9.a Audit report on 2017 Financial Statements
SCHLENNER WENNER & CO.
Certified Public Accountants
& Business Consultants
CITY OF SCANDIA, MINNESOTA
REPORT TO MEMBERS
OF GOVERNANCE
APRIL 9, 2018
CITY OF SCANDIA, MINNESOTA
TABLE OF CONTENTS
Introductory Letter ..................................................................................................................................................... 1
Required Communications ......................................................................................................................................... 2
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.
St. Cloud
320.251.0286
Little Falls
320.632.6311
Albany
320.845.2940
Maple Lake
320.963.5414
Monticello
763.295.5070
www.swcocpas.com
April 9, 2018
Members of Governance
City of Scandia, Minnesota
We are pleased to present this report related to our audit of the basic financial statements of the City of Scandia (the
City) as of and for the year ended December 31, 2017. This report summarizes certain matters required by
professional standards to be communicated to you in your oversight responsibility for the City’s financial reporting
process.
This report is intended solely for the information and use of the members of governance, and is not intended to be, and
should not be, used by anyone other than these specified parties. It will be our pleasure to respond to any questions
you have regarding this report. We appreciate the opportunity to continue to be of service to the City.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
CITY OF SCANDIA, MINNESOTA
REQUIRED COMMUNICATIONS
2
Generally accepted auditing standards (AU-C 260, The Auditor’s Communication with Those Charged with
Governance) require the auditor to promote effective two-way communication between the auditor and those charged
with governance. Consistent with this requirement, the following summarizes our responsibilities regarding the
financial statement audit as well as observations arising from our audit that are significant and relevant to your
responsibility to oversee the financial reporting process.
Auditor's Responsibility under Professional Standards
Our responsibilities under auditing standards generally accepted in the United States of America have been described
to you in our arrangement letter dated January 3, 2017. Our audit of the financial statements does not relieve
management or those charged with governance of their responsibilities, which are also described in that letter.
Overview of the Planned Scope and Timing of the Financial Statement Audit
We have issued a separate communication regarding the planned scope and timing of our audit and have discussed
with you our identification of, and planned audit response to, significant risks of material misstatement.
Accounting Practices
Preferability of Accounting Policies and Practices
Under accounting principles generally accepted in the United States of America, in certain circumstances,
management may select among alternative accounting practices. In our view, in such circumstances, management has
selected the preferable accounting practice.
Adoption of, or Change in, Accounting Policies
Management has the ultimate responsibility for the appropriateness of the accounting policies used by the City. The
City did not adopt any significant new accounting policies, nor have there been any changes in existing significant
accounting policies during the current period.
Significant or Unusual Transactions
We did not identify any significant or unusual transactions or significant accounting policies in controversial or
emerging areas for which there is a lack of authoritative guidance or consensus.
Alternative Treatments Discussed with Management
We did not discuss with management any alternative treatments within generally accepted accounting principles for
accounting policies and practices related to material items during the current audit period.
Management’s Judgments and Accounting Estimates
Accounting estimates are an integral part of the preparation of financial statements and are based upon management's
current judgment. The process used by management encompasses their knowledge and experience about past and
current events and certain assumptions about future events. You may wish to monitor throughout the year the process
used to compute and record these accounting estimates. The only estimate we have deemed significant to the financial
statements is the estimate included in the calculation of overall net pension liability and deferred inflows/outflows of
resources for the pension plan(s) in which the City’s employees participate.
CITY OF SCANDIA, MINNESOTA
REQUIRED COMMUNICATIONS
3
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other
than those that are trivial, and communicate them to the appropriate level of management.
There were no uncorrected misstatements discovered during the course of our audit.
We detected no material misstatements and did not propose any adjustments that in our judgement could have a
significant effect, either individually or in the aggregate, on the City’s financial reporting process.
Disagreements with Management
We encountered no disagreements with management over the application of significant accounting principles, the
basis for management’s judgments on any significant matters, the scope of the audit, or significant disclosures to be
included in the financial statements.
Consultations with Other Accountants
We are not aware of any consultations management had with other accountants about accounting or auditing matters.
Significant Issues Discussed with Management
No significant issues arising from the audit were discussed or were the subject of correspondence with management.
Significant Difficulties Encountered in Performing the Audit
We did not encounter any significant difficulties in dealing with management during the audit.
Letter Communicating Material Weakness
We have separately communicated the material weakness identified during our audit of the financial statements, and
this communication is included within the compliance section of the City’s financial report for the year ended
December 31, 2017.
Certain Written Communications Between Management and Our Firm
We have requested certain representations from management that are included in the management representation letter
dated April 9, 2018.
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.
St. Cloud
320.251.0286
Little Falls
320.632.6311
Albany
320.845.2940
Maple Lake
320.963.5414
Monticello
763.295.5070
www.swcocpas.com
April 9, 2018
Neil Soltis, City Administrator
City of Scandia
14727 209th Street North
Scandia, MN 55073
Dear Mr. Soltis:
In accordance with your request, we are attaching the accompanying PDF file, which contains an electronic final
version of the financial statements of the City of Scandia as of December 31, 2017. We understand that your
request for the electronic copy has been made as a matter of convenience. You understand that electronic
transmissions are not entirely secure and that it is possible for confidential financial information to be intercepted
by others.
These financial statements and our report(s) on them are not to be modified in any manner. This final version
supersedes all prior drafts. Any preliminary draft version of the financial statements previously provided to you
in an electronic format should be deleted from your computer, and all printed copies of any superseded
preliminary draft versions should likewise be destroyed.
Professional standards and our firm policies require that we perform certain additional procedures whenever our
reports are included, or we are named as accountants, auditors, or “experts,” in a document used in a public or
private offering of equity or debt securities. Accordingly, as provided for and agreed to in the terms of our
arrangement letter, the City of Scandia will not include our reports, or otherwise make reference to us, in any
public or private securities offering without first obtaining our consent. Any request to consent is also a matter
for which separate arrangements will be necessary. After obtaining our consent, the City of Scandia also agrees to
provide us with printer’s proofs final reproduced material for our approval before it is distributed. In the event
our auditor/client relationship has been terminated when the City of Scandia seeks such consent, we will be under
no obligation to grant such consent or approval.
Thank you for the opportunity to serve you.
Sincerely,
SCHLENNER WENNER & CO.
SCHLENNER WENNER & CO.
Certified Public Accountants
& Business Consultants
CITY OF SCANDIA, MINNESOTA
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2017
CITY OF SCANDIA, MINNESOTA
TABLE OF CONTENTS
INTRODUCTORY SECTION:
CITY COUNCIL AND OFFICIALS ................................................................................................................................ 1
FINANCIAL SECTION:
INDEPENDENT AUDITORS' REPORT ......................................................................................................................... 2
REQUIRED SUPPLEMENTARY INFORMATION:
Management’s Discussion and Analysis ....................................................................................................................... 4
BASIC FINANCIAL STATEMENTS:
Government-wide Financial Statements
Statement of Net Position ..................................................................................................................................... 14
Statement of Activities ......................................................................................................................................... 15
Fund Financial Statements
Balance Sheet-Governmental Funds ..................................................................................................................... 16
Reconciliation of the Balance Sheet-Governmental Funds
to the Statement of Net Position .................................................................................................................... 17
Statement of Revenues, Expenditures, and
Changes in Fund Balances-Governmental Funds .......................................................................................... 18
Reconciliation of Changes in Fund Balance of Governmental
Funds to the Statement of Activities.............................................................................................................. 19
Statement of Net Position-Proprietary Funds ....................................................................................................... 20
Statement of Revenues, Expenses, and
Changes in Net Position-Proprietary Funds .................................................................................................. 21
Statement of Cash Flows-Proprietary Funds ........................................................................................................ 22
Statement of Fiduciary Net Position ..................................................................................................................... 23
Notes to the Basic Financial Statements ...................................................................................................................... 24
REQUIRED SUPPLEMENTARY INFORMATION:
Budgetary Comparison Schedule-General Fund .......................................................................................................... 48
Schedule of City’s Proportionate Share of Net Pension Liability ................................................................................ 49
Schedule of City Contributions ................................................................................................................................... 49
Schedule of Changes in Net Pension Liability (Asset) ................................................................................................ 50
OTHER SUPPLEMENTARY INFORMATION:
Supplemental Combining Balance Sheet - Major Governmental Fund - Debt Service Fund ...................................... 51
Supplemental Combining Schedule of Revenues, Expenditures, and
Changes in Fund Balance - Major Governmental Fund - Debt Service Fund ...................................................... 52
Combining Balance Sheet - All Nonmajor Governmental Funds ................................................................................ 53
Combining Statement of Revenues, Expenditures, and
Changes in Fund Balances - All Nonmajor Governmental Funds ........................................................................ 54
Schedule of Indebtedness ............................................................................................................................................ 55
OTHER REPORTS:
Independent Auditors’ 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 .......................................................................................................................... 56
Schedule of Findings and Responses ........................................................................................................................... 58
Corrective Action Plans ............................................................................................................................................... 59
Independent Auditors’ Report on Minnesota Legal Compliance ................................................................................. 60
INTRODUCTORY
SECTION
1
CITY OF SCANDIA, MINNESOTA
CITY COUNCIL AND OFFICIALS
FOR THE YEAR ENDED DECEMBER 31, 2017
CITY COUNCIL Term Expires
Christine Maefsky Mayor January 1, 2019
Bob Hegland Council Member January 1, 2019
Steve Kronmiller Council Member January 1, 2021
Chris Ness Council Member January 1, 2021
Jim Schneider Council Member January 1, 2019
CITY OFFICIALS
Neil Soltis City Administrator
Colleen Firkus Treasurer
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.
