10.a.2 2023 Audited Financial Statements - Scandia
City of Scandia,
Minnesota
Audited Financial Statements
For The Year Ended
December 31, 2023
CITY OF SCANDIA, MINNESOTA
TABLE OF CONTENTS
INTRODUCTORY SECTION:
CITY COUNCIL AND OFFICIALS ................................................................................................................................ 2
FINANCIAL SECTION:
INDEPENDENT AUDITOR’S REPORT ........................................................................................................................ 4
REQUIRED SUPPLEMENTARY INFORMATION:
Management’s Discussion and Analysis ....................................................................................................................... 8
BASIC FINANCIAL STATEMENTS:
Government-wide Financial Statements
Statement of Net Position ..................................................................................................................................... 19
Statement of Activities ......................................................................................................................................... 20
Fund Financial Statements
Balance Sheet – Governmental Funds .................................................................................................................. 21
Reconciliation of the Balance Sheet – Governmental Funds
to the Statement of Net Position .................................................................................................................... 23
Statement of Revenues, Expenditures,
and Changes in Fund Balances – Governmental Funds ................................................................................ 24
Reconciliation of Changes in Fund Balances of
Governmental Funds to the Statement of Activities ...................................................................................... 26
Statement of Net Position – Proprietary Funds .................................................................................................... 27
Statement of Revenues, Expenses, and
Changes in Net Position – Proprietary Funds ................................................................................................ 28
Statement of Cash Flows – Proprietary Funds ..................................................................................................... 29
Notes to the Basic Financial Statements ..................................................................................................................... 31
REQUIRED SUPPLEMENTARY INFORMATION:
Budgetary Comparison Schedule – General Fund ....................................................................................................... 59
Schedule of City’s Proportionate Share of Net Pension Liability ............................................................................... 61
Schedule of City Pension Contributions ...................................................................................................................... 62
Schedule of Changes in Net Pension Liability (Asset) ................................................................................................ 63
Notes to the Required Supplementary Information ..................................................................................................... 64
SUPPLEMENTARY INFORMATION:
Supplemental Combining Balance Sheet – Major Governmental Fund – Debt Service Fund .................................... 70
Supplemental Combining Schedule of Revenues, Expenditures, and
Changes in Fund Balance – Major Governmental Fund – Debt Service Fund ..................................................... 71
Combining Balance Sheet – All Nonmajor Governmental Funds ............................................................................... 72
Combining Statement of Revenues, Expenditures, and
Changes in Fund Balances – All Nonmajor Governmental Funds ....................................................................... 73
Schedule of Indebtedness ............................................................................................................................................ 74
OTHER REQUIRED REPORTS:
Independent Auditor’s Report on Internal Control Over Financial
Reporting and on Compliance and Other Matters Based on an
Audit of Financial Statements Performed in Accordance with
Government Auditing Standards .......................................................................................................................... 76
Schedule of Findings and Responses ........................................................................................................................... 78
Corrective Action Plans ............................................................................................................................................... 80
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INTRODUCTORY
SECTION
CITY OF SCANDIA, MINNESOTA
CITY COUNCIL AND OFFICIALS
FOR THE YEAR ENDED DECEMBER 31, 2023
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CITY COUNCIL Term Expires
Christine Maefsky Mayor December 31, 2024
Heather Benson Council Member December 31, 2024
Jerry Cusick Council Member December 31, 2026
Steve Kronmiller Council Member December 31, 2024
Mike Lubke Council Member December 31, 2026
CITY OFFICIALS
Kyle Morell City Administrator
Colleen Firkus Treasurer
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FINANCIAL
SECTION
An Independently Owned Member, RSM US Alliance
RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member
firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International.
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www.schlennerwenner.cpa
INDEPENDENT AUDITOR’S REPORT
Honorable Mayor and City Council
City of Scandia, Minnesota
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major
fund, and the aggregate remaining fund information of the City of Scandia, Minnesota (the City), as of and for the year ended
December 31, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial
statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of
the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the
City of Scandia, Minnesota, as of December 31, 2023, and the respective changes in financial position and, where applicable, cash
flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the
standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the
United States. Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of
the Financial Statements” section of our report. We are required to be independent of the City an d to meet our other ethical
responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Emphasis of Matter
As discussed in Note 6.D. to the financial statements, the 2022 financial statements have been restated to correct a misstatement.
Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting
principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal
control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the
aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the
financial statement date, including any currently known information that may raise substant ial doubt shortly thereafter.
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Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a
high level of assurance but is not absolute assurance and, therefore, is not a guarantee that an audit conducted in accordance with
generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it
exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are
considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment
made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and
design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control.
Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial
doubt about the City’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis,
Budgetary Comparison Schedule, Schedule of City’s Proportionate Share of Net Pension Liability, Schedule of City Pension
Contributions, and Schedule of Changes in Net Pension Liability (Asset) listed in the table of contents, be presented to supplement
the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial
statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial
reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have
applied certain limited procedures to the required supplementary information in accordance with auditing standards generally
accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the
information and comparing the information for consistency with management’s responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or
provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an
opinion or provide any assurance.
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s
basic financial statements. The accompanying introductory section, combining and individual nonmajor governmental funds
financial statements and supplemental schedules, and schedule of indebtedness are presented for purposes of additional analysis
and are not a required part of the basic financial statements.
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The combining and individual nonmajor governmental funds financial statements and supplemental schedules are the
responsibility of management and were derived from and relate directly to the underlying accounting and other records used to
prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the
basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the basic financial statements or to the financial statements themselves,
and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our
opinion, the combining and individual nonmajor governmental funds financial statements and supplemental schedules are fairly
stated, in all material respects, in relation to the basic financial statements as a whole.
The introductory section and schedule of indebtedness have not been subjected to the auditing procedures applied in the audit of
the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated April 12, 2024, on our consideration of
the City of Scandia’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on
the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering the City of Scandia’s internal control over financial
reporting and compliance.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
April 12, 2024
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REQUIRED SUPPLEMENTARY
INFORMATION
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2023
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Our discussion and analysis of the City of Scandia’s financial performance provides an overview of the City’s financial activities
for the year ended December 31, 2023. Please read it in conjunction with the independent auditor’s report on page four and the
City’s financial statements, which begin on page nineteen.
FINANCIAL HIGHLIGHTS
• The City’s net position increased $405,446 compared to the prior year as a result of this year’s operations.
• The City’s General Fund generated more revenue than budgeted by $62,307. Expenditures were less than budgeted by
$68,159, excluding transfers to other funds. See additional detail pertaining to differences between budgeted and actual
amounts at the General Fund’s Budgetary Comparison Schedule on page fifty -nine.
• The unassigned fund balance in the General Fund of $1,336,309 is 61.23 percent of the 2023 General Fund budgeted
expenditures, excluding budgeted transfers to other funds.
• In the City’s Sewer utility funds, revenues increased $40,857 (or 31.15 percent), while operating expenses increased
$8,440 (or 6.09 percent). The City’s utility funds ended 2023 with a net gain of $24,990, with the cash position
decreasing $11,276.
• During the year ended December 31, 2023, the City determined an adjustment to opening equity was necessary to correct
an error identified in the City's prior year financial statements. See additional information related to this correction at
Note 6.D. As a result of this correction, certain prior year information presented throughout the Management's
Discussion and Analysis section has been restated.
USING THIS ANNUAL REPORT
This annual report consists of series of financial statements. The Statement of Net Position and the Statement of Activities (on
pages nineteen and twenty) provide information about the activities of the City as a whole and present a longer-term view of the
City’s finances. Fund financial statements start on page twenty-one. For governmental activities, these statements tell how these
services were financed in the short term as well as what remains for future spending. Fund financial stat ements also report the
City’s operations in more detail than the government-wide statements by providing information about the City’s most significant
funds.
Reporting the City as a Whole
Our analysis of the City as a whole begins on page ten. One of the most important questions asked about the City’s finances is,
“Is the City as a whole better off or worse off as a result of the year’s activities?” The Statement of Net Position and the
Statement of Activities report information about the City as a whole and about its activities in a way that helps answer this
question. These statements include all assets, liabilities and deferred outflows/inflows of resources using the accrual basi s of
accounting, which is similar to the accounting used by most private -sector companies. All of the current year’s revenues and
expenses are taken into account regardless of when cash is received or paid.
These two statements report the City’s net position and changes net position. You can think of the City’s net position (the
difference between assets and liabilities, adjusted for deferred outflows/inflows) as one way to measure the City’s financial health,
or financial position. Over time, increases or decreases in the City’s net position are one indicator of whether its financial health
is improving or deteriorating. You will need to consider other nonfinancial factors, however, such as changes in the City’s
property tax base, costs associated with current and future construction projects, and the condition of the City’s roads, to assess the
overall health of the City.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2023
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USING THIS ANNUAL REPORT (Continued)
In the Statement of Net Position and the Statement of Activities, we divide the City into two kinds of activities:
• Governmental Activities – Most of the City’s basic services are reported here, including law enforcement, fire, public works,
parks, planning, and general administration. Property taxes, special assessments, licenses, permits and fees, and state aids
finance most of these activities.
• Business-type Activities – The City charges a fee to customers to help it cover all or most of the cost of certain services it
provides. The City’s Big Marine Sewer and Uptown Sewer systems are reported here.
Reporting the City’s Most Significant Funds
Our analysis of the City’s major funds begins on page thirteen. The fund financial statements begin on page twenty-one and
provide detailed information about the most significant funds-not the City as a whole. Some funds are required to be established
by State law and by bond covenants. However, the City Council may establish other funds to help it control and manage money
for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money. The
City’s two kinds of funds (governmental and proprietary) use different accounting approaches.
• Governmental Funds – Most of the City’s basic services are reported in governmental funds, which focus on how money
flows into and out of those funds and the balances left at year-end that are available for spending. These funds are
reported using an accounting method called modified accrual accounting, which measures cash and all other financial
assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the
City’s general government operations and the basic services it provides. Governmental fund information helps you
determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s
programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of
Net Position and the Statement of Activities) and governmental funds in reconciliations following the fund financial
statements.
• Proprietary Funds – When the City charges customers for the services it provides these services are generally reported in
proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net
Position and the Statement of Activities. In fact, the City’s proprietary funds are the same as the business-type activities
we report in the government-wide statements but provide more detail and additional information, such as cash flows, for
proprietary funds.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2023
10
THE CITY AS A WHOLE
The City’s combined net position increased $405,446 from a year ago. Our analysis below focuses on the net position (Table 1)
and changes in net position (Table 2) of the City’s governmental and business-type activities.
Table 1
Net Position
Governmental Business-Type Total
Activities Activities Government
2022 2022
2023 (Restated)2023 2022 2023 (Restated)
Current and Other Assets 3,866,031$ 4,627,615$ 98,856$ 96,305$ 3,964,887$ 4,723,920$
Net Capital Assets 15,648,401 15,010,557 956,629 919,667 16,605,030 15,930,224
Total Assets 19,514,432 19,638,172 1,055,485 1,015,972 20,569,917 20,654,144
Deferred Outflows of Resources 318,680 315,010 6,876 8,418 325,556 323,428
Current Liabilities 513,927 576,245 12,550 9,073 526,477 585,318
Noncurrent Liabilities 3,238,607 3,794,931 24,527 23,663 3,263,134 3,818,594
Total Liabilities 3,752,534 4,371,176 37,077 32,736 3,789,611 4,403,912
Deferred Inflows of Resources 257,375 139,259 8,960 320 266,335 139,579
Net Position:
Net Investment in
Capital Assets 12,831,124 11,894,552 956,629 919,667 13,787,753 12,814,219
Restricted 735,531 528,521 - - 735,531 528,521
Unrestricted 2,256,548 3,019,674 59,695 71,667 2,316,243 3,091,341
Total Net Position 15,823,203$ 15,442,747$ 1,016,324$ 991,334$ 16,839,527$ 16,434,081$
The net position of the City’s governmental activities increased by $380,456 (or 2.47 percent). Unrestricted net position (the part
of net position that can be used to finance day-to-day operations without constraints established by debt covenants, enabling
legislation, or other legal requirements) decreased by $763,126 (or 25.27 percent) compared to the prior year.
The net position of the City’s business-type activities increased by $24,990 (or 2.52 percent). The unrestricted portion of net
position decreased by $11,972 (16.71 percent), due to a greater net investment in capital assets in comparison to the prior year.
Aside from this, operations were comparable to the prior year.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2023
11
THE CITY AS A WHOLE (Continued)
Table 2
Changes in Net Position
Governmental Business-Type Total
Activities Activities Government
2022 2022
2023 (Restated)2023 2022 2023 (Restated)
REVENUE
Charges for Services 292,526$ 245,200$ 169,712$ 127,225$ 462,238$ 372,425$
Operating Grants and
Contributions 115,760 64,871 - - 115,760 64,871
Capital Grants and
Contributions (363) 4,652 403 3,425 40 8,077
Taxes 2,811,237 2,604,523 - - 2,811,237 2,604,523
Intergovernmental 305,227 262,247 3 103 305,230 262,350
Franchise Fees 31,405 28,312 - - 31,405 28,312
Investment Income 77,064 16,482 1,889 397 78,953 16,879
Other 11,977 14,752 - - 11,977 14,752
Total Revenues 3,644,833 3,241,039 172,007 131,150 3,816,840 3,372,189
PROGRAM EXPENSES
General Government 796,916 873,152 - - 796,916 873,152
Public Safety 735,598 569,530 - - 735,598 569,530
Public Works 1,433,277 1,228,071 - - 1,433,277 1,228,071
Culture and Recreation 220,144 228,834 - - 220,144 228,834
Economic Development 4,470 4,713 - - 4,470 4,713
Debt Service 88,677 98,538 - - 88,677 98,538
Big Marine Sewer - - 123,718 117,062 123,718 117,062
Uptown Sewer - - 23,299 21,515 23,299 21,515
Total Expenses 3,279,082 3,002,838 147,017 138,577 3,426,099 3,141,415
Gain (Loss) on Sale of Assets 14,705 - - - 14,705 -
Change in Net Position 380,456 238,201 24,990 (7,427) 405,446 230,774
Net Position - Beginning of Year 15,442,747 15,204,546 991,334 998,761 16,434,081 16,203,307
Net Position - End of Year 15,823,203$ 15,442,747$ 1,016,324$ 991,334$ 16,839,527$ 16,434,081$
The City’s total revenues increased by $444,651 (or 13.19 percent). Operations were comparable to the prior year, but various
changes of significance include:
• Charges for Services revenues increased by $89,813 from 2022, primarily due to fees the City received from a local
developer for building construction along with an increase in Sewer rates charged to customers in 2023.
• Revenues from taxes increased $206,714 as a result of additional ad valorum property taxes levied for the year.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2023
12
THE CITY AS A WHOLE (Continued)
The total cost of all programs and services increased by $284,684 (or 9.06 percent), primarily due to increases in Public Works
program costs discussed below.
Our analysis below separately considers the operations of governmental and business-type activities:
Governmental Activities
Revenue for the City’s governmental activities increased $403,794 (or 12.46 percent), while total expenses increased by $276,244
(or 9.20 percent). Revenues and expenses were generally consistent year to year, with the exception of the matters previously
noted and discussed below.
Table 3 presents the cost of each of the City’s programs (general government, public safety, public works, culture and recreation,
economic development, and debt service) as well as each program’s net cost (total cost less revenues generated by the activities).
The net cost shows the financial burden that was placed on the City’s taxpayers by each of these functions. Activities, net of
capital outlay which is excluded from Table 3, were generally comparable to the prior year as operations remained fairly
consistent with the prior year, with the exception of:
• General government net cost of services decreased $83,948, largely due to expenses incurred in the prior year for the
City's share of broadband infrastructure being installed throughout the City.
• Public safety net cost of services increased $142,005 primarily due an increase in wage and salary costs, along with an
increase in pension expenses recognized in the current year as a result of changes in actuarial calculations and
assumptions for the statewide pension plans in which City employees participate.
• Public works net cost of services increased $228,466 primarily due to an increase in engineering fees incurred for various
projects during the year.
• Culture and Recreation net cost of services decreased $93,325 primarily due to the City receiving various donations,
grants, and park dedication fees in the current year.
