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CITY OF HOLCOMB, KANSAS

STATUTORY BASIS FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2010

CITY OF HOLCOMB, KANSAS

STATUTORY BASIS FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2010

TABLE OF CONTENTS

INTRODUCTORY SECTION

Title PageTable of Contents

FINANCIAL SECTION

Independent Auditors’ Repo[t

STATEMENT 1Summary of Cash Receipts, Expenditures and Unencumbered Cash

STATEMENT 2Summary of Expenditures - Actual and Budget

STATEMENT 3Statement of Cash Receipts and Expenditures - Actual and Budget

General FundSpecial Highway FundSpecial Park FundEquipment Reserve FundCapital Improvement Reserve FundHealth Insurance Reserve FundADSAP Fees FundClutter Memorial FundBond and Interest FundWater and Sewer Utility FundWater Depreciation Reserve FundWater Bond and Interest FundSewer Reserve FundCustomer Deposits FundSolid Waste Utility FundStorm Sewer Utility Fund

Notes to Financial Statements

SUPPLEMENTALSCHEDULES

1-2

3

4

5-6789

10111213141516I718192021

22-29

Schedule of Insurance in Force 31Graphs 32-34

LEWIS,HOOPER&DICK oterrified pubflc a¢countanls

INDEPENDENT AUDITORS’REPORT

The City Council MembersCity of Holcomb, Kansas

405 North Sixth Street i EO. Box 699Garden Cit% KS 67846

620-275-9267 1800-627-0636Fax: 620-275-89361 wwwAhd.com

CPAsCharles H Claar, Jr, CPA

Theresa Dasenbrock, CPA, CFEDavid L Hetrick, CPA

Steven D. Josserand, CPADonald R Linville, CPAGary A Schlappe, CPA

Rodney Van Norden, CPA

Lisa L. Axman, CPASue A Bradley, CPA

Susan A Burgardt, CPAShatmon N Euliss, CPA

Tracey Homm, CPA, CSEPKimberly A Roth, CPAKristin J Sekavec, CPALaura G Voran, CPA

Monica J. Wilson, CPA

We have audited the accompanying statutory basis financial statements of the City ofHolcomb, Kansas, as of and for the year ended December 31, 2010, as listed in the table ofcontents. These statutory basis financial statements are the responsibility of the City’smanagement. Our responsibility is to express an opinion on these statutory basis financialstatements based on our audit. The prior year comparative information has been derivedfrom the City’s 2009 financial statements and, in our report dated May 26, 2010, weexpressed an unqualified opinion on the statutory basis financial statements prepared on thebasis of accounting described in Note 1.

We conducted our audit in accordance with auditing standards generally accepted in theUnited States of America, and the Kansas Municipal Audit Guide. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for our opinion.

As described in Note 1, the City prepared these statutory basis financial statements usingaccounting practices prescribed by the State of Kansas to demonstrate compliance with thecash basis and budget laws of the State of Kansas, which practices differ from accountingprinciples generally accepted in the United States of America. The effects on the financialstatements of the variances between these regulatory accounting practices and accountingprinciples generally accepted in the United States of America, although not reasonablydeterminable, are presumed to be material

In our opinion, because of the effects of the matter described in the preceding paragraph, thestatutory basis financial statements referred to in the first paragraph do not present fairly, inconformity with accounting principles generally accepted in the United States of America, thefinancial position of the City of Holcomb, Kansas, as of December 31, 2010, or the changesin its financial position, or where applicable, its cash flows for the year then ended. Further,the City has not presented a management’s discussion and analysis that accountingprinciples generally accepted in the United States has determined is necessary tosupplement, although not required to be part of, the basic financial statements.

In our opinion, the statutory basis financial statements referred to in the first paragraphpresent fairly, in all material respects, the cash and unencumbered cash balances of the Cityof Holcomb, Kansas, as of December 31, 2010, and its cash receipts and expenditures, andbudgetary comparisons, for the year then ended, taken as a whole under the basis ofaccounting described in Note 1.

The City Council MembersCity of Holcomb, KansasPage 2

Our audit was performed for the purpose of forming an opinion on the statutory basisfinancial statements of the City of Holcomb, Kansas, taken as a whole. The accompanyingfinancial information listed as supplemental schedules in the table of contents is presentedfor purposes of additional analysis and is not a required part of the statutory basis financialstatements. Such information has been subjected to the auditing procedures applied in theaudit of the statutory basis financial statements and, in our opinion, is fairly stated, in allmaterial respects, in relation to the statutory basis financial statements taken as a whole onthe basis of accounting described in Note 1.

