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2011 Comprehensive Annual Financial ReportCITY OF HOPKINS MEMORANDUM Date: June 19, 2012 To: Mayor & City Council From: Christine Harkess, Finance Director �FiN►TCE IPAT�:'I' Subject: 2011 Comprehensive Annual Financial Report (CAFR) Staff has prepared a presentation of a consolidated version of the 2011 Comprehensive Annual Financial Report (CAFR). Dennis Hoogeveen, Principal of the audit firm CliftonLarsonAllen, LLC will be present to review the results of the 2011 audit to the City Council and public. Supporting Information • Power Point Presentation • 2011 Executive Audit Summary • 2011 Comprehensive Annual Financial Report (separate attachment due to size) Financial Report No. City of Hopkins An Overview of the 2011 Comprehensive Annual Financial Report Economic Condition ■ Valuation of new non-residential construction was $12.4 million in 2011. ■ There remains an viable economic development and redevelopment market within the City of Hopkins. ■ An additional $137 million of construction is projected over the next several years. Future Projects ■ Hopkins Cold Storage ■ Marketplace & Main Townhms ■ 5t" Avenue Flats ■ 8th Avenue Redev ■ Mayon Plastics Site Redev $62 million $ 2 million $40 million $30 million $ 3 million City of Hopkins The City of Hopkins • Economic Condition presents its • Major Initiatives Comprehensive Annual r Revenues by fund Financial Report ■ Holiday Station Stores $ .3 million types This presentation r Expenditures by fund provides a broad types overview of our financial 0 Statement of Met performance and position. Assets ® Statement of All information is public. Activities Significant Projects in 2011 ■ Excelsior Crossing III $1.1 million final stages of completion ■ Marketplace & Main $8.4 million ■ Hopkins Health & Wellness $3.0 million ■ Holiday Station Stores $ .3 million ■ 7900 Excelsior Blvd $ .3 million Major Municipal Initiatives ■ Street repair and improvements - $1,602,500 ■ Utility improvement projects - $470,000 ■ Lift Station #1 upgrade - $337,500 ■ Nine Mile Creek Bank Stabilization - $246,070 ■ Emergency Vehicle Preemptive Signal - $52,250 ■ Shady Oak Beach Improvements - $200,000 ■ Park Improvements — $54,000 ■ Conversion of large commercial water meters to radio read system. 1 Financial Highlights ■ Assets exceeded liabilities by approximately $64.1 million — About 76% is capital assets ($49 m) — $7.4 million can be used for ongoing obligations ■ Governmental funds fund balances totaled $15.0 million, an decrease of $1.1 million ■ Unreserved fund balance of the General Fund totaled $4.3 million or 42% of expenditures ■ Debt decreased $3.56 million due to bond refunding payments and scheduled maturities. Revenues and Other Financing Sources by Fund Type G Enterprise ■ Internal $1,332,257 Service ■ Debt 35 $415,352 $2,593,23 ■ Capital ■ General $1,329,676 $10,961,702 ■ Special Revenue $4,844,532 Financial Highlights - cont ■ Governmental Activities — Property tax revenues increased as a result of debt levies and increased operating costs. — Program grants were received for specific programs ■ Business Type Activities — Charges for service increased due to scheduled rate increases per the Utility Master Plan — Program grants increased • Primarily for HRA programs Expenditures and Other Financing Uses by Fund Type Internal Service Enterprise $527,979 $5,272,318 General Debt $10,182,751 53,167,673 Capital Special 52,289,729 Revenue 55,159,937 2 Statement of Activities Proprietary Fund Types, (In thousands) 2011 2010 Revenues Fund Type —charges for services $5,618 $5,434 —Operating grants & contributions 190 216 —capital grants & contributions 28 328 —other revenues 36 9 Total Revenues and Other Sources $5,872 $5,987 Expenditures $ 454,601 ■ Internal Service Funds —Water $1,264 $1,197 —Sewer 1,800 1,844 —Storm sewer 407 421 —Refuse 778 738 —PavilionAce Arena 416 398 —Housing & Redevelopment Authonty 607 542 —Transfers 145 145 Total E.penditures and Other uses $5,417 $5,285 Excess Revenues over Expenditures $ 455 $ 702 CAFR — Changes in Reporting ■ In 2011 we implemented GASB No. 54 regarding classification of fund balances ■ Governmental Funds Fund Equity now has 5 categories — Non -spendable — Restricted — Committed — Assigned — Unassigned Fund Equity Fund Balance/ Fund Type Ecuity Incr/ De r ■ General Fund $ 5,032,211 $ 778,951 ■ Special Revenue Funds $ 3,119,777 ($ 315,405) ■ Capital Project Funds $ 2,614,530 ($ 957,472) ■ Debt Service funds $ 4,275,717 ($ 768,278) ■ Enterprise Funds $17,806,958 $ 454,601 ■ Internal Service Funds $ 3,638,221 ($ 112,627) CITY OF HOPKINS EXECUTIVE AUDIT SUMMARY (EAS) DECEMBER 31, 2011 CITY OF HOPKINS TABLE OF CONTENTS DECEMBER 31, 2011 AUDIT REPORT SUMMARY FINANCIAL RESULTS GOVERNMENT -WIDE FINANCIAL STATEMENTS GENERALFUND ENTERPRISE FUNDS APPENDIX A FORMAL REQUIRED COMMUNICATIONS APPENDIX B 2 4 5 6 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 10 APPENDIX C AUDI_rOR'S REPORT ON LEGAL COMPLIANCE 12 NEW ACCOUNTING AND REPORTING STANDARDS 13 0 C(iftonLarsonAtlen AUDIT REPORT SUMMARY CliftonLarsonAllen LLP www.cliftonlarsonallen.com We prepared this Executive Audit Summary and Management Report in conjunction with our audit of the City's financial records for the year ended December 31, 2011. The following is a summary of reports we have issued: Audit Opinion The financial statements are fairly stated in accordance with generally accepted accounting principles. We issued an "unqualified" audit opinion. Yellow Book Opinion Our report on internal control over financial reporting noted no material weaknesses. Legal Compliance No compliance issues were reported with respect to Minnesota Statutes. Significant Reporting Changes from Prior Year As described in Note 1 to the financial statements, the City changed accounting policies related to the classification of fund balances, by adopting Statement of Governmental Accounting Standards (GASB Statement) No. 54, Fund Balance Reporting and Governmental Fund Type Definition, in 2011. (1) FINANCIAL RESULTS GOVERNMENT -WIDE FINANCIAL STATEMENTS Statement of Net Assets The Statement of Net Assets reflects what the City owns and owes at a given point in time, the last day of the fiscal year. Theoretically, net assets represent the resources the City has leftover to use for providing services after its debts are settled. However, those resources are not always in expendable form, or there may be restrictions on how some of those resources can be used. For instance, invested in capital assets -net of related debt is the largest classification and reflects the balance of infrastructure (streets, storm water, side walks, etc.) and other assets net of the debt incurred to finance them and therefore, not cash available for use. In order to address this, the statement divides the net assets into three components: net assets invested in capital assets -net of related debt, restricted net assets, and unrestricted net assets. The following is a condensed version of the Statement of Net Assets at December 31, 2011: Assets: Current Assets Capital Assets Total Assets Liabilities: Current Liabilities Long -Term Liabilities Total Liabilities Net Assets: Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total Net Assets Governmental Business -Type Activities Activities Total $ 23,924,306 $ 1,260,095 $ 25,184,401 46,439,544 20,918,467 67,358,011 70,363,850 22,178,562 92,542,412 1,147,322 363,285 1,510,607 22,951,033 4,008,319 26,959,352 24,098,355 4,371,604 28,469,959 31,666,432 17,075,284 48,741,716 8,250,360 - 8,250,360 6,348,703 731,674 7,080,377 $ 46,265,495 $ 17,806,958 $ 64,072,453 A significant portion of the City's net assets translate into restricted net assets by virtue of external restrictions (statutory reserves) or by the nature of the fund they are in (e.g. equity in a debt service fund typically can only be spent on future repayment of debt). (2) Statement of Activities The Statement of Activities tracks the City's yearly revenues and expenses, as well as any other transactions that increase or reduce total net assets. These amounts represent the full cost of providing services. This statement provides a more comprehensive measure than just the amount of cash that changed hands, as reflected in the fund -based financial statements. This statement includes the cost of supplies used, depreciation of long-lived capital assets, and other accrual -based expenses. The following is a condensed version of the Statement of Activities for the year ended December 31, 2011: Functions/Programs Governmental Activities: General Government Public Safety Health and Welfare Highways and Streets Urban Redevelopment and Housing Culture and Recreation Interest on Long -Term Debt Total Governmental Activities Business -Type Activities: Water Sewer Storm Sewer Refuse Pavilion/Ice Arena Housing and Redevelopment Authority Total Business -Type Activities Total Governmental and Business -Type Activities Expenses Program Revenue $ 1,719,970 6,213,995 170,018 3,332,067 2,859,900 1,644,834 871,902 16,812,686 1,263,835 1,800,126 407,057 778,044 416,166 607,090 5,272,318 378,610 1,052,325 164,236 1,849,871 1,078,425 727,275 5,250,742 1,395,306 1,838,949 803,417 983,118 385,748 430,183 5,836,721 $ 22, 085, 004 $ 11, 087,463 General Revenues: Property Taxes Tax Increments Grants and Contributions Not Restricted Unrestricted Investment Earnings Gain on disposal of capital assets Total General Revenues, Special Items, and Transfers Change in Net Assets (3) Difference $ (1,341,360) (5,161,670) (5,782) (1,482,196) (1,781,475) (917,559) (871,902) (11, 561, 944) 131,471 38,823 396,360 205,074 (30,418) (176,907) 564,403 (10,997,541) 9,952,156 2,239,668 312,519 117,275 69,222 12,690,840 $ 1,693,299 GENERALFUND The following table presents the City's General Fund revenue sources for each of the past three years. The most significant component is property taxes which amounted to $8,611,399 for 2011. It is important that the City operate governmental and enterprise funds effectively so that there is not a need to be subsidized by the General Fund. The following table presents the City's General Fund expenditures for each of the past three years. The most significant component is public safety which amounted to $5,701,777 for 2011. General Fund Revenue by Source Years Ended December 31, Ended December31, $9,000,000 $6,000,000 � \ .;,q \,\ $8,000,000 \\\\ y \ ti• \\ s \�\ \ \\ \ \ \\ \ $7,000,000 \\ \ �. $6,000,000 z \ $4,000,000. \ ,\ \\\\\ \ $5,000,000�� \ b�. $3,000,000 \ $4,000,000 \\ \\ `\ , $3,000,000 j $2,000,000 W\. \, \ y \ \ \a $2,000,000 Y �s \ \ ;, \� f $1,000,000 $1,000,000 '$0 2008 2009 2010 2011 I) Taxes M Intergovernmental o Charges for Services o License and Permits =EOth=er The following table presents the City's General Fund expenditures for each of the past three years. The most significant component is public safety which amounted to $5,701,777 for 2011. (4) General Fund Expenditures by Function Years Ended December31, $6,000,000 \\\\ y \ ti• \\ $5,000,000 \ is \: \\ \\ \\ �. z \ $4,000,000. �� \ b�. $3,000,000 $2,000,000 $1,000,000 2008 2009 2010 2011 ® General Governmental ■Public Safety El Health& Welfare 13Highways&Streets ■Culture& Recreation mCapitalOutlay (4) GENERAL FUND (CONTINUED) Fund Balance — Total fund balance of the City's General Fund increased by $778,951 during fiscal 2011, from $4,253,260 to $5,032,211 at December 31, 2011. A City's fund balance in the General Fund is an important aspect in considering the City's financial well being since a healthy fund balance represents things such as cash flow, as a cushion against unanticipated expenditures, funding deficiencies and similar problems. At December 31, 2011, the unassigned fund balance as a percentage of annual expenditures is 41.9% or approximately 22 weeks of expenditures. This compares to 41.1% and approximately 21 weeks of expenditures as of December 31, 2010. In order to properly analyze fund balance levels you must review all categories of fund balance (nonspendable, restricted, committed, and assigned) as well as growth indicators of the City. The percentage above is average for established communities such as the City of Hopkins. Budget to Actual — Total revenues in the General Fund were $199,751 (or 2.0%) higher than the budgeted amount while total expenditures were $118,326 (or 1.1%) less than had been budgeted. After considering operating transfers, the net effect was an increase to total fund balance that was $909,754 more than had been reflected in the City's budget. As part of any budget update initiated for fiscal 2012, the Council will want to take this and other budget variances into consideration in order to limit future budget differences to every extent possible. ENTERPRISE FUNDS The enterprise funds (Water Utility, Sewer Utility, Storm Sewer Utility, Refuse Utility, Pavilion/Ice Arena and Housing Authority Funds) have a healthy combined net asset balance in the amount of $17,806,958 as of December 31, 2011. The largest portion of this being an investment in infrastructure and other capital assets net of related debt in the amount of $17,075,284. (5) 0 Clifton LarsonAllen APPENDIX A FORMAL REQUIRED COMMUNICATIONS Honorable Mayor and Members of the City Council City of Hopkins, Minnesota CliftonLarso Allen LLP www_cliftonlarsonal len.com We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of City of Hopkins, Minnesota (the City) for the year ended December 31, 2011, and have issued our report thereon dated June 5, 2012. Professional standards require that we provide you with the following information related to our audit. Our Responsibility under U.S. Generally Accepted Auditing Standards and OMB Circular A-133 As stated in our engagement letter dated January 30, 2012, our responsibility, as described by professional standards, is to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. As part of our audit, we considered the internal control of the City of Hopkins. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the City of Hopkins's compliance with certain provisions of laws, regulations, contracts, and grants. However, the objective of our tests was not to provide an opinion on compliance with such provisions. Our responsibility is to plan and perform the audit to obtain reasonable, but not absolute, assurance that the financial statements are free of material misstatement. 2. We are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures specifically to identify such matters. 3. We are also responsible for communicating matters regarding the provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions, promulgated by the State Auditor pursuant Minnesota Statute 6.65. N Honorable Mayor and Members of the City Council City of Hopkins Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our meeting about planning matters on January 30, 2012. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City of Hopkins are described in Note 1 to the financial statements. As described in Note 1, the City of Hopkins changed accounting policies related to the classification of fund balances, by adopting Statement of Governmental Accounting Standards (GASB Statement) No. 54, Fund Balance Reporting and Governmental Fund Type Definition, in the year ending December 31, 2011. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: Management's estimate of the useful lives of capital assets is based on authoritative guidance and past experience. Management's estimate of the investments at fair value is based on published market values at December 31, 2011. Estimated current portion of compensated absences payable — Management's estimate of the amount of the year-end compensated absences payable balance to be taken by employees within one year of December 31, 2011 is based on historical trends and anticipated leave time activity. We evaluated the key factors and assumptions used to develop the above estimates in determining that it is reasonable in relation to the financial statements taken as a whole. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. I;Q Honorable Mayor and Members of the City Council City of Hopkins Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. We noted a number of completed street improvements remained in construction in progress and were not properly placed into service and depreciated on the government -wide financial statements in prior years. These road projects have been placed in service and depreciated for fiscal year 2011. As a result of not capitalizing these assets in prior years, beginning net assets were overstated and accumulated depreciation is understated by approximately $300,000. Management has determined that the effects are immaterial to the financial statements taken as a whole. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors' report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated June 5, 2012. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditors' opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Information in Documents Containing Audited Financial Statements Our responsibility for the supplementary information accompanying the financial statements, as described by professional standards, is to evaluate the presentation of the supplementary information in relation to the financial statements as a whole and to report on whether the supplementary information is fairly stated, in all material respects, in relation to the financial statements as a whole. With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with U.S. generally accepted accounting principles, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We have issued our report thereon dated June 5, 2012. N Honorable Mayor and Members of the City Council City of Hopkins Other Information in Documents Containing Audited Financial Statements (Continued) Other information is being included in documents containing the audited financial statements and the auditors' report thereon. Our responsibility for such other information does not extend beyond the financial information identified in our auditors' report. We have no responsibility for determining whether such other information is properly stated and do not have an obligation to perform any procedures to corroborate other information contained in such documents. As required by professional standards, we read the other information in order to identify material inconsistencies between the audited financial statements and the other information. We did not identify any material inconsistencies between the other information and the audited financial statements. With respect to the required supplementary information (RSI) accompanying the financial statements, we made certain inquiries of management about the methods of preparing the RSI, including whether the RSI has been measured and presented in accordance with prescribed guidelines, whether the methods of measurement and preparation have been changed from the prior period, and whether there were any significant assumptions or interpretations underlying the measurement or presentation of the RSI. We compared the RSI for consistency with management's responses to the foregoing inquiries, the basic financial statements, and other knowledge obtained during the audit of the basic financial statements. Because these limited procedures do not provide sufficient evidence, we did not express an opinion or provide any assurance on the RSI. Our auditors' opinion, the audited financial statements, and the notes to financial statements should only be used in their entirety. Inclusion of the audited financial statements in a document you prepare, such as an annual report, should be done only with our prior approval and review