2012 Comprehensive Annual Financial Report - the City of Tukwila

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CITY OF TUKWILA: 2012 CAFRMANAGEMENT’S DISCUSSION AND ANALYSISOverview of the Financial StatementsThe City’s basic financial statements are presented in three parts:1) Government-wide financial statements2) Fund financial statements3) Notes to the financial statementsOther supplementary information, in addition to the basic financial statements, is also contained inthis report. This section of the Management’s Discussion and Analysis is intended to introduce andexplain the basic financial statements.Government-wide Financial StatementsThe government-wide financial statements are designed to be corporate-like in that all governmentaland business-type activities are consolidated into columns which add to a total for the City. Thefocus of the Statement of Net Position is designed to be similar to bottom-line results for the City andits governmental and business-type activities. This statement combines and consolidatesgovernmental funds’ current financial resources (short-term spendable resources) with capital assetsand long-term obligations. Over time, increases or decreases in net assets may be one indicator ofimprovement or deterioration in the City’s overall financial health.The Statement of Activities is focused on both the gross and net cost of various functions, includingboth governmental and business-type activities, which are supported by the City’s general tax andother revenues. This is intended to summarize and simplify the user’s analysis of the cost of variousgovernmental services and/or subsidy to various business-type activities. The revenue generated bythe specific functions (charges for services, grants, and contributions) is compared to the expensesfor those functions to show how much each function either supports itself or relies on taxes and othergeneral funding sources for support. All activity on this statement is reported on the accrual basis ofaccounting, requiring that revenues are reported when they are earned and expenses are reportedwhen they are incurred, regardless of when cash is received or disbursed.Governmental activities of the City include general government (executive, finance, legal, humanresources, court), public safety, physical environment, economic environment, transportation, mentaland physical health, and culture and recreation. The City’s business-type activities include a waterand sanitary sewer utility, surface water utility, and a municipal golf course. Governmental activitiesare primarily supported by taxes, charges for services, and grants while business-type activities areself-supporting through user fees and charges.Fund Financial StatementsThe fund financial statements are the traditional reporting format for governments. A fund is a fiscaland accounting entity with a self-balancing set of accounts used to account for specific activities ormeet certain objectives. While the government-wide statements present the City’s finances basedon the type of activity (general government vs. business type), the Fund Financial Statements arepresented by fund type, such as the general fund, special revenue funds and proprietary funds, withthe focus on major funds.Governmental FundsGovernmental funds are used to account for essentially the same functions that are reported asgovernmental activities in the government-wide financial statements. The governmental major fundpresentation is used, utilizing the “sources and uses of resources” basis. This is the manner in whichthe budget is typically developed. The basis of accounting is different between the governmentalfund statements and the government-wide financial statements. The governmental fund statements16
CITY OF TUKWILA: 2012 CAFRMANAGEMENT’S DISCUSSION AND ANALYSISfocus on the near-term revenues/financial resources and expenditures while the government-widefinancial statements include both near-term and long-term revenues/financial resources andexpenditures. The information in the governmental fund statements can be used to evaluate theCity’s near-term financing requirements and immediate fiscal health. Comparing the governmentalfund statements with the government-wide statements can help the reader better understand thelong-term impact of the City’s current year financing decisions.Because the basis of accounting is different between the governmental fund statements and thegovernment-wide financial statements, reconciliations are provided. The reconciliation between thegovernmental fund Balance Sheets and the government-wide Statement of Net Position is found onthe bottom of the governmental funds’ Balance Sheet, while the reconciliation between thegovernmental fund Statement of Revenues, Expenditures and Changes in Fund Balance and thegovernment-wide Statement of Activities is found directly following the governmental funds’Statement of Revenues, Expenditures, and Changes in Fund Balance.The City maintains nineteen individual governmental funds. Of these, three are considered major(the general fund, the arterial street fund, and the land acquisition recreation & park developmentfund) and are presented separately in the governmental fund Balance Sheet and the governmentalfund Statement of Revenues, Expenditures and Changes in Fund Balances. The remaininggovernmental funds are combined into a single column labeled “Other Governmental Funds”.Individual fund data for each of the other governmental funds can be found in the combiningstatements later in this report.The City maintains budgetary control over its operating funds through the adoption of a biennialbudget. Budgets are adopted at the fund level according to state law. Budgetary comparisonstatements are presented for the general, arterial street, and special revenue funds in the “RequiredSupplemental Information” section of the report.Proprietary FundsProprietary funds are used by governments to account for their business-type activities and use thesame basis of accounting as utilized in private industry. Business-type activities provide specificgoods or services to a group of customers that are paid for by fees charged to those customers.There is a direct relationship between the fees paid and the services rendered.The City has two types of proprietary funds: enterprise funds and internal service funds. Enterprisefunds are used to account for goods and services provided to citizens, while internal service fundsare used to account for goods and services provided internally to various City departments.Enterprise funds report the same functions presented as business-type activities in the governmentwidestatements, but in greater detail. The City’s enterprise fund statements provide information onthe City’s three utilities (water, sanitary sewer, surface water) as well as the City-owned golf course.Internal service funds are an essential accounting tool used to accumulate and allocate costsinternally among the City’s various functions. The City uses internal service funds to account for itsfleet of vehicles, and its insurance premiums. Internal service funds benefit both governmental andbusiness-type activities, and are allocated accordingly in the government-wide statement ofactivities.17
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2012 Comprehensive Annual Financial Report - the City of Tukwila

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