St. Cloud
320.251.0286
Little Falls
320.632.6311
Albany
320.845.2940
Maple Lake
320.963.5414
Monticello
763.295.5070
www.swcocpas.com
INDEPENDENT AUDITORS' REPORT
April 9, 2018
Honorable Mayor and City Council
City of Scandia, Minnesota
Report on the Financial Statements
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 as of and for the year ended December 31,
2017, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in
the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting
principles generally accepted in the United States of America; this includes 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.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance
with auditing standards generally accepted in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the City’s preparation and fair presentation of the financial statements 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, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
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, 2017, 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.
3
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis,
Budgetary Comparison information, Schedule of City’s Proportionate Share of Net Pension Liability, Schedule of City
Contributions, and Schedule of Changes in Net Pension Liability (Asset) be presented to supplement the basic financial
statements. Such information, 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.
Other 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 introductory section, supplementary combining debt service fund schedules, combining and individual
nonmajor fund financial statements and schedule of indebtedness, as listed in the table of contents, are presented for the purposes
of additional analysis and are not a required part of the basic financial statements.
The introductory section, supplementary combining debt service fund schedules, combining and individual nonmajor fund
financial statements, and schedule of indebtedness, have not been subject 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 9, 2018 on our consideration of
the City of Scandia’s internal control over financial reporting and our tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements and other matters. The purpose of that report is 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 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.
Report on Other Legal and Regulatory Requirements
In accordance with Minnesota Statutes, we have also issued our report dated April 9, 2018, on our consideration of the City of
Scandia’s compliance with provisions of the Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State
Auditor pursuant to Minnesota Statute Section § 6.65. The purpose of the report is to determine if the City has complied with
Minnesota laws and regulations. That report is an integral part of an audit performed in the State of Minnesota.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
REQUIRED SUPPLEMENTARY
INFORMATION
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2017
4
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, 2017. Please read it in conjunction with the independent auditor’s report on page two and the
City’s financial statements, which begin on page fourteen.
FINANCIAL HIGHLIGHTS
The City’s net position increased $753,511 compared to the prior year, primarily due to property taxes levied in 2017 that
are intended to be used for a major road project in 2018 and building permit revenues which exceeded the budget by
$264,000
The City’s General Fund generated more revenue than budgeted of $316,113. Expenditures were less than budgeted by
$138,725, including transfers to other funds which did not exceed budgeted amounts.
The unassigned fund balance in the General Fund of $1,701,596 is 72% of the 2017 General Fund budgeted
expenditures.
In the City’s Sewer utility funds, revenues increased $4,441 (or 4.38 percent), while operating expenses decreased
$12,820 (or 9.71 percent). The City’s utility funds ended 2017 with a net loss of $13,410, with the cash position
increasing $17,595, due to fewer capital improvements during in 2017.
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 fourteen and fifteen) 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 sixteen. 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 statements also report the
City’s operations in more detail than the government-wide statements by providing information about the City’s most significant
funds. The remaining statements provide financial information about activities for which the City acts solely as an agent for the
benefit of those outside of the government.
Reporting the City as a Whole
Our analysis of the City as a whole begins on page six. 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 basis 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 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, 2017
5
USING THIS ANNUAL REPORT (Continued)
Reporting the City as a Whole (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 201 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 eight. The fund financial statements begin on page sixteen 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
three kinds of funds (governmental, proprietary, and fiduciary) 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.
Fiduciary Fund – This fund is used to account for resources held for the benefit of parties outside of the City.
Accounting for fiduciary funds is much like that used for proprietary funds.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2017
6
THE CITY AS A WHOLE
The City’s combined net position increased $753,511 from a year ago. Our analysis below focuses on the net position (Table 1)
and changes in net position (Table 2) of the City’s governmental and business-type activities.
Table 1
Net Position
Governmental Business-Type Total
Activities Activities Government
2017 2016 2017 2016 2017 2016
Assets
Current and Other Assets 4,481,637 3,455,810 86,231 67,579 4,567,868$ 3,523,389$
Net Capital Assets 9,882,633 9,981,972 959,927 993,252 10,842,560 10,975,224
Total Assets 14,364,270 13,437,782 1,046,158 1,060,831 15,410,428 14,498,613
Deferred Outflows of Resources 108,367 203,774 6,969 18,568 115,336 222,342
Liabilities
Current & Other Liabilities 557,088 595,264 34,425 49,383 591,513 644,647
Long-Term Debt Outstanding 639,000 577,000 - - 639,000 577,000
Total Liabilities 1,196,088 1,172,264 34,425 49,383 1,230,513 1,221,647
Deferred Inflows of Resources 107,995 67,659 6,482 4,386 114,477 72,045
Net Position
Net Investment in
Capital Assets 9,243,633 9,404,972 959,927 993,252 10,203,560 10,398,224
Restricted 78,132 166,691 - - 78,132 166,691
Unrestricted 3,846,789 2,829,970 52,293 32,378 3,899,082 2,862,348
Total Net Position 13,168,554$ 12,401,633$ 1,012,220$ 1,025,630$ 14,180,774$ 13,427,263$
The net position of the City’s governmental activities increased by $766,921 (or 6.18 percent) as a result of the funds levied for
2018 road projects and building permit revenues that exceeded the budget. 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) increased by $1,016,819 (or 35.93 percent) compared to the prior year.
The net position of the City’s business-type activities decreased by $13,410 (or 1.31 percent), while the unrestricted net position
increased from $32,378 to $52,293 due to the depreciation of capital assets included in Net Investment in Capital Assets.
Operations were comparable to the prior year.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2017
7
THE CITY AS A WHOLE (Continued)
Table 2
Changes in Net Position
Governmental Business-Type Total
Activities Activities Government
2017 2016 2017 2016 2017 2016
Program Revenues
Charges for Services 444,418$ 245,302$ 103,789$ 91,220$ 548,207$ 336,522$
Grants and Contributions 49,016 133,109 1,367 9,688 50,383 142,797
Taxes 2,264,177 2,267,065 - - 2,264,177 2,267,065
Intergovernmental 75,193 25,669 9 175 75,202 25,844
Investment Income 25,928 11,828 586 227 26,514 12,055
Other 78,313 66,556 - - 78,313 66,556
Total Revenues 2,937,045 2,749,529 105,751 101,310 3,042,796 2,850,839
Program Expenses
General Government 590,400 488,880 - - 590,400 488,880
Public Safety 386,468 368,621 - - 386,468 368,621
Public Works 1,058,902 967,057 - - 1,058,902 967,057
Parks and Recreation 116,445 103,303 - - 116,445 103,303
Economic Development 326 90,811 - - 326 90,811
Debt Service 17,583 15,314 - - 17,583 15,314
201 Sewer - - 101,976 110,202 101,976 110,202
Uptown Sewer - - 17,185 21,779 17,185 21,779
Total Expenses 2,170,124 2,033,986 119,161 131,981 2,289,285 2,165,967
Change in Net Position 766,921$ 715,543$ (13,410)$ (30,671)$ 753,511$ 684,872$
The City’s total revenues increased by $191,957 (or 6.73 percent), largely due to an increase in charges for services and by various
increases in other areas. Significant changes included:
Building permits increased by $207,450 (241%) from 2016.
Intergovernmental revenues increased due to increased Local Government aids from the State of Minnesota and a
Healthy Living Grant from St. Croix County.
Grants decreased from 2016 due to a $90,486 grant received for the construction of storm shelters at the Oakhill Cottages
which are owned and operated by the Washington County HRA.
The total cost of all programs and services increased by $123,318 (or 5.69 percent), primarily due to costs related to the increased
number of building inspections, the cost for work on the development of the City’s 2040 Comprehensive Plan, and the costs
related to the purchase of a new plow truck.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2017
8
THE CITY AS A WHOLE (Continued)
Our analysis below separately considers the operations of governmental and business-type activities:
Governmental Activities
Revenue for the City’s governmental activities increased $187,516 (or 6.82 percent), while total expenses also increased by
$136,138 (or 6.69 percent). Revenues and expenses were generally consistent year to year, with the exception of the matters
previously noted.
Table 3 presents the cost of each of the City’s programs (general government, public safety, public works, parks and recreation,
economic development, and debt service) as well as each program’s net cost (total cost less revenues generated by the activities).
The net cost shows the financial burden that was placed on the City’s taxpayers by each of these functions. Activities, net of
capital outlay which is excluded from Table 3, were generally comparable to the prior year as operations remained fairly consistent
with the prior year, with the exception of the fluctuation in expenses for economic development previously mentioned.
Table 3
Governmental Activities
Total Cost Net Cost
2017 2016 2017 2016
General Government 590,400$ 488,880$ 210,247$ 311,603$
Public Safety 386,468 368,621 311,667 300,483
Public Works 1,058,902 967,057 1,045,695 957,608
Parks and Recreation 116,445 103,303 91,172 70,242
Economic Development 326 90,811 326 325
Debt Service 17,583 15,314 17,583 15,314
Totals 2,170,124$ 2,033,986$ 1,676,690$ 1,655,575$
of Services of Services
Business-type Activities
Revenues of the City’s business-type activities (see Table 2) increased by $4,441 (or 4.38 percent). Expenses decreased by
$12,820 (or 9.71 percent). Operations were comparable to those of the prior year.
THE CITY’S FUNDS
Governmental Funds
As the City completed the year, its governmental funds (as presented in the balance sheet on page sixteen) reported a combined
fund balance of $4,098,057. This is an increase of $959,164 (or 30.56 percent) from the prior year. This increase in fund balance
is the net result of a multitude of transactions, but a few of the largest contributing factors unique to the current year’s operations
are as follows:
Revenue from building permits issued by the City exceeded budgeted amounts by $264,811 (394%) and were $207,450
(241%) greater than 2016. The increase is related to permits for 3 community solar gardens, roof and siding repairs from
2 summer storms, and 22 permits issued for new single-family homes.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2017
9
THE CITY’S FUNDS (Continued)
Governmental Funds (Continued)
During 2017, the City received an insurance dividend of $4,090, a decrease of $13,054 (76%) from 2016.