Table 3
Governmental Activities
Total Cost Net Cost
of Services of Services
2022 2022
2023 (Restated)2023 (Restated)
General Government 796,916$ 873,152$ 763,961$ 847,909$
Public Safety 735,598 569,530 478,751 336,746
Public Works 1,433,277 1,228,071 1,425,151 1,196,685
Culture and Recreation 220,144 228,834 110,949 204,274
Economic Development 4,470 4,713 3,670 3,963
Debt Service 88,677 98,538 88,677 98,538
Totals 3,279,082$ 3,002,838$ 2,871,159$ 2,688,115$
Business-type Activities
Revenues of the City’s business-type activities (see Table 2) increased by $40,857 (or 31.15 percent). Expenses increased by
$8,440 (or 6.09 percent). Operations were comparable to those of the prior year, aside for an increase in sewer rates charged to
customers in 2023.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2023
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THE CITY’S FUNDS
Governmental Funds
As the City completed the year, its governmental funds (as presented in the balance sheet on page twenty-one) reported a
combined fund balance of $3,207,019. This is a decrease of $525,278 (or 14.12 percent) from the prior year. This decrease in
fund balance is the net result of a multitude of transactions, but a few of the largest contributing factors unique to the cu rrent
year’s operations are as follows:
• Public safety program wage and salary expenditures increased, as previously discussed.
• Significant expenditures were incurred for capital outlay again in the current year, as discussed in greater detail below.
Other operations were comparable to the prior year. The following is a summary of the City’s major governmental funds:
Increase
2023 2022 (Decrease)
General 1,359,642$ 1,349,787$ 9,855$
Fund Balance December 31,
Major Funds
The fund balance of the General Fund increased by $9,855 as a result of current year operations. In comparison to the prior year,
revenues increased 16.93 percent and expenditures increased 8.84 percent. Details of the General Fund's revenues and
expenditures are displayed below:
General Fund Revenues
Taxes
Franchise Taxes
Licenses, Permits and Fees
Intergovernmental
Charges for Services
Fines
Investment Earnings
(Losses)
Miscellaneous
The City receives the majority of its funding in the General Fund in the form of taxes (82.70 percent), licenses, permits, and fees
(8.60 percent), intergovernmental (3.69 percent), and charges for services (2.58 percent). Overall, the City’s General Fund
revenues were comparable to the prior year, with the exception of matters previously discussed.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2023
14
THE CITY’S FUNDS (Continued)
General Fund Expenditures
General Government
Public Safety
Public Works
Parks and Recreation
Capital Outlay
A significant portion of the City’s General Fund expenditures are used for public works (32.17 percent). Remaining expenditures
are used primarily on public safety (30.02 percent) and general government operations (29.95 percent). Overall, the City’s
General Fund expenditures were comparable to the prior year.
General Fund Budgetary Highlights
The City’s General Fund generated more revenue than budgeted of $62,307. Expenditures, including transfers out to other funds,
were more than those budgeted by $78,461. See additional detail pertaining to differences between budgeted and actual amounts
within the General Fund and at the Budgetary Comparison Schedule on page fifty-nine.
Increase
2023 2022 (Decrease)
Fund Balance December 31,
Major Funds
Capital Improvement Fund 708,799$ 577,485$ 131,314$
At December 31, 2023, the Capital Improvement Fund has a cash balance of $782,892. The fund balance increased by $131,314
during the current year primarily due to revenues from property taxes and intergovernmental sources exceeding capital
expenditures. The beginning fund balance of the Capital Improvement Fund has been restated to correct a misstatement. See
additional information at Note 6.D. to the financial statements.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2023
15
THE CITY’S FUNDS (Continued)
Increase
2023 2022 (Decrease)
Fund Balance December 31,
Major Funds
Local Road Improvement Fund 100,002$ 896,739$ (796,737)$
At December 31, 2023, the Local Road Improvement Fund has a cash balance of $155,620. The fund balance decreased by
$797,737 primarily due to capital expenditures for street reconstruction projects exceeding the revenue sources for the fund.
Park Capital Improvement Fund 91,868$ 130,797$ (38,929)$
At December 31, 2023, the Park Capital Improvement Fund has a cash balance of $63,928. The fund balance decreased by
$38,929 primarily due to capital expenditures for the playground project exceeding the revenue sources for the fund.
Debt Service Fund 94,334$ 74,157$ 20,177$
At December 31, 2023, the Debt Service Fund has a cash balance of $94,334. The fund balance increased by $20,177 primarily
due to revenues from property taxes exceeding the payment of principal and interest.
COVID Relief Fund 466,422$ 456,363$ 10,059$
At December 31, 2023, the Covid Relief Fund has a cash balance of $466,422. The fund balance increased by $10,059 due to
investment earnings recognized on Federal covid aid received in prior years that remains unspent.
Proprietary Funds
As the City completed the year, its business-type activities (as presented in the statement of net position on page twenty-seven)
reported a combined net position of $1,016,324. This is an increase of $24,990 from the prior year. The following is a summary of
the City’s proprietary funds:
Increase
2023 2022 (Decrease)
Big Marine Sewer Fund 856,050$ 830,254$ 25,796$
Net Position December 31,
Funds
The Big Marine Sewer Fund provides sanitary sewer services to customers in the Anderson-Erickson and Bliss subdivisions. At
December 31, 2023, the fund had a cash balance of $54,245 with a decrease in cash of $15,422 for the year. The decrease in cash
is attributable to an increase in capital project activity. The fund’s net position increased $25,796 during the current year
primarily due to revenues from charges for services and connection fees exceeding operating expenses.
Uptown Sewer Fund 160,274$ 161,080$ (806)$
The Uptown Sewer Fund provides sanitary sewer services to commercial customers near the Olinda Trail / Oakhill intersection.
At December 31, 2023, the fund had a cash balance of $18,168 with an increase in cash of $4,146 for the year. The increase in
cash is attributable to an increase in charges for services revenues in the current year. The fund’s net position decreased $806
during the year as a result of operating expenses exceeding revenues from charges for services.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2023
16
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
At the end of 2023, the City had $16,605,030 invested in a broad range of capital assets, including land, buildings, equipment and
vehicles, infrastructure, improvements, and sewer systems. This amount represents a net increase of $674,806 (or 4.24 percent)
from last year.
Table 4
Capital Assets Net of Depreciation
Governmental
Activities Activities Totals
2023 2022 2023 2022 2023 2022
Land 487,735$ 487,735$ -$ -$ 487,735$ 487,735$
Construction In Progress 113,028 622,277 104,906 21,088 217,934 643,365
Buildings 1,070,730 1,124,127 - - 1,070,730 1,124,127
Equipment 882,641 683,948 215,475 227,455 1,098,116 911,403
Vehicles 617,804 708,236 - - 617,804 708,236
Infrastructure 12,161,008 11,253,829 - - 12,161,008 11,253,829
Other Improvements 315,455 130,405 - - 315,455 130,405
Sewer Plant - - 480,000 510,000 480,000 510,000
Uptown Sewer - - 156,248 161,124 156,248 161,124
Totals 15,648,401$ 15,010,557$ 956,629$ 919,667$ 16,605,030$ 15,930,224$
Business-Type
Significant capital asset acquisitions during 2023 were:
• Capital outlay for 2023 street improvement project - $739,799
More detailed information about the City’s capital assets is presented in Note 2.B. to the financial statements.
Debt
In 2023, the City paid off $295,000 of the $3,075,000 in debt that was outstanding at December 31, 2022. The City did not issue
any new debt during 2023, bringing the total year-end balance of debt outstanding at December 31, 2023 to $2,780,000. See
additional information at Note 2.C. to the financial statements.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
The City’s elected and appointed officials considered many factors when setting the year 2024 budget, including tax rates and fees
that will be charged for business-type activities. The 2024 tax levy increased 6.89% from $2,803,556 in 2023 to $2,996,852 in
2024. The City’s tax rate increased 0.66% from 26.460% to 26.633%, mainly due to increased tax capacity from increased home
valuations. The net effect on the local tax rate was an increase of 0.174%. The 2024 Assessment report from Washington County
reports a decrease in property values for 2024. This decrease in City value will have a significant effect on spending in 2024 and
the City’s 2025 budget.
The City’s continued use of a long-term financial management plan will help it predict tax rates, fee revenues, and estimated costs
by using information on economic conditions, including inflationary estimates and trends in property assessment with their effect
on expenditures and revenues. Prioritizing Capital Investments and utilizing levies combined with debt will be key factors to
consider for the City’s capital expenditures.
Sewer rates were adjusted by 25% for the Big Marine and Uptown Sewer Utilities. In addition to increased utility rates, the City
continues to seek funding options through state grants and loan programs and the allocation of American Rescue Plan Act funds to
pay for the state-mandated Bliss Nitrate Treatment Projects and other sewer infrastructure repairs and replacements.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2023
17
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview
of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about this report or
need additional financial information, contact the City of Scandia, 14727 209th Street N, Scandia, MN 55073.
18
BASIC FINANCIAL STATEMENTS
CITY OF SCANDIA, MINNESOTA
STATEMENT OF NET POSITION
DECEMBER 31, 2023
See accompanying notes. 19
Governmental
Activities
Business-Type
Activities Totals
ASSETS
Cash and Cash Equivalents 3,487,273$ 72,413$ 3,559,686$
Property Taxes Receivable 69,601 - 69,601
Assessments Receivable 29,160 7,058 36,218
Accounts Receivable 144,009 29,933 173,942
Interest Receivable 3,723 - 3,723
Internal Balances 10,548 (10,548) -
Inventory 12,375 - 12,375
Prepaids 10,958 - 10,958
Deposit on Asset 12,717 - 12,717
Noncurrent Assets:
Capital Assets Not Being Depreciated 600,763 104,906 705,669
Capital Assets Being Depreciated (Net) 15,047,638 851,723 15,899,361
Net Pension Asset 85,667 - 85,667
TOTAL ASSETS 19,514,432 1,055,485 20,569,917
DEFERRED OUTFLOWS OF RESOURCES
Pensions 318,680 6,876 325,556
LIABILITIES
Accounts Payable 412,956 9,809 422,765
Salaries Payable 48,064 1,374 49,438
Accrued Interest Payable 1,754 - 1,754
Deposits Payable 50,428 - 50,428
Unearned Revenue 725 1,367 2,092
Noncurrent Liabilities:
Amount Due Within One Year 287,996 - 287,996
Amount Due After One Year 2,572,277 - 2,572,277
Net Pension Liability 378,334 24,527 402,861
TOTAL LIABILITIES 3,752,534 37,077 3,789,611
DEFERRED INFLOWS OF RESOURCES
Pensions 257,375 8,960 266,335
NET POSITION
Net Investment in Capital Assets 12,831,124 956,629 13,787,753
Restricted 735,531 - 735,531
Unrestricted 2,256,548 59,695 2,316,243
TOTAL NET POSITION 15,823,203$ 1,016,324$ 16,839,527$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2023
See accompanying notes. 20
Operating Capital
Charges for Grants and Grants and Governmental Business-Type
Expenses Services Contributions Contributions Activities Activities Total
Governmental Activities:
General Government 796,916$ 32,955$ -$ -$ (763,961)$ -$ (763,961)$
Public Safety 735,598 207,319 49,528 - (478,751) - (478,751)
Public Works 1,433,277 8,489 - (363) (1,425,151) - (1,425,151)
Culture and Recreation 220,144 42,963 66,232 - (110,949) - (110,949)
Economic Development 4,470 800 - - (3,670) - (3,670)
Debt Service 88,677 - - - (88,677) - (88,677)
Total Governmental Activities 3,279,082 292,526 115,760 (363) (2,871,159) - (2,871,159)
Business-Type Activities:
Big Marine Sewer 123,718 147,546 - 403 - 24,231 24,231
Uptown Sewer 23,299 22,166 - - - (1,133) (1,133)
Total Business-Type Activities 147,017 169,712 - 403 - 23,098 23,098
TOTALS 3,426,099$ 462,238$ 115,760$ 40$ (2,871,159) 23,098 (2,848,061)
General Revenues:
Taxes 2,811,237 - 2,811,237
Franchise and Other Tax 31,405 - 31,405
Intergovernmental 305,227 3 305,230
Investment Earnings (Losses)77,064 1,889 78,953
Gain (Loss) on Sale of Assets 14,705 - 14,705
Miscellaneous 11,977 - 11,977
Total General Revenues 3,251,615 1,892 3,253,507
CHANGE IN NET POSITION 380,456 24,990 405,446
NET POSITION - BEGINNING OF YEAR 15,429,997 991,334 16,421,331
(As Previously Reported)
PRIOR PERIOD ADJUSTMENT 12,750 - 12,750
(See Note 6.D.)
NET POSITION - BEGINNING OF YEAR 15,442,747 991,334 16,434,081
(As Restated)
NET POSITION - END OF YEAR 15,823,203$ 1,016,324$ 16,839,527$
Functions/Programs
Program Revenues Net (Expense) Revenue and Changes in Net Position
Primary Government
CITY OF SCANDIA, MINNESOTA
BALANCE SHEET
GOVERNMENTAL FUNDS
DECEMBER 31, 2023
See accompanying notes. 21
General Fund
Capital
Improvement
Fund
Local Road
Improvement
Fund
Park Capital
Improvement
Fund
Debt Service
Fund
COVID Relief
Fund
Total Nonmajor
Funds
Total
Governmental
Funds
ASSETS
Cash and Cash Equivalents 1,542,588$ 782,892$ 155,620$ 63,928$ 94,334$ 466,422$ 381,489$ 3,487,273$
Property Taxes Receivable 69,601 - - - - - - 69,601
Assessments Receivable - - 29,160 - - - - 29,160
Accounts Receivable 40,681 - - 101,250 - - 2,078 144,009
Interest Receivable 3,723 - - - - - - 3,723
Inventory 12,375 - - - - - - 12,375
Prepaids 10,958 - - - - - - 10,958
Deposit on Asset - - - - - - 12,717 12,717
Advances to Other Funds - 28,548 - - - - - 28,548
TOTAL ASSETS 1,679,926$ 811,440$ 184,780$ 165,178$ 94,334$ 466,422$ 396,284$ 3,798,364$
LIABILITIES
Accounts Payable 171,008$ 102,641$ 55,665$ 73,310$ -$ -$ 10,332$ 412,956$
Salaries Payable 48,064 - - - - - - 48,064
Deposits Payable 50,428 - - - - - - 50,428
Unearned Revenue 725 - - - - - - 725
Advances from Other Funds 18,000 - - - - - - 18,000
Total Liabilities 288,225 102,641 55,665 73,310 - - 10,332 530,173
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue:
Property Taxes 32,059 - - - - - - 32,059
Special Assessments - - 29,113 - - - - 29,113
Total Deferred Inflows of Resources 32,059 - 29,113 - - - - 61,172
Capital Project
CITY OF SCANDIA, MINNESOTA
BALANCE SHEET (Continued)
GOVERNMENTAL FUNDS
DECEMBER 31, 2023
See accompanying notes. 22
General Fund
Capital
Improvement
Fund
Local Road
Improvement
Fund
Park Capital
Improvement
Fund
Debt Service
Fund
COVID Relief
Fund
Total Nonmajor
Funds
Total
Governmental
Funds
FUND BALANCES
Nonspendable 23,333$ 28,548$ -$ -$ -$ -$ 12,717$ 64,598$
Restricted - - - - 94,334 466,422 176,529 737,285
Committed - 680,251 - 91,868 - - 37,707 809,826
Assigned - - 100,002 - - - 158,999 259,001
Unassigned 1,336,309 - - - - - - 1,336,309
Total Fund Balances 1,359,642 708,799 100,002 91,868 94,334 466,422 385,952 3,207,019
TOTAL LIABILITIES, DEFERRED
INFLOWS OF RESOURCES,
AND FUND BALANCES 1,679,926$ 811,440$ 184,780$ 165,178$ 94,334$ 466,422$ 396,284$ 3,798,364$
Capital Project
CITY OF SCANDIA, MINNESOTA
RECONCILIATION OF THE BALANCE SHEET - GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET POSITION
DECEMBER 31, 2023
See accompanying notes. 23
Total Fund Balances - Governmental Funds 3,207,019$
Amounts reported for governmental activities in the Statement of Net Position
are different because:
Capital assets used in governmental activities are not current financial resources
and, therefore, are not reported as assets in the governmental funds:
Capital Assets 25,384,574$
Accumulated Depreciation (9,736,173)
Capital Assets (Net) 15,648,401
Long-term liabilities are not due and payable in the current period and, therefore,
are not reported as liabilities in the governmental funds Balance Sheet:
Bonds and Equipment Certificates Principal Payable (2,780,000)
Bond Premium, Net of Accumulated Amortization (37,277)
Compensated Absences (42,996)
(2,860,273)
The net pension asset/liability and related deferred outflows/inflows represent the
allocation of the pension obligations of the statewide plans to the City. Such
balances are not reported in the governmental funds:
Net Pension Asset 85,667
Net Pension Liability (378,334)
Deferred Outflows - Pensions 318,680
Deferred Inflows - Pensions (257,375)
(231,362)
Interest on long-term debt is recognized as an expenditure when due and payable
in the governmental funds. Therefore, interest is not accrued in the governmental
funds Balance Sheet, but is accrued in the Statement of Net Position: (1,754)
Other long-term assets are not available to pay for current-period expenditures and,
therefore, are reported as unavailable in the governmental funds:
Property Taxes 32,059
Special Assessments 29,113
TOTAL NET POSITION OF GOVERNMENTAL ACTIVITIES 15,823,203$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2023
See accompanying notes. 24
General Fund
Capital
Improvement
Fund
Local Road
Improvement
Fund
Park Capital
Improvement
Fund
Debt Service
Fund
COVID Relief
Fund
Total Nonmajor
Funds
Total
Governmental
Funds
REVENUES
Taxes 1,877,975$ 293,790$ 212,012$ 20,000$ 406,536$ -$ 5,300$ 2,815,613$
Franchise Taxes 5,874 - - - - - 25,531 31,405
Special Assessments - - 197 - - - - 197
Licenses, Permits, and Fees 195,194 - - - - - - 195,194
Intergovernmental 83,775 56,232 - 101,250 - - 176,529 417,786
Charges for Services 58,499 - - 30,000 - - 800 89,299
Fines 7,133 - - - - - - 7,133
Interest Earnings (Losses)29,798 15,886 11,889 3,146 1,291 10,059 4,995 77,064
Miscellaneous 12,577 - - 10,000 - - 19,451 42,028
TOTAL REVENUES 2,270,825 365,908 224,098 164,396 407,827 10,059 232,606 3,675,719
EXPENDITURES
Current:
General Government 633,330 - - - - - 16,134 649,464
Public Safety 634,771 - - - - - - 634,771
Public Works 680,238 - - - - - - 680,238
Parks and Recreation 144,544 31,200 - 4,500 - - - 180,244
Economic Development - - - - - - 4,470 4,470
Capital Outlay 21,467 203,394 1,020,835 345,445 - - 73,019 1,664,160
Debt Service:
Principal - - - - 295,000 - - 295,000
Interest and Other Charges - - - - 92,650 - - 92,650
TOTAL EXPENDITURES 2,114,350 234,594 1,020,835 349,945 387,650 - 93,623 4,200,997
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 156,475 131,314 (796,737) (185,549) 20,177 10,059 138,983 (525,278)
Capital Project
CITY OF SCANDIA, MINNESOTA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (Continued)
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2023
See accompanying notes. 25
General Fund
Capital
Improvement
Fund
Local Road
Improvement
Fund
Park Capital
Improvement
Fund
Debt Service
Fund
COVID Relief
Fund
Total Nonmajor
Funds
Total
Governmental
Funds
OTHER FINANCING SOURCES (USES)
Transfers In -$ -$ -$ 146,620$ -$ -$ -$ 146,620$
Transfers Out (146,620) - - - - - - (146,620)
TOTAL OTHER FINANCING
SOURCES (USES)(146,620) - - 146,620 - - - -
NET CHANGE IN FUND BALANCES 9,855 131,314 (796,737) (38,929) 20,177 10,059 138,983 (525,278)
FUND BALANCES - BEGINNING 1,349,787 564,735 896,739 130,797 74,157 456,363 246,969 3,719,547
(As Previously Reported)
PRIOR PERIOD ADJUSTMENT - 12,750 - - - - - 12,750
(See Note 6.D.)
FUND BALANCES - BEGINNING 1,349,787 577,485 896,739 130,797 74,157 456,363 246,969 3,732,297
(As Restated)
FUND BALANCES - ENDING 1,359,642$ 708,799$ 100,002$ 91,868$ 94,334$ 466,422$ 385,952$ 3,207,019$
Capital Project
CITY OF SCANDIA, MINNESOTA
RECONCILIATION OF CHANGES IN FUND BALANCE S OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITES
FOR THE YEAR ENDED DECEMBER 31, 2023
See accompanying notes. 26
Net Change in Fund Balances - Total Governmental Funds (525,278)$
Amounts reported for governmental activities in the Statement of Activities are
different due to the following:
Capital outlays are reported in the governmental funds as expenditures. However, in the
Statement of Activities, the cost of those assets is allocated over the estimated
useful lives as depreciation expense:
Capital Outlay Capitalized 1,340,104$
Depreciation Expense (697,814)
Loss on Disposal of Assets (4,446)
637,844
The issuance of long-term debt provides current financial resources to governmental
funds while the repayment of principal of long-term debt consumes the current
financial resources of governmental funds. Neither transaction, however, has any
effect on net position. Also, governmental funds report the effect of premiums
and discounts when debt is first issued, whereas these amounts are deferred and
amortized in the Statement of Activities. The amounts below detail the effects of
these differences in the treatment of long-term debt and related items:
Bond Principal Repayments 295,000
Amortization of Bond Premium 3,728
298,728
Interest on long-term debt in the Statement of Activities differs from the amounts
reported in the governmental funds because interest is recognized as an expenditure
in the funds only when it is due. In the Statement of Activities, however, interest
expense is recognized as the interest accrues, regardless of when it is due:245
Under the modified accrual basis of accounting, certain revenues cannot be recognized
until they are available to liquidate liabilities of the current period:
Property Taxes (4,376)
Special Assessments (560)
(4,936)
Some expenses reported in the Statement of Activities do not require the use of
current financial resources and, therefore, are not reported as expenditures in
the governmental funds:
Compensated Absences (17,001)
Certain liabilities do not represent the impending use of current resources.
Therefore, the change in such liabilities and related deferrals are not reported
in the governmental funds:
Net Pension Asset/Liability and Deferred Outflows/Inflows of Resources (9,146)
CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES 380,456$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF NET POSITION
PROPRIETARY FUNDS
DECEMBER 31, 2023
See accompanying notes. 27
Nonmajor
Big Marine Sewer
Fund
Uptown Sewer
Fund Totals
ASSETS
Current Assets
Cash and Cash Equivalents 54,245$ 18,168$ 72,413$
Assessments Receivable 7,058 - 7,058
Accounts Receivable 24,762 5,171 29,933
Total Current Assets 86,065 23,339 109,404
Noncurrent Assets
Capital Assets Not Being Depreciated 104,906 - 104,906
Capital Assets Being Depreciated (Net)695,475 156,248 851,723
Total Noncurrent Assets 800,381 156,248 956,629
TOTAL ASSETS 886,446 179,587 1,066,033
DEFERRED OUTFLOWS OF RESOURCES
Pensions 4,839 2,037 6,876
LIABILITIES
Current Liabilities
Accounts Payable 9,391 418 9,809
Salaries Payable 962 412 1,374
Unearned Revenue 1,367 - 1,367
Total Current Liabilities 11,720 830 12,550
Noncurrent Liabilities
Advances from Other Funds - 10,548 10,548
Net Pension Liability 17,223 7,304 24,527
Total Noncurrent Liabilities 17,223 17,852 35,075
TOTAL LIABILITIES 28,943 18,682 47,625
DEFERRED INFLOWS OF RESOURCES
Pensions 6,292 2,668 8,960
NET POSITION
Net Investment in Capital Assets 800,381 156,248 956,629
Unrestricted 55,669 4,026 59,695
TOTAL NET POSITION 856,050$ 160,274$ 1,016,324$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2023
See accompanying notes. 28
Nonmajor
Big Marine Sewer
Fund
Uptown Sewer
Fund Totals
OPERATING REVENUES
Charges for Services 139,546$ 22,166$ 161,712$
OPERATING EXPENSES
Wages and Benefits 31,048 13,443 44,491
Materials and Supplies 2,471 403 2,874
Repairs and Maintenance 15,141 1,940 17,081
Professional Services 9,200 733 9,933
Utilities 3,979 863 4,842
Miscellaneous 11,451 1,041 12,492
Depreciation 50,428 4,876 55,304
TOTAL OPERATING EXPENSES 123,718 23,299 147,017
NET OPERATING INCOME (LOSS)15,828 (1,133) 14,695
NONOPERATING INCOME (EXPENSE)
Special Assessments 403 - 403
Intergovernmental 2 1 3
Connection Fees 8,000 - 8,000
Investment Earnings (Losses)1,563 326 1,889
TOTAL NONOPERATING INCOME (EXPENSE)9,968 327 10,295
CHANGE IN NET POSITION 25,796 (806) 24,990
NET POSITION - BEGINNING OF YEAR 830,254 161,080 991,334
NET POSITION - END OF YEAR 856,050$ 160,274$ 1,016,324$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2023
See accompanying notes. 29
Nonmajor
Big Marine Sewer
Fund
Uptown Sewer
Fund Totals
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers 129,857$ 21,463$ 151,320$
Cash Paid to Suppliers (46,345) (5,185) (51,530)
Cash Paid to Employees (23,609) (9,819) (33,428)
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 59,903 6,459 66,362
CASH FLOWS FROM NONCAPITAL FINANCING
ACTIVITIES
Intergovernmental 2 1 3
Other Receipts from Customers 8,000 - 8,000
NET CASH PROVIDED (USED) BY NONCAPITAL
FINANCING ACTIVITIES 8,002 1 8,003
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Special Assessments 403 - 403
Purchases of Capital Assets (85,293) - (85,293)
Payments on Interfund Advances - (2,640) (2,640)
NET CASH PROVIDED (USED) BY CAPITAL AND
RELATED FINANCING ACTIVITIES (84,890) (2,640) (87,530)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment Income 1,563 326 1,889
Net Change in Cash and Cash Equivalents (15,422) 4,146 (11,276)
Cash and Cash Equivalents - Beginning of Year 69,667 14,022 83,689
Cash and Cash Equivalents - End of Year 54,245$ 18,168$ 72,413$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF CASH FLOWS (Continued)
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2023
See accompanying notes. 30
Nonmajor
Big Marine Sewer
Fund
Uptown Sewer
Fund Totals
RECONCILIATION OF NET OPERATING
INCOME (LOSS) TO NET CASH PROVIDED
(USED) BY OPERATING ACTIVITIES
Net Operating Income (Loss)15,828$ (1,133)$ 14,695$
Adjustments to Reconcile Net Operating
Income (Loss) to Net Cash Provided (Used)
by Operating Activities:
Depreciation Expense 50,428 4,876 55,304
Changes in Assets, Liabilities, and Deferrals:
Accounts Receivable (7,782) (703) (8,485)
Assessments Receivable (2,702) - (2,702)
Accounts Payable (4,103) (205) (4,308)
Salaries Payable 11 6 17
Unearned Revenue 795 - 795
Net Pension Liability 155 709 864
Deferred Outflows of Resources - Pensions 1,212 330 1,542
Deferred Inflows of Resources - Pensions 6,061 2,579 8,640
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 59,903$ 6,459$ 66,362$
SCHEDULE OF NONCASH CAPITAL
AND RELATED FINANCING ACTIVITIES
Purchase of Capital Assets on Account 6,973$ -$ 6,973$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
31
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the City of Scandia, Minnesota (the City) have been prepared in conformity with accounting principles
generally accepted in the United States of America (GAAP) as applied to governmental units. GAAP includes all relevant
Governmental Accounting Standards Board (GASB) pronouncements.
The City has a mayor-council form of government that is governed by an elected mayor and four-member council. The City
provides the following services: sanitation, recreation, public improvements, public safety, planning and zoning, and general
administrative services.
1.A. FINANCIAL REPORTING ENTITY
The City’s financial reporting entity is comprised of the primary governmental unit of the City of Scandia, Minnesota.
In determining the financial reporting entity, the City complies with the provisions of GASB Statement No. 14, The Financial
Reporting Entity, and includes all component units of which the City appointed a voting majority of the units’ board; the City is
either able to impose its will on the unit or a financial benefit or burden relationship exists.
Blended Component Units
Blended component units are separate legal entities that meet the component unit criteria described above and whose governing
body is the same or substantially the same as the City Council or the component unit provides services entirely to the City. These
component units’ funds are blended into those of the City’s by appropriate activity type to compose the primary government
presentation. Currently, the City has the following blended component unit:
Economic Development Authority – The City created an Economic Development Authority (EDA) by resolution of its City
Council. The EDA is governed by a five-member board whose members are the same as those serving on the City Council.
Although it is legally separate from the City, the EDA is reported as if it were part of the primary government because its
purpose is to approve the City's redevelopment plans. The EDA cannot issue bonded debt without the City's approval.
Discretely Presented Component Units
Discretely presented component units are separate legal entities that meet the component unit criteria described above but do not
meet the criteria for blending. Currently, the City has no discretely presented component units.
1.B. BASIS OF PRESENTATION
Government-wide Financial Statements
The Statement of Net Position and Statement of Activities display information about the reporting government as a whole. They
include all funds of the reporting entity except for fiduciary funds (of which the City has none). The statements distinguish
between governmental and business-type activities. Governmental activities generally are financed through taxes,
intergovernmental revenues, and other nonexchange revenues. Business-type activities are financed in whole or in part by fees
charged to external parties for goods and services.
Fund Financial Statements
Fund financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting
entity. Each fund is accounted for by providing a separate set of self-balancing accounts that constitute its assets, deferred
outflows, liabilities, deferred inflows, fund equity, revenues, and expenditures/expenses. Funds are organized into two major
categories: governmental and proprietary. An emphasis is placed on major funds within the governmental and proprietary
categories.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
32
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.B. BASIS OF PRESENTATION (Continued)
A fund is considered major if it is the primary operating fund of the City or meets the following criteria:
• Total assets and deferred outflows, liabilities and deferred inflows, revenues or expenditures/expenses of that individual
governmental or proprietary fund are at least 10 percent of the corresponding total for all funds of that category or type;
and
• Total assets and deferred outflows, liabilities and deferred inflows, revenues or expenditures/expenses of that individual
governmental or proprietary fund are at least 5 percent of the corresponding total for all governmental and proprietary
funds combined.
The City reports the following major governmental funds:
The General Fund is the primary operating fund of the City and is always classified as a major fund. It is used to
account for all activities except those legally or administratively required to be accounted for in other funds.
The Capital Improvement Fund accounts for financial resources to be used for the acquisition or construction of capital
projects (other than those financed by proprietary funds).
The Local Road Improvement Fund is a capital project fund used to account for financial resources to be used for the
construction or improvement of roads within the City.
The Park Capital Improvement Fund is a capital project fund used to account for financial resources to be used for the
construction or improvement of parks within the City.
The Debt Service Fund accounts for the accumulation of financial resources for the payment of interest and principal on
general long-term debt of the City other than debt service payments made by proprietary funds. Ad valorem taxes and
special assessments are used for the payment of principal and interest on the City’s indebtedness.
The COVID Relief Fund is a special revenue fund used to account for financial resources that are to be used for
pandemic response activities or related projects.
The City reports the following major proprietary fund:
The Big Marine Sewer Fund accounts for business-type activities related to the operation of a sewer system provided to
the general public. These activities are financed primarily by user charges, and the measurement of financial activity
focuses on the net income measurement similar to the private sector.
Additionally, the government reports the following nonmajor fund types:
The Special Revenue Funds account for funds received by the City with a specific purpose.
The Capital Project Fund accounts for financial resources to be used for the acquisition or construction of capital
projects (other than projects financed by proprietary funds).
The Uptown Sewer Fund accounts for business-type activities related to the operation of a sewer system provided to
the general public. These activities are financed primarily by user charges, and the measurement of financial activity
focuses on the net income measurement similar to the private sector.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
33
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING
Measurement focus is a term used to describe “which” transactions are recorded within the various financial statements. Basis of
accounting refers to “when” transactions are recorded regardless of the measurement focus applied.
Measurement Focus
On the government-wide Statement of Net Position and the Statement of Activities, both governmental and business-type
activities are presented using the economic resources measurement focus as defined in the second bullet point below. In the fund
financial statements, the current financial resources measurement focus or the economic resources measurement focus is used as
appropriate:
• All governmental funds utilize a current financial resources measurement focus. Only current financial assets and
liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available
spendable financial resources during a given period. These funds use fund balance as their measure of available
spendable financial resources at the end of the period.
