Other Auditor Reports 12/31/2003

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The City needs to review each of these funds to determine how the deficits will be eliminated. In some cases, transfers from other funds may be needed to eliminate the deficits. These transfers should be made as soon as the amount can be determined so as not to overstate the fund balances in the transferring funds. We also recommend that the City close funds once the related projects are complete. SAC Revolving The SAC Revolving Fund was established in 1990 to account for a refund from the MCES (formerly MWCC) of past SAC charges which were paid by residents that had not hooked up to the sewer system. A summary of financial activity of this fund is as follows: Prior Years 2003 Total Revenue SAC refund $ 368,816 $ - $ 368,816 Investment earnings 246,626 3,265 249,891 Total revenue 615,442 3,265 618,707 Expenditures: Refunds $ 248,576 $ 3,832 252,408 Fund balance - December 31, 2003 $ 366,299 The City is allowing current homeowners to request a refund with 4% interest. If refunds and claims are not submitted, the City will pay the full SAC charge from this fund at the time of hook -up. This policy will likely require a supplemental future revenue source as the current MCES SAC charges times the potential hookups exceeds the available balance. If the MCES SAC fees continue to increase at a rate that is faster than the investment earnings rate, other revenue sources will be needed in the future to fund the actual connections when they occur. Area and Unit Charge Fund On January 11, 1988, the City Council approved Resolution 1 -88, which established the Area and Unit Charge Fund for the City. The purpose of this fund is to collect various area and unit charges to be used to meet debt payments. Before October 1 of each year, the City estimates the required transfer needed to meet debt payments for the subsequent year. In December, these estimated amounts are transferred to the various debt funds. We recommend that the City continue to closely monitor actual versus projected area and unit assessment collections to assure that debt payment requirements will be met. Designations of balances required for debt service is necessary to define discretionary construction balances available to the City. The financing plan for the following bond issues have pledged area and unit charges for the repayment of debt service: • Improvement Refunding Bonds of 1999A • Improvement Bonds of 1996A • Water Revenue Bonds of 1999B • Water Revenue Bonds of 1996B (8)