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HomeMy WebLinkAbout08222022 City Council Special Meeting LAYDOWN - 2021 Financial Audit Results220822 CC Spc Mtg LAYDOWN - 2021 Financial Audit Results City of Seward, Alaska Comprehensive Annual Financial Report Year Ended December 31, 2021 Prepared by City of Seward Finance Department Comprehensive Annual Financial Report of the City of Seward, Alaska For the Fiscal Year Ended December 31, 2021 Christy Terry Mayor Janette Bower City Manager Prepared by the Finance Department Sully Jusinv Finance Director City of Seward, Alaska Table of Contents Exhibit No. Page No, INTRODUCTORY SECTION Letter of Transmittal List of Principal Officials Organization Chart FINANCIAL SECTION Independent Auditor's Report Management Discussion and Analysis (MD€tA� Basic Financial Statements: Government -wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of Governmental Funds Balance Sheet to Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Reconciliation of Statement of Revenues, Expenditures and Change in Fund Balances of Governmental Funds to the Statement of Activities Proprietary Funds: Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position Statement of Cash Flows Notes to Financiat Statements i-V VI VII 1.4 5-16 A-1 17-18 B-1 19 C-1 20 C-2 21 D-1 22 D-2 23 E-1 24-25 E-2 26 E-3 27.28 29-67 h. II��v[y�U SISO�'tii 1{�L'{t�fi�j[[[Uryj{vf1��lO �C)(d Y 8 0 A. V Y� 1 '� i VF 1 11 3 8 V City of Seward, Alaska Table of Contents, Continued Exhibit No. _Page No. Required Supplementary Information: Schedule of Revenues, Expenditures, and Change in Fund Balance - Original and Final Budget and Actual: General Fund F• 1 68 Public Employees' Retirement System: Schedule of the City's Proportionate Share of the Net Pension Liability G-'t 69 Schedule of the City's Proportionate Share of the Net QPEB Liability (Asset) G-2 70 Schedule of the City's Contributions (Pension) G-3 71 Schedule of the City's Contributions (OPEB) G-4 72 International Brotherhood of Electrical Workers (iBEW) Defined Benefit Pension Plan - Schedule of the City's Contributions (Pensions) G-5 73 Notes to Required Supplementary Information 74-75 Additional Supplementary Information: General. Fund - Schedute of Revenues, Expenditures and Changes in Fund Balance H-1 76-81 Other Governmental Funds: Combining Balance Sheet 1-1 82-83 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 1-2 84-85 Nonmajor Enterprise Funds: Combining Statement of Net Position J-1 86 Combining Statement of Revenues, Expenses and Changes in Net Position J-2 87 Combining Statement of Cash Flows J-3 88 Internal Service Funds: Combining Statement of Net Position K-1 89 Combining. Statement of Revenues, Expenses and Changes in Net Position K-2 90 Combining. Statement of Cash Flows K-3 91 Schedule of Expenditures of Federal Awards L-i 92 Motes to Schedule of Expenditures of Federal Awards 93 Schedule of State Financial Assistance Notes to Schedule of State Financial Assistance M-1 94 95-96 i.JVHCI /k8VNH/VF laud City of Seward, Alaska Table of Contents, Continued STATISTICAL SECTION: Exhibit No. Pate No. Net Position by Component 1 97 Changes in Net Position 2 98-99 Fund Balances of Governmental Funds 3 100 Changes in Fund Balances of Governmental Funds 4 101 General Fund Revenues by Source 5 102 General Fund Tax Revenues by Source 6 103 Property Tax Rates 7 104 Property Tax Levies and Collections 8 105 Assessed and Estimated Actual Value of Taxable Property 9 106 Principal Property Taxpayers Compared with Nine Years Ago 10 107 Principal Taxable Sales by Line of Business 11 108 Ratios of Outstanding Debt by Type 12 109 Ratio of General Obligation Bonded Debt to Assessed Value and General. Obligation Bonded Debt per Capita 13 110 Computation of Direct and Overlapping Bonded Debt 14 111 Legal Debt Margin 15 112 Revenue Bond Coverage - Etectric Enterprise Fund 16 113 Revenue Bond Coverage - Harbor Enterprise Fund 17 114 Demographic and Economic Statistics 18 115 Principal Employment by Industry 19 116 Full -Time Equivalent Employees by Fund 20 117 Operating Indicators by Function 21 118 Capital Asset Statistics by Function 22 119 Property Value, Construction, and Bank Deposits 23 120 Miscellaneous Statistics 24 121 SINGLE AUDIT: Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based an an Audit of Financiat Statements Performed in Accordance with Government Auditing Standards 122-123 Independent Auditor's Report on Compliance For Each Major Federal Program; Report on Internal Control Over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance 124-126 Federal Schedule of Findings and Questioned Costs 127-128 Independent Auditor's Report on Compliance For Each Major State Program; Report on Internal Control over Compliance, and Report on the Schedule of State Financial Assistance Required by the State of Alaska Audit Guide and Compliance Supplement for State Single audits 129-131 State Schedule of Findings and Questioned Costs 132 Summary of Prior Audit Findings 133-134 Corrective Action Plan t— (� E I � �J� � `� f � � 5DRA� I=L4 L�: I_i�` ll�r`'l=iil�1_03E,5ONL.Y Inde2endent Auditor's Report Honorable Mayor and City Council City of Seward Seward, Alaska Opinions We have audited the accompanying financial statements of the governmental activities, the business - type activities, each major fund, and the aggregate remaining fund information of the City of Seward, Alaska, as of and for the year ended December 31, 2021, and the related notes to the financial statements, which collectively comprise the City of Seward, Alaska's basic financial statements as listed in the table of contents. In our opinion, based on our audit and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Seward, Alaska, as of December 31, 2021, and the respective Changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. We did not audit the financial statements of the Providence Seward Medical and Care Center (PSMCQ which represent 30%, 17%, and 100% respectively, of the assets and deferred outflows of resources, net position and revenues of the Healthcare Facilities Enterprise Fund, and 6%, 1%, and 56% respectively, of the assets and deferred outflows of resources, net position and revenues of the business -type activities as of December 31, 2021, and the respective changes in financial position, and where applicable, cash flows thereof for the year then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the financial statements of the PSMCC, is based solely on the report of the other auditors.. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial. Statements section of our report. We are required to be independent of the City of Seward, Alaska, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. PRELIMINARY DRAVT FOR DiSCtl._S CJ Honorable Mayor and City Council City of Seward Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City of Seward, Alaska's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards, we- 0 Exercise professional judgment and maintain professional skepticism throughout the audit. + Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City of Seward, Alaska 's internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements, « Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City of Seward, Alaska 's ability to continue as a going concern for a reasonable period of time. 2 PRELIMINARY DRAFT FOR, D;S.` US`3l'DN r`1ONl_'r Honorable Mayor and City Council City of Seward We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control -related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 4-15 and budgetary comparison information on pages 68-69 and the Schedules of Net Pension and OPEB Liabilities (Assets) and Contributions for the Public Employees' Retirement System and International Brotherhood of Electrical Workers Plan on pages 70- 75 be presented to supplement the basic financial statements. Such information is the responsibility of management and, although rot a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We and other auditors have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance, Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Seward, Alaska's basic financial statements. The combining and individual fund financial statements and schedules, Schedule of Expenditures of Federal Awards, and the Schedule of State Financial Assistance are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards and the Schedule of State Financial Assistance are required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and the State of Alaska Audit Guide and Compliance Supplement for State Single Audits, respectively. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America by us and other auditors. in our opinion, based on our audit and the report of the other auditors, combining and individual fund financial statements and schedules, Schedule of Expenditures of Federal Awards, and the Schedule of State Financial Assistance are fairly stated, in all material respects, in relation to the basic financial statements as a whole. PRE !MINAH- Y DRAFT Honorable Mayor and City Council City of Seward Other Information Management is responsible for the other information included in the annual report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor's report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. in connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated_ If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated July XX, 2022, on our consideration of the City of Seward, Alaska's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City of Seward, Alaska's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Seward, Alaska's internal control over financial reporting and compliance.. Anchorage, Alaska July XX, 2022 4 PRELI5NMAR`>✓ DRAFT 1 DISf'l.l l;y}w G7ji jppol.;ES ON0 Basic Financial Statements - Overview These financial statements provide a summary of the financial position and results of operations of all funds of the City, aggregated at the government -wide and the major fund level. The following statements are inctuded in this section: Government -wide - Statement of Net Position Government -wide - Statement of Activities Governmental Funds - Balance Sheet Reconciliation of Governmental Funds Balance Sheet to Statement of Net Position Governmental Funds - Statement of Revenues, Expenditures and Change in Fund Balances Reconciliation of the Changes in Fund Balances of Governmental Funds to Statement of Activities Proprietary Funds - Statement of Net Position Proprietary Funds Statement of Revenues, Expenses and Change in Net Position Proprietary Funds - Statement of Cash Flows Statement of Fiduciary Assets and Liabilities Notes to Basic Financial Statements PREUMINARY DRAFT MR LYI-,: PIURI'OSE`� ONLY Exhibit A-1 City of Seward, Alaska Statement of Net Position Governmental Business -type December 31, 2021 Activities Activities Total Assets and Deferred Outflows of Resources Cash and investments 5 14,437,852 3B,683,008 53,120,860 Receivables, net of allowance for doubtful accounts: Taxes 947,732 - 947,732 Accounts 147,569 8,381,383 9,528,952 Grants, shared revenues, and loans 298,348 798,348 Accrued interest 36,074 36,074 other 2,347,312 2,347,312 Prepaid items 545,560 7,076 552,636 inventory - 814,539 814,539 Restricted cash and investments 2,405,972 2,405,972 Other assets - 70,000 70,000 Internal balances 268,512 (265,512) Capital assets not being depreciated 5,933.284 31,655,074 37,588,358 Capital assets being depreciated, net of depreciation 47,256.398 97,671,933 144,928,331 Net pension and O PEB assets 3,742,577 1,113,569 4,856,146 Total Assets 73,613,906 182,881,354 256,495,260 Deferred Outflows of Resources Pension and OPEB related 597,589 127,622 125,211 Unamortized deferred loss on refunding - 1,614,582 1,614,592 Totat Deferred Outflows of Resources 597,589 1,742,204 2,339,793 Totai Assets and Deferred Outflows of Resources 5 74,211,495 184,623,558 258,835,053 (continued) -LV 4 r RY DRAFT 1-UH Di -_IUISS�ON PURPOSES ONLY 17 Exhibit A -I . continu City of Seward, Alaska Statement of Net Position, Continued Govemmentat Business -type December 31, 2021 Activities Activities Total Liabilities, Deferred inflows of Resources, and Net Position Current Liabilities Accounts payable $ 777,430 2,335,353 3,112,783 Payable to Prwdence Health and Services - Washington 2,222,000 2,222,000 Due to contractual agencies 581,000 581,DO0 Accrued payroll and related liabilities 404,236 1,269,491 1,673,727 Accrued interest 74,472 316,204 340,676 Other accrued liabilities 99,198 - 99,198 Customer deposits 15,060 474,656 489,716 Unearned revenue 431,002 1,507,598 1,938,600 Noncurrent Liabilities Due within one year. Accrued conxpensated absences 106.740 61,045 167,285 Lease liability 94,DD0 94,000 Notes payable 202,441 202,441 Bonds payable 215,000 1,490,OD0 1,705,000 Due in more than one year* Accrued compensated absences 3581905 97,033 455,938 Lease liability 291,000 Notes payable 1,599,911 1,599,91I Bonds payable 5,101,563 20,600,774 25,702,287 Net pension and OPEB tiabilities 4,830,467 1,827,630 6,658,D97 Total Liabilities 12,363,573 34,970,086 47,042,659 Deferred inflows of Resources Pension and OPEB related 3,969,585 1,284,416 5,254,001 Unamortized deferred gain on refunding 102,210 102,210 Total Referred Inflows of Resources 4,071,795 1,284,416 5,356,211 Total Liabilities and Deferred Inflows of Resources 16,435,368 36,254,502 52,398,870 Net Position Net investment in capital assets Restncted for commercial passenger vessel tax harestricted Total NLt Position 47,873,119 ir1$,061,535 t55,934,654 - Z.789,905 x,289,905 9,903,008 18,017,61 47,920,624 57,776,127 148,3.69.056 206,145,181 Total Liabilities, Deferred Inflows of Resources, and Net Fasihnro $ 74.211 ,495 184,623,558 258,544,U5'� See accompanying notes Co boslc financial statements,. 18 PRELIMINARY DRAFT Exhibit U City of Seward, Alaska Statement of Activities Net (Expense) Revenue and Prgram Revenues Changes in Het Pastdon Fees, Operating Capital Fines )k Grants & Grants & Govern Busiriess- Charges for Contri- Contri- mental type Year EndedDecember 31,2021 Expenses Services butions butions Activities Activities Total Governmental Activities General gavemment 5 2,682.966 637,177 822,565 1,049,133 (174,091) (174,091) Public Safety 4,371,214 490,060 111,413 - (3,769,841) (3,769,841) Public works 3,447,427 27,571 81,049 713,896 (2,624,911) (2,624,911) Parks and recreation 1,269,771 1,500,354 22,496 - 253,079 253,079 Library 881,107 15,000 22,204 (843,903) (843,903) Ctlnic 2,121,653 2.107,042 (14,611) (14,611) Seal-ife Center 1,396,490 - (1,396,490) (i,396,490) Interest on long-term debt 171,623 (171,623) (171,623) Total Governmental Activities 16,342,351 2,670,162 3,166,769 1.763,029 (8,742,391) (8,742,391) Business -type Activities Electric 12,435,907 13,319,862 72,931 956,886 956,886 Water 1,398,746 2,389,549 22,174 1,412,977 1,012,977 Wastewater 1,305,694 2,102,861 20,597 - 817,764 817,764 Harbor 3,689,010 3,730,319 66,604 368,239 498,152 498,152 SMIC 2,212,217 781,863 11,029 - (1,419,325) (1,419,325) Healthcare Facilities 24,903,943 28,537,000 1,478,000 - 5,111,057 5,111,057 Parking 90,237 431,065 340,828 340,828 Total Business -type Activities 46,035,744 51,292,519 1,673.325 388,239 7,318,339 7,318,339 Total 5 62,378,095 53,962,661 4,840,094 2,151,268 (6,742,391) 7,318,339 (1,424,052) General Revenues 7a);r5; S"t-,taxes 6,861,114 6,961,114 +'roP•erly +,r ., 1,636,727 1,636,727 Cithc; : •:_ _ 713,633 713,633 R)1 ,1,'rii in lieu -...'taxes 89,061 89,061 Gi,,Ft,. er:i entitle.mr.nrs not restri,:zed to a spec Ti; tn,rpn5e 444,556 444,556 Investment income (lossl (49,937) (104,961) (154,798) Transfers 850,387 (850,387) - Total General Revenues and Transfers 10,545,641 (955,348) 9,590,293 t.hangesin net position 1,803,250 6,362,991 8,166,241 Net Position, beginning of year 55,972,877 142,00b,065 197,978,947 plet Position, eszi of year Iz 57,776, t27 $149,36J,056 $ 206,t45AK 5ee accompanying notes to basic financial statements. , ;Y DRAG-T 19 FOR U'I$-rl 1. ;- r-- Exhibit C-1 City of Seward, Alaska Governmental Funds Balance Sheet Total Nonmajor Governmental December 31, 2027 General Funds Funds Assets Cash and investments 11,307,444 2,665,263 13,972,707 Receivables, net of allowance for doubtful accounts: Taxes 947,732 947.732 Accounts 147,569 147,569 Grants and shared revenues 59,981 238,367 298,348 Accrued interest. 36,074 36,074 Prepaid items 545,560 545,560 Total Assets $ 13,044,360 2,903,630 15,947,990 Liabilities and Fund Balances Liabilities Accounts payable 518,919 258,511 777,430 Accrued payroll and related llabiRies 404,236 - 404,236 Accrued liabilities 99,198 99,198 Deposits 15,060 - 15,060 Unearned revenue 423,453 7,549 431,002 Total Liabilities 1,460,866 266,060 1,726,926 Fund Balances Nonspendable: Prepaid items 545.560 545.560 Committed: Working capital 1,500,000 1, 500,000 Hospital line of credit 500,000 500,000 Assigned: Insurance 512,487 512,487 Other assignments 100,000 - 100,000 Capitalpro)ects 2,645,898 2,645,898 Public works 2,150 2,150 Unassigned (deficit) 8.425,447 (10,478) 8,414,969 Total Fund Balances 11,583,494 2,637,570 14,221,064 Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 13,044,360 2,903,630 15,947,990 See accompanying notes to basic fmancic! statements, 20 PRELIMINARY DRAFT POR ©IS" US&ON PURPOSES ONLY Exhibit C-2 City of Seward, Alaska Reconciliation of Governmental Funds Balance Sheet to Statement of Net Position Aecember 31, 202 f Total fund balances for governmental funds $ 14,221,06-4 Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. These assets consist of; Land $ 5,509,589 Construction in progress 423,695 Buildings 70,654,374 Improvements other than buildings 29,294,548 Machinery and equipment 10, 755,618 Accumulated depreciation (63,448,142) Total capital assets 53,189,682 Other long-term assets are not available to pay for current period expenditures and therefore, are deferred in the funds: Delinquent property taxes - Proportionate share of the collective net OPEB assets 3,742,577 3,742,577 Deferred outflows of resources related to pensions and 4PE6 liabilities (assets) are net deemed available to pay current period expenditures and therefore are not reported as governmental fund assets. 597,589 Deferred inflows of re5ource5 related to pensions and OPEB liabilities (assets) are not deemed available to pay current period expenditures and therefore are not reported as governmental fund liabilities. (3,969,585) An internal service fund is used ')y the City to charge the cost of accrued compensated absence_ for the governmental funds. The net position of the internal service fund attributable to governmental activities is included in the governmental column of the Statement of Net position. Net position related to governmental activities 168,512 Plus arnount reported with long-term liabilities 465,145 733,657 Long-term babihtie5 are not deemed due and payable in the current period and theretore are not reported as ; �vernmental lnterndl fund liabilities. These long-term liUbilitie; r;unsist of: Governmental service Gen^ral obisg,stion bori,7s payable i4,66i7,t1i�{li Accrued interest on bords (24,4721 Unamortized bond premium 1656.563) Deferred loss on refunding d.102,21iW Accrued compensated absences (465,145) Proportionate share of the collective net pension and OPEB liabilities t4.836,4671 Total long-term liabilities 5 (1i), 73,712) (465,145) (10,738,857) Total Net Position of Governmental Activities 5 57,776,127 See accompanying notes to basic financial statements. PRELIMINARY DRAFT Exhibit D-1 City of Seward, Alaska Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances Year Ended December 31, 2021 General Nonmajor Funds Total Governmental Funds Revenues Taxes 5 9,326,027 9,376,027 Licenses and permits 116,886 116,886 Intergovernmental 1,239,768 3,180,175 4,419,943 Charges for services 3,639,583 3,639,583 Fines and bails 22,308 22,308 Investment income (toss) (49,808) (29) (49,937) Otherrevenues 917,436 749,841 1,666,777 Total Revenues 15,212,200 3,928,987 19,141,187 Expenditures Current: General government 4,480,785 83,801 4,564,586 Public safety 4,486,732 - 4,486,732 Public works 1,630,652 67,725 1,693,377 Parks and recreation 1,516,689 - 1,516,699 Library 616,045 616,045 Clinic 7,107,042 2,107,042 Debt service: Principal payments 230.000 - 230,000 Interest payments 211,404 211,404 Debt issuance casts 51,572 - 51,572 Capital outlay 1,970.121 1,970,121 Total Expenditures 13,223,879 4,223,689 17,447,568 Excess of revenues over (under) expenditwes 1,988,321 (294,702) 1,691.619 Other Financing Sources (Uses) Proceeds from issuance of refunding debt 2,180.000 7,180,000 Premium on refunding debt 574,273 574,273 Payment to bond refunding escrow agent (2,720,201) (2,720,201) Transfers in 2,286,776 1,513,596 3,800,372 Transfers out (2,949,985) (2,949,985) Total Other Financing Sources (uses) (629,137) 1,513,596 884,459 Change in Fund Balances 1,359,184 1,219.894 2,578,078 Fund Balances, beginning of year 10,224,310 1,418,676 11,642,986 Fund Balances, end of year $ 11,583,494 2,637,570 14,221,064 See accompanying notes to basic financial statements. 22 PRELIMINARY DRAFT F--Ofi Ia1S,-_.US� 10N t�iJ�tPOSES OW Y City Df Seward, Alaska Reconciliation of Statement of Revenues, Expenditures and Change in Fund Balances of Governmental Funds to the Statement of Activities Year Ended December 31, 2021 Exhibit 0-2 raet change in fund balances - total governmental funds 2 ; 576,078 The change in net position reported for governmental activities in the litatemeat of Activities is different because: Governmental funds report capital outlays as expenditures. However, on the Statement of Activities, depreciation expense is recognized to allocate the cost of these items over their estimated useful lives. This is the amount by which depreciation ($2,714,511) exceeded capital outlays ($1,146,591y. i,568.O1f,Y Governmental funds report only the revenues from the sale of assets to the extent of proceeds received. In the Statement of Activities a gain or lass is reported for each sale. This is the net effect of transactions involving disposal of Capital assets. Cost of disposed assets $ {1,119,Zf,3i Accumulated depreciation of disposed assets 449,427 (669,836) Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. This is the decrease in delinquent property takes. Some expenses reported in the statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Change in accrued interest payable Change in the propoftianate share of the unfunded net pension and OPES liabilities {assets} Changes in deferred inflows and outflows of resources are the results of timing differences in the actuarial report and adjustments to reflect employee and non -employee contributions based on the measurement date. Change in deferred inflows and outflows of resources related to pension and OPES liabilities (assets) The issuance of tong -term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position: Issuance of tong term debt Debt defeasement Principal repayments Bond premium amortization An internal service fund is used by the City to charge the cost of vehicles and heavy equipment to fndiVdual funds- A portion of the net revenue of these activities is reported with governmental activities. Change in Net Position of Governmental Activities See accompanying notes to basic jfnandol statements. 