THOMAS, WILSON, RAGUSA, UFFMAN & CO.app1.lla.la.gov/PublicReports.nsf/1A9372794CB90C... · THOMAS,...

EAST SIDE FIRE PROTECTION DISTRICT NO. 5CITY OF BATON ROUGE

PARISH OF EAST BATON ROUGE, LOUISIANA

COMPONENT UNIT FINANCIAL STATEMENTSAND INDEPENDENT AUDITORS' REPORTS

For the Year Ended December 31,2006

Under provisions of state law, this report is a publicdocument. A copy of the report has been submitted tothe entity and other appropriate public officials. Thereport is available for public inspection at the BatonRouge office of the Legislative Auditor and, whereappropriate, at the office, of the parish clerk of court.

Release Date

THOMAS, WILSON, RAGUSA, UFFMAN & CO.

CERTIFIED PUBLIC ACCOUNTANTSBATON ROUGE, LOUISIANA

T A B L E O F C O N T E N T S

Page

INDEPENDENT AUDITORS' REPORT i

MANAGEMENT'S DISCUSSION AND ANALYSIS 2-6

EXHIBIT A.

EXHIBITS.

EXHIBIT C.

EXHIBIT D 10

GOVERNMENT-WIDE FINANCIAL STATEMENTSSTATEMENT OF NET ASSETS, DECEMBER 31,2006

STATEMENT OF ACTIVITIES, YEAR ENDEDDECEMBER 31,2006

FUND FINANCIAL STATEMENTSBALANCE SHEET - GOVERNMENTAL FUNDS,

DECEMBER 31,2006

STATEMENT OF REVENUES, EXPENDITURES, ANDCHANGES IN FUND BALANCE - GOVERNMENTALFUNDS ACTUAL AND BUDGET (NON-GAAP BASIS),YEAR ENDED DECEMBER 31,2006

RECONCILIATION OF THE STATEMENT OFGOVERNMENTAL FUND BALANCE SHEET TO THEGOVERNMENT-WIDE STATEMENT OF NET ASSETS,DECEMBER 31,2006

RECONCILIATION OF THE STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCEOF GOVERNMENTAL FUNDS TO THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES, YEAR ENDEDDECEMBER 31,2006 EXHIBIT F 12

NOTES TO FINANCIAL STATEMENTS, DECEMBER 31,2006 13-20

INDEPENDENT AUDITORS1 REPORT ON COMPLIANCE AND ONINTERNAL CONTROL OVER FINANCIAL REPORTING BASEDON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED INACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 21

EXHIBITE 11


THOMAS, WILSON, RAGUSA, UFFMAN & COrCEBTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT

Board of CommissionersEast Side Fire Protection District No. 5Baton Rouge, Louisiana

We have audited the accompanying financial statements of East Side Fire Protection District No. 5, acomponent unit of the City of Baton Rouge, as of December 31, 2006, and for the year then ended, aslisted in the table of contents. These component unit financial statements are the responsibility of EastSide Fire Protection District No. 5. Our responsibility is to express an opinion on these component unitfinancial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the component unit financial statements are free of material misstatement An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the component unitfinancial statements. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall component unit financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the component unit financial statements referred to above present fairly, in all materialrespects, the financial position of East Side Fire Protection District No. 5, as of December 31, 2006, andthe changes in financial position thereof for the year then ended in conformity with accounting principlesgenerally accepted in the United States of America,

The management's discussion and analysis on pages 2 through 5 is not a required part of the basicfinancial statements but is supplementary information required by accounting principles generallyaccepted in the United States of America. We have applied certain limited procedures, which consistedprincipally of inquiries of management regarding the methods of measurement and presentation of therequired supplementary information. However, we did not audit the information and express no opinionon it

In accordance with Government Auditing Standards, we have also issued a reported dated March 30,2007, on our consideration of East Side Fire Protection District No. 5's internal control over financialreporting and on our test of its compliance with certain provisions of laws, regulations, contracts andgrants.

Certified Public AccountantsMarch 30, 2007

527 EAST AIRPORT AVENUE BATON ROUGE, LOUISIANA 70806 225-926-1050 EMAIL:[email protected]

Page 2MANAGEMENT'S DISCUSSION AND ANALYSIS

Within this section of the East Side Fire Protection District No. 5's annual financial report, the District'smanagement provides narrative discussion and analysis of the financial activities of the district for thefiscal year ended December 31,2006. The District's financial performance is discussed and analyzedwithin fee context of the accompanying financial statements and disclosure following this section.Additional information is available in the transmittal letter which precedes Management's Discussion andAnalysis.

Financial Highlights• The District's assets exceeded its liabilities by $3,381,438 (net assets) for the fiscal year reported.

