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HomeMy WebLinkAbout12/17/2012 • Council Work Session December 17, 2012 Time as indicated below Council Chambers Roll Call. Approval of Agenda, as proposed or amended. 3:10 p.m. - Presentation by INRCOG on University Avenue Project— Submitted by Sandie Greco, Traffic Operations Superintendent. 4:10 p.m. - Discussion of Roadside Memorials—Submitted by Mayor Buck Clark. 4:30 p.m. - Presentation by McGladrey on the Audit Submitted by Michelle Weidner, Chief Financial Officer. ADJOURNMENT Suzy Schares City Clerk a Jo.'..*" k `` _� �' Y. s.r . , I Iltst i.. * , ,,,,., ige, —, ' ' kr\ f ', vg IP S ll i 0 o y. .x> 12/17/2012 9:29:11 AM 0. y s}ti • ^" y S b 'S lel ` , " s " r to � 5� .F -er• ' /4 - . 4lt G C u .-4- �rr d h [�, 4'7. \ k r rr P M k ,iiM1 , F� ss ...R 12/17/2012 9:25:17 AM 12/17/2012 9:25:27 AM `- ' 4 4'. 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Y ! 1, f ` • .�' s� f rk�5 L } sf Sofa �2. 3 } ,a-'��SXf t v fie.•-,.� • t.. w - r >�� `{ .'@ #. t r 4,: he` _ -v§ Council Work Session December 17, 2012 Time as indicated below Council Chambers • Roll Call. Approval of Agenda, as proposed or amended. 3:10 p.m. - Presentation by INRCOG on University Avenue Project Submitted by Sandie Greco, Traffic Operations Superintendent. 4:10 p.m. - Discussion of Roadside Memorials—Submitted by Mayor Buck Clark. 4:30 p.m. - Presentation by McGladrey on the Audit Submitted by Michelle Weidner, Chief Financial Officer. ADJOURNMENT Suzy Schares City Clerk CITY OF WATERLOO Council Communication City Council Meeting: December 10, 2012 Prepared: November 5, 2012 Dept. Head Signature: Sandie Greco # of Attachments: SUBJECT: Council Work Session — University Ave. Project Submitted by: Sandie Greco, Traffic Operations Superintendent Recommended City Council Action: Summary Statement Staff Report on the development of the University Ave. Project Expenditure Required: Source of Funds: Policy Issue Alternative Background Information: University HNTB Avenue/ MEETING Engineers Architects Planners IA 934 715 Kirk Drive AGENDA Kansas City, MO 64105-1310 EA phone: (816)472-1201 fax: (816)472-4086 Date: December 17, 2012 Time: 3:10 p.m. — 4:10 p.m. University Ave/IA 934 EA City Hall Subject: Location: 715 Mulberry Street Waterloo City Council Meeting Waterloo, Iowa 50703 Agenda Items: • Welcome and Introductions • University Avenue/IA 934 Study Overview • Overview of Alternatives • Success Stories on Similar Projects • Traffic Videos of Alternatives • Conceptual Engineering of Alternatives • Group Discussion • Schedule and Next Steps Council Work Session December 17, 2012 Time as indicated below Council Chambers Roll Call. Approval of Agenda, as proposed or amended. 3:10 p.m. - Presentation by INRCOG on University Avenue Project Submitted by Sandie Greco, Traffic Operations Superintendent. 4:10 p.m. - Discussion of Roadside Memorials Submitted by Mayor Buck Clark. 4:30 p.m. - Presentation by McGladrey on the Audit—Submitted by Michelle Weidner, Chief Financial Officer. ADJOURNMENT Suzy Schares City Clerk CITY OF WATERLOO , IOWA opikse� CITY CLERK AND FINANCE DEPARTMENT .. gym 715 Mulberry Street • Waterloo.IA 50703 • (319)291-4323 Fax(319)291-4571 SUZY SCHARES • Cuy Clerk MICHELLE WEIDNER,CPA • Chief FinancialOff?cer Mayor BUCK CLARK Council Communication COUNCIL City Council Meeting: December 17, 2012 MEMBERS Prepared: December 11, 2012 Dept. Head Signature: DAVID Number of Attachments: None JONES Ward 1 CAROLYN SUBJECT: Comprehensive Annual Financial Report for COLE the Year Ended June 30, 2012 Ward 2 Submitted by: Michelle Weidner, Chief Financial Officer HAROLD GETTY Ward3 Recommended City Council Action: I recommend that the Comprehensive QUENTINM. Annual Financial Report for the Fiscal Year Ended June 30, 2012 be placed on HART file. Ward 4 Summary Statement: N/A RON WELPER Expenditure Required: None Ward BOB Source of Funds: N/A GREENWOOD At-Large Policy Issue: None STEVE Alternative: N/A SCHMITT At-Large Background Information: The financial statements were not printed in time to include them in the council packets. McGladrey will deliver them Monday, December 17. • CITY WEBSITE:www.cityofwaterlooiowa.com WE'RE WORKING FOR YOU! An Equal Opportunity/Affirmative Action Employer • �; �� CITY OF WATERLOO , IOWA ivqpii, IA, may.^k+�/� CITY CLERK AND FINANCE DEPARTMENT ^ m 715 Mulberry Street • Waterloo,IA 50703 • (319)291-4323 Fax(319)291-4571 dfOrl00 �0 SUZY SCHARES • City Clerk MICHELLE WEIDNER,CPA • Chief Financial Officer Council Communication • City Council Meeting: December 17, 2012 Prepared: December 14, 2012 Mayor Dept. Head Signature: BUCK file dfuteL, Ldi,, ,<2iLiis CLARK Number of Attachments: One — audited financial statements COUNCIL SUBJECT: Comprehensive Annual Financial Report for MEMBERS the Year Ended June 30, 2012 Submitted by: Michelle Weidner, Chief Financial Officer Joy` D Recommended City Council Action: I recommend that the Comprehensive Ward! Annual Financial Report for the Fiscal Year Ended June 30, 2012 be placed on file. CAROLYN COLE Background Information: Please find attached the City of Waterloo Ward2 Comprehensive Annual Financial Report for the fiscal year ended June 30, 2012, together with the compliance report for the passenger facility charges program HAROLD and a separate reporting package from the auditors. We are pleased to report ua d3Y that the audited financial statements reflect that the overall financial position of the City continued to improve during the fiscal year ended June 30, 2012 and QUENTIN IV that the independent auditor's report issued by McGladrey & Pullen, LLP is HART unqualified (see the tab labeled Auditor's Report for their opinion). Ward 4 Reading the transmittal letter, found at pages iii through x, and Management's RON Discussion and Analysis, found at pages 3 through 14, provides a summary of W LPER the information included in the basic financial statements. Reading through the d 5 transmittal letter and Management's Discussion and Analysis will provide you BOB with an idea of the contents of the report, although I would recommend that you GREENWOOD read the entire report to more fully understand the City's financial position. This Al-Large document summarizes all the financial activity that was undertaken by the City during the fiscal year ended June 30, 2012. The footnotes, found at pages 32 STEVE through 67, provide additional background and explanation about the activities. SCHMITT' The grant compliance portion of the audit is found at pages 123 through 137. At-Large One of the key indicators in the report is the trend in General fund balance. The unassigned fund balance in the General fund increased by $1,127,099, indicating that General fund activities as a whole performed significantly better than budgeted, since the City budgeted for a decrease of$609,056 in unassigned fund balance. Unassigned fund balance of$9,644,699 is 21% of general fund revenue, also a significant improvement from FYE2011. This is a key indicator used by many readers of the statements, including the bond rating services. In order to provide an adequate cash flow cushion for expenses and grants, and to improve our bond rating to the next category, which is the level that many cities our size hold, it is recommended that unassigned fund balance be 25% of general fund revenues. It's significant to note that this ratio has improved from a low point of 5.2% at June 30, 2000. CITY WEBSI 1 E:www.cityofwaterlooiowa.com WE'RE WORKING FOR YOU! An Equal Opportunity/Affirmative Action Emoloyer FYE2012 CAFR Cover Letter Page 2 of 4 Overall General fund balance, including amounts restricted and designated for special purposes, increased by $340,189. Restricted, committed and assigned sources of fund balance