LEGISLATIVE DEPARTMENT, STATE OF COLORADO FINANCIAL AUDIT REPORT YEARS ENDED JUNE 30, 2003 AND 2002_part3 pptx

LEGISLATIVE DEPARTMENT, STATE OF COLORADO BUDGETARY COMPARISON SCHEDULE - SPECIAL REVENUE FUNDS (BUDGET BASIS) YEAR ENDED JUNE 30, 2002 Legislative Long Favorable Appropriations Appropriations Roll Forward Supplemental (Unfavorable) Bill Bill Appropriations Appropriations Transfers Budget Actual Variance APPROPRIATIONS AND REVENUES Appropriation Ballot Information and Publication Fund 429,443$ 429,443$ -$ Augmenting revenue Sale of State Capitol history memorabilia - 3,110 3,110 Miscellaneous revenue Interest income - 41,475 41,475 Miscellaneous - 15 15 TOTAL APPROPRIATIONS AND REVENUES 429,443 474,043 44,600 EXPENDITURES BY APPROPRIATION Ballot analysis - operating transfer in -$ 952,000$ -$ (522,557)$ -$ 429,443 400,972 28,471 Public building - - - - - - 194 (194) TOTAL EXPENDITURES BY APPROPRIATION - 952,000 - (522,557) - 429,443 401,166 28,277 EXCESS OF APPROPRIATIONS AND REVENUES OVER EXPENDITURES AND TRANSFERS - 72,877 72,877 FUND BALANCE, BEGINNING OF YEAR - 147,619 147,619 FUND BALANCE, END OF YEAR -$ 220,496$ 220,496$ The accompanying notes are an integral part of these financial statements. 17 This is trial version www.adultpdf.com LEGISLATIVE DEPARTMENT, STATE OF COLORADO NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2003 AND 2002 18 NOTE 1 - DEFINITION OF REPORTING ENTITY: The Legislative Department (the “Department”) is a sub-entity of the State of Colorado. The State of Colorado is the oversight entity that has the responsibility for primary reporting of the State’s financial activities. The accompanying financial statements present only that portion of the State of Colorado’s financial position and activity which pertains to the Department. The Department’s primary activities are included in the General Fund of the State of Colorado basic financial statements. The Department consists of six agencies: General Assembly, Joint Budget Committee, Legislative Council, Office of the State Auditor, Office of Legislative Legal Services, and Reapportionment Commission, when active. The Department does not exercise oversight responsibility over any other entity. The Department follows the Governmental Accounting Standards Board (GASB) accounting pronouncements which provide guidance for determining which governmental activities, organizations, and functions should be included within the financial reporting entity. GASB pronouncements set forth the financial accountability of a governmental organization’s elected body as the basic criterion for including a possible component governmental organization in a primary government’s legal entity. Financial accountability includes, but is not limited to, appointment of a voting majority of the organization’s governing body, ability to impose its will on the organization, a potential for the organization to provide specific financial benefits or burdens, and fiscal dependency. The Department is not financially accountable for any other organization. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The more significant accounting policies of the Department are described as follows: A. Measurement Focus, Basis of Accounting, and Financial Statement Presentation: 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. Expenditures are recorded when a liability is incurred, as under accrual accounting. However, expenditures related to compensated absences are recorded only when payment is due and payable. The financial activities of the Department are recorded in individual funds, each of which is deemed to be a separate accounting entity. The Department uses fund accounting to report on its financial position and results of operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. The Department reports the following major governmental fund: The General Fund is the principal operating fund of the Department. It accounts for all financial resources except those required to be accounted for in another fund. This is trial version www.adultpdf.com LEGISLATIVE DEPARTMENT, STATE OF COLORADO NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2003 AND 2002 19 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): A. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (continued): Special Revenue Funds include fund activities financed by specific revenue sources that are legally restricted for specified purposes. The Department has the following two special revenue funds: The Ballot Information Publication and Distribution Revolving Fund was created by Senate Bill 97-204 to pay the costs of publishing the text and title of each constitutional amendment and initiated or referred measure in every legal newspaper in the State as required by Section 1-40-124, C.R.S., and to pay the costs of distributing the ballot information booklet as required by subsection (2) of Section 1-40-124.5, C.R.S. Any monies credited to the revolving fund and unexpended at the end of any given Fiscal Year will remain in the fund. Monies in the revolving fund are continuously appropriated. The Public Buildings Trust Fund was created for the purpose of promoting historical interest in the State Capitol Building. Receipts from gifts, grants, or donations and sales to the public of publications on the history of the State Capitol Building and other State Capitol memorabilia and associated disbursements are accounted for in this fund. Transactions recorded in this fund on these financial statements reflect only the activity of this special account of the Department within the State’s Other Special Revenue Fund. B. Budgets: Expenditures of the Department are authorized under annual appropriations and supplemental appropriations made by the General Assembly. The legislative appropriation is constitutionally limited to the unrestricted funds held by the State at the beginning of the year as determined by the modified accrual basis of accounting. Expenditures are controlled through the use of encumbrances. Monies are reserved for satisfaction of obligations incurred under contracts and purchase orders. Encumbrances outstanding at year-end are not reported as a reservation of fund balance, but rather become a commitment against resources that will become available in future periods. The State Controller has the authority to approve the carryover of unexpended appropriations to the subsequent Fiscal Year under circumstances described in the State Fiscal Rules. The budget for all funds is adopted on a basis consistent with Generally Accepted Accounting Principles (GAAP) except as follows: • Expenditures for budgetary purposes exclude amounts for June 2003 salaries and benefits incurred but unpaid at year end. • Expenditures for budgetary purposes exclude amounts for capital assets acquired under a capital lease. This is trial version www.adultpdf.com LEGISLATIVE DEPARTMENT, STATE OF COLORADO NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2003 AND 2002 20 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): B. Budgets (continued): • Payments from the General Fund to the Ballot Information Publication and Distribution Revolving Fund (Ballot Revolving Fund) are treated as expenditures for budgetary purposes and as operating transfers for GAAP purposes. Budget to GAAP differences for General Fund expenditures for the Fiscal Years ending June 30, 2003 and 2002 are as follows: C. Cash: The balances in cash at June 30, 2003 and 2002 represent the net year-end effect of transactions between the Legislative Department and the State’s General Fund. The balance can be an asset, in which case it represents a claim against the unrestricted fund balance of the State General Fund, or a liability, in which case it represents the amount to be provided by the Department appropriations to the unrestricted fund balance of the State General Fund. The Department deposits cash with the Colorado State Treasurer as required by Colorado Revised Statutes (C.R.S.). The State Treasurer pools these deposits and invests them in securities approved by Section 24- 75-601.1, C.R.S. The Department reports its share of the unrealized gains/losses on the basis of its participation in the State Treasurer’s pool. All of the Treasurer’s investments are reported at fair value, which is determined on the basis of quoted market prices at June 30, 2003 and 2002. The State Treasurer does not invest in any external investment pool, and there is no assignment of income related to participation in the pool. Unrealized gains are included in “Interest Income” and reflect only the change in fair value during the current Fiscal Year. Additional information on the Treasurer's pool may be obtained in the State of Colorado’s Comprehensive Annual Financial Report. D. Capital Assets: Capital assets are stated at cost, except for those assets contributed, which are stated at the estimated fair market value at the date of contribution. Capital assets are recorded as expenditures in the year of acquisition. 2003 2002 Total expenditures, GAAP Basis $ 27,423,767 $ 29,013,240 Salaries incurred but unpaid (1,517,614) - Capital lease expenditures (40,500) - Transfers to Ballot Revolving Fund 1,953,000 429,443 Total expenditures, Budgetary Basis $ 27,818,653 $ 29,442,683 This is trial version www.adultpdf.com LEGISLATIVE DEPARTMENT, STATE OF COLORADO NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2003 AND 2002 21 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): E. Compensated Absences: The Department has a policy that allows employees to accumulate unused vacation benefits and sick leave up to certain maximums. Compensated absences are recognized as current salary costs only when paid. As such, none of the accrued vacation or sick leave benefits would normally be liquidated with expendable available financial resources. F. Fund Balance: In the financial statements, a portion of the fund balance has been reserved for amounts that are legally segregated or are not subject to future appropriation. The reserved fund balance in the Ballot Information Publication and Distribution Revolving Fund is to be used exclusively for the printing and distribution of annual ballot information and was $734,581 at June 30, 2003 and $214,695 at June 30, 2002. The reserved fund balance in the Public Buildings Trust Fund is to be used exclusively for the promotion of history publications and memorabilia related to the Capitol Building and was $13,255 at June 30, 2003 and $5,801 at June 30, 2002. At June 30, 2003, the General Fund had an unreserved deficit fund balance of $1,517,614. This deficit fund balance was due to June 2003 salaries and benefits that were incurred but unpaid at Fiscal Year end as discussed in Note 3. The Department received the appropriation to pay those salaries and benefits on July 1, 2003. NOTE 3 - ACCRUED SALARIES AND BENEFITS: Senate Bill 03-197 requires employee salaries to be paid on a monthly basis as of the last working day of the month, except that salaries for the month of June shall be paid on the first working day of July. The salaries and benefits earned, but unpaid, as of June 30, 2003, were $1,517,614. Accordingly, the accrued compensation is reflected as a liability in the accompanying financial statements. NOTE 4 - FULL ACCRUAL ACCOUNTING: Effective July 1, 2001, the Department, in conjunction with the State of Colorado, adopted Governmental Accounting Standards Board (“GASB”) Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments and Statement No. 37, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments: Omnibus Statement No. 38, Certain Financial Statement Disclosure, Statement No. 41, Budgetary Comparison Schedules – Perspective Differences and Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements. These statements establish new financial reporting requirements for state and local governments throughout the United States of America. These statements require new information and restructure much of the information that governments have presented in the past. Comparability with reports issued in all prior years is affected. This is trial version www.adultpdf.com LEGISLATIVE DEPARTMENT, STATE OF COLORADO NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2003 AND 2002 22 NOTE 4 - FULL ACCRUAL ACCOUNTING (CONTINUED): As noted earlier, the 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. Expenditures are recorded when a liability is incurred except expenditures related to compensated absences which are recorded only when payment is due. In addition, capital assets are recorded as expenditures. Under full accrual accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. The cost of accumulated compensated absences is recorded as a liability and capital assets are recorded as assets, net of accumulated depreciation. Depreciation expense is also recorded. For purposes of full accrual accounting, capital assets of the Department are depreciated using the straight- line method, with a half-year’s depreciation charged in the year of acquisition and in the year of disposal. Agencies within the Department assigned useful lives that were most suitable for the particular assets. Estimated useful lives for equipment range from 3 to 40 years. If the Department had prepared its financial statements using full accrual accounting, its net assets (liabilities) as of the Fiscal Years ended June 30, 2003 and 2002 would have been as shown below. 2003 2002 Current assets $ 1 , 413 , 730 $ 2 , 236 , 397 Ca p ital assets 410,667 454,518 Total assets 1 , 824 , 397 2 , 690 , 915 Current liabilities (including accounts payable, deferred revenue, and other accrued liabilities) 2,364,069 2,107,072 Long-term liabilities 1,601,745 1,654,284 Total liabilities 3,965,814 3,761,356 Net assets: Invested in capital assets, net of related debt 410,667 454,518 Restricted for specific purpose 747,836 220,496 Unrestricted (3,299,920) (1,745,455) Total net assets (liabilities) $ (2,141,417) $ (1,070,441) This is trial version www.adultpdf.com LEGISLATIVE DEPARTMENT, STATE OF COLORADO NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2003 AND 2002 23 NOTE 4 - FULL ACCRUAL ACCOUNTING (CONTINUED): Adjustments to reconcile the governmental fund balance sheet to net assets shown above are as follows: 2003 2002 (Deficit) fund balances as reported on the governmental fund balance sheets $ (769,778) $ 220,496 Capital assets used in governmental activities are not current financial resources and therefore are not reported in the fund balance sheets 410,667 454,518 Capital leases are not due and payable in the current period and therefore are not reported in the fund balance sheets (38,856) - Compensated absences are not due and payable in the current period and therefore are not reported in the fund balance sheets (1,743,450) (1,745,455) Net assets (liabilities) $ (2,141,417) $ (1,070,441) If the Department had prepared its financial statements using full accrual accounting, its activities for the Fiscal Years ended June 30, 2003 and 2002 would have been as shown below. 2003 2002 Revenues: Program revenues, charges for services $ 998,038 $ 919,534 General revenues, interest income 71,627 41,475 Miscellaneous revenue 306,999 62,992 Total revenues 1,376,664 1,024,001 Expenses: Compensation 20,110,568 19,568,669 Purchased services 5,089,753 5,609,667 Operating expenses 2,933,755 3,151,675 Travel and subsistence 718,177 912,902 Debt service 849 - Depreciation expense 115,832 95,270 Total expenses 28,968,934 29,338,183 Deficiency of revenues over expense (27,592,270) (28,314,182) State appropriations 29,708,034 31,443,860 Reversions to State General Fund (3,186,740) (2,980,578) Changes in net assets $ (1,070,976) $ 149,100 This is trial version www.adultpdf.com LEGISLATIVE DEPARTMENT, STATE OF COLORADO NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2003 AND 2002 24 NOTE 4 - FULL ACCRUAL ACCOUNTING (CONTINUED): The following reconciliations are provided to explain the differences between the governmental fund’s excess of appropriations and revenue over expenditures and other financing sources (uses) and the changes in net assets reported under full accrual accounting. 2003 2002 Excess (deficiency) of appropriations and revenues over expenditures and other financing sources (uses) $ (990,274) $ 72,877 Compensated absences reported in the Department’s activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. 2,004 (96,266) Governmental funds report lease proceeds as an other financing source. However, in the Department’s activities, the lease proceeds are reported as liabilities. (40,500) - Governmental funds report payments on principal as expenditures. However, in the Department’s activities, payments on principal are not reported. They are reported as reductions in the related liability reported in net assets. 1,644 - Governmental funds report capital outlay as expenditures. However, in the Department's activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense: Capital outlay 71,982 267,759 Depreciation (115,832) (95,270) Changes in net assets $ (1,070,976) $ 149,100 NOTE 5 - APPROPRIATIONS AND REVENUE: The Department’s primary funding source consists of an appropriation from the State’s General Fund. This appropriation is supplemented by appropriations from cash funds and cash exempt funds. The cash funds appropriated to the Department are from sales of publications. Cash exempt funds are transfers from other agencies within the State. These funds are designated as “exempt” because they are exempt from the Taxpayer’s Bill of Rights (TABOR) calculations discussed in Note 7. The unspent appropriations are either rolled forward to the next fiscal year with the approval of the State Controller’s Office or reverted to the State’s General Fund. For Fiscal Years ended June 30, 2003 and 2002, the Department appropriations specified that $90,000 of revenue earned by the sale of bill copies was available for expenditure by the General Assembly. Receipts for sales in excess of that amount each year, as well as receipts for sales of Colorado Revised Statutes and supplements, were not available for expenditure by the Department. The Department appropriations also specified that $500,000 of audit revenue was available for expenditure by the Office of the State Auditor. Receipts in excess of that amount were not available for expenditure. Miscellaneous revenue consists of charges in excess of $500,000 for audit services performed by the Office of the State Auditor for certain non state-appropriated activities of the State, the sale of bill copies in excess of $90,000, and other miscellaneous amounts. This is trial version www.adultpdf.com LEGISLATIVE DEPARTMENT, STATE OF COLORADO NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2003 AND 2002 25 NOTE 6 - AUDIT CONTRACTS: The Office of the State Auditor contracts with private firms to perform audits of various state agencies and authorities. In situations where the state agency or authority is required by law to pay for audit costs, the Office of the State Auditor acts as agent and offsets the amounts paid to the private firms by the amounts reimbursed by the auditee agency or authority. The amounts received for these audits for Fiscal Year 2003 was $870,628 and for Fiscal Year 2002 was $994,267. These amounts are not reflected in expenditures or audit reimbursement revenue. As of June 30, 2003 and 2002, the Office of the State Auditor had contract commitments of $554,688 and $495,538, respectively, with private firms to perform audit and consulting services. NOTE 7 - TAX, SPENDING, AND DEBT LIMITATIONS: In November 1992, the voters of Colorado approved Amendment 1, commonly known as the Taxpayer's Bill of Rights (TABOR), which added a new Section 20 to Article X of the Colorado Constitution. TABOR contains tax, spending, revenue, and debt limitations. The Department’s financial activity, as part of the State of Colorado’s budget for Fiscal Year 1993, provided the basis for calculation of future limitations at the state level adjusted for allowable increases tied to inflation and population. Subsequent to 1993, revenue in excess of the State's “spending limit” must be refunded unless voters approve the retainage of such excess revenue. TABOR generally requires voter approval for any new tax, tax increases, and new debt. TABOR does not affect the Department’s Fiscal Year 2003 and 2002 financial statements; however, the limitations contained in TABOR may impact future financial activity of the State of Colorado and the Department. NOTE 8 - RELATED PARTY TRANSACTIONS: The Department is a branch of Colorado State Government and, as such, receives many services from other state agencies, many of which are not billed to the Department. The most significant of these are accounting support and review services provided by the State Controller’s Office. This is trial version www.adultpdf.com LEGISLATIVE DEPARTMENT, STATE OF COLORADO NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2003 AND 2002 26 NOTE 9 - OPERATING LEASES: The Department has several operating leases for equipment and pays rent for the capitol complex building space used by the Department service agencies. Total rent expense for Fiscal Years 2003 and 2002 was $1,188,190 and $1,235,963, respectively. Future minimum commitments for the capitol complex lease do not exceed one year. Operating leases for equipment expire September 2003 through December 2007, and the future minimum annual rental commitments are as follows: Year ending June 30, Minimum lease payments 2004 $ 150,228 2005 64,173 2006 59,454 2007 48,283 2008 18,605 Total $ 340,743 NOTE 10 - CAPITAL ASSETS: Capital asset activity for the Fiscal Year ended June 30, 2003 was as follows: Balances at July 1, 2002 Increases Decreases Balances at June 30, 2003 Cost of capital assets, equipment $ 998,788 $ 71,982 $ (41,408) $ 1,029,362 Less accumulated depreciation, equipment 544,270 111,029 (36,604) 618,695 Total capital assets, net of accumulated depreciation $ 454,518 $ (39,047) $ (4,804) $ 410,667 Capital asset activity for the Fiscal Year ended June 30, 2002 was as follows: Balances at July 1, 2001 Increases Decreases Balances at June 30, 2002 Cost of capital assets: Equipment $ 833,177 $ 268,259 $ (102,648) $ 998,788 Library books 100,361 - (100,361) - Total cost of capital assets 933,538 268,259 (203,009) 998,788 Less accumulated depreciation 551,647 90,240 (97,617) 544,270 Total capital assets, net of accumulated depreciation $ 381,891 $ 178,019 $ (105,392) $ 454,518 This is trial version www.adultpdf.com . version www.adultpdf.com LEGISLATIVE DEPARTMENT, STATE OF COLORADO NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2003 AND 2002 25 NOTE 6 - AUDIT CONTRACTS: The Office of the State Auditor. part of these financial statements. 17 This is trial version www.adultpdf.com LEGISLATIVE DEPARTMENT, STATE OF COLORADO NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2003 AND 2002 . trial version www.adultpdf.com LEGISLATIVE DEPARTMENT, STATE OF COLORADO NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2003 AND 2002 20 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING