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Annual Rpt ending 06/30/05 BOLDT, CARLISLE & SMITH LLC CERTIFIED PUBLIC ACCOUNTANTS PARTNERSHIP . ASSURANCE . INNOVATION WOODBURN URBAN RENEWAL AGENCY ANNUAL FINANCIAL REPORT Year Ended June 30,2005 . www.bcsllc.com SALEM: 480 CHURCH STREET S.E. . SALEM, OR 97301 . PHONE: (503) 585-7751 . FAX: (503) 370-3781 STAYTON: 408 NORTH THIRD AVENUE . STAYTON, OR 97383 . PHONE: (503) 769-2186 . FAX: (503) 769-4312 ALBANY: 1205 9TH AVENUE S.E. . ALBANY, OR 97322 . PHONE: (541) 928-6500 . FAX: (541) 928-6501 . . . . . . : , 1 I [ I ( l I \ I I 1 WOODBURN URBAL RENEWAL AGENCY Kathryn Figley 601 S Settlemier Woodburn OR 97071 Walter Nichols 413 Willow Street Woodburn OR 97071 Richard Bjelland 888 Wilson Street Woodburn OR 97071 Peter McCallum 370 Ironwood Terrace Woodburn OR 97071 Jim Cox 1530 Ranier Way Woodburn OR 97071 Frank Lonergan 245 N 2nd Street Woodburn OR 97071 Elida Sifuentez 860 E Lincoln Street Woodburn OR 97071 BOARD OF DIRECTORS Year Ended June 30, 2005 TERM EXPIRES December 2006 December 2008 December 2008 December 2006 December 2006 December 2006 I December 2008 r , 1 I l I l I WOODBURN URBAN RENEWAL AGENCY TABLE OF CONTENTS Year Ended June 30, 2005 INDEPENDENT AUDITOR'S REPORT ................ .............. .......... .... ...... .... .............. ..... .... ....... ..... MANAGEMENT'S DISCUSSION AND ANALYSIS ..................................................................... BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Assets ..,......,.................,.........,.....,...........................,..........,........................ Statement of Activities...................................................."....................................................... Fund Financial Statements Balance Sheet - Governmental Funds. ......,..... ...... ....... ........................... ........ ... .......... ....... ..... Statement of Revenuest Expenditures and Changes in Fund Balances - Governmental Funds..........................................................................,......................................................... . Reconciliation of the Statement of Revenuest Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities,....,......................................................... Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual- General (Debt Service) Fund....... ........ ..... ..... ..................... ... ..... ........... ......... ................. ....... Notes to Basic Financial Statements .... .,................. ..............,. ...... ... ............... ......... ....... ..... ............ Page A a-c I 2 3 4 5 6 7 -11 DISCLOSURES AND INDEPENDENT AUDITOR'S COMMENTS REQUIRED BY THE MINIMUM STANDARDS FOR AUDITS OF OREGON MUNICIPAL CORPORATIONS ....................................................,......,............,...,....,..,.......,.............................. 12t 13 I I f I t \ I I BOLDT, CARLISLE & SMITH LLC CERTIFIED PUBLIC ACCOUNTANTS PARTNERSHIP . ASSURANCE . INNOVATION INDEPENDENT AUDITOR'S REPORT Agency Officials WOODBURN URBAN RENEWAL AGENCY WOODBURN, Oregon We have audited the accompanying financial statements of the governmental activities and the major fund of WOODBURN URBAN RENEWAL AGENCY, component unit of the City of WOODBURN as of and for the year ended June 30, 2005, which collectively comprise the Agency's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Agency's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and the major fund of WOODBURN URBAN RENEWAL AGENCY, as of June 30, 2005, and the respective changes in financial position thereof and the budgetary comparison for the General (Debt Service) Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. The management's discussion and analysis on pages a through c is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally, of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Boldt, Carlisle & Smith, LLC Certified Public Accountants Salem, Oregon September 16, 2005 By: rt2.