This compares to the previous year when assets exceeded liabilities by $2,847,843.

• Total net assets are comprised of the following;

1. Capital assets, net of related debt, of $2,055,505 include property and equipment, net ofaccumulated depreciation, and reduced for outstanding debt related to the purchase orconstruction of capital assets.

2. Unrestricted net assets of $1,325,933 represent the portion available to maintain the District'scontinuing obligations to citizens and creditors.

• The District's governmental funds reported total ending fund balance of $1,334,636 this year.This compares to the prior year ending fund balance of $1,131,985 showing an increase of$202,651 during the current year.

• At the end of the current year, unreserved fund balance for the District was $1,325,933, or 74% oftotal District expenditures including transfers and 107% of total District revenues.

• Total liabilities of the District increased by $901,224 to $1,455,549 during the fiscal year.

Overview of the Financial Statements

Management's Discussion and Analysis introduces the District's basic financial statements. The basicfinancial statements include: (1) government-wide financial statements, (2) fund financial statements, and(3) notes to the financial statements. The District also includes in this report additional information tosupplement the basic financial statements.

Government-Wide Financial Statements

The District's annual report includes two government-wide financial statements. These statementsprovide both long-term and short-term information about the District's overall status. Financial reportingat this level uses a perspective similar to that found in the private sector with its basis in full accrualaccounting and elimination or reclassification of internal activities.

The first of these government-wide statements is the Statement of Net Assets. This is the District'sstatement of position presenting information that includes all of the District's assets and liabilities, withthe difference reported as net assets. Over time, increases or decreases in net assets may serve as a usefulindicator of whether the financial position of the District as a whole is improving or deteriorating.Evaluation of the overall economic health of the District would extend to other non-financial factors suchas diversification of the taxpayer base in addition to the financial information provided in this report.


Page 3

The second government-wide statement is the Statement of Activities which reports how the District's netassets changed during the current fiscal year. All current year revenues and expenses are includedregardless of when cash is received or paid. An important purpose of the design of the statement ofactivities is to show the financial reliance of the District's activities and functions on revenues providedby the District's taxpayers.

Fund Financial Statements

A fund is an accountability unit used to maintain control over resources segregated for specific activitiesor objectives.

Governmental funds are reported in the fund financial statements and encompass essentially the samefunctions reported as governmental activities in the government-wide financial statements. However, thefocus is very different with fund statements providing a distinctive view of the District's governmentalfunds. These statements report short-term fiscal accountability focusing on the use of spendable resourcesduring the year and balances of spendable resources available at the end of the year. They are useful inevaluating annual financing requirements of governmental programs and the commitment of spendableresources for the near-term.

Since the government-wide focus includes the long-term view, comparisons between these twoperspectives may provide insight into the long-term financing decisions. Both the governmental fundbalance sheet and the governmental fund statement of revenues, expenditures, and changes in fundbalances provides a reconciliation to the government-wide statements to assist in understanding thedifferences between these two perspectives.

Budgetary comparison statements are included in the basic financial statements for the District. Thesestatements and schedules demonstrate compliance with the District's adopted budget

Notes to the financial statements

The accompanying notes to the financial statements provide information essential to a full understandingof the government-wide and fund financial statements. The notes to the financial statements beginimmediately following the basic financial statements.

Financial Analysis of the District as a Whole

As year-to-year financial information is accumulated on a consistent basis, changes in net assets may beobserved and used to discuss the changing financial position of the District as a whole.

The District's net assets at year-end are $3,381,438. This is an increase $533,592 over last year's netassets of $2,847,846. The following table provides a summary of the District's net assets;

THOMAS, WILSON, RAGUSA, UPFMAN & CO.

Summary of Net Assets (Government Wide)Page 4

2006Current and other assetsCapital assetsAccumulated depreciationTotal assets

Current liabilitiesLong-term liabilities

Total liabilities

Net assets:Invested in capital assets,

Net of related debtUnrestricted

Total net assets

$ 1,571,8094,568,019(1.302,841)4,838.993

543,635911.914

1.455.549

2,055,5051.325.933

2005$ 1,277,1013,236,251(1.111T184)3.402.168

171,956382.369554.325

1,773,9041.073.939

AmountChange

$ 294,7081,331,768_ (191,657)1.434.819

371,679529.545901.224

281,601251.994

216.15138.49162.58

15.8723.46

18.74

The District reported positive balances in net assets. The District's overall financial position improved duringfiscal year 2006.

Comparative data is accumulated and presented to assist analysis. The following table provides a summary ofthe District's changes in net assets:

Summary of Changes in Net Assets (Governmental Funds)

Revenues: 2006Ad valorem taxes $ 1,265,818Inter-governmental revenues 70,000Fire protection user charges 230,582Interest 27,895Miscellaneous 123,289Supplemental Pay - State of

LA Funded 9.600Total Revenues 1.727.184

Expenses:Public safety (1,017,411)Debt service (147,340)Capital expenditures 11.354.782)

Total Expenditures (2,519,533)

Other Financing Sources:Bond Issue Proceeds 0Short Term Borrowings 295,000Capita] Lease Proceeds 700.000

Total Financing Proceeds 995,000

(Decrease) Increase in net assets 202,651Beginning net assets U131.985

Ending net assets S 1.334T636

20051,098,076

32,740237,282

13,670223,719

7.2001.602.687

(780,049)(209,760)(161.636)

(1,151,445)

0000

451,242680.743

AmountChange

$ 103,29037,260(6,700)14,225

(100,430)

2.40050.055

237,364(62,420)

1.193.1461,368,090

0295,00070.000995.000

(182,309)384.958

Change9.41

113.81(2.82)104.06(44.89)

33.333.10

30.43(29.76)738.17118.82

0.00100.00100.00100.00

(55.09)66.29

17.90


General Fund Budgetary HighlightsPage 5

The General Fund revised budget for fiscal year 2006 was approximately $ 1,623,323. This was an increase of$432,479 over the previous year budget. The General Fund budget complied with financial policies approved bythe District's Board of Commissioners.

Capital Asset and Debt Administration

Capital assetsThe District's investment in capital assets, net of accumulated depreciation, for governmental and business-typeactivities as of December 31,2006 and 2005, was $3,265,178 and $2,125,067, respectively. The total increase inthis net investment was $1,140,111 or 53.65%.

Capital AssetsNet of Accumulated Depreciation

Totals2006

Non-Depreciable Assets:LandDeposits on Land

Depreciable Assets:BuildingsInitial costs associate with new stationEquipmentEquipment under capital lease

Total

Long-Term Debt

469,7850

2005

151,36023,013

1,188,596190,221723,929692,647

1,215,2210

684,38451,089

AmountChange

318,425(23,013)

(26,625)190,22139,545641.558

Total %

210.38(100,00)

(2-19)100.00

5.781255.77

53.65

At the end of the year, the District had total bonded debt outstanding of $200,000. At the end of the year, theDistrict had total debt relating to capital leases of $714,673. Some equipment was moved from the classificationof under capital lease to regular equipment because during the year final lease payments were made and theequipment was purchased under the purchase option at the end of the lease term.

Short-Term Debt

At the end of the year, the District had total short term debt outstanding of $295,000. This related to thepurchased of the land for the new fire station.

Economic Environment and Next Year's Budgets and Rates

The general outlook for the next year is for moderate growth. The major expenditures to satisfy the districtgrowth and as recommended by the Property Insurance Association of Louisiana (PIAL) have been committed(one new aerial apparatus plus one new satellite fire station). The cost of the new aerial apparatus wasapproximately $700,000 and was funded by a ten-year lease to protect the district's cash-flow in preparation offunding a new fire station in the post-Katrina real estate market.

The cost of the new station is now estimated to be approximately $2.1 - 2.2 million including the purchase of theland. The district has issued $2,0 million excess revenue bonds to fund the new station and will handle anycapital costs greater than the bond amount with the district's residual fund balance. The total cost for the newfire station has increased by approximately 60% over the pre-Katrina estimates and these additional costs willcertainly hurt the district.


Page 6

On the revenue side, the tax revenues are expected to minimally increase from their current levels. Overall thebudget will be tight for the next six to ten years but the service area is continuing to develop and should providea steady tax base of support.

The fire district was awarded $621,000 in federal grants for the purpose of increasing the firefighter staffing in2006. The district was the only fire department in Louisiana to receive a SAFER grant and the revenue fromthat grant will be received starting in April, 2007. The staffing was increased in October 2006 to satisfy therequirements of that grant.

Contacting the District's Financial Management

This financial report is designed to provide a general overview of the District's finances, comply with finance-related laws and regulations, and demonstrate the District's commitment to public accountability. If you havequestions about this report or would like to request additional information, contact the District's Chief S. DaleHancock, East Side Fire Protection District No. 5, 15094 Old Hammond Highway, Baton Rouge, Louisiana70816.




STATEMENT OF NET ASSETSDecember 31,2006

Exhibit A

CURRENT ASSETS:Cash and Cash EquivalentsProperty Taxes Receivable, Net of Uncollectible AllowanceDue From Other GovernmentsPrepaid Items

TOTAL CURRENT ASSETS

CAPITAL ASSETS:LandDeposit on New Station LandBuildingsEquipmentVehiclesEquipment and Vehicle Under Capital LeasesAccumulated Depreciation

NET CAPITAL ASSETS

TOTAL ASSETS

248,686257,859

1,059,1466,118

1,571,809

469,785190,221

1,526,748

1,534,17896,577750,510

0302,841)3,265,178

$ 4,836,987

LIABILITIES

CURRENT LIABILITIES:Accrued ExpensesNote PayableCurrent Portion of Bonds PayableCurrent Portion of Obligation Under Capital Leases

TOTAL CURRENT LIABILITIES

LONG-TERM LIABILITIES:Bonds Payable - net of current poritonObligations Under Capital Leases - net of current portionCompensated Absences Payable

TOTAL LONG-TERM LIABILITIES

TOTAL LIABILITIES

NET ASSETS:Investment in Capital Assets, Net of Related DebtUnrestricted

TOTAL NET ASSETS

TOTAL LIABILITIES AND NET ASSETS

63,223295,000100,00085,412

543,635

100,000629,261182,653911,914

1,455,549

3,381,438

$ 4,836,987

The accompanying notes are an integral part of these financial statements.


PageSExhibits



STATEMENT OF ACTIVITIESYear Ended December 31,2006

FUNCTION/PROGRAM:Governmental Activities:

Public Safety

TOTAL GOVERNMENTAL ACTIVITIES

Expenses

$ 1,236,802

$ 1,236,802

ProgramRevenues

Charges forServices

$ 251,303

$ 251,303

NetRevenues

(Expenses)

$ (985,499)

$ (985,499)

General Revenues:Taxes:

Property $ 1,309,031Grants and Contributions not

Restricted to Specific Programs 70,000Grants Restricted to Specific Programs 53,030Reimbursement of Insurance Premiums 49,538State Supplemental Pay 9,600Investment Earnings 27,895

Total General Revenues and Transfers 1,519,094

Change in Net Assets 533,595

Net Assets - Beginning 2,847,843

Net Assets - Ending $ 3,381,438



EAST SIDE FERE PROTECTION DISTRICT NO. 5CITY OF BATON ROUGE


BALANCE SHEET - GOVERNMENTAL FUNDSDecember 31,2006

Page 9Exhibit C

ASSETS:Cash and Cash EquivalentsAccounts Receivable (Net)Due From Other GovernmentsPrepaid Items

TOTAL ASSETS

LIABILITIES:Accrued Expenses and Benefits Payable

FUND BALANCE:Unrestricted

TOTAL LIABILITIES AND FUND BALANCE

248,68683,909

1,059,1466,118

$ 1,397,859

$ 63,223

1,334,636

$1,397,859





STATEMENT OF REVENUES, EXPENDITURES, ANDCHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS

ACTUAL AND BUDGET (NON-GAAP) BASISYear Ended December 31,2006

Page 10Exhibit D

ActualREVENUES:

Ad Valorem TaxesInsurance RebatesFire Protection User ChargesIntergovernmental RevenuesInterest & Penalties - delinquent taxesInterest & Investment EarningsMiscellaneous Revenues

TOTAL REVENUES

EXPENDITURES:Current:

Public SafetyDebt ServiceCapital Expenditures

TOTAL EXPENDITURES

Excess (Deficiency) of Revenues Over Expenditures

1,265,81849,538

230,58270,000

95627,89582,395

1,727,184

1,017,411147,340359,782

1,524,533

(Original)Budget

$ 1,080,00043,000220,00070,0002,10010,000

1,425,100

956,240151,300314,700

1,422,240

(Revised)Budget

51,163,55549,538220,00070,000956

21,37597,899

1,623,323

997,600151,300248,700

1,397,600

VarianceFavorable

(Unfavorable)

$ 102,263

10,582

6,520(15,504)

103,861

(19,811)3,960

(111,082)

_(126,933)

202,651 $ 2,860 S 225,723 $ 23,072





RECONOLIATION OF GOVERNMENTAL FUNDSBALANCE SHEET TO THE STATEMENT OF NET ASSETS

December 31,2006

Page 11Exhibit E

Fund Balances - Total Governmental Funds

Amounts reported for governmental activities in the statementof net assets are different because:

Capital assets used in governmental activities are notfinancial resources and, therefore are not reported inthe governmental funds.

Governmental Capital FundsLess: Accumulated Depreciation

Some property tax revenues were collected more thansixty days after year-end and therefore are not availablesoon enough to pay for current period expenditures.

Long-term liabilities, including bonds payable, are not dueand payable in the current period and therefore are notreported in the governmental funds.

Bonds PayableNote PayableObligations Under Capital LeasesCompensated Absences

NET ASSETS OF GOVERNMENTAL ACTIVITIES

$ 1,334,636

$ 4,568,019(1,302,841)

(200,000)(295,000)(714,673)(182,653)

3,265,178

173,950

(1,392,326)

$ 3.381,438





RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO

THE STATEMENT OF ACTIVITIESYear Ended December 31,2006

Page 12Exhibit F

Net Change in Fund Balance - Total Governmental Funds

Amounts reported for governmental activities in the statementof activities are different because;

Governmental funds report capital outlays as expenditures. However, inthe statement of activities, the cost of those assets are allocated overtheir estimated useful lives and reported as depreciation expense

Capital OutlayDepreciation Expense

Because some revenues will not be collected for several months afteryear-end, they are not considered "available" revenues in thegovernmental funds.

Because some revenues from prior year were not collected until after60 days into the current year, they were not consider "available"revenues in governmental funds until current year.

The issuance of long-term debt provides current financial resources togovernmental funds, while the repayment of the principal of long-termdebt consumes the current financial resources of governmental funds.Neither transaction, however, has any effect on the net assets.

Some expenses reported in the statement of activities, such ascompensated absences, do not require the use of current financialresources and,"therefore, are not reported as expenditures ingovernmental funds.

CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES

$ 202,651

1,354,782(191,658) 1,163,124

173,950

(130,737)

(858,509)

(16,884)

533,595



Page 13EAST SIDE FIRE PROTECTION DISTRICT NO. 5

CITY OF BATON ROUGEPARISH OF EAST BATON ROUGE, LOUISIANA

NOTES TO FINANCIAL STATEMENTSYear Ended December 31,2006

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Formation and Operations - East Side Fire Protection District No. 5 (the District) is a component unit of theCity of Baton Rouge, Parish of East Baton Rouge, Louisiana (the City-Parish), A five-member boardgoverns the District. The board members are appointed by the City-Parish Metropolitan Council and are notcompensated. Effective January 1, 1994, the District became a separate operational unit actingindependently from the City-Parish, pursuant to an intergovernmental agreement between the City-Parishand the District.

The purpose of the District is to provide fire protection for the citizens of the District. The District servesapproximately 5,000 households and other business establishments. The total estimated population served isapproximately 18,000. The District employs nine permanent full-time employees and various otherpermanent and contract part-time employees. However, many of the District's services are still providedthrough volunteers.

Basis for Presentation - The accompanying financial statements of East Side Fire Protection District No. 5have been prepared in conformity with generally accepted accounting principles (GAAP) as applied togovernmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles.

Financial Reporting Entity - As the governing authority, for reporting purposes, the City-Parish is theprimary financial reporting entity. Governmental Accounting Standards Board Statement No. 14 establishedcriteria for determining which component units should be considered part of the City-Parish for financialreporting purposes. The basic criterion for including a potential component unit within the reporting entity isfinancial accountability. The GASB has set forth criteria to be considered in detennining financialaccountability. Because the City-Parish Metropolitan Council appoints the District's governing body, and(1) has the ability to impose its will on the District, and, (2) the District has the potential to provide specificfinancial benefits to, or impose specific financial burdens on, the City-Parish, then, the District isdetermined to be a component unit of the City-Parish.

The accompanying financial statements present information only on the funds maintained by the Districtand do not present information on the City-Parish, the general government services provided by thatgovernmental unit, or the other governmental units that comprise the financial reporting entity.

Fund Accounting - The District uses funds and account groups to report on its financial position and theresults of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financialmanagement by segregating transactions relating to certain government functions or activities. The Generalfund is used to record all financial resources not required to be accounted for in other funds.

Government-Wide Accounting - In accordance with Governmental Accounting Standards Board Statement(GASB) No. 34, the District has presented a Statement of Net Assets and a Statement of Activities. Thesestatements include only the activities and assets of the District Government-wide accounting is designed toprovide a more comprehensive view of the government unit's operations and financial position as a singleeconomic entity.




NOTES TO FINANCIAL STATEMENTS - 2Year Ended December 31,2006

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued^

Government-Wide Accounting (continued! - Government-wide statements distinguish betweengovernmental-type and business-type activities. Governmental activities are those financed through taxes,intergovernmental revenues, and other non-exchange revenues and are usually reported in governmentalfunds. Business activities are financed in whole or part through fees charged for goods or services to thegeneral public and is usually reported in proprietary funds. The District only has governmental-typeactivities.

Basis of Accounting - The accounting and financial reporting treatment applied to a fund is determined byits measurement focus. The Governmental funds are accounted for using a current financial resourcesmeasurement focus. With this measurement focus, only current assets and current liabilities are generallyincluded on the balance sheet. The operating statement presents increases and decreases in net currentassets.

The modified accrual basis of accounting is used by the Governmental Funds. Revenues are recognized inthe accounting period in which they become available and measurable. Property taxes are consideredmeasurable in the calendar year of the tax levy. User fees are considered measurable in the period they arecollected. Expenditures are recognized in the accounting period in which the liability is incurred, ifmeasurable. Transfers between funds that are not expected to be repaid are accounted for as other financingsources (uses). They are recorded at the time the transfer is made.

Policies specific to government-wide statements are as follows:

1. Inter-fund receivables and payables are eliminated in the Statement of Net Assets, except for theresidual amounts due between governmental and business type activities.

2. Reporting on governmental-type activities is based on Financial Accounting Standards Board (FASB)Statements and Interpretations issued after November 30,1989, except where they conflict or contradictGASB pronouncements.

3. Tangible and/or intangible assets used in operations with an estimated useful life that extends beyondone year are capitalized. Such assets are recorded at their historical costs and are depreciated using thestraight-line method of depreciation over their estimated useful lives.

4. The Statement of Activities presents two categories of program revenues - a) charges for services; andb) operating grants and contributions. Charges for services are those revenues arising from charges tocustomers who purchase, use, or directly benefit from goods and services provided by the DistrictGrants and contributions, whether operating or capital in nature, are revenues arising from receipts thatare restricted for a specific use.

Budget-The 2006 budget was prepared in 2005 by the Chief, and ratified by the Board of Commissioners.A public hearing was held in November 2005, and the budget became effective January 1,2006. The budgetwas revised during 2006 and a public hearing was held in December 2006 to ratify the revisions. The budgetfor the District is prepared on the cash basis. Revenues and receipts are budgeted in the year receipt isexpected, and expenditures and disbursements are budgeted in the year that the purchases are made. Nobudget distinction is made between the capital projects and general funds. Further, for financial statementpresentation purposes, the governmental funds are combined and compared to the budget for variances.





NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Encumbrances - The District does not use an encumbrance system of accounting. The books are kept on thecash basis and the financial statements are prepared on the modified accrual basis of accounting.

Cash and Cash Equivalents - Cash includes amounts in demand deposits and interest-bearing demanddeposits. The District considers short-term (maturity of 90 days or less), highly liquid investments as cashequivalents. Under state law, the District may deposit funds in demand deposits, interest-bearing demanddeposits, or time deposits with state banks organized under Louisiana law and national banks having theirprincipal offices in Louisiana,

Fixed Assets and Depreciation - Fixed assets are recorded as expenditures at the time of purchase, and therelated assets are capitalized (reported) in the Statement of Net Assets. Fixed assets donated are recorded atthe estimated fair market value at the time the assets were donated. Costs associated with the new firestation are capitalized but will not be depreciated until the building is completed and placed in service.

In June 1999, GASB No. 34 was issued requiring the inclusion and depreciation of the District'sinfrastnicture, retroactive to 1982 if applicable. Such assets have been depreciated using the straight-linemethod over their estimated useful lives from date of acquisition as follows:

ApproximateLife in Years

Buildings 50Equipment 5-10Vehicles 5-10Equipment under capital leases "life" of lease

The financial statement amounts for accumulated depreciation as of the year December 31,2000 have beenrestated to reflect compliance with this GASB requirement.

Compensated Absences - The District's policy relating to sick leave includes recognizing sick leave at arate of .02 hours for every hour worked for permanent part-time employees. All civil service employees getone year of paid sick leave. No cash payment may be made for accumulated sick leave upon termination orseparation of employment, therefore no accrual has been made for non-vesting sick pay. Part-timeemployees earn vacation time at a rate of .04 hours for every hour worked. Full-time employees earnvacation at a rate eighteen days per year. Compensated absences payable represents the accrued vacationpay and the vested accrued sick pay.

Long-Term Obligations - Long-term obligations expected to be financed from governmental funds arereported in the Statement of Net Assets.





NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued')

Net Assets/Fund Balance - In the Statement of Net Assets, the difference between a governments assets andliabilities is recorded as net assets. The two components of net assets are as follows:

1. Invested in Capital Assets. Net of Related Debt - records capital assets net of accumulateddepreciation and reduced by any outstanding balances of bonds or other borrowing (leaseobligations) attributable to the acquisition, construction, or improvement of capital assets.

2. Unrestricted Net Assets - represent net assets not appropriable for expenditures or legallysegregated for a specific future use.

NOTE 2: CASH AND CASH EQUIVALENTS

At December 31,2006, the District had cash and cash equivalents (book balances) as follows:

Certificates of Deposit $ 36,496Interest-bearing demand deposits 212,190

Total Cash and Cash Equivalents $ 248.686

These deposits are stated at cost, which approximate market. Under state law, these deposits (or the resultingbank balances) must be secured by federal deposit insurance or the pledge of securities owned by the fiscalagent bank. The market value of the pledged securities plus the federal deposit insurance must at all timesequal the amount on deposit with the fiscal agent. These securities are held in the name of the pledgingfiscal agent bank in a holding or custodial bank that is mutually acceptable to both parties. At December 31,2006, the District had deposits (collected bank balances) secured from risk by $100,000 of federal depositinsurance and over $1,625,000 of pledged securities held by the custodial bank in the name of the fiscalagent bank (GASB Category 3).

Even though the pledged securities are considered uncollateralized (Category 3) under the provisions ofGASB Statement 3, Louisiana Revised Statute 39:1229 imposes a statutory requirement on the custodialbank to advertise and sell the pledged securities within 10 days of being notified by the District that thefiscal agent has failed to pay deposited funds upon demand.

NOTE 3: INVESTMENTS

The District does not have any investments other than the cash deposits shown in the financial statementsunder cash and cash equivalents.





NOTE 4: PROPERTY TAXES

Property taxes are assessed and collected by the East Baton Rouge Assessor's Office and Sheriff's Office.The following is a summary of property taxes receivable at December 31,2006:

Property taxes receivable $ 284,737Less: allowance for uncollectible accounts .(26,878)Net property taxes receivable S 257,859

The allowance represents taxes not expected to be collected within the next year.

Included in due from other governments is $1,059,146 which represents property taxes collected by the EastBaton Rouge Assessor's office and Sheriffs office but not remitted to the District as of December 31,2006.

NOTE 5: CHANGES IN FIXED ASSETS

Following is a summary of the changes in fixed assets for the year December 31,2006:

BuildingsFurniture &Equipment$ 3,061,877

01,036.357

Land$ 174,373

0295.412

Less:AccumulatedDepreciation$(1,111,183)

0(191.658)

Total. Net$ 2,128,067

0U40.811

Balance at 12/31/05

Disposals - 2006Additions - 2006

Balance at 12/31/06 $ 4.098r234 $ 469.785 $n.3Q2.84n

NOTE 6: RETIREMENT PLAN AND NET PENSION OBLIGATION

Some of the District's employees are eligible for participation in the Employees' Retirement System of theEast Baton Rouge City-Parish. The District's contributions for 2006 were 22.38% of the coveredemployees' wages. Required contributions for 2006 were $44,295. There were no unfunded contributions atDecember 31,2006.

NOTE 7: COMPENSATED ABSENCES

At December 31,2006, employees of the District have accumulated and vested $182,653 of compensatedabsences, which were computed in accordance with GASB Codification Section C60.





Page 18

NOTE 8: CHANGES IN LONG-TERM OBLIGATIONS

In November 2001, the District entered into a lease purchase for a new fire engine vehicle. The cost of theasset and enhancements was $99,500, to be repaid in 60 monthly installments of principal and interesttotaling $1,865. The imputed interest rate was calculated to be approximately 4.8%.

In December 2004, the District entered into a lease purchase for a new Ford Expedition. The cost of theasset and enhancements was $43,643, to be repaid in 3 annual installments of principal and interest totaling$15,324. The imputed interest rate was calculated to be approximately 4.37%.

In 2004, the District issued five long-term certificates of indebtedness to a local bank in the aggregateamount of $450,000, payable over a five year period at various stated rates ranging from 2.3% to 4%, tomake improvements to facilities, purchased equipment and refinanced old bonds payable for the District'sfire protection purposes. The certificate is secured by and payable solely from a pledge and dedication of theexcess of annual revenues of the District above statutory, necessary, and usual charges in each of the fiscalyears during which the certificate is outstanding.

In 2006, the District signed a note payable to an individual in the amount of $295,000 for the purchase ofland for the new fire station. The note is non-interest bearing and will be due on February 1,2007.

The following is a summary of the long-term obligation transactions and balances during the year:

CompensatedAbsences

Balance at 12/31/05 $ 165,770

Additions 16,883Deductions/repayments 0

Balance at 12/31/06

CapitalLeases

BondDebt

NotePayable Totals

$ 51,163 $ 300,000 $ 0 $ 516,933

700,000..(36,490)

0(100.000)

295,0000

1,011,883(136.4901

The annual principal payments on long-term obligations outstanding at December 31,2006, are as follows:

Year Ending20072008200920102011Therafter

During 2006, interest expense paid totaled $24,452.

Bond Issue$450M

$ 100,000100,000

0000

Two LeaseObligations$ 85,412

56,12259,15662,35365,724

385.906

NotePayable

$ 295,00000000

Total$ 480,412

156,12259,15662,35365,724

385,906$ 714.673 $ 295.QQQ 1.. 1.209.673





NOTE 9: RELATED PARTY TRANSACTIONS

There were no transactions with related parties during the year ended December 31,2006.

NOTE 10: VALUE OF CONTRIBUTED SERVICES

The District relies heavily on the contributed sendees of volunteer firefighters and support staff. During2006, there were responses to approximately 1,438 fires, emergency medical services (EMS), and othermiscellaneous calls. Volunteer hours for training, firefighting, and administrative duties totaledapproximately 14,500 at an estimated value of approximately $182,200, which is not included in theaccompanying financial statements.

NOTE 11: CONTINGENCIES

Under current Civil Service regulations, each full-time employee is technically allowed one year ofcompensated sick pay in the event of a long-term illness or injury not due to gross negligence or willfulintent to harm themselves. Under this policy, the District could be liable for additional compensatedabsences for its two civil service classified employees in the total amount of $ 55,231. However, no cashpayment may be made for unused, non-vested sick pay upon termination or separation of employment.

NOTE 12: SUPPLEMENTAL PAY

The statement of activities reflects income and program expenses of $9,600 for supplemental pay from theState of Louisiana paid directly to the covered employees.

NOTE 13: DEFERRED COMPENSATION PLAN

During 2006, the District adopted a deferred compensation plan created in accordance with Section 457 ofthe Internal Revenue Code of 1986. The assets of the plan are held in trust as described in IRC Section457(g) for the exclusive benefit of participants and their beneficiaries. The custodian thereof for theexclusive benefit of the participants holds the custodial account for the beneficiaries of this plan, and theassets may not be diverted to any other use. The administrators are agents of the employer for purposes ofproviding direction to the custodian of the custodial account from time to time for the investment of thefunds held in the account, transfer of assets to or from the account, and all other matters. In accordance withprovisions of GASB Statement No. 32, plan balances and activities are not reflected in the District'sfinancial statements.





NOTE 14: RISK MANAGEMENT

The District is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets;errors and omissions and natural disasters, workers* compensation for which the District carries commercialinsurance. There have been no significant reduction in coverage from the prior year and settlements have notexceeded coverage in the past three years.

NOTE 15: SUBSEQUENT EVENT

In October 2006, the District entered into a contract to build an additional fire station. The contract costs areestimated at $ 1,700,000. A two million dollar bond issue has been approved to cover these costs. The bondissue has a repayment schedule often years.


THOMAS, WILSON, RAGUSA, TJFFMAN & CO.CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT ON COMPLIANCEAND ON INTERNAL CONTROL OVER FINANCIAL REPORTING

BASED ON AN AUDIT OF FINANCIAL STATEMENTSPERFORMED IN ACCORDANCE WITHGOVERNMENT AUDITING STANDARDS

Board of CommissionersEast Side Fire Protection District No. 5Baton Rouge, Louisiana

We have audited the component unit financial statements of East Side Fire Protection District No. 5 as of andfor the year ended December 31, 2006, and have issued our report thereon dated March 30, 2007.We conducted our audit in accordance with generally accepted auditing standards and the standards applicableto financial audits contained in Government Auditing Standards, issued by the Comptroller General of theUnited States and the provisions of Office of Management and Budget Circular A-128, "Audits of State andLocal Governments".

ComplianceAs part of obtaining reasonable assurance about whether East Side Fire Protection District No, 5's financialstatements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws and regulations, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not anobjective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed noinstances of noncompliance that are required to be reported under Government Auditing Standards.

Internal Control Over Financial ReportingIn planning and performing our audit, we considered East Side Fire Protection District No. 5's internal controlover financial reporting in order to determine our auditing procedures for the purpose of expressing our opinionon the financial statements and not to provide assurance on the internal control over financial reporting. Ourconsideration of the internal control over financial reporting would not necessarily disclose all matters in theinternal control over financial reporting that might be material weaknesses. A material weakness is a conditionin which the design or operation of one or more of the internal control components does not reduce to arelatively low level the risk that misstatements in amounts that would be material in relation to the financialstatements being audited may occur and not be detected within a timely period by employees in the normalcourse of performing their assigned functions. We noted no matters involving the internal control over financialreporting and its operation that we consider to be material weaknesses.

This report is intended solely for the use of management, the City-Parish of East Baton Rouge, and theLegislative Auditor of the State of Louisiana and is not intended to be used, nor should be used, by anyone otherthan the specified parties.

Certified Public AccountantsMarch 30, 2007

527 EAST AIKPORT AVENUE BATON ROUGE, LOUISIANA 70806 225-926-1060 EMAIL:[email protected]

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