Expenditures for planning and buildings services exceeded budgeted amounts by $64,887 (44%), an increase of $101,284
(90%) from 2016.
In 2017, property tax revenues and capital expenditures from the Local Road Improvement Fund decreased from 2016
amounts by $20,609 (4%) and $877,053 (91%), respectively. The decreases were consistent with the City’s 2016-2020
Capital Improvement Plan which calls for a major road improvement project every two years.
Other operations were comparable to the prior year. The following is a summary of the City’s major governmental funds:
Increase
2017 2016 (Decrease)
General 1,715,008$ 1,771,828 (56,820)$
Fund Balance December 31,
Major Funds
The fund balance of the General Fund decreased by $56,820 as a result of current year operations. In comparison to the prior year,
revenues and expenditures increased approximately 16.83 and 14.74 percent, respectively.
General Fund Revenue
Taxes
Licenses, Permits, and Fees
Intergovernmental
Charges for Services
Fines
Investment Income
Miscellaneous
The City receives the majority of its funding in the General Fund in the form of taxes (72 percent) and licenses, permits, and fees
(17 percent). Overall, the City’s General Fund revenues were comparable to the prior year, with the exception of increased revenue
from building permit sales and related expenditures previously discussed.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2017
10
THE CITY’S FUNDS (Continued)
Governmental 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 (39 percent). Remaining expenditures are
used primarily on public safety (20 percent) and general government operations (34 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 $316,113. Expenditures were less than those budgeted by
$138,725. See additional detail pertaining to differences between budgeted and actual amounts within the General Fund
previously discussed and at the Budgetary Comparison Schedule on page forty-eight.
Increase
2017 2016 (Decrease)
Fund Balance December 31,
Major Funds
Debt Service 46,609$ 113,621$ (67,012)$
The fund balance of the Debt Service Fund decreased by $67,012. The subfunds that comprise the Debt Service Fund had a cash
balance of $44,860 at December 31, 2017. Any remaining cash in these subfunds after the pay-off of the related debt has been
designated by the Council to fund future road improvement projects.
Equipment Replacement Fund 477,802$ 501,061$ (23,259)$
At December 31, 2017 the Equipment Replacement Fund has a cash balance of $477,802. The fund balance of the Equipment
Replacement Fund decreased by $23,259. Significant activity in this fund during 2017 include the purchase of a new plow truck
and plow for $195,094, partially financed through the issuance of $160,000 of Certificates of Indebtedness.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2017
11
THE CITY’S FUNDS (Continued)
Governmental Funds (Continued)
Increase
2017 2016 (Decrease)
Fund Balance December 31,
Major Funds
Local Road Improvement Fund 1,455,036$ 374,020$ 1,081,016$
At December 31, 2017 the Local Road Improvement Fund has a cash balance of $1,510,326. The fund balance increased by
$1,081,016, primarily due to property tax revenue and operating transfers designated for future road projects.
Proprietary Funds
As the City completed the year, its business-type activities (as presented in the statement of net position on page twenty) reported a
combined net position of $1,012,220. This is a decrease of $13,410 from the prior year. Other operations were comparable to the
prior year. The following is a summary of the City’s major proprietary funds:
Increase
2017 2016 (Decrease)
201 Sewer Fund 851,042$ 864,676$ (13,634)$
Net Position December 31,
Major Funds
The 201 Sewer Fund provides sanitary sewer services to customers in the Anderson-Erickson and Bliss subdivisions. At
December 31, 2017 the fund had a cash balance of $84,391 with an increase in cash of $16,181 for the year. The increase in cash
is attributable to fewer capital assets replaced in the current year. The fund’s net position decreased $13,634 during the current
year as a result of operating expenses exceeding revenues from charges for services and other activities.
Uptown Sewer Fund 161,178$ 160,954$ 224$
The Uptown Sewer Fund provides sanitary sewer services to customers near the Olinda Trail / Oakhill intersection. At December
31, 2017 the fund had a cash balance of $4,196 with an increase in cash of $1,414 for the year. The fund’s net position increased
$224 during the year as a result of operating revenues exceeding expenses from charges for services and other activities.
Operations in this fund were comparable to the prior year.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2017
12
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
At the end of 2017, the City had $10,842,560 invested in a broad range of capital assets, including land, buildings, equipment and
vehicles, infrastructure, improvements, and sewer systems. This amount represents a net decrease of $132,664 (or 1.21 percent)
from last year.
Table 4
Net Capital Assets at Year-End
Governmental
Activities Activities Totals
2017 2016 2017 2016 2017 2016
Land 487,735$ 487,735$ -$ -$ 487,735$ 487,735$
Construction in Progress 88,753 - - - 88,753 -
Buildings 1,264,850 1,314,690 - - 1,264,850 1,314,690
Equipment and Vehicles 1,230,644 1,111,668 114,420 112,868 1,345,064 1,224,536
Infrastructure 6,758,921 7,010,619 - - 6,758,921 7,010,619
Other Improvements 51,730 57,260 - - 51,730 57,260
201 Sewer System - - 660,000 690,000 660,000 690,000
Uptown Sewer - - 185,507 190,384 185,507 190,384
Totals 9,882,633$ 9,981,972$ 959,927$ 993,252$ 10,842,560$ 10,975,224$
Business-Type
Significant capital asset acquisitions during 2017 were:
Purchase of a new plow truck and plow - $195,094
Purchase of a new tractor - $41,500
Engineering design for 2018 road improvement project - $88,753
More detailed information about the City’s capital assets is presented in Note 3.B. to the financial statements.
Debt
In 2017 the City paid off $98,000 of the $577,000 in debt that was outstanding at December 31, 2016. The City issued new debt
of $160,000 during 2017 (as previously discussed), bringing the total year-end balance of debt outstanding at December 31, 2017
to $639,000. See additional information at Note 3.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 2018 budget, such as tax rates and fees
that will be charged for the business-type activities. The property tax levy for 2018 was not increased over the 2017 levy. The
levy amount allocated to the General Fund decreased by $201,480 (13%) compared to 2017 in order to reallocate a portion of the
Public Works budget for road maintenance to the Local Road Improvement Fund. The budget for General Fund revenues
decreased by $190,380 and expenditures decreased $188,900. The largest decreases in budgeted General Fund expenditures were
for Public Works road maintenance ($118,100) and decreasing the transfer to the Local Road Improvement Fund ($123,200). The
property tax levy for the Local Road Improvement Fund increased by $164,517 from 2016. Sewer rates for the 201 sewer system
were increased by 10%. Sewer rates for the Uptown system were increased by 10% and the basis for the charge was modified for
have a greater portion of the charge based on actual usage.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2017
13
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview
of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about this report or
need additional financial information, contact the City of Scandia, 14727 209th Street N, Scandia, MN 55073.
BASIC FINANCIAL STATEMENTS
Governmental Business-Type
Activities Activities Total
ASSETS
Cash and Cash Equivalents 4,220,889$ 88,587$ 4,309,476$
Property Taxes Receivable 57,212 - 57,212
Assessments Receivable 33,805 8,609 42,414
Accounts Receivable 19,967 14,824 34,791
Interest Receivable 3,470 - 3,470
Prepaids 6,078 599 6,677
Inventory 7,334 - 7,334
Internal Balances 26,388 (26,388) -
Noncurrent Assets:
Net Pension Asset 106,494 - 106,494
Capital Assets not Being Depreciated 576,488 - 576,488
Capital Assets Being Depreciated (Net) 9,306,145 959,927 10,266,072
TOTAL ASSETS 14,364,270 1,046,158 15,410,428
DEFERRED OUTFLOWS OF RESOURCES
Pensions 108,367 6,969 115,336
LIABILITIES
Accounts Payable 181,175 8,595 189,770
Accrued Payroll, Taxes, and Benefits 26,035 515 26,550
Accrued Interest 2,282 - 2,282
Unearned Revenue 1,807 - 1,807
Noncurrent Liabilities:
Net Pension Liability 313,034 25,315 338,349
Compensated Absences 32,755 - 32,755
Debt Due Within One Year 130,000 - 130,000
Debt Due After One Year 509,000 - 509,000
TOTAL LIABILITIES 1,196,088 34,425 1,230,513
DEFERRED INFLOWS OF RESOURCES
Pensions 107,995 6,482 114,477
NET POSITION
Net Investment in Capital Assets 9,243,633 959,927 10,203,560
Restricted 78,132 - 78,132
Unrestricted 3,846,789 52,293 3,899,082
TOTAL NET POSITION 13,168,554$ 1,012,220$ 14,180,774$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF NET POSITION
DECEMBER 31, 2017
See accompanying notes.14
Operating CapitalCharges for Grants and Grants and Governmental Business-TypeFunctions/ProgramsExpensesServicesContributionsContributionsActivitiesActivitiesTotalGovernmental Activities:General Government 590,400$ 380,153$ -$ -$ (210,247)$ -$ (210,247)$ Public Safety 386,468 34,500 40,301 - (311,667) - (311,667) Public Works 1,058,902 7,337 - 5,870 (1,045,695) - (1,045,695) Parks and Recreation 116,445 22,428 2,845 - (91,172) - (91,172) Economic Development 326 - - - (326) - (326) Debt Service 17,583 - - - (17,583) - (17,583) Total Governmental Activities 2,170,124 444,418 43,146 5,870 (1,676,690) - (1,676,690) Business-Type Activities:201 Sewer 101,976 86,418 - 1,367 - (14,191) (14,191) Uptown Sewer17,185 17,371 - - - 186 186 Total Business-Type Activities 119,161 103,789 - 1,367 - (14,005) (14,005) TOTALS2,289,285$ 548,207$ 43,146$ 7,237$ (1,676,690) (14,005) (1,690,695) General Revenues:Taxes2,264,177 - 2,264,177 Intergovernmental 75,193 9 75,202 Investment Income 25,928 586 26,514 Miscellaneous 28,313 - 28,313 Total General Revenues 2,393,611 595 2,394,206 Net Gain on Disposal of Assets 50,000 - 50,000 CHANGE IN NET POSITION766,921 (13,410) 753,511 NET POSITION - BEGINNING OF YEAR12,401,633 1,025,630 13,427,263 NET POSITION - END OF YEAR13,168,554$ 1,012,220$ 14,180,774$ Primary GovernmentProgram RevenuesCITY OF SCANDIA, MINNESOTASTATEMENT OF ACTIVITIESFOR THE YEAR ENDED DECEMBER 31, 2017Net (Expense) Revenue and Changes in Net PositionSee accompanying notes.15
CITY OF SCANDIA, MINNESOTABALANCE SHEETGOVERNMENTAL FUNDSDebt Equipment Local Road Total TotalGeneral Service Replacement Improvement Nonmajor GovernmentalFundFundFundFundFundsFundsASSETSCash and Cash Equivalents 1,810,687$ 44,860$ 477,802$ 1,510,326$ 377,214$ 4,220,889$ Property Taxes Receivable 56,818 394 - - - 57,212 Assessments Receivable - 33,805 - - - 33,805 Accounts Receivable 19,967 - - - - 19,967 Interest Receivable 3,470 - - - - 3,470 Prepaids 6,078 1,355 - - - 7,433 Inventory 7,334 - - - - 7,334 Advance to Other Fund - - - - 52,388 52,388 TOTAL ASSETS1,904,354$ 80,414$ 477,802$ 1,510,326$ 429,602$ 4,402,498$ LIABILITIESAccounts Payable 125,885$ -$ -$ 55,290$ -$ 181,175$ Accrued Payroll, Taxes, and Benefits 26,035 - - - - 26,035 Unearned Revenue 1,807 - - - - 1,807 Advance from Other Fund - - - - 26,000 26,000 Total Liabilities 153,727 - - 55,290 26,000 235,017 DEFERRED INFLOWS OF RESOURCESUnavailable Revenue:Property Taxes 35,619 - - - - 35,619 Special Assessments - 33,805 - - - 33,805 Total Deferred Inflows of Resources 35,619 33,805 - - - 69,424 FUND BALANCESNonspendable 13,412 - - - 52,388 65,800 Restricted - 46,609 - - - 46,609 Committed - - - 606,223 360,959 967,182 Assigned - - 477,802 848,813 - 1,326,615 Unassigned 1,701,596 - - - (9,745) 1,691,851 Total Fund Balances 1,715,008 46,609 477,802 1,455,036 403,602 4,098,057 TOTAL LIABILITIES, DEFERRED INFLOWSOF RESOURCES, AND FUND BALANCES1,904,354$ 80,414$ 477,802$ 1,510,326$ 429,602$ 4,402,498$ DECEMBER 31, 2017See accompanying notes.16
CITY OF SCANDIA, MINNESOTA
RECONCILIATION OF THE BALANCE SHEET-GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET POSITION
Total fund balance for governmental funds 4,098,057$
Amounts reported for governmental activities in the Statement of Net Position are
different because:
Capital assets (net of accumulated depreciation of $6,236,253) used in
governmental activities are not financial resources and, therefore
are not reported in the funds. 9,882,633
Other long-term assets are not available to pay for current-period expenditures
and therefore are reported as unavailable revenue in the funds.69,424
Some expenses reported in the Statement of Activities do not require the use
of current financial resources and therefore are not reported as expenditures
in the governmental funds:
Accrued/Prepaid Interest (3,637)
Compensated Absences (32,755)
Long-term liabilities are not due and payable in the current period and,
therefore, they are not reported in the governmental funds:
Debt Due Within One Year (130,000)
Debt Due After One Year (509,000)
The net pension asset/liability and related deferred outflows/inflows of resources
represent the allocation of the pension obligations of the statewide plans to the City.
Such balances are not reported in the funds:
Net Pension Asset - PERA Volunteer Firefighter Retirement Plan 106,494
Net Pension Liability - PERA General Employees Retirement Fund (313,034)
Deferred Outflows - Pensions 108,367
Deferred Inflows - Pensions (107,995)
TOTAL NET POSITION OF GOVERNMENTAL ACTIVITIES 13,168,554$
DECEMBER 31, 2017
See accompanying notes.17
CITY OF SCANDIA, MINNESOTASTATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESGOVERNMENTAL FUNDSDebt Equipment Local Road Total TotalGeneral Service Replacement Improvement Nonmajor GovernmentalFundFundFundFundFundsFundsREVENUESTaxes 1,556,278$ 116,739$ -$ 560,533$ 35,000$ 2,268,550$ Special Assessments - 18,126 - - - 18,126 Licenses, Permits, and Fees 366,902 - - - - 366,902 Intergovernmental 107,716 - - - - 107,716 Charges for Services 63,886 - - - 3,000 66,886 Fines 8,392 - - - - 8,392 Investment Income 12,958 205 3,523 6,718 2,524 25,928 Miscellaneous 38,023 - - - 2,450 40,473 TOTAL REVENUES2,154,155 135,070 3,523 567,251 42,974 2,902,973 EXPENDITURESCurrent: General Government 566,215 - - - - 566,215 Public Safety 334,787 - - - - 334,787 Public Works 665,123 - - - 7,306 672,429 Parks and Recreation 99,791 - - - 3,768 103,559 Economic Development - - - - 326 326 Debt Service:Principal - 98,000 - - - 98,000 Interest and Other Charges - 16,452 - - - 16,452 Capital Outlay 21,859 - 195,094 88,753 6,335 312,041 TOTAL EXPENDITURES1,687,775 114,452 195,094 88,753 17,735 2,103,809 EXCESS (DEFICIENCY) OF REVENUESOVER (UNDER) EXPENDITURES466,380 20,618 (191,571) 478,498 25,239 799,164 OTHER FINANCING SOURCES (USES)Equipment Certificates Issued - - 160,000 - - 160,000 Operating Transfers In - - 8,312 602,518 - 610,830 Operating Transfers Out (523,200) (87,630) - - - (610,830) TOTAL OTHER FINANCINGSOURCES (USES)(523,200) (87,630) 168,312 602,518 - 160,000 NET CHANGE IN FUND BALANCES(56,820) (67,012) (23,259) 1,081,016 25,239 959,164 FUND BALANCES - BEGINNING1,771,828 113,621 501,061 374,020 378,363 3,138,893 FUND BALANCES - ENDING1,715,008$ 46,609$ 477,802$ 1,455,036$ 403,602$ 4,098,057$ FOR THE YEAR ENDED DECEMBER 31, 2017See accompanying notes.18
Net change in fund balances - total governmental funds 959,164$
Amounts reported for governmental activities in the Statement
of Activities are different due to the following:
Governmental funds report capital outlays as expenditures while
governmental activities report depreciation expense to allocate those
expenditures over the life of the assets. Gains (losses) related to the
disposal of such assets are reported in the Statement of Activities,
while governmental funds only report cash proceeds:
Capital Outlay, Net of $50,000 Trade-in Value 312,041$
Gain on Sale of Assets 50,000
Depreciation Expense (461,380) (99,339)
Revenues in Statement of Activities that do not provide
current financial resources are not reported as revenues
in the funds:
Change in Long-Term Receivables (16,629)
Proceeds from the issuance of long-term debt is an other financing
source in the governmental funds, while repayment of debt principal
is an expenditure in the governmental funds. However, neither
transaction has any effect on net position:
Equipment Certificates Issued (160,000)
Equipment Certificates Principal Payments 98,000
Net change in accrued interest on equipment certificates is not
reported as an expenditure in the funds. (1,131)
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 governmental funds:
Change in Compensated Absences (8,054)
Net pension asset/liability balances do not represent the impending use or
acquisition of current resources. Therefore, the change in the asset/liability
and the related deferrals is not reported in the governmental funds. (5,090)
CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES 766,921$
CITY OF SCANDIA, MINNESOTA
RECONCILIATION OF CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2017
TO THE STATEMENT OF ACTIVITIES
See accompanying notes.19
201 Sewer Uptown Sewer
Fund Fund Totals
ASSETS
Current Assets
Cash and Cash Equivalents 84,391$ 4,196$ 88,587$
Accounts Receivable 10,569 4,255 14,824
Prepaids 349 250 599
Assessments Receivable 8,609 - 8,609
Total Current Assets 103,918 8,701 112,619
Noncurrent Assets
Capital Assets Being Depreciated (Net) 774,420 185,507 959,927
TOTAL ASSETS 878,338 194,208 1,072,546
DEFERRED OUTFLOWS OF RESOURCES
Pensions 5,195 1,774 6,969
LIABILITIES
Current Liabilities
Accounts Payable 8,447 148 8,595
Accrued Salaries 366 149 515
Total Current Liabilities 8,813 297 9,110
Noncurrent Liabilities
Net Pension Liability 18,851 6,464 25,315
Advance from Other Fund - 26,388 26,388
Total Noncurrent Liabilities 18,851 32,852 51,703
TOTAL LIABILITIES 27,664 33,149 60,813
DEFERRED INFLOWS OF RESOURCES
Pensions 4,827 1,655 6,482
NET POSITION
Net Investment in Capital Assets 774,420 185,507 959,927
Unrestricted 76,622 (24,329) 52,293
TOTAL NET POSITION 851,042$ 161,178$ 1,012,220$
CITY OF SCANDIA, MINNESOTA
PROPRIETARY FUNDS
DECEMBER 31, 2017
STATEMENT OF NET POSITION
See accompanying notes.20
201 Sewer Uptown Sewer
Fund Fund Totals
OPERATING REVENUES
Charges for Services 86,418$ 17,371$ 103,789$
OPERATING EXPENSES
Wages and Benefits 17,947 7,928 25,875
Materials and Supplies 863 174 1,037
Professional Services 4,967 120 5,087
Repairs and Maintenance 29,138 1,853 30,991
Other Services and Charges 10,343 2,233 12,576
Depreciation 38,718 4,877 43,595
TOTAL OPERATING EXPENSES 101,976 17,185 119,161
NET OPERATING INCOME (LOSS)(15,558) 186 (15,372)
NONOPERATING INCOME
Special Assessments 1,367 - 1,367
Intergovernmental 7 2 9
Investment Income 550 36 586
TOTAL NONOPERATING INCOME 1,924 38 1,962
CHANGE IN NET POSITION (13,634) 224 (13,410)
NET POSITION - BEGINNING OF YEAR 864,676 160,954 1,025,630
NET POSITION - END OF YEAR 851,042$ 161,178$ 1,012,220$
CITY OF SCANDIA, MINNESOTA
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2017
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
See accompanying notes.21
201 Sewer Uptown Sewer
Fund Fund Totals
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers 86,342$ 17,369$ 103,711$
Cash Paid to Suppliers (39,986) (4,748) (44,734)
Cash Paid to Employees (23,293) (8,605) (31,898)
NET CASH PROVIDED BY OPERATING ACTIVITIES 23,063 4,016 27,079
CASH FLOWS FROM NONCAPITAL FINANCING
ACTIVITIES
Intergovernmental Cash Receipts 7 2 9
Special Assessments 2,831 - 2,831
Net Advances to/from Other Funds - (2,640) (2,640)
NET CASH PROVIDED (USED) BY NONCAPITAL
FINANCING ACTIVITIES 2,838 (2,638) 200
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Purchases of Capital Assets (10,270) - (10,270)
CASH FLOW FROM INVESTING ACTIVITIES
Investment Income 550 36 586
Net Increase in Cash and Cash Equivalents 16,181 1,414 17,595
Cash and Cash Equivalents-Beginning of Year 68,210 2,782 70,992
Cash and Cash Equivalents-End of Year 84,391$ 4,196$ 88,587$
RECONCILIATION OF NET OPERATING INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Net Operating Income (Loss) (15,558)$ 186$ (15,372)$
Adjustments to Reconcile Net Operating Income (Loss)
to Net Cash Provided by Operating Activities
Depreciation Expense 38,718 4,877 43,595
Change in Assets, Liabilities, and Deferred Outflows/Inflows
Accounts Receivable (76) (2) (78)
Prepaids 367 (170) 197
Accounts Payable 4,959 (198) 4,761
Accrued Wages 70 (21) 49
Deferred Outflows of
Resources - Pension 9,166 2,433 11,599
Net Pension Liability (16,018) (3,750) (19,768)
Deferred Inflows of
Resources - Pension 1,435 661 2,096
NET CASH PROVIDED BY OPERATING ACTIVITIES 23,063$ 4,016$ 27,079$
CITY OF SCANDIA, MINNESOTA
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2017
STATEMENT OF CASH FLOWS
See accompanying notes.22
Agency
Fund
ASSETS
Cash and Cash Equivalents 11,430$
LIABILITIES
Accounts Payable 11,430$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF FIDUCIARY NET POSITION
FIDUCIARY FUND
DECEMBER 31, 2017
See accompanying notes.23
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
24
