to the award of any City contract that is equal to or exceeds $15,000. This requirement willapply to all City contracts - not merely contracts in support of federal projects.

Follow-up - The City amended its Purchasing Policies and Procedures to include a requirement that theExcluded Parties List System (EPLS) be checked prior to the award of any City contract that is equal to orexceeds $ 15,000. Although the City's policies have been amended and are being followed, the City isnot maintaining documentation to support this requirement. As a result, this finding is repeated for thefiscal year ending December 31, 2007 and is reported as Finding No. 2007-1.

Finding No. 2006-4


Cause and Condition - During cash management testwork, we noted that a large amount of federal fundswas received several weeks in advance of corresponding City expenditures. The funds were placed ininterest bearing accounts However, the City did not monitor the amount of interest earned to ensure thatamounts earned in excess of$ 100 were reported and/or returned to the grantor.

Criteria - When Federal funds are received in advance of expenditures, the City is required to monitorthe interest earned on the Federal monies Interest earned in excess of $ 100 on advances is required to bereported and/or submitted to the grantor.

Effect - Any interest earned in excess of $100 was not reported and returned to the grantor as required.


Recommendation - The City should deposit all federal funds received in advance of City expenditures ina non-interest bearing account or develop a process that would monitor the interest earned on Federalfunds and report and/or return the interest owed to the grantor in a timely fashion

Management's Response/Corrective Action Plan (Unaudited) - All funds received by the City aredeposited into interest bearing accounts Therefore, depositing federal funds received in advance of Cityexpenditures in a non-interest bearing account is not an option

134



It is, therefore, entirely possible that the City will earn interest in excess of $100 on federal funds receivedin advance of City expenditures. The City has the systems in place to allocate interest to the appropriatefederal project. Subject to the requirements of the grantor, the City will submit interest earnings in excessof $100 to the Federal government on a quarterly basis.

Follow-up - The City did not calculate the interest earned on funds received in advance for the prior yearor for the fiscal year ending December 31, 2007. As a result, this finding is repeated as Finding No.2007-2.

Finding 2006-5


Cause and Condition - The City received federal funds to cover administrative costs related to this grant.However, the City was not able to provide documentation, such as timesheets allocating time spentadministering the grant, to support the allocation of administrative costs to this grant.

Criteria - Only necessary costs of requesting, obtaining, and administering Federal disaster assistancesubgrants will be covered by an administrative allowance. No other administrative costs of a subgranteeare eligible. (Code of Federal Regulation 44 CFR 206.228 a(2) ii and a(3) ii). Such costs should besupported by time and effort documentation, such as timesheets.

Effect - The City could have allocated unallowable administrative, costs to this grant.

Questioned Costs - Unknown.

Recommendation - The City should develop a process to maintain supporting documentation that wouldidentify and provide support for the allocation of administrative costs.

Management's Response/Corrective Action Plan (Unaudited) - The City has developed a process bywhich administrative costs related to federal projects are identified. Since most administrative costs arepersonnel-related, this process includes the identification of time devoted to the administration of federalprojects through the payroll process, and the identification of costs related to that time. The process ismanaged by the Finance Department and includes appropriate internal control mechanisms.

Follow-up - The City has developed a process to identify time devoted to the administration of Federalprojects through the payroll process. Our testwork for the year ended December 31, 2007 did not identifyinstances ofnoncompliance; therefore, this finding will not be repeated.

135


136

Documents

COMPREHENSIVE ANNUAL FINANCIAL REPORT - · PDF fileStatement of Cash Flows ... Required Supplementary Information ... Comprehensive Annual Financial Report Year Ended December 31,