Annual Financial Report - 2012
State law requires that all general purpose local governments publish, within four months of the close of each fiscal year, a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP), and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that requirement, and the provisions of the City’s Charter, Section 53, we hereby issue the Comprehensive Annual Financial Report (CAFR) for the City of Gaithersburg, Maryland, for the year ending June 30, 2012.
This report consists of management’s representations concerning the finances of the City of Gaithersburg. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Gaithersburg has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft or misuse, and to compile sufficient reliable information for the preparation of the City of Gaithersburg statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Gaithersburg’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects.
The City of Gaithersburg’s financial statements have been audited by McGladrey LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the basic financial statements of the City of Gaithersburg for the fiscal year that ended June 30, 2012 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the basic financial statements; assessing the accounting principles used, and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City of Gaithersburg financial statements for the fiscal year that ended June 30, 2012 are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the Financial Section of the CAFR.
In prior years, the independent audit of the financial statements of the City of Gaithersburg, Maryland was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The City’s grant expenditures during fiscal year 2012 met the threshold to require a Single Audit. These reports are available in the City of Gaithersburg, Maryland Single Audit Section of the CAFR.
GAAP requires that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City of Gaithersburg’s MD&A can be found immediately following the report of the independent auditor in the Financial Section of the CAFR.
The remainder of this letter provides an overview of local economic conditions and prospects for the future, provides a report on some of the City’s current initiatives, and highlights the City’s financial results.
The City’s financial statements include Casey Community Center operations, Aquatic Facility operations, Senior Center operations, and all departments and funds operated by the City of Gaithersburg. In addition, the Employees’ Retirement Plan is included as a component unit of the reporting entity. The retirement plan activity is reported in the Pension Trust Fund in the accompanying financial statements.
The financial activities of the Montgomery County Board of Education and the Washington Suburban Sanitary Commission are not considered part of the City’s reporting entity. These are separate entities over which the City exercises no control and are not included in this report.
ECONOMIC CONDITION AND OUTLOOK
Gaithersburg is centrally located in the heart of Montgomery County. The southeastern border lies 12 miles from the northwestern border of Washington, D.C., and 18.5 miles northwest of the U.S. Capitol Building. Gaithersburg occupies approximately 10.33 square miles, with a population of 62,848 as of July 2012.
In 2012, CNN/Money Magazine ranked Gaithersburg #23 on a national list of Best Places to Live. This designation recognizes Gaithersburg for its desirable attributes such as family purchasing power, median home price sales, student test scores, job growth, air quality, incidents of personal and property crimes, commute times, and access to arts and leisure activities.
The City continues to attract and maintain a dense concentration of information and biotechnology companies along the Interstate 270 Technology Corridor, which benefit from their proximity to the regulatory agencies in the National Capital region. The recent opening of the InterCounty Connector, a highway linking Gaithersburg to the busy I-95 corridor, increases the accessibility of our community for both workforce and commercial transportation. Additionally, the residential assessable tax base continues its growth. The current economic condition of the City is excellent, and we are confident that this can be maintained.
Gaithersburg’s consistent strategy to attract biotechnology firms continues to reap substantial benefits. MedImmune, one of the 10 largest pharmaceutical companies in the world, is headquartered in the City and continues to eye future expansion. MedImmune’s neighbors include Digene, GenVec, Antex, Gene Logic, IBM and Lockheed Martin. According to Expansion Management magazine, Gaithersburg possesses many attributes these technology firms seek, including a superior work force, good transportation infrastructure, quality of life, competitive operating costs, and a pro-business government.
Additionally, we were recently informed that Adventist HealthCare will move its corporate headquarters to Gaithersburg, and biotechnology firm Novavax will be relocating to Gaithersburg as well.
Due to the current economy, real property tax revenue posted a moderate increase, resulting in an overall increase to total revenues for fiscal year 2012. With the current development projects in the pipeline, we expect the real property assessed base to continue to grow for the next several years, but this growth will be offset by reductions in other revenue areas.
The City’s fiscal health is tied to revenues at the local, state and federal level, as well as sources such as interest income and permit fees that are susceptible to fluctuation due to changing economic conditions. Over the past two years, the City has made a concerted effort to lessen the effect of waning state and federal revenue.
In preparing the FY 2012 Budget, the City of Gaithersburg identified, through a strategic planning process, several major programs needed to meet resident requirements for services and to safeguard the environment, in conformity with applicable federal and state standards. These programs include:
- Ensure that all planning and development considers and responds to the City’s environmental, transportation, economic, social, and civic needs.
- Implement traffic and transportation management strategies to improve the safety, structure and function of streets, transit, bikeways and sidewalks within the City.
- Actively pursue the Olde Towne Blueprint.
- Maintain and enhance priority City services.
- Pursue programs that preserve and improve current and future housing stock and mix (e.g., aging apartments).
- Maintain support of neighborhood Community Policing programs.
- Implement programs to enhance delivery of services that address the needs of the City’s culturally diverse population.
- Implement the Master Plan for Parks, Recreation, Cultural, and Leisure Activities.
- Implement recommendations from ongoing evaluation of natural resources and encourage protection and enhancement of the environment (streams, parks, stormwater management, and other CIP projects).
- Actively pursue economic development programs and strategies.
- Continue communication activities and implement programs that promote citizen involvement.
The largest capital projects are the renovation of the Water Park at Bohrer Park at Summit Hall Farm ($1.4mm); Technology Projects, one of which is a Planning, Code Enforcement and Inspection package ($700k); construction, retrofit and stream restorations of stormwater management projects ($685k); and major street reconstruction projects and street resurfacing projects ($1.3mm). Parenthetical figures represent Fiscal Year 2012 appropriations.
CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Gaithersburg for its Comprehensive Annual Financial Report for the year that ended June 30, 2011. The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports.
In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized Comprehensive Annual Financial Report (CAFR), the contents of which conform to the program standards. Such Comprehensive Annual Financial Report must satisfy both GAAP and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. The City of Gaithersburg has received a Certificate of Achievement for 34 consecutive years (fiscal years 1978-2011). We believe our current report continues to conform to Certificate of Achievement Program requirements and we are submitting it to the Government Finance Officers Association of the United States and Canada for review.
DISTINGUISHED BUDGET PRESENTATION
GFOA presented an award of Distinguished Presentation to the City of Gaithersburg for its annual budget for the fiscal year beginning July 1, 2011. In order to receive this award, a governmental unit must publish a document that meets program criteria as a policy document, as an operations guide, as a financial plan, and as a communications device. The award is only valid for a period of one year. The City of Gaithersburg is proud to be the recipient of the award for the ninth consecutive year (fiscal years 2003-2011). It is our belief the current budget continues to conform to program requirements and we have submitted it to GFOA to determine its eligibility for another award.
The preparation of this report in a timely manner could not be accomplished without the professional, efficient and dedicated services of the entire staff of the Department of Finance and Administration, along with the various City staff that assisted and contributed to its preparation. Their hard work, professional dedication and continuing efforts to improve the quality of this report are a direct benefit to all who read and use it. A special thank you goes to the Public Information Office staff for their invaluable assistance. We also would like to acknowledge the cooperation and assistance of the City’s departments throughout the year in the efficient administration of the City’s financial operations.
In closing, we would like to thank the Mayor and the members of the City Council for their interest and support in planning and conducting the financial operation of the City in a responsible and progressive manner.
Acting City Manager
Harold W. Belton, CGFM
Director of Finance and Administration