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the City of Scandia (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 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 describe 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. The City’s blended component units consist of:
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 appointed by 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. The fiduciary fund is only reported in the Statement of
Fiduciary Net Position at the fund financial statement level. 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 three major
categories: governmental, proprietary, and fiduciary. 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, 2017
25
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.B. BASIS OF PRESENTATION (Continued)
Fund Financial Statements (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 enterprise 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 enterprise fund are at least 5 percent of the corresponding total for all governmental and enterprise funds
combined.
The City reports the following major governmental funds:
The General Fund is the primary operating fund. It accounts for all financial resources of the general government,
except those required to be accounted for in another fund.
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 enterprise funds. Ad valorem taxes and
special assessments are used for the payment of principal and interest on the City’s judgment.
The Equipment Replacement Fund is a capital project fund used to account for financial resources to be used for various
equipment purchases made by the City.
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 City reports the following major proprietary funds:
The 201 Sewer and Uptown Sewer Funds account for business-like activities related to the operation of sewer systems
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 Agency Fund accounts for assets held by the City as an agent for other parties outside the organization. These assets
cannot be used to finance the City’s own operating programs.
The Special Revenue Fund accounts for funds received by the City with a specific purpose.
The Capital Projects Funds account for financial resources to be used for the acquisition or construction of capital
projects (other than projects financed by proprietary funds).
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
26
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-like 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, proprietary, and fiduciary funds utilize an economic resources measurement
focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net
position, 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-like 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 and fiduciary funds utilize the accrual basis of accounting.
1.D. 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 contingencies related to these balances 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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
27
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.E. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY
Cash and Cash Equivalents
For purposes of the Statement of Net Position, “cash and cash equivalents” includes all demand, savings, and money market
accounts for the City. For the purpose of the proprietary fund Statement of Cash Flows, “cash and cash equivalents” include all
demand, savings, and money market accounts.
See Note 3.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 and interfund receivables and payables between
funds within business-type activities are eliminated in the Statement of Net Position. See Note 3.D. for details of interfund
transactions, including receivables and payables at year-end.
Prepaids
Prepaids represent costs paid during the current year to be recognized in future periods.
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.
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 are 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,
fines and charges for service since they are usually both measurable and available. Nonexchange transactions 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. Allowance for uncollectible accounts receivable are based upon historical trends and the periodic
aging of accounts receivable. No allowances are deemed necessary at year end.
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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
28
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.E. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY (Continued)
Capital Assets (Continued)
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 fair 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.
Noncurrent Liabilities
The accounting treatment of long-term debt depends on whether the assets are used in 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 Statewide General Employees
Retirement Fund net pension liability.
PERA
For purposes of measuring the net pension asset/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 PERA’s fiscal
year 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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
29
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.E. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY (Continued)
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 fund
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 fund Statements of
Net Position in relation to the activity of pension funds in which City employees participate. Accordingly, such amounts are
deferred and recognized as inflows of resources in the period that they become available.
See Note 4 for additional information pertaining to the deferred outflows and deferred inflows recorded to account for pension
activities.
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 result 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.
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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
30
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.E. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY (Continued)
Equity Classifications (Continued)
Fund Statements
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 the 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, 2017 consist of inventory,
prepaid expenditures, 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 35%-50% of annual General
Fund operating expenses.
See Note 3.E. for additional disclosures.
Proprietary Fund Financial Statements – Proprietary fund equity is classified the same as in the government-wide statements, as
described on the prior page.
1.F. 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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
31
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.F. REVENUES, EXPENDITURES, AND EXPENSES (Continued)
Property Tax (Continued)
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 1 5 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.
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 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.
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 3.D.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
32
NOTE 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
2.A. FUND ACCOUNTING REQUIREMENTS AND DEPOSITS AND INVESTMENTS LAWS AND
REGULATIONS
By its nature as a local government unit, the City is subject to various federal, state, and local laws and contractual regulations.
The City complies with all state and local laws and regulations requiring the use of separate funds.
In accordance with state law, all uninsured deposits of municipal funds in financial institutions must be secured with acceptable
collateral at market value. Minnesota Statutes require that all deposits with financial institutions be collateralized in an amount
equal to 110% of deposits in excess of FDIC or FSLIC insurance (100% if collateral pledged is irrevocable standby letters of
credit issued by the Federal Home Loan Bank). The City complies with such laws.
2.B. BUDGETARY INFORMATION
Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America.
All annual appropriations lapse at fiscal year-end. The City does not use encumbrance accounting.
2.C. DEFICIT FUND BALANCE
At December 31, 2017, the City has a deficit fund balance of $9,745 in its Park Capital Improvement Fund. Such deficit is
expected to be covered through future revenues or transfers from other funds.
NOTE 3 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.
3.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.
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;
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
33
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.A. CASH, CASH EQUIVALENTS, AND INVESTMENTS (Continued)
Deposits (Continued)
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 public debt 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, 2017, the City’s deposits 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.
Investments
The City may also invest idle funds as authorized by Minnesota Statutes as follows: direct obligations guaranteed by the United
States or its agencies; shares of investment companies registered under the Federal Investment Company Act of 1940 that received
the highest credit rating, are rated in one of the two highest rating categories by a statistical rating agency, and all of the
investments have a final maturity of 13 months or less; general obligations rated “A” or better; revenue obligations rated “AA” or
better; general obligations of the Minnesota Housing Finance Agency rated “A” or better; bankers’ acceptances of United States
banks eligible for purchase by the Federal Reserve System; commercial paper issued by United States corporations or their
Canadian subsidiaries, rated of the highest quality category by at least two nationally recognized rating agencies, and maturing in
270 days or less; Guaranteed Investment Contracts guaranteed by a United States commercial bank, domestic branch of a foreign
bank, or a United States insurance company, and with a credit quality in one of the top two highest categories; repurchase or
reverse purchase agreements and securities lending agreements with financial institutions qualified as a “depository” by the
government entity, with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a
primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York, or certain Minnesota securities
broker-dealers. The City does not have any investment policies that would further limit investment choices.
