Audit 2005 MDA

THE TOWN OF GEORGETOWN P.O. Box 426 Georgetown, Colorado 80444 (303-569-2555) As management of the Town of Georgetown, we offer readers of the Town of Georgetown’s financial statements this narrative overview and analysis of the financial activities of the Town of Georgetown for the fiscal year ended December 31, 2004. Please read the information presented here in conjunction with the audited financial statements beginning on page I and the Town’s financial statements beginning on page 1. These financial statements are the Town’s first year of financial reporting under the major new reporting format in compliance with the Governmental Accounting Standards Board Statement Number 34 (GASB S34). It is a significant change in governmental financial reporting. This change brought about several new financial statements and this narrative titled Management’s Discussion and Analysis. The new statements are listed and described below with additional information in the accompanying text: • Statement of Net Assets – a statement that combines the financial position as of December 31, 2004 for all funds on a government-wide basis. • Statement of Activities – a statement that combines the changes in financial position for the year ended December 31, 2004 for all funds on a government-wide basis. • Statements for Governmental funds – these present the governmental funds such as the general fund, Business Promotions Fund, and other funds. • Statements for Business-type funds – these present proprietary funds, such as the Town’s water and wastewater utility funds. FINANCIAL HIGHLIGHTS • The Town of Georgetown’s financial condition has deteriorated in recent years, but is beginning to rebound. • The assets of the Town of Georgetown exceeded its liabilities at the close of 2004 by $6,210,123 (net assets). Of this amount, $354,948 (unrestricted net assets) may be used to meet the Town’s ongoing obligations to citizens and creditors. • The Town’s total net assets increased by $237,062 or 3.97% in 2004. The Town received $154,903 in capital grants and contributions, most of which was for improvements to the water and wastewater system. • Sales tax collections decreased by $12,087, a 2.69 percent decrease from the prior year. The major factor affecting this decrease was winter month tourism activity. III • At the end of 2004, the Town’s general fund reported a deficit ending fund balance of <$19,328>, which is an increase of $22,892 in comparison with the deficit ending balance of <$42,220> at the end of 2003. The primary reasons for the increase were that the Town is slowly recovering from some incorrect spending decisions and accounting allocations made by a previous Town Administrator which, when corrected by the Town’s auditor, forced the general fund into a deficient fund balance. However, the Town is gradually coming out of that situation and is reporting a positive fund balance in the first half of 2005. • At the end of 2004, the unreserved fund balance for the general fund was $0.00, which is 0% of total general fund expenditures. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Town of Georgetown’s basic financial statements. The Town of Georgetown’s basic financial statements comprise three components: 1) the government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. GOVERNMENT-WIDE FINANCIAL STATEMENTS The government-wide financial statements are designed to provide readers with a broad overview of the Town of Georgetown’s finances, in a manner similar to a private-sector business. The statement of net assets presents information on all the Town of Georgetown’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Town of Georgetown is improving or deteriorating. The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the Town of Georgetown that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the Town of Georgetown include general government, public safety, highways and streets, and parks and recreation. The business-type activities of the Town IVof Georgetown include the Town’s water and wastewater utility functions. The government- wide financial statements can be found on page 1 of this report. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town of Georgetown, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. All of the funds of the Town of Georgetown can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Town of Georgetown maintains four individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, Sales Tax Capital Improvement special revenue fund, the Conservation Trust special revenue fund and the Business Promotions special revenue fund, all of which are considered to be major funds. Individual fund data for each of the special revenue governmental funds is provided in the form of combining statements elsewhere in this report. The Town of Georgetown adopts an annual appropriated budget for all of its funds. To demonstrate compliance, a budgetary comparison statement is provided for each of the major funds and a like schedule are provided for the other funds elsewhere in this report. The basic governmental fund financial statements can be found on page 5 of this report. Proprietary funds. The Town of Georgetown maintains one type of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The Town of Georgetown uses enterprise funds to account for its water and wastewater utility functions. Internal service funds are an accounting Vdevice used to accumulate and allocate costs internally among the Town of Georgetown’s various functions. The Town of Georgetown does not have any internal service funds. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide information on the Town’s Water Enterprise Fund and on the Wastewater Enterprise Fund. The basic proprietary fund financial statements can be found starting on page 7 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the Town of Georgetown’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on pages 11-12 of this report. Notes to the financial statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on page 13 of this report. Other information The combining statements referred to earlier in connection with special revenue governmental funds are presented immediately following the notes to the financial statements. Combining and individual fund statements and schedules can be found on pages 32 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve as a useful indicator of a government’s wide financial position. In the c