~ Q2 ~am,M~ A www.bcsllc.com - . . I . t. SALEM: 480 CHURCH STREET S.E. . SALEM, OR 97301 . PHONE: (503) 585-7751 . FAX: (503) 370-3781 STAYTON: 408 NORTH THIRD AVENUE . STAYTON, OR 97383 . PHONE: (503) 769-2186 . FAX: (503) 769-4312 ALBANY: 1205 9TH AVENUE S.E. . ALBANY, OR 97322 . PHONE: (541) 928-6500 . FAX: (541) 928-6501 i I I \ I l I MANAGEMENT'S DISCUSSION AND ANALYSIS , I I I I I I { I MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the Woodburn Urban Renewal Agency (Agency), we offer readers of the Agency's basic financial statements this narrative overview and analysis of the financial activities of the Agency as of June 30, 2005 and for the fiscal year then ended. We encourage readers to consider the information presented here in conjunction with the Agency's basic fmancial statements in the financial section of this report, OVERVIEW OF THE BASIC FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Agency's basic financial statements. The Agency's basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. Government-wide fmancial statements. The government-wide financial statements are comprised of the Statement of Net Assets and the Statement of Activities. These two statements are designed to provide readers with a broad overview of the Agency's finances utilizing the full accrual method of accounting, in a manner similar to a private- sector business. Under the full accrual method of accounting, transactions are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, assets, liabilities, revenues and expenses are reported in these statements for some items that will only result in cash flows in future fiscal periods (eg. uncollected revenues and accrued but unpaid interest expense). The Statement of Net Assets presents information on all of the Agency's assets and liabilities, including capital assets and long-term liabilities, with the difference betw~en 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 Agency as a whole is improving or deteriorating. The Statement of Activities presents information showing how the Agency's net assets changed during the most recent fiscal year. Fund financial statements. The fund financial statements focus on current available resources and are organized on the basis of funds, each of which is defined as a fiscal and accounting entity with a self-balancing set of accounts established for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. 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 pages. a r FINANCIAL HIGHLIGHTS The Agency's assets exceeded its liabilities at June 30, 2005 by $324,557 (net assets). All of this amount is current assets, and all of the assets are restricted for debt service. The only assets of the Agency are Cash and Investments ($308,247) and Receivables ($16,310). NET ASSETS 2004-05 2003-04 Cash and investments $ 308,247 $ 283,402 Receivables 16.310 11.980 Net Assets Restricted for debt service $ 324.557 $ '. 295.382 Property Taxes comprising 100% of the Agency's revenue are derived from the tax increment in the Agency's boundaries. Expenditures (a repayment of debt to the City of Woodburn) for the year ended June 30, 2005 were 285,947. CHANGES IN NET ASSETS 2004-05 2003-04 Revenue Property taxes levied for debt service $ 315,122 $ 295,382 Expenses General Government 285.947 Increase (decrease) in net assets 29,175 295,382 Net assets - beginning 295.382 Net assets - ending $ 324.557 $ 295.382 b r FINANCIAL ANALYSIS OF FUNDS As of June 30, 2005 the Agency's governmental fund reported a fund balance of $312,089, which is an increase of $26,225 from June 30, 2004. BUDGET ARY HIGHLIGHTS There were no changes between the original and final budget. CAPITAL ASSETS AND DEBT ADMINISTRATION As of June 30, 2005, the Agency owned no capital assets, The Agency did not issue any long-term debt during the year ended June 30, 2005, and it had no long-term debt outstanding as of that date. ECONOMIC FACTORS Oregon's economy continues to lag behind the recovery being experienced by the rest of the nation. W oodbum, however, has avoided some of the severest set backs experienced by the rest of the state. The Agency benefits from its location on 1-5 at highway 214. Transportation and warehouse companies value Woodburn's location for its access to good highways both north/south and east/west. The Woodburn Company Stores, opened in 1999, draw large numbers of customers from those driving 1-5. Growth experienced in 2004-05 (which shows up in the 2006 levy) is expected to be flat in 2006. Regional unemployment is forecast to decline only slightly. FINANCIAL CONTACT The Agency's financial statements are designed to present users (citizens, taxpayers, customers, investors, and creditors) with a general overview of the Agency's finances and to demonstrate the Agency's accountability. If you have questions about the report or need additional financial information, please contact the Agency Finance Director at 270 Montgomery, Woodburn, Oregon. c 1 I I { { { 1 BASIC FINANCIAL STATEMENTS , / I WOODBURN URBAN RENEWAL AGENCY ~ I { I t I ASSETS Cash and investments Receivables NET ASSETS Restricted for debt service STATEMENT OF NET ASSETS June 30, 2005 See notes to basic financial statements 1 Governmental Activities $ 308,247 16,310 $ 324,557 r WOODLAND URBAN RENEWAL AGENCY STATEMENT OF ACTIVITIES Year Ended June 30, 2005 Functions/Pro~rams Governemental activities General government General revenues Property taxes, levied for debt service Change in net assets Net assets - beginning Net assets - ending See notes to basic financial statements 2 Expenses $ 285.947 $ Net (Expense) Revenue and Changes in Net Assets Governmental Activities $ (285,947) 315.122 29,175 295.382 324.557 WOODBURN URBAN RENEWAL AGENCY I l ( { 1 BALANCE SHEET GOVERNMENT AL FUNDS June 30,2005 General (Debt Service) Fund ASSETS Cash and investments Receivables $ 308,247 16.310 TOT AL ASSETS $ 324,557 LIABILITIES Deferred revenue $ 12,468 FUND BALANCE Reserved for debt service TOT AL LIABILITIES AND FUND BALANCE $ FUND BALANCE - RESERVED FOR DEBT SERVICE $ Amounts reported for governmental activities in the Statement of Net Assets are different because: Deferred revenue represents assets that were not not available to pay for current-period expenditures and therefore were not reported in the governmental funds TOT AL NET ASSETS $ See notes to basic financial statements 3 312.089 324,557 312,089 12.468 324.557 WOODBURN URBAN RENEWAL AGENCY ST A TEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year Ended June 30, 2005 General (Debt Service) Fund REVENUES Property taxes $ 312,172 EXPENDITURES Payment to City of Woodburn 285.947 Net change in fund balance Fund balance at beginning of year 26,225 285,864 Fund balance at end of year $ 312,089 See notes to basic financial statements 4 I I I { I WOODBURN URBAN RENEWAL AGENCY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the year ended June 30, 2005 NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the Statement of Activities are different because of the following: Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds as follows: Taxes CHANGE IN NET ASSETS OF GOVERNMENTAL ACTNITIES See notes to basic financial statements 5 $ 26,225 2,950 $ 29.175 WOODBURN URBAN RENEWAL AGENCY ST ATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL (DEBT SERVICE) FUND Year Ended June 30, 2005 Original and Final Budget Actual REVENUES Property taxes Variance $ 611 tOOO $ 312t 172 $ (298t828) EXPENDITURES Payment to City of W oodbum 896.000 Net change in fund balance Fund balance at beginning of year (285tOOO) 285.000 285.947 26t225 285.864 610.053 311t225 864 Fund balance at end of year $ -- $ 312.089 $ 312.089 See notes to basic financial statements 6 , I WOODBURN URBAN RENEWAL AGENCY NOTES TO BASIC FINANCIAL STATEMENTS Year Ended June 30, 2005 1. Summary of Significant Accounting Policies A. Organization The Agency, a component unit of the City of W oodbum, was organized under ORS 457 and is a municipal corporation created by the City of W oodbum to facilitate urban renewal within the boundaries ofthe City. The city council serves as the governing body and is accountable for the fiscal matters of the Agency, B. Urban Renewal Areas Tax Allocation Bonds for urban renewal plan areas are authorized by state law to I) " .. . eliminate and prevent the development or spread of urban blight and deterioration; and 2) encourage needed urban conservation and rehabilitation and provide for redevelopment of blighted or deteriorated areas." Projects are financed in urban renewal plan areas as follows: . The Agency (City Council) selects an urban renewal plan area and defines its boundaries. The County Assessor "freezes" the assessed value of property within the urban renewal area. This is referred to as the "frozen" value. . Any increase in assessed value above the frozen value is called the "incremental value." The tax revenue generated by the tax rate times the incremental value is provided for use in paying the principal and interest on any indebtedness incurred to finance the Urban Renewal Project. . Urban Renewal Tax Increment revenues are used to repay the indebtedness of the Agency. The proceeds of the indebtedness fmance the Agency's activities. As required byORS 457. 1 90(3)(a) , the Agency has included in its current plan the maximum amount of indebtedness that may be issued or incurred under the plan in the amount of $29,300,000, 7 ~ NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 1. Summary of Significant Accounting Policies (continued) C. Basis of Presentation. Measurement Focus. and Basis of Accounting Government-wide Financial Statements The Statement of Net Assets and the Statement of Activities display information about the Agency, including all of its fmancial activities. Governmental activities are financed primarily through property taxes and proceeds from borrowings. The Statement of Activities presents a comparison between direct expenses and program revenues for the Agency's program. The Agency does not allocate indirect expenses. Program revenues include grants and contributions that are restricted to meeting operational requirements. Revenues that are not classified as prograIJl revenues, including property taxes, earnings on investments and the gain on sale of property, are presented as general revenues. Fund Financial Statements The fund financial statements provide information about the Agency's fund. The emphasis of fund financial statements is on major funds, each displayed in a separate column. The single major fund, General (Debt Service) Fund, accounts for general administration of the Agency's urban renewal areas, for acquisition and rehabilitation of blighted and deteriorated areas within the designated urban renewal areas, and repayment of debt incurred for these activities. Measurement Focus and Basis of Accounting Government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the Agency receives value without giving equal value in excpange, include property taxes, grants, entitlements and donations. On the accrual basis of accounting, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. ' The government-wide statements have applied all Financial Accounting Standards Board (F ASB) Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins of the Committee on Accounting Procedures issued on or before November 30, 1989, unless those pronouncements conflict with or contradict Governmental Accounting Standards Board (GASB) pronouncements. 8 I t l t \ ~ l I \ NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 1. Summary of Significant Accounting Policies (continued) C. Basis of Presentation. Measurement Focus. and Basis of Accounting (continued) Governmental fund financial statements are reporting using the current financial resources measurement focus and modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The Agency considers all revenues reported in the governmental funds to be available if they are collected within thirty days after year end. Property taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for flaims and judgments, which are recognized as expenditures to the extent they have been incurred. Capital asset acquisitions are reported as expenditures in the governmental funds and proceeds from general long-term debt are reported as other financing sources. When both restricted and unrestricted net assets are available, unrestricted resources are used only after the restricted resources are depleted. D. Budget Policies and Budgetary Control Generally, Oregon Local Budget Law requires annual budgets be adopted for all funds. The modified accrual basis of accounting is used for all budgets. All annual appropriations lapse at fiscal year end. The Agency begins its budgeting process by appointing Budget Committee members in the fall of each year. Budget recommendations are developed by management through early spring, with the Budget Committee meeting and approving the budget document in late spring. Public notices of the budget hearing are generally published in Mayor Jline and the hearing is held in June. The governing body adopts the budget, makes appropriations, and declares the tax levy no later than June 30. Expenditure appropriations may not be legally overexpended. The resolution authorizing appropriations for each fund sets the level at which expenditures cannot legally exceed appropriations. The governing body established the levels of budgetary control at the personal services, materials and services, capital outlay, operating contingencies, debt service, and all . ' I other reqUIrement levels for all funds. Budget amounts shown in the financial statements have been revised since the original budget amounts were adopted. The governing body must authorize all. appropriation transfers and supplementary budgetary appropriations. E. Cash and Investments Investments are stated at cost which approximates fair value. 9 1. Summary of Significant Accounting Policies (continued) \ \ NOTES TO BASIC FINANCIAL STATEMENTS (Continued) F. Use of Estimates The process of preparing financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the fmancial statements. Accordingly, upon settlement, actual results may differ from estimated amounts. 2. Deposits and Investments The Agency's deposits and investments are held by the City ofW oodburn in pooled deposit and investment accounts that are available for use by all funds and the Agency. The Agency's portion of this pool is displayed on the financial statements as cash and investments. Additionally, several funds hold separate cash and investment accounts. Interest earned on pooled cash and investments is allocated to participating funds based upon their combined cash and investment balances. Investments, including amounts held in pooled cash and investments are stated at fair value. In accordance with Governmental Accounting Standards Board (GASB) Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, investments with a remaining maturity of more than one year, at the time of purchase are stated at fair value. Fair value is determined at the quoted market price, if available; otherwise the fair value is estimated based on the amount at which the investment could be exchanged in a current transaction between willing parties, other than a forced liquidation sale. Investments in the State of Oregon Local Government Investment Pool (LGIP) are stated at fair value. The Oregon State Treasury administers the LGIP. The LGIP is an open-ended, no-load, diversified portfolio offered to any agency, political subdivision or public' corporation of the state who by law is made the custodian of, or has control of, any fund. The LGIP is commingled with the State's short-term funds. To provide regulatory oversight, the Oregon Legislature established the Oregon Short-Term Fund 'Board and LGIP investments are approved by the Oregon Investment Council. The fair value of the Agency's position in the LGIP is the same as the value of the pool shares. Credit risk: Oregon statutes authorize the Agency to invest in obligations of the U.S. Treasury and U.S. agencies, bankers' acceptances, repurchase agreements, commercial paper rated A-I by Standard & Poor's Corporation or P-I by Moody's Commercial Paper Record, and the state treasurer's investment pool. 10 NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 2. Deposits and Investments (continued) As of June 30, 2005, investments were as follows: Investment Carrying Value Fair Value Oregon State Local Government Investment Pool $ 27,633,901 $ 27,633,901 Amount allocable to Agency $ 298,985 $ 298,985 I 'I \ Interest Rate Risk: The Agency does not have a formal policy that limits investment maturities as a means of managing its exposure to fair-value losses arising from increases in interest rates. Concentration of Credit Risk: The Agency does not have a formal policy that places a limit on the amount that may be invested in anyone insurer. Custodial Credit Risk _ Investments: This is the risk that, in the event of the failure of a counterparty, the Agency will not be able to recover the value of its investments that are in the possession of an outside party. Investments, except those in the Local Investment Pool have custodial credit risk because the related securities are uninsured, unregistered and held by the City's brokerage firm, which is the counterparty to those securities. The Agency does not have a policy which limits the amount of investments that can be held by counterparties. Custodial Credit Risk _ Deposits: This is the risk that, in the event of a bank failure, the City's deposits may not be returned. Oregon statute requires collateralization of deposits in excess of amounts insured by the Federal Depository Insurance Corporation. As of June 30, 2005, $1,090,479 of the City's bank balance of$I,553,972 was exposed to custodial credit risk because it was uninsured and uncollateralized. The City's deposits and investments and the amount allocable to the Agency as of June 30, 2005, are as follows: City of Allocable Woodburn to Agency Deposits $ 858,052 $ 9,262 Investments 28.456.259 298.985 Total deposits and investments $ 29.314.311 $ 308.247 11 T Property taxes $ 16.310 \ \ \ \ ! NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 3. Receivables A. The Agency's receivables at June 30, 2005, are shown below: B. Property taxes 1. Collection procedures Taxes are levied on July 1 and are payable in three installments due November 15, February 15 and May 15. Marion County bills and collects property taxes for the Agency. 11. Transactions Balances Net Balances July 1, 2004-05 Adjust- Interest Collec- June 30, 2004 Levy ments (Discounts ) tions 2005 Current $ $ 327,442 $ (5,919) $ (8,025) $ 301,534 $ 11,964 Prior 11.980 (1.237) 37 6.434 4.346 Totals $ 11.980 $ 327.442 $ (7.156) $ (7.988) $ 307.968 $ 16.310 lll. Ensuing year's levy The Agency will levy 100 percent of the amount of its authority under option one of ORS 457.435(2)(a) for the retirement of long-term obligations principal and interest without making a special levy in 2005-06. The tax rate limit of $1 0 per thousand of assessed value imposed by the Oregon Constitution is not expected to affect this levy. 4. Deferred Revenue Resources owned by the Agency, which are measurable, but not available, and therefore, deferred in the funds, consist of the following: Property taxes $ 12.468 12 DISCLOSURES AND INDEPENDENT AUDITOR'S COMMENTS REQUIRED BY THE MINIMUM STANDARDS FOR AUDITS OF OREGON MUNICIPAL CORPORATIONS Oregon Administrative Rules 162-10-050 through 162-10-320 incorporated in the Minimum Standards for Audits of Oregon Municipal Corporations, prescribed by the Secretary of State in cooperation with the Oregon State Board of Accountancy, enumerate the financial statements, schedules, and comments and disclosures required in audit reports. The required statements and schedules are set forth in preceding sections of this report. Required comments and disclosures related to our audit of such statements and schedules are set forth in the following pages. . Accounting and Internal Controls . Collateral . Indebtedness . Budget . Insurance and Fidelity Bonds . Programs Funded from Outside Sources . Investments . Public Contracts and Purchasing BOLDT, CARLISLE & SMITH LLC CERTIFIED PUBLIC ACCOUNTANTS PARTNERSHIP . ASSURANCE . INNOVATION WOODBURN URBAN RENEWAL AGENCY DISCLOSURES AND INDEPENDENT AUDITOR'S COMMENTS REQUIRED BY THE MINIMUM STANDARDS FOR AUDITS OF OREGON MUNICIPAL CORPORATIONS Year Ended June 30, 2005 Accountin~ and Internal Controls I \ The broad objectives of internal accounting control are to provide management with reasonable, but not absolute, assurance that assets are safeguarded from unauthorized use or disposition and that financial records are reliable to permit the preparation of financial statements. The following operative objectives are necessary to achieve the broad objectives: a. Transactions are executed in accordance with management's general or specific authorization. b. Transactions are recorded as necessary (1) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements and (2) to maintain accountability for assets. c. Access to assets is permitted only in accordance with management's authorization. d. The recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. ' There are inherent limitations that should be recognized in considering the potential effectiveness of any system of internal accounting control. Any projection of a current evaluation of internal accounting c<;mtr91 to future periods is subject to the risk that the procedures may become inadequate because of changes in conditions and that the degree of compliance with prescribed procedures may deteriorate. The accounting records and internal controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. Collateral The Agency does not maintain separate cash accounts. Instead, the Agency's cash is pooled with the cash of the City of Woodburn. During the year, the City of Woodburn exceeded insured amounts for one day due to bond proceeds received at Bank of America. 13 .1 al I.: SALEM: 480 CHURCH STREET S.E. . SALEM, OR 97301 . PHONE: (503) 585-7751 . FAX: (503) 370-3781 STAYTON: 408 NORTH THIRD AVENUE . STAYTON, OR 97383 . PHONE: (503) 769-2186 . FAX: (503) 769-4312 ALBANY: 1205 9TH AVENUE S-E. . ALBANY, OR 97322 . PHONE: (541) 928-6500 . FAX: (541) 928-6501 www,bcsllccom r Budflet 1. Preparation and Adoption The budgets for the years ended June 30, 2005 and 2006, were prepared and adopted in compliance with legal requirements. \ \ \ \ \ DISCLOSURES AND INDEPENDENT AUDITOR'S COMMENTS REQUIRED BY THE MINIMUM STANDARDS FOR AUDITS OF OREGON MUNICIPAL CORPORATIONS (Continued) Indebtedness The legal debt limitation has not been exceeded. 2. Execution The budget for the year ended June 30, 2005, was executed in compliance with legal requirements. Insurance and Fidelitv Bonds The Agency does not have separate coverage. Instead the Agency's risks are insured by policies owned by the City of Woodburn. The City's insurance agent has indicated that insurance coverage at June 30,2005, was adequate. Insurance coverage appears to comply with legal requirements. Programs Funded from Outside Sources The Agency did not operate any programs funded wholly or partially by other governmental agencies. Investments Funds of the Agency were invested in compliance with ORS 294.035. Public Contracts and Purchasin~ 1. Awarding of public contracts The Agency did not award public contracts subject to ORS 279. 2. Construction of public improvements The Agency did not construct any public improvements subject to ORS 279. Bold~ Carlisle & Smith, LLC Certified Public Accountants Salem, Oregon September 16, 2005 14 r