At December 31, 2017, the City does not hold any investments.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
34
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.B. CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2017 is as follows:
Balance at Balance at
01/01/17 Additions Disposals 12/31/17
Governmental Activities:
Capital Assets not Being
Depreciated
Land 487,735$ -$ -$ 487,735$
Construction In Progress - 88,753 - 88,753
Total Capital Assets not Being
Depreciated 487,735 88,753 - 576,488
Capital Assets Being
Depreciated
Buildings 2,272,131 - - 2,272,131
Equipment 863,936 151,311 (19,034) 996,213
Vehicles 1,379,251 100,860 (78,319) 1,401,792
Infrastructure 10,688,497 21,117 - 10,709,614
Other Improvements 162,648 - - 162,648
Total Capital Assets Being
Depreciated 15,366,463 273,288 (97,353) 15,542,398
Less: Accumulated Depreciation
Buildings (957,441) (49,840) - (1,007,281)
Equipment (514,769) (64,788) 19,034 (560,523)
Vehicles (616,750) (68,407) 78,319 (606,838)
Infrastructure (3,677,878) (272,815) - (3,950,693)
Other Improvements (105,388) (5,530) - (110,918)
Total Accumulated
Depreciation (5,872,226) (461,380) 97,353 (6,236,253)
Total Capital Assets Being
Depreciated, Net 9,494,237 (188,092) - 9,306,145
Capital Assets, Net 9,981,972$ (99,339)$ -$ 9,882,633$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
35
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.B. CAPITAL ASSETS (Continued)
Balance at Balance at
01/01/17 Additions Disposals 12/31/17
Business-Type Activities:
Capital Assets Being Depreciated
Sewer Plant 1,500,000$ -$ -$ 1,500,000$
Equipment 123,925 10,270 - 134,195
Uptown Sewer 243,827 - - 243,827
Total Capital Assets Being
Depreciated 1,867,752 10,270 - 1,878,022
Less: Accumulated Depreciation
Sewer Plant (810,000) (30,000) - (840,000)
Equipment (11,057) (8,718) - (19,775)
Uptown Sewer (53,443) (4,877) - (58,320)
Total Accumulated
Depreciation (874,500) (43,595) - (918,095)
Business-Type Activites 993,252$ (33,325)$ -$ 959,927$
Depreciation is charged to governmental activities as follows:
General Government 13,976$
Public Safety 59,578
Public Works 375,752
Parks and Recreation 12,074
Total Depreciation Expense 461,380$
3.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). All bonds and certificates set forth below are direct obligations of the City and pledge the
full faith and credit of the City.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
36
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.C. NONCURRENT LIABILITIES (Continued)
Debt Detail
As of December 31, 2017, the long-term debt of the financial reporting entity consists of the following:
Governmental Activities
Issue Annual Interest Maturity Original Remaining
Type of Debt Date Payment Rate(s)Date Amount Amount
2013 Equipment Certificate 7/13 $50,000 - 65,000 0.80-3.10% 7/23 570,000$ 350,000$
2015 Equipment Certificate 5/15 $43,000 1.40-2.30% 7/20 215,000 129,000
2017 Equipment Certificate 8/17 $32,000 2.35-2.75% 8/22 160,000 160,000
Total Governmental Activities Equipment Certificates Payable 639,000
Equipment Certificates Due Within One Year 130,000
Equipment Certificates Due After One Year 509,000$
Equipment Certificates
Changes in Noncurrent Liabilities
The following is a summary of changes in noncurrent liabilities for the year ended December 31, 2017:
Amounts Due
Balance Balance Within
Type of Debt 1/1/17 Additions Deductions 12/31/17 One Year
Governmental Activities
Equipment Certificates 577,000$ 160,000$ (98,000)$ 639,000$ 130,000$
Compensated Absences 24,701 28,031 (19,977) 32,755 -
Net Pension Liability 417,729 - (104,695) 313,034 -
Total Long-Term Debt 1,019,430$ 188,031$ (222,672)$ 984,789$ 130,000$
Business-Type Activities
Net Pension Liability 45,083$ -$ (19,768)$ 25,315$ -$
Interest and other fiscal changes total $17,583 in the Statement of Activities (included in Debt Service line). Interest and other
fiscal changes total $16,452 for the Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds
(included in the line Interest and Other Charges).
Governmental activity debt is typically funded through the Debt Service Fund. Compensated absences and Net Pension Liability
are funded through the funds to which the respective employees’ wages are allocated.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
37
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.C. NONCURRENT LIABILITIES (Continued)
Annual Debt Service Requirements
At December 31, 2017, the estimated annual debt service requirements to maturity, including principal and interest, are as follows
for the City’s governmental activities:
Years Ending
December 31, Principal Interest Total
2018 130,000$ 15,203$ 145,203$
2019 130,000 12,638 142,638
2020 135,000 9,593 144,593
2021 92,000 6,228 98,228
2022 92,000 3,670 95,670
2023 60,000 930 60,930
Totals 639,000$ 48,262$ 687,262$
Governmental Activities
3.D. INTERFUND TRANSACTIONS AND BALANCES
Operating transfers consist of the following for the year ended December 31, 2017:
Transfers Equipment Local Road
Major Fund Out Replacement Improvement Fund Total
General 523,200$ -$ 523,200$ 523,200$
Debt Service 87,630 8,312 79,318 87,630
610,830$ 8,312$ 602,518$ 610,830$
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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
38
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.D. INTERFUND TRANSACTIONS AND BALANCES (Continued)
The interfund balances are as follows:
Due To Fund Due From Fund Amount Reason
Capital Improvement Uptown Sewer 26,388$ Sewer improvements
Capital Improvement Park Capital Improvement 26,000 Finance parking lot
Total Interfund Balances 52,388$
Governmental Fund Elimination (26,000)
Government-wide Internal Balances 26,388$
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 Park Capital Improvement Fund monies owed to the Capital Improvement Fund will be
repaid as park dedication fees and donations are received.
3.E. FUND EQUITY
At December 31, 2017, governmental fund equity consists of the following:
General Fund
Nonspendable - Prepaids and Inventory 13,412$
Unassigned 1,701,596
Total General Fund Balance 1,715,008$
Debt Service Fund
Restricted for Debt Service 46,609$
Equipment Replacement Fund
Assigned for Equipment Replacement 477,802$
Local Road Improvement Fund
Committed for Local Road Improvements 606,223$
Assigned for Local Road Improvement 848,813
Total Local Road Improvement Fund 1,455,036$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
39
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.E. FUND EQUITY (Continued)
Other Governmental Funds
Nonspendable - Advance to Other Fund 52,388$
Committed for Capital Improvements 351,214
Committed for Economic Development 9,745
Unassigned (9,745)
Total Other Governmental Funds Balance 403,602$
NOTE 4 OTHER NOTES
4.A. EMPLOYEE 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 (General Employees Plan (accounted for in the General Employees Fund))
All full-time and certain part-time employees of the City of Scandia are covered by the General Employees Plan. General
Employees Plan members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by
Social Security and Basic Plan members are not. The Basic Plan was closed to new members in 1967. All new members must
participate in the Coordinated Plan.
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.
Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. Members
in plans that are at least 90% funded for two consecutive years are given 2.50% increases. Members in plans that have not
exceeded 90% funded, or have fallen below 80%, are given 1% increases.
The benefit provisions stated in the following paragraphs of this section are current provisions and apply to active plan
participants. 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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
40
NOTE 4 OTHER NOTES (Continued)
4.A. EMPLOYEE DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
Benefits Provided (Continued)
General Employees Plan Benefits
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 and Basic Plan members.
The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2).
Under Method 1, the annuity accrual rate for a Basic Plan member is 2.20% of average salary for each of the first ten years of
service and 2.70% for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.20% of average salary
for each of the first ten years and 1.70% for each remaining year. Under Method 2, the annuity accrual rate is 2.70% of average
salary for Basic Plan members and 1.70% for Coordinated Plan members for each year 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.
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
Basic Plan members and Coordinated Plan members were required to contribute 9.10% and 6.50%, respectively, of their annual
covered salary in calendar year 2017. The City was required to contribute 11.78% of pay for Basic Plan members and 7.50% for
Coordinated Plan members in calendar year 2017. The City’s contributions to the General Employees Fund for the year ended
December 31, 2017 were $27,172. 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, 2017, the City reported a liability of $338,349 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 $6 million to
the fund in 2017. 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 $4,251. The net pension liability was measured as of June 30, 2017, 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 proportion 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, 2016 through June 30, 2017 relative to the total employer contributions received from all of PERA’s
participating employers. At June 30, 2017, the City’s proportion share was 0.0053%, which was a decrease of 0.0004% from its
proportion measured as of June 30, 2016.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
41
NOTE 4 OTHER NOTES (Continued)
4.A. EMPLOYEE DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
Pension Costs (Continued)
For the year ended December 31, 2017, the City recognized pension expense of $5,758 for its proportionate share of the General
Employees Fund’s pension expense. In addition, the City recognized an additional $123 as pension expense (and grant revenue)
for its proportionate share of the State of Minnesota’s contribution of $6 million to the General Employees Fund.
At December 31, 2017, the City reported its proportionate share of the General Employees Fund’s deferred outflows of resources
and deferred inflows of resources related to pensions from the following sources:
Deferred Outflows of Deferred Inflows of
Resources Resources
Differences between expected
and actual economic experience 11,151$ 23,410$
Changes in actuarial assumptions 60,413 33,919
Difference between projected
and actual investment earnings 6,686 -
Changes in proportion - 29,312
Contributions paid to PERA subsequent
to the measurement date 13,955 -
Total City Deferred Outflows/Inflows 92,205$ 86,641$
A total of $13,955 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to
the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2018. Other
amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as
follows:
Year ended
December 31: Pension Expense
2018 7,180$
2019 12,145$
2020 (13,354)$
2021 (14,362)$
Actuarial Assumptions
The total pension liability in the June 30, 2017, actuarial valuation was determined using the following actuarial assumptions:
Assumptions Rates
Inflation 2.50% per year
Active Member Payroll Growth 3.25% per year
Investment Rate of Return 7.50%
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
42
NOTE 4 OTHER NOTES (Continued)
4.A. EMPLOYEE DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
Actuarial Assumptions (Continued)
Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors and disabilitants
were based on RP-2014 tables for males or females, as appropriate, with slight adjustments. Cost of living benefit increases for
retirees are assumed to be 1.00% for the General Employees through 2044 and then 2.50% thereafter.
Actuarial assumptions used in the June 30, 2017 valuation were based on the results of actuarial experience studies. The most
recent four-year experience study in the General Employees Plan was completed in 2015.
