ADD TO END OF EDC PACKET 42412KENNEDALE ECONOMIC
DEVELOPMENT CORPORATION
ANNUAL FINANCIAL REPORT
SEPTEMBER 30, 2011
KENNEDALE ECONOMIC DEVELOPMENT CORPORLATION
TABLE OF CONTENTS
SEPTEMBER 30, 2011
Page
Number
Independent Auditors' Report ................................................................. ............................... I
Management's Discussion and Analysis ................................................ ............................... 2-5
Basic Financial Statements:
Statement of Net Assets and Governmental Fund Balance Sheet ....... ............................... 6
Statement of Activities and Governmental Fund Revenues,
Expenditures and Changes in Fund Balance ..................................... ............................... 7
Statement of Revenues, Expenditures and Changes in
Fund Balances — Budget and Actual — General Fund ....................... ............................... 8
Notes to Financial Statements .............................................................. ............................... 9-15
PATTILLO, BROWN & HILL ,L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS IN BUSINESS CONSULTANTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
of Kennedale Economic Development Corporation
Kennedale, Texas
We have audited the accompanying financial statements of the governmental activities and major
find of Kennedale Economic Development Corporation (the "Corporation "), a component of the City of
Kemredale, Texas, as of and for the year ended September 30, 2011, which collectively comprise the
Corporation's basic financial statements as listed in the table of contents. These financial statements are
the responsibility of the Corporation's management. Our responsibility is to express an opinion on these
basic 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 of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinions.
hi our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities and major fund of the Corporation as of
September 30, 2011, and the respective changes in financial position of these activities, and the
respective budgetary comparison for the General Fund for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis on pages 2 through 5 be presented to supplement the basic
financial statements. Such information, although not a part of the basic financial statements, is required
by the Governmental Accounting Standards Board, who considers it to be an essential part of financial
reporting for placing the basic financial statements in an appropriate operational, economic or historical
context. We have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which consisted
of inquiries of management about the methods of preparing the information and comparing the
information for consistency with management's responses to our inquiries, the basic financial
statements, and other knowledge obtained during our audit of the basic financial statements. We do not
express an opinion or provide any assurance on the information because the limited procedures do not
provide us with sufficient evidence to express an opinion or provide any assurance.
p( , & I U� �• p
April 19, 2012
401 NEST HIGHWAY 6 ■ R O. BOX 20725 ■ WACO, TX 76702 -0725 ■ (254) 772 -4901 ■ FAX: (254) 772 -4920 ■ mm.pbhcpa.com
AFFILIATE OFFICES: BROWNSVILLE; TX (956) 544 -7778 ■ HILLSBORO, TX (254) 582 -2583
TEMPLE, TX (254) 791 -3460 ■ ALBUQUERQUE, NM (505) 266 -5904
MANAGEMENT'S DISCUSSION AND ANALYSIS
As management of the Kennedale Economic Development Corporation, we offer readers of the
Kennedale Economic Development Corporation financial statements, this narrative overview, and
analysis of the financial activities of the Kennedale Economic Development Corporation for the fiscal
year ended September 30, 2011. We encourage readers to consider the information presented here in
conjunction with additional information that we have furnished in the accompanying basic financial
statements.
FINANCIAL HIGHLIGHTS
• The assets of the Kennedale Economic Development Corporation exceeded its
liabilities at the close of the most recent fiscal year by $4,972,517.
• The Kennedale Economic Development Corporation's net assets increased by $8,843.
The increase was smaller than the prior year increase due to the prior year
contribution from the City of Kennedale. Sales tax also decreased while payments to
the City for debt increased.
• As of the close of the current fiscal year, the Kennedale Economic Development
Corporation's governmental fund reported an ending fund balance of $2,181,440, an
increase of $199,299 in comparison with the prior year. All of the fund balance is
restricted for economic development.
• At the end of the current fiscal year, the restricted Rind balance for the General Fund
was $2,181,440, or 101.4% of the total General Fund expenditures.
OVERVIEW OF THE FINANCIAL STATEMENTS
The discussion and analysis is intended to serve as an introduction to the Kennedale Economic
Development Corporation's basic financial statements. The Kennedale Economic Development
Corporation's basic financial statements comprise three components: 1) govermnent -wide financial
statements, 2) fund financial statements, and 3) notes to the financial statements. This report also
contains other supplementary information in addition to the basic financial statements.
Government -wide financial statements. The government -wide financial statements are designed
to provide readers with a broad overview of the Kennedale Economic Development Corporation's
finances, in a manner similar to a private- sector business.
The statement of net assets presents information on all of the Kennedale Economic Development
Corporation's assets and liabilities, with the difference between the two reported as net assets. Over
time, increases or decreases in net assets may serve as a useful indicator of whether the financial
position of the Kennedale Economic Development Corporation is improving or deteriorating.
2
GOVERNMENT -WIDE FINANCIAL ANALYSIS
As noted earlier, over time, net assets may serve as a useful indicator of the Corporation's financial
position. In the case of the Kennedale Economic Development Corporation, assets exceeded liabilities
by $4,972,517 at the close of the most recent fiscal year.
KENNEDALE ECONOMIC DEVELOPMENT CORPORATION'S NET ASSETS
Governmental Activities
2011 2010
Current assets
$ 2,259,206
$ 2,203,691
Capital assets
5,535,207
4,059,046
Total assets
7,794,413
6,262,737
Current liabilities
51,896
194,063
Noncurrent liabilities
2,770,000
1,105,000
Total liabilities
2,821,896
1,299,063
Net assets:
Invested in capital assets, net of related debt
2,765,207
2,954,046
Unrestricted
i
2,207,310
2,009,628
Total net assets
$ 4,972,517
$ 4,963,674
II
The Corporation's net assets increased by $8,843
during the current fiscal
year. This increase is
significantly less than the prior year increase due to contributions from the City of Kennedale and is
related simply to sales and rent exceeding normal operating expense.
KENNEDALE ECONOMIC DEVELOPMENT CORPORATION'S
CHANGES IN NET ASSETS
Governmental Activities
2011
2010
General Revenues:
Sales tax
$ 418,303
467,585
i Rental income
209,087
203,796
Miscellaneous income
21,916
21,065
Contributions from City of Kennedale
-
2,006,635
Investment earnings
1,570
4,456
Total general revenues
650,876
2,703,537
Expenses:
Economic development:
Administration
410,738
427,004
Payment to city for debt
154,619
26,540
Interest and fiscal charges
76,676
79,149
Total expenses
642,033
532,693
Changes in net assets
8,843
2,170,844
Net assets, beginning
4,963,674
2,792,830
Net assets, ending
$ 4,972,517
$ 4,963,674
4
BASIC
FINANCIAL STATEMENTS
KENNEDALE ECONOMIC DEVELOPMENT CORPORATION
STATEMENT OF NET ASSETS
AND GOVERNMENTAL FUND BALANCE SHEET
SEPTEMBER 30, 2011
LIABILITIES
Accounts payable
35,238
Statement of
Customer deposits
General
Adjustments
Net Assets
Noncurrent liabilities:
ASSETS
Due within one year
-
Cash and investments
$ 2,164,601
$
$ 2,164,601
Sales taxes receivable
68,735
-
68,735
Deferred charges
-
25,870
25,870
Capital assets:
Fund balance:
Land
-
985,945
985,945
Buildings and improvements
-
2,305,258
2,305,258
Construction in progress
-
2,556,892
2,556,892
Less: accumulated depreciation
-
( 312,888
( 312,888
Total capital assets
-
5,535,207
5,535,207
Total assets
2,233,336
5,561,077
7,794,413
LIABILITIES
Accounts payable
35,238
35,238
Customer deposits
16,658
-
16,658
Noncurrent liabilities:
Due within one year
-
120,920
120,920
Due in more than one year
-
2,649,080
2,649,080
Total liabilities
51,896
2,770,000
2,821,896
FUND BALANCE/NET ASSETS
Fund balance:
Restricted for economic development
2,181,440
( 2,181,440)
-
Total fund balance
2,181,440
( 2,181,440)
-
Total liabilities and fund balance
$ 2,233,336
Net assets:
Invested in capital assets, net of related debt
2,765,207
2,765,207
Restricted for economic development
2,207,310
2,207,310
Total net assets
$ 4,972,517
$ 4,972,517
The accompanying notes are an integral part of these financial statements.
6
KENNEDALE
ECONOMIC DEVELOPMENT CORPORATION
STATEMENT OF ACTIVITIES
AND GOVERNMENTAL FUND REVENUES, EXPENDITURES
-
AND CFIANGES IN FUND BALANCE
FOR
THE YEAR ENDED SEPTEMBER 30,
2011
Statement
General
Adjustments
of Activities
Expenditures /expenses:
Current:
Economic development
$ 1,885,282
$( 1,474,544)
$ 410,738
Payment to city for debt
154,619
-
154,619
Debt service:
Principal
35,000
( 35,000)
-
Interest and fiscal charges
76,676
-
76,676
Total expenditures /expenses
2,151,577
( 1,509,544
642,033
General revenues:
Sales taxes
418,303
-
418,303
Rental income
209,087
-
209,087
Miscellaneous income
21,916
-
21,916
Investment earnings
1,570
-
1,570
Total general revenues
650,876
-
650,876
Excess of revenues over expenditures ( 1,500,701
1,509,544
8,843
Other financing sources
1,700,000
( 1,700,000)
-
Total other financing sources
(uses) 1,700,000
( 1,700,000
Net change in fund balance
199,299
( 199,299)
-
Change in net assets
-
8,843
8,843
Fund balance /net assets:
Beginning
1,982,141
2,981,533
4,963,674
Ending
$ 2,181,440
$ 2,791,077
$ 4,972,517
The accompanying notes are an integral part of these financial statements.
7
KENNEDALE ECONOMIC DEVELOPMENT CORPORATION
The accompanying notes are an integral part of these financial statements.
8
COMPONENT UNIT - GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FOR THE YEAR ENDED SEPTEMBER
30, 2011
(With Comparative
Actual Amounts for the
Year Ended September
30, 2010)
2011
2010
- Variance with
Final Budget
Budgeted Amounts
Actual
Positive
Actual
Original
Final
Amounts
(Negative)
Amounts
REVENUES
Sales tax
$ 347,905
$ 347,905 $
418,303
$ 70,398
$ 467,585
Rental income
239,244
239,244
209,087
( 30,157)
203,796
Miscellaneous income -
-
-
21,916
21,916
21,065
Contribution from City of Kemredale
-
-
-
-
2,006,635
Investment earnings
5,200
5,200
1,570
( 3,630)
4,456
Total revenues
592,349
592,349
650,876
58,527
2,703,537
EXPENDITURES
Current:
Economic development
667,518
1,794,001
1,885,282
( 91,281)
2,295,139
Payment to city for debt
154,619
154,619
154,619
-
26,540
Debt Service:
Principal
35,000
35,000
35,000
-
35,000
Interest and fiscal charges
76,798
76,798
76,676
122
79,149
Total expenditures
933,935
2,060,418
2,151,577
( 91,159)
2,435,828
EXCESS OF REVENUES OVER EXPENDITURES
( 341,586)
( 1,468,069) (
1,500,701)
( 32,632)
267,709
OTHER FINANCING SOURCES
Debt issuance
-
572,550
1,700,000
1,127,450
-
Total other financing sources and (uses)
572,550
1,700,000
1,127,450
-
NET CHANGE IN FUND BALANCES
( 341,586)
( 895,519)
199,299
1,094,818
267,709
FUND BALANCES, BEGINNING
1,982,141
1,982,141
1,982,141
-
1,714,432
FUND BALANCES, ENDING
$ 1,640,555
$ 1,086,622 $
2,181,440
$ 1,094,818
$ 1,982,141
The accompanying notes are an integral part of these financial statements.
8
KENNEDALE ECONOMIC DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2011
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of Kennedale Economic Development Corporation (the "Corporation ")
have been prepared in conformity with generally accepted accounting principles ( "GAAP ") for
local govermnental units. The Governmental Accounting Standards Board ( "GASB ") is the
accepted standard - setting body for establishing governmental accounting and financial reporting
principles. GASB's jurisdiction includes nonprofit corporations that are in substance part of a
govermnental unit. The most significant accounting and reporting policies of the Corporation are
described in the following notes to the financial statements.
A. Reporting Entity
The Kennedale Economic Development Corporation (KEDC) was incorporated on December
2, 1996. The Corporation is a nonprofit corporation organized and operating under the laws
of the State of Texas, particularly Section 4B of the Development Corporation Act of 1979,
as amended and Article 5190.6, Vernon's Texas Civil Statutes, (the "Act "), as amended. The
Corporation was created following an election held by the City of Kennedale, Texas (the
"City'.'), on August 10, 1996, to levy 0.5% local sales and use tax in the City for the benefit
of the Corporation. The Corporation, as currently organized, is to promote economic
development within the City, including, but not limited to, construction, operation and
administration, as permitted by Section 4B of the Act, as amended. The Corporation is a
discretely presented component unit of the City under the provisions of Governmental
Accounting Standards Board Statement No. 14.
As required by generally accepted accounting principles, these financial statements present
the Kennedale Economic Development Corporation and do not include any component units,
entities for which the Corporation is considered to be financially accountable. The
Corporation did not have any entities which meet the component unit criteria. Therefore, the
reporting entity is limited to those departments which comprise the Corporation's legally
adopted jurisdiction. However, the Corporation is considered to be, and is reported as, a
component unit of the City.
B. Government -wide and Fund Financial Statements
The government -wide financial statements (i.e., the statement of net assets and the statement
of activities) report information on all of the activities of the government. Governmental
activities are supported by taxes, rent and investment revenue.
(continued)
9
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets, Liabilities and Net Assets or Equity
Cash and Investments
The City of Kennedale, Texas, pools substantially all cash and investments except for
separate cash and investment accounts which are maintained in accordance with legal
restrictions. The Corporation participates in the City's cash and investment pool.
Investments are recorded at fair value. Fair value is the amount at which a financial
instrument could be exchanged in current transactions between willing parties. Investment
income on investments is allocated to the Corporation based upon its pro rata participation in
the pool.
2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
Budgetary Information
The Economic Development Board of Directors and the City Council of the City of Kemredale,
Texas, follow these procedures in establishing budgets reflected in the financial statements:
1. Prior to the beginning of each fiscal year, the Executive Director submits a
proposed budget to the Corporation's Board of Directors for the fiscal year
beginning on the following October 1. The operating budget includes proposed
expenditures and means of financing them.
2. Public hearings are conducted at which all interested persons' comments
concerning the budget are heard.
3. The budget is legally enacted by the Corporation's Board of Directors and ratified
by the City Council of the City.
4. The Board of Directors and the City Council must approve any budget
amendments. At the end of each fiscal year, all appropriations lapse.
5. Annual budgets adopted for the Economic Development Fund are adopted on a
basis consistent with generally accepted accounting principles.
(continued)
11
3. DETAIL NOTES
A. Cash and Investments (Continued)
At September 30, 2011, the carrying amounts of the Corporation's investments were as
follows:
Balances in public fiords investrnent pools:
State Treasurer's Investment Pool (TexPool) 2,168,311
$ 2,168,311
Balances in public fiords investment pools noted above are not evidenced by underlying
securities that exist in physical or book entry form and, therefore, are not subject to credit
risk categorization.
B. Risk Manaeenrent
The City of Kennedale, Texas, carries its general insurance risks with a public entity risk
pool by transferring all risks to the insurance carrier except for small deductible amounts.
C. EmDlovee Plans
The Corporation has no employees. The personnel duties for the Corporation are performed
by employees of the City of Kennedale, and the Corporation is charged for expenses related
to these duties. For complete `Employee Plan" disclosures, reference is made to the basic
financial statements of the City of Kennedale, Texas.
(continued)
13
3. DETAIL NOTES
I
F. Lone -term Debt (Continued)
Amoral debt service requirements to maturity for the revenue bonds
are as follows:
Year End'uig
Govermnental
Activities
September 30
Principal
Interest
2012
$ 120,920
$ 124,844
2013
132,088
122,841
2014
140,126
117,024
2015
148,264
110,758
2016
151,506
104,041
2017 -2021
870,020
409,682
2022 -2026
1,090,131
186,904
2027 -2031
116,945
7,298
Total
$ 2,770,000
$ 1,183,392
IS