Annual Comprehensive Financial Report 2021

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MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the City of Red Oak, we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2021. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found preceding this report. FINANCIAL HIGHLIGHTS • On a government-wide basis, the assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $41,380,122 (Net Position). Of this amount, $12,869,728 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors. • On a government-wide basis, the City's total net position increased by $4,606,300. This increase is attributable largely to capital grants and contributions of $2,485,606, operating grants and contributions of $1,293,401, and the sale of land held for sale in the Economic Development Corporation in the amount of $1,103,869. • As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $43,396,048. Approximately 9.1% of this total amount, $3,962,045 is unassigned and available for use at the City's discretion. • At the end of the current fiscal year, unreserved fund balance for the General Fund was $3,962,045 or 27.0% of the total General Fund expenditures. • The City's outstanding debt increased by $10,490,933 or 21.7% during the current fiscal year due to the issuance of bonds for various capital improvements, primarily including construction and resurfacing of roads, park improvements, and purchase and improvements for municipal buildings. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements are comprised of three components: 1) government-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 themselves. Government-wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the City's assets, deferred outflows, liabilities and deferred inflows, with the difference between these reported as Net Position. Over time, increases or decreases in Net Position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities presents information showing how the City's Net Position changed during the most recent fiscal year. All changes in Net Position are reported when 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 only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused compensated absences). 3
Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, cultural and recreational, public works, industrial development and economic development. The business-type activities of the City include utility operations. The Red Oak Economic Development Corporation and Red Oak Industrial Development Corporation, although legally separate, functions for all practical purposes as a department of the City, and therefore has been included as an integral part of the primary government. The government-wide financial statements can be found on pages 11-13 of this report. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories- governmental funds and proprietary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on current sources and uses of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statements of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains nine individual governmental funds. Information is presented separately in the Governmental Fund Balance Sheet and in the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances for the General, Industrial Development Corporation, and Economic Development Corporation funds, all of which are considered to be major funds. Data from the other five funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. Annual appropriated budgets are adopted for the General Fund, Industrial Development Corporation and the Economic Development Corporation. A budgetary comparison schedule has been provided for the General Fund Industrial Development Corporation and the Economic Development Corporation, to demonstrate compliance with these budgets. The basic governmental fund financial statements can be found on pages 14-19 of this report. Proprietary Funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses two enterprise funds to account for its utility operations, one for water and sewer utilities and the other is for storm water utilities. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The basic proprietary fund financial statements can be found on pages 20-23 of this report. 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. The notes to the financial statements can be found on pages 24-44 of this report. 4
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Annual Comprehensive Financial Report 2021

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