The following changes in actuarial assumptions occurred in 2017:
General Employees Fund
The Combined Service Annuity (CSA) loads were changed from 0.80% for active members and 60.00% for vested
and non-vested deferred members. The revised CSA loads are now 0.00% for active member liability, 15.00% for
vested deferred member liability and 3.00% for non-vested deferred member liability.
The assumed post-retirement benefit increase rate was changed from 1.00% for all years, to 1.00% per year through
2044 and 2.50% per year thereafter to.
The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness of the long-
term expected rate of return on a regular basis 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:
Long-Term Expected
Real Rate of Return Asset Class Target Allocation
Domestic Stocks 39% 5.10%
International Stocks 19% 5.30%
Bonds 20% .75%
Alternative Assets 20% 5.90%
Cash 2% 0.0%
Discount Rate
The discount rate used to measure the total pension liability in 2017 was 7.50%. The projection of cash flows used to determine
the discount rate assumed that employee and employer contributions will be made at rates set in Minnesota Statutes. Based on
these assumptions, the fiduciary net position of the General Employees Fund was projected to be available to make all projected
future benefit payments of current active and inactive employees. 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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
43
NOTE 4 OTHER NOTES (Continued)
4.A. EMPLOYEE DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
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 1 percentage point lower or 1 percentage point higher than the current discount rate:
1% Decrease in 1% Increase in
Discount Rate (6.5%) Discount Rate (7.5%) Discount Rate (8.5%)
Net Pension Liability 524,804$ 338,349$ 185,701$
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.
4.B. EMPLOYEE DEFINED CONTRIBUTION PENSION PLAN - STATEWIDE
The council members of the City of Scandia are covered by the Public Employees Defined Contribution Plan (PEDCP), a multiple-
employer deferred compensation plan administered by the Public Employees Retirement Association of Minnesota (PERA). The
PEDCP 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 5 percent of salary which is
matched by the elected official's employer. 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 2
percent of employer contributions and twenty-five hundredths of one percent of the assets in each member's account annually.
Total contributions made by the City during fiscal year 2017 amount to $842.
4.C. STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN
Plan Description
The Scandia Fire/Rescue participates in the Statewide Volunteer Firefighter Retirement Plan (Volunteer Firefighter 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, 2017, the plan covered 27 active firefighters and 1 vested terminated fire fighters whose pension benefits are deferred. The
plan is established and administered in accordance with Minnesota Statutes, Chapter 353 G.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
44
NOTE 4 OTHER NOTES (Continued)
4.C. STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
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 of Scandia. 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% through 20 years at 100%.
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 $33,224 in fire state aid to
the plan on behalf of the Scandia Fire/Rescue for the year ended December 31, 2016, which was recorded as revenue. Required
employer contributions are calculated annually based on statutory provisions. The City of Scandia’s statutorily-required
contributions to the Volunteer Firefighter Plan for the year ended December 31, 2017, was $0. The City of Scandia contributions
were equal to the required contributions as set by state statute.
Pension Costs
At December 31, 2017, the City of Scandia reported a net pension asset of $160,494 for the Volunteer Firefighter Plan. The net
pension asset was measured as of December 31, 2016. The total pension liability used to calculate the net pension asset in
accordance with GASB 68 was determined by PERA applying an actuarial formula to specific census data certified by the fire
department as of December 31, 2016. The following table presents the changes in net pension asset during the year.
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability (Asset)
Beginning Balance 12/31/15 654,741$ 735,277$ (80,536)$
Service Cost 24,777 - 24,777
Interest on Pension Liability 38,089 - 38,089
Actuarial Experience (Gains)/Losses (11,188) - (11,188)
Projected Investment Earnings - 44,116 (44,116)
Contributions (State) - 33,224 (33,224)
Asset (Gain)/Loss - 1,069 (1,069)
Benefit Payouts (89,400) (89,400) -
PERA Administrative Fee - (773) 773
Net Changes (37,722) (11,764) (25,958)
Balance End of Year 12/31/16 617,019$ 723,513$ (106,494)$
For the year ended December 31, 2017, the City of Scandia recognized pension expense of $17,070.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
45
NOTE 4 OTHER NOTES (Continued)
4.C. STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
Pension Costs (Continued)
At December 31, 2017, the City of Scandia reported deferred inflows of resources and deferred outflows of resources related to the
pension from the following sources:
Deferred Outflows of Deferred Inflows of
Resources Resources
Differences between expected
and actual economic experience -$ 27,836$
Difference between projected
and actual investment earnings 23,131 -
Total City Deferred Outflows/Inflows 23,131$ 27,836$
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
2018 (2,836)$
2019 (2,836)$
2020 3,419$
2021 (2,452)$
Actuarial Assumptions
The total pension liability at December 31, 2016, 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 6.00%
Inflation rate of 3.00%
There were no changes in actuarial assumptions in 2016.
Discount Rate
The discount rate used to measure the total pension liability was 6.00%. The projection of cash flows used to determine the
discount rate assumed that contributions to the Volunteer Firefighter Plan 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 all
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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
46
NOTE 4 OTHER NOTES (Continued)
4.C. STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
Pension Liability Sensitivity
The following presents the City’s net pension asset for the Volunteer Firefighter Plan, calculated using the discount rate disclosed
in the preceding paragraph, as well as what the City’s net pension asset would be if it were calculated using a discount rate 1%
lower or 1% 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 93,762$ 106,494$ 118,698$
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.
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 Statewide
Volunteer Firefighter Retirement Plan (VOLP) 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%
Cash 5% 0.0%
The 6.00% 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. 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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2017
47
NOTE 4 OTHER NOTES (Continued)
4.C. STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
Plan Investments (Continued)
Description of significant investment policy changes during the year
The SBI made no significant changes to their investment policy during Fiscal Year 2016 for the Statewide Volunteer Firefighter
Retirement Plan.
Pension Plan Fiduciary Net Position
Detailed information about the Volunteer Firefighter Plan’s fiduciary net position as of December 31, 2016, 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.
4.D. RISK MANAGEMENT
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. The City’s management is not aware of
any incurred but unreported claims.
4.E. 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 2018 contract budget, expenditures anticipated under this agreement for 2018 are estimated at
$126,884.
4.F. SUBSEQUENT EVENTS
Subsequent to year-end and prior to issuance of these financial statements, the City initiated the purchase of a brush truck, which is
anticipated to have a final cost approximating $90,000.
REQUIRED SUPPLEMENTARY INFORMATION
Budget Actual Variance with
Amounts- Amounts Final Budget
Original and Budgetary Over
Final Basis (Under)
RESOURCES (INFLOWS):
Taxes 1,573,400$ 1,556,278$ (17,122)$
Licenses, Permits, and Fees 101,900 366,902 265,002
Intergovernmental 51,900 107,716 55,816
Charges for Services 64,112 63,886 (226)
Fines 12,000 8,392 (3,608)
Investment Income 5,000 12,958 7,958
Miscellaneous 29,730 38,023 8,293
AMOUNTS AVAILABLE 1,838,042 2,154,155 316,113
CHARGES TO APPROPRIATIONS (OUTFLOWS):
General Government:
Mayor and Council 18,900 19,290 390
Planning and Buildings 149,000 213,886 64,886
Elections 1,300 1,766 466
General Government 342,600 331,274 (11,326)
Public Safety:
Police 120,500 128,656 8,156
Fire 244,500 213,208 (31,292)
Public Works 848,600 679,904 (168,696)
Parks and Recreation 101,100 99,791 (1,309)
Transfers Out 523,200 523,200 -
TOTAL CHARGES 2,349,700 2,210,975 (138,725)
NET CHANGE IN FUND BALANCE (511,658)$ (56,820) 454,838$
FUND BALANCE - BEGINNING 1,771,828
FUND BALANCE - ENDING 1,715,008$
CITY OF SCANDIA, MINNESOTA
FOR THE YEAR ENDED DECEMBER 31, 2017
BUDGETARY COMPARISON SCHEDULE-GENERAL FUND
48
City's Proportionate Share of the Net Proportionate Pension Liability Share of the PlanCity's State's and the State's Net Pension Fiduciary NetProportionate Proportionate Proportionate Liability Position as aCity's Share of the Share of the Net Share of the Net City's as a Percentage PercentageFor the Fiscal Portion of the Net Pension Pension Liability Pension Liability Covered- of its Covered- of the TotalYear Ended Net Pension Liability Associated with Associated with Employee Employee PensionJune 30Liability (Asset)(Asset) (a)the City (b)the City (a+b)Payroll (c)Payroll ((a+b)/c)LiabilityGeneral Employees Retirement Fund Pension Plan2017 0.0053% 338,349$ 4,251$ 342,600$ 338,175$ 100.1% 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%Contributions in Contributions as Relation to the a Percentage of For the Calendar Statutorily Statutorily Contribution City's Covered-Year Ended Required Required Deficiency Covered-EmployeeEmployeeDecember 31ContributionContribution(Excess)Payroll PayrollGeneral Employees Retirement Fund Pension Plan2017 27,172$ 27,172$ -$ 262,292$ 7.5%2016 24,941$ 24,941$ -$ 334,592$ 7.5%2015 25,468$ 25,468$ -$ 348,155$ 7.3%Statewide Volunteer Firefighter Pension Plan2017 -$ -$ -$ N/A N/A2016 -$ -$ -$ N/A N/A2015 -$ -$ -$ N/A N/ANote: These schedules are provided propsectively beginning with the City's fiscal year ended December 31, 2015 and are intended to show a ten year trend. Additional years will be reported as they become available.LAST TEN YEARS (Presented Prospectively)LAST TEN YEARS (Presented Prospectively)SHARE OF NET PENSION LIABILITYSCHEDULE OF CITY'S PROPORTIONATE CITY OF SCANDIASCHEDULE OF CITY CONTRIBUTIONS49
2016 2015 2014
Changes in Total Pension Liability (TPL)
Balance at January 1st 654,741$ 636,294$ 629,967$
Service Cost 24,777 23,343 22,874
Interest on the TPL 38,089 38,665 38,350
Actuarial Experience (Gains)/Losses (11,188) (13,108) (27,553)
Benefit Payments (89,400) (30,453) (27,344)
Balance at December 31st 617,019$ 654,741$ 636,294$
Plan Fiduciary Net Position (PFNP)
Balance at January 1st 735,277$ 730,400$ 658,422$
Fire State Aid 26,738 27,129 24,368
Fire Supplemental Aid 6,486 6,638 5,896
Supplemental Benefit Reimbursement - 1,000 2,955
Municipal Contributions - - 18,259
Adjustment to Initial Asset Transfer - - 5,368
Net Investment Income 45,186 1,367 43,226
Total Additions 78,410 36,134 100,072
Benefit Payments (89,400) (30,453) (27,344)
Administrative Expenses (774) (804) (750)
Total Reductions (90,174) (31,257) (28,094)
Balance at December 31st 723,513$ 735,277$ 730,400$
Net Pension Liability (Asset) - December 31st (106,494)$ (80,536)$ (94,106)$
Plan Fiduciary Net Position as a Percentage of Total Pension Liability 117% 112% 115%
Note: The schedule is provided propsectively beginning with the Firefighter Fund's fiscal year ended December 31, 2014 and is intended to
show a ten year trend. Additional years will be reported as they become available.
LAST TEN YEARS (Presented Prospectively)
SCHEDULE OF CHANGES IN NET PENSION LIABILITY (ASSET)
CITY OF SCANDIA, MINNESOTA
STATEWIDE VOLUNTEER FIREFIGHTER FUND
50
OTHER SUPPLEMENTARY INFORMATION
CITY OF SCANDIA, MINNESOTASUPPLEMENTAL COMBINING BALANCE SHEETMAJOR GOVERNMENTAL FUND - DEBT SERVICE FUND2007 2010 2011 2013 2015 2017 TotalImprovement Equipment Equipment Equipment Equipment Equipment DebtBondCertificatesCertificatesCertificatesCertificatesCertificatesServiceASSETSCash and Cash Equivalents 17,756$ -$ -$ 16,374$ 13,230$ (2,500)$ 44,860$ Property Taxes Receivable 394 - - - - - 394 Assessments Receivable 33,805 - - - - - 33,805 Prepaids - - - - 1,355 - 1,355 TOTAL ASSETS51,955$ -$ -$ 16,374$ 14,585$ (2,500)$ 80,414$ DEFERRED INFLOWS OF RESOURCESUnavailable Revenue:Special Assessments 33,805$ -$ -$ -$ -$ -$ 33,805$ FUND BALANCERestricted 18,150 - - 16,374 14,585 (2,500) 46,609 TOTAL DEFERRED INFLOWS OFRESOURCES AND FUND BALANCE51,955$ -$ -$ 16,374$ 14,585$ (2,500)$ 80,414$ DECEMBER 31, 201751
2007 2010 2011 2013 2015 2017 TotalImprovement Equipment Equipment Equipment Equipment Equipment DebtBondCertificatesCertificatesCertificatesCertificatesCertificatesServiceREVENUESTaxes -$ -$ -$ 68,000$ 48,739$ -$ 116,739$ Special Assessments 18,126 - - - - - 18,126 Investment Income 65 - - 91 49 - 205 TOTAL REVENUES18,191 - - 68,091 48,788 - 135,070 EXPENDITURESDebt Service:Principal - - - 55,000 43,000 - 98,000 Interest and Other Charges 40 - - 10,493 3,419 2,500 16,452 TOTAL EXPENDITURES40 - - 65,493 46,419 2,500 114,452 EXCESS (DEFICIENCY) OF REVENUESOVER (UNDER) EXPENDITURES18,151 - - 2,598 2,369 (2,500) 20,618 OTHER FINANCING SOURCES (USES)Operating Transfers In - - - - 10,177 - 10,177 Operating Transfers Out (79,318) (10,177) (8,312) - - - (97,807) TOTAL OTHER FINANCINGSOURCES (USES)(79,318) (10,177) (8,312) - 10,177 - (87,630) NET CHANGE IN FUND BALANCE(61,167) (10,177) (8,312) 2,598 12,546 (2,500) (67,012) FUND BALANCE - BEGINNING79,317 10,177 8,312 13,776 2,039 - 113,621 FUND BALANCE - ENDING18,150$ -$ -$ 16,374$ 14,585$ (2,500)$ 46,609$ FOR THE YEAR ENDED DECEMBER 31, 2017 MAJOR GOVERNMENTAL FUND - DEBT SERVICE FUND SUPPLEMENTAL COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE CITY OF SCANDIA, MINNESOTA 52
Economic Park
Development Capital Capital Total
Authority Improvement Improvement Nonmajor
Fund Fund Fund Funds
ASSETS
Cash and Cash Equivalents 9,745$ 16,255$ 351,214$ 377,214$
Advance to Other Fund - - 52,388 52,388
TOTAL ASSETS 9,745$ 16,255$ 403,602$ 429,602$
LIABILITIES
Advance from Other Funds -$ 26,000$ -$ 26,000$
FUND BALANCES
Nonspendable - - 52,388 52,388
Committed 9,745 - 351,214 360,959
Unassigned - (9,745) - (9,745)
Total Fund Balances 9,745 (9,745) 403,602 403,602
TOTAL LIABILITIES
AND FUND BALANCES 9,745$ 16,255$ 403,602$ 429,602$
DECEMBER 31, 2017
ALL NONMAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEET
CITY OF SCANDIA, MINNESOTA
53
Economic Park
Development Capital Capital Total
Authority Improvement Improvement Nonmajor
Fund Fund Fund Funds
REVENUES
Taxes 5,000$ -$ 30,000$ 35,000$
Charges for Services - 3,000 - 3,000
Investment Income (20) 132 2,412 2,524
Miscellaneous - 2,450 - 2,450
TOTAL REVENUES 4,980 5,582 32,412 42,974
EXPENDITURES
Current:
Building Inspector - - 7,306 7,306
Parks and Recreation - 3,768 - 3,768
Economic Development 326 - - 326
Capital Outlay - - 6,335 6,335
TOTAL EXPENDITURES 326 3,768 13,641 17,735
NET CHANGE IN FUND BALANCES 4,654 1,814 18,771 25,239
FUND BALANCES - BEGINNING 5,091 (11,559) 384,831 378,363
FUND BALANCES - ENDING 9,745$ (9,745)$ 403,602$ 403,602$
FOR THE YEAR ENDED DECEMBER 31, 2017
ALL NONMAJOR GOVERNMENTAL FUNDS
CITY OF SCANDIA, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES
54
Initial Outstanding Outstanding Principal Issue Interest Maturity Authorized Balance Balance Due inDateRateDateIssue01/01/17IssuedPaid12/31/172018GOVERNMENTAL INDEBTEDNESS2013 Certificates of Indebtedness 7/1/2013 0.80-3.10% 7/1/2023 570,000$ 405,000$ -$ 55,000$ 350,000$ 55,000$ 2015 Certificates of Indebtedness 7/1/2015 1.40-2.30% 7/1/2020 215,000 172,000 - 43,000 129,000 43,000 2017 Certificates of Indebtedness 8/1/2017 2.35-2.75% 8/1/2022 160,000 - 160,000 - 160,000 32,000 TOTAL INDEBTEDNESS945,000$ 577,000$ 160,000$ 98,000$ 639,000$ 130,000$ CITY OF SCANDIA, MINNESOTASCHEDULE OF INDEBTEDNESSFOR THE YEAR ENDED DECEMBER 31, 2017(UNAUDITED)55
OTHER 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.
St. Cloud
320.251.0286
Little Falls
320.632.6311
Albany
320.845.2940
Maple Lake
320.963.5414
Monticello
763.295.5070
www.swcocpas.com
INDEPENDENT AUDITORS' 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
April 9, 2018
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 (the City) as of and for the year ended December 31, 2017, 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 9, 2018.
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) to determine the 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 to
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 a certain deficiency in internal control that we consider to be a material weakness.
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 following deficiency described in the accompanying Schedule of Findings and Responses to be a material
weakness: 2013-001.
57
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City'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 determination of financial statement amounts. However, providing an
opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do 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.
City’s Response to Findings
The City of Scandia’s response to the findings identified in our audit is described in the accompanying Schedule of Findings and
Responses. The City’s response was not subjected to the auditing procedures applied in the audit of the financial statements and,
accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control 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
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF FINDINGS AND RESPONSES
FOR THE YEAR ENDED DECEMBER 31, 2017
58
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.
Management’s Response: Management agrees with our recommendation.
CITY OF SCANDIA, MINNESOTA
CORRECTIVE ACTION PLANS
FOR THE YEAR ENDED DECEMBER 31, 2017
59
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 will review current procedures and implement additional controls where possible.
3. Office Responsible
Neil Soltis, 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.
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.
St. Cloud
320.251.0286
Little Falls
320.632.6311
Albany
320.845.2940
Maple Lake
320.963.5414
Monticello
763.295.5070
www.swcocpas.com
INDEPENDENT AUDITORS' REPORT ON
MINNESOTA LEGAL COMPLIANCE
April 9, 2018
Honorable Mayor and City Council
City of Scandia, Minnesota
We have audited, in accordance with auditing standards generally accepted in the United States of America, 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, 2017, and the related notes to
the financial statements, and have issued our report thereon dated April 9, 2018.
The Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State Auditor pursuant to Minnesota Stat. § 6.65,
contains seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest,
public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our audit considered all of
the listed categories, except tax increment financing, since the City has none.
In connection with our audit, nothing came to our attention that caused us to believe that the City failed to comply with the
provisions of the Minnesota Legal Compliance Audit Guide for Cities. 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.
This report is intended for the information and use of those charged with governance and management of the City of Scandia and
the State Auditor and is not intended to be and should not be used by anyone other than these specified parties.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota