Requirement 9c.
Net (Expense) Revenue and
Program Revenues Changes in Net Position
Operating Capital Primary Government
Charges for Grants and Grants and Governmental Business-Type Component
Functions/Programs Expenses Services Contributions
Contributions
Activities Activities Total Units (none)
Governmental Activities:
General government 1,267,823$ 939,645$ –$ –$ (328,178)$ (328,178)$
Public safety 2,491,042 99,519 360,000 (2,031,523) (2,031,523)
Public works 1,089,118 (1,089,118) (1,089,118)
Business-type Activities:
Solid waste disposal 2,534,069 2,617,290 83,221$ 83,221
Total Primary Government 8,965,749$ 3,950,093$ 789,000$ –$ (4,309,877) 83,221 (4,226,656)
Component Units (none)
General Revenues:
Taxes:
Property 1,859,913 1,859,913
Sales 1,940,203 1,940,203
Interest and penalties on taxes 6,918 6,918
City of Smithville
Statement of Activities
As of December 31, 2023
Requirement 9c.
Street
Street Improvement Total
Improvement Debt Service Governmental
Assets General Fund Fund Funds
Cash 594,543$ 1,000$ 37,500$ 633,043$
Taxes receivable delinquent (net) 262,821 262,821
Liabilities, Deferred Inflows of Resources and
Fund Balances
Liabilities:
Vouchers payable 219,121$ 219,121$
Due to other funds 3,100 3,100
Due to federal government 133,973 133,973
Fund Balances:
Nonspendable—inventory of supplies 60,420 60,420
Restricted for public safety 54,000 54,000
Restricted for capital projects 1,000 1,000
Restricted for debt service 37,500 37,500
Committed for health and welfare 43,000 43,000
Unassigned 302,777 302,777
City of Smithville
Balance Sheet
Governmental Funds
As of December 31, 2023
Taxes-property 1,877,578$ 1,877,578$
Taxes-sales 1,579,203 361,000$ 1,940,203
Interest and penalties on taxes 12,571 12,571
Licenses and permits 497,960 497,960
Fines and forfeits 173,590 173,590
General government 1,175,043 1,175,043
Public safety 2,214,350 2,214,350
Public works 862,998 862,998
Health and welfare 734,390 734,390
Culture and recreation 645,408 645,408
Construction expenditures 3,360,000 3,360,000
Interfund transfers in (out) 38,750 38,750 –
Premium on bonds 30,000 30,000
City of Smithville
Statement of Revenues, Expenditures, and Changes in Fund Balances
Governmental Funds
For the Year Ended December 31, 2023
Requirement 9c.
Total fund balances 498,697$
Capital assets used in governmental activities are not
financial resources and therefore are not reported in
in the funds 20,253,171
Deferred inflows of resources are recognized as revenues
of governmental activities in the statement of net
position 74,386
City of Smithville
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position
As of December 31, 2023
Requirement 9c.
Net changes in fund balances—total governmental funds 49,966$
Amounts reported for the governmental activities in the
statement of activities are different because:
Depreciation expense reduces net position but has no
effect on fund balances. (815,980)
governmental funds, but the repayment reduces long-
term liabilities in the statement of net position. There was
no repayment of bond principal during the year but new
bonds were issued in this amount (including unamortized
premium of $29,536). (3,029,536)
Some expenses reported in the statement of activities
do not require the use of current financial resources and
therefore are not reported as expenditures in govern-
mental funds. Accrued interest on deferred serial bonds
payable was reported in the statement of activities. (37,500)
For the Year Ended December 31, 2023
City of Smithville
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of Governmental Funds
to the Government-wide Statement of Activities
Requirement 9c.
Enterprise Funds
Solid Waste
Disposal Totals
Assets
Current assets:
Cash 381,392$
Customer accounts receivable (net of $5,725 for doubtful accounts) 94,088
Due from other funds 3,100
Inventories 74,583
Total Current Assets 553,163
Liabilities
Current Liabilities:
Vouchers payable 85,600
Accrued payroll and fringe benefits 27,429
Accrued interest payable 4,875
Net Position
Net investment in capital assets 2,044,908
Business-type Activities—
City of Smithville
Statement of Net Position
Proprietary Funds
As of December 31, 2023
Requirement 9c.
Enterprise Funds
Solid
Waste
Disposal Totals
Operating Revenue:
Operating Expenses:
Payroll and fringe benefits expense 1,344,067
Materials and supplies expense 875,797
Depreciation expense 309,330
Total Operating Expenses 2,529,194
Operating Income 88,096
Nonoperating Expenses:
Interest expense 4,875
Business-type Activities—
City of Smithville
Statement of Revenues, Expenses, and Changes in Fund Net Position
Proprietary Funds
For Year Ended December 31, 2023
Requirement 9c.
Solid
Waste
Disposal Totals
Cash flows from operating activities:
Cash received from customers 2,639,850$
Net cash provided by operating activities 295,992
Cash flows from capital and related
financing activities:
Acquisition of equipment (159,600)
Net cash used by capital and related activities (159,600)
Reconciliation of Operating Income to
Net Cash Used by Operating Activities
Operating income 88,096$
Adjustments:
Depreciation 309,330
Decrease in net accounts receivable 18,260
Decrease in interfund receivables 4,300
Business-type Activities—
Enterprise Funds
City of Smithville
Statement of Cash Flows
Proprietary Funds
For Year Ended December 31, 2023
Indicator (Ill 10-3) Formula Source Values Calculation
Revenue Measures:
General Fund intergovt revenues General Fund financial statements 789,000$
Total General Fund revenues General Fund financial statements 5,682,405$
Operating Position Measures:
Total operating revenues* Governmental funds financial statements 5,688,655$
Total operating expenditures** Governmental funds financial statements 5,669,689$
Cash Governmental funds financial statements 633,043$
Current liabilities Governmental funds financial statements 392,364$
Debt Indicators:
Performance Measures (Ill 10-4)
Financial Position:
Unrestricted net position Government-wide financial statements 480,583$
Total governmental activities revenue Government-wide financial statements 6,020,087$
Total governmental activities liabilities Government-wide financial statements 3,459,400$
Total governmental activities assets Government-wide financial statements 21,218,618$
9)
8)
Chapter 10 – Ratio Analysis
1)
2)
0.163
Intergovernmental revenues
Revenues over expenditures
0.139
1.003
5)
1.613
0.080
Liquidity
Unrestricted net position
Debt ratio
Financial Performance:
Net governmental activities revenues Government-wide financial statements 6,020,087$
Total governmental activities expenses Government-wide financial statements 6,431,680$
Financial Capability:
General obligation bonded debt Government-wide financial statements 3,029,536$
General obligation bonded debt Government-wide financial statements 3,029,536$
Legal debt limit Calculated in chapter 6 of problem 27,326,545$
13)
11)
0.936
0.111
Interperiod equity
Available legal debt limit
Interpretation of Ratios
(Note to Instructor – It is not expected that your students would need to prepare all of the
following ratios. Ratios that were redundant were not calculated, for example the liquidity ratio
and the quick ratio were not both calculated.)
1) At 13.9% of total revenues, intergovernmental revenues constitute a somewhat significant
portion of total revenues used by Smithville. However, although somewhat significant it
does not appear that Smithville is overly reliant on revenues over which it has no control.
This percentage will want to be watched in the future to ensure it does not continue to grow
unchecked.
3) Although this ratio is not large, Smithville is operating at a surplus rather than a deficit.
Therefore, this ratio is considered acceptable.
4) At a ratio of .081, the fund balances ratio is less than .10. Generally, a ratio of .10 to .25 is
5) Smithville’s liquidity is ratio is 1.613. A warning ratio is between 1 and 2 in the most recent
years. Smithville’s liquidity is relatively weak if this is an ongoing situation.
6) With a ratio of .069, Smithville’s current liabilities ratio is above the ratio of .05 that would
be considered a warning sign. An analysis of the trend in this ratio is warranted.
8) This ratio can be interpreted in a manner similar to the fund balance ratio.
10) The current ratio for Smithville is 2.246, indicating a favorable financial position ratio.
(Instructor Note: Although 1.0 is considered an acceptable benchmark current ratio in
business, a ratio of 2.0 is often considered for governments.)
11) The interperiod equity ratio of .936 is less than one, indicating that not all of the expenses are
12) The bonded debt per capita is $121.18. Without additional information about the population
demographics, such as unemployment, average salaries, overlapping debt and taxes per
13) At a ratio of .111, only a small percentage of the available legal debt limit has been used.
Overall the City of Smithville seems to have an adequate financial position. Several of the ratios
are marginal and bear watching, such as the fund balances and unrestricted net position ratios,
liquidity ratio, current liabilities ratio, and interperiod equity ratio. The financial condition of the
city is favorable with regard to its debt burden and the ability to cover the debt as it comes due.
Chapter 11 Preparation of Audit Report
An unmodified auditor’s report appears to be appropriate for the City of Smithville for the year
An unmodified audit report on the City of Smithville should appear as follows:
Independent Auditor’s Report
To the Honorable Mayor, City Council, and City Manager of the City of Smithville
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the
business-type activities, the aggregate discretely presented component units, each major fund,
and the aggregate remaining fund information of the City of Smithville, as of and for the year
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with accounting principles generally accepted in the United States of America; this
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair presentation of the financial
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinions.
Opinions
In our opinion, 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 Smithville, as of
December 31, 2023, and the respective changes in financial position, and, where applicable, cash
—End—