of the document. This information is intended solely for the use of the Members of the City Council and management of the City of Hopkins, Minnesota and is not intended to be and should not be used by anyone other than these specified parties. Minneapolis, Minnesota June 5, 2012 (9) 44 � Z->7-> CliftonLarsonAllen LLP op, CliftonLarsonAtlen APPENDIX B CtiftonLarsonNlen LLP www-diftonlarsonallen.com REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Mayor and Members of the City Council City of Hopkins, Minnesota We have audited the financial statements of the governmental activities, business -type activities, each major fund, and the aggregate remaining fund information of the City of Hopkins, Minnesota (the City) as of and for the year ended December 31, 2011, which collectively comprise the City's basic financial statements and have issued our report thereon dated June 5, 2012. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. (10) Honorable Mayor and Members of the City Council City of Hopkins Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of 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 and material effect on the determination of financial statement amounts. However, providing an opinion 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 test disclosed no instances of noncompliance 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 Council, management, the Office of the State Auditor, and state and federal awarding agencies and is not intended to be and should not be used by anyone other than these specified parties. CliftonLarsonAllen LLP Minneapolis, Minnesota June 5, 2012 CliftonLarsonNlen LLP wway. diftonlarsonallen:com C(iftonLarsonAlten APPENDIX C AUDITOR'S REPORT ON LEGAL COMPLIANCE Honorable Mayor and Members of the City Council City of Hopkins, Minnesota We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Hopkins, Minnesota (the City) as of and for the year ended December 31, 2011, which collectively comprise the City's basic financial statements and have issued our report thereon dated June 5, 2012. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions, promulgated by the State Auditor pursuant to Minn. Stat. §6.65. Accordingly, the audit included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The Minnesota Legal Compliance Audit Guide for Political Subdivisions covers seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our study included all of the listed categories. The results of our tests indicate that for the items tested, the City complied with the material terms and conditions of applicable legal provisions. This report is intended solely for the information and use of the City Council, management, and the Office of the State Auditor and is not intended to be, and should not be, used by anyone other than those specified parties. Minneapolis, Minnesota June 5, 2012 (12) 1 CliftonLarsonAllen LLP NEW ACCOUNTING AND REPORTING STANDARDS The Financial Reporting Entity In November 2010, the GASB issued Statement No. 61, The Financial Reporting Entity: Omnibus an amendment of GASB Statements No. 14 and No. 34. Statement No. 61 is effective for financial reporting in fiscal year 2013 and modifies previous requirements for the assessment of potential component units (for example the City's Housing and Redevelopment Authority) in determining what should be included in the City's financial statements. The Statement also modifies the display and disclosure requirements for component units. As a result, the method for including component units in the City's financial statements will need to be re-evaluated and potentially changed in fiscal year 2013. In preparation for evaluating the inclusion of component units under the new guidance in GASB Statement No. 61, the City should revisit the formative documents of its component units including charters, resolutions, bylaws, articles of incorporation, etc. GASB Codification In December 2010, the GASB issued Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre -November 30, 1989 FASB and AICPA Pronouncements. As discussed in the City's accounting policy disclosures in its financial statements, the City historically followed Financial Accounting Standards Board (FASB) guidance issued before November 30, 1989, for purposes of reporting financial activity of proprietary funds such as the Water, Sewer, Storm Sewer and Refuse Utility Fund; the Pavilion/Ice Arena Fund; the Housing Authority and Internal Service Funds, and GASB guidance issued on and after November 30, 1989, all of which is considered acceptable methods for financial reporting of proprietary funds. However, GASB has accumulated and codified pre -November 30, 1989 FASB guidance deemed applicable to proprietary funds into an all- inclusive Statement No. 62. Statement No. 62 is very thorough, detailed and extensive — over 300 pages in length — and thus will require thoughtful implementation in fiscal year 2012. (13)