23 (i8,489) 34,295 4,952,950 4,987,145 (3,831,901) (2,754,273) 2,720,201 230,000 5,486 201,414 124.859 s 1,803,250 PREUMINARY DRAFT F{�y;l1r[;l)�t`jlOnlfOhl Exhibit E'1 City of Seward, Alaska Proprietary Funds Statement of Net Position Major Enterprise Funds Nonmajor Total intemal Healthcare Enterprise Enterprise service Derember3i.202i Electric Harbor SM1C Facilities Funds Funds Funds Assets and Deferrad Outflows of Rk-5.:urces Current Assets Ca5n ;,rd in•.esr.ments S 8,056,461 5,790,OD9 225,871 T2,529,783 8,360.953 34,963,077 4,165,076 Reeeivable5. I Qt of allowance for doulhtiut accounts:. .Ace'unts 1.488,126 122.777 41.215 6,395.0i10 334,165 8.381.363 - Actrued interest - 22,252 Inrerturrd loads - - 76,374 Grants and loans - - Other 680,423 1.657 112 510,600 1,155,100 2,347.312 - Prepufd Items 7,076 - 7,076 - Inventory 711,247 93.292 614,539 Othet assets Total Current Assets 10,953,433. 5,914,443 267,218 19,434.783 9,943,510 46,513,387 4,283,6F4 Noncurrent assets RL:,tn(th1 cash and investments 322.824 690,194 1.392.950 - 2,405,972 '• Other ass•=ts - 70,000 7D,000 ._ Inierfund loan:- net of current porron - - 347,527 Prepenrv- plan[ and equipmert: E r, pi tan ass..ts not ming depreciated 766,e21 18,368.0o11 12,021,821 287.ODD 211,431 31,655,OT4 - Qpftal assets being depreciated, ntt ui depr'.00 is 19,516,452 16,669,3c8 33,855,912 12,376,012 13,278,589 95,69P1,233 1,975,71)D flea p nsion and OPEs r5sets 152,468 523,841 110,673 326,537 1, 113, 5r.9 - Total N9n Cl[Trent Assets 20,758,565 36,25 i,•158 15,98e,;0o 1-1175, 45Z i3,vt E•,557 00..44Q,848 2.,323,227 Total Ass atS 31,T11.998 42, lb5,'JO"I 46.255.524 s3, 560,745 23, 760,061 177.454,235 6,606,879 Referred outflows of Resources Related to pensions and OPIEB i4,625) B3,553 46,704j 55,2s8 177.627 tlnnr:'—rizr-d deferred i= on reFundina 355, 358 P,ta,{iT9 1,1T8, 345 1:61•n. SE? Total Outfl—;r,f R.-srnuec; 350.733 164.542 (6,704) 11711,345 55.288 1,742,204 Total A'asct ,. ,,-mn Ori7, nsd Outtir-s of i?esrurr-e5 32.JM2.731 42,310.443 46.245.82n 34. 739.090 23.815.355 179. 196.01 6.06,Tf79 (continued) pp RA" 1 P11HPOSES ONL Y Exhibit, E,1, can;inugd City of Seward, Alaska Proprietary Funds Statement of Net Position, continued Major Eriterpn5e Funds linnn,ajol Total internal Healthcare Enterprise Enterprise Semce tVicernfrer37, 7021 Etectrfc Harbor swc Facilities Funds Funds Funds Lianill.11e% nLVr ert I,nriow, of RF.:oi,F[e6, and Het Pasltion Current Liabil,ties 4teo,nts;ri,yWF. 5 786,191 169162 5,976 1.270,000 38,293 2,269,472 65.991 "Pat•uSla is Pr.rndence Health and Seatiices - tvar.i.irrgtan - - Y,222,000 - 2,222,000 Ei, to cnntrcctual - - 581,0p0 581,000 Acrrt;,d payrrilt.nod rcimed I11+hil11.1es 99,474 36,704 3,727 1.106.0f10 33.586 1,269,491 Accrurd 64,354 71,713 238,256 14,633 318.456 Current portion: Pcaued cornpensated absences 16,209 19,406 6,064 19,366 61,045 106,240 ponds payable 190,000 330,000 950,000 1,490,000 - 14otr 5 aw able - - - - 202,441 202,441 Wli riundIDnn; - - - 76,324 76,324 Cu[.[crrer Capo:its 431,756 25,60U 17,300 - 474,656 ui,ea*nedrewoiue - 560,204 27,394 920,000 1,507,W11 L�as2 Iiau4!iLy 94,000 94,000 - Total CUrr PRt Liabilftie5 1,5T7,984 1,192,229 60,311 7,457,580 309,119 10,586,403 172,171 Noncurrent Liabilities, net of current portion accrued compensated absences 4,690 51,123 3,759 37,46t 97,033 358.905 -ew,I.iobiiily - - 291,000 291,000 Eunds paysbtu, including i, inamnrti,r-d premiUrn 4,430.183 .6W i' 9 - 14,479,681 2%600,724 Nrlrc' povable - - 1,599,911 1,599,951 ilo[ pensvm and OPFSliabitity 714,954 70 - 450,306 1.877,630 Ioterfurid leans - - 347,527 347,527 Total Noncurrent ..,.52 3,759 15.1181209 2,08708 24,763„825 358..905 Tota! L i6c.E41 64,070 22,575,7119 2,.395,997 35,350,308 531,026 �.+ia, c•d forte, . of R�-Sou -. . Total Llahimies am3 beferreo Infic- of Resource5 Met posl[io11 Net ir,ve;trnent In capital assets Re;tri�r,,d Fc., rpiAm:erraai pa5sengei vev,l Lan i rIK Yf i[i.,id Total Net Posl:ion Total Liabilities, Uefrrred Inflows of 21d, 1Ri ,S86 "5 a21 - 16,341,27Z 25.018,121 1.284.416 .531.724 531.626 33,767,587 45,877,633 (1,588,325j 1t,687,668 106,085,835 1,975.700 2.789.96` 2,289,905 4[,626 d,A6,882 34,185,975 4,100.153 3 074,550 142,56t,715 6,075,853 Resvimo5 and Net Positron $ 32,062,731 42.330,443 46,248,820 34,739,090 23,815.355 Adjustment to reflect the Consolidation c•f internal serviceiund acttvities related to enterprise funds - Net Position of euMness-type Activities See(xComparn'rng notes to bask fltfn iOol Slatements, 51807,341 $ 148,36?.056 6,606,879 25 R'R!EUM i DRAFT FOR C`a: �t �,;C`lN PURPOSIFS ONl-1, Exhibit E-2 City of Seward, Alaska Proprietary Funds Statement of Revenues, Expenses and Changes in Net Position Major Enterprise Funds Ncnrnajor Total Inti mal. Healthcare Enterprise Enterprise Service I'ppr Fndod Decemher 31. 2627 Electric Harbor 5%C FaClOties Funds Funds Funds Dperatin3 P.-noes ti ha•pca fin a maces $ 1Z,709,422 3,730,187 781 .863 28.537,000 3,1.79,428 48,937,900 vehwYe reFltol aril snlerfund CI Iames 1091861 Total Operating Revenues 12,709,42Z 3,130,167 781,863 28,537,000 3,179,428 48,937,900 11089,861 OperatinCE pc•nses 6ndernpl❑yeebereflts 1,848,592 995.644 154,551 17,060.NO 626.640 20,675,433 453,892. `•rn�ces and supplies 7,513,240 813,430 165,574 4,M,000 880,922 13,469,166 14,339 Adr101;uation 1,422,088 320,583 241,902 1,586.460 472,920 043,958 OapreOaOorr 1,606,346 1527.006 1,650,184 1,509.124 796,304 7,018.964 343,840 T❑ta1 Opar4tine,Expenses 12,390,266 3,646 668 2,212,217 24,251 584 2,776,796 45,277,521 812,071 .,_crr,e rL�r:=i irosr Orrrtic•rs 319,75E 83,519 (t,43O,354) 4,285,416 402,642 3,660,379 277,910 Nonoperaung Revenues(Euperises) ,ntE; aavcrn,n�ntal - PCPS x,..behalf 72,931 63,604 11,029 - 42,761 195,325 'nt rEr.•rcrr.mc,ntal - Provider relief fund - - - 1,478,000 - 1,478,000 Intc-rr;L mw,,e - - - - 22,252 lnve5111'L-nt inIarnr-(loss) (24,539) j13,691) (9779) (29,576) (36,1771 1104,961) (16,26a1 Salary credits - work orders 19,069 - 19,869 Supply credits - work orders 11,308 - - - - 11,408 {Lass) on sale of capkat assets. - - - (71,045) - (7t,O45) nt,, c ei,,Nme 4166.769) (70,380) - (571,314) (27,828) (836,291) otherr 4erluf (expen5e5) 579,263 132 - (10,000) _ 1,743,787 Zy313,182 438 Total Nonoperating Revenues(Expenses) 492,064 (15,335) 10,050 796,065 1,722,54) 3,005,397 6,422 income (Lass) Before Contributions and transfers 811,226 68,184 (1,420,304) 5,DB1,481 2,125,185 6,665,766 294,232 Capftdl contributions: State of Ataska 389,239 - - 388,239 Transfers in - - 60,143 1,629,872 16,000 1,706,015 288,671 Tianstersnor (1,734,989) 1609,379) S136C648) (359,057) (2,845,073) Chance in net pasituxr (928,769) (152,936) (1,496,809) 6,711,353 1,787,128 5,914,947 572,903 Net Positron, h7Rin9ing afyeaF 25,90,890 38.352,870 47,602,638 5,451,948 19.292,422 5,502,950 Net ?asitinn,ar,,loi•,ear S 25,018,121 38,199,914 46,105.329 12,163.301 21,07d.550 6,075,853 Adjustment to reflect the consol;d ,t ir;n ;,f ;;ar:ral scrncc fund activities related to enterprise hinds. 448,044 Change In Net Position of eusiriess-type Activities See occonlparAy+" Motes to basic. frrancraf 5tateM6ntd. 5 6.362.991 PR LIMA' NARY DRAFT 26 P 0 R CIS (J`"I0hj l,(_IR('InSF.; Exhibit E- C" of Seward, Alaska Proprietary rands $tatemeric of cash Flows Major Enterprise I ands llattnl3jur -0t31 Internal Hr,-a[Lh.etu Enterprise Fit terprise service Year frded December 31, 2021 Fly erne Harbor yMIC rerilities `Lads Fun L rand. Cash Flows from (fur) OperatingActivtt(ea Receipls Rom customers and users payments to supPliers Payrne;Lis to eniplcy, s Pavmeras tot irlertiuni] se!t5:7 t•} used f7ereipi. f,nis yr-futlr re vats and mterfund charges. R:=CCC'ip16 f: Uis. p:1�a� :C,;:rrpb $ 12,507,845 3,666,678 (8,278,167) 174,429 (11791;923) (1,110,084) (436,9961 (1,247,351) 798,325 24,425,999 2,026,557 43,•125,434 (309,449) 857.270? 14 460,697) 41,709 (1554026) 07,073,t100) 1689,0111 (20,819,0441 (404,862) 198,416) (468,338) (2,251,1011 - - 1,084,881 843 Met cash flares from f(or1 af:^.r3tio-g acti"Ities 2,000,759 1,483,672 235,434 2,144,539 1,988 5.566.392 727,571 Cash Flows (rate liorl Noo-pital rirraricing ActlYWIft •fran;rot, i,r 60,143 1,629,672 16,000 1,706.015 288,671 •Trap-,cos.;ut 11.739,999) (609,379) (136448) (359,057) 12,045,073) - Dther 31,177 • - 1,74VV 1,774,964 Pro�idrr relict funt"67g received 277,000 Z77,000 " Pi'otider r6icf E¢ndin ;tpsid - - - (2,019,0001 (2,019,000) latertund interest received - - - 26,059 Interfund loan receipts - - 72,517 Met cash flows from (for) noncapital financinn.c(Mties (1,708,8t2) 1609,3791 176,505) ii12s1za� 1,400,730 (1,106,094) 387,247 Cash Flews from iiar) Capital and Related Financing Activities Prtrn-.ipal paymr-nt5 on long term debt (180,001) (559,999) - (910,OIX1) (1"A49) 11,849,449) Interest payments crr luny -term debt (163,450) (110,550) (561 (301026) (868,030) Acqu;ytion cf prcptrty, plank. arid eyulpmet+t (514,5(12) 1467,588) (3,204) (919,9801 (91802) 11,915,076) (490,5121 Principal payments on Capital. lease rhli3m;rjos - - (48,0p6} - (46,000) Capital contribution: - 388,239 - - 308,2311 Intrtiund lmnt:iplcpuyincnts - - (72,517) - (77,517) InteifunJ,,rte-rest peyntents - OS 26,059) Net cash 11-5 from (for) capital and rely L":1lini;Kink ACtilY16E5 1057,953i 1749,898• (3,2041 12,538,560) t239,277) 14,3688892) 1490,512i. Cash Flows f,on Investing Act v;ttr:5 lnvc tm nlin-om vrc-7eivad { 4 53Hi M 6911 19791 (291576) _ (36.1771 (104,%1) U6,268) I let increase In cash and investments (590.544) 110,704 154,746 (535.725) 1,127,264 266,445 6015,038 Cash and Investments, bmginning of year 0,959.029 6, 369.503 71,125 14,458,458 7,233,689 37,102,604 3,577,030 Cacti and Imestrnents end cl ;caf 5 0 119.205 5,480 207 225 871 13,922,733 0.360953 37 369 049 4,185,076 Recgr,C'lletlrn 0' caeh and lnvastment5 to tht 3tatoment of NPt Positicn: Cnrrc,t assets 11,056,461 5,790,009 225,871 17,529,.783 8,3450,953 34,%3,077 4,185,076 rlgn,tirrant as,,A5 322,824 690,198 1,392,950 2,405,972 Total ;ash and investments $ 9,379 285 G 480,207 235,871 13,922,733 8,360,953 37,369 049 4,185 076 (cont$nuedl PRELIMI DRAFT 27 FOR FOR PORES 1 +�ibit E-7 ccntirrt-ed City of Seward, Alaska Proprietary Funds Statoment of Cash Flows, continued t,vaor Enterf+rae Von,]= nonMniior otai Internal .-.__ __. _..._ _ .. - FICAnccnre Emcrprisc %nterprise Service Ycur&iued Gcr.ernfjer 31-2021 Electric Hurliur SM.IC. F401me, Funds Funds Funds RECor+crliatlon of eam;ngs (tmsl from op_rat:or to nel -CnSil frvw5 from rrar) or,,tiny Imenei'.0557f,7,mcz-o,,rr, i'9,151 °s,St4 I,,430,554)1 4,255,416 402,642 3,660,379 277,8K Adjusime.,t. L, recc,ilc• c'.wmn u: ilo5 I fturn opelat;cu;� 1� list Cjsh fluty frQnl iIul I operaGr,g a[[i,nlIts: brprG•aat�nn 1.606.346 1.577.00E 1,650,184 1,509,124 796,304 7,088,964 343,940 C^1hc•r u:��f><r ar.;:1c revenues (expenses) 579,263 132 (10,000) 569,395 438 Hour,esh.^>:pr--mo-PERSon-behatf 72,931 5S,Go4 11,D29 - 42,761 195,325 - Intn;ase (dloe.,O in alCman[c fcv dQuULf ul -_ouotS • 8,254 3851000 (81) 393,203 flrcrusei douc-a SE• 1n a&sei: and deterred rwtflo•M of re.nurc.�•-. Reteivahle; (836.802) (64.718) (13,632) (3,816,001) (1,152,760) (5,993,913) 405 Prepaid e>.P-7n5z9 (2.825) (2,825) Inventory (50,080) - (6,872) (56,952) Other assets 12,DOW (2,000) Net t-nsion and OPE8 35setS (1Z5,893) (435,939) (110,673) (27t,088) (943,5931 Dcrcrrr-3o::rPn-of rr-r.,: rrr-s-pension and OPFB U-138 41.706 6,704 25,995 86,543 Inc.cd5c fd:`crcmce irand dt.(a r ,d in;ir_ns ci rcSuUfc.?s; Arcounts P"aN. 273.070 61,D96 (3sq) 644.000 25,1Z6 1,002,903 56.D48 l+lher pavahle; - - 058, 000) (158,0001 Accrued P3YToll and reLatea hahihw7� 31,450 (17,235) 3,727 (13,0(10) 1471) 4.471 49,030 ACciucxl r.ornpon>au.-d ,M,ncos (2,3671 114,999) 9,923 (7,546} (20,089) Cu.5tvm1r dptC6ts 55,9h2 i6,Go3) 2.709 52,059 - llncarnPd revenue (504) 27,394 (680.000) (653.2101 I1,;t Knsion it-d CIPF6lithiliR.ies Q4,a6Aj ps'., C1t1 (158,011) (484,976) Oercrrtd inildw+ of resuurcr=5 pension and OPES 142,874 +9©,92.1 78.41D 305,989 1,018,708 Nct Cash Flows from Operating Activities $ e,Cuil.7y`.+ 1.•s:;3.E72 7a,as4 2,144,539 1.988 5,866,392 717,571 See acrompapyfng notes to bmir financial :tatemems PRELIMINARY DRAFT City of Seward, Alaska Notes to Basic Financial Statements December 31, 2021 1. Summary of Significant Accounting Policies Reporting Entity The City of Seward, Alaska (the City) was incorporated June 1, 1912 as a home -rule city and operates under a Council -Manager form of government, The City provides the full range of municipal services as provided for by Alaska Statute. This includes police and fire protection, electric, water and wastewater services, library, parks and recreation, public improvements, planning and zoning, port and harbor, hospital and long-term care, and general administrative services. The City reports the Providence Seward Medical Care Center (PSMCC) as an enterprise fund in accordance with the provisions of GASB Statement No. 61, The Financial Reporting Entity: Omnibus. In 2013, the City entered into a contractual agreement with a nonprofit organization as co-signees to a federally funded health clinic program. The nonprofit organization is legally separate and does not meet the criteria under GASB 61 for inclusion as a component unit. However, many activities associated with the clinic are reported in the SCHC Special. Revenue Fund as the City is the named grantee on the primary operating grant. The hospital and long-term care facilities (the PSMCC) are owned by the City of Seward. The facilities are managed by Providence Health Et Services - Washington, a nonprofit corporation (the Corporation), under a management and operating agreement. Under the operating agreement, the Corporation is responsible for day to day management of the hospital and long-term care facilities in exchange for a management fee, All financial risks and rewards from the operations of the hospital and long-term care facilities accrue to the City. The City is responsibte for debt obligations, including payment of revenue bonds through revenues generated at the PSMCC. The City pays for all capital costs of the healthcare facilities and is legally obligated to finance potential deficits, Government -Wide and Fund Financial Statements The accounting policies of the City conform to accounting principles generally accepted in the United States of America as applicable to governments. The following is a summary of the more significant policies: The government -wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government. All fiduciary activities are only reported in the fund financial statements. Gavernrrmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely primarily on fees and charges to external parties. As a general rule the effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this general rule are allocated administration fees and charges between the enterprise funds and the various other funds and departments. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. 29 PREL! ►` F� Y Dk,AFT City of Seward, Alaska Notes to Basic Financial Statements, Continued The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) fees, fines and charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes, investment income and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government -wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. The remaining governmental and enterprise funds are being aggregated and reported as nonmajor funds. The internal service funds are combined into a single aggregated presentation in the proprietary fund financial statements. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government -wide and proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when transactions occur and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized as revenues in the year for which they are Levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The Fiduciary Fund has no measurement focus but uses the accrual basis of accounting. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers atl revenues, except reimbursement grants, to be available if they are collected within 60 days after year end. Reimbursement grants are considered available if they are collected within one year of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, pensions and other postemployment benefits are recorded only to the extent they have matured. Property taxes, sales taxes, charges for services, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue in the current period. Most other revenue items are considered to be measurable and available only when received by the government. PRELIM NARY GRAFT 30 �J EL, 0 N I �r City of Seward, Alaska Notes to Basic Financial Statements, Continued The City reports the following major funds based on the required quantitative criteria: Major Governmental Funds: The General Fund is the government's main operating fund. it accounts for all financial resources of the general government, except those required to be reported in another fund. Major Proprietary Funds: The Electric Enterprise Fund accounts for all activities related to the operation of the City's electric utility. The Harbor Enterprise Fund accounts for the marine -related activities of the City's harbor. The Seward Marine Industrial Center (SMiC) Enterprise Fund accounts for marine -related services on the east side of Resurrection Bay. The Healthcare Facilities Enterprise Fund accounts for the healthcare facilities, local hospital and long-term care facilities. The City also reports two Internal Service Funds which account for the activities relating to the City's motor pool activities of the other funds and compensated absences of the governmental funds. The Motor Pool Internal Service Fund reports revenues charged to the other funds based on rental fees and capital lease payments designed to cover the cost of the tease payments and to fund depreciation. The Compensated Absences Internal Service Fund accounts for the accrual and payment of compensated absences of the governmental activities. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internatly dedicated resources are reported as general revenues rather than as program revenues. In addition, general revenues include all taxes, investment income, and State of Alaska entitlement revenues. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. Operating expenses for the proprietary funds include the costs of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities, and deferred inflows of resources and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures / expenses during the reporting period. Actual results could differ from those estimates. PRELIMINARY DRAFT City of Seward, Alaska Notes to Basic Financial Statements, Continued Cash and Investments A central treasury is used to account for the City"s cash and investments to maximize investment income. Investment income is atlocated among the funds based on their respective cash balances. Investments are stated at fair value. For purposes of the statement of cash flows, the City has defined cash as demand deposits and aft investments maintained in the cash management pool, regardless of maturity period, since various funds use the cash management poot essentially as a demand deposit account. inventory Inventories are valued at cost in governmental funds and at the lower of cost or market in the proprietary funds. Cost is determined by the first -in, first -out method. The cost is recorded as an expenditure or expense at the time individual inventory items are consumed (consumption method). Restricted Assets Restricted cash and investments are held in capital project and debt service funds, and are restricted because their use is limited by bond covenant or grant agreements for the construction of capital assets. Accounts Receivable All trade and tax receivables are shown net of an allowance for uncoltectible accounts, determined by historical experience. Ambulance receivable allowance is recorded at 30 percent, based on historical recoveries. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government wide and fund financial. statements. Cost is recorded as an expenditure or expense as the prepayment is applied (consumption method). Interfund Balances Activity between funds that are representative of tending/borrowing arrangements outstanding at the end of the year are referred to as either "due to I from other funds" (i.e., the current portion of interfund loans) or "advances to / from other funds" (i_e., the noncurrent portion of interfund loans). All other outstanding balances between funds are reported as "due to / from other funds," Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances." Capitol Assets Capital assets, which include property, plant, equipment and infrastructure assets (.e.g. roads and similar items), are reported in the applicable governmental or business -type activities columns in the government -wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $2,500 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. Acquisition value is the price that would be paid to acquire an asset with equivalent service potentiat in an orderly market transaction at the acquisition date. In the case of the initial capitalization of infrastructure assets, the City chose to include all such items, regardless of their acquisition date. 32 PRELIMINAR DRAFT FOR l} ;a L: t'w}r r'UR}-,G­,,t �:7 or,,IL City of Seward, Alaska Notes to Basic Financial Statements, Continued The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the useful life of the asset are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business -type activities is included as part of the capitalized value of the assets constructed. Capital assets reimbursed by outside entities, including granting agencies, are recorded as capital contributions in the enterprise funds. Property, plant, and equipment of the City is depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings and improvements 20-40 years Infrastructure 10-50 years System infrastructure 20-50 years Machinery and equipment 3-8 years Improvements other than buildings 3-40 years Accrued Compensated Absences The City allows employees to accumulate earned but unused vacation and sick leave benefits. All accrued compensated absences is accrued when incurred in the government -wide, proprietary fund, and governmental fund financial statements. Accrued compensated absences that is earned in the governmental funds is accounted for in the Compensated Absences Internal Service Fund. Long-term Debt In the government -wide and proprietary fund financial statements, long -terra debt and other long- term obligations are reported as liabilities in the Statement of Net Position. Bond premiums and discounts are amortized over the life of the bonds on a straight-line basis, which approximates the effective interest rate method. Bonds payable as reported include amounts of unamortized bond premiums or discounts. In the fund financial statements, governmental fund types recognize bond premiums and discounts during the current period. The face amount of the debt issues are reported as other financing sources. Premiums received on debt issuances are reported as other financing sources white discounts on debt issuances are reported as other financing uses. Principal payments on debt are reported as debt service expenditures. Fund Balance and Fund Balance Flow Assumptions In the fund financial statements, governmental funds report aggregate amounts for five classifications of fund balances based on the constraints imposed on the use of these resources. The nonspendable fund balance classification includes amounts that cannot be spent because they are either (a) not in spendable form —prepaid items or inventories; or (b) legally or contractually required to be maintained intact. 33 PRELIA NARY DRAFT City of Seward, Alaska Notes to Basic Financial Statements, Continued The spendable portion of the fund balances comprises the remaining four classifications: restricted, committed, assigned, and unassigned. Restricted fund balance - This classification reflects the constraints imposed on resources either externally by creditors, grantors, contributors, or laws or regulations of other governments; or imposed by law through constitutional provisions or enabling legislation. Commuted fund balance - These amounts can only be used for specific purposes pursuant to constraints imposed by formal resolutions of the City Council —the government's highest level of decision making authority. Those committed amounts cannot be used for any other purpose unless the City Council removes the specified use, also through resolution. This classification also includes contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. Assigned fund balance - This classification reflects the amounts constrained by the City's "intent" to be used for specific purposes, but are neither restricted nor committed. City Resolution 2009- 131 delegates authority to assign fund balance to the City Manager and the Finance Director. Assigned fund balances, by default, include all remaining amounts (except negative balances) that are reported in governmental funds, other than the General Fund, that are not classified as nonspendable and are neither restricted nor committed. Unassigned fund balance This fund balance is the residual classification for the General Fund. It is also used to report negative fund balances in other governmental funds. When both restricted and unrestricted resources are available for use, it is the City's policy to use externally restricted resources first, then unrestricted resources —committed, assigned, and unassigned_ in order as needed. Net Positron and Net Positron Flow Assumptions Net position represents the residual interest in the City's assets and deferred outflows of resources after liabilities and deferred inflows of resources are deducted and consists of three components: net investment in capital assets, restricted, and unrestricted net position. Net investment in capital assets includes capital assets; net of accumulated depreciation, reduced by outstanding debt incurred to acquire, construct, or improve those capital assets, excluding unexpended proceeds. The restricted category represents the balance of assets restricted for general use by external parties (creditors, grantors, contributors, or laws or regulations of other governments) or imposed by law through constitutional provisions or enabling legislation. Unrestricted net position consists of the net position not meeting the definition of either of the other two components. Sometimes the City will fund outlays for a purpose from both restricted and unrestricted resources. In order to calculate the amounts to report as restricted and unrestricted net position in the government - wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the City's policy to consider restricted net position to have been depleted before unrestricted net position is applied. 34 101RE1._� ri�w C•I,ti�ll'4,�,�iPJ City of Seward, Alaska Notes to Basic Financial Statements, Continued Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments for expenditures are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration in the General Fund during the year. However, it is the City's policy to stop issuing purchase orders in early December. As a result, there are no outstanding encumbrances at December 31, 2021. Outstanding purchase orders, if any, at December 31, are cancelled and new ones are issued in the subsequent year. Unearned Revenue Amounts received from grantor agencies, which are restricted as to use and have not been expended for the intended use, are shown as unearned revenue. Grant and Other Intergovernmental Revenues In applying the measurable and available concepts to grants and intergovernmental revenues, the legal and contractual requirements of the numerous individual programs are used as guidance. There are, however, essentially two types of these revenues. In one, monies must be expended on the specific purpose or project before any amounts are considered "recognizable", therefore, revenues are recognized based upon expenditures recorded. in the other, monies are virtually unrestricted as to purpose of expenditure and are usually revocable only for failure to comply with prescribed compliance requirements. These resources are reflected as revenues at the time of receipt or earlier if the measurable and available criteria are met. Pension Plans With the exception of certain Electric Fund employees, substantially all other employees of the City participate in the Public Employees' Retirement System (PERS) administered by the State of Alaska. Certain Electric Fund employees participate in the International Brotherhood of Electrical Workers (IBEW) Defined Benefit Pension Plan. Pension and Other Postemployment Benefits (OPEB) For purposes of measuring the net pension and OPEB assets and liabilities, deferred outflows of resources and deferred inflows of resources related to pensions and OPEB, and pension and OPEB expense, information about the fiduciary net position of the Public Employees' Retirement System (PER5) and additions to/from PERS's fiduciary net position have been determined on the same basis as they are reported by PERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Deferred Outflows of Resources and Deferred inflows of Resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net assets that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. Generally, the City reports deferred charges on bond refunding and pension and OPEB related items as deferred outflows of resources. These items are amortized to expense over time. 35 F r P City of Seward, Alaska Dotes to Basic Financial Statements, Continued In addition to the liabilities, the financial statements may also present deferred inflows of resources. Deferred inflows of resources represent an acquisition of net assets that applies to a future period and will not be recognized until later. The City reports certain pension and OPEB related items as deferred inflows of resources. These items are amortized as a reduction of expense over varying periods of time based an their nature. Property Taxes Property taxes are liens on the assessed value of taxable property as of January 1 . Pursuant to Alaska Statutes, the City establishes the mill rate and tax levy on or before June 15. The City is located within the Kenai Peninsula Borough, which acts as the City's agent in the billing and collection of property taxes. Tax bills for one-half of the taxes are mailed prior to July 1 and are payable on August 15; tax bills for the second -half of the taxes are mailed by October 1 and are payable on November 15. City property tax revenues are recognized in the fiscal year in which they are collectible and available (collected within sixty days after year-end) to finance expenditures of the fiscal year. At December 31, the delinquent real and personal property taxes not currently available are reflected as deferred inflows of the General Fund. 2. Stewardship, Compliance, and Accountability Allocation of Sales Tox Revenues When the City transferred the operations of the Hospital to Providence Seward Medical and Care Center an July 1, 1996, the City agreed to allocate 1% of the sates tax for the benefit of the Hospital. During construction, the allocated sates tax was used to offset losses and transition costs. Subsequent to completion of the construction, the allocated sales tax has been used to fund the debt service on the Hospital general obligation bonds. Upon maturity of hospital bonds, sates tax revenues will be used to fund healthcare capital and operating costs, and debt service on long-term care facility bonds, if necessary. All sales tax revenue is recorded in the General Fund. The allocated portion is then transferred to the Healthcare Facilities Enterprise Fund for debt service. 3. Cash and Investments The City of Seward maintains a central treasury that is available for use by all funds. Each fund's portion of the central treasury is displayed on the balance sheet as "cash and investments" or in the case of "negative cash," is included in "due to other funds." Investments City statutes authorize the City to invest in obligations of the U.S. Treasury and U.S. agencies, bankers' acceptances, repurchase agreements, commercial paper issued by corporations or businesses and having the highest rating of a nationally -recognized rating service and maturing within nine months, certificates of deposit insured by federal depository insurance or secured by eligible collateral held by a third party in the City's name, and investments through the Alaska Municipal League Investment Pool (AMLIP). The City's investment policy does not specify a maximum investment maturity, but the City generally invests funds for less than five years from the date of purchase. The City has complied with its investment policy throughout the year. The City's investments are recorded at fair value. 36 raUR"OSES ONLY City of Seward, Alaska Notes to Basic Financial Statements, Continued The AMLIP is an external investment pool. Alaska Statute 37,23 establishes regulatory oversight of the Pool. The law sets forth numerous requirements regarding authorized investments and reporting. On a monthly basis the investments in the Pool are reviewed for fair value by an independent pricing service. The values of investments in the AML Pool are approximately equal to fair value. Reconciliation of Cash and Investment Balances The following is a reconciliation of the City's cash and investment balances to the financial statements as of December 31, 2021: Government -Wide Statement of Net Position Cash and investments 53,120,960 Restricted cash and investments 2,405,972 Total Cash and Investments 5 55.526.832 As of December 31, 2021, the City had the following investments: Investment Fair Value U.S. treasury securities (SLGS) S 11,158,625 U.S. government bonds 5,225,965 Total Subject to Interest Rate Risk 16,384,590 Carried at Amortized Cost Pooled investments 1 AMLIP 11,281,400 Certificates of deposit 12,874,089 Money market account 3,209,973 Total Investments 43,750,052 Cash 11,776,780 Total Cash and Investments $ 55,526,832 Investment Maturities (in Years) Less than 1 year 1 to 5 years 5,040,525 6,118,100 - 5,225,965 5,040,525 11,344,065 (The remainder of this page intentionally left blank.) Over 5 years 37 COI i' a "RPOSFS ON[ v City of 'Seward, Alaska Notes to Basic Financial Statements, Continued Farr Value Measurement The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The City's investments that are classified as Level 2 are valued using third party pricing models provided by brokerages. The City has the following recurring fair value measurements as of December 31, 2021: Total Investments by fair value level: U.S. treasury securities (5LG5) $ 11,158,625 U.S- government bonds 5,225,965 Total investments at fair value 16, 384, 590 Investments measured at amortized cost: Pooled investments 1 AMLIP 11,281,400 Certificates of deposit 12,874,089 Money market account 3,209,973 Total investments at amortized cost 27, 365,462. Total Investments S 43,750,052 Restricted Cash and Investments Level Level Level 11,158,625 5,225,965 16,384,590 The City maintains bond redemption and reserve accounts as required by bond covenants. The balances at December 31, 2021 are as follows: Electric Enterprise Fund Harbor Enterprise Fund Healthcare Enterprise Facilities Fund $ 322,824 690,198 1,392,950 Total Restricted for Bond Retirement $ 2,405,972 The City also includes in restricted cash and investments amounts that have been designated for capital projects. The total amount of restricted cash and investments that has been designated for capital projects follows: Harbor Enterprise Fund 5 2,289,905 City of Seward, Alaska Notes to Basic Financial Statements, Continued Custodial Credit Risk The fair value of the City's investments at year-end is shown below. GASB Statement 3, as amended by GASB Statement 40, establishes categories as an indication of the level of custodial credit risk involved in the investments. All of the City's remaining investments are in the category of least risk and include investments that are insured or registered in the City's name, or securities that are held by the City or its agent in the City's name. All of the United States treasury bills, treasury notes, and United States agency securities are held in custodial accounts in the U.S. Bank and Bank of New York Trust Departments and are recorded in the City's name, in accordance with safekeeping agreements. U.S. Bank and Bank of New York are not counter parties to security transactions. To limit exposure to custodial credit risk, City policy requires that all deposits and investments be fully insured or collateralized. As of December 31, 2021, $947,000 of the Healthcare Facitities Enterprise Fund Cash balance attributable to PSMCC was subject to custodial credit risk. interest Rate Risk The fair value of the City's fixed -income investments fluctuate in response to changes in market interest rates. Increases in prevailing interest rates generally translate into decreases in fair value of those investments. Fair values of interest rate -sensitive instruments may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument, and other general market conditions. The City manages interest rate risk by allocating specific percentages of the portfolio over specified time periods, and generally holds investments for less than five years, which minimizes the sensitivity of fair value to changes in market interest rates. The City has no formal policy relating to a specific deposit or interest rate risk. Option Risk Option risk is the risk that an investment's counterparty may exercise a right embedded in the investment - an embedded option. The City invests in securities issued by U.S. government agencies that contain call provisions. The exercise of the call option by the counterparty occurs during times of declining interest rates; therefore the City is exposed to the risk of having to reinvest at a lower interest rate. In the table above, securities are categorized according to the final maturity, regardless of call option dates. If call options were exercised at the next possible call date, many of the callable securities would mature in less than one year. Concentration of Credit Risk The City's investment policy places no limit on the amount that can be invested in any one issuer, Approximately 5% of the total portfolio is held with the Federal Farm Credit Banks Funding Corporation, 5% is held with the Federal Home Loan Mortgage Corporation, and 6% is held by the Resolution Funding Corporation. Credit Risk Generally, credit risk is the risk that an issuer of an investment wilt not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. All of the U.S. Treasuries (SLGS) and Bond investments are rated AAA by Standard and Door's. AMLIP investments are rated AAAm. City of Seward, Alaska Notes to Basic Financial Statements, Continued At December 31, 2021, the City's investments in U.S. Treasuries (SLGS) and Bond investments implicitly guaranteed by the U.S. Government were rated AAA. The City's investment policy specifies the types of investments that can be purchased in order to limit credit risk. The City may invest in obligations of the United States government, its agencies and instrumentalities; insured or collateralized certificates of deposit; savings accounts; collateralized repurchase agreements; commercial paper maturing within nine months issued by corporations having the highest rating of a national rating agency; bankers' acceptances; and the State investment pool. Credit risk is mitigated by limiting the eligible investment options. 4. Accounts Receivable Receivables at December 31, 2021, for the City's individual mayor fund, and Nonmajor funds in the aggregate including applicable allowances for doubtful accounts, are as follows: Governmental Funds Enterprise Funds Total General Nonmajor Governmental Fund Funds Funds Electric Harbor Receiva btes: Taxes S 947,732 947,732 - - Accounts 147,569 147,569 1,558,989 162,773 Grants and shared revenues 59,981 238,367 298,348 - Accrued interest 36,074 - 36,074 - - Other - - 680,423 1,657 Gross receivables 1,191,356 238,367 1,429,723 Z,239,412 164,430 Less: allowance for doubtful accounts - (70,763) (39,9%) Net receivables $ 1,191,356 238,367 1,429,723 2,168,649 124,434 Enterprise Funds Nonmajor Total Total Healthcare Enterprise Enterprise Primary SMIC Facilities Funds Funds Government Receivables: Taxes 5 - - 947,732 Accounts 41,215 6,447,000 349,910 10,559,8B7 12,885,96C Grants and shared revenues - - 298,348 Accrued interest - 36,074 Other 132 510,000 1,155,100 2,347,312 2,347,312 Gross receivables 41,347 8,957,000 1,505,010 12,907,199 16515,426 Less: altowance for doubtful accounts (2,052,000) (15,745) (2,178,504) (4,357,0081 Net receivables S 41,347 6.905,000 1,489,255 10,728,695 12,158,418 40 FOR QI�,US&Ohl City of Seward, Alaska Notes to Basic Financial Statements, Continued 5, Capital Assets Capital asset activity for the year ended December 31, 2021 was as follows: Balance Balance January 1, Additions and Deletions and December 31, Governmental Activities 2021 Reclassifications Reclassifications 2021 Capital assets not being depreciated: Land and land improvements $ 5,509,589 Construction in progress 370,275 Total assets not being depreciated 5,879.864 Capital assets being depreciated: Buildings 71,675,025 Improvements other than buildings 28,468,235 Machinery and equipment 10,587,372 Total assets being depreciated 110,730,632 Less accumulated depreciation for: Buildings 34,735,444 Improvements other than buildings 17.663,508 Machinery and equipment 8,784,006 Totat accumulated depreciation 61,182,958 Total capital assets being depreciated 49,547,674 Governmental Activities Capital Assets, net $ 55,427, 538 5,509,589 481,391 (427,971) 423,695 481,391 (427,971) 5,933,284 98,612 (1,119,263) 70,654,374 826,313 - 29,294,548 168,246 10,755,618 1,093,171 (1,119,263) 110,704,540 1,754,348 (449,427) 36,040,365 646.245 18,309,753 314,018 9,098,024 2,714,611 (449,427) 63,448,142 (1,621,440) (669,836) 47,256,398 (1,140,049) (1,097,807)) 53,189,682 (The remainder of this page intentionally left blank.) 41 �Fi U i�C;CI= ONLV City of Seward, Alaska Notes to Basic Financial Statements, Continued Business -type Activities Capital assets not being depreciated: Land and land improvements Construction in progress Total assets not being depreciated Capital assets being depreciated: Buildings Infrastructure Improvements other than buildings Machinery and equipment Total assets being depreciated Less accumulated depreciation for: Buildings Infrastructure Improvements other than buildings Machinery and equipment Total accumulated depreciation Total capital assets being depreciated Balance Balance January 1, Additions and deletions and December 31, 2021 Reclassifications Reclassifications 2021 S 30,703,256 - 30,703,256 361,636 590,182 951,818 31,064,392 590,182 31,655,074 37,201,367 901,774 (41,874) 38,061,267 51,185,227 51,185,227 140,063,321 126,178 140,189,499 29,713,568 1,218,454 (249,289) 30,682,733 258,163,483 2,246,406 (291,163) 260,118,726 21,950,307 1,022,922 (25,125) 22,948,104 5,133.7D2 1,991,365 7,125,C67 106,070,650 3,271,210 109,341,860 22,079,448 1,147,307 (194,993) 23,031,762 155,234,107 7,432,604 (220,118) 162,446,793 102,929,376 (5,186,398) (71.045) 97,671,933 Business -type Activities Capital Assets, net $ 133,994,268 (4,596,216) (71,045) 129,327,007 " The ending balances include $8,535,955 and $6,560,255 of equipment cost and accumulated depreciation, respectively, related to the Motor Pool Internal Service Fund. (The remainder of this page intentionally left blank.) 42 FOR UISC08 '101~ r'l,aRriosES 4NLY City of Seward, Alaska Notes to Basic Financial Statements, Continued Depreciation for the year ended December 31, 2021 was charged to the functions as follows: Governmental Activities General government $ 81,904 Public safety 202,606 Public works 712,143 Parks and recreation 64,429 Library 242,428 Ctinic 14,611 sea Life Center 1,396,490 Total Governmental Activities $ 2,714,611 Business -type Activities Electric $ 1,606, 346 Harbor 1,527,006 5MIC 1,650,184 Healthcare facilities 1,509,124 Water 417,881 Wastewater 353,183 Parking 25,Z40 In addition, depreciation on capital assets held by the City's Motor Pool internal service fund is charged to the various functions based on their usage of the assets. _ 343,840 Total Business -type Activities 7,432,804 (The remainder of this page intentionally left blank.) 