decreased by a total of $886,910. Most of this decrease arose from using the Black Hawk County Solid Waste distributions for Vision Iowa project expenses. General fund unrestricted cash of$6,715,450 is 14.62% of General fund revenues (including amounts levied for employee benefits), exceeding the 5% of revenues required by city ordinance. This amount decreased substantially by $5,281,804 from FYE2011. A portion of this cash has been committed by the City Council for the specific purposes of providing matching funds for the Vision Iowa award to complete the Riverfront Renaissance project. Another portion has been assigned to fund a pool to self-insure the City for various risks, such as uninsured worker's compensation claims, tort claims and employee health care and also to provide cash to fund the amount of fund balance that was budgeted to be used for FYE2013 general operations. Unrestricted cash net of that committed or assigned for those purposes is $2,088,524, or 4.5% of general fund revenues, less than the 5% of revenues required by city ordinance. Amounts spent for grants that have not yet been reimbursed increased substantially during FYE2012, resulting in this reduction in cash. The entity-wide financial statements reflect the City's substantial investment in fixed assets net of related depreciation expense and debt. The addition of these items was required by Government Accounting Standard #34 and is intended to provide the reader of the statements with more information regarding how the City has invested taxpayer funds. Capital assets currently recorded on the City's books total $592,873,220. The City's investment in capital assets, net of accumulated depreciation and related debt, was $322,062,448. The Debt Service fund, which is used to retire the city's general obligation debt, recognized an increase in cash of$4,459,797 and an increase in fund balance of $4,480,936 available for the retirement of future debt. This increase was largely due to holding the proceeds of a refunding bond issue that was sold June 28, 2012, but not used to redeem the outstanding bonds until July 2012. The Tax Increment Financing (TIF) fund realized an increase in cash ($800,122) and a decrease in fund balance ($212,764) available for the repayment of future tax increment expenses. The Trust and Agency fund is used to levy property taxes for the payment of employee benefits for general fund employee activities. Cash decreased by $422,678 and fund balance decreased by $313,248, respectively, in this fund during the year ended June 30, 2012, due to paying the benefits related to the twenty-seventh pay period using fund balance. The Local Option Tax fund, which is used to repair, reconstruct and improve streets, saw a decrease in cash and an increase fund balance available for future construction at the end of June 30, 2012. Cash decreased by $168,733 while fund balance increased by $119,304 to $9.3 million. The City budgeted to expend more funds on projects than spent due to the delayed starting dates for two significant projects, Highway 63 reconstruction and the Donald Street project. FYE2012 CAFR Cover Letter Page 3 of 4 The year-end fund balance was committed to construction contracts that were already awarded but uncompleted at June 30, 2012. The Road Use Tax fund, which pays for such things as street maintenance, snow removal, traffic operations and engineering, saw an increase in cash ($414,515) and an increase in fund balance ($596,804). This fund now has a balance of $5,227,878. The increase was primarily due to less expense required for snow removal activities. In addition, there were some vacant positions that resulted in budgetary savings. The Library Special Levy fund recognized a slight decrease in cash ($3,289) and an increase in fund balance ($11,276) during the year ended June 30, 2012. The fund balance is 29.5% of revenues at June 30, 2012, which is slightly higher than the 25% target for this fund. A very small cash balance is maintained in the Community Development Block Grant Fund. Grant funds received from the federal government are required to be spent as received. The City routinely advances general fund monies to pay these expenses until reimbursements are received, generally from the federal government. This practice reduces general fund investment earnings and temporarily reduces general fund cash available for other uses. Cash and fund balance increased by $266,011 and $270,603, respectively, in the Housing fund. Expenditures in this fund are restricted for specified uses by the federal government. The total cash and investments balance was $4,535,366 at June 30, 2012, while fund balance increased to $4,407,984. The negative fund balances reflected in the Grants fund is temporary and was caused due to expenditures made prior to receiving reimbursements from the granting agencies. General fund monies are advanced to pay these project expenses until grant reimbursements are received. Ensuring that all grant reimbursements are received within sixty days of year-end would eliminate this negative fund balance and also allow the audit finding regarding the negative fund balance to be eliminated. The amount of grant reimbursements outstanding increased substantially during the current year. Some of this occurred to staff not filing requests timely. However, there are situations when the reimbursements cannot be received within sixty days of year-end. For example, the city retains a portion of contract payments due until contracts are complete. The retainage is reflected as an amount due, but the reimbursing agencies don't reimburse the city until the contract is complete, creating a negative fund balance. The City will continue to explore ways to improve this turnaround. This practice reduces general fund investment earnings and temporarily reduces cash available for other uses in order to comply with grant requirements. Granting agency requirements that the City pay expenses prior to receiving grant reimbursements require that the City maintain a cash balance in the General fund to address this issue. FYE2012 CAFR Cover Letter Page 4 of 4 The Sanitation fund, which accounts for garbage removal and recycling activities, ended the year with $2,662,682 in cash, a slight increase of $2,721 from the previous year, while net assets increased by $155,378 to $4,772,239. This cash level provides the fund with a needed cushion to allow the fund to pay its bills prior to receiving revenue and to pay expenses even if revenue declines unexpectedly. Available cash not committed to repay current liabilities is 59% of revenues, covering seven months of operating expenses. The Sewer fund, which accounts for wastewater and storm water activities, ended the year with unrestricted cash available for operations of $8,572,055, an increase of $1,961,656. Available cash not committed to repay current liabilities (excluding bonds) increased to 60% of revenues, which is approximately seven months of cash flow to pay operating expenses. Unrestricted net assets increased by $1,716,689. Sewer operations cash increased $2,179,099 to $7,926,335, while $217,443 was used in the storm water fund, decreasing that cash balance to $645,720. Cash accumulated in the storm water fund during the prior fiscal year was planned to be used for the construction of the Cattle Congress pump station, which is now complete. One of the benefits obtained from having an independent audit is recommendations made for improvements to processes used by the City. Please refer to pages 128 through 137 for a description of all the audit findings. As you may remember, more stringent auditing standards regarding internal controls were effective beginning for the year ended June 30, 2008. Two internal control deficiencies continue to be classified as significant deficiencies as described on pages 133 and 134 (Issues 12-II-A and 12-II-B). Currently, we believe that the benefit to implement the additional control processes required to eliminate these deficiencies does not outweigh the cost. We continue to review ways to compensate for these issues in areas where the cost to implement the additional control processes is less than the anticipated benefit. Two statutory compliance issues as reported in previous years (see pages 134 through 136, Issues 12-IV-H and 12-IV0J) were repeated. Both are situations that are required to be reported, but that the city either cannot correct or chooses not to address. The first of these findings relates to the negative fund balances carried in the reimbursable project funds, as reported above. The second finding points out that the City has provided property tax support to the Waterloo Regional Airport, although a City ordinance requires that the airport be self-supporting. Past City Councils elected to use property taxes to support this vital economic development tool. Two additional findings related to the timing of publications (See pages 135 and 136, issues 12-V-F and as-IV-K). Council minutes were not always published within 15 days as required and capital bidding notices were not always published a minimum of four days prior to the hearing date as required. If you have any questions about the information presented or would like to discuss the performance of any of the funds or any of the findings specifically, please contact me. I'll be happy to provide further information. City of Waterloo, Iowa Report to the Honorable Mayor and City Council December 14, 2012 MCG lad rey Assurance • Tax • Consulting McGladrey LIP McGladrey December 14, 2012 To the Honorable Mayor and City Council City of Waterloo, Iowa 715 Mulberry Street Waterloo, Iowa 50703 We are pleased to present this report related to our audit of the financial statements and compliance of City of Waterloo, Iowa for the year ended June 30, 2012. This report summarizes certain matters required by professional standards to be communicated to you in your oversight responsibility for City of Waterloo, Iowa's financial and compliance reporting process. This report is intended solely for the information and use of the Honorable Mayor and City Council and management and is not intended to be and should not be used by anyone other than these specified parties. It will be our pleasure to respond to any questions you have regarding this report. We appreciate the opportunity to continue to be of service to City of Waterloo, Iowa. %e4 / G f' Member of the RSM International network of Independent accounting,tax and consulting toms Contents ® � �■ Required Communications 1 —2 Summary of Accounting Estimates 3—4 Summary of Uncorrected Misstatements 5 Exhibit A -Significant Written Communications between Management and Our Firm Representation Letter Independent Auditor's Report on Compliance with Requirements that Could Have a Direct and Material Effect on the Passenger Facility Charge Program and on Internal Control Over Compliance Required Comm ■q Communications Auditing guidance requires the auditor to communicate certain matters to keep those charged with governance adequately informed about matters related to the financial statement audit that are, in our professional judgment, significant and relevant to the responsibilities of those charged with governance in overseeing the financial reporting process. The following summarizes these communications: Area Comments Auditor's Responsibility Under Our responsibility under auditing standards generally accepted Professional Standards in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States, and provisions of OMB Circular A-133 and OMB's Compliance Supplement has been described to you in our arrangement letter dated April 18, 2011. Accounting Practices Adoption of, or Change in, Accounting Policies Management has the ultimate responsibility for the appropriateness of the accounting policies used by the City. The City did not adopt any significant new accounting policies nor have there been any changes in existing significant accounting policies during the year. Significant or Unusual Transactions We did not identify any significant or unusual transactions or significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Alternative Treatments Discussed with Management We did not discuss with management any alternative treatments within generally accepted accounting principles for accounting policies and practices related to material items during the current audit period. Management's Judgments and Summary information about the process used by management Accounting Estimates in formulating particularly sensitive accounting estimates and about our conclusions regarding the reasonableness of those estimates is in the attached "Summary of Accounting Estimates." Audit Adjustments Audit adjustments recorded by City of Waterloo, Iowa are attached to the representation letter included within Exhibit A. Uncorrected Misstatements Uncorrected misstatements are summarized in the attached "Summary of Uncorrected Misstatements." Disagreements with Management We encountered no disagreements with management over the application of significant accounting principles, the basis for management's judgments on any significant matters, the scope of the audit or significant disclosures to be included in the financial statements. Page 1 Area Comments Consultations with Other We are not aware of any consultations management had with Accountants other accountants about accounting or auditing matters. Significant Issues Discussed with No significant issues arising from the audit were discussed or Management were the subject of correspondence with management. Difficulties Encountered in We did not encounter any difficulties in dealing with Performing the Audit management during the audit. Accounting Pronouncements Please refer to Note 23 of the financial statements for new accounting pronouncements that have been recently issued that may affect the City's financial reporting in future periods. Letter Communicating Significant We have separately communicated the significant deficiencies Deficiencies and instances of noncompliance identified during our audit of the financial statements and major awards, as required by the Government Auditing Standards and OMB Circular A-133, and this communication is included within the compliance section of the City of Waterloo, Iowa's financial report for the year ended June 30, 2012. Significant Written Copies of significant written communications between our firm Communications Between and the management of the City are attached as Exhibit A. Management and Our Firm Page 2 City of Waterloo, Iowa Summary of Accounting Estimates Year Ended June 30, 2012 Accounting estimates are an integral part of the preparation of financial statements and are based upon management's current judgment. The process used by management encompasses their knowledge and experience about past and current events and certain assumptions about future events. You may wish to monitor throughout the year the process used to compute and record these accounting estimates. The following describes the significant accounting estimates reflected in the City's June 30, 2012, basic financial statements: Area Accounting Policy Estimation Process Comments Depreciable Useful The depreciable useful The determination is We believe the Life of Capital Assets life of capital assets is made at the time the estimates and the set at the estimated asset is placed into process used by useful life of the related service and involves management are asset. various judgments and reasonable. assumptions based on prior experience. Incurred but Not The City records an The City relies on the We tested the propriety Reported (IBNR) estimated liability for actuarial computed of the information Liability for risk management losses IBNR based on data provided to the actuary. DentalNision and which include amounts provided by the City of We believe the Health Insurance Self- for incurred but not outstanding claims, estimates and Insurance Liability reported claims. history of claims and processes used by various judgments and management are assumptions. reasonable. Management reviews the actuarial results. Worker's The City records an The City calculated the We tested the propriety Compensation and estimated liability for IBNR liability using of the information Automobile Liability risk management losses various judgments and underlying which include amounts assumptions and management's for incurred but not records a liability for estimates. Based on our reported claims. claims incurred. procedures, we believe • management's estimate is reasonable. Page 3 Area Accounting Policy Estimation Process Comments Other A liability is reported on Numerous assumptions We tested the Postemployment the government-wide are used by the actuary information provided to Benefit Plan (OPEB) and proprietary fund and include employee- the actuary and Assumptions financial statements for related factors such as obtained the actuarial the difference of annual turnover, retirement age calculation reports. We required contributions and mortality. These believe the estimates and the amounts paid factors and estimated and processes used by by the City. discount rate used to management are determine the present reasonable. value of liabilities are based upon historical data and general market data. The amount is calculated by an actuary. Management reviews the actuarial results. Allowance for The allowance for The allowance is We tested the Doubtful Accounts receivables are adjusted as information underlying information recorded at net about specific accounts supporting this realizable value; gross becomes available. The allowance, including the accounts receivable net City also compares most recent aging an allowance for current allowance reports and collection doubtful accounts. amounts to prior-year experience. We believe collection or write-off that management's experience. estimate is reasonable. Allocation of Indirect Operating funds, Annually, management We tested the Costs departments and estimates the value of underlying information activities receive these services and supporting the services from records applicable underlying allocations. supporting funds indirect allocations. We believe that departments and management's estimate activities. is reasonable. Community Low interest loans, low- The loans are monitored We tested the Development Block income housing loans for collectability by underlying information Grant Loans and forgivable loans management and supporting this receivable are valued at management has allowance. We believe $0 with 100 percent developed an allowance that management's allowance for doubtful as information about estimate is reasonable. accounts. These loans specific accounts are not recorded as an becomes available. asset on the balance sheet or statement of net assets. Page 4 City of Waterloo, Iowa Summary of Uncorrected Misstatements Year Ended June 30, 2012 During the course of our audit, we accumulated uncorrected misstatements that were determined by management to be immaterial, both individually and in the aggregate, to the statements of financial position, results of operations and cash flows and to the related financial statement disclosures. Following is a summary of those differences: Debit(Credit)to Correct the Misstatements Governmental Activities Assets Liabilities Net Assets Revenue Expense Description' Under accrual of workers'compensation claim liability $ - $ (390.000) $ - $ - $ 390.000 Effect of prior year passed adjustments on net assets 390,000 Total $ 390,000 Page 5 Exhibit A - Significant Written Communications between Management and Our Firm CITY OF WATERLOOv IOWA I/Pie r,//l CITY CLERK AND FINANCE DEPARTMENT 715 Mulberry Street • Waterloo,IA 50703 • (319)291-4323 Fax(319)291-4571 d SU.'ZYSCHARES • City Clerk MICHELLE WEIDNER,CPA • Chief Frnancial Officer tet7:10 Mayor BUCK December 14, 2012 . CLARK McGladrey LLP COUNCIL 201 North Harrison Street • MEMBERS Suite 300 Davenport, Iowa 52801 DAVID In connection with your audit of the basic financial statements of the City of Waterloo, Iowa (the City) as of and for the year ended June 30, 2012, we confirm that we are JONES responsible for the fair presentation in the financial statements of financial position, Ward t changes in financial position, and cash flows in conformitywith accounting g principles generally accepted in the United States of America. CAROLYN COLE We confirm to the best of our knowledge and belief, as of December 14, 2012 the Ward2 following representations made to you during your audit: HAROLD 1. The financial statements referred to above are fairly presented in conformity with GETIY accounting principles generally accepted in the United States of America. Ward 3 2. We have identified for you all organizations that are a part of this reporting entity QUENTIN M. or with which we have a relationship, as these organizations are defined in HART Section 2100 of the Governmental Accounting Standards Board's Codification of Ward 4 Governmental Accounting and Financial Reporting Standards, that are: RON a. Component units. WELWard 5 PER b. Other organizations for which the nature and significance of their relationship with the City of Waterloo, Iowa are such that exclusion would BOB cause the reporting entity's financial statements to be misleading or GREENWOOD incomplete. At-Large c. Jointly governed organizations in which we participated. STEVE 3. We have identified for you all of our funds, governmental functions, and SCHMITT identifiable business-type activities. At-Large 4. We have properly classified all funds and activities. 5. We have properly determined and reported the major governmental and enterprise funds based on the required quantitative criteria. 6. We are responsible for compliance with laws and regulations applicable to the City including adopting, approving and amending budgets. CITY WEBSITE:www.cityofwateriooiowa.com WE'RE WORKING FOR YOU! An Equal OpportunitylAffimtative Action Employer McGladrey LLP December 14, 2012 Page 2 7. We have identified and disclosed to you all laws and regulations that have a direct and material effect on the determination of financial statement amounts including legal and contractual provisions for reporting specific activities in separate funds. 8. We have made available to you: a. All financial records and related data of all funds and activities, including those of all special funds, programs, departments, projects, activities, etc., in existence at any time during the period covered by your audit. b. All minutes of the meetings of the governing board and committees of board members or summaries of actions of recent meetings for which minutes have not yet been prepared. c. All communications from grantors, lenders, other funding sources, or regulatory agencies concerning noncompliance with: i. Statutory, regulatory or contractual provisions or requirements. ii. Financial reporting practices that could have a material effect on the financial statements. 9. We have no knowledge of fraud or suspected fraud affecting the entity involving: a. Management. b. Employees who have significant roles in the internal control, or c. Others where the fraud could have a material effect on the financial statements. 10. We acknowledge our responsibility for the design and implementation of programs and controls to provide reasonable assurance that fraud is prevented and detected. 11. We have no knowledge of any allegations of fraud or suspected fraud affecting the City received in communications from employees,former employees,analysts, regulators or others. 12. We have informed you of all significant deficiencies in the design or operation of internal controls that could adversely affect the entity's ability to record, process, summarize, and report financial data. 13. There have been no communications from regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices. 14. We have no plans or intentions that may materially affect the carrying value or classification of assets and liabilities. 15. The following have been properly recorded and/or disclosed in the financial statements: a. Related-party transactions, including those with component units for which the City is accountable,jointly governed organizations in which the City participates, as defined in Section 2100 of the Governmental Accounting Standards Board's Codification of Governmental Accounting and Financial Reporting Standards, and interfund transactions, including interfund accounts and advances receivable and payable, sale and purchase transactions, interfund transfers, long-term loans, leasing arrangements, and guarantees, all of which have been recorded in accordance with the economic substance of the transaction and appropriately classified and reported. McGladrey LLP December 14, 2012 Page 3 b. Arrangements with financial institutions involving compensating balances or other arrangements involving restrictions on cash balances. c. Security agreements in effect under the Uniform Commercial Code. d. Any other liens or encumbrances on assets or revenues or any assets or revenues which were pledged as collateral for any liability or which were subordinated in any way. e. The fair value of investments. f. Amounts of contractual obligations for construction and purchase of real property or equipment not included in the liabilities or encumbrances recorded on the books. g. Debt issue provisions. h. All leases and material amounts of rental obligations under long-term leases. i. All significant estimates and material concentrations known to management which are required to be disclosed in accordance with the AICPA's Statement of Position No. 94-6, Disclosure of Certain Significant Risks and Uncertainties. Significant estimates are estimates at the balance sheet date which could change materially within the next year. Concentrations refer to volumes of business, revenues, available sources of supply,or markets for which events could occur which would significantly disrupt normal finances within the next year. j. Authorized but unissued bonds and/or notes. k. Risk financing activities. I. The effect on the financial statements of GASB statement Nos. 61, 62, 63, 65 and 68 which have been issued, but which we have not yet adopted. m. Deposits and investment securities categories of risk, interest rate risk,credit risk and concentration of credit risk. n. Net assets and fund balance classifications. 16. We are responsible for making the accounting estimates included in the financial statements. Those estimates reflect our judgment based on our knowledge and experience about past and current events and our assumptions about conditions we expect to exist and courses of action we expect to take. In that regard, adequate provisions have been made: a. To reduce receivables to their estimated net collectable amounts. b. For risk retention, including uninsured losses or loss retentions(deductibles) attributable to events occurring through June 30, 2012, and/or for expected retroactive insurance premium adjustments applicable to periods through June 30, 2012. c. For pension obligations, post-retirement benefits other than pensions, and deferred compensation agreements attributable to employee services rendered through June 30, 2012. McGladrey LLP December 14, 2012 Page 4 17. There are no: a. Material transactions that have not been properly recorded in the accounting records underlying the financial statements. b. Violations or possible violations of laws or regulations whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency. In that regard,we specifically represent that we have not been designated as, or alleged to be, a"potentially responsible party"by the Federal Environmental Protection Agency or any equivalent state agencies in connection with any environmental contamination. c. Other material liabilities or gain or loss contingencies that are required to be accrued or disclosed by Statement of Financial Accounting Standards No. 5 and/or GASB Statement No. 10. d. Guarantees, whether written or oral, under which the City is contingently liable. e. Lines of credit or similar arrangements. f. Agreements to repurchase assets previously sold. g. Liabilities which are subordinated in any way to any other actual or possible liabilities. h. Debt issue repurchase options or agreements, or sinking fund debt repurchase ordinance requirements. i. Derivative financial instruments. j. Special and extraordinary items. k. Arbitrage rebate liabilities. I. Impairment of capital assets. m. Obsolete, damaged or excess inventories. n. Investments, intangibles, and other assets which have permanently declined in value. o. Material losses to be sustained in the fulfillment of, or from the inability to fulfill, any service commitments. p. Material losses to be sustained as a result of purchase commitments. q. For environmental cleanup obligations. r. Closure and post-closure care costs. 18. There are no unasserted claims or assessments that our lawyer has advised us are probable of assertion and must be disclosed in accordance with Statement of Financial Accounting Standards No.5 and/or GASB Statement No.10. 19. We have no direct or indirect, legal or moral obligation for any debt of any organization, public or private that is not disclosed in the financial statements. 20. We have satisfactory title to all owned assets. McGladrey LLP December 14, 2012 Page 5 21. We have complied with all aspects of contractual agreements that would have a material effect on the financial statements in the event of noncompliance. 22. Net assets (invested in capital assets, net of related debt; restricted; and unrestricted) and fund balances are properly classified and, when applicable, approved. 23. Expenses or expenditures have been appropriately classified in or allocated to functions and programs in the statement of activities, and allocations have been made on a reasonable basis. 24. Revenues are appropriately classified in the statements of activities within program revenues and general revenues. 25. Capital assets, including infrastructure assets, are properly capitalized, reported and depreciated. 26. We are responsible for and have reviewed and approved the proposed adjustments to the trial balances identified during the audit, which are included in the summarized schedule of posted adjustments and will post all adjustments accordingly. These adjustments are attached as Appendix A. We have reviewed, approved, and are responsible for overseeing the preparation and completion of the basic financial statements and related notes. 27. With respect to supplementary information presented in relation to the financial statements as a whole: a. We acknowledge our responsibility for the presentation of such information. b. We believe such information, including its form and content, is fairly presented in accordance with accounting principles generally accepted in the United States of America. c. The methods of measurement or presentation have not changed from those used in the prior period. d. There were no assumptions or interpretations regarding the measurement or presentation of such information. e. When supplementary information is not presented with the audited financial statements,we will make the audited financial statements readily available to the intended users of the supplementary information no later than the date of issuance of the supplementary information and the auditor's report thereon. 28. With respect to management's discussion and analysis, budgetary comparison schedule and other postemployment benefits plan schedule of funding progress presented as required by • Governmental Accounting Standards Board(GASB)to supplement the basic financial statements: a. We acknowledge our responsibility for the presentation of such required supplementary information. b. We believe such required supplementary information is measured and presented in accordance with guidelines prescribed by accounting principles generally accepted in the United States of America. c. The methods of measurement or presentation have not changed from those used in the prior period. McGladrey LLP December 14, 2012 Page 6 d. The following are underlying significant assumptions or interpretations regarding the measurement or presentation of such information:the actuarial assumptions for the OPEB plan. 29. In connection with your audit, conducted in accordance with Government Auditing Standards, we confirm: a. We are responsible for: i. Compliance with the laws, regulations and provisions of contracts and grant agreements applicable to the City of Waterloo, Iowa. ii. Establishing and maintaining effective internal control over financial reporting. b. We have identified and disclosed to you: i. All laws, regulations and provisions of contracts and grant agreements that have a direct and material effect on the determinations of financial statement amounts or other financial data significant to audit objectives. ii. Violations (and possible violations)of laws, regulations, and provisions of contracts and grant agreements whose effects should be considered for disclosure in the auditor's report on noncompliance. c. We have a process to track the status of audit findings and recommendations. d. We have identified for you previous audits, attestation engagements, performance audits, or other studies related to the objectives of the audit being undertaken and the corrective action taken to address significant findings and recommendations. e. We have provided you with our views on your reported findings, conclusions, and recommendations, as well as our planned corrective actions for the report. f. We have reviewed, approved, and take full responsibility for the financial statements and related notes and acknowledge the auditor's role in the preparation of this information. g. We have reviewed, approved, and take full responsibility for all accrual adjustments and an acknowledgement of the auditor's role in the preparation of the adjustments. 30. In connection with your audit of federal awards conducted in accordance with OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations,we confirm: a. We are responsible for complying, and we have complied,with the requirements of OMB Circular A-133. b. We are responsible for understanding and complying with the requirements of laws, regulations, and the provisions of contracts and grant agreements related to each of our federal programs. c. We are responsible for establishing and maintaining, and we have established and maintained, effective internal control over compliance for federal programs that provides reasonable assurance that we are managing federal awards in compliance with laws, regulations and the provisions of contracts or grant agreements that could have a material effect on our federal programs. McGladrey LLP December 14, 2012 Page 7 d. We have prepared the schedule of expenditures of federal awards in accordance with Circular A-133 and have included expenditures made during the period being audited for all awards provided by federal agencies in the form of grants, federal cost-reimbursement contracts, loans, loan guarantees, property(including donated surplus property), cooperative agreements, interest subsidies, insurance, food commodities, direct appropriations and other assistance. e. We have identified and disclosed to you the requirements of laws, regulations, and the provisions of contracts and grant agreements that are considered to have a direct and material effect on each major program. f. We have made available all contracts and grant agreements (including amendments, if any) and any other correspondence relevant to federal programs and related activities that have taken place with federal agencies or pass-through entities. g. We are not aware of any amounts questioned and all known noncompliance with the direct and material compliance requirements of federal awards. h. We believe that we have complied with the direct and material compliance requirements as outlined in Circular A-133. i. We have made available all documentation related to compliance with the direct and material compliance requirements, including information related to federal program financial reports and claims for advances and reimbursements. j. We have provided you our interpretations of any compliance requirements that are subject to varying interpretations. k. We have disclosed to you any communications from grantors and pass-through entities concerning possible noncompliance with the direct and material compliance requirements, including communications received from the end of the period covered by the compliance audit to the date of your report. I. We have disclosed to you the findings received and related corrective actions taken for previous audits, attestation engagements, and internal or external monitoring that directly relate to the objectives of the compliance audit, including findings received and corrective actions taken from the end of the period covered by the compliance audit to the date of your report. m. We have provided you with all information on the status of the follow-up on prior audit findings by federal awarding agencies and pass-through entities, including all management • decisions. n. We are not aware of any subsequent events that provide additional evidence with respect to • conditions that existed at the end of the reporting period that affect noncompliance during the reporting period. o. There are no known instances of noncompliance with direct and material compliance requirements occurring subsequent to the period covered by your report. p. There have been no changes in internal control over compliance or other factors that might significantly affect internal control, including any corrective action taken by us with regard to significant deficiencies in internal control over compliance (including material weaknesses in internal control over compliance), have occurred subsequent to the date as of which compliance is audited. McGladrey LLP December 14,2012 Page 8 q. Federal program financial reports and claims for advances and reimbursements are supported by the books and records from which the basic financial statements have been prepared. r. The copies of federal program financial reports provided to you are true copies of the reports submitted, or electronically transmitted,to the federal agency or pass-through entity, as applicable. s. We have monitored subrecipients to determine that they have expended pass-through assistance in accordance with applicable laws and regulations and have met the requirements of Circular A-133. t. We have issued management decisions timely after the receipt of subrecipients'auditor's reports that identified noncompliance with laws, regulations, or the provisions of contracts or grant agreements, and we have ensured that subrecipients have taken the appropriate and timely corrective action on findings. u. We have considered the results of subrecipient audits and have made any necessary adjustments to our own books and records. v. We have charged costs to federal awards in accordance with applicable cost principles. w. We are responsible for, and have accurately prepared,the summary schedule of prior audit findings to include all findings required to be included by Circular A-133. x. We have accurately completed the appropriate sections of the data collection form. 31. We are responsible for determining that significant events or transactions that have occurred since the balance sheet date and through December 14, 2012, have been recognized or disclosed in the financial statements. No events or transactions other than those disclosed in the basic financial statements have occurred subsequent to the balance sheet date and through December 14, 2012 that would require recognition or disclosure in the basic financial statements. We further represent that as of December 14, 2012, the financial statements were complete in a form and format that complied with accounting principles generally accepted in the United States of America, and all approvals necessary for issuance of the financial statements had been obtained. 32. During the course of your audit, you may have accumulated records containing data that should be reflected in our books and records. All such data have been so reflected.Accordingly, copies of such records in your possession are no longer needed by us. As of and for the year ended June 30, 2012, we believe that the effects of the uncorrected misstatements aggregated by you and summarized below are immaterial, both individually and in the aggregate to the opinion units of the basic financial statements. For purposes of this representation,we consider items to be material, regardless of their size, if they involve the misstatement or omission of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement. McGladrey LLP December 14,2012 Page 9 Debit(Credit)to Correct the Misstatements Governmental Activities Assets Liabilities Net Assets Revenue Expense Description: Under accrual of workers'compensation claim liability $ • $ (390,000) $ - $ • $ 390,000 Effect of prior year passed adjustments on net assets 390.000 Total $ 390.000 City aterloo, Iowa mest Clark, Mayor `fi.ic/cc Michelle Weidner, Chief Financial Officer City of waterloo, Iowa Appendix A Journal entries identified by City management during the audit process: Debit Credit 1. 100-03-8980-3750 104,100.00 100-03-8980.1765 104,100.00 To net good faith deposit received and returned for 2012C bond sale not completed. 2. 412-03-8980-1750 18,354.95 412 22000 18,354.95 Record additional bond issuance costs payable. 3. 100-03-8980-3765 75,281.48 100-03-9050-6050 2,408,823.50 100-03-8980-2210 1,757,500.00 100-03-8980-2211 726,604.98 To reclassify sewer portion of GO debt service to sewer fund. 4. 204 13420 7,825.00 204-33-3100-1131 7,825.00 205 13420 13,598.00 205-07-7830-1131 13,598.00 266 13420 108,189.00 266-07-7830-1131 17,806.00 266-17-7120-1131 29,835.00 266-19-7100-1131 60,548.00 To remove OPEB amounts charged to funds from fund financial statements. 5. 010-03-9050-2700 362,550.60 010 13420 362,550.60 010 32100 362,550.60 010 30000 362,550.60 424 13420 362,550.60 424-07-9050-6050 362,550.60 To record transfer of the balance of BHCSW distributions received for Vision Iowa projects to the Vision Iowa Project Fund and remove remaining committed general fund/cash balance for the VI projects. 6. 205 26000 45,000.00 205 13650 83,923.63 205-07-7500-3112 38,923.63 To adjust Local Option Tax Receivable estimate to actual amount per the State of Iowa as of November 15,2012. 7, 520 31000 15,256,652.00 520 30000 15,256,652.00 To correct Fund Balance Invested in Capital Assets to reduce by net debt, 8. GOVW 29950 81,544.00 GOVW-04.9410-1111 54,045.00 GOVW-04-9430-1111 2,040.00 GOVW-04-9440-1111 17,619.00 GOVW-04-9450-1111 6,866.00 W GOV -04-9460-1111 974.00 520 29950 6,034.00 520-14-5200-1111 5,034.00 525 29950 2,383.00 525-15-5125-1111 2,383.00 To correct OPEB liability for updated actuary report. McGladrey LLP McGladrey Independent Auditor's Report on Compliance with Requirements that Could Have a Direct and Material Effect on the Passenger Facility Charge Program and on Internal Control Over Compliance Waterloo Regional Airport Board and Honorable Mayor and City Council Waterloo Regional Airport City of Waterloo, Iowa Waterloo, Iowa Compliance We have audited the compliance of the City of Waterloo, Iowa (the City), which includes the Federal Aviation Agency Projects Fund, a special revenue fund of the City, with the compliance requirements described in the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration (Guide), that could have a direct and material effect on its passenger facility charge program for the year ended June 30, 2012. Compliance with the requirements of laws and regulations applicable to its passenger facility charge program is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America, the Guide and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on the passenger facility charge program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City's compliance with those requirements. In our opinion, the City, which includes the Federal Aviation Agency Projects Fund, a special revenue fund of the City, complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on its passenger facility charge program for the year ended June 30, 2012. Internal Control Over Compliance Management of the City, which includes the Federal Aviation Agency Projects Fund, a special revenue fund of the City, is responsible for establishing and maintaining effective internal control over compliance with requirements of laws and regulations applicable to the passenger facility charge program. In planning and performing our audit, we considered the City's internal control over compliance with requirements that could have a direct and material effect on the passenger facility charge program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with the Guide, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City of Waterloo, Iowa's, which includes the Federal Aviation Agency Projects Fund, a special revenue fund of the City, internal control over compliance. 1 Member of the RSM International network of Independent accounting,tax and consulting firms. 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 the passenger facility 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 the passenger facility charge program will not be prevented or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. Schedule of Passenger Facility Charges Collected and Expensed and Schedule of Passenger Facility Charges Cash Activity We have audited the financial statements of the governmental activities, business-type activities, aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Waterloo, Iowa, which includes the Federal Aviation Agency Projects Fund, a special revenue fund of the City, as of and for the year ended June 30, 2012, and have issued our report thereon dated December 14, 2012. Our report includes a reference to other auditors. Our audit was performed for the purpose of forming opinions on the financial statements that collectively comprise the City of Waterloo, Iowa's basic financial statements. The accompanying schedule of passenger facility charges collected and expended and schedule of passenger facility charges cash activity are presented for purposes of additional analysis as specified in the Guide and are not a required part of the basic financial statements. 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 audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. This report is intended solely for the information and use of the City Council, the Airport Board, management and the Federal Aviation Administration of the U.S. Department of Transportation and is not intended to be and should not be used by anyone other than those specified parties. Davenport, Iowa December 14, 2012 2 City of Waterloo, Iowa Schedule of Passenger Facility Charges Collected and Expended Year Ended June 30,2012 Beginning Ending Application Balance Balance Approval Unliquidated PFC Interest Unliquidated Number PFC Collections Earned Expenditures PFC Reconstruction of terminal area ramp 05-06-U-00-ALO $ 64,893 $ 17,024 $ - $ 17,024 $ 64,893 - Obstruction removals 07-07-C-00-ALO 86 1,055 • 875 266 Master plan update 07-07-C•00-ALO 5,575 200 - 2,310 3,465 Rehab Airfield Vault&Control System 09-08-C-00-ALO 59,503 39,328 401 10,603 88,629 Snow removal equipment 09-08-C-00-ALO 5,976 (1,507) - 4,469 - • Snow removal equipment 10-09-C-OO-ALO 23,725 9,650 - 30,708 2,667 Design Taxiway A,B,E&Ramp 11-10-C-00-ALO 7,251 - - 3,681 3,570 PFC Administration Costs 11-10-C-00-AZO 35,175 14,708 - 15,068 34,815 Total $ 202,184 $ 80,458 $ 401 $ 84,738 $ 198,305 Passenger Facility Charges(PFCs)are expended as the local match required for CFDA No.20,106,Airport Improvement Program,as displayed on the schedule of expenditures of federal awards plus additional amounts approved by the Federal Aviation Administration(FAA). Cumulative approvals for collections and uses are both$2,765,171 * Project completed 3 City of Waterloo, Iowa Schedule of Passenger Facility Charges Cash Activity Year Ended June 30,2012 Totals Totals Totals Description July 1,2011 Quarter#1 Quarter#2 Quarter#3 Quarter#4 for Year June 30,2012 Passenger Facility Charges collected $ 2,251,120 $ 20.005 $ 21,558 $ 16,766 $ 22,129 $ 80,458 $ 2,331,579 Interest 30,836 143 94 81 82 401 31,237 Expended (2,079,772) (10,689) (19,713) (10,555) (43,780) (84,738) (2,164,510) Total $ 202,184 $ 9,459 $ 1,939 $ 6,292 $ (21,569) $ (3,879) $ 198,305 4 McGladrey LIP McGladrey Independent Auditor's Report on Compliance with Requirements that Could Have a Direct and Material Effect on the Passenger Facility Charge Program and on Internal Control Over Compliance Waterloo Regional Airport Board and Honorable Mayor and City Council Waterloo Regional Airport City of Waterloo, Iowa Waterloo, Iowa Compliance We have audited the compliance of the City of Waterloo, Iowa (the City), which includes the Federal Aviation Agency Projects Fund, a special revenue fund of the City, with the compliance requirements described in the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration (Guide), that could have a direct and material effect on its passenger facility charge program for the year ended June 30, 2012. Compliance with the requirements of laws and regulations applicable to its passenger facility charge program is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America, the Guide and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on the passenger facility charge program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City's compliance with those requirements. In our opinion, the City, which includes the Federal Aviation Agency Projects Fund, a special revenue fund of the City, complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on its passenger facility charge program for the year ended June 30, 2012. Internal Control Over Compliance Management of the City, which includes the Federal Aviation Agency Projects Fund, a special revenue fund of the City, is responsible for establishing and maintaining effective internal control over compliance with requirements of laws and regulations applicable to the passenger facility charge program. In planning and performing our audit, we considered the City's internal control over compliance with requirements that could have a direct and material effect on the passenger facility charge program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with the Guide, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City of Waterloo, Iowa's, which includes the Federal Aviation Agency Projects Fund, a special revenue fund of the City, internal control over compliance. 1 Member of the RSM International network of Independent accounting,tax and oonsuldng firms. 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 the passenger facility 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 the passenger facility charge program will not be prevented or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. Schedule of Passenger Facility Charges Collected and Expensed and Schedule of Passenger Facility Charges Cash Activity We have audited the financial statements of the governmental activities, business-type activities, aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Waterloo, Iowa, which includes the Federal Aviation Agency Projects Fund, a special revenue fund of the City, as of and for the year ended June 30, 2012, and have issued our report thereon dated December 14, 2012. Our report includes a reference to other auditors. Our audit was performed for the purpose of forming opinions on the financial statements that collectively comprise the City of Waterloo, Iowa's basic financial statements. The accompanying schedule of passenger facility charges collected and expended and schedule of passenger facility charges cash activity are presented for purposes of additional analysis as specified in the Guide and are not a required part of the basic financial statements. 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 audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. This report is intended solely for the information and use of the City Council, the Airport Board, management and the Federal Aviation Administration of the U.S. Department of Transportation and is not intended to be and should not be used by anyone other than those specified parties. / Davenport, lowa December 14, 2012 2 City of Waterloo,Iowa Schedule of Passenger Facility Charges Collected and Expended Year Ended June 30,2012 Beginning Ending Application Balance Balance Approval Unliquidated PFC Interest Unliquidated Number PFC Collections Earned Expenditures PFC Reconstruction of terminal area ramp 05-06-U-00-ALO $ 64,893 $ 17,024 $ - $ 17,024 $ 64,893 Obstruction removals 07-07-C-00-ALO 86 1,055 - 875 266 Master plan update 07-07-C-00-ALO 5,575 200 - 2,310 3,465 Rehab Airfield Vault&Control System 09-08-C-00-ALO 59,503 39,328 401 10,603 88,629 Snow removal equipment 09-08-C-00-ALO 5,976 (1,507) - 4,469 - ' Snow removal equipment 10-09-C-OO-ALO 23,725 9,650 - 30,708 2,667 Design Taxiway A,B,E&Ramp 11-10-C-00-ALO 7,251 - . 3,681 3,570 PFC Administration Costs 11-10-C-00-ALO 35,175 14,708 - 15,068 34,815 Total $ 202,184 $ 80,458 $ 401 $ 84,738 $ 198,305 Passenger Facility Charges(PFCs)are expended as the local match required for CFDA No.20.106,Airport Improvement Program,as displayed on the schedule of expenditures of federal awards plus additional amounts approved by the Federal Aviation Administration(FAA). Cumulative approvals for collections and uses are both$2,765,171 ' Project completed 3 City of Waterloo, Iowa Schedule of Passenger Facility Charges Cash Activity Year Ended June 30,2012 Totals Totals Totals Description July 1,2011 Quarter#1 Quarter#2 Quarter#3 Quarter#4 for Year June 30,2012 Passenger Facility Charges collected $ 2,251,120 $ 20,005 $ 21,558 $ 16,766 $ 22,129 $ 80,458 $ 2,331,579 Interest 30,836 143 94 81 82 401 31,237 Expended (2,079,772) (10,689) (19,713) (10,555) (43,780) (84,738) (2,164,510) Total $ 202.184 $ 9,459 $ 1,939 $ 8,292 $ (21,569) $ (3,879) $ 198,305 4 II . II! 1 R — eo _. 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