Fort Walton Beach Council agenda — 03-19-12--special--audit — reading text

PackeCl+g: 86  3. 1. a City of Fort Walton Beach, Florida NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE 10 - OTHER POST EMPLOYMENT BENEFITS (OPEB) ( CONTINUED) D. Annual OPEB Cost and Net OPEB Obligation The City's annual other post employment benefit ( OPEB) cost ( expense) is calculated based on the annual required contribution ( ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities ( or funding excess) over a closed period not to exceed thirty years. The following table shows the components of the City' s annual OPEB cost for the fiscal year ended September 30, 2012, the amount actually contributed to the plan, and changes in the City' s net OPEB obligation to the retiree health plan: Annual required contribution $ 488, 841 Interest on net OPEB obligation 17. 848 Adjustment to annual required contribution ( 15, 936) Annual OPEB cost ( expense) total 490, 753 2) Employer contributions Increase in net OPEB obligation 212, 621 446202 Net OPEB obligation - beginning of year 6$ 58, 823 Net OPEB obligation - end ofyear For the governmental activities, the net other postemployment benefit obligation is generally liquidated by the general fund. The City' s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the past three years, were as follows: Three -Year Trend Information No OI' EB Annual OPEB Cit, Perccmage Oblieetion Co' l Contributions Contributed Assco 442, 811 296328 67 on % 146. 482 Octnhcr 01, 2010 328 -899 236253 72, 00 % 139, 128 October 01. 2011 490. 753 278. 132 56. 67 % 6.18. 823 October 01, 2012 1 railedrailed toto thethe differencedifference betweenbetween age-age- adiustedadiusted andand compositecomposite premiumspremiums paidpaid forfor retircesretirces duringduring thethe yxryxr 6161  3. I. a City of Fort Walton Beach, Florida NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE 10 - OTHER POST EMPLOYMENT BENEFITS ( OPEB) ( CONTINUED) E. Funded Status and Funding Progress As of October 1, 2010, the most recent actuarial valuation date, the plan funded status was as follows: Actuarial Aee, ued Aanuel Actuarial Value of Liability ( AAL) Unfunded AAL Funded Ratio Covered UAAL as Asset, ( a) EntrvA¢c( b) UAA1.)( b -a) a/ b) Pay roll lcl of Pa) roll 6312, 795 6. 312. 795 6.57 &002 95. 97 % F. Required Supplementary Information The schedule of funding progress immediately following the notes to the financial statements presents multi -year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The schedule of employer contributions can also be found in the supplemental information of this comprehensive annual report. The projection of future benefit payments for an ongoing plan involves estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi -year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. G. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan ( the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as results are compared to past expectations and new estimates are made about the future. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short- term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long- term perspective of the calculations. 62  3. 1. a City of Fort Walton Beach, Florida NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE 10 - OTHER POST EMPLOYMENT BENEFITS ( OPEB) ( CONTINUED) G. Actuarial Methods and Assumptions ( Continued) In the latest actuarial valuation as of October 1, 2010, the Individual Entry Age Normal Cost Method ( with an increasing Normal Cost pattern consistent with the salary increase assumptions) was used. The actuarial assumptions included a 4% investment rate of return and an annual healthcare costs trend rate of 3 %, which will be increased to an ultimate rate of 5% beginning in fiscal yea ending September 30, 2019. The investment rate of return included a 3% inflation assumption. The unfunded actuarial accrued liability is being amortized in a closed amortization. calculated as a level percent of payroll over a twenty- eight year period. NOTE. 11 - RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; employee medical benefits and natural disasters. The City purchases insurance through commercial carriers. Insurance coverage for workers' compensation, liability, casualty, inland marine, flood, police accidental death, public officials' bonds, fiduciary and fuel tanks were purchased from several commercial carriers during the year ended September 30. 2012. There has been no significant reduction in insurance coverage from the prior year. Commercial insurance coverage has been sufficient to cover all claims made in the prior three fiscal years. NOTE 12 - OPERATING LEASES Lessor The City receives rental income from leasing various parcels of land under cancelable operating agreements. The lease periods vary from one to forty years. Income for the year ended September 30, 2012, was $ 228, 546 in the General Fund. $ 15, 902 in the Utilities Funds and $ 25. 911 in the Golf Fund. In addition, the City also leases a portion of its Golf Clubhouse for retail and food service operations. The rent received for this lease for the fiscal year ended September 30, 2011 totaled $ 68, 710. 63