43 P R F I_.4 DRAFT ONI v City of Seward, Alaska Notes to Basic Financial Statements, Continued 6, Interfund Receivables, Payables and Transfers A schedule of interfund balances and transfers as of and for the year ended December 31, 2021, follows. interfund balances typically result from short-term operating or capital advances. Transfers typically result from capital matching, operating subsidies, and payment in lieu of taxes. Transfers From General Fund to: SMIC Enterprise Fund S 60,143 Healthcare Facilities Enterprise Fund 1,629,872 Nonmajor Enterprise Funds 16,000 Nonmajor Governmental Funds 1,743,970 Total transfers from General Fund 2,949,985 From Electric Enterprise Fund to: General Fund 1,351,318 Motor Pool Internal Service Fund 288,671 Nonmajor Governmental Funds 100,000 From Harbor Enterprise Fund to: General Fund 530,349 Nonmajor Governmental Funds 79,030 Fro►n SMIC Enterprise Fund to: General Fund 136,648 From Nonmajor Enterprise Funds to: General Fund 268,461 Nonmajor Governmental Funds 90,996 "fetal Transfers From Other Funds $ 5,795,058 The City has one outstanding interfund loan. In 2006, the Motor Pool Internal Service Fund and the Electric Enterprise Fund issued interfund loans in the total amount of $1,708,125 to the Healthcare Facilities Enterprise Fund for the purpose of paying the Seward General Hospital PERS unfunded pension liability. Repayment is scheduled over twenty years bearing interest at 5.25%. In 2016, the Electric Enterprise Fund portion of the loan was retired. At December 31, 2021 the outstanding balance of the loan is $423,851 of which $76,324 is presented as current. At December 31, 2021 $22,252 of interest has been accrued on this loan. 44 City of Seward, Alaska Notes to Basic Financial Statements, Continued 7. Long-term Liabilities The following is a summary of long-term Liability transactions of the City for the year ended December 31, 2021: Governmental Activities General obligation bonds - $3,480,000 2012 General Obligation bonds, due in annual installments of $115,000 to $240,000. Plus interest at 4.0% to 5.0% through July 1, 2036 December 1, 2036 $2,890,000 2018 General Obligation fronds, due in annual installments of $110,000to $200,030, plus interest at 2.5% to 5.0% through May 1, 2037 $2,180,000 2021 General Obligation Refunding bond, due in annual installments of $100,000 to $200,000, plus interest at 4.0% to 5.0% through December 1, 20361 Balance at Balance at January 1, December 31, 2021 Additions Retirements 2021 5 2,780,000 2,780.000 2,590,000 2,180,000 Due Within One Year 110,000 2,480,000 115,000 Accrued compensated absences 416,115 465,145 416,115 Total Governmental Activities Lang -term Liabilities $ 5,786,1in 2,645,145 3,306.115 Plus unamortired bond premium 2,180,000 100,000 465,145 106,240 5,125,145 321,240 656,563 Liquidation of governmental accrued compensated absences is made by the Compensated Absences Internal Service Fund. All other debt service payments above are made by the General Fund. 45 CJ DJ3rUSS!ON;_- 4URi'ICIEESONLY City of Seward, Alaska Notes to Basic Financial Statements, Continued Balance at Balance at Due January 1, December 31, Within Business -type Activities 2021 Additions Retirements 2021 One Year Revenue bonds: $17,135,000 refunding tong -term care facility bands, due in annual installments of $870„000 to $1,405,000, plus interest at 2.0% to 5.0% through August 1, 2033 $ 15,210,000 910,000 14,300,000 950,000 $5,045,000 refunding electric revenue bonds, due in annual installments of $165,000 to $330,000, plus interest at 2.0% to 5.0%,through August 1,2038 4,565,000 180,000 4,385,000 190,000 $1,055,000 refunding harbor revenue bonds, due in annual installments of $200,000 to $230,000, plus interest at 4.0%, through December 1, 2021 230,000 730,000 $830,000 2014 A refunding harbor revenue bonds, due in annual installments of $65,000 to $100,000, plus interest at 5.0%, through April 1, 2025 465,000 - 851000 380,000 90,000 $2,575,000 2014 Brefunding harbor revenue bonds, due in annual installments of $2.10,000 to $320,000, plus interest at 3.0% to 5.0%,through April 1, 2026 1,690,000 245,000 1,445,000 260,000 Notes payabte: $678,740 sewer note payable to State of Alaska Department of Environmental Conservation, due in annual installments of $36,688 including interest at 1.5% through September 1, 2035 487,308 29,379 457,929 29,820 46 $:OF nt 1Pf'r).,E . ()NI v City of Seward, Alaska Notes to Basic Financial Statements, Continued Balance at Balance at Due January 1, December 31, Within Business -type Activities 2021 Additions Retirements 2021 One Year Notes payable, continued; $620,047 sewer note payable to State of Alaska Department of Environmental Conservation, due in annual installments of 535,944 including interest at 1.5%through September 11, 2035 5 479,602 28,749 450.853 29,181 $2,652,849 water note payable to State of Alaska Department of Environmental Conservation, due in annual installments of $156,844 including interest at 1.5% through April 1, 2027 1,034,891 - 141,321 893,570 143,440 Accrued compensated absences 178,167 158,078 178,167 158,078 61,045 Total Business -type Activities Long-term Liabilities $ 24,339,968 158,077 2,027,616 22,470,430 1,753,486 Plus unamortized bond premium 1,580,724 $ 24,051,154 (The remainder of this page intentionally left blank.) 47 City of Seward, Alaska Notes to Basic Financial Statements, Continued Annual debt service requirements to maturity on the bonds and notes follow: General Obligation Bonds Governmental Activities Year EndinS December 31, Principal Interest Total 2022 $ 215,000 196,481 411,481 2023 230,000 185,606 415,606 2024 235,000 175,544 410,544 2025 245,000 165,232 410,232 2026 255,000 152,856 407,856 2027.2031 1,465,000 581,636 2,046,636 2032-2036 1,815,000 246,931 2,061,931 2037 200,000 3,750 203,750 $ 4,660,000 1,708,036 6,368,036 Revenue Bonds Business -type Activities Year Ending December 31, Principal Interest. Total 2022 $ 1,490,000 757,806 2,247,806 7023 1,570,000 683,306 2,253,306 2024 1,635,000 604,806 2,239,806 2025 1,720,000 523,056 2,243,056 2026 1,700,000 432,256 2,132,256 2027-2031 7,530,000 1,473,695 9,003,695 2032-2036 4,220,000 378,425 4,598,425 2037-2038 645,000 34,125 679,125 $ 20,510,000 4,887,475 25,397,475 Notes Payable Business- type Activities Year Endin December 31, Principal Interest Total 2022 $ 202,441 27,036 229,477 2023 205,477 24,000 229,477 2024 208,560 20,917 229,477 2025 211,689 171,788 229,477 2026 214,864 14,613 229,477 2027-2031 482,007 37,999 520,006 2032.2035 277,314 10,416 287,730 $ 1,802,352 152,769 1,955,121 48 ,--OR Cal cuss:01'1 ONLY City of Seward, Alaska Notes to Basic Financial Statements, Continued 8. Revenue Bond Requirements Pledged Revenues The enterprise funds have pledged future customer revenues, net of specified operating expenses, to repay revenue bonds. Electric Revenue Bonds The Electric Enterprise Fund has pledged future electric customer revenues, net of specified operating expenses, to repay Electric Enterprise Fund revenue bonds. Proceeds from the bonds provided financing for construction and other capital improvements. The bonds are payable solely from electric customer net revenues and are payable through 2038. The total principal and interest remaining to be paid on the bonds is 55,803,075. Principal and interest paid for the current year and total customer net revenues were $343,451 and $2,511,404, respectively. Harbor Revenue Bonds The Harbor Enterprise Fund has pledged future harbor customer revenues, net of specified operating expenses, to repay Harbor Enterprise Fund revenue bonds. Proceeds from the bonds provided financing for construction and other capital improvements. The bonds are payable solely from harbor customer net revenues and are payable through 2026. The total principal and interest remaining to be paid on the bonds is $2,060,450. Principal and interest paid for the current year and total customer net revenues were $670,459 and $1,596,966, respectively. Healthcare Revenue Bonds The Healthcare Enterprise Fund has pledged future healthcare customer revenues, net of specified operating expenses, to repay Healthcare Enterprise Fund revenue bonds. Proceeds from the bands provided financing for construction and other capital improvements. The bonds are payable solely from healthcare customer net revenues and are payable through 2038. The total principal and interest remaining to be paid on the bonds is $17,533,950. Principal and interest paid for the current year and total customer net revenues were $1,474,004 and $5,764,964, respectively. (The remainder of this page intentionally left blank.) 49 PREU =09 -D IJSS:1,j'N City of Seward, Alaska Notes to Basic Financial Statements, Continued Revenue Requirements The Electric and Harbor revenue bonds also require that rates be maintained at a level that will produce net revenues after certain adjustments, equal to 1.3 and 1.2, respectively, times the amount required each year to pay the principal and interest. The City met these revenue requirements for both bonds in 2021. The bond coverage calculations are as follows: Electric Revenue Bonds Total revenues, excluding grants S 13,295,324 Total operating expenses, excluding depreciation (10,783,920) Available for Debt Service 5 2,511,404 Debt service payments: Principal Interest S 180,000 163,451 Total Debt Service Payments 5 343,451 Debt Coverage 7.31 Harbor Revenue Bonds Total revenges, excluding grants S 3,716,628 Total operating expenses, excluding depreciation (2,119,662) Available for Dent Service $ 1,596,966 Debt service payments: Principal S 560,000 Interest 110,549 Total Debt Service Payments $ 670,549 Debt Coverage 2.38 50 City of Seward, Alaska Notes to Basic Financial Statements, Continued 9. Fund Balances Fund balances, reported for the major funds and the nonmajor funds in the aggregate on the governmental funds balance sheet are subject to the following constraints: General Fund Nonmajor Funds Totals Nonpendabte: Prepaid items 5 545,560 545,560 Committed: Working capital 1,500,000 1,500,000 Hospital line of credit 500,000 500,000 Total committed 2,000,000 2,000,000 Assigned: Insurance 512,487 512,487 Other assignments 100,000 100,000 Capital projects - 2,645,898 2,645,898 Public works - 2,150 2,150 Total assigned 612,487 2,648,048 3,260,535 Unassigned (deficit) 8,425,447 (10,478) 8,414,969 Total Fund Balances $ 11,583,494 2,637,570 14,221,064 A deficit of ($10,478) exists in the Teen Council Special Revenue Fund as a result of the City transferring funds out of the fund to pay for Hoops for Seward. IL is expected that this deficit will be eliminated through future revenues or transfers from the General Fund. 101. Employee Retirement Systems and Plans The City follows Governmental Accounting Standards Berard (GASB) Codification P20, Accounting for Pensions by State and Local Governmental Employees and GAS8 Codification P50, Accounting and Financial Reporting by Employers for Post -employment Benefits Other than Pensions. GASB Codification P20 and GAS8 Codification P50 establish uniform standards for the measurement, recognition, and display of pension and other post -employment benefits other than pensions (healthcare) expend itureslexpense and related liabilities, assets, note disclosure and applicable required supplementary information in the financial reports of state and local governmental employers. All full-time employees and certain permanent part-time employees of the City participate in the State of Alaska Public Employees' Retirement System (PERS). In addition to the pension plan, PERS also administers other post -employment benefit (OPEB) plans. 51 V111, ! City of Seward, Alaska Motes to Basic Financial Statements, Continued The system is governed by the Alaska Retirement Management Board. The benefit and contribution provisions are established by State law and may be amended only by the State legislature. The Administrator of the Plan is the Commissioner of Administration or the Commissioner's designee. Summary of Significant Accounting Policies. The financial statements for PERS are prepared using the accrual basis of accounting. Plan member contributions are recognized in the period in which the contributions are due. The City's contributions are recognized when due and a formal commitment to provide the contributions has been made. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. All plan investments are reported at fair value. PERS acts as the common investment and administrative agencies for the following multiple - employer plans: Plan Name Defined Benefit Pension Plan (DB) Defined Contribution Pension Plan (DC) Defined Benefit Other Postemptoyment Benefits (OPEB). Occupational Death and Disability Plan Alaska Retiree Healthcare Trust Plan Retiree Medical Plan Defined Contributior Other Postemployment Benefits (DC): Healthcare Reimbursement Arrangement Plan Other Postemployment Benefit Plans (OPEB) Occupational Death and Disability Plan (ODD) Type of Plan _ Cost -sharing, Defined Benefit Pension Defined Contribution Pension Cost -sharing, Defined Benefit OPEB Cost -sharing, Defined Benefit OPEB Cost -sharing, Defined Benefit OPEB Defined Contribution OPEB The Occupational Death and Disability Plan provides death benefits for beneficiaries of plan participants and long-term disability benefits to all active members within the System. For the year ended December 31, 2021 the employer contribution rate is 0.31%. Membership in the plan consisted of the following at June 30, 2021 (latest available report): Membership PERS Active plan members 24,481 Participating employers 151 52 POR D=US&ON PURr=O SES ONLY City of Seward, Alaska Notes to Basic Financial Statements, Continued Alaska Retiree Healthcare Trust Plan (ARHCT) Beginning July 1, 2007, the Alaska Retiree Healthcare Trust Plan (ARHCT), a Healthcare Trust Fund of the State, was established. The ARHCT is self -funded and provides major medical coverage to retirees of the System. The System retains the risk of loss of allowable claims for eligible members. The ARHCT began paying member healthcare claims on March 1, 2008. Prior to that, healthcare claims were paid for by the Retiree Health Fund (RHF). For the year ended June 30, 2021 (latest available information) employer contributions were 7.43°r of annual payroll. Membership in the plan consisted of the following at June 30, 2021 (latest report available): Membership PERS — Inactive plan members or beneficiaries currently receiving benefits 36,704 Inactive plan members entitled to but not yet receiving benefits 5,112 Inactive plan members not entitled to benefits 10,366 Active plan members 10,066 Total plan membership 62,248 Retiree Medical Ptah (RMP) The retiree medical plan provides major medical coverage to retirees of the DC plan. The plan is self -insured. Members are not eligible to use this plan until they have at least 10 years of service and are Medicare age eligible. For the year ended December 31, 2021 employer contributions were 1.07%. Membership in the plan consists of the following at June 30, 2021 (latest available report): Membership PERS Inactive plan members or beneficiaries currently receiving benefits 67 Inactive plan members entitled to but not yet receiving benefits 2,082 Inactive plan members not entitled to benefits 16,249 Active plan members 24,481 Total plan membership 42,879 Healthcare Reimbursement Arrangement Plan The Healthcare Reimbursement Arrangement Plan was established to allow medical expenses to be reimbursed from individual savings accounts established for eligible participants, Employer contributions are 39/0" of the average annual compensation of all employees in the plan. Membership in the plan consists of the following at June 30, 2021 (latest available report): Membership PERS Inactive plan members or beneficiaries currently receiving benefits 113 Inactive plan members entitled to but not yet receiving benefits 2,082 Inactive plan members not entitled to benefits 16,249 Active plan members 24,487 Total plan membership 42,931 53 City of Seward, Alaska Notes to Basic Financial Statements, Continued Investments The Board is the investment oversight authority of the system's investments. As the fiduciary, the Board has the statutory authority to invest the assets under the Prudent Investor Rule. Fiduciary responsibility for the Board's invested assets is pursuant to AS 37.10.210.390. State of Alaska Department of Treasury provides staff for the Board. Treasury has created a pooled environment by which it manages investments of the Board. Additionally, Treasury manages a mix of Pooled Investment Funds and Collective investment Funds for the DC Participant -directed Pension plans under the Board's fiduciary responsibility. Rate of Return The money -weighted rate of return expresses investment performance, net of investment. expense, adjusted for the changing amounts actually invested. The annual weighted rate of return, net of investment expense, for the year ended June 30, 2021 (latest available report) for the DB Plan for PERS is 29.77%, for the ARHCT plan is 30.00%, for the ODD Plan is 29.55%, and for the RMP is 29.54%. For additional information on securities lending, interest rates, credit risks, foreign exchange, derivatives, fair value, and counterparty credit risks, see the separately issued report on the Invested Assets of the State of Alaska Retirement and Benefits Plans at: httiJ._/1_treasur-,dor.alaska.,;ovlarmblRe,,sorts-and-Policies/Annual _Audited-Financial- Schedules.asr x. The long-term expected rate of return on pension and OPEB plan investments was determined using the building-block method in which best -estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are Combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and adding expected inflation. The best estimates of arithmetic real rates of return for each major asset class are summarized below for the PERS plan: Long -Term Expected Asset Class Real Rate of Return Broad Domestic Equity 6.63% Global Equity (non-U.S.) 5.41% Aggregate Bonds 0.76% Opportunistic 4.39% Real Assets 3 A 6% Private Equity 9.29% Cash Equivalents 0.13 54 OR DICK, S&ON r,URP=r;:yESQNLv City of Seward, Alaska Motes to Basic Financial Statements, Continued Discount Rote: The discount rate used to measure the total pension and QPEB liabilities and assets is 7.38%, which has not changed since the prior measurement period. The projection of the cash flows used to determine the discount rate assumes that Employer and State contributions will continue to follow the current funding policy, which meets State statutes. Based on those assumptions, the net pension and QPEB plans fiduciary net pension and OPEB liabilities and assets were projected to be available to make all projected future benefit payments of current ptan members. Therefore, the long-term expected rate of return on pension and QPEB plan investments were applied to all periods of projected benefit payments to determine the total pension and QPEB liabilities and assets. In the event benefit payments are not covered by the plan's fiduciary net position, a municipal bond rate would be used to discount the benefits not covered by the plan's fiduciary net position. The S&P Municipal Bond 24-Year Nigh Grade Index rate was 2.18% as of June 30, 2021. Employer and Other Contribution Rates. There are several contribution rates associated with the pension and healthcare contributions and related liabilities- These amounts are calculated on an annual basis. Employer Effective Rate: This is the actual employer pay -in rate. Under current legislation, this rate is statutorily capped at 22% of eligible wages, subject to the salary floor, and other termination costs as described below. This rate is calculated on all PERS participating wages, including those wages attributable to employees in the defined benefit plan. ARM Board Adopted Rate: This is the rate formally adopted by the Alaska Retirement Management Board. This rate is actuarially determined and used to calculate annual Plan funding requirements,. without regard to the statutory rate cap or the GASB accounting rate. Prior to July 1, 2015, there were no constraints or restrictions on the actuarial cost method or other assumptions used in the ARM Beard valuation. Effective July 1, 2015, the Legislature requires the ARM Board to adopt employer contribution rates for past service Liabilities using a level percent of pay method over a closed 25 year term which ends in 2039. This will result in lower ARM Board Rates in future years. On -behalf Contribution Rate: This is the rate paid in by the State as an on -behalf payment as mandated under current statute. Under state law, subject to annual appropriation, the state will contribute an on -behalf payment into the plan in an amount equal to the difference between the ARM Board Rate and the Employer Effective Rate. On -behalf contribution amounts have been recognized in these financial statements as both revenue and expenditures. GASB Rate: This is the rate used to determine the long-term pension and healthcare liability for plan accounting purposes. Certain actuarial methods and assumptions for this rate catculation are mandated by the Governmental Accounting Standards Board (GASB). Medicare Part D subsidies are not reflected in this rate. The rate uses a 7.38% discount rate. AIt,.P.ASRY ]RAFT 55 ,. r City of Seward, Alaska Notes to Basic Financial Statements, Continued Employer Contribution rates for the year ended December 31, 2021 are as follows: ARM Employer Board State Effective Adopted Contribution Rate Rate Rate PERS: Pension 15.54% 21.270A"' 8.11 % OPEB 6.46% 8.84% 0% Total PERS contribution rates 22.00% 30.11% 8.11% Termination Costs: if the City decides to terminate coverage for a department, group, or other classification of members, even if that termination results from the decision to divest of a particular City function, all affected employees in that department, group, or other classification of members become immediately vested in the plan. The City must pay to have a termination study compteted. The purpose of the study is to calculate the City's one-time termination costs. The costs represent the amount necessary to fully fund the costs of plan members who become vested through this process and for other changes in actuarial assumptions, such as, earlier than expected retirement, that arise from the act of termination of coverage. The City must pay a lump sum within 60 days of termination or arrange a payment plan that is acceptable to the PERS Administrator, For fiscal year 2021 the past service rate for PERS is 18.31%. Actuarial Assumptions: The total pension and OPEB liabilities on June 30, 2021 (latest available) were determined by an actuarial valuation as of June 30, 2021 which was rolled forward to the measurement date June 30, 2021. These actuarial assumptions were based on the results of an actuarial experience study for the period from July 1, 2013 to June 30, 2017. Investment return 1 discount rate Salary scale Payroll growth 7.38% per year (geometric), compounded annually, net of expenses Inflation - 2.5'% per year Productivity - 0.25% per year 2.75% per year (inflation + productivity) Total inflation Total inflation as measured by the Consumer Price Index for urban and clerical workers from Anchorage is assumed to increase 2.5% annually. Mortality (Pre -termination) Based upon 2013-2017 actual mortality experience, 100% (male and female) of RP-2014 healthy annuitant table with MP-2017 generational improvement. Mortality (Post -termination) Mortality rates based upon the 2013-2017 actual experience. 