• The government-wide financial statements and proprietary funds utilize an economic resources measurement focus. The
accounting objectives of this measurement focus are the determination of operating income, changes in net position (or
cost recovery), financial position, and cash flows. All assets, deferred outflows, liabilities, and deferred inflows (whether
current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net position.
Basis of Accounting
In the government-wide Statement of Net Position and Statement of Activities, both governmental and business-type activities are
presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and
expenses are recorded when the liability is incurred, or economic asset used. Revenues, expenses, gains, losses, assets, and
liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place.
In the fund financial statements, governmental funds are presented on the modified accrual basis of accounting. Under this
modified accrual basis of accounting, revenues are recognized when “measurable and available.” Measurable means knowing or
being able to reasonable estimate the amount. Available means collectible within the current period or within sixty days after year
end. Expenditures (including capital outlay) are recorded when the related fund liability is incurred, except for general obligation
bond principal and interest which are reported when due.
All proprietary funds utilize the accrual basis of accounting.
1.D BUDGETARY INFORMATION
Annual budgets are adopted on a basis consistent with generally accepted accounting principles for the General Fund. The
appropriated budget is prepared by fund, function, and department. City of Scandia’s department heads may make transfers of
appropriations within a department. Transfers of appropriations between departments require the approval of the Council. The
legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the department
level.
Appropriations in all budgeted funds lapse at the end of the fiscal year. Encumbrance accounting, under which purchase orders ,
contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the appropriation,
is not employed by the City because it is at present not considered necessary to assure effective budgetary control or to facilitate
effective cash management.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
34
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.E. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows,
liabilities, and deferred inflows, and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates
also affect reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
1.F. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY
Cash and Cash Equivalents
For purposes of the Statement of Net Position and proprietary fund Statement of Cash Flows, “cash and cash equivalents” includes
all demand, savings, certificates of deposit, and money market accounts for the City. Certificates of deposit are stated at cost,
which approximates fair value.
See Note 2.A. for additional information related to Cash and Cash Equivalents.
Interfund Transactions and Balances
During the course of operations, transactions occur between individual funds that may result in amounts owed between funds.
Those related to good and services type transactions are classified as “due to and from other fund.” Short-term interfund loans are
reported as “due to and from other fund.” Long-term interfund loans are reported as “advances from and to other funds.”
Interfund receivables and payables between funds within governmental activities, as well as interfund receivables and payables
between funds within business-type activities are eliminated in the Statement of Net Position. See Note 2.D. for details of
interfund transactions, including receivables and payables at year-end.
Receivables
In the government-wide statements, receivables consist of all revenues earned at year-end and not yet received. Allowances for
uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts receivable and not deemed
necessary at year end. Major receivable balances for the governmental activities include charges for services, fines, fees, taxes,
and special assessments. Business-type activities report utility charges and assessments as their major receivables.
In the fund financial statements, material receivables in governmental funds include revenue accruals such as taxes, franchise fees,
assessments, other intergovernmental revenues, fines, and charges for service since they are usually both measurable and
available. Revenues collectible but not available are deferred in the fund financial statements in accordance with modified
accrual, but not deferred in the government-wide financial statements in accordance with the accrual basis. Interest and
investment earnings are recorded when earned only if paid within 60 days since they would be considered both measurable and
available. Proprietary fund material receivables consist of all revenues earned at year-end and not yet received. Utility accounts
receivable and assessments compose the majority of proprietary fund receivables. Allowances for uncollectible accounts
receivable are based upon historical trends and the periodic aging of accounts receivable. No allowances are deemed necessary at
year end.
Inventories
Inventory is valued at the lower of average cost or market based on physical counts. Inventory in the General Fund consists of
expendable supplies held for consumption and is equally offset by a nonspendable fund balance classification. The cost of
inventory is recorded as an expense when purchased and adjusted at year-end.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
35
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.F. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY (Continued)
Prepaids
Prepaids represent costs paid during the current year to be recognized in future periods.
Capital Assets
The accounting treatment over property, plant and equipment (capital assets) depends on whether the assets are used in
governmental or proprietary fund operations and whether they are reported in the government-wide or fund financial statements.
Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 and must have an estimated
useful life in excess of one year.
The range of estimated useful lives by type of asset is as follows:
Buildings and Structures 40 years
Machinery and Equipment 5-25 years
Vehicles 25 years
Infrastructure 50 years
Government-wide Statements
In the government-wide financial statements, capital outlay expenditures are accounted for as capital assets. All capital assets are
valued at historical cost or estimated historical cost if actual is unavailable, except for donated capital assets which are recorded at
their estimated acquisition value at the date of donation.
Depreciation of all exhaustible capital assets is recorded as an allocated expense in the Statement of Activities, with accumulated
depreciation reflected in the Statement of Net Position. Depreciation is provided over the assets’ estimated useful lives using the
straight-line method of depreciation.
Fund Financial Statements
In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay
expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the
same as in the government-wide statements.
Accounts Payable
Payables in the governmental and proprietary funds are composed almost entirely of payables to vendors.
Compensated Absences
It is the City’s policy to permit employees to accumulate a limited amount of earned but unused leave. All leave pay is accrued
when incurred in the government-wide and proprietary fund financial statements.
A liability for these amounts is reported in governmental funds only if they have matured, for example, as the res ult of an
employee’s resignation or retirement. In the event a liability is recorded in the governmental funds, General Fund resources
would be used to liquidate the compensated absences.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
36
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.F. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY (Continued)
Long-Term Debt
The accounting treatment of long-term debt and other long-term obligations depends on whether the liabilities pertain to
governmental fund operations or proprietary fund operations and whether they are reported in the government -wide or fund
financial statements.
All long-term debt to be repaid from governmental and business-type resources are reported as liabilities in the government-wide
statements. The long-term debt consists of general obligation bonds and certificates payable.
Long-term debt for governmental funds is not reported as liabilities in the fund financial statements. The debt proceeds are
reported as other financing sources and payment of principal and interest are reported as expenditures. The accounting for
proprietary funds is the same in the fund statements as it is in the government-wide statements.
Net Pension Asset/Liability
The net pension asset represents the City’s allocation of its pro-rata share of the Statewide Volunteer Firefighter Fund net pension
asset. The net pension liability represents the City’s allocation of its pro-rata share of the net pension liabilities of the Statewide
pension plans administered by the Public Employees Retirement Administration (PERA).
PERA
For purposes of measuring the net pension asset and liability, deferred outflows/inflows of resources, and pension expense,
information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions
from PERA’s fiduciary net position have been determined on the same basis as they are reported by PERA, except that PERA’s
fiscal year end is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit
payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair
value.
Deferred Outflows/Inflows of Resources
In addition to assets, the Statements of Net Position report a separate section for deferred outflows of resources. This element
represents a consumption of net position that applies to future periods and, therefore, will not be recognized as an outflow of
resources (expense) until that time. The City reports deferred outflows of resources in the government-wide and proprietary funds
Statements of Net Position in relation to the activity of the pension funds in which City employees participate.
In addition to liabilities, the Statements of Net Position and Balance Sheet report a separate section for deferred inflows of
resources. This element represents an acquisition of net position or fund balance that applies to future periods, and therefore, will
not be recognized as an inflow of resources (revenue) until that time. The City reports property taxes and special assessments as
deferred inflows of resources in the governmental fund financial statements, in accordance with the modified accrual basis of
accounting. In addition, the City reports deferred inflows of resources in the government-wide and proprietary funds Statements
of Net Position in relation to the activity of pension funds in which City employees participate.
See Notes 3 and 5 for additional information pertaining to the deferred outflows and deferred inflows recorded to account for
pension activities.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
37
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.F. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY (Continued)
Equity Classifications
Government-wide Statements
Equity is classified as net position and displayed in three components:
Net Investment in Capital Assets – Consists of capital assets including restricted capital assets, net of accumulated
depreciation and reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable
to the acquisition, construction, or improvement of those assets.
Restricted – Consists of net position with constraints placed on the use either by 1) external groups such as creditors, grantors,
contributors, or laws or regulations of other governments; or 2) law through constitutional provisions or enabling legislation.
Unrestricted – Remaining balance of net position that does not meet the definition of “restricted” or “net investment in capital
assets.”
It is the City’s policy to consider restricted net position to its depletion before unrestricted net position is applied.
Governmental Fund Financial Statements
In the fund financial statements, governmental funds report fund balances as either nonspendable, restricted, committed, assigned,
or unassigned. When the City incurs an expenditure for which it may use either restricted or unrestricted fund balances, it uses
restricted fund balances first unless unrestricted fund balances will have to be returned because they were not used. When t he
City incurs an expenditure for purposes for which amounts in any unrestricted fund balance classification could be used, it uses
fund balances in the following order: Committed, assigned, unassigned.
Nonspendable – Includes amounts that cannot be spent because they are either not in spendable form, or legally or
contractually required to be maintained intact. The nonspendable fund balances at December 31, 2023 consist of inventory,
prepaid expenditures, deposit on asset, and advances to other funds.
Restricted – Includes the portion of fund balance which is not available for appropriation or which has been legally
segregated for a specific purpose.
Committed – Amounts that can only be used for specific purposes pursuant to constraints imposed by formal action
(resolution) of the City Council, which is the highest level of decision making authority. Committed amounts cannot be used
for any other purpose unless the City Council modifies or rescinds the commitment by resolution.
Assigned – Amounts that are constrained by the City’s intent to be used for specific purposes, but are neither restricted nor
committed. The City Administrator or his/her designee shall have the authority to assign fund balance.
Unassigned – This classification represents fund balance that has not been assigned to other funds and that has not been
restricted, committed, or assigned to specific purposes within the general fund. The City has formally adopted a policy under
which it strives to maintain a minimum unassigned general fund balance equal to approximately 50%-65% of annual General
Fund operating expenditures.
See Note 2.E. for additional disclosures.
Proprietary Fund Financial Statements
Proprietary fund equity is classified the same as in the government-wide statements, as described above.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
38
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.G. REVENUES, EXPENDITURES, AND EXPENSES
Property Tax
Under State law, municipalities are limited in their ability to levy a property tax. The City levies its property tax for the
subsequent year during the month of December. The County of Washington is the collecting agency for the levy and remits the
collections to the City. In the fund financial statements, property taxes are recorded as revenue in the period levied to the extent
they are collected within 60 days of year-end.
December 31 is the last day the City can certify a tax levy to the County for collection the following year. The County creates the
tax list for all taxable property in the City and applies the applicable tax rate to the tax capacity of individual properties to arrive at
the actual tax for each property. The County also collects all special assessments, except for certain prepayments paid directly to
the City. The County collects all taxes and assessments, except as noted above. The County mails copies of all real estate and
personal property tax statements. Each year, property owners are required to pay one half of their real estate taxes by May 15 and
the balance by October 15. Penalties and interest are assessed to property owners who do not pay their property taxes and special
assessments by the due dates.
Delinquent taxes receivable include the past six years’ uncollected taxes. Delinquent taxes have been offset by deferred inflows
of resources for taxes not received within 60 days after year end in the fund financial statements.
Special Assessments
Special assessments are levied against benefited properties for the cost or a portion of the cost of special assessment improvement
projects in accordance with State Statutes. These assessments are collectible by the City over a term of years usually consistent
with the term of the related bond issue. Collection of annual installments (including interest) is handled by the County Auditor in
the same manner as property taxes. Property owners are allowed to (and often do) prepay future installments without interest or
prepayment penalties.
Within the government-wide financial statements, the City recognizes special assessment revenue in the period that the assessment
roll was adopted by the City Council. Uncollectible special assessments are not material and have not been reported.
Within the governmental fund financial statements, the revenue from special assessments is recognized by the City when it
becomes measurable and available to finance expenditures of the current fiscal period. In practice, current and delinquent special
assessments received by the City are recognized as revenue for the current year. Special assessments are collected by the County
and remitted by December 31 (remitted to the City the following January) and are also recognized as revenue for the current year.
All remaining delinquent, deferred, and special deferred assessments receivable in governmental funds are completely offset by
deferred inflows of resources.
Operating Revenues and Expenses
Operating revenues and expenses for proprietary funds are those that result from providing services and producing and delivering
goods and/or services. It also includes all revenue and expenses not related to capital and related to financing, noncapital
financing, or investing activities.
Expenditures/Expenses
In the government-wide financial statements, expenses are classified by function for both governmental and business -type
activities.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
39
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.G. REVENUES, EXPENDITURES, AND EXPENSES (Continued)
In the fund financial statements, expenditures are classified as follows:
Governmental Funds – By Character Current (further classified by Function)
Debt Service
Capital Outlay
Proprietary Fund – By Operating and Nonoperating
In the fund financial statements, governmental funds report expenditures of financial resources. Proprietary funds report expenses
relating to use of economic resources.
Interfund Transfers
Permanent reallocations of resources between funds of the reporting entity are classified as interfund transfers. For the purpose of
the Statement of Activities, all interfund transfers between individual governmental funds, as well as all interfund transfers
between individual proprietary funds, have been eliminated. See additional information at Note 2.D.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
40
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS
The following notes present detail information to support the amounts reported in the basic financial statements for its various
assets, liabilities, deferred outflows/inflows of resources, equity, revenues, and expenditures/expenses.
2.A. CASH, CASH EQUIVALENTS, AND INVESTMENTS
Deposits
In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council.
Minnesota Statutes require that all City deposits be protected by insurance, surety bond, or collateral. The market value of
collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds (100 percent if collateral pledged is
irrevocable standby letters of credit issued by the Federal Home Loan Bank). The City complies with such laws.
Authorized collateral in lieu of a corporate surety bond includes:
• United States Government Treasury bills, Treasury notes, Treasury bonds;
• Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service
available to the government entity;
• A general obligation of a state or local government, with taxing powers, rated “A” or better;
• A revenue obligation of a state or local government, with taxing powers, rated “AA” or better;
• Unrated general obligation securities of a local government, with taxing powers, pledged as collateral against funds
deposited by that same local government entity;
• Irrevocable standby letter of credit issued by a Federal Home Loan Bank accompanied by written evidence that the
Federal Home Loan Bank’s publicdebt is rated “AA” or better by Moody’s or Standard and Poor’s; or
• Time deposits insured by any federal agency.
Minnesota Statutes require that all collateral shall be placed in safekeeping in a restricted account at a Federal Reserve Bank, or in
an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial
institution furnishing the collateral. The selection should be approved by the City.
At December 31, 2023, the City’s deposits, including certificates of deposit, were not exposed to custodial credit risk. The City’s
deposits were sufficiently covered by federal depository insurance or by collateral held by the City’s agent in the City’s name.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
41
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
2.B. CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2023 is as follows:
Balance at Balance at
01/01/23 Additions Disposals Transfers 12/31/23
Governmental Activities:
Capital Assets not Being
Depreciated
Land 487,735$ -$ -$ -$ 487,735$
Construction In Progress 622,277 854,131 - (1,363,380) 113,028
Total Capital Assets not Being
Depreciated 1,110,012 854,131 - (1,363,380) 600,763
Capital Assets Being
Depreciated
Buildings 2,394,353 - - 2,394,353
Equipment 1,122,596 283,414 (41,500) - 1,364,510
Vehicles 2,030,630 - - - 2,030,630
Infrastructure 17,149,001 - 1,363,380 18,512,381
Other Improvements 279,378 202,559 - - 481,937
Total Capital Assets Being
Depreciated 22,975,958 485,973 (41,500) 1,363,380 24,783,811
Less: Accumulated Depreciation
Buildings (1,270,226) (53,397) - - (1,323,623)
Equipment (438,648) (80,275) 37,054 - (481,869)
Vehicles (1,322,394) (90,432) - - (1,412,826)
Infrastructure (5,895,172) (456,201) - - (6,351,373)
Other Improvements (148,973) (17,509) - - (166,482)
Total Accumulated
Depreciation (9,075,413) (697,814) 37,054 - (9,736,173)
Total Capital Assets Being
Depreciated, Net 13,900,545 (211,841) (4,446) 1,363,380 15,047,638
Capital Assets, Net 15,010,557$ 642,290$ (4,446)$ -$ 15,648,401$
Depreciation is charged to governmental activities as follows:
General Government 34,698$
Public Safety 88,853
Public Works 550,532
Parks and Recreation 23,731
Total Depreciation Expense 697,814$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
42
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
2.B. CAPITAL ASSETS (Continued)
Balance at Balance at
01/01/23 Additions Disposals Transfers 12/31/23
Business-Type Activities:
Capital Assets not Being
Depreciated
Construction In Progress 21,088$ 83,818$ -$ -$ 104,906$
Capital Assets Being Depreciated
Sewer Plant 1,500,000 - - - 1,500,000
Equipment 317,976 8,448 - - 326,424
Uptown Sewer 243,827 - - - 243,827
Total Capital Assets Being
Depreciated 2,061,803 8,448 - - 2,070,251
Less: Accumulated Depreciation
Sewer Plant (990,000) (30,000) - - (1,020,000)
Equipment (90,521) (20,428) - - (110,949)
Uptown Sewer (82,703) (4,876) - - (87,579)
Total Accumulated
Depreciation (1,163,224) (55,304) - - (1,218,528)
Total Capital Assets Being
Depreciated, Net 898,579 (46,856) - - 851,723
Capital Assets, Net 919,667$ 36,962$ -$ -$ 956,629$
2.C. NONCURRENT LIABILITIES
The City’s long-term debt is segregated between the amounts to be repaid from governmental activities and amounts to be repaid
from business-type activities (none).
Debt Detail
General Obligation Bonds
The City issues general obligation bonds to finance the acquisition and construction of major capital facilities and infrastructure
throughout the City. Currently, general obligation bonds have been issued and are outstanding solely for activities pertaining to
governmental operations. General obligation bonds are direct obligations and pledge the full faith and credit of the City. General
obligation bonds outstanding at December 31, 2023 consist of the following:
Issue Annual Interest Maturity Original Remaining
Type of Debt Date Payment Rate(s)Date Amount Amount
G.O. Bonds, Series 2018A 5/18 $155,000 - $315,000 3.00-3.13%12/33 3,835,000$ 2,780,000$
General Obligation Bonds
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
43
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
2.C. NONCURRENT LIABILITIES (Continued)
Changes in Noncurrent Liabilities
The following is a summary of changes in noncurrent liabilities, excluding net pension liability, for the year ended December 31,
2023:
Amounts Due
Balance Balance Within
Type of Debt 1/1/23 Additions Deductions 12/31/23 One Year
Governmental Activities:
Bonds 3,015,000$ -$ (235,000)$ 2,780,000$ 245,000$
Unamortized Bond Premium 41,005 - (3,728) 37,277 -
Equipment Certificates 60,000 - (60,000) - -
Compensated Absences 24,420 43,489 (24,913) 42,996 42,996
Total 3,140,425$ 43,489$ (323,641)$ 2,860,273$ 287,996$
Governmental activity debt is typically funded through the Debt Service Fund. Compensated absences is funded through the
funds to which the respective employees’ wages are allocated.
Annual Debt Service Requirements
At December 31, 2023, the estimated annual debt service requirements to maturity, including principal and interest, are as follows:
Years Ending
December 31, Principal Interest Total
2024 245,000$ 84,175$ 329,175$
2025 250,000 76,825 326,825
2026 255,000 69,325 324,325
2027 265,000 61,675 326,675
2028 275,000 53,725 328,725
2029-2033 1,490,000 140,144 1,630,144
Totals 2,780,000$ 485,869$ 3,265,869$
Governmental Activities
Interest and other fiscal charges total $88,677 in the Statement of Activities (included in Debt Service line). Interest and other
fiscal charges total $92,650 for the Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds
(included in the line Interest and Other Charges).
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
44
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
2.D. INTERFUND TRANSACTIONS AND BALANCES
Operating transfers consist of the following for the year ended December 31, 2023:
Transfers Park Capital
Major Funds Out Improvement
General 146,620$ 146,620$
Transfers In
Transfers are used to (a) move revenues from the fund that statute or budget requires to collect them to the fund that statute or
budget require to expend them and to (b) use unrestricted revenues collected in the General Fund to finance various programs
accounted for in other funds in accordance with budgetary authorizations.
The interfund balances are as follows:
Due To Fund Due From Fund Amount Reason
Capital Improvement Uptown Sewer 10,548$ Sewer improvements
Capital Improvement General Fund 18,000 Community Center LED lighting improv.
Governmental Funds Advances To/From 28,548$
Governmental Fund Elimination (18,000)
Government-wide Internal Balances 10,548$
Long-Term Advances
The Uptown Sewer Fund monies owed to the Capital Improvement Fund will be repaid as future sewer charges are collected and
the cash flows become available. The General Fund monies owed to the Capital Improvement Fund will be repaid via an annual
payment of $3,000 per year.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
45
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
2.E. FUND EQUITY
At December 31, 2023, governmental fund equity consists of the following:
Nonspendable Restricted Committed Assigned Unassigned
General Fund
Nonspendable - Inventory 12,375$ -$ -$ -$ -$
Nonspendable - Prepaids 10,958 - - - -
Unassigned - - - - 1,336,309
Total General Fund Balance 23,333$ -$ -$ -$ 1,336,309$
Capital Improvement Fund
Nonspendable - Advances to Other Fund 28,548$ -$ -$ -$ -$
Committed for Capital Improvements - - 680,251 - -
Total Capital Improvement Fund 28,548$ -$ 680,251$ -$ -$
Local Road Improvement Fund
Assigned for Local Road Improvements -$ -$ -$ 100,002$ -$
Park Capital Improvement Fund
Committed for Park Capital Improvements -$ -$ 91,868$ -$ -$
Debt Service Fund
Restricted for Debt Service -$ 94,334$ -$ -$ -$
COVID Relief Fund
Restricted for COVID Relief -$ 466,422$ -$ -$ -$
Nonmajor Governmental Funds
Nonspendable - Deposit on Asset 12,717$ -$ -$ -$ -$
Restricted for Public Safety - 176,529 - - -
Committed for Economic Development - - 37,707 - -
Assigned for Cable TV - - - 21,378 -
Assigned for Equipment Replacement - - - 137,621 -
Total Nonmajor Governmental Funds Balance 12,717$ 176,529$ 37,707$ 158,999$ -$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
46
NOTE 3 DEFINED BENEFIT PENSION PLANS - STATEWIDE
Plan Description
The City participates in the following cost-sharing multiple-employer defined benefit pension plans administered by the Public
Employees Retirement Association of Minnesota (PERA). PERA’s defined benefit pension plans are established and administered
in accordance with Minnesota Statutes Chapters 353 and 356. PERA’s defined benefit pension plans are tax qualified plans under
Section 401(a) of the Internal Revenue Code.
General Employees Retirement Plan
All full-time and certain part-time employees of the City are covered by the General Employees Plan. General Employees Plan
members belong to the Coordinated Plan. Coordinated Plan members are covered by Social Security.
Public Employees Police and Fire Plan
The Police and Fire Plan, originally established for police officers and firefighters not covered by a local relief association, now
covers all police officers and firefighters hired since 1980. Effective July 1, 1999, the Police and Fire Plan also covers po lice
officers and firefighters belonging to local relief associations that elected to merge with and transfer assets and administration to
PERA.
Benefits Provided
PERA provides retirement, disability, and death benefits. Benefit provisions are established by State Statute and can only be
modified by the State Legislature. Vested terminated employees who are entitled to benefits, but are not receiving them yet, are
bound by the provisions in effect at the time they last terminated their public service.
General Employees Plan Benefits
General Employees Plan benefits are based on a member’s highest average salary for any five successive years of allowable
service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated Plan
members. Members hired prior to July 1, 1989, receive the higher of Method 1 or Method 2 formulas. Only Method 2 is used for
members hired after June 30, 1989. Under Method 1, the accrual rate for Coordinated members is 1.20 percent for each of the first
10 years of service and 1.70 percent for each additional year. Under Method 2, the accrual rate for Coordinated members is 1.70
percent for all years of service. For members hired prior to July 1, 1989 a full annuity is available when age plus years of service
equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal retirement age is the age for
unreduced Social Security benefits capped at 66.
Benefit increases are provided to benefit recipients each January. The postretirement increase is equal to 50 percent of the cost-of-
living adjustment (COLA) announced by the SSA, with a minimum increase of at least 1 percent and a maximum of 1.5 percent.
Recipients that have been receiving the annuity or benefit for at least a full year as of the June 30 before the effective date of the
increase will receive the full increase. Recipients receiving the annuity or benefit for at least one month but less than a full year as
of the June 30 before the effective date of the increase will receive a reduced prorated increase. In 2023, legislation repealed the
statute delaying increases for members retiring before full retirement age.
Police and Fire Plan Benefits
Benefits for Police and Fire Plan members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis from 50
percent after five years up to 100 percent after ten years of credited service. Benefits for Police and Fire Plan members first hired
after June 30, 2014, vest on a prorated basis from 50 percent after ten years up to 100 percent after twenty years of credited
service. The annuity accrual rate is 3 percent of average salary for each year of service. For Police and Fire Plan members who
were first hired prior to July 1, 1989, a full annuity is available when age plus years of service equal at least 90.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
47
NOTE 3 DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
Benefit increases are provided to benefit recipients each January. The postretirement increase is fixed at 1 percent. Recipients that
have been receiving the annuity or benefit for at least 36 months as of the June 30 before the effective date of the increase will
receive the full increase. Recipients receiving the annuity or benefit for at least 25 months but less than 36 months as of the June
30 before the effective date of the increase will receive a reduced prorated increase.
In 2023, the legislature allocated funding for a one-time lump-sum payment to General Employee and Police and Fire Plan benefit
recipients. Eligibility criteria and the payment amount is specified in statute. The one-time payment is non-compounding towards
future benefits.
Contributions
Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified
by the State Legislature.
General Employees Fund Contributions
Coordinated Plan members were required to contribute 6.50 percent of their annual covered salary in fiscal year 2023, and the
City was required to contribute 7.50 percent for Coordinated Plan members. The City’s contributions to the General Employees
Fund for the year ended December 31, 2023, were $31,393. The City’s contributions were equal to the required contributions as
set by State Statute.
Police and Fire Fund Contributions
Police and Fire Plan members were required to contribute 11.80 percent of their annual covered salary in fiscal year 2023 and the
City was required to contribute 17.70 percent for Police and Fire Plan members. The City’s contributions to the Police and Fire
Fund for the year ended December 31, 2023, were $8,946. The City’s contributions were equal to the required contributions as set
by State Statute.
Pension Costs
General Employees Fund Pension Costs
At December 31, 2023, the City reported a liability of $335,513 for its proportionate share of the General Employees Fund’s net
pension liability. The City’s net pension liability reflected a reduction due to the State of Minnesota’s contribution of $16 million.
The State of Minnesota is considered a non-employer contributing entity and the State’s contribution meets the definition of a
special funding situation. The State of Minnesota’s proportionate share of the net pension liability associated with the City totaled
$9,151.
The net pension liability was measured as of June 30, 2023, and the total pension liability used to calculate the net pension
liability was determined by an actuarial valuation as of that date. The City’s proportionate share of the net pension liability was
based on the City’s contributions received by PERA during the measurement period for employer payroll paid dates from July 1,
2022 through June 30, 2023, relative to the total employer contributions received from all of PERA’s participating employers. The
City’s proportionate share was 0.0060 percent at the end of the measurement period and 0.0064 percent for the beginning of the
period.
City’s proportionate share of the net pension liability: $335,513
State of Minnesota’s proportionate share of the net pension
liability associated with the City 9,151
Total $344,664
For the year ended December 31, 2023, the City recognized pension expense of $917 for its proportionate share of the General
Employees Plan’s pension expense. In addition, the City recognized an additional $41 as pension expense (and grant revenue) for
its proportionate share of the State of Minnesota’s contribution of $16 million to the General Employees Fund.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
48
NOTE 3 DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
At December 31, 2023, the City reported its proportionate share of the General Employees Plan’s deferred outflows of resources
and deferred inflows of resources related to pensions from the following sources:
Deferred Outflows of Deferred Inflows of
Resources Resources
Differences between expected
and actual economic experience 11,195$ 2,311$
Changes in actuarial assumptions 54,460 91,961
Difference between projected
and actual investment earnings - 4,531
Changes in proportionate share 14,537 23,760
Contributions paid to PERA subsequent
to the measurement date 19,053 -
Total Deferred Outflows/Inflows 99,245$ 122,563$
The $19,053 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the
measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2024. Other
amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense
as follows:
Year ended
December 31: Pension Expense
2024 13,036$
2025 (50,909)$
2026 2,779$
2027 (7,277)$
Police and Fire Fund Pension Costs
At December 31, 2023, the City reported a liability of $67,348 for its proportionate share of the Police and Fire Fund’s net pension
liability. The net pension liability was measured as of June 30, 2023, and the total pension liability used to calculate the net
pension liability was determined by an actuarial valuation as of that date. The City’s proportionate share of the net pension
liability was based on the City’s contributions received by PERA during the measurement period for employer payroll paid dates
from July 1, 2022 through June 30, 2023, relative to the total employer contributions received from all of PERA’s participating
employers. The City’s proportionate share was 0.0039 percent at the end of the measurement period and 0.0039 percent for the
beginning of the period.
The State of Minnesota contributed $18 million to the Police and Fire Fund in the plan fiscal year ended June 30, 2023. The
contribution consisted of $9 million in direct state aid that does meet the definition of a special funding situation and $9 million in
supplemental state aid that does not meet the definition of a special funding situation. The $9 million direct state was paid on
October 1, 2022. Thereafter, by October 1 of each year, the state will pay $9 million to the Police and Fire Fund until full funding
is reached or July 1, 2048, whichever is earlier. The $9 million in supplemental state aid will continue until the fund is 90 percent
funded, or until the State Patrol Plan (administered by the Minnesota State Retirement System) is 90 percent funded, whichever
occurs later. The State of Minnesota’s proportionate share of the net pension liability associated with the City totaled $2,742.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
49
NOTE 3 DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
City’s proportionate share of the net pension liability: $67,348
State of Minnesota’s proportionate share of the net pension
liability associated with the City 2,742
Total $70,090
The State of Minnesota is included as a non-employer contributing entity in the Police and Fire Retirement Plan Schedule of
Employer Allocations and Schedule of Pension Amounts by Employer, Current Reporting Period Only (pension allocation
schedules) for the $9 million in direct state aid. Police and Fire Plan employers need to recognize their proportionate share of the
State of Minnesota’s pension expense (and grant revenue) under GASB 68 special funding situation accounting and financial
reporting requirements. For the year ended June 30, 2023, the City recognized pension expense of negative $1,765 for its
proportionate share of the Police and Fire Plan’s pension expense. The City recognized negative $165 as grant revenue for its
proportionate share of the State of Minnesota’s pension expense for the contribution of $9 million to the Police and Fire Fund.
The State of Minnesota is not included as a non -employer contributing entity in the Police and Fire Pension Plan pension
allocation schedules for the $9 million in supplemental state aid. The City recognized $351 for the year ended December 31, 2023
as revenue and an offsetting reduction of net pension liability for its proportionate share of the State of Minnesota’s on -behalf
contributions to the Police and Fire Fund.
At December 31, 2023, the City reported its proportionate share of the Police and Fire Plan’s deferred outflows of resources and
deferred inflows of resources related to pensions from the following sources:
Deferred Outflows of Deferred Inflows of
Resources Resources
Differences between expected
and actual economic experience 18,668$ -$
Changes in actuarial assumptions 78,152 94,720
Difference between projected
and actual investment earnings - 2,149
Changes in proportionate share 20,581 12,522
Contributions paid to PERA subsequent
to the measurement date 4,552 -
Total Deferred Outflows/Inflows 121,953$ 109,391$
The $4,552 reported as deferred outflows of resources related to pensions resulting from the City contributions subsequent to the
measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2024.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
50
NOTE 3 DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as
follows:
Year ended
December 31: Pension Expense
2024 10,172$
2025 6,861$
2026 12,187$
2027 (4,499)$
2028 (16,711)$
Long-Term Expected Return on Investment
The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular
basis of the long-term expected rate of return using a building-block method in which best-estimate ranges of expected future rates
of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by
weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of
geometric real rates of return for each major asset class are summarized in the following table:
Asset Class
Target Allocation
Long-Term Expected Real Rate
of Return
Domestic Equity 33.5% 5.10%
International Equity 16.5% 5.30%
Fixed Income 25.0% 0.75%
Private Markets 25.0% 5.90%
Total 100%
Actuarial Methods and Assumptions
The total pension liability in the June 30, 2023 actuarial valuation was determined using an individual entry-age normal actuarial
cost method. The long-term rate of return on pension plan investments used in the determination of the total liability is 7.00
percent. This assumption is based on a review of inflation and investments return assumptions from a number of national
investment consulting firms. The review provided a range of return investment return rates deemed to be reasonable by the
actuary. An investment return of 7.00 percent was deemed to be within that range of reasonableness for financial reporting
purposes.
Inflation is assumed to be 2.25 percent for the General Employees Plan and Police and Fire Plan. Benefit increases after retirement
are assumed to be 1.25 percent for the General Employees Plan and 1.00 percent for the Police and Fire Plan.
Salary growth assumptions in the General Employees Plan range in annual increments from 10.25 percent after one year of service
to 3.00 percent after 27 years of service. In the Police and Fire Plan, salary growth assumptions range from 11.75 percent after one
year of service to 3.00 percent after 24 years of service.
Mortality rates for the General Employees Plan are based on the Pub-2010 General Employee Mortality Table. Mortality rates for
the Police and Fire Plan are based on the Pub-2010 Public Safety Employee Mortality tables. The tables are adjusted slightly to fit
PERA’s experience.
Actuarial assumptions for the General Employees Plan are reviewed every four years. The most recent four-year experience study
for the General Employees Plan was completed in 2022. The assumption changes were adopted by the Board and became
effective with the July 1, 2023 actuarial valuation. The most recent four-year experience studies for the Police and Fire Plan were
completed in 2020 were adopted by the Board and became effective with the July 1, 2021 actuarial valuation.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
51
NOTE 3 DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
The following changes in actuarial assumptions and plan provisions occurred in 2023:
General Employees Fund
Changes in Actuarial Assumptions:
• The investment return assumption and single discount rate were changed from 6.50 percent to 7.00 percent.
Changes in Plan Provisions:
• An additional one-time direct State aid contribution of $170.1 million will be contributed to the Plan on October 1, 2023.
• The vesting period of those hired after June 30, 2010 was changed from five years of allowable service to three years of
allowable service.
• The benefit increase delay for early retirements on or after January 1, 2024 was eliminated.
• A one-time, non-compounding benefit increase of 2.50 percent minus the actual 2024 adjustment will be payable in a
lump sum for calendar year 2024 by March 31, 2024.
Police and Fire Fund
Changes in Actuarial Assumptions:
• The investment return assumption was changed from 6.50 percent to 7.00 percent.
• The single discount rate changed from 5.40 percent to 7.00 percent.
Changes in Plan Provisions:
• Additional one-time direct State aid contribution of $19.4 million will be contributed to the Plan on October 1, 202 3.
• Vesting requirement for new hires after June 30, 2014 was changed from a graded 20-year vesting schedule to a graded
10-year vesting schedule, with 50 percent vesting after five years, increasing incrementally to 100 percent after 10 years.
• A one-time, non-compounding benefit increase of 3.0 percent will be payable in a lump sum for calendar year 2024 by
March 31, 2024.
• Psychological treatment is required effective July 1, 2023, prior to approval for a duty disability benefit for a
psychological condition relating to the member’s occupation.
• The total and permanent duty disability benefit was increased, effective July 1, 2023.
Discount Rate
The discount rate used to measure the total pension liability in 2023 was 7.00 percent. The projection of cash flows used to
determine the discount rate assumed that contributions from plan members and employers will be made at rates set in Minnesota
Statutes. Based on these assumptions, the fiduciary net position of the General Employees Fund and the Police and Fire Fund
were projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term
expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total
pension liability.
Pension Liability Sensitivity
The following presents the City’s proportionate share of the net pension liability for all plans it participates in, calculated using the
discount rate disclosed in the preceding paragraph, as well as what the City’s proportionate share of the net pension liability would
be if it were calculated using a discount rate one percentage point lower or one percentage point higher than the current discount
rate:
6.00% $ 593,550 6.00%133,626$
7.00%335,513$ 7.00%67,348$
8.00%123,268$ 8.00%12,858$ 1% Increase in Discount Rate
Current Discount Rate
1% Decrease in Discount Rate
Sensitivity Analysis
General Employees Fund Police and Fire Fund
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
52
NOTE 3 DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in a separately-issued PERA financial report that
includes financial statements and required supplementary information. That report may be obtained on the Internet at
www.mnpera.org.
NOTE 4 DEFINED CONTRIBUTION PENSION PLAN - STATEWIDE
The council members of the City of Scandia are covered by the Defined Contribution Plan, a multiple-employer deferred
compensation plan administered by PERA. The Defined Contribution Plan is a tax qualified plan under Section 401(a) of the
Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal.
Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota
Statutes, Chapter 353D.03, specifies plan provisions, including the employee and employer contribution rates for those qualified
personnel who elect to participate. An eligible elected official who decides to participate contributes five percent of salary which
is matched by the elected official's employer. For ambulance service personnel, employer contributions are determined by the
employer, and for salaried employees contributions must be a fixed percentage of salary. Employer contributions for volunteer
personnel may be a unit value for each call or period of alert duty. Employees who are paid for their services may elect to make
member contributions in an amount not to exceed the employer share. Employer and employee contributions are combined and
used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering
the plan, PERA receives two percent of employer contributions and twenty-five hundredths of one percent (0.25 percent) of the
assets in each member's account annually.
Total contributions made by the City during fiscal year 2023 were:
Contribution Amounts Percentage of Covered Payroll Required Rate
Employee Employer Employee Employer
$847 $847 5% 5% 5%
NOTE 5 STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN
Plan Description
The Scandia Fire/Rescue participates in the Statewide Volunteer Firefighter Retirement Plan (accounted for in the Volunteer
Firefighter Fund), an agent multiple-employer lump-sum defined benefit pension plan administered by the Public Employees
Retirement Association of Minnesota (PERA). The Volunteer Firefighter Plan covers volunteer firefighters of municipal fire
departments or independent nonprofit firefighting corporations that have elected to join the plan. As of December 31, 2022, the
plan covered 26 active firefighters and 5 vested terminated firefighters whose pension benefits are deferred. The plan is
established and administered in accordance with Minnesota Statutes, Chapter 353 G.
Benefits Provided
The Volunteer Firefighter Plan provides retirement, death, and supplemental benefits to covered firefighters and survivors.
Benefits are paid based on the number of years of service multiplied by a benefit level approved by the City. Members are
eligible for a lump-sum retirement benefit at 50 years of age with five years of service. Plan provisions include a pro-rated vesting
schedule that increases from 5 years at 40 percent through 20 years at 100 percent.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
53
NOTE 5 STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
Contributions
The Volunteer Firefighter Plan is funded by fire state aid, investment earnings and, if necessary, employer contributions as
specified in Minnesota Statutes, and voluntary City contributions. The State of Minnesota contributed $40,474 in fire state aid to
the fund for the year ended December 31, 2022. Required employer contributions are calculated annually based on statutory
provisions. The City of Scandia’s statutorily-required contributions to the Volunteer Firefighter Fund for the year ended
December 31, 2022 were $0.
Pension Costs
At December 31, 2023, the City of Scandia reported a net pension asset of $85,667 for the Volunteer Firefighter Fund. The net
pension asset was measured as of December 31, 2022. The total pension liability used to calculate the net pension asset in
accordance with GASB 68 was determined by PERA applying an actuarial formula to specific census data certified by the fire
department. The following table presents the changes in net pension asset during the year.
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability (Asset)
Beginning Balance 12/31/21 774,018$ 1,028,982$ (254,964)$
Service Cost 35,635 - 35,635
Interest on Pension Liability 46,449 - 46,449
Actuarial Experience (Gains)/Losses (20,824) - (20,824)
Projected Investment Earnings - 61,739 (61,739)
Contributions (State)- 40,474 (40,474)
Asset (Gain)/Loss (209,321) 209,321
Benefit Payouts (71,000) (71,000) -
PERA Administrative Fee - (870) 870
SBI Investment Fee - (59) 59
Net Changes (9,740) (179,037) 169,297
Balance End of Year 12/31/22 764,278$ 849,945$ (85,667)$
For the year ended December 31, 2023, the City recognized pension expense of negative $22,665.
At December 31, 2023, the City of Scandia reported deferred outflows of resources and deferred inflows of resources related to
pensions from the following sources:
Deferred Outflows of Deferred Inflows of
Resources Resources
Differences between expected
and actual economic experience -$ 34,381$
Difference between projected
and actual investment earnings 104,358 -
Total Deferred Outflows/Inflows 104,358$ 34,381$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
54
NOTE 5 STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
Amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as
follows:
Year ended
December 31: Pension Expense
2024 (6,348)$
2025 10,694$
2026 27,932$
2027 37,699$
Actuarial Assumptions
The total pension liability at December 31, 2022, was determined using the entry age normal actuarial cost method and the
following actuarial assumptions:
• Retirement eligibility at the later of age 50 or 20 years of service
• Investment rate of return of 6.0 percent
• Inflation rate of 3.0 percent
No changes in actuarial assumptions were made during the measurement period.
Discount Rate
The discount rate used to measure the total pension liability was six percent. The projection of cash flows used to determine the
discount rate assumed that contributions to the Volunteer Firefighter Fund will be made as specified in statute. Based on that
assumption and considering the funding ratio of the plan, the fiduciary net position was projected to be available to make al l
projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on
pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
Pension Liability Sensitivity
The following presents the City’s net pension asset for the Volunteer Firefighter Fund, calculated using the assumed discount rate
as well as what the City’s net pension asset would be if it were calculated using a discount rate one percent lower or one percent
higher than the current discount rate:
1% Decrease in 1% Increase in
Discount Rate (5.0%)Discount Rate (6.0%)Discount Rate (7.0%)
Net Pension Asset 68,276$ 85,667$ 102,454$
Plan Investments
Investment Policy
The Minnesota State Board of Investment (SBI) is established by Article XI of the Minnesota Constitution to invest all state funds.
Its membership as specified in the Constitution is comprised of the governor (who is designated as chair of the board), state
auditor, secretary of state and state attorney general.
All investments undertaken by the SBI are governed by the prudent person rule and other standards codified in Minnesota
Statutes, Chapter 11A and Chapter 353G.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
55
NOTE 5 STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
Within the requirements defined by state law, the SBI, with assistance of the SBI staff and the Investment Advisory Council,
establishes investment policy for all funds under its control. These investments policies are tailored to the particular needs of each
fund and specify investment objectives, risk tolerance, asset allocation, investment management structure and specific
performance standards. Studies guide the on-going management of the funds and are updated periodically.
Asset Allocation
To match the long-term nature of the pension obligations, the SBI maintains a strategic asset allocation for the Volunteer
Firefighter Plan that includes allocations to domestic equity, international equity, bonds and cash equivalents. The long -term
target asset allocation and long-term expected real rate of return is the following:
Long-Term Expected
Asset Class Target Allocation Real Rate of Return
Domestic Stocks 35% 5.10%
International Stocks 15% 5.30%
Bonds 45% 0.75%
Unallocated Cash 5% 0.00%
The six percent long-term expected rate of return on pension plan investments was determined using a building-block method.
Best estimates for expected future real rates of return (expected returns, net of inflation) were developed for each asset class using
both long-term historical returns and long-term capital market expectations from a number of investment management and
consulting organizations. The asset class estimates and the target allocations were then combined to produce a geometric, long-
term expected real rate of return for the portfolio. Inflation expectations were applied to derive the nominal rate of return for the
portfolio.
Description of significant investment policy changes during the year
The SBI made no significant changes to their investment policy during fiscal year 2022 for Volunteer Firefighter Fund.
Pension Plan Fiduciary Net Position
Detailed information about the Volunteer Firefighter Fund’s fiduciary net position as of December 31, 2022, is available in a
separately-issued PERA financial report that includes financial statements and required supplementary information. That report
may be obtained at www.mnpera.org.
NOTE 6 OTHER NOTES
6.A. RISK MANAGEMENT
Claims and Judgements
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions;
injuries to employees; and natural disasters. To manage these risks, the City purchases commercial insurance. The City retains
risk for the deductible portions of the insurance. The amounts of these deductibles are considered immaterial to the financial
statements. There were no significant reductions in insurance from the previous year settlements in excess of insurance for any of
the past two years.
Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated.
Liabilities, if any, include an amount for claims that have been incurred but not reported (IBNRs). The City’s management is not
aware of any incurred but unreported claims.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
56
NOTE 6 OTHER NOTES (Continued)
6.B. COMMITMENTS
Law Enforcement Services
The City receives law enforcement services under an agreement with Washington County. Such agreement automatically renews
on an annual basis and calls for the City to compensate the County based on the actual costs incurred while providing services
under the agreement. Based on the 2024 contract budget, expenditures anticipated under this agreement for 2024 are estimated at
$183,442.
Purchases
The City approved purchases of a utility truck, fire truck, and boat with trailer in the amount of $520,956.
6.C. OTHER EMPLOYEE BENEFITS
The City provides eligible employees future retirement benefits through participation in the Minnesota Deferred Compensation
Plan (MNDCP), which is a Section 457 plan administered by the Minnesota State Retirement System. Eligible employees of the
City may begin participating in the MNDCP commencing on the date of their employment by electing to have a percentage of
their pay contributed to the Plan. The City does not currently make employer contributions to the plan.
6.D. CORRECTION OF AN ERROR
During the year ended December 31, 2023, the City determined an adjustment to beginning equity was necessary to correct an
error identified in the City’s prior year financial statements. Expenditures paid during the year ended December 31, 2022 were
inadvertently included in the December 31, 2022 accounts payable balances, resulting in an overstatement in December 31, 2022
accounts payable and an understatement in the December 31, 2022 fund balance and governmental activities net position. An
adjustment has been recorded to correct this error. The table below displays the impact of this adjustment on the prior year
financial statements:
Capital
Improvement Governmental
Fund Activities
December 31, 2022 Fund Balance / Net Position,
as Previously Reported 564,735$ 15,429,997$
Accounts Payable Adjustment 12,750 12,750
December 31, 2022 Fund Balance / Net Position,
as Restated 577,485$ 15,442,747$
Net Change in Fund Balance / Net Position for the Year
Ended December 31, 2022, as Previously Reported (71,169)$ 225,451$
Accounts Payable Adjustment 12,750 12,750
Net Change in Fund Balance / Net Position for the Year
Ended December 31, 2022, as Restated (58,419)$ 238,201$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2023
57
NOTE 6 OTHER NOTES (Continued)
6.E. SUBSEQUENT EVENTS
Construction Projects
Subsequent to year-end and prior to issuance of these financial statements, the City approved a contract for the 2024 Street
Improvement Project at an approximate cost of $3,014,097.
58
REQUIRED SUPPLEMENTARY INFORMATION
CITY OF SCANDIA, MINNESOTA
BUDGETARY COMPARISON SCHEDULE – GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2023
59
Budget Actual Variance with
Amounts- Amounts Budget
Original and Budgetary Over
Final Basis (Under)
REVENUES
Taxes
Property Taxes 1,872,318$ 1,862,829$ (9,489)$
Franchise Taxes 6,000 5,874 (126)
Gravel Tax 20,000 15,146 (4,854)
Total Taxes 1,898,318 1,883,849 (14,469)
Licenses and Permits 161,100 195,194 34,094
Intergovernmental Revenue
State Revenue
Market Value Credit 7,000 14,409 7,409
Police and Fire Aid 37,000 47,148 10,148
Other State Grants and Aids 12,200 14,053 1,853
County Revenue
Other County Grants and Aids 10,500 8,165 (2,335)
Total Intergovernmental Revenue 66,700 83,775 17,075
Charges for Services
General Government 9,700 10,447 747
Police and Fire Contracts 32,300 32,300 -
Streets and Highways 3,300 3,689 389
Parks and Recreation 7,700 12,063 4,363
Total Charges for Services 53,000 58,499 5,499
Fines and Forfeitures 7,400 7,133 (267)
Miscellaneous Revenue
Investment Earnings 12,100 29,798 17,698
Contributions and Donations 2,000 6,092 4,092
Other Miscellaneous 7,900 6,485 (1,415)
Total Miscellaneous Revenue 22,000 42,375 20,375
TOTAL REVENUES 2,208,518 2,270,825 62,307
EXPENDITURES
General Government
Mayor and Council 20,900 23,195 2,295
Administration and Finance 274,200 200,104 (74,096)
Other General Government 404,000 410,031 6,031
Capital Outlay 5,500 8,247 2,747
Total General Government 704,600 641,577 (63,023)
CITY OF SCANDIA, MINNESOTA
BUDGETARY COMPARISON SCHEDULE – GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2023
60
Budget Actual Variance with
Amounts- Amounts Budget
Original and Budgetary Over
Final Basis (Under)
Public Safety
Police
Current 168,999$ 169,458$ 459$
Fire
Current 328,600 389,106 60,506
Capital Outlay 1,400 416 (984)
Other Public Safety
Current 55,000 76,207 21,207
Total Public Safety 553,999 635,187 81,188
Public Works
Street Maintenance and Storm Sewers 683,550 633,342 (50,208)
Snow and Ice Removal 30,000 24,777 (5,223)
Street Engineering 10,000 12,793 2,793
Street Lighting 8,200 9,326 1,126
Capital Outlay - Other 1,000 407 (593)
Total Public Works 732,750 680,645 (52,105)
Culture and Recreation
Parks and Recreation
Current 175,160 144,544 (30,616)
Capital Outlay 16,000 12,397 (3,603)
Total Culture and Recreation 191,160 156,941 (34,219)
TOTAL EXPENDITURES 2,182,509 2,114,350 (68,159)
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 26,009 156,475 130,466
OTHER FINANCING SOURCES (USES)
Transfers
To Other Funds - (146,620) (146,620)
NET CHANGE IN FUND BALANCE 26,009$ 9,855 (16,154)$
FUND BALANCE - BEGINNING 1,349,787
FUND BALANCE - ENDING 1,359,642$
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF CITY’S PROPORTIONATE
SHARE OF NET PENSION LIABILITY
LAST TEN YEARS (Presented Prospectively)
61
City's
Proportionate
Share of the Net City's
Pension Liability Proportionate Plan
City's State's and the State's Share of the Net Fiduciary Net
Proportionate Proportionate Proportionate Pension Liability Position as a
For the City's Share of the Share of the Net Share of the Net (Asset) as a Percentage
Measurement Proportion of the Net Pension Pension Liability Pension Liability City's Percentage of of the Total
Year Ended Net Pension Liability Associated with Associated with Covered its Covered Pension
June 30 Liability (Asset)(Asset) (a)the City (b)the City (a+b)Payroll (c)Payroll ((a+b)/c)Liability
General Employees Retirement Pension Plan
2023 0.0060%335,513$ 9,151$ 344,664$ 409,689$ 84.1%83.1%
2022 0.0064%506,882$ 14,663$ 521,545$ 454,973$ 114.6%76.7%
2021 0.0060%256,227$ 7,846$ 264,073$ 412,253$ 64.1%87.0%
2020 0.0056%335,746$ 10,402$ 346,148$ 403,027$ 85.9%79.1%
2019 0.0056%309,611$ 9,666$ 319,277$ 370,760$ 86.1%80.2%
2018 0.0057%316,213$ 10,395$ 326,608$ 380,371$ 85.9%79.5%
2017 0.0053%338,349$ 4,251$ 342,600$ 338,175$ 101.3%75.9%
2016 0.0057%462,812$ 6,071$ 468,883$ 357,680$ 131.1%68.9%
2015 0.0059%305,769$ -$ 305,769$ 342,106$ 89.4%78.2%
Public Employees Police and Fire Pension Plan
2023 0.0039%67,348$ 2,742$ 70,090$ 49,270$ 142.3%86.5%
2022 0.0039%169,713$ 7,468$ 177,181$ 47,226$ 375.2%70.5%
2021 0.0039%30,104$ 1,362$ 31,466$ 44,542$ 70.6%93.7%
2020 0.0058%76,450$ 1,790$ 78,240$ 20,323$ 385.0%87.2%
Note: The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 and is intended to show a ten year trend. Additional years will be
reported as they become available. 2020 was the first year during which City employees participated in the Public Employees Police and Fire Pension Plan.
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF CITY PENSION CONTRIBUTIONS
LAST TEN YEARS (Presented Prospectively)
62
Contributions in
Relation to the Contributions as
For the Fiscal Statutorily Statutorily Contribution City's a Percentage of
Year Ended Required Required Deficiency Covered Covered
December 31 Contribution Contribution (Excess)Payroll Payroll
General Employees Retirement Pension Plan
2023 31,393$ 31,393$ -$ 418,575$ 7.50%
2022 35,278$ 35,278$ -$ 470,373$ 7.50%
2021 31,626$ 31,626$ -$ 421,680$ 7.50%
2020 32,939$ 32,939$ -$ 439,187$ 7.50%
2019 29,072$ 29,072$ -$ 387,627$ 7.50%
2018 27,150$ 27,150$ -$ 362,002$ 7.50%
2017 27,172$ 27,172$ -$ 362,292$ 7.50%
2016 24,941$ 24,941$ -$ 334,592$ 7.45%
2015 25,468$ 25,468$ -$ 348,155$ 7.32%
Public Employees Police and Fire Pension Plan
2023 8,946$ 8,946$ -$ 50,544$ 17.70%
2022 8,584$ 8,584$ -$ 48,497$ 17.70%
2021 7,854$ 7,854$ -$ 44,373$ 17.70%
2020 7,652$ 7,652$ -$ 43,232$ 17.70%
Statewide Volunteer Firefighter Pension Plan
2023 -$ -$ -$ N/A N/A
2022 -$ -$ -$ N/A N/A
2021 -$ -$ -$ N/A N/A
2020 -$ -$ -$ N/A N/A
2019 -$ -$ -$ N/A N/A
2018 -$ -$ -$ N/A N/A
2017 -$ -$ -$ N/A N/A
2016 -$ -$ -$ N/A N/A
2015 -$ -$ -$ N/A N/A
Note: The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 and is intended to
show a ten year trend. Additional years will be reported as they become available. 2020 was the first year during which City
employees participated in the Public Employees Police and Fire Pension Plan.
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF CHANGES IN NET PENSION LIABILITY (ASSET)
STATEWIDE VOLUNTEER FIREFIGHTER FUND
LAST TEN YEARS (Presented Prospectively)
63
2022 2021 2020 2019 2018 2017 2016 2015 2014
Changes in Total Pension Liability (TPL)
Balance at January 1st 774,018$ 712,593$ 659,574$ 490,428$ 545,327$ 617,019$ 654,741$ 636,294$ 629,967$
Service Cost 35,635 31,256 29,799 31,774 25,342 28,912 24,777 23,343 22,874
Interest on the TPL 46,449 44,631 41,362 31,332 31,414 34,163 38,089 38,665 38,350
Actuarial Experience (Gains)/Losses (20,824) (14,462) (18,142) (8,940) (17,415) (54,911) (11,188) (13,108) (27,553)
Changes in Benefit Level - - - 114,980 - 73,244 - - -
Benefit Payments (71,000) - - - (94,240) (153,100) (89,400) (30,453) (27,344)
Balance at December 31st 764,278$ 774,018$ 712,593$ 659,574$ 490,428$ 545,327$ 617,019$ 654,741$ 636,294$
Plan Fiduciary Net Position (PFNP)
Balance at January 1st 1,028,982$ 902,162$ 752,345$ 604,335$ 687,094$ 723,513$ 735,277$ 730,400$ 658,422$
Fire State Aid 33,678 32,376 30,706 27,954 26,919 26,278 26,738 27,129 24,368
Fire Supplemental Aid 6,797 6,802 6,778 6,472 6,405 6,359 6,486 6,638 5,896
Supplemental Benefit Reimbursement - - - 1,840 3,000 2,000 - 1,000 2,955
Municipal Contributions - - - - - - - - 18,259
Adjustment to Initial Asset Transfer - - - - - - - - 5,368
Net Investment Income (Loss)(147,582) 88,505 113,188 112,533 (23,964) 83,014 45,186 1,367 43,226
Total Additions (107,107) 127,683 150,672 148,799 12,360 117,651 78,410 36,134 100,072
Benefit Payments (71,000) - - - (94,240) (153,100) (89,400) (30,453) (27,344)
Administrative Expenses (930) (863) (855) (789) (879) (970) (774) (804) (750)
Total Reductions (71,930) (863) (855) (789) (95,119) (154,070) (90,174) (31,257) (28,094)
Balance at December 31st 849,945$ 1,028,982$ 902,162$ 752,345$ 604,335$ 687,094$ 723,513$ 735,277$ 730,400$
Net Pension Liability (Asset) - December 31st (85,667)$ (254,964)$ (189,569)$ (92,771)$ (113,907)$ (141,767)$ (106,494)$ (80,536)$ (94,106)$
Plan Fiduciary Net Position as a Percentage of
Total Pension Liability (Asset)111%133%127%114%123%126%117%112%115%
Measurement Year Ended December 31,
Note: The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 (December 31, 2014 measurement date) and is intended to show a
ten year trend. Additional years will be reported as they become available.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31, 2023
64
NOTE 1 PUBLIC EMPLOYEES RETIREMENT PLAN – GENERAL EMPLOYEES FUND
2023 Changes
Changes in Actuarial Assumptions
• The investment return assumption and single discount rate were changed from 6.50 percent to 7.00 percent.
Changes in Plan Provisions
• An additional one-time direct State aid contribution of $170.1 million will be contributed to the Plan on October 1, 2023.
• The vesting period of those hired after June 30, 2010 was changed from five years of allowable service to three years of
allowable service.
• The benefit increase delay for early retirements on or after January 1, 2024 was eliminated.
• A one-time, non-compounding benefit increase of 2.50 percent minus the actual 2024 adjustment will be payable in a
lump sum for calendar year 2024 by March 31, 2024.
2022 Changes
Changes in Actuarial Assumptions
• The mortality improvement scale was changed from Scale MP-2020 to Scale MP-2021.
Changes in Plan Provisions
• There were no changes in plan provisions since the previous valuation.
2021 Changes
Changes in Actuarial Assumptions
• The investment return and single discount rates were changed from 7.50 percent to 6.50 percent, for financial reporting
purposes.
• The mortality improvement scale was changed from Scale MP-2019 to Scale MP-2020.
Changes in Plan Provisions
• There were no changes in plan provisions since the previous valuation.
2020 Changes
Changes in Actuarial Assumptions
• The price inflation assumption was decreased from 2.50 percent to 2.25 percent.
• The payroll growth assumption was decreased from 3.25 percent to 3.00 percent.
• Assumed salary increase rates were changed as recommended in the June 30, 2019 experience study. The net effect is
assumed rates that average 0.25 percent less than previous rates.
• Assumed rates of retirement were changed as recommended in the June 30, 2019 experience study. The changes result in
more unreduced (normal) retirements and slightly fewer Rule of 90 and early retirements.
• Assumed rates of termination were changed as recommended in the June 30, 2019 experience study. The new rates are
based on service and are generally lower than the previous rates for years 2-5 and slightly higher thereafter.
• Assumed rates of disability were changed as recommended in the June 30, 2019 experience study. The change results in
fewer predicted disability retirements for males and females.
• The base mortality table for healthy annuitants and employees was changed from the RP-2014 table to the Pub-2010
General Mortality table, with adjustments. The base mortality table for disabled annuitants was changed from the RP-
2014 disabled annuitant mortality table to the PUB-2010 General/Teacher disabled annuitant mortality table, with
adjustments.
• The mortality improvement scale was changed from Scale MP-2018 to Scale MP-2019.
• The assumed spouse age difference was changed from two years older for females to one year older.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31, 2023
65
NOTE 1 PUBLIC EMPLOYEES RETIREMENT PLAN – GENERAL EMPLOYEES FUND (Continued)
• The assumed number of married male new retirees electing the 100.00 percent Joint & Survivor option changed from
35.00 percent to 45.00 percent. The assumed number of married female new retirees electing the 100.00 percent Joint &
Survivor option changed from 15.00 percent to 30.00 percent. The corresponding number of married new retirees
electing the Life annuity option was adjusted accordingly.
Changes in Plan Provisions
• Augmentation for current privatized members was reduced to 2.00 percent for the period July 1, 2020 through December
31, 2023 and 0.00 percent after. Augmentation was eliminated for privatizations occurring after June 30, 2020.
2019 Changes
Changes in Actuarial Assumptions
• The mortality projection scale was changed from MP-2017 to MP-2018.
Changes in Plan Provisions
• The employer supplemental contribution was changed prospectively, decreasing from $31.0 million to $21.0 million per
year. The State’s special funding contribution was changed prospectively, requiring $16.0 million due per year through
2031.
2018 Changes
Changes in Actuarial Assumptions
• The mortality projection scale was changed from MP-2015 to MP-2017.
• The assumed benefit increase was changed from 1.00 percent per year through 2044 and 2.50 percent per year thereafter
to 1.25 percent per year.
Changes in Plan Provisions
• The augmentation adjustment in early retirement factors is eliminated over a five -year period starting July 1, 2019,
resulting in actuarial equivalence after June 30, 2024.
• Interest credited on member contributions decreased from 4.00 percent to 3.00 percent, beginning July 1, 2018.
• Deferred augmentation was changed to 0.00 percent, effective January 1, 2019. Augmentation that has already accrued
for deferred members will still apply.
• Contribution stabilizer provisions were repealed.
• Postretirement benefit increases were changed from 1.00 percent per year with a provision to increase to 2.50 percent
upon attainment of 90.00 percent funding ratio to 50.00 percent of the Social Security Cost of Living Adjustment, not
less than 1.00 percent and not more than 1.50 percent, beginning January 1, 2019.
• For retirements on or after January 1, 2024, the first benefit increase is delayed until the retiree reaches normal retirement
age; does not apply to Rule of 90 retirees, disability benefit recipients, or survivors.
• Actuarial equivalent factors were updated to reflect revised mortality and interest assumptions.
2017 Changes
Changes in Actuarial Assumptions
• The Combined Service Annuity (CSA) loads were changed from 0.80 percent for active members and 60.00 percent for
vested and non-vested deferred members. The revised CSA loads are now 0.00 percent for active member liability, 15.00
percent for vested deferred member liability and 3.00 percent for non-vested deferred member liability.
• The assumed postretirement benefit increase rate was changed from 1.00 percent per year for all years to 1.00 percent per
year through 2044 and 2.50 percent per year thereafter.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31, 2023
66
NOTE 1 PUBLIC EMPLOYEES RETIREMENT PLAN – GENERAL EMPLOYEES FUND (Continued)
Changes in Plan Provisions
• The State’s contribution for the Minneapolis Employees Retirement Fund equals $16,000,000 in 2017 and 2018, and
$6,000,000 thereafter.
• The Employer Supplemental Contribution for the Minneapolis Employees Retirement Fund changed from $21,000,000
to $31,000,000 in calendar years 2019 to 2031. The State’s contribution changed from $16,000,000 to $6,000,000 in
calendar years 2019 to 2031.
2016 Changes
Changes in Actuarial Assumptions
• The assumed postretirement benefit increase rate was changed from 1.00 percent per year through 2035 and 2.50 percent
per year thereafter to 1.00 percent per year for all years.
• The assumed investment return was changed from 7.90 percent to 7.50 percent. The single discount rate changed from
7.90 percent to 7.50 percent.
• Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary
increases, payroll growth, the inflation were decreased by 0.25 percent to 3.25 percent for payroll growth and 2.50
percent for inflation.
Changes in Plan Provisions
• There were no changes in plan provisions since the previous valuation.
2015 Changes
Changes in Actuarial Assumptions
• The assumed postretirement benefit increase rate was changed from 1.00 percent per year through 2030 and 2.50 percent
per year thereafter to 1.00 percent per year through 2035 and 2.50 percent per year thereafter.
Changes in Plan Provisions
• On January 1, 2015, the Minneapolis Employees Retirement Fund was merged into the General Employees Fund, which
increased the total pension liability by $1.1 billion and increased the fiduciary plan net position by $892 million. Upon
consolidation, State and employer contributions were revised; the State’s contribution of $6 million, which meets the
special funding situation definition, was due September 2015.
NOTE 2 PUBLIC EMPLOYEES RETIREMENT PLAN – POLICE AND FIRE FUND
2023 Changes
Changes in Actuarial Assumptions:
• The investment return assumption was changed from 6.50 percent to 7.00 percent.
• The single discount rate changed from 5.40 percent to 7.00 percent.
Changes in Plan Provisions:
• Additional one-time direct state aid contribution of $19.4 million will be contributed to the Plan on October 1, 2023.
• Vesting requirement for new hires after June 30, 2014 was changed from a graded 20-year vesting schedule to a graded
10-year vesting schedule, with 50.00 percent vesting after five years, increasing incrementally to 100.00 percent after 10
years.
• A one-time, non-compounding benefit increase of 3.00 percent will be payable in a lump sum for calendar year 2024 by
March 31, 2024.
• Psychological treatment is required effective July 1, 2023, prior to approval for a duty disability benefit for a
psychological condition relating to the member’s occupation.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31, 2023
67
NOTE 2 PUBLIC EMPLOYEES RETIREMENT PLAN – POLICE AND FIRE FUND (Continued)
• The total and permanent duty disability benefit was increased, effective July 1, 2023.
2022 Changes
Changes in Actuarial Assumptions
• The mortality projection scale was changed from MP-2020 to MP-2021.
• The single discount rate changed from 6.50 percent to 5.40 percent.
Changes in Plan Provisions
• There were no changes in plan provisions since the previous valuation.
2021 Changes
Changes in Actuarial Assumptions
• The investment return and single discount rates were changed from 7.50 percent to 6.50 percent, for financial reporting
purposes.
• The inflation assumption was changed from 2.50 percent to 2.25 percent.
• The payroll growth assumption was changed from 3.25 percent to 3.00 percent.
• The base mortality table for healthy annuitants and employees was changed from the RP-2014 table to the Pub-2010
Public Safety Mortality table. The mortality improvement scale was changed from MP-2019 to MN-2020.
• The base mortality table for disabled annuitants was changed from the RP-2014 healthy annuitant mortality table (with
future mortality improvement according to Scale MP-2019) to the Pub-2010 Public Safety disabled annuitant mortality
table (with future mortality improvement according to Scale MP-2020).
• Assumed rates of salary increase were modified as recommended in the July 14, 2020 experience study. The overall
impact is a decrease in gross salary increase rates.
• Assumed rates of retirement were changed as recommended in the July 14, 2020 experience study. The changes result in
slightly more unreduced retirements and fewer assumed early retirements.
• Assumed rates of withdrawal were changed from select and ultimate rates to service-based rates. The changes result in
more assumed terminations.
• Assumed rates of disability were increased for ages 25-44 and decreased for ages over 49. Overall, proposed rates result
in more projected disabilities.
• Assumed percent married for active female members was changed from 60 percent to 70 percent. Minor changes to
form of payment assumptions were applied.
Changes in Plan Provisions
• There were no changes in plan provisions since the previous valuation.
2020 Changes
Changes in Actuarial Assumptions
• The mortality projection scale was changed from MP-2018 to MP-2019.
Changes in Plan Provisions
• There were no changes in plan provisions since the previous valuation.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31, 2023
68
NOTE 3 STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN
2022 Changes
Changes in Actuarial Assumptions
• There were no significant changes made to actuarial assumptions during 2022.
2021 Changes
Changes in Actuarial Assumptions
• There were no significant changes made to actuarial assumptions during 2021.
2020 Changes
Changes in Actuarial Assumptions
• There were no significant changes made to actuarial assumptions during 2020.
2019 Changes
Changes in Actuarial Assumptions
• There were no significant changes made to actuarial assumptions during 2019.
2018 Changes
Changes in Actuarial Assumptions
• There were no significant changes made to actuarial assumptions during 2018.
2017 Changes
Changes in Actuarial Assumptions
• There were no significant changes made to actuarial assumptions during 2017.
2016 Changes
Changes in Actuarial Assumptions
• There were no significant changes made to actuarial assumptions during 2016.
2015 Changes
Changes in Actuarial Assumptions
• There were no significant changes made to actuarial assumptions during 2015.
69
SUPPLEMENTARY INFORMATION
CITY OF SCANDIA, MINNESOTA
SUPPLEMENTAL COMBINING BALANCE SHEET
MAJOR GOVERNMENTAL FUND – DEBT SERVICE FUND
DECEMBER 31, 2023
70
2013 Equipment
Certificates
2018A G.O.
Street Bonds
Total Debt Service
Fund
ASSETS
Cash and Cash Equivalents 31,943$ 62,391$ 94,334$
FUND BALANCE
Restricted 31,943$ 62,391$ 94,334$
CITY OF SCANDIA, MINNESOTA
SUPPLEMENTAL COMBINING SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE
MAJOR GOVERNMENTAL FUND – DEBT SERVICE FUND
FOR THE YEAR ENDED DECEMBER 31, 2023
71
2013 Equipment
Certificates
2018A G.O.
Street Bonds
Total Debt Service
Fund
REVENUES
Taxes 64,000$ 342,536$ 406,536$
Investment Earnings (Losses)- 1,291 1,291
TOTAL REVENUES 64,000 343,827 407,827
EXPENDITURES
Debt Service:
Principal 60,000 235,000 295,000
Interest and Other Charges 930 91,720 92,650
TOTAL EXPENDITURES 60,930 326,720 387,650
NET CHANGE IN FUND BALANCE 3,070 17,107 20,177
FUND BALANCE - BEGINNING 28,873 45,284 74,157
FUND BALANCE - ENDING 31,943$ 62,391$ 94,334$
CITY OF SCANDIA, MINNESOTA
COMBINING BALANCE SHEET
ALL NONMAJOR GOVERNMENTAL FUNDS
DECEMBER 31, 2023
72
Economic
Development
Authority Fund Cable TV Fund
Public Safety
Aid Fund
Equipment
Replacement
Fund
Total Nonmajor
Funds
ASSETS
Cash and Cash Equivalents 37,707$ 19,632$ 176,529$ 147,621$ 381,489$
Accounts Receivable - 2,078 - - 2,078
Deposit on Asset - - - 12,717 12,717
TOTAL ASSETS 37,707$ 21,710$ 176,529$ 160,338$ 396,284$
LIABILITIES
Accounts Payable -$ 332$ -$ 10,000$ 10,332$
FUND BALANCES
Nonspendable - - - 12,717 12,717
Restricted - - 176,529 - 176,529
Committed 37,707 - - - 37,707
Assigned - 21,378 - 137,621 158,999
Total Fund Balances 37,707 21,378 176,529 150,338 385,952
TOTAL LIABILITIES AND
FUND BALANCES 37,707$ 21,710$ 176,529$ 160,338$ 396,284$
Special Revenue Capital Project
CITY OF SCANDIA, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE S
ALL NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2023
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Economic
Development
Authority Fund Cable TV Fund
Public Safety
Aid Fund
Equipment
Replacement
Fund
Total Nonmajor
Funds
REVENUES
Taxes 5,300$ -$ -$ -$ 5,300$
Franchise Taxes - 25,531 - - 25,531
Intergovernmental - - 176,529 - 176,529
Charges for Services 800 - - - 800
Interest Earnings (Losses)735 302 - 3,958 4,995
Miscellaneous 300 300 - 18,851 19,451
TOTAL REVENUES 7,135 26,133 176,529 22,809 232,606
EXPENDITURES
Current:
General Government - 16,134 - - 16,134
Economic Development 4,470 - - - 4,470
Capital Outlay - - - 73,019 73,019
TOTAL EXPENDITURES 4,470 16,134 - 73,019 93,623
NET CHANGE IN FUND BALANCES 2,665 9,999 176,529 (50,210) 138,983
FUND BALANCES - BEGINNING 35,042 11,379 - 200,548 246,969
FUND BALANCES - ENDING 37,707$ 21,378$ 176,529$ 150,338$ 385,952$
Special Revenue Capital Project
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF INDEBTEDNESS
FOR THE YEAR ENDED DECEMBER 31, 2023
(UNAUDITED)
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Initial Outstanding Outstanding Principal
Issue Interest Maturity Authorized Balance Balance Due Within
Dates Rates Dates Issue 01/01/23 Issued Paid 12/31/23 One Year
GOVERNMENTAL INDEBTEDNESS
2013 Certificates of Indebtedness 7/1/2013 0.80-3.10%7/1/2023 570,000$ 60,000$ -$ 60,000$ -$ -$
G.O. Street Reconstruction Bonds, Series 2018A 5/15/2018 3.00-3.13%12/15/2033 3,835,000 3,015,000 - 235,000 2,780,000 245,000
TOTAL INDEBTEDNESS 4,405,000$ 3,075,000$ -$ 295,000$ 2,780,000$ 245,000$
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OTHER REQUIRED REPORTS
An Independently Owned Member, RSM US Alliance
RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member
firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International.
76
www.schlennerwenner.cpa
INDEPENDENT AUDITOR’S REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE
AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
Honorable Mayor and City Council
City of Scandia, Minnesota
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States,
the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining
fund information of the City of Scandia, Minnesota (the City), as of and for the year ended December 31, 2023, and the related
notes to the financial statements, which collectively comprise the City of Scandia’s basic financial statements and have issued our
report thereon dated April 12, 2024.
Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City of Scandia's internal control over
financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the
purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the
effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal
control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed t o
identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material
weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying Schedule of
Findings and Responses, we identified certain deficiencies in internal control that we consider to be material weaknesses and a
significant deficiency.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the
normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A
material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility
that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.
We consider the deficiencies described in the accompanying Schedule of Findings and Responses as items 2013-001, 2019-001,
and 2023-001 to be material weaknesses.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less sever that a material
weakness, yet important enough to merit attention by those charged with governance. We consider the deficiency described in the
accompanying Schedule of Findings and Responses as item 2019-002 to be a significant deficiency.
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Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City of Scandia's financial statements are free from material
misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements,
noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on
compliance with those provisions was not an objective of our audit, and accordingly, we d o not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government
Auditing Standards.
Minnesota Legal Compliance
In connection with our audit, nothing came to our attention that caused us to believe that the City of Scandia failed to comply with
the provisions of the contracting – bid laws, depositories of public funds and public investments, conflicts of interest, public
indebtedness, claims and disbursements, and miscellaneous provisions sections of the Minnesota Legal Compliance Audit Guide
for Cities, promulgated by the State Auditor pursuant to Minn. Stat. § 6.65, insofar as they relate to accounting matters. However,
our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed
additional procedures, other matters may have come to our attention regarding the City’s noncompliance with the above
referenced provisions, insofar as they relate to accounting matters.
City of Scandia’s Response to Findings
Government Auditing Standards requires the auditor to perform limited procedures on the City of Scandia’s response to the
findings identified in our audit and described in the accompanying Schedule of Findings and Responses. The City of Scandia’s
response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we
express no opinion on the response.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control over financial reporting and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance.
This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s
internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
April 12, 2024
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF FINDINGS AND RESPONSES
DECEMBER 31, 2023
78
FINANCIAL STATEMENT FINDINGS
Finding 2013-001 Limited Segregation of Duties
Condition: The City has limited segregation of accounting duties.
Criteria: The basic premise of proper segregation of duties is that no one employee should have access to both
physical assets and the related accounting records or to all phases of the transaction.
Cause: There are a limited number of employees.
Effect: The City’s lack of adequate segregation of accounting duties could adversely affect the City’s ability
to initiate, record, process, and report financial data consistent with the assertions of management in
the financial statements.
Recommendation: Although the number of employees may not be large enough to eliminate this deficiency, we
recommend that the City evaluate current procedures and segregate where possible and implement
compensating controls. It is important that the Council is aware of this condition and monitor all
financial information.
Views of Responsible
Officials And Planned
Corrective Actions: Management agrees with the recommendation. See corresponding Corrective Action Plan.
Finding 2019-001 Material Audit Adjustments
Condition: Audit adjustments were required to correct material misstatements identified in the trial balance
presented for the audit.
Criteria: The City is required to report financial information in accordance with accounting principles generally
accepted in the United States of America.
Cause: The City failed to record all year-end adjustments required under the accrual basis of accounting and
various other adjustments were required to correct misstatements.
Effect: The misstatements in the trial balance presented for the audit resulted in the need to record audit
adjustments to achieve fair financial statement presentation under accounting principles generally
accepted in the United States of America.
Recommendation: We recommend management perform a thorough review of the trial balance prior to the audit and
ensure all accounts have been properly adjusted at year-end.
Views of Responsible
Officials And Planned
Corrective Actions: Management agrees with the recommendation. See corresponding Corrective Action Plan.
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF FINDINGS AND RESPONSES
DECEMBER 31, 2023
79
FINANCIAL STATEMENT FINDINGS (Continued)
Finding 2019-002 Financial Statement Preparation
Condition: Schlenner Wenner & Co. drafts the financial statements for the City. These financial statements,
including disclosures, were reviewed by management and management has taken responsibility for
them. However, we believe that management would require additional training in accounting
principles generally accepted in the United States of America to adequately apply such standards
internally.
Criteria: Internal controls over financial reporting should be in place to provide for the preparation of financial
statements on an annual basis.
Cause: The City’s staff does not possess the expertise to prepare financial statements internally. This is not
unusual for a City of your size.
Effect: The inability to internally prepare the City’s financial statements can result in undetected errors in
financial reporting.
Recommendation: While the City may not have adequate controls in place to eliminate this finding, the City should
document its annual review of the financial statements.
Views of Responsible
Officials And Planned
Corrective Actions: Management agrees with the recommendation. See corresponding Corrective Action Plan.
Finding 2023-001 Prior Period Adjustment
Condition: The City’s prior year financial statements contained a material misstatement.
Criteria: The City is required to report accurate financial information that is accurately presented in accordance
with accounting principles generally accepted within the United States of America.
Cause: Expenditures paid during the year ended December 31, 2022 were inadvertently included in the
December 31, 2022 accounts payable balances, resulting in an overstatement in December 31, 2022
accounts payable and an understatement in the December 31, 2022 fund balance and governmental
activities net position. See further details described in Note 6.D. in the notes to the basic financial
statements.
Effect: The misstatements in the prior year’s audited financial statements resulted in the need to restate
beginning fund balance and net position of the current year.
Recommendation: We recommend management perform a thorough review of the audited financial statements and year-
end adjustments to ensure their accuracy and completeness.
Views of Responsible
Officials and Planned
Corrective Actions: Management agrees with our recommendation. See corresponding Corrective Action Plan.
CITY OF SCANDIA, MINNESOTA
CORRECTIVE ACTION PLANS
DECEMBER 31, 2023
80
FINANCIAL STATEMENT FINDINGS
Finding 2013-001 Limited Segregation of Duties
1. Explanation of Disagreement with Audit Finding
There is no disagreement with the audit finding.
2. Actions Planned in Response to Finding
The City currently has the following procedures in place:
o The City’s Department Heads review all invoices received. The City Council also reviews the monthly
invoices and approves the expenditures.
o The City utilizes claim listings which are approved by the City Administrator.
The City will review current procedures and implement additional controls where possible.
3. Office Responsible
Kyle Morell, City Administrator, is the official responsible for ensuring corrective action.
4. Planned Completion Date
The Corrective Action Plan will be reviewed on an ongoing basis with no anticipated completion date.
5. Plan to Monitor Completion
The City Council will be monitoring the Corrective Action Plan.
Finding 2019-001 Material Audit Adjustments
1. Explanation of Disagreement with Audit Finding
There is no disagreement with the audit finding.
2. Actions Planned in Response to Finding
The City will continue to have Schlenner Wenner & Co. prepare certain audit adjustments and the City will review the
adjustments and schedules provided to the auditor. The City will be more diligent in the review of schedules, including
those prepared by third parties, to ensure they are correct and agree with the unaudited trial balance.
3. Office Responsible
Kyle Morell, City Administrator, is the official responsible for ensuring corrective action.
4. Planned Completion Date
The Corrective Action Plan will be reviewed on an ongoing basis with no anticipated completion date.
5. Plan to Monitor Completion
The City Council will be monitoring the Corrective Action Plan.
CITY OF SCANDIA, MINNESOTA
CORRECTIVE ACTION PLANS
DECEMBER 31, 2023
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FINANCIAL STATEMENT FINDINGS (Continued)
Finding 2019-002 Financial Statement Preparation
1. Explanation of Disagreement with Audit Finding
There is no disagreement with the audit finding.
2. Actions Planned in Response to Finding
The City will continue to have Schlenner Wenner & Co. prepare the financial statements and will continue to document
the annual review of the financial statements and related footnote disclosures.
3. Office Responsible
Kyle Morell, City Administrator, is the official responsible for ensuring corrective action.
4. Planned Completion Date
The Corrective Action Plan will be reviewed on an ongoing basis with no anticipated completion date.
5. Plan to Monitor Completion
The City Council will be monitoring the Corrective Action Plan.
Finding 2023-001 Prior Period Adjustment
1. Explanation of Disagreement with Audit Finding
There is no disagreement with the audit finding.
2. Actions Planned in Response to Finding
The City will perform a thorough review of the audited financial statements and year-end adjustments to ensure their
accuracy and completeness.
3. Official Responsible
Kyle Morell, City Administrator, is the official responsible for ensuring corrective action.
4. Planned Completion Date
December 31, 2024.
5. Plan to Monitor Completion
The City Council will be monitoring this Corrective Action Plan.