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Consolidated Public Library District No. 3 Known As Mid-Continent Public Library Accountants’ Report and Financial Statements June 30, 2007 Consolidated Public Library District No. 3 Known As Mid-Continent Public Library June 30, 2007 Contents Independent Accountants’ Report on Financial Statements and Supplementary Information........................................................................................ 1 Management’s Discussion and Analysis ............................................................................. 2 Basic Financial Statements Governmental Fund Balance Sheet/Statement of Net Assets ............................................................. 6 Reconciliation of the Statement of Net Assets with Governmental Fund Balance Sheet ................................................................................................................................. 7 Governmental Fund Revenues, Expenditures and Changes in Fund Balance/Statement of Activities ............................................................................................ 8 Reconciliation of the Statement of Activities with Governmental Fund Revenues, Expenditures and Changes in Fund Balance ................................................................. 9 Notes to Financial Statements .......................................................................................................... 10 Required Supplementary Information Revenues and Expenses Compared to Budget.................................................................................. 20 Schedule of Funding Progress .......................................................................................................... 22 Independent Accountants’ Report on Financial Statements and Supplementary Information Board of Directors Consolidated Public Library District No. 3, Known As Mid-Continent Public Library Independence, Missouri We have audited the accompanying financial statements of the governmental activities and the general fund of Consolidated Public Library District No. 3, Known As Mid-Continent Public Library (the Library), as of and for the year ended June 30, 2007, which collectively comprise the Library’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Library’s management. Our responsibility is to express opinions on these 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. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and the general fund of Consolidated Public Library District No. 3, Known As Mid-Continent Public Library as of June 30, 2007, and the respective changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying management’s discussion and analysis, budgetary information and schedule of funding progress as listed in the table of contents are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. /s/ BKD, LLP Kansas City, Missouri August 31, 2007 120 West 12th Street, Suite 1200 bkd.com Kansas City, MO 64105-1936 Beyond Your Numbers 816.221.6300 Fax 816.221.6380 Consolidated Public Library District No. 3 Known As Mid-Continent Public Library Management’s Discussion and Analysis June 30, 2007 The discussion and analysis of Mid-Continent Public Library (the Library) provides an overview of the Library’s financial activities for the year ended June 30, 2007. While profit is not a motive of the Library, a strong financial position allows the Library to deliver excellent services to the taxpayers of the District. This discussion and analysis should be read in conjunction with the accompanying financial statements of the Library. Financial Highlights Management believes the financial condition of the Library is strong. The Library successfully issued a $10 million bond with an AA- rating by Standard & Poor’s to finance major capital projects. • Cash and Investments increased by $12,922,165. This consists of a 76% increase in cash and a 23% increase in investments. • Total assets at year-end amounted to $114,731,503, which exceeded total liabilities by the amount of $102,393,660, resulting in a highly positive net asset position. • Total revenues were $41,502,519, an increase from 2006 in the amount of $3,809,675 or 10%, primarily due to property taxes collected on newly developing areas in the Library district and investment income. • Total expenses increased by $1,319,461, a 4% increase from fiscal 2006. Overview of Financial Statements Management’s discussion and analysis introduces the Library’s basic financial statements. The Library’s basic financial statements include: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. This report also contains additional required supplementary information (budgetary schedules) in addition to the basic financial statements. Basic Financial Statements The Library operates a single government program (library system) and presents the aforementioned government-wide financial statements and fund financial statements in combined form. The combined statements are: (1) Governmental Fund Balance Sheet/Statement of Net Assets, (2) Governmental Fund Revenues, Expenditures and Changes in Fund Balance/Statement of Activities. These financial statements also include Notes to the Financial Statements that explain some of the information in the financial statements and provide more detail. 2 Consolidated Public Library District No. 3 Known As Mid-Continent Public Library Management’s Discussion and Analysis June 30, 2007 Government-Wide Financial Statements The two government-wide financial statements report information about the Library as a whole using accounting methods similar to those used by private-sector companies. Government-wide financial statements provide both long-term and short-term information about the Library’s overall financial status. (A) The statement of net assets includes all of the Library’s assets and liabilities, with the difference reported as net assets. Over time, increases or decreases in the Library’s net assets may serve as a useful indicator of whether financial position is improving or deteriorating. (B) The statement of activities reports how the Library’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will not result in cash flows until future fiscal periods. The government-wide financial statements reflect the Library’s only program, the library system, which is a governmental activity. Governmental activities are supported primarily by property taxes. Fund Financial Statements Governmental funds focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at year-end that are available for spending. Consequently, the governmental fund statement reports short-term fiscal accountability focusing on the use of spendable resources during the year and balances of spendable resources available at the end of the year. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Required Supplementary Information The basic financial statements are followed by a section of required supplementary information. This section includes a budgetary comparison schedule and a pension plan schedule of funding progress. 3 Consolidated Public Library District No. 3 Known As Mid-Continent Public Library Management’s Discussion and Analysis June 30, 2007 Financial Analysis The following comparative condensed statements serve as the key financial data and indicators for management, monitoring and planning. Consolidated Public Library District No. 3 Known As Mid-Continent Public Library, Net Assets 2007 2006 $ 57,006,838 57,736,469 $ 43,986,594 54,267,407 Total assets 114,743,307 98,254,001 Current liabilities Long-term liabilities 3,038,749 9,310,898 2,161,610 178,197 12,349,647 2,339,807 56,604,905 45,788,755 54,267,407 41,646,787 $ 102,393,660 $ 95,914,194 Current assets Capital assets Total liabilities Net assets Invested in capital assets Unrestricted Total net assets Consolidated Public Library District No. 3 Known As Mid-Continent Public Library, Changes in Net Assets Revenues $ 41,502,519 $ 37,692,844 Expenses 35,023,053 33,703,592 6,479,466 3,989,252 95,914,194 91,924,942 $ 102,393,660 $ 95,914,194 Change in net assets Net Assets, Beginning of Year Net Assets, End of Year 4 Consolidated Public Library District No. 3 Known As Mid-Continent Public Library Management’s Discussion and Analysis June 30, 2007 General Trends and Significant Events Construction has begun on the new Genealogy Library which will be known as the Midwest Genealogy Center. Construction bids were awarded and are below the budgeted amount. Completion is scheduled for late Spring of 2008. The Library issued $10 million in revenue bonds through UMB Bank for the purpose of financing the new Genealogy Center. The bonds were given an AA- long term rating by Standard and Poor’s. A new Smithville Branch Library is in the planning stage. Preliminary Plat approval is before the Smithville Planning and Zoning Commission. Breaking of ground for the new facility is expected to take place in Spring of 2008. A “pay for performance” and grade salary system is being phased in over a two-year period for all salaried employees. This will replace the step and grade system which as been in place for many years. The new salary system will give emphasis and reward to accomplishing goals as opposed to having longevity as the dominant factor in determining salary. The purchase of the property in Kansas City/Clay County known as “Woodneath” is in the final stages of planning. This will be the site of a themed destination library. The Board authorized the interior improvement or enhancement of the older branches over a period of the next four years. The interiors of six branches will be completed during this fiscal year. Richard J. Wilding Director of Libraries 5 Consolidated Public Library District No. 3 Known As Mid-Continent Public Library Governmental Fund Balance Sheet / Statement of Net Assets June 30, 2007 Assets General Fund Cash and cash equivalents Investments and deposits Interest receivable Prepaid expenses and subscriptions Designated investments Designated cash and cash equivalents Designated interest receivable Capital assets, net Total assets See Notes to Financial Statements $ 6,368,581 21,421,783 43,738 390,485 24,665,555 3,819,123 176,960 — $ 56,886,225 Statement of Net Assets Adjustments $ 108,809 — — — 57,736,469 6,368,581 21,421,783 43,738 499,294 24,665,555 3,819,123 176,960 57,736,469 $ 57,845,278 $ 114,731,503 $ Liabilities and Fund Balance – Net Assets General Fund Accounts payable Accrued expenses Vacation and sick pay Wages and payroll taxes Early retirement benefits Bond Payable Total liabilities Fund Balance/Net Assets Fund balances Reserved for Bond payments Unreserved, designated for Compensated absences Encumbrances Unreserved, undesignated for General fund Total liabilities and fund balance Net Assets Invested in capital assets, net of related debt Unrestricted Total net assets Total liabilities and net assets $ 437,420 Statement of Net Assets Adjustments $ 94,186 $ 531,606 1,483,667 138,154 28,518 — — — 171,482 9,984,416 1,483,667 138,154 200,000 9,984,416 2,087,759 10,250,084 12,337,843 10,000,000 (10,000,000) — 1,483,667 437,420 (1,483,667) (437,420) — — 42,877,379 (42,877,379) — $ 56,886,225 56,604,905 45,788,755 56,604,905 45,788,755 102,393,660 102,393,660 $ 57,845,278 $ 114,731,503 6 Consolidated Public Library District No. 3 Known As Mid-Continent Public Library Reconciliation of the Statement of Net Assets with Governmental Fund Balance Sheet June 30, 2007 Total Fund Balances — Governmental Funds Amounts reported for governmental activities in the statement of net assets are different because Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds. The cost of the assets is $167,885,294, and the accumulated depreciation is $110,148,825. Bond issuance costs not reported in the funds $ 54,798,466 57,736,469 108,809 Long-term liabilities early retirement benefits—noncurrent are not due and payable in the current period and, therefore, are not reported as liabilities in the funds: (171,482) Special obligation bonds, net unamortized discount of $15,584 (9,984,416) Interest payable Total net assets See Notes to Financial Statements (94,186) $ 102,393,660 7