91 % of male and 96% of female rates of RP-Z014 health annuitant }t1a:..bl;e, th 017 is,generational AFT 56 �C)� Total turnover City of Seward, Alaska Notes to Basic Financial Statements, Continued Based upon the 2013-2017 actual withdrawal experience, Disability Incidence rates based on 2013-2017 actual experience. Post -disability mortality in accordance with the RP-2014 disability table with MP-2017 generational improvement. Disabilities are assumed to be occupational 75% of the time for peace officers/firefighters, 40% of the time for others. Retirement Retirement rates based upon the 2013-2017 actual experience, Deferred vested members are assumed to retire at their earliest unreduced retirement date. Marriage and age difference Healthcare cost trend rates Males are assumed to be three years alder than their wives. Females are assumed to be two years younger than their husbands. For others, 75% of male members and 70% of female members are assumed to be married. For peace officers/firefighters, 85 a of male members and 60% female members are assumed to be married. Pre-65 medical: 6.5% grading down to 4.5% Post-65 medical: 5.4% grading down to 4.5% Prescription drugs: 7.5% grading down to 4.5% EGWP: 7.5% grading down to 4.5%. As a result of the Latest experience study, the Board adopted updated actuarial assumptions for the June 30, 2018 actuarial valuation to better reflect expected future experience. In addition to the changes in assumptions resulting from the experience study, the following assumption changes related to the ARHCT plan have been made since the prior valuation: 1. Per capita claims costs were updated to reflect recent experience. 2. Normal cost for administrative expenses were updated to reflect recent experience. 3. Healthcare cost trends were updated to reflect the repeal of the Cadillac Tax. The changes of assumptions from the latest experience study created substantial deferred outflows of resources attributable to the City, as well as an. DPEB benefit recognized by the City for the State's proportionate share of DPEB plan expense attributable to the City. In some instances the reduction of revenues and expenses reported for the State's proportionate share of DPEB plan expense attributable to the City creates a net negative Pension/DPEB expense (net pensionlOPE8 benefit) which results in negative operating grants and contributions for certain functions reported on the Statement of Activities. PREUMINARY DRAFT 57 cnr r,in{ 1c"r1g1 r-M 1¢r1n-,Fq ONI w City of Seward, Alaska Notes to Basic Financial Statements, Continued Alaska Public Employee Retirement System (PERS) - defined Benefit Plan (DB) Plan Description. The City participates in the Alaska Public Employees' Retirement System (PERS), a cost sharing multiple employer defined benefit pension plan. PERS provides retirement benefits, disability and death benefits, and post -employment healthcare to plan members and beneficiaries. The Plan was established and is administered by the State of Alaska. Department of Administration. The Public Employee's Retirement System issues a publicly available financial report that includes financial statements and required supplementary in€ormation for PERS. This report may be obtained from the system at Pouch C, Juneau, Alaska 99811 or online at: httr.:l/doa.alaska.�ovIdrblr.ers. Pension Benefits. All tier employee benefits vest with five years of credited service. There are three tiers of employees based on entry date. Tier I employees enrolled prior to July 1, 1986, with five or more years of credited service are entitled to annual pension benefits beginning at normal retirement age 55 or early retirement age 50. For Tier 11 and ill employees enrolled after June 30, 1986, but before July 1, 2006, the normal and early retirement ages are 60 and 55, respectively. All tier employees with 30 or more years of credited service may retire at any age and receive a normal benefit. The PERS defined benefit is closed to new hires enrolled on or after July 1, 2006. New hires after this date participate in the PERS defined contribution plan (DC) described later in these notes. Currently there are 150 employers participating in PERS defined benefit plan and 151 participating in PERs defined contribution and OPEB plans. The DB Plan's membership consisted of the following at June 30, 2021 (latest available report): Inactive plan members or beneficiaries currently receiving benefits 36,704 inactive plan members entitled to but not receiving benefits 5,112 Inactive members not entitled to benefits 10,364 Active plan members 10,066 Total DB plan membership 62.246 Retirement benefits are calculated by multiplying the average monthly compensation (AMC) times credited PIERS service times the percentage multiplier. The AMC is determined by averaging the salaries earned during the five highest (three highest for peace officers/firefighters members or members hired prior to July 1, 1996) consecutive payroll years. Members must earn at least 115 days of credit in the last year worked to include it in the AMC calculation. The PERS pays a minimum benefit of $25 per month for each year of service when the calculated benefit is less. The percentage multipliers for peace officers/firefighters are 2% for the first ten years of service and 2.5 % for all service over 10 years. The percentage multipliers for all other participants are 2% for the first ten years, 2,25% for the next ten years, and 2.5% for all remaining service earned on or after July 1, 1986, All service before that date is calculated at 2%. Post -employment healthcare benefits are provided without cost to all members first enrolled before July 1, 1986. Members first enrolled after June 30, 1986, but before July 1, 2006, and who have not reached age 60 may elect to pay for major medical ben t EU KI I NARY DRAFT 58 nNI V City of Seward, Alaska Notes to Basic Financial Statements, Continued Post Retirement Pension Adjustments. Post retirement pension adjustments (PRPAs) are granted annually to eligible benefit recipients when the consumer price index (CPI) increases during the preceding calendar year'. PRPAs. are calculated by multiplying the recipient's base benefit, including past PRPAs, times: (a) 75% of the CPI increase in the preceding calendar year or 9%, whichever is less, if the recipient is at least 65 or on PER$ disability; or (b) 50% of the CPI increase in the preceding calendar year or 6 0, whichever is less, if the recipient is at least 60, or has been receiving benefits for at least five years. Ad hoc PRPAs, up to a maximum of 4%, may be granted to eligible recipients who first entered the PIERS before July 1, 1986, if the CPI increases and the financial condition of the fund will permit an increase. In a year where an ad hoc PRPA is granted, eligible recipients will receive the higher of the two calculations. Funding Policy. In April 2008 the Alaska Legislature passed legislation which statutorily capped the employer contribution, established a state funded "on -behalf" contribution, and required that employer contributions be calculated against all PER$ eligible wages, including wages paid to participants of the PIERS Tier IV defined contribution plan (DC) described later in these footnotes. The state legislature capped the rate at 22%, with the State contributing an on -behalf payment for the difference between the actuarial contribution and the cap. Salary Floor. During the 2511 legislation session, Senate Bill �25 passed, which established a June 30, 2008 salary floor under AS 39.35.255(a)(2). The salary floor is the total base salaries paid by an employer to active employees of the system as of the fiscal year ending June 30, 2008, The statute requires the Division of Retirement and Benefits (Division) to collect employer contributions at a minimum based on FY 2008 base salaries. Ernployee Contribution Rate. The City's PIERS active members are required to contribute 6.75%. Employer contributions for the year ended December 31, 2021, were: Pensions Other Post -Employment (DBL_ _ Benefits (DB) Total $ 716,692 170.648 887.340 Public Employees Retirement Plans For the year ended December 31, 2021 the State of Alaska contributed $455,867 (100% pension cost) on -behalf of the City, which has been recorded in the fund financial statements under the modified - accrual basis of accounting. In the government -wide financial statements the on -behalf contribution has been adjusted as of the measurement date June 30, 2021 to a total of ($210,690), to represent the pension/OPEB expense attributable to the State under the full accrual basis of accounting. D 59 r,� r 4 qc rr ,fir 11 PQ—,,h City of Seward, Alaska Notes to Basic Financial Statements, Continued Pension and OPEB Liabilities and Assets,. Pension and OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions and OPEB: At December 31, 2021, the City reported liabilities and assets that reflected a reduction for State pension and OPEB support provided to the City. The amount recognized by the City as its proportionate share of net pension and OPEB liabilities (assets), the related State support, and the total portion of the net pension and OPEB liabilities (assets) that were associated with the City were as follows: Defined Benefit: City's proportionate share of the net pension liability State's proportionate share of the net pension liability Total City's proportionate share of the ARHCT OPEB liability (asset) State's proportionate share of the ARHCT OPEB liability (asset) Total City's proportionate share of the ODD OPEB (lability (asset) City's proportionate share of the RMP OPEB liability (asset) Total City's share of net pension liabilities Total City's share of net OPEB (assets) Pension $ 6,658,097 ----__ 901,089 $ 7,559,186 OPEb $ (4,678,439) (610,964) $ (5,289,403) $ (112,865) $ (64,842) $ 6,658,097 $ (4,856,14� The net pension and OPEB liabilities and assets were measured as of June 30, 2021, and the total pension and OPEB liabilities used to calculate the net pension and OPEB liabilities and assets were determined by an actuarial valuation as of that date. The City's proportion of the net pension and OPEB liabilities and assets were based on the present value of contributions for FY2023 through FY2039, as determined by projections based on the June 30, 2021 valuation. The City's proportionate share and changes in the pension and OPEB liabilities and assets were as follows: June 30, 2020 June 30, 2021 Measurement Measurement Change Pension 0A512% 0.1815% 0.0303% OPEB: ARHCT 0.1511% 0.1824 a 0.0313% ODD 0.2547% 0.2561% 0.0014% RMP 0.2385% 0.2416% 0,0031% City of Seward, Alaska Notes to Basic Financial Statements, Continued Based on the measurement date of June 30, 2021, the City recognized pension and OPEB expense of $1,997,373 and ($1,859,570), respectively, for the year ended December 31, 2021. At December 31, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to pensions and OPEB from the following sources; Defined Benefit: Differences between expected and actual experience Changes of assumptions Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between City contributions and proportionate share of contributions City contributions subsequent to the measurement date Total Differences between expected and actual experience Changes of assumptions Net difference between projected and actual earnings on OPEB plan investments Changes in proportion and differences between City contributions and proportionate share of contributions City contributions subsequent to the measurement date Total Pension Deferred Outflows Deferred Inflows of Resources of Resources $ 29,497 2,625,604 236,564 381,526 - 5 618,090 2,655,101 OPEB ARHCT Deferred Outflows Deferred Inflows of Resources of Resources 50,355 $ 50,355 49,131 176,799 2,189,259 31,020 2,446,209 PRELIMINARY DRAFT s1l FOR l7xSCUSS'''O v PUR';'r;R1P-S City of Seward, Alaska Notes to Basic Financial Statements, Continued Differences between expected and actual experience Changes of assumptions Net difference between projected and actual earnings on DPEB plan investments Changes in proportion and differences between City contributions and proportionate share of contributions City contributions subsequent to the measurement date Total Differences between expected and actual experience Changes of assumptions Net difference between projected and actual earnings on DPEB plan investments Changes in proportion and differences between City contributions and proportionate share of contributions City contributions subsequent to the measurement date Total -- — DPEB ODD - Deferred Outflows Deferred Inflows of Resources of Resources - 857 399 3,183 7,766 - $ 8,165 52,966 DPEB RMP Deferred Outflows Deferred Inflows of Resources of Resources $ 4,821 3,082 20,154 38,536 - 58,010 1,940 97 21,686 - $ 48,601 99,725 $381,526 and $79,807 are reported as deferred outflows of resources related to pension and OPEB resulting from City contributions subsequent to the measurement date and will be recognized as a reduction of the net pension and DPEB liabilities or as an increase to the net pension and DPEB assets in the year ended December 31, 2021, respectively. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pension and DPEB will be recognized in pension and DPEB expense as follows: Year Ended December 31, 2022 2023 2024 2025 2026 Thereafter Total Pension $ (403,089) (601,423) (650,573) (763,452) DPEB ARHCT (fbv' zL ) (504,179) (541,383) (630,822) $-(2,418,537) (2,446,209) 62 DPEB OPED ODD RMP (10,157) (15,649) (10,141) (15,676) (10,331) (16,262) (10,935) (18,110) (5,692) (1,973) (5,316)- - (5,14QD DRAFT hPI-DngF1' ONLY City of Seward, Alaska Notes to Basic Financial Statements, Continued For the year ended December 31, 2021, the City recognized $1,086,737 and (544,037) of pension and OPEB amortization of the net deferred outflows and inflows of resources, respectively. Sensitivity of the Net Pension and OPEB Liabilities and Assets to Changes in the Discount Rate: The following presents the net pension and OPEB liabilities and assets of the plan calculated using the discount rate of 7.38 0, as well as what the Plans' net pension and OPEB liabilities and assets would be if they were calculated using a discount rate that is 1-percentage-point lower (6.38 p) or 1- percentage-point higher (8.38 0) than the current rate: Net pension liability Net OPEB ARHCT liability (asset) Net. OPEB ODD liability (asset) Net OPEB RMP liability (asset) 1% Decrease (6.38%) $ 9,861,569 $ (3,D59,629)� $ (108,074) $ 42,321 Current Rate (7, 38%) 6,658,097 (4,678,439) (112,865)' —(64,842) 1% Increase (8.38%) 3,966,770 F (6,022,740) (116,681) (145,782) Sensitivity of the City's proportionate share of the Net OPEB liability and assets to chanses in the healthcare cost trend rates. The following present the City's proportionate share of the net OPEB liability (asset), as well as what the City's proportionate share of the net OPEB liability (asset) would be if it were calculated using healthcare cost trend rates that are 1-percentage-point tower or 1-percentage point higher than the current healthcare cost trend rates: 1% Decrease Current Rate 1% Increase Net OPEB ARHCT liability (asset) S (6,180,107) (4,678,439) (2,866,316) Net OPEB itMP liability (asset) $ (157,368) (64,842) 61,231 Alaska Public Employee Retirement System (PERS) - Defined Contribution Plan (DC) Plan Description and Funding Requirements. Cities and Public Employers in the State of Alaska have a defined contribution retirement plan (PERS Tier IV) for new hires first enrolled on or after July 1, 2006, This Plan is administered by the State of Alaska, Department of Administration in conjunction with the defined benefit plan noted above. The Administrator of the Plan is the Commissioner of Administration or the Commissioner's designee, Plan members make mandatory contributions of 8% of gross eligible compensation. This amount goes directly to the individual's account. State statutes require the employer to contribute 5% of employees' eligible compensation. Additionally, employers are required to contribute to OPEB (DB): 1.07% for the retiree medical plan (DB), 0.31% for occupational and death and disability benefits (DB) and 3% of employers' average annual employee compensation to the health reimbursement arrangement (HRA DC). The effective employer contribution is 22%. Additionally, there is a defined benefit unfunded liability (DBUL) amount levied against the DC plan and allocated to the DB Plan's pension and OPEB contribution. Plan members are 100% vested with their contributions. Members become vested in employers' contributions as follows: 2 years of service - 25% 3 years of service - 50% 4 years of service - 75% 5 years of service 100PRELIM N17R T DRAF F 63 rr 9 f�l sc_Si'i �R OJ.yCl1�,5;L}N r R.l��i [, ,C_ NL Y City of Seward, Alaska Notes to Basic Financial Statements, Continued The City contributed $327,646 for the year ended December 31, 2021, which included forfeitures of $19,075 which have been applied as employer contributions. 11. international Brotherhood of Electrical Workers Defined Benefit Pion Certain Electric Fund employees are members of the International Brotherhood of Electrical Workers (IBEW), and participate in a cost -sharing defined benefit plan, the Alaska Electrical Pension Plan of the Alaska Electrical Pension Fund (IEBW Plan). The Alaska Electrical Pension Trust (AEPT) Board of Trustees administers the IBEW Plan and has the authority to establish and amend benefit terms and approve changes in employer required contributions. Each year, AEPT issues annual financial reports that can be obtained by writing the plan administrator, Alaska Electrical Pension Trust, 2600 Denali Street, Suite 200, Anchorage, Alaska 99503. The City had six employees covered by the Plan as of December 31, 2021. The IBEW Plan provides several levels of retirement benefits, including early retirement, normal retirement, late retirement, and disability retirement and includes several options for spouse participation and death benefits. The City contributes to the IBEW Plan for its covered employees according to the terms of its Agreement Covering Terms and Conditions of Emptoyment (Agreement) with the IBEW Local 1547. The current Agreement became effective on July 1, 2019 and expires on June 30, 2022. The Agreement automatically renews for a period of one year from its expiration date and for successive periods of one year each thereafter for so long as there is no proper notification of an intent to negotiate a successor Agreement. Employer contributions are determined from hours of work reported by participating employers and the contractual employer contribution rate in effect. The City's required contribution to the IBEW Plan for each hour for which compensation is paid to the employee for July 1, 2020 to June 30, 2021 was $8.71 and July 1, 2021 to December 31, 2021 was $8.96. The City's total employer contributions to the IBEW Plan for 2021 were $127,768. These amounts are paid during the normal course of business in the month following each year end. The City is not subject to withdrawal penalties, nor are there any future minimum payments to the IBEW Plan required other than the contribution per hour compensated as required by the Agreement. Defined Contribution Plan - Money Purchase Plan The Agreement requires employer contributions to be made in an amount of $225 per month for eligible employees to the Alaska Electrical Workers Money Purchase Plan (Money Purchase Plan). The City's employer and employee contributions to the Money Purchase Ptan during 2021 were 516,200 and $25.306, respectively. One hundred percent (1003,,) of the City's required contributions to the IBEW plans have been made through these contributions to the AETF. 12. Deferred Compensation Plan The City offers its employees a voluntary deferred compensation plan created in accordance with Internal Revenue Code Section 457. The Plan, available to all employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. The provisions of the Plan require that all assets and income of the Plan be held in trust fo f e? gl'is$ e�`oinerk' oDRPT- participants and their beneficiaries. FOR PURL-C�Eq 64 City of Seward, Alaska Motes to Basic Financial Statements, Continued 13. Risk Management The City faces a considerable number of risks of loss, including (a) damage to and loss of property and contents, (b) employee torts, (c) professional liability; i.e., errors and omissions, (d) environmental damage, (e) workers' compensation; i.e., employee injuries, and (f) medical insurance costs of employees. The City is a member of the Alaska Municipal League Joint Insurance Association (JIA), a governmental insurance pool established by the Alaska Municipal League. The JIA provides the City coverage for property, including building and contents, automobiles, mobile equipment, data processing equipment and boiler and machinery; casualty, including general liability, public officials and employees liability, law enforcement professional liability, auto liability and employee benefit liability; workers' compensation, including employers liability; and commercial blanket bond. The City maintains supplemental marine insurance and firefighters group accident coverage with insurance companies placed through JIA. The City has no coverage for potential tosses from environmental damages. The JIA is a public entity risk pool organized to share risks among its member;. The Association's bylaws provide for the assessment of supplemental contributions from members in the event that losses and expenses for any coverage year exceed the annual contributions and income earned on such contributions for the year_ Such supplemental contributions shall be based on each member's deposit contribution in comparison to the aggregate deposit contributions of all members. The Association made no supplemental assessments during the year ended December 31, 2021, The JIA provides loss control services and conducts periodic inspections to ensure safe operations. The City has utilized an established safety committee to review and recommend safety policies and procedures far all departments. The City Council has committed a portion of the General Fund balance to meet potential losses not covered by insurance and insurance deductibles. The City also participates in the Alaska Public Utilities Insurance Trust, which provides insurance coverage for employee health benefits, The Plan is a public entity risk pool in which risks are shared among the members. Stop loss insurance limits participants' liability for individual and aggregate claims. There was no significant reduction in the City's major categories of risk insurance coverage from the prior year, and the amount of settlements for the past three fiscal years did not materially exceed the City's insurance coverage. 14. Commitments and Contingencies Amounts received or receivabte from grantor agencies are subject to audit and adjustment by grantor agencies, principally the state and federal government. Any disallowed claims, including any amount already collected, could become a liability of the applicable funds. PRELIM NARY DRAFT FOR DISGUE'SION PORPDSESrlNl.y 65 City of Seward, Alaska Notes to Basic Financial Statements, Continued The City of Seward is the owner of the Alaska SeaLife Center ("Center"), which is operated on the City's behalf by the Seward Association for the Advancement of Marine Science ("SAAMS"). The City is obligated to abide by provisions of the Cooperative Agreement ("Agreement") between the City and the State of Alaska Department of Fish and Game, which served as a significant funding source for the construction of the Center. The City has passed most of its obligations for operating the Center on to SAAMS through a management and operating agreement ("Operating Agreement"), but the City ultimately remains responsible to ensure that provisions of the Agreement with the State are met. The Operating Agreement requires, in part, that SAAMS maintain sufficient termination fund reserves to enable the City to operate the facility for up to one full year in the event SAAMS is unable to meet its obligations under the Operating Agreement. The estimated costs of operating the Center for a full year are not easily measured based on imprecise definitions of the requirements, but could approach $3 million per year. The Operating Agreement does not require SAAMS to maintain that level of reserves, and to the extent their termination fund reserve levels are inadequate, the City would be expected to cover any shortfall. Should the City be required to cover any shortfall, there could be a material adverse impact on the General Fund undesignated reserves. Various other claims and lawsuits against the City are pending, but are either covered by insurance or are the types which are normal and reasonable in view of the City's operations. City management believes the totat amount of the liability, if any, which may arise from such claims and lawsuits beyond that which is covered by insurance would not have a material effect on the City's financial condition or its ability to carry on its activities as now conducted. 15. Subsequent Accounting Pronouncements The Governmental Accounting Standards Board has passed several new accounting standards with upcoming implementation dates covering several topics as follows; • GASB 87 Leases. Effective for fiscal years beginning after June 15, 2021, • GASB 91 Conduit Debt Obligations. Effective for fiscal years beginning after December 15, 2021. • GASB 92 Omnibus 2020. This Statement has multiple effective dates which vary by topic. • GASB 93 Replacement of Interbank Offered Rates. Effective for fiscal years beginning after June 15, 2021. • GASB 94 Public -Private and Public-Pubiir. Partnerships and Availability Payments Arrongements. Effective for fiscal years beginning after June 15, 2022. • GASB 95 Postponement of the Effective pates of Certain Authoritative Guidance. Effective immediately. ■ GASB 9b Subscription -Based Information Technology Arrangements. Effective for fiscal years beginning after June 15, 2022. Pt E U NIN N �Al t�i �f L.r' f�i /�1 f I 66 -rC)j=; CAI. ti �• . City of Seward, Alaska Notes to Basic Financial Statements, Continued • GASB 97 Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. Effective for fiscal years beginning after ,tune 15, 2021. • GASB 98 The Annual Comprehensive Financial Report. Effective forfiscat years ending after December 15, 2021. • GASB 99 Omnibus 2022. Multiple effective dates. • GASB 100 Accounting Changes and Error Corrections --an amendment of GASB Statement No. 62. Effective for fiscal years beginning after June 15, 2023. Multiple effective dates. • GASB 101 Compensated Absences. Effective for fiscal years beginning after December 15, 2023. GASB Statements No. 87, 91, 93, 94, 96, 98, 99, 100, and 101 are not expected to have any significant impact on the financial statements of the City. GASB Statement No. 87, the objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments' financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to•use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments' teasing activities. GASB Statement No. 92, the objectives of this Statement are to enhance comparability and financial reporting and to improve the consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB Statements. GASB Statement No. 95 provides temporary relief to governments in tight of the COVID-19 pandemic. The effective dates of the following pronouncement are postponed by one year: GASB Statements No. 83, No. 84, No. 88, No. 89, No. 90, No. 91, No. 92, and No. 93. The effective date for GASB 87 has been postponed by 18 months. GASB Statement No, 97 will result in more consistent financial reporting of defined contribution pension plans, defined contribution OPEB plans, and other employee benefit plans, while mitigating the costs associated with reporting those plans. The requirements also will enhance the relevance, consistency, and comparability of (1) the information related to Section 457 plans that meet the definition of a pension plan and the benefits provided through those plans and (2) investment information for all Section 457 plans. 57 PRE�. IM N►� RY RAFT Required Supplementary Information PRELIMINARY DRAFT FOR USCUSSCON PUPPOSES ONI u Exhibit F-1 City of Seward, Alaska General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Original and Final Budget and Actual Budgeted Amounts Variance with Year Ended December 31, 2021 Original Final Actual 'Final Budget Revenues Taxes 5 7,828,635 6,482,652 9,326,027 2,843,375 Licenses and permits 144,400 144,400 116,996 (27,514) intergovernmental 891,074 2,447,132 1,239,768 (1,207,364) Charges for services 3,184,931 3,962,331 3,639,583 (322,748) Fines and bails 17,000 17,000 22,308 5,309 Investment income (loss) 81,500 82,500 (49,808) (132,308) Other 17,500 26,100 917,436 S91,336 Total Revenues 12,165,040 13,162,115 15,212,200 2,050,085 Expenditures Current; General government 3,412,606 4,695,448 4,480,785 114,663 Public safety, 4,354.777 4,625,519 4,486,732 1381,787 Public works 1,461,661 1,524,603 1,630,652 (106,049) Parks and recreation 1.764,541 1,852,568 1,516,689 335,379 Library 691,950 760,329 616,045 144,284 Debt service: Principal payments 230,000 730,000 230,000 - Retirement benefits 731,058 733,138 - 733,138 Debt issuance casts - - 51,572 (51,572) Interest and other costs 223,456 223,456 211,404 12,052 Total Expenditures 12,870,049 14,645,061 13,223,879 1,471,18Z Excess of Revenues Over (Under) Expenditures (705,009) (1,482,946) 1,988,321 3,471,267 Other financing Uses Proceeds from issuance of refunding debt 2,180,000 2,180,000 Premium on refunding debt 574,273 574,273 Payment to band refunding escrow agent - (2,720,201) (2,720.201) Transfers in 2,127.651 2,127,651 2,286,776 159,125 Transfers out (1,413,643) (1,413,643) (2,949,985) (1,536,342) Total Other Financing Sources (Uses) 714,008 714,008 (629,137) (1,343,145) Change in Fund Balance $ 5,999 (768,935) 1,359,184 2,128,122 Fund Balance, beginning of year Fund Balance, end of year See accompanying notes to required supplementary information. 10,274,310 5 11.583,49.7 6B F(�r� C�llfisJN iWl IIt�r;r,C y Exhibit G 1 City of Seward, Alaska Schedule of the City's Proportionate Share of the Net Pension Liability Public Employees' Retirement System (PERS) December 31, 2021 City's Proportionate Share of the Plan Fiduciary City's City's State of Alaska Net Pension her, Position as Proportion Proportionate Proportionate Liability as a a Percentage of the Net Share of the Share of the Total City's Percentage al ❑r the Total Pension Net Pension Net Pension Net Pension Covered Cowered Pension Year Liability Liability Uab!Hty Liability Payroll Payroll Liability 2015 0.1853% $ 9,965,893 5 2,408,070 S 11,393,963 S 5,021,055 179% 63.96% 2016 0.2068`x. S 11,558,576 S 1.457,718 $ 13,016,294 5 4,968,887 233% 59,55% 2017 0.156.5%. S 8,088.553 5 3,013,251 S 11,101,804 S 5-031,902 161% 63.37% 20i8 0.1867% S 9,776,595 5 2.637,289 5 11,963,884 $ 5,141,955 180% 65.19% 2019 0.156" S 9.586,970 5 3,409,173 5 11,9%.143 S 4,008,713 175% 63.42%, 2020 0.151Ds 5 5,920.386 5 3,692,619 5 12.613,005 S 4.728,623 189% 61,61% 2021 0.1815% 5 6,658,097 S 901,089 $ 7,559,186 S 5,588,777 119% 74.46% See accompanying notes to Required Supplementary Information. 69 �tirp Exhibit G•'. City of Seward, Alaska Schedule of the City's Proportionate Share of the Net OPEB Liability (Asset) Public Employees' Retirement System (PERS) December 31, 2021 City's Proportionate Plan Fiduciary cityys eity's State of Alaska Share of the W. ll,v it:or1 a< Proportion Proportionate Proportionate Net OPEB a Fz Cenrage of the Net Share of the Share of the Total Liahflity as a nr ton_ T 0tal OPEB Net OPES Net OPEB Net OPEB City$ Percentage of r?FF1S Liability Liability Liability Liability Covered Covered ; is t:• l s-.; Year (Asset) (Asset) (AsW) (A55et) Payroll Payroll (A,&t) Alaska Retiree Healthr re Tru5t Plan {ARHCT): 2017 0,1565% 5 1,321,B17 5 156 5 1,814,173 $ 4,902,9D1 26.%% 89.6ti, 2M 0.1866% $ 1,415,02e $ 157 $ 2,471,185 5 5,160,904 37.11% 88.E '�: 2014 0.1569' S 232,530 $ '2.`''-5 5 325.360 $ 4,908,713 4134% 98.1, 2020 0.1511'il $ (68=,4") $ (293 ,6971 5 1%8,187) $ 4,729,623 -14.49% 106.15: 2021 0.1824% $ i4,678.419i S (610,964j $ (5,289,403) S 5,588,777 -83.71% 135.5-r: Uccupational Death and Disability (ODD); 2G17 a.2280% S - .1°, , 5 S (32,352) s 4,902,901 -0.66% 212X% 2019 0.2258% $ -, 51') $ $ (43,856) S 5,160,9D4 -o,85% 270.62% 2a19 0-.7477% $ iL(1.055) $ - $ (60,055) $ 4,908,713 •1.22% 297.43% 20Z0 0-2547° S (69,440) $ $ (69.440) $ 4.728,623 -1.47% 283.81% 2021 0-2561% $ (112,865) 5 S (112,865) S 5.588,777 -2,02% 374.22%, Retiree Medical Plan (RMP): 2017 0.2280%i S 11,890 $ $ 1t,89D $ 4,902,901 0.74% 93,9s% 201E 0.2258% $ 28,734 $ $ 28,734 S 5,160,904 0,56% 88.71% 2019 0.2275Y $ 54,424 S S 54,424 $ 4,906.713 1.11% 83.17% 2020 0.2385'k $ 16,914 $ $ 16,914 S 4,728,623 0.36% 95,23% 2021 0.2-116% S (64,842) $ 5 (64,8421 $ 5.588,777 -1.16% 115.10% see accompanying notes ro Required Suppfemenrary 1,71b"natran. PREIAMiNARY D ' E 70 _.rr2t nr"ni lr+-.^n1 r;11r ^n.,cc ON1I Y Exhibit G-3 City of Seward, Alaska Schedule of the City's Contributions (Pension) Public Employees" Retirement System (PERS) December 31, 2021 Contributions Relative to the Contribution5 Contractually Contractualty Contribution city's as a Percentage Required Required Deficiency Covered of Covered Year Contribution Contribution `Excess) Payroll Payroll 2015 5 485,647 S (485,647) S 5 5,09$,436 9.53'% 2016 S 541,407 S 1541,407) S $ 4,902,901 11.04'G 2017 $ 645,662 $ (645,662) S 5 5.160,904 12.51% 2018 $ 644,586 $ {644,586) S 5 5,123,006 12.58% 2019 5 550,925 $ (547,855) $ 3,070 $ 4,838,355 11,39% 2020 $ 567,373 5 (570,443) S (3,070) 5 4,894,286 11.59:# 2021 $ 703.865 $ (716,692) S (12,827) 5 5,522,664 12.75% See accompanying notes to Required Supplementary Information. 71 FOR DWLIS :0N City of Seward Alaska Schedule of the City's Contributions (OPEB) Public Employees" Retirement System (PERS) December 31, 2021 Contributions. Relative to the Contractually Contractually Required Required Year Contribution Contribution Alaska Retiree Healthcare Trust Plan (ARHCT),. 2017 $ 285,897 $ 2018 $ 207,098 $ 7019 $ 709,371 $ 2020 $ 163,155 5 2021 $ 110,629 $ Occupational Death and Disability (ODD): 2017 5,285 $ 2018 $ 7,742 $ 2019 $ 10,726 $ 2020 $ 12,097 $ 2021 $ 14,889 $ Retiree Medical Plan (RMP): 2017 5 26,831 $ 2019 5 26,770 $ 2019 5 34,650 $ 2020 $ 42,569 $ 2021 $ 45,130 $ Exhibit G-4 Contributions Contribution City"s as a Percentage Deficiency Covered of Covered (Excess) Payroll pdyrvll (285,897) $ - $ 5,160,904 5.54`#i (207,098) $ $ 5,123,006 4.04% (209,371) S - $ 4,838,355 4.33% (163,155) S - $ 4,894,286 3.33% (110,629) $ - $ 5,522,664 2.OD% (5,285) $ $ 5,160,904 0.10% (7,742) $ - $ 5,123,006 0.154 (10,726) 5 - $ 4,838,355 0.22�. (12,097) S $ 4,894,286 0.25% (14,889) $ $ 5,522,664 0.27% (26,831) S $ 5,160,904 0.52% (26,770) S - 5 5,123,006 0.52% (34,650) S - $ 4,838,355 0.n% (42,569) $ $ 4,894,286 0.87% (45,130) $ $ 5,522,664 0.82% See accompanying notes to Required Supplementary Wormation. v:oR C11SCuSSIJN PURPOSES ONLY Exhibit G•5 City of Seward, Alaska Schedule of the City's Contributions (Pension) 1MOM)Atl6nal Brotherhood of Electrical Workers (IBEW) Defined Benefit Pension Plan December 31, 2021 Cantributhms Relative to the Contributions Contractually Contractually Contribution Cfty's as a Percentage Required Required Deficiency Covered of Covered Year Contribution Contribution (Excess) Payrall Payroll 2010 5 59,231 $ (59,231) $ $ 649,553 9.12% 2011 $ 65,956 $ (65,956) S $ 697,056 9.46% 2012 $ 70,686 $ (70,686) $ $ 661,071 10.69% 2013 5 88,389 5 (88,389) $ $ 719,381 12.29T1 2014 $ 72,669 $ (72.669) $ S 806,727 01111 2015 $ 81,964 $ (81,964) 5 $ 668,257 12.27% 2016 5 102,429 $ (102,429) $ $ 752,587 13.61% 2017 $ 129,627 $ (129,627) $ S 79C,348 16.40W, 2018 $ 103,547 S (103,5471 $ $ 958,591 10,80% 2019 5 113,631 $ (113,631) 5 $ 862,937 13.17% 2020 $ 133,453 $ (133,453) $ $ 865,034 15,43`# 2021 $ 127,769 $ (127,768) $ 5 921,477 13.87%. See accompanying notes to required supplementary information. 73 PREU DRAFT 1`7t7R DfSGI'URPDSES ONLY City of Seward, Alaska Notes to Required Supplementary Information December 31, 2021 Budgets and Budgetary Accounting The City follows these procedures in establishing the budgetary data reflected in the fund financial statements: • The City manager must submit to the city council by November 15th a proposed operating budget for the next biennial fiscal year commencing the following January 1. The operating budget includes proposed expenditures which shalt not exceed the expected revenues of the city. • The budget proposal of the city manager shall be reviewed by the council and shalt be available for public inspection in the office of the city clerk. The Council shalt direct that a public hearing on the biennial budget proposal shall be held not less than one week before its final adoption. Notice of the public hearing shall be published in a newspaper by the City clerk at least one week prior to the date of the hearing. • At a regular meeting held not less than ten days prior to the end of the fiscal year, the council shall, by resolution, adopt a budget for the next two fiscal years and make appropriation of the money needed therefore. If the council does not adopt a biennial budget prior to the third day preceding the commencement of the next fiscal year, it shall be held to make an appropriation therefore„ without any further council action. • Amendments to the budget can occur anytime during the fiscal year through the City Council or administrative action. Generally, the following actions are required at the level of the particular change. o The City Council may at any time, amend the budget by passing an appropriating resolution that amends the original budget. o Unencumbered appropriation balances may be transferred to any department within the same fund by the city manager at any time. At the request of the city manager, or on its own initiative, the council may transfer unencumbered balances from one fund to another. • Appropriations lapse at year end to the extent that they have not been expended for all funds, except Capital Projects Funds, which lapse at project completion. • Budgets adopted by the City Council are in accordance with accounting principles generally accepted in the United States of America. • The City published a separate 2020-2021 biennial budget document. That document may be obtained from the City of Seward, City Clerk, 410 Adams Street City Hall Building, Seward, AK 99664 or at www.cityofseward.us. Excess of Expenditures over Appropriations The Council approves operating budgets and appropriations of direct costs at the function and department level. For the year ended December 31, 2021, expenditures exceeded appropriations in the following Generat Fund function: Public works S 1 W049 ?4 DF =1 PRa "PiFS, ONO City of Seward, Alaska Notes to Required Supplementary Information, Continued Public Employees' Retirement System Schedule of District's Proportionate Share of Net Pension and OPEB Liability (Asset) The table is presented based on the Plan measurement date which is eighteen months prior to fiscal year end for all years presented. Changes in Methods Since the Prior Valuation - June 30, 2020 to June 30, 2021: There were no changes in actuarial methods since the prior valuation. Changes in Assumptions Since the Prior Valuation - June 30, 2020 to June 30, 2021: • All Plans - The amounts included in the Normal Cost for administrative expenses were updated based on the most recent two years of actual administrative expenses paid from plan assets. OPEB ARHCT - Healthcare claims costs are updated annually. Retired member contributions were updated to reflect the 5% decrease from 2020 to 2021. ■ OPEB RMP - The per capital claims cost assumption is updated annually. The medical and prescription drug relative value factors were updated and the 0.2% annual trend rate adjustment factor between the DB and OCR plans was removed_ Changes in Benefit Provisions Since the Prior Valuation - June 30, 2020 to June 30, 2021: There were no changes in benefit provisions since the prior valuation. GASB requires ten years of information be presented. However, until a full ten years of information is available, the District will present only those years for which information is available. Schedule of District Contributions (Pension) and (OPEB) The table valuation date is June 30, 2020 which was rolled forward to June 30, 2021. Actuarially determined contribution rates are calculated as of June 301h, two years prior to the fiscal year in which contributions are reported. 75 �:OR U!3C —QS; 7N Additional Supplementary Information General Fund The General Fund is established to account for the revenues and expenditures necessary to carry out basic governmental activities of the City such as fire and police protection, public works, recreation, planning, administrative services, etc. Appropriations are made from the General Fund annually. Revenue is recorded by source, i.e., taxes, charges for services, intergovernmental, Expenditures are recorded first by function then by activity and object of expenditures. City of Seward, Alaska General Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Year Ended December 31, 2021 Exhibit H-1 Final Budget Actual Variance Revenues Taxes: Sales S 4,256,017 6,861,114 2,605,097 Property 1,500,000 1,655,216 155,216 Hotel/motel room 673,135 713,633 40,498 Payments in lieu of taxes 52,000 89,061 37,061 Penalties and interest 1,500 7,003 5,503 Total taxes 6,482,652 9,326,027 2,843,375 Licenses and permits: Building permits 41,600 71,091 29,491 Taxi permits 1,100 587 (513) Department of Motor Vehicles commissions 77,000 31,089 (45,911) Animal control licenses 200 100 (100) Business licenses 21,000 11,670 (9,330) Miscellaneous 3,500 2,349 (1,151) Total licenses and permits 144,400 116,896 427,514) Intergovernmental; .sail contract 350,000 368,952 18,952 Dispatch contracts 98,800 98,800 Raw fish tax 420,000 350,482 j69,518) Shared fisheries tusiness and landing tax 2,500 3,151 651 Liquor tax 20,000 - (20,000) Marijuana tax - 300 300 Library grants 7,000 7,000 Community assistance program - 85,793 85,793 PERS relief program 546,832 312,756 (236,076) Other grants 1,007,000 12,534 (994,466) Total intergovernmental 2,447,132 1,239,768 (1,207,364) Charges for services: Administrative 2,008,510 2,008,510 Rents and leases 127,971 111,305 06,666) Copying charges 7,000 1,893 (5,107) Work orders 2,000 2,521 52FI Recreation 1,797,850 1,500,354 (297,496) Library 19,000 15,000 (4,000) Total charges for services 5 3,962,331 3,639,583 (322,748) (continued) 76 �-1 }RI -'(„ES Exhibit H-1 continued City of Seward, Alaska General Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual, continued Year Ended December 31. 2021 Final budget Actual Variance Revenues, continued Fines and baits $ 17,000 ZZ,308 5,308 Investment income (toss) 82,500 (49,808) (132,308) Other revenues: Sale of land, equipment and gravel 312,586 312,5R6 Refuse contract 17,500 75,090 7,550 Insurance recovery 41,423 41,423 Local grants 501000 500,000 Other 9,,600 38,377 29,777 Total other 26,100 917,436 891,336 Total Revenues 13,162,115 15,212,200 2,050,(185 Expenditures General government: Mayor and council: Salaries 53,441 35,880 17,561 Employee benefits Z4,177 27,413 %Z36) Audit 115.000 127,600 (12,600) Legal 80,000 89,5511 (9,551) Purchased services 320,959 291,371 29,587 Supplies and maintenance 11,156 9,543 1,613 Legislative representation 185,O00 t76,508 8,492 General and administrative 568,058 538,041 30,017 Total mayor and courscit 1,357,790 1,295,907 61,883 City manager: Salaries 385,581 3Z1,254 64,327 Employee benefits 179,413 157,626 21,787 Purchased services 40,700 43,473 i2,773) Supplies and maintenance 11,000 17,474 (6,474) General and administrative 34.600 33,590 1,010 Total city manager 651,294 573,417 77,877 City clerk: 5ataries 236,649 168,451 68,198 Employee benefits 105,523 12Z.165 (16,642) Purchased services 47,962 36,194 11,769 General and administrative 16,577 13,515 3,062 Total city clerk $ 406,711 340,325 66,386 (continued) 77 City of Seward, Alaska General Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual, Continued Year Ended December 31, Exhibit H-1, continued 2021 Final Budget Actual Variance Expenditures, continued Management information systems: salaries $ Z17,130 228,849 (11,719) Employee benefits 118,731 158,335 140,104) Purchased services 23,800 11,612 12,188 Supplies and maintenance 45,000 35,288 9,712 General and administrative 22,000 12,563 9,437 Totat management information systems 426,161 446,647 (20,486) Finance: Salaries 556,075 516,560 39,515 Employee benefits 309,911 3212943 {12,C32) Purchased services 54,6.50 70,407 f15,757) Supplies and maintenance 38,000 41,320 (3,310) General and administrative 17,000 22,149 (5,149) Totat finance 975.036 972,379 3,d57 Comm unity development: Salaries 183,452 159,236 24,216 Employee benefits 106,526 144,748 (38,220) Purchased services 21,312 33,226 (11,914) Supplies and maintenance 5,700 4,445 1,255 General and administrative 6,000 6,092 (92) Capital outlay 8,253 (9,253) Total community development 322,992 356,000 03,008) General services: Employee benefits 10,000 10,000 Purchased services 136,932 63,471 73,461 5upplies and maintenance 6,700 3,914 2,786 General and administrative 18,200 27,888 (9,688) Total general services 171,832 95,273 76,559 Contributions to organizations: Senior Citizens 80,000 80,000 Chamber of Commerce 275,032 295,817 (17,805) R(lys rind C,irk Club 25,000 25,000 Total contributions to organizations 383,032 400,837 (17,805) Total general government $ 4,695,448 4.480,785 214,663 (continued► 78 CoR. cIG; u-Qs:Gal PIJRt-OSES ON[ Y City Of Seward, Alaska General Fund Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual, continued Year Ended December 31, 2021 Exhibit H•1 continued Final Budget Actual Variance Expenditures, continued Public safety: Police: Salaries S 1,342,714 1,294,568 48,146 Employee benefits 775,920 846,714 (70,794) Purchased services 155.197 193.893 (38,696) Supplies and maintenance 101.500 110,203 (8,703) General and administrative 104,000 78,776 25,224 Capital outlay 6,038 6,695 (657) Tor -�'•.roUce 2,485.369 2,530,849 (45,480) Jail: Salaries 397.846 2%,439 101,407 Employee benefits 261.433 198,957 62,576 Purchased services 60,7u0 69,289 (8,589) Supplies and maintenance Z5,000 23,891 1,109 General and administrative 119,737 119,285 452 Total jail 864,716 707,761 156,955 Animal control: Salaries 102,383 85,791 16592 Emptoyee benefits 50,358 48,057 2,301 Purchased services 8,700 10,235 (1,535) Supplies and maintenance 12,700 3,355 9,345 GenFral and administrative 6,200 6,200 Total anima! control 180,341 147,438 32,903 Fire: Salaries 236,910 203,476 33,434 Employee benefits 128,653 164,340 (35.687) Purchased services 206,127 214,723 (8,596) Supplies and maintenance 44,259 35,467 8,792 General and administrative 70.71E 61,145 9,573 �;tj Fare 686,667 679,151 7,516 \ t,I�jrrteer training: r.mptoyee benefits 4,680 5,325 (645) Purchased services 2,1.J15 25,753 (93B) Supplies and maintenance 3657 28,608 7,949 General aMad ministr tier �1.869 42,200 (331) 71;�1 �olurtf°�r ira!r�tr.r, lu/,921 101,896 6,035 (continued) 79 '7 ?OR CISCUSS;DN 1703I10S S C]NLY City of Seward, Alaska General Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual, continued Yecr Ended December 31. 2021 Exhibit H-1 cont.inuod Final Budget Actual. Variance Expenditures, continued Public safety, continued: Emergency preparedness: Purchased services S 10,240 10, 009 231 Supplies and maintenance 3,869 6,974 13,105) General and administrative 1,654 246 1,408 Total emergency prcparcdress 15,763 17,L29 11,466) Building inspediar Salares 170,559 147,547 23,012 Employee benefits 92,627 134,576 (41.949) Purchased services 6,080 7,027 (947) SuppUes and maintenance 4,921 2,637 2,284 Gener?,l Rnd ndministrativc 10,555 10,631 (76) Total bulldint;inspeclion 2&4,742 202,418 (17,676) Total public safety 4,625,519 4,486.732 138,787 Public works: Roads and streets: sataries 2BZ,972 295,450 (2,479) Employee benefits 201,157 249,873 (48,716) Purchased services 176,300 140,392 35,705 Supplies and maintenance 160,150 194,333 (24,193) General and administrative 132,950 131,398 1,552 Capital outlay 24,950 11,650 13,300 Tatdlroads and streets 986.279 11013,096 (24,817) City shop: Salaries 95,317 112,975 (17,638) Employee benefits 52,422 59,997 (7,575) Purchased services 68,000 80,679 (12,619) Supplies and maintenance 49,300 69,490 (20,t9o) General and administrative 12,500 12,240 260 Capital outlay - 41,964 (41,964) Total city shop 277,559 377,345 (99,786) Municipal building: Salaries 47,414 44,424 2,990 Employee benefits 42,351 33,746 8,605 Purchased services 145,900 153,770 (7,870) Supplies and maintenance 21,900 8,271 13,629 General and administrative 1,200 - 1,200 Total municipal building 258,765 240,211 18,554 Total public works $ 1,524,603 1,630,652 (106,049) (continued) 84 ONLY Fxhibit H•1. continued City of Seward, Alaska General Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual, continued Year Ended Uerenrder 31, 2071 Final Actual Variance Expenditures, continued Parks and recreation: Salaries 5 703,919 417,355 286,594 Employee benefits 362,304 23D,742 131,562 Purchased services 451.850 555,565 (113,7151 Supplies and maintenance 163,400 12.1,365 General and administrative 81,300 >'=,76C 31.1A0 '_,]Pita[ out(oy 89,775 1"1.., 907 139, 127 ) Total parks and recreation 852.563 I,5,;,,c.8l) _:s5,371) Library: Salaries 292,542 248,398 4-1, r 11 Employee benefits 154„901 13U.644 t1,)',7 Purchased services 179,909 154,727 25,1u2 Supple 3 and maintenance 119,577 ; =.n8t~ 4'.a._:9 General and administrati,e 13,400 7.588 S.n 12 lutr,llibrary ]60,329 615.04- 144,484 Debt service: principol payrnents 230,DD0 230,000 - Retirement benefits 733,110 - 733,138 interest and other costs 7.23,456 211,404 12,052 Debt issuance costs 51,572 (51,572) Total debt service 1,186,594 -192,976 6R3,618 Total Expenditures 14,645,061 13,222.3,879 1,421,182 Excess of revenues over (under) expenditures f1,4a2,946i 1.988,321 3,471,267 Other Financing Sources (Uses) Proceeds from issuance of refunding debt 2,180,000 2AB0,000 Premiurn on refunding debt 574,273 574,273 Payment to bond refunding escrow agent (2,720,201) (2,720.201) Transfers in 2,127,651 2.286,776 159,125 Transfers cut (1,413.643) (2,949,9851 1.536.3421 7otal Other Financing Sources(UsesY 710,008 (679,137) {1,343,145I Change in fund balance 5 (768,938) 1359,184 2,128,122 Fund Balance, beginning of year 10,224,310 Fund Balance, end of year $ 11,551494 81 4 DlGIC1lv5:^N FiJ'a P04343E$ � C W N C 6 LLlL u GVi -w-L tl Li Ltl = (d _N M L, Q V Q V m a C "C7 rn p) c a a C oC a V Q 'a w m .1 H C 'o ti to LPL. = — Lnto G nj 43 C (U V E +� w er L„ Ln 4- a Q c C G 7r cL L 'E O M m U 11 0 U CL w in C u Q7 C � a L,1 n cc r. N M W N 0 .MO n .O Lo IV .O LLn N CD N P rn o [V w � I h co N ma U7 LLM N r. O rN6 N C.7 N oc r. Ln �1 n 10 m N Ln O d r'1 i Cr V M M M Ln In Xr 17 +0 v " co CO 90 Ln N OLn 00 Q N a a a Ir N N N N nl w ao n co +rr a V C b m m C C L6 It a V a u s m A O C v C S N N V Dn 1G C1 � '� � H LL J e ova c ;° 41 Q u. H 00 I QJ u �o C -Z G C a �0 LL V a d s E c a `' u jC R O i3 w G a E 0 u M f., a [ v N O L U l Do v rq b Ln �4 • y 7 v O � p � a aj J LJ UI a pp p • E a pl O GO o � d a EI —I U N N � V C - O W W a in in N 0 M v 0 0 8 Cl 1+ al N ru N G U 61 � � a N Q [p L u c) Q r Q c5 W In 07 Lc c 'a m NI ti ry It y a m FOP GI:>:",USS::N ONLY .Ti. N oi, ut c ` n� am LM Ln N a 4 b Q 7 Qj N (V "0 C W L 3 w w d to c - on c 7 C C C C x p LiI N ` V u o c W fV M3 C '` V a m C p C C L' t v u � A cc w 0 c ` Ln Ch A Iff N tT Y L O Qr VI E c oao c N coo %0 0 N o � 0 o r7l M G� N N N rr'i M a t7 r� V a r`7 r r r M r r r r rn M en en q o u � cl 9 9 9 a� G O y j u Ln V cl ID .,, G r^•f M O p nl E G cnV to LIJ Ln i-n ra ip rV N N N N a w 0 r:. w p W u LA T 7 C: E i i n E a O 4, G yut ai y r�0 ¢ci b 4 U U D cr H LU F- .r Z 0 L Ln N A co .ry rPr m Ln an •n d a -- j N v � u o a, N (� V) L � � N w C Y C " c 9 c A a a., o r z yr ffi m m r a' Lb Q u r� li Enterprise Funds and Internal Service Funds Enterprise Funds Enterprise Funds are established to account for the financing and self-supporting activities of governmental units, which render services to the general public on a user -charge basis. Enterprise Funds are maintained on the accrual basis of accounting. Electric - To account for the provision of electrical service to the residents of the City and other areas within the electric service area. Harbor - To account for the provision of harbor and marine services to the public within the Small Boat Harbor basin. Seward Marine Industrial Center (SMIC) - To account for the provision of marine -related services to the public on the east side of Resurrection Bay. Healthcare Facilities - To account for the provision of services provided by Seward Community Health Center, Providence Seward Medical and Care Center (PMSCC) and long-term care facilities. Water - To account for the provision of water services to the residents of the City. Wastewater - To account for the provision of sewer services to the residents of the City. Parking - To account for the provision of public parking services. internal Service Funds Motor Pool - The Motor Pool Internal Service Fund accounts for payments from departments for the use of vehicles, in order to accumulate cash to forward -fund replacement of vehicles. This funding mechanism spreads the cost of the vehicles over the expected life of the vehicle in each program's annual budget, rather than to show the cost of vehicles as a ore -time expenditure to each fund in the year of purchase. Compensated Absences - The Compensated Absences Internal Service Fund was created in 2005 for the purpose of accumulated cash reserves to pay compensated absences cash -outs for governmental funds. Nonmajor Governmental Funds Nonmajor Special Revenue Funds Nonmajor Special Revenue Funds are used to account for expenditures associated with dedicated or restricted revenue sources. Teen Council - To account for the funds held by the City on behalf of the local teen council. Public Education Signage - To account for the costs of installing signage. SCHC - To account for the costs of running a community health center. Bus Transportation - To account for city bussing transportation. Beachfront Erosion - To account for the costs associated with the beachfront erosion. Nonmajor Capital Project Funds Nonmajor Capital Project Funds are established to account for the resources expended to acquire or construct assets of a relatively permanent nature. Capital Acquisition - To account for purchase of equipment not financed by the Motor Pool Fund and capital improvements and projects of at least $20,000. Animal Shelter - To account for all activities related to animal shelter capital costs. Streets and Sidewalks - to account for ail activities related to street and sidewalk capital costs. Energy Efficiency - To account for all activities related to energy efficiency capital costs. Utility Improvement To account for public utility improvements of the approved improvement districts of the City. Developer Reimbursement - To account for .Jesse Lee Home - To account for a State Designated Legislative grant for use towards hazardous material removat and site remediation at the Jesse Lee Home. FOR C1" USS"4N ONC Exhibit.! I City of Seward, Alaska Nonmajor'Enterprise Funds Combining Statement of Net Position December 31, 2021 Water Wastewater Parking Total Assets and Deferred Outflows of Resources Current Assets Cash and investments S 3,246,578 3,391,843 1,732,532 8,360,953 Receivables Accounts 157,245 192,665 349,910 Other 577,696 577,404 1,155'1OD Less allowance for doubtful accounts (7,076) (8,669) (15,745) Inventory 93,292 93,292 Total Current Assets 4,067,735 4,143,243 1,732,532 9,943,510 Noncurrent Assets Land 100,420 111,011 - 211,431 Property, plant and equipment, net of acuminated depreciation 8,307,195 4,864,761 106,633 13,278,599 Net pension and OPEB assets 169,324 157,213 - 326,537 Total Assets 12,644,674 9,276,228 1,839,165 23,760,067 Deferrred Outflows of Resources Related to pensions and OPEB 26,827 28,461 55288 Total Assets and Deferred O.utflows of Resources S 12,671,501 9,304,889 1,839,165 23,815,355 Liabilities, Deferred Inflows of Resources„ and Net Position Current Liabilities Accounts payable 5 8,9D9 21.598 7,766 38,293 Accrued payroll and related liabilities 15,869 17,717 33,586 Accrued interest 10,239 4.394 14,633 Current portion-. Accrued compensated absences 9,683 9,683 19.3: Notes payable 143,440 59)610 1 70 ,ad1 Total Current Liabilities 188,140 112393 7.7f36 30h'.31`1 Noncurrent liabilities, net of current portion Accrued compensated absences 18,730 18,731 17,461 Notes payable 75D.130 849,781 i,599,y11 Ner pension and OPEB liabilities 231,002 219,304 450.3 , Total Noncurrent Liabilities 999,862 1,087,S16 2.077,676 Total Liabilities 1,188,002 1,200,209 7,786 2,395,997 Deferred Inflows of Resources Related to pensions and OPE5 181,609 163,199 - 344,808 Total Liabilities and Deferred Inflows of Resources 1,369,611 1.363,408 7,786 2,740,805 Net Position Net investment in capital assets 7,5114,045 4,066,990 106,633 11,687,6a. Unrestricted 3,787,845 3,974,791 1,724,746 9,386,882 Total Net Position 11,301,890 7,941,281 1,831,379 21,07 F,550 Total Liabilities, Deferred Inflows of Resources, and Net Position 12,671,501 9,304,689 1,839,165 23,815,355 86 Exhibit J-2 City of Seward, Alaska Nonmajor Enterprise Funds Combining Statement of Revenues, Expenses and Changes in Net Position Year Ended December 31, 2021 Water Wastewater Parking Total Operating Revenues - charges for services S 1,511,295 1,237,068 431,065 3,179,428 Operating Expenses Salaries and employee benefits 329,893 290,865 5,882 626,640 Purchased services 315,085 391,891 34,600 741,576 Supplies and maintenance 46,504 87,398 5,444 139,346 Administration 277,735 170,679 24,506 472,920 Depreciation 417,881 353,183 25,240 796,304 Total Operating Expenses 1,387,098 1,294,016 95,672 2,776,786 Earnings (loss) from operations 124,197 (56,948) 335,393 402.642 Nonoperating Revenues Intergovernmental - PERS on -behalf 22,174 20,587 42,761 Investment income (loss) (13,656) (14,328) (8,193) (36,177) Interest expense (13,904) (13,924) - (27,828) Other revenue (expenses) 878,254 865,793 (260) 1,743,787 Total Nonoperating Revenues 872,868 958,128 (8,453) 1,722,543 Income Before Transfers 997,065 801,180 326,940 2,125,185 Transfers in 16,000 16,000 'Transfers out (173,172) (151,180) (34,705) (359,057) Change in net position 923,893 666,000 292,235 1.782,128 Net Position, beginning of year 10,477,997 7,275,281 1,539,144 19,292,422 Net Position, end of year 5 11,301,890 7,941,281 1,831,379 21,074,550 97 City of Seward, Alaska Nonmajor Enterprise Funds Combining Statement of Cash Flows Year Ended December 31, 2021 Cash Flows from (for) Operating Activities Receipts from customers and users Payments to suppliers Payments ir, c nployees Payment: tar in+;erf,md services used kt ccsrh: iln. s f,r,;n (for) operating activities C,,sh F lows rrurn (for) Noncapital Financing Activities Trary,J,-- , in �i rn:75f i•r is i?Ut Ozh, i r+cu peradng receipr,. (payments) NJ r,y ;t li,,,ws iron, uco nonaoprt,sl frnanrin, ai:uvttle, cash mows from (for) Capital Financing Activities Water Wastewater Exhibit J-3 Total 5 939,D77 656,410 431,100 2,026,587 (370,106) (464,730) (32,414) (867,250) 1356,461) (326,668) (5,882) (689,011) i274,388) (169,531) (24,419) (468,338) (61,878) (304,519) 368,385 1,988 16,000 16,0D0 {173,17-1) (151,180) (34,705) (359,057) 87a,2754 865,793 (260) 1,743,787 705,08Z 730,613 (34,965) 1,400,730 Principat payments on notes payabte (141,321) (93,128) (199,449) Interest payments on rotes payabte (15,57-3) (14,503) (30,026) Acquisi0on of property, plant ini equipment (9,802) 19,802) Net cash flows from (tor) tapir,+( fi;,,,ncirs, 3CLivare5 (156,844) (72,631) (9,802) (239,277) Lash Flaws from Investing Activities investment income I',ass) (13,656) (14,378) (8,193) (36,177) Net increase in cash and investments 472,704 339,135 315,425 1,127,264 Cash and investments, beginning of year 2,773,874 3,042,708 1,417,107 7,233,689 Cash and investments, end of year 3,246,578 3,391,843 1,732,532 9,360,953 Reconciliation of earnings (loss) from operations to net cash flaws from (for) operating activities:. Earnings (loss) from operations $ Adjustments to reconcile earnings (loss) from operations to net cash flows from (for) operating activities: Depreciation Nomash State PERS relief Increase (decrease) in allowance for doubtful accounts (increase) decrease in assets and deferred outflows of resources: Receivables Inventory Net pension and OPE13 assets Deferred outflows of resources - pension and OPED Increase (decrease) in tiabilfties and deferred inflows of resources: Accounts payahle Accrued payrall and related liabilities Accrued compensated absences Net pension and OPEB liabilities Deferred inflows of resources - pension and OPEB 124,197 (56,948) 335,393 402,642 417,881 353,193 25,240 796,304 22,174 20,587 - 42,761 (233) 152 - (81) (571,985) (580,810) 35 (1,157,7601 (6,872) - (6,872) (137,527) (133,561) (271,088) 13,480 12,515 - 25,995 1,702 15,707 7,717 25,126 (710) 239 (471) 2,326 (9,872 17,546) (84,980) (73:031j (158,011) 158.669 147.320 305-989 P1ei [ash flews from {fort' operating activities $ (61,878) f304..519i 3b8,385 1 M8 r6 Exhibit K-1 City of Seward, Alaska Internal Service Funds Combining Statement of Net Position Compensated Motor Annual December 31, 2021 POOL Leave Total Assets and Deferred Outflows of Resources Current Assets Cash and investments $ 3,719,931 465,145 4,185,076 Receivables Accrued interest 22,252 22,252 Interfund loans - current portion 76,324 76,324 Total Current Assets 3,818,507 465,145 4,283,652 Noncurrent Assets Interfund loans, net of current portion 347.527 347.527 Property, plant and equipment, net Equipment and vehicles 8,535,955 - 8,535,955 Less accumulated depreciation (6,560,255) (6,560,255) Net property, plant and equipment in service 1,975,700 1,975,700 Total Noncurrent Assets 2,323,227 - 2,323,227 Total Assets S 6,141,734 465,145 6,606,879 Liabilities and Net Position Current Liabilities Accounts payable $ 65,891 - 65,881 Accrued compensated absences - current portion - 106,240 106,240 Total Current Liabilities 65,881 106,240 172,121 Noncurrent Liabilities Accrued compensated absences, net of current portion 358,905 358,905 Total Liabilities 65,881 465,145 531,026 Net Position Net investment in capital. assets 1,975,700 1,975,700 Unrestricted 4,100,153 4,100,153 Total Net Position 6,075,853 - 6,075,853 Total Liabilities and Net Position $ 6,141,734 465,145 6,606,879 89 Exhibit K-2 City of Seward, Alaska Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Net Position Compensated Motor Annual Year Ended December .31, 2021 Pas! Leave Total Operating Revenues Vehicle rental and interfund charges $ 635,989 453,892 1,089,881 Operating Expenses Salaries and employee benefits - 453,892 453,892 Supplies and maintenance 14,339 - 14,339 Depreciation 343,840 - 343,840 Total Operating Expenses 358,179 453,892 812,071 Earnings (loss) from operations 277,810 277,810 Honoperating Revenues Interest income 22,252 - 22,252 Investment income (loss) (16,268) - (16,268) Other revenue 438 - 438 Total Nonoperating Revenues 6,422 - 6,422 Income Before Transfers 284,232 - 284,232 Transfers in 288,671 288,671 Change in net position 572,903 572,903 Net Position, beginning of year 5,502,950 5,502,950 Net Position, end of year $ 6,075,853 6,075,853 Exhibit K-3 City of Seward, Alaska Internal Service Funds Combining Statement of Cash Flows Compensated Motor Annual Year Ended December 31, 2021 Pool Leave Total Cash Flows from (for) Operating Activities Receipts from vehicle rentats and interfund charges Receipts from other sources Payments to suppliers Payments to employees S 635,989 453,892 1,089,881 843 843 41,709 41,709 - (404,862) (404,862) Net cash flows from (for) operating activities 678,541 49,030 727,571 Cash Flows from (for) Noncapital Financing Activities Transfers in 288,671 288,671 Interfund interest received 26,059 26,059 Interfund loan receipts 72,517 72,517 Net cash flows from (for) noncapital and related financing activities Cash Flows from (for) Capital Financing Activities Acquisition of equipment and vehicles Cash Flows from Investing Activities Investment income received 387,247 387,247 (490,512) (490,512 (16, 268) (16,268) Net increase (decrease)in cash and investments 559,008 49,030 608,038 Cash and Investments, beginning of year 3,160,923 416,115 3,577,038 Cash and Investments, end of year $ 3,719,931 465,145 4.185,076 Reconciliation of earnings (loss) from operations to net cash flows from (for) operating activities: Earnings (loss) from operations S 277,810 - 277,810 Adjustments to reconcile earnings (loss) from operations to net cash flows from (for) operating activities: 438 438 Depreciation 343,840 343,840 (Increase) decrease in assets - other accounts receivable 405 405 Increase (decrease) in liabilities: Accounts payable 56,048 56,048 Accrued compensated absences - 49,030 49,030 Net cash flows from (for) operating activities $ 678,541 49,030 727,571 91 Fa:hibv. c f City of Seward, Alaska Schedule of Expenditures of Federal Awards Year Endpd December 31, 2021 Grant Number or Pass Through Assistance Grantors Listing .award Program 1 Award Federal Federal Grantor Number Number Amount Expenditures U.S, Department of Justices Passed through the Municipality of Anchorage - Alaska Internet Crimes Against Children Task Farce 16.543 40DDD45 5,000 5 0X1 U.S. Department of the Interior: Passed through the State of Alaska, Department of Natural Resources - Seward Historical Tour 15.904 HPF-2DO05 24.000 24,000 U.s- Department of Agriculture: Passed through the State of Alaska, Department Natural Resources - Division of Forestry 2021 Assistance to Firefighters Grant 10,664 None 4,979 4,979 V.S. nk-oaernler}r nr the Treasury: , h•r:1 nl •.ne State of —,ska, Department of Revenue - R6.,5cue Plan A.,I (ArP!,) 21.027 None 5,954 5,954 If arh Ctnr; o-r (Litt:1: Grrr; rOI r}r•;; ::r:d ¢-:..I ao o! Sr rvice5 up—r rl:- F' It I.? 1r.,' '1r:2rnm 93.527 7HB0057.6600 1,164,539 82,190 Grant: r1F>4ew rri E ,,a.,tcaServices undrf tltr H�alt�r Cente- 93-527 a HBOCS26600 1.290,549 1,195.372 Crar,s forf'ew a'rd Evpanced under the Health Center ProLyam 93.224 7 HOOCS26600 271,713 66.726 Grants for New aml FMpardpd 4ervires under the Heald, Center program 93.224 8 HBDC526600 333,786 290,687 COVID-19 - American Rescue Plan Act fARPA{ 93.224 1 HBF(541405 629, 250 472,057 Total Health Center Program Cluster 3,989,837 2,167,042 COVID-19 - Provider Relief Fund 93.499 None 1,478,000 1,478,000 Total Department of Health and Human Services 5,467,537 3,585,D42 Total Expenditures of Federal Awards $ 5,507,770 3,624,975 Reconciliation to Intergovernmental Revenues in the Statement of Revenues, Expenditures, and Chang?; in Fund Einlance. Toral Federalhnancial assistance per above schedule Tore( 1•IBtr• finanCill tmn,(- Intefcovernmental contracts riot included on [he SEFA or SSFA 167,75;I Provider Pell;-f Funds reported as Revenues in the SCHC Special Revenue Fund rhm ir,= not reported on The SEFA I CPV Fuiding reported as Capital. Cnntribl}tiori: in the Enterprise Funds (366,239r PEaS 5upplen)e(f on behalf recorded in the enterprise funds prior to adiusrment to match the measurement of the net pension and OPEB assets and liabidties as required oy GASE Statements 68 and 75. (143,111) ToW Intervow fnmental Revenr,FS in the Statement of Revenues, Expenditures and Changes in Fuad 63tarce )Es.l ibi[ T, 'I I. $ 4,419,943 S P,' :7LCC'r: i':K11}r1n�4 notes CO Ih, sr;'edole- 92 ON1 City of Seward, Alaska Notes to the Schedule of Expenditures of Federal Awards Year Ended December 31, 2021 (1) Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards (the "Schedule") includes the federal award activity of City of Seward, Alaska, under programs of the federal government for the year ended December 31, 2021. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Reguiations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of City of Seward, it is not intended to and does not present the basic financial statements of City of Seward. (2) Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. (3) Indirect Cost Rate City of Seward has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. (4) Provider Relief funds The CARES Act authorizes funding to hospitals and other healthcare providers to be distributed through the Public Health and Social Services Emergency Fund (Provider Relief Fund). Payments from the Provider Relief Fund are to be used to prevent, prepare for, and respond to the Coronavirus pandemic, and shall reimburse the recipient for health care related expenses or lost revenues attributable to the Coronavirus pandemic and are not required to be repaid, provided the recipients attest to and comply with the terms and conditions of the funding. For the year ended December 31, 2021, the Healthcare Facilities Enterprise Fund received payments of approximately $277,000 from the Provider Relief Fund and has reported revenues of $1,478,000. (5) Passed Through Awards The City of Seward did not pass any federal funds through to subrecipients during the year ended December 31, 2021. 93 City of Seward, Alaska Schedule of State Financial Assistance Year Ended December 31, 2021 Grantor Department of Commerce, Community and Economic Development: " Designated Legislative Grant - Jesse Lee Home Designated Legislative Grant - Responding to and Mitigating the risk of COVID-19 outbreak in the State Marijuana tax sharing Fisheries Resource Landing Tax Community Assistance Program Total Department of Commerce, Community and Economic Development Department of Administration: PERS Relief Department of Revenue_ " Fisheries Business Tax Department of Education and Early Development: Pubtic Library Assistance Department of Public Safety - Alaska Police Standards Council (.APSC) APSC Training Verbal De-escalation Training Total Department of Public Safety Total State Finaridat Assistance See accompanying notes to the Schedule. Exhibit M-1 Pass Through Grantor's. State Award Program 1 Award Share of Expenditures 19-RR-004 5 1,073,441 1,049,133 20-CPV-06 388,239 388,139 300 300 3,151 31151 85,793 85,793 1,550,924 1,526,616 455,867 455.867 344,528 344,528 P LA22-Sewar 7,000 7,000 None 1,560 1,560 None 995 995 2,555 2,555 5 7,360,874 2,336,566 94 City of Seward, Alaska Notes to the Schedule of State Financial Assistance Year Ended December 31, 2021 (1) Basis of Presentation The accompanying Schedule of State Financial Assistance (the "Schedule") includes the state award activity of City of Seward, Alaska, under programs of the State of Alaska for the year ended December 31, 2021, The information in this Schedule is presented in accordance with the requirements of the State of Aloska Audit Guide and Compliance Supplement for State Single Audits. Because the Schedule presents only a selected portion of the operations of City of Seward, it is not intended to and does not present the basic financial statements of City of Seward. (2) Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the State Single audit, wherein certain types of expenditures are not allowable or are limited as to reimbursement. (3) 5ubreciplents The City did not pass any state funds through to subrecipients during the year ended December 31, 2021. (4) Commercial Passenger Vessel Tax - State Assistance Cash receipts for commercial passenger vessel taxes have been recorded as revenue in the Harbor Enterprise Fund on an accrual basis. Any unspent portion of these funds, is reported as restricted net position in the fund financial statements. At December 31, 2021, the cumulative unspent vessel tax receipts were $2,289,905, Total vessel tax funds expended in 2021 and reported on the schedule of state financial assistance were 50. (5) PERS On -behalf The City has recorded 5455,867 in PERS On -behalf payments in the schedule of state financial assistance. This represents the PERS relief payments appropriated and transferred into the plan during calendar year 2021 and relates to both pension and OPEB contributions. In the governmentat fund financial statements, on -behalf revenue and expenditures have been recognized in their proportional share of on -behalf payments within the calendar year under audit. 95 m City of Seward, Alaska Notes to the Schedule of State Financial Assistance, Continued However, in the full accrual financial statements (the government -wide and enterprise fund financial statements), GASES 68 provisions prescribe that on -behalf pension contributions in a special funding situation may only be recognized during the measurement period in which the plan recognized the contributions. For the City of Seward, the PERS plan measurement period is July 1, 2020 through June 30, 2021, creating a six month timing difference between the cash contribution and revenue and expense recognition for the pension on -behalf by the City in those funds. As a result of these perspective and timing differences, amounts reported on the financial statements do not agree to the amount reported on the schedule of state financial assistance. (6) Major Programs . denotes a major program for compliance audit purposes. 96-q D RAC 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 Audicin� Standards Independent Auditor's Report Honorable Mayor and City Council City of Seward, Alaska We have audited, in accordance with the 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, the financial statements of the governmental activities, the business type activities, each major fund, and the aggregate remaining fund information of the City of Seward, Alaska, as of and for the year ended December 31, 2021, and the related notes to the financial statements, which collectively comprise the City of Seward's basic financial statements and have issued our report thereon dated MONTH XX, 2022. Our report includes a reference to other auditors who audited the financial statements of the Providence Seward Medical and Care Center, as described in our report of City of Seward's basic financial statements. This report does not include the results of the auditors' testing of internal control over financial reporting or compliance and other matters that are reported on separately by these auditors. Report on Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City of Seward's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances 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 of Seward's internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Seward'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. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 12.2 r l "NLV Honorable Mayor and City Council City of Seward, Alaska Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did identify a certain deficiency in internal control, described in the accompanying federal schedule of findings and questioned costs as Finding 2021-001, that we consider to be a material weakness. Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Seward's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, reputations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. 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 tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. City of Seward's Response to Finding City of Seward's response to the finding identified in our audit is described in the accompanying federal schedule of findings and questioned costs and corrective action plan. City of Seward's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City of Seward's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Anchorage, Alaska July XX, 2022 123 NARY DPAF I1, Report on Compliance For Each Major Federal Program, Report on Internal Control Over Corn2lfance; and Report on Schedule of Expenditures of Federal Awards Reguired by the Uniform Guidance Independent Auditor's Report Honorable Mayor and City Council City of Seward, Alaska Opinion on Each Major Federal Program We have audited the City of Seward's compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of the City of Seward, Alaska's major federal programs for the year ended December 31, 2021. City of Seward, Alaska's major federal programs are identified in the summary of auditor's results section of the accompanying federal schedule of findings and questioned costs. In our opinion, City of Seward, Alaska complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2021. Basis for Opinion on Each Major Federal Program We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor's Responsibilities for the Audit of Compliance section of our report. We are required to be independent of City of Seward, Alaska and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination of City of Seward, Alaska's compliance with the compliance requirements referred to above. DRAFT 124 "�l4SSeONR i POSES()NLY Honorable Mayor and City Council City of Seward, Alaska Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to City of Seward, Alaska's federal programs. Auditor's Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on City of Seward, Alaska's compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about City of Seward, Alaska's compliance with the requirements of each major federal program as a whole. In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding City of Seward, Alaska's compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. • Obtain an understanding of City of Seward, Alaska's internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of City of Seward, Alaska's internal control over compliance. Accordingly, no such opinion is expressed. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. 125 m Honorable Mayor and City Council City of Seward, Alaska Report on Internal Control over Compliance A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the Auditor's Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified. Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing. based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Anchorage, Alaska July XX, 2022 INARY DR/FT 126 oisruSGioN PlIPP0�ESONI.v City of Seward, Alaska Federal Schedule of Findings and Questioned Costs Year Ended December 31, 2021 Section I - Summary of Auditor's Results Financial Statements Type of auditors' report issued: Is a going concern emphasis -of -matter paragraph included in the audit report? Internal control over financial reporting; Material weakness(es) identified? Significant deficiency(ies) identified? Noncompliance material to financial statements noted? Federal Awards Internal control over major programs (2 CFR 200.516 (a)(1 }): Material weakness(es) identified? Significant deficiency(es) identified? Any material noncompliance with the provisions of Laws, regulations, contracts, or grant agreements retated to a major program (2 CFR 200.516 (a)(2))? Type of auditor's report issued on compliance for major program: Any audit findings disclosed that are required to be reported in accordance with Uniform Guidance, (2 CFR 200.516 (a)(3) or (4)? Identification of major programs: CF_QA Numbertsi 93,224/93,527 Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as low -risk auditee? Unmodified Yes X No X Yes No Yes X None reported Yes X No Yes X No Yes X None reported Yes X No Unmodified Yes X No Name of Federal Pro�!*am or Cluster Health Centers Cluster $ 750,000 Yes X No 127 City of Seward, Alaska Federal Schedule of Findings and Questioned Costs, Continued Section II - Financial Statement Findings Findin 2021-001 Lack of Internal Controls over Utility Billings Material Weakness Criteria: Internal controls should be in place to ensure proper and accurate financial reporting in accordance with Generally Accepted Accounting Principles (GAAP). Condition and Context: During our testing of internal controls over the utility bitting system, we noted four instances where customers were classified as the incorrect account type, three instances where a customer was charged more than one equivalent residential unit for water and sewer service without adequate documentation, and two instances where a customer was not charged for water and sewer service although they were using those services. Cause: The City does not have adequate processes and controls in place to ensure that all utility accounts are bitted the correct rate and for the correct service, Effect: A number of utility customers are being billed incorrectly. In some cases customers are being overbilled, in some cases customers are being under billed. The amounts noted are immaterial in nature but indicate a tack of internal controls over utility biltings. Repeat Finding: Repeat of Finding 2020.003 Recommendation: We recommend the City strengthen its processes and controls related to individual utility account balances and charges Management's Response: Management agrees with this finding. See Corrective Action Plan. Section lit - Federal Award Findings The City of Seward did not have any findings that relate to Federal awards. Report on Compliance For Each Major State Program- Report an Internal Control over Compliance; and Report on the Schedule of State Financial Assistance Required by the State of Alaska Audit Guide and Compliance Supplement for State Single Audits Independent Auditor's Report Honorable Mayor and City Council City of Seward, Alaska Opinion on Compliance for Each Major State Program We have audited City of Seward's compliance with the types of compliance requirements described in the State of Alaska Audit Guide and Compliance Supplement for State Single Audits that could have a direct and material effect on each of City of Seward's major state programs for the year ended December 31, 2021. City of Seward's major state programs are identified in the accompanying Schedule of State Financial Assistance. In our opinion, City of Seward complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major state programs for the year ended December 31, 2021. Basis for Opinion on Each Major State Program We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America (GAAS); the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards); and the audit requirements in the State of Alaska Audit Guide. Our responsibilities under those standards and the State of Alaska Audit Guide are further described in the Auditor's Responsibilities for the Audit of Compliance section of our report.. We are required to be independent of City of Seward, Alaska and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination of City of Seward, Alaska's compliance with the compliance requirements referred to above. 129 PRE .i Honorable Mayor and City Council City of Seward, Alaska Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to City of Seward.. Alaska's federal programs. Auditor's Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on City of Seward, Alaska's compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GARS, Government Auditing Standards, and the State of Alaska Audit Guide requirements will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about City of Seward, Alaska's compliance with the requirements of each major state program as a whole. In performing an audit in accordance with GARS, Government Auditing Standards, and the State of Alaska Audit Guide, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding City of Seward, Alaska's compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. • Obtain an understanding of City of Seward, Alaska's internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the State of Alaska requirements, but not for the purpose of expressing an opinion on the effectiveness of City of Seward, Alaska's internal control over compliance. Accordingly, no such opinion is expressed. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. 130 DHAFT Honorable Mayor and City Council City of Seward, Alaska Report on Internal Control over Compliance A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not atlow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a state program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a state program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a state program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal controt over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internat control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal controt over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal controt over comptiance. Accordingly, no such opinion is expressed. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the State of Alaska. Accordingly, this report is not suitabte for any other purpose. Anchorage, _Alaska July XX, 2022 131 City of Seward, Alaska State Schedule of Findings and Questioned Costs Year Ended December 31, 2021 Section 1- Summary of Auditor's Results Financial Statements Type of auditor's report issued: Internal control over financial reporting: Material weakness(es) identified? Significant deficiency(ies) identified? Noncompliance material to financial statements? State Awards Internal control over major programs: Material weakness(es) identified? Significant deficiency(ies) identified? Type of auditor's report issued on compliance for major program: Dollar threshold used to distinguish a state major program Section II - Financial Statement Findings Unmodified X Yes No Yes X None reported Yes X No Yes X No Yes X None reported Unmodified 5 150,000 See the Federal Schedule of Findings and Questioned Costs for all reported financial statement findings. Section III - State Award Findings The City of Seward did not have any findings that relate to State awards. 132 • Wain Office (907) 224-4050 CITY OF SEWA.RD Police (907) 224-3338 t + Harbor (907) 224-3138 F.O. Box 167 Fire (907) 224-3445 410 Adains Street City Clerk (907) 224-4046 Seward, Alaska 99664.0167 • Community Development (907) 224-4049 • utilities (907) 224-4050 • Fax (907) 224.4038 Summary of Prior Audit Findings Year Ended December 31, 2021 Financial Statement Findings Finding 2020-001 Lack of Internal Controls over Governmental Activities Capital Assets Material Weakness Condition; During the audit we noted that the governmental activities capital asset schedule lacked significant additions as a result of capital expenditures in the governmental fund financial statements not properly being identified for capitatization on the City's capital asset schedule. During the audit we performed a search for unrecorded assets and noted a material understatement of capital assets and a corresponding overstatement of expenses reported in governmental activities. Status; This finding has been resolved. Finding 2020-002 Lack of Internal Controls over Year End Close Procedures Material Weakness Condition A number of general ledger accounts were not properly reconciled at the start of the audit. As a result, the balances for capital assets, accrued interest, cash, debt, PERS on -behalf, and the Compensated Annual Leave Internal Service Fund charges required adjustments. Status: This finding has been resolved. 133 City of Seward Summary of Prior Audit Findings, Continued Finding 2020-003 Lack of Internal Controls over Utility Billings Material Weakness Condition and Context: During our testing of internal controls over the utility bitting system, we noted two instances where customers were classified as the incorrect account type, one instance where a customer was charged more than one equivalent residential unit for water and sewer service without adequate documentation, and one instance where a customer was not charged for water and sewer service although they were using those services. Status: This finding has not been resolved and is repeated as Finding 2021- 001. 134 • Main Office (907) 224-4050 CITY OF SEWARD • Police (907) 224-3338 • Harbor (907) 224-3138 P.O. Box 167 - Fire (907) 224-3445 410 Adams 5trcct City Clerk (907) 224-4046 Seward, Alaska 99664.016 7 Community Development (907) 224-4049 ■ Utilities (907) 224-4050 • Fax (907) 2244038 Corrective Action Plan Year Ended December 31, 2021 Financial Statement. Findings Finding 2020-001 Lack of internal Controls over Utility Billin&s Material Weakness Name of Contact Person: Corrective Action Plan: The City is in the process of addressing weaknesses regarding utility bitting. An external forensic audit is being conducted for utility hitting as well as an internal audit of utility billings. Finance is in the process of reviewing and updating all. bitting errors as a result of these audits. It is finance's desire to ensure utility billings are bitted in accordance with each utility tariff without error. With the hire of a new Finance Director and a Utility Bitting Manager, finance wilt be implementing a second count of cash as a secondary level of review. Further discussions, internally, in finance are taking place to ensure proper secondary level of review and segregation of duties is achieved. Proposed Completion Date: March 31, ZOR RA�F 135 PURPOSES ONLY