LEWIS, HOOPER & DICK, LLC

June 8, 2011

STATEMENT1

CITY OF HOLCOMB, KANSASSummary of Cash Receipts, Expenditures and Unencumbered Cash

For the Year Ended December 31, 2010

Unencumbered Receipts Expenditures Unencumbered Add Payables Treasurer’sCash and and Cash and Cash

01/01/10 Transfers Transfers 12/31/10 Encumbrances 12/31/10

$ 341,510 $ 907,359 $ 806,937 $ 442,932 $ 5~ $ 500,219

~pecial Revenue FundsSpecial Highway 44,764 55.562 21,448 78,878 200 79,078Special Park 2,231 2,020 1,053 3~198 - 3,198Equipment Reserve 2!3,473 60,000 104,087 169,386 2,769 172,155Capital Improvement Reserve 275,867 151,914 125,300 302,481 302,481Health Insurance Reserve 37,000 28,000 9,000 9,000ADSAP Fees 2,700 - - 2,700 2.700Clutter Memorial 940 150 1.090

Total Special Revenue 576,975 269,646 280,978 565,643 2.969 568,612

Debt Service FundBond an6 Interest 73.688 213.475 249 162 38,001 38,001

Enterprise FundsWater and Sewer Utility 340,389 506,164 520,327 326,226 9,567 335,793Water Depreciation Reserve 64,189 60,000 2,769 121,420 121,420Water Bond and Interest 28,783 45,000 40,931 32,852 32,852Sewer Reserve 197,024 21,000 - 218,024 - 218,024Customer Deposits 33,360 5~674 483 38,551 19 38,570Solid Waste Utility 36~078 130,367 134,236 32,209 5,354 37,563Storm Sewer UtiIity 241,!65 82,441 76,000 247,606 247,606

Total Enterprise

Total All Funds

940,988 850,646 774,746 1,016,888 14,940 1,031,828

$ %933,161 $ 2,241,126 $ 2,110,823 $ 2,063,464 $ 75,196 $ 2,138,660

Composition of Cash:

First National Bank of HolcombLess outstanding warrants

Total cash in bank

Investments - Certificates of Deposit

Total cash

$ 1,448,133

$ 1,434,675

703,985

$ 2,138,660

The accompanying Notes to Financial Statements are an integral part of this statement.3

STATEMENT 2

CITY OF HOLCOMB, KANSASSummary of Expenditures - Actual and Budget

For the Year Ended December 31, 2010

Fund

Governmental Type Funds:General

Special HighwaySpecial ParkEquipment ReserveCapital Improvement Reserve

ADSAP Fees

Proprietary Type Funds:Water and Sewer UtilityWater Depreciation ReserveWater Bond and Interest

Customer DepositsSolid Waste UtilityStorm Sewer Utility

Adjustments Expendituresfor Qualifying Chargeable to Variance

Certified Budget Total Current Year Over

$ 970,070 $ $ 970,070 $ 805,937 $ (164,133)

82,7096,195

237,055977,10028,000

3,700

265,379

566,85084,18941,325

208,0248.000

168,470316,382

82,709 21,4486,195 1,053

237,055 104,887577,190 125,30028,000 28,000

3,700

(61,261)(5,142)

{132,968)(451,800)

(3,700)

2B5,279 249,162 (16,117)

566,850 520,327 (46,523)84,189 2,769 (81,420)41,325 40,931 (394)

208,024 - (208,024)8,000 483 (7,517)

168,470 134,236 (34,234)316,382 76,000 (240,382)


STATEMENT3

CITY OF HOLCOMB, KANSASGeneral Fund

Statement of Cash Receipts and Expenditures - Actual and BudgetFor the Year Ended December 31,2010

(With Comparative Actual Totals for the Prior Year Ended December 31, 2009)

Cash receipts:Administration:

TaxesFranchisesLicenses and permitsFines, forfeitures and penaltiesFire departmentInterest on investmentsVehicle inspectionsDonationsReimbursements and miscellaneousTransfer from Solid Waste UtilityTransfer from Health Insurance Reserve

Total cash receipts

Expenditures:Generat administration:

Personnel servicesContractual servicesCommoditiesCapital outlay

Total general administration

Law enforcement:Personnel servicesContractual servicesCommoditiesCapital outlay

Total law enforcement

Street lighting and tornado sirens:Contractual services

Fire depadment:Personnel servicesContractual servicesCommoditiesCapital outlay

Total fire department

Current YearVariance

Prior OverYear Actual Budget (Under)

588,255 $ 711,440 $ 613,64548,031 61,577 42,000

1,866 2,068 2,17533,847 31,398 42,00033,642 43,265 34,0007,652 4,099 18,000

21,220 19,050 17,0001,6394,948 11,212 10,500

10,000 10,000 10,00013,250 13,250

97,79519,577

(107)(10,602)

9,265(13,901)

2,050

712

751,100 907,359 $ 802,570 $ 104,789

53,724 60,456 $ 64,000 $ (3,544)98,370 66,741 118,500 (51,759)34,967 35,476 6,220 29,256

1,566 873 7,000 (6,127)

188,627 163,546 195,720 (32,174)

138,417 163,240 162,000 1,2409,665 12,428 16,300 (3,872)6,334 6,521 40,650 (34,129)

2,5OO (2,5OO)

154,416 182,189 221,450 (39,261)

20,759 23,910 25,000 (1,090)

18,789 26,781 35,000 (8,219)38,310 25,812 8,500 17,31212,894 14,631 19,500 (4,869)8,743 6,309 10,000 (3,691)

78,736 73,533 73,000 533

(continued)5

STATEMENT3

CITY OF HOLCOMB, KANSASGeneral Fund

Statement of Cash Receipts and Expenditures - Actual and BudgetFor the Year Ended December 31, 2010

(With Comparative Actual Totals for the Prior Year Ended December 31,2009)

(continued)Expenditures:

Municipal court:Personnel servicesContractual servicesCommodities

Total municipal court

Employee benefits:Social SecurityKPERSUnemployment insuranceWorkmen’s compensationHealth insurance

Total employee benefits

Street improvements:Contractual services

Operating transfers out:Equipment ReserveCapital Improvement Reserve

Total operating transfers out

Total expenditures

Receipts over (under) expenditures

Unencumbered cash, beginning of year

Unencumbered cash, end of year


Prior OverYear Actual Budpet (Under)

$ 27,831 $ 22,757 $ 26,000 $ (3,243)22,751 27,908 35,875 (7,967)2,646 1,880 4,775 (2,895)

53,228 52,545 66,650 (14,105)

27,527 30,156 32,000 (1,844)18,867 23,938 18,000 5,938

262 7,868 1,000 6,86815,937 12,785 13,000 (215)99,619 70,467 109,250 (38,783)

162,212 145,214 173,250 (28,036)

50,0oo (5o,ooo)

40,000 40,000175,000 125,000

215,000 165,000

872,978 805,937

(121,878) 101,422

463,388 341,510

341,510 $ 442,932

40,000125,000

165,000

$ 970,070 $ (164,133)


STATEMENT3

CITY OF HOLCOMB, KANSASSpecial Highway Fund

Statement of Cash Receipts and Expenditures ~ Actual and BudgetFor the Year Ended December 31, 2010


Cash receipts:State of Kansas - gas tax

Expenditures:Personnel se~icesContractual servicesCommodities


Prior OverYear Actual Bud,get (Under)

$ 48,645 $ 55,562 $ 53,810 $ 1,752

1,430 3,420 $ 16,000 $ (12,580)1,774 16,098 46,709 (30,611 )1,246 1,930 20,000 (18,070)

Total expenditures 4,450 21,448 $ 82,70~9 $ (61,261)

Receipts over expenditures 44,195 34,114

Unencumbered cash, beginning of year 569 44,764

Unencumbered cash, end of year $ 44,764 $ 78,878


STATEMENT 3

CITY OF HOLCOMB, KANSASSpecial Park Fund



Cash receipts:Alcohol taxesDonations

Total cash receipts

Expenditures:Capital outlay






1,500 $ 2,000 $ (500)520 520

2,020 $ 2,000 $ 20

564 1,053

(564) 967

2,795 2,231

$ 2,231 $ 3,198

$ 6,195 $ (5,142)


STATEMENT3

CITY OF HOLCOMB, KANSASEquipment Reserve Fund



Cash receipts:Transfer from GeneralTransfer from Water and Sewer UtilityTransfer from Solid Waste

Total cash receipts

Expenditures:Equipment payments and purchases





Prior OverYear Actual Bud~let /Under)

$ 40,000 $ 40,000 $ 40,000 $10,000 10,000 10,00020,000 10,000 20,000 (10,000)

70,000 60,000 $ 70,000 $ (10,000)

34,201 104,087

35,799 (44,087)

177,674 213,473

213,473 $ 169,386

$ 237,055 $ (132,968)


STATEMENT 3

CITY OF HOLCOMB, KANSASCapital Improvement Reserve Fund



Cash receipts:Intergovernmental revenueRentTransfer from General

Total cash receipts

Expenditures:Capital improvements

Receipts over expenditures





265,177 $ 19,614 $ $ 19,6144,900 7,300 4,000 3,300

175,000 125,000 125,000

445,077 151,914 $ 129,000 $ 22,914

420,334 125,300 $ 577,100 $ (451,800)

24,743 26,614

251,124 275,867

$ 275,867 $ 302,481


STATEMENT 3

CITY OF HOLCOMB, KANSASHealth Insurance Reserve Fund





Cash receipts:Transfers from General $

Expenditures:Health insuranceTransfer to General

Total expenditures


Unencumbered cash, beginning of year 37,000

Unencumbered cash, end of year $ 37,000 $

14,75013,250

28,000

(28,OOO)

37,000

9,000

$ 14,75013,250

$ 28,000

$

$


STATEMENT3

CITY OF HOLCOMB, KANSASADSAP Fees Fund



Revenue:Fees collected

Expenditures:Fees paid

Current Year

PriorYear Actual E}ud~et

$ $ 1,000


Unencumbered cash, beginning of year 2,700 2,700


VarianceOver

(UndeO

(1.00o)

$ 3,700 $ (3,700)


STATEMENT 3

CITY OF HOLCOMB, KANSASClutter Memorial Fund

Statement of Cash Receipts and Expenditures - ActualFor the Year Ended December 31,2010


Cash receipts:Donations





CurrentPrior YearYear Actual

$ 26,68O $ 150

25,740 1,090

940 (940)

94O

$ 940 $

The accompanying Notes to Financial Statements are an integral pan of this statement.13

STATEMENT 3

CiTY OF NOLCOMB, KANSASBond and Interest Fund



Cash receipts:TaxesSpecial assessmentsBond proceedsInterest on investmentsTransfer from Water and Sewer UtilityTransfer from Storm Sewer Utility

Total cash receipts

Expenditures:PrincipalInterest and fiscal feesCash basis reserve

Total expenditures





Prior OverYear Actual Bud,qet (Under)

50,160 $ 7,924 $ 7,57917,881 9,551 5,0004,0572,179

120,000 120,000 120,00076,000 76,000 76,000

$ 3454,551

270,277 213,475 $ 208,579 $ 4,896

115,000 125,000 $ 115,000 $ 10,000139,694 124,162 87,922 36,240

62,357 {62,357)

254,694 249,162 $ 265,279 $ (16,117)

15,583 (35,687)

58,105 73,688

$ 73,688 $ 38,001


STATEMENT3

CITY OF HOLCOMB, KANSASWater and Sewer Utility Fund


With Comparative Actual Totals for the Prior Year Ended December 31,2009)

Cash receipts:Charges for servicesConnects and disconnectsMiscellaneous

Total cash receipts

Expenditures:WaterSewerGeneral administrationCapital outlayTransfer to Equipment ReserveTransfer to Sewer ReserveTransfer to Water Bond and InterestTransfer to Bond and InterestTransfer to Water Depreciation

Total expenditures

Receipts under expenditures





484,737 $ 489,166 $ 510,000 $ (20,834)19,650 16,510 16,510

790 488 488

505,177 506,164 $ 510,000 $ (3,836)

151,393 162,201 $ 184,58596,178 91,905 83,46510,478 10,221 9,8001,966 33,000

10,000 10,000 10,00021,000 21,000 21,00045,000 45,000 45,000

120,000 120,000 120,00060,000 60,000 60,000

(22,384)8,440

421(33,000)

516,015 520,327 $ 566,850 $ (46,523)

(10,838) (14,163)

351,227 340,389

$ 340,389 $ 326,226


STATEMENT3

CITY OF HOLCOMB, KANSASWater Depreciation Reserve Fund



Cash receipts:Transfer fromWater and Sewer Utility







60,000 $ 60,000 $ 60,000 $

2,769

60,000 57,231

4,189 64,189

$ 64,189 $ 121,420

____$ 84,189 $ (81,420)

The accompanying Notes to Financial Statements are an integral part of this statement,16

STATEMENT 3

CITY OF HOLCOMB, KANSASWater Bond and Interest Fund



Cash receipts:Transfer from Water and Sewer Utility

Expenditures:PrincipalInterest and fiscal feesFiscal fees

Total expenditures






$ 45,000 $ 45,000 $ 45,000 $

35,000 35,000 $ 35,000 $7,115 5,925 5,925

123 6 400 (394)

42,238 40,931 $ 41,32~5 $.~._~(394_..~.)

2,762 4,069

26,021 28,783

28,783 $ 32,852


STATEMENT 3

C~TY OF HOLCOMB, KANSASSewer Reserve Fund




Prior OverYear Actual Bud£1et (Under)

Cash receipts:Transfer from Water and Sewer Utility $





21,000 $ 21,000 $ 21,000 $

$ 208,024 $ (208,024)


STATEMENT 3

C~TY OF HOLCOMB, KANSASCustomer Deposits Fund





Cash receipts:Customer deposits $ 7,280 $ 5,674 $ 8,000 $ (2,326)

Expenditures:Refunds 860 483 $ 8,000 $ (7,517)




The accompanying Notes to Financial Statements are an integral part of this statement19

STATEMENT3

CITY OF HOLCOMB, KANSASSolid Waste Utility Fund



Cash receiptsCharges for services

Expenditures:Personnel servicesContractual servicesCommoditiesCapital outlayTransfer to Genera~Transfer to Equipment Reserve

Total expenditures

Receipts under expenditures




Prier OverYear Actual Budget (Under)

$ 128,286 $ 130,367 $ 135,420 $ (5,053)

33,112 31,780 $ 40,420 $ (8,640)70,827 65,572 67,000 (1,428)20,631 16,884 21,050 (4,166)9,540 10,000 (10,000)

10,000 10,000 10,00020,000 10,000 20,000 (10,000)

164,110 134,236 $ 168,470 $ (34,234)

(35,824) (3,869)

71,902 36,078

$ 36,078 $ 32,209


STATEMENT 3

CiTY OF HOLCOMB, KANSASStorm Sewer Utility Fund



Charges for services

Expenditures:Capital outlayTransfer to Bond and Interest

Total expenditures






$ 80,783 $ 82,441 $ 78,000 $ 4,441

$ 240,382 $ (240,382)76,000 76,000 76,000

76,000 76,000 $ 316,382 $ (240,382)

4,783 6,441

236,382 241,165

$ 241,165 $ 247,606

The accompanying Notes to Financial Statements are an integral pad( of this statement.21

CITY OF HOLCOMB, KANSASNotes to Financial Statements

For The Year Ended December 31, 2010

Summary of siclnificant accountinq policiesThe City of Holcomb, Kansas, was incorporated under the provisions of the State of Kansas. TheCity operates under a City Council form of government and provides the following services asauthorized by its charter: public safety (police and fire), streets, sanitation, health and socialservices, cultural activities, public improvements, planning and zoning and general administrativeservices. Other services include utility operations.

Financial reportinq entityThe City is governed by an elected five-member council and a mayor. These financialstatements present the City of Holcomb (the primary government) and its component units.The component units discussed below are included in the City’s reporting entity because of thesignificance of their operational or financial relationships with the City.

The City has no organizations, functions or activities which are considered component units ofthe City.

Measurement focus, basis of accountin~q and basis of presentationThese financial statements are presented on a basis of accounting which demonstratescompliance with the cash basis and budget laws of the State of Kansas. Cash receipts arerecognized when the cash balance of a fund is increased. Expenditures includedisbursements, accounts payable and encumbrances, with disbursements being adjusted forprior year’s accounts payable and encumbrances. Encumbrances are commitments related tounperformed (executory) contracts for goods and services, and are usually evidenced by apurchase order or written contract. For an interfund transaction, a cash receipt is recorded inthe fund receiving cash from another fund, and an expenditure is recorded in the fund fromwhich the transfer is made.

Waiver of financial reporting requirementsThe City’s Council has determined by resolution that financial statements prepared inconformity with generally accepted accounting principles are not relevant to the requirementsof the cash basis and budget laws of the State of Kansas and are of no significant value to theCouncil, the City or the members of the general public of the City. The Council approved theresolution which served as notice of the Council’s election to waive the requirements forreporting of its financial data in conformity with accounting principles generally accepted in theUnited States of America, as provided and authorized by K.S.A. 75-1120a.

Departure from accountinq principles ~qenerally accepted in the United States of AmericaThe basis of accounting described above results in a financial statement presentation whichshows cash receipts, expenditures, cash and unencumbered cash balances and expenditurescompared to budget. Balance sheets that would have shown noncash assets such asreceivables, inventories and prepaid expense, liabilities such as deferred revenue andmatured principal and interest payable and reservations of the fund balance are not presented.Under accounting principles generally accepted in the United States of America,encumbrances are only recognized as a reservation of fund balance; encumbrancesoutstanding at year end do not constitute expenditures or liabilities. Consequently, theexpenditures as reported do not present the cost of goods and services received during thefiscal year in accordance with accounting principles generally accepted in the United States ofAmerica. Capital assets that account for land, buildings and equipment owned by themunicipality are not presented in the financial statements. Also, long-term debt such asgeneral obligation bonds, revenue bonds, capital leases, temporary notes and compensatedabsences are not presented in the financial statements.

22



1. Summary of siqnificant accountinq policies (continued)

Fund accounting1A fund is defined as an independent fiscal and accounting entity with a self-balancing set ofaccounts recording cash and other financial resources, together with all related liabilities andresidual equities or balances, and changes therein, which are segregated for the purpose ofcarrying on specific activities or attaining certain objectives in accordance with specialregulations, restrictions or limitations. The following fund types are used by the City:

Governmental FundsGeneral Fund - The General Fund is the general operating fund of the City. It is used toaccount for all financial resources except those required to be accounted for in another fund.

Special Revenue Funds - Special Revenue Funds are used to account for the proceeds ofspecific revenue sources (other than special assessments, expendable trusts, or major capitalprojects) that are legally restricted to expenditures for specified purposes.

Debt Service Fund - The Debt Service Fund is used to account for the accumulation ofresources and the payment of general long-term debt principal, interest and related costs.

Capital Project Fund - The Capital Project Fund is used to account for financial resources tobe used for the acquisition or construction of major capital facilities (other than those financedby proprietary funds or trust funds).

Proprietary FundsEnterprise Funds - Enterprise Funds are used to account for operations (a) that are financedand operated in a manner similar to private business enterprises - where the intent of thegoverning body is that the costs and expenses of providing goods or services to the generalpublic on a continuing basis be financed or recovered primarily through user charges; or (b)where the governing body has decided that periodic determination of revenues earned,expenses incurred and/or net income is appropriate for capital maintenance, public policy,management control, accountability or other purposes.

Cash and investmentsCash resources of the individual funds are combined to form a pool of cash and investmentswhich is managed by the City (except for investments in the Kansas Municipal InvestmentPool). Cash includes amounts in demand deposits, time deposits and certificates of deposit.Investments of the pooled accounts consist primarily of investments with the Kansas MunicipalInvestment Pool and U.S. government securities carried at cost, which approximates market.Interest income earned, unless specifically designated, is allocated to the general fund.

Property taxes and special assessmentsThe determination of assessed valuations and the collections of property taxes for all politicalsubdivisions in the State of Kansas is the responsibility of the counties. The County Appraiserannually determines assessed valuations based on real property transactions as recorded bythe Register of Deeds and personal property holdings reported by taxpayers. The CountyClerk spreads the annual assessment on the tax rolls and the County Treasurer collects thetaxes for all taxing entities within the County.

23



1. Summary of siqnificant accountinq policies (continued)

Property taxes and special assessments (continued)Taxes are assessed on a calendar year basis, are levied and become a lien on the propertyon November 1st of each year. The County Treasurer is the tax collection agent for all taxingentities within the County. Property owners have the option of paying one-half or the fullamount of the taxes levied on or before December 20th during the year levied with the balanceto be paid on or before May 10th of the ensuing year. State statutes prohibit the CountyTreasurer from distributing the taxes collected in the year levied prior to January 1st of theensuing year. One-half of the property taxes are due December 20th and distributed to theDistrict by January 20th to finance a portion of the current year’s budget. The second half isdue May 10th and distributed to the City by June 5th. The City Treasurer draws availablefunds from the County Treasurer’s office at designated times throughout the year.

Kansas statutes require projects financed in part by special assessments to be financedthrough the issuance of general obligation bonds which are secured by the full faith and creditof the City. Special assessments received prior to or after the issuance of general obligationbonds are recorded as revenue in the appropriate project fund. Further, state statutes requirelevying additional general ad valorem property taxes in the Debt Service Fund to financedelinquent special assessments receivable.

Compensated absencesThe City’s policy regarding leave pay permits employees to accumulate leave days at amaximum rate of 12 days per year. No more than 90 days may be accumulated. Leave maybe used for sick leave, bereavement leave and personal leave. The City does not pay forunused accumulated leave pay at termination of employment.

The City’s policy regarding vacation leave pay permits employees to accumulate leave days ata maximum rate of 12 days per year up to a maximum of 18 days. The City has estimated thedollar amount of accumulated vacation leave pay at December 31, 2010, to be $14,939.

Interfund transactionsQuasi-external transactions (i.e., transactions that would be treated as revenues or expensesif they involved organizations external to the governmental unit, such as internal service fundbillings to departments) are accounted for as cash receipts or expenditures. Transactions thatconstitute reimbursements to a fund for expenditures initially made from it that are properlyapplicable to another fund, are recorded as expenditures in the reimbursing fund and asreductions of expenditures in the fund that is reimbursed.

All other inteffund transactions, except quasi-external transactions and reimbursements, arereported as transfers.

ReimbursementsA reimbursement is an expenditure or expense initially made in one fund, but properlyattributable to another fund. For example, it is common for the general fund to pay a vendor’sbill and have portions of it reimbursed by other funds. In accounting for such reimbursements,the City records an expenditure (or expense) in the reimbursing fund, and a reduction ofexpenditure (or expense) in the reimbursed fund, following the authoritative guidance of theGovernmental Accounting, Auditing and Financial Reporting.

Memorandum totalsTota~ columns on the financial statements are captioned "memorandum only" to indicate thatthey are presented only to facilitate financial analysis. No consolidated financial information ispresented nor is all required disclosures presented for these amounts.

24



1. Summary of significant accountinq policies (continued)

Comparative dataThe statutory basis financial statements include certain prior year comparative information inorder to provide an understanding of the changes in the cash receipts and expenditures of thefunds, but not at the level of detail required for a presentation in conformity with the statutorybasis of accounting. Accordingly, such information should be read in conjunction with theCity’s financial statements for the year ended December 31, 2009, from which thesummarized information was derived.

2. Stewardship, compliance and accountability

A. Budcletary informationKansas statutes require that an annual operating budget be legally adopted for the generalfund, special revenue funds (unless specifically exempted by statute), debt service funds andenterprise funds. Although directory rather than mandatory, the statutes provide for thefollowing sequence and timetable in the adoption of the legal annual operating budget:

1. Preparation of the budget for the succeeding calendar year on or before August1 st.

2. Publication in local newspaper of the proposed budget and notice of public hearingon the budget on or before August 5th.

3. Public hearing on or before August 15th, but at least ten days after publication ofnotice of hearing.

4. Adoption of the final budget on or before August 25th.

The statutes allow for the governing body to increase the originally adopted budget forpreviously unbudgeted increases in revenue other than ad valorem property taxes. To do this,a notice of public hearing to amend the budget must be published in the local newspaper. Atleast ten days after publication the hearing may be held and the governing body may amendthe budget at that time. There were no such budget amendments for the year endedDecember 31, 2010.

The legal level of budgetary control is the fund level. The statutes permit transferringbudgeted amounts between line items within an individual fund. However, such statutesprohibit expenditures in excess of the total amount of the adopted budget of expenditures ofindividual funds. Budget comparison statements are presented for each fund showing actualreceipts and expenditures compared to legally budgeted receipts and expenditures.

All legal annual operating budgets are prepared using the modified accrual basis ofaccounting, modified further by the encumbrance method of accounting. Revenues arerecognized when cash is received. Expenditures include disbursements, accounts payableand encumbrances, with disbursements being adjusted for prior year’s accounts payable andencumbrances. Encumbrances are commitments by the municipality for future payments andare supported by a document evidencing the commitment, such as a purchase order orcontract. All unencumbered appropriations (legal budget expenditure authority) lapse at year-end.

A legal operating budget is not required for capital projects funds, fiduciary funds, permanentfunds and certain special revenue funds. Spending in funds which are not subject to the legalannual operating budget requirement are controlled by federal regulations, other statutes or bythe use of internal spending limits established by the governing body.

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2. Stewardship, compliance and accountability (continued)

Compliance with Kansas statutesReferences made herein to the statutes are not intended as interpretation of law, but areoffered for consideration of the Director of Accounts and Reports and interpretation by theCounty Attorney and the legal representative of the City.

No known violations were noted for the year ended December 31,2010.

3. Detailed notes on all funds

A. Deposits and investmentsA reconciliation of cash and investments as shown in the composition of cash on the summaryof cash receipts, expenditures and unencumbered cash on Statement 1 is as follows:

Carrying amount of deposits $ 2,138,660

$ 2,138,660Total cash

K.S.A. 9-1401 establishes the depositories which may be used by the City. The statuterequires banks eligible to hold the City’s funds have a main or branch bank in the county inwhich the City is located, or in an adjoining county if such institution has been designated asan official depository, and the banks provide an acceptable rate of return on funds. Inaddition, K.S.A. 9-1402 requires the banks to pledge securities for deposits in excess of FDICcoverage. The City has no other policies that would further limit interest rate risk.

K.S.A. 12-1675 limits the City’s investment of idle funds to time deposits, open accounts, andcertificates of deposit with allowable financial institutions; US. government securities;temporary notes; no-fund warrants; repurchase agreements; and the Kansas MunicipalInvestment Pool. The City has no investment policy that would further limit its investmentchoices.

Concentration of credit riskState statutes place no limit on the amount the City may invest in any one issuer as long asthe investments are adequately secured under K.S.A. 9-1402 and 9-1405.

Custodial credit risk - depositsCustodial credit risk is the risk that in the event of a bank failure, the City’s deposits may notbe returned to it. State statutes require the City’s deposits in financial institutions to be entirelycovered by federal depository insurance or by collateral held under a joint custody receiptissued by a bank within the State of Kansas, the Federal Reserve Bank of Kansas City or theFederal Home Loan Bank of Topeka except during designated "peak periods" when requiredcoverage is 50%. The City does not use designated "peak periods".

At year end, the City’s carrying amount of deposits was $2,138,660 and the bank balance was$2,152,118. The bank balance was held by one bank resulting in a concentration of creditrisk. Of the bank balance, $278,746 was covered by federal depository insurance and$1,873,372 was collateralized with securities held by the pledging financial institution’s agentsin the City’s name. The City’s cash deposits at year-end are as follows:

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Detailed notes on all funds (continued)

A. Deposits and investments (continued)

Custodial credit risk - deposits (continued)First National

Bank of HolcombFDIC coverage $ 278,746Pledged securities at market value 2,095,803

Total coverage $ 2,374,549

Funds on deposit $ 2,152,118

Funds at risk $

Credit risk - investmentsFor an investment, this is the risk that, in the event of the failure of the issuer or counterparty,the City will not be able to recover the value of its investments or collateral securities that arein the possession of an outside party. State statutes require investments to be adequatelysecured. The City had no investments of this type at December 31, 2010.

Interfund transfersInterfund operating transfers are as follows:

From

GeneralGeneralHealth Insurance ReserveWater and Sewer UtilityWater and Sewer UtilityWater and Sewer UtilityWater and Sewer UtilityWater and Sewer UtilitySolid Waste UtilitySolid Waste UtilityStorm Sewer Utility

StatutoryTo Authority

Equipment Reserve 12-1,117 $ 40,000Capital Improvement Reserve 12-1,118 125,000General 13,250Equipment Reserve 12-825d 10,000Bond and interest 12-825d 120,000Sewer Reserve 12-825d 21,000Water Bond and Interest 12-825d 45,000Water Depreciation 12-825d 60,000General 10-1204 10,000Equipment Reserve 12-825d 10,000Bond and Interest 12-825d 76,000

Total $ 530,250

Capital projects in processCapital projects in process during the year ended December 31, 2010, under authorizedconstruction contracts were as follows:

Disbursementsand Accounts

Payable toProject Authorization Date Committed

Henderson Street repair $ 130,959 $ 125,301 $Crack sealing 70,824 70,824

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3. Detailed notes on all funds (continued)

D. Long-term debtChanges in long-term liabilities for the City for the year ended December 31, 2010, were asfollows:

Current maturities of long-term debt and interest for the next five years and in five yearincrements through maturity are as follows:

Year2011 2012 2013 2014 2015 2016-2020 2021-2023 Total

InterestGeneral obligation bOndS payable 103,726 99,878 ~6,192 920B2 85,995 313,447 70,200 861,520Revenue bonds payable 4630 3,230 1,760 . . . 9,620Capital leases payable 2275 1,560 ~ 856 484 98 6.487

Total p~lneipal and interest

Legal debt marc]inThe debt limit per K.S.A. 10-308 is thirty percent of the assessed tangible valuation of the Cityadjusted for exempt farm property, business aircraft and motor vehicles given by the CountyAssessor to the County Clerk on August 25th each year. Per K.S.A. 10-309, certain bond issuesare not subject to the bonded indebtedness limitation; these include the refunding bonds and thelimited obligation bonds issued for the purpose of acquiring, enlarging, extending or improvingany municipal utility; or to pay the cost of improvements to intersections of streets and alleysor that portion of any street immediately in front of city or school district property. The amountof debt outstanding does not exceed the statutory limit.

