2003 Comprehensive Annual Financial Report

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Management's Discussion a d Ana °` As management of the City of South Bend, we offer readers of the City of South Bend's financial statements this narrative overview and analysis of the financial activities of the City of South Bend for the fiscal year ended December 31, 2003. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal. This discussion will contain comparative analysis in future years when prior year information is available. As with other sections of this financial report, the information contained within this MD &A should be considered only a part of a greater whole. The readers of this statement should take time to read and evaluate all sections of this report, including the footnotes and the other Required Supplemental Information( "RSI ") that is provided in addition to this MD &A. Financial Highlights The assets of the City of South Bend exceeded its liabilities at December 31, 2003 by $198,491,845. Of this amount, unrestricted net assets of $42,647,967 may be used to meet the governments ongoing obligations to citizens and creditors. The total net assets increased by $11,580,458. Of this amount, governmental activities increased by $13,444,799 and business -type activities decreased by $1,864,341. Total cost of all of the City's programs were $137.7 million, This is an increase of $5.5 million from last year. At the end of the current fiscal year, unreserved fund balance for the general fund was $18.5 million or 34% of total general fund expenditures. The City of South Bend's total debt obligations increased by the net of $38 million. The increase was mostly attributable to the issuance of the three new governmental revenue bonds. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the City of South Bend's basic financial statements. The City of South Bend'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. The report also includes 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 of South Bend's finances, in a manner similar to a private- sector business. The statement of net assets. This statement reports all assets and liabilities of the City as of December 31, 2003 The difference between total assets and total liabilities is reported as "net assets." Increases in net assets generally indicate an improvement in financial position while decreases may indicate a deterioration of financial position. The statement of activities. This statement serves the purpose of the traditional income statement. It provides consolidated reporting of the results of all activities of the City for the year ended December 31, 2003. Changes in net assets are recorded in the period in which the underlying event takes place, which may differ from the period in which cash is received or disbursed. The Statement of Activities displays the expense of the City's various programs net of the related revenues, as well as a separate presentation of revenues available for general purposes. Both of the government -wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from 3