Other information

A. Risk managementThe City is exposed to various risks of loss related to torts; theft of, damage to, anddestruction of assets; errors and omissions; injuries to employees; and natural disasters. In1995, the City joined together with other municipalities in the State to form Kansas MunicipalInsurance Trust (KMIT), a public entity risk pool currently operating as a common riskmanagement and insurance program for municipalities which are members in good standingof the League of Kansas Municipalities, meet the requirements established by the Board ofTrustees; and which properly adopt the agreement. The City pays an annual premium toKMIT for its workmen’s compensation insurance coverage. The Agreement for Formation ofthe KMIT provides that KMIT will be self-sustaining through member premiums.

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4. Other information (continued)

Risk manaqement (continued)The City continues to carry commercial insurance for all other risks of loss including employeehealth and accident insurance. Settled claims resulting from these risks have not exceededcommercial insurance coverage in any of the past three years.

Post-employment health care benefitsAs provided by K.S.A. 12-5040, the local City allows retirees to participate in the group healthinsurance plan. While each retiree pays the full amount of the applicable premium,conceptually, the City is subsidizing the retirees because each participant is charged a levelpremium regardless of age. However, the cost of this subsidy has not been quantified inthese financial statements.

Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), the City makes healthcare benefits available to eligible former employees and eligible dependents. Certainrequirements are outlined by the federal government for this coverage. The premium is paidin full by the insured. There is no cost to the City under this program.

Defined benefit pension planPlan description: The City of Holcomb, Kansas, contributes to the Kansas Public EmployeesRetirement System ("KPERS"), a cost sharing, multiple-employer defined benefit pension planas provided by K.S.A. 74-4901, et seq. KPERS provides retirement benefits, life insurance,disability income benefits, and death benefits. Kansas law establishes and amends benefitprovisions. KPERS issues a publicly available financial report that includes financialstatements and required supplementary information. That report may be obtained by writingto KPERS (611 S Kansas, Suite 100, Topeka, KS 66603-3869) or by calling 1-888-275-5737.

Funding policy: K.S.A. 74-4919 establishes the KPERS member-employee contribution rateat up to 6% of covered salary. The employer collects and remits member-employeecontributions according to the provisions of section 414(h) of the Internal Revenue Code.State law provides that the employer contribution rate be determined annually based on theresults of an annual actuarial valuation. KPERS is funded on an actuarial reserve basis.State law sets a limitation on annual increases in the contribution rates for KPERS employers.The employer rate established by statute for calendar year 2010 is 7.14%. The City ofHolcomb, Kansas, contributions to KPERS for the years ending December 31,2010, 2009 and2008, were $25,086, $18,252, and $13,707, respectively, equal to the required contributionsfor each year as set forth by the legislature.

D. Commitments and continqencies

Grant auditsThe City participates in federally assisted grant programs. These programs are subject tofinancial and compliance audits by the grantors and their representatives. As of December31, 2010, the City was aware of no material questioned or disallowed costs as a result of grantaudits completed or in process.

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SUPPLEMENTALSCHEDULES

SCHEDULE A

CITY OF HOLCOMB, KANSASSchedule of Insurance in Force

December 31, 2010

Type of Insurance - Insurer

Employers Mutual Casualty CompanyExpiration Date: 4-1-11

Buildings and personal property -Commercial propertyInland marineLinebacker

Comprehensive General Liability Policy -Personal injury liabilityProperty damage liability

Combination Auto Policy -Bodily injury and property damageAutomobile medical paymentsUninsured motoristUnderinsured motorist

Policy lnsgredNumber Premium Amount

8X5-74-74-11

$ 4,695 $ 1,904,8212,758 481,8911,588 1,000,000

2,5261,000,0001,000,000

7,589500,000

2,000500,000500,000

Kansas Municipal Insurance TrustExpiration Date: 12-31-10Workmen’s Compensation and Employer’s

Liability 15,001 Statutory

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GRAPH 1

CITY OF HOLCOMB, KANSASRevenue - General Fund

For the Year Ended December 31

2010 ReceiptsGeneral Fund

2010 TaxesGeneral Fund

78%

_Other5%

Donations_VIN 0%

2%

5%

d Valorem66%

Comparison of ReceiptsGeneral Fund

$700,000

$600000

$500,000

$4O0,000

$300,000

$200,000

$Taxes Intergov’tl Franchises Interest Other Donations VIN Fire Dept Transfers

I2009

I2007

I2004

32

GRAPH 2

CITY OF HOLCOMB, KANSASExpenditures - General Fund


Employee Benefits18%

20 I0 ExpendituresGeneral Fund

Fire9%

Law Enforcement23%

Municipal Court7%

Streel3%

Gene~ladmin.20%

Transfers2O%

$250,000

Comparison of ExpendituresGeneral Fund

$200,000

$150,000

$100,00D

$50000

12010

02003

Streets Municipal Cou~ EmployeeBenefits

33

CITY OF HOLCOMB, KANSASComparison of Receipts and Expenditures - General Fund


GRAPH 3

$1,000000

$800,000

$700,000

$600,000

$500000

$400000

$300,000

$200,000

$100,000

2010 2009 2008 2007 2006 2005 2004 2003

gTotal Receipts mTotal Expenditures

2OO2 2001

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