9.a) Presentation of 2009 Audit and Financial Statements, LarsenAllen Meeting Date: 5/18/2010
Agenda Item: �. ��
City Council Agenda Report
City of Scandia
14727 209'h St. North
Scandia, MN 55073 (651) 433-2274
Action Requested: Accept the Auditors Report and Financial Statements for the year
ended December 31, 2009 and direct publication of the summary
financial statement as required by state law.
Deadline/ Timeline: N/A
Background: Representatives of Larson Allen will be present at the May 18 City
Council meeting to present the audit report and answer any questions.
Recommendation: I recommend that the Council receive the report and,unless additional
discussion is needed at a subsequent meeting, accept the report.
Attachments/ • SAS 114 Letter for Year Ended December 31, 2009
Materials provided: . Management Letter for Year Ended December 31,2009
• Financial Statements for Year Ended December 31, 2009
Contact(s): Craig Popenhagen, CPA
LarsonAllen (612 397-3087)
Prepared by: Anne Hurlburt, Administrator
(audit 2009)
Page 1 of 1
OS/13/10
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CI'As, Consultants & Advisors
www,larsonallen.com
Management
City of Scandia
Scandia, Minnesota
� In planning and performing our audit of the financial statements of City of Scandia, Minnesota (the City) for the
year ended December 31, 2009, in accordance with auditing standards generally accepted in the United States of
America, we considered the City's internal control over �nancial reporting (internal control) as a basis for
designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not
for the purpose of expressing an opinion on the effectiveness of the City's internal control.
However, during our audit we became aware of certain matters that are opportunities for strengthening internal
controls and operating efficiency. The memorandum that accompanies this letter summarizes our comments and
suggestions regarding those matters. (We previously reported on the Organization's internal control in our report
dated May 7, 2010.) This letter does not affect our repoR dated May 7, 2010, on the financial statements of City
of Scandia.
Accountin�and Financial Reportin�for Easements
The Governmental Accounting Standards Board (GASB) issued Statement No. 51, which is applicable to the City
for the year ending December 31, 2010. The purpose of Statement No. 51 is to eliminate the inconsistencies in
accounting and reporting between governmental entities related to intangible items such as easements, patents,
trademarks, software, and donated assets. The area that GASB No. 51 will affect the City is in regards to
easements. The City would only be required to record easements acquired in 2010 and thereafter, but has the
option to retroactively record easements back to 1980.
Fund Balance Renorting Chan�es
In March 2009, Governmental Accounting Standards Board issued GASB Statement No. 54, Fund Balance
Reporting and Governme�ztnl Fu�id Type Definitions. The requirements of this Statement are effective for the
City's fiscal year ending December 31, 20ll. Governments that wish to implement earlier than that date are
encouraged to do so.
Statement 54 distinguishes between fund balance amounts that are considered non-spendnble, such as fund
balance associated with inventories, and other amounts that are classified based on the relative ability to be spent.
Beginning with the most non-spendable classification, fund balances will be reported in the following
classifications:
• Restricted—amounts constrained by external parties, constitutional provision, or enabling legislation.
• Committed—includes amounts that can be used only for the specific purposes determined by a formal
action of the government's highest level of decision-making authority.
• Assignecl—amounts a government intends to use for a particular purpose. In governmental funds other
than the general fund, assigned fund balance represents the remaining amount th�t is not restricted or
committed.
• Unassigned—amounts that are not constrained at all will be reported in the general fund or to report
deficit balances in other governmental funds.
�� � LarsonAllen LLP is a member of Nexia lnternational,a worldwide network of independent accounting and consulting firms.
INTFRVATIONAL.
Management
City of Scandia
Page 2
The new standard also clarifies the definitions of individual governmental fund types. The statement interprets
certain terms within the definition of special revenue fund types, while further clarifying the debt service and
capital projects fund type definitions. The statement also specifies how economic stabilization or "rainy-day"
amounts should be reported.
We look forward to answering the City Council's and your staff's questions and concerns related to the new
standards, accounting guidance, or issues that arise throughout the year that impact the City.
We will review the status of these comments during our next audit engagement. We have already discussed many
of these comments and suggestions with various organization personnel, and we will be pleased to discuss them in
further detail at your convenience, to perfarm any additional study of these matters, ar to assist you in
implementing the recommendations.
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LarsonAllen LLP
Minneapolis, Minnesota
May 7, 2010
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City Council
City of Scandia
Scandia,Minnesota
We have audited 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) for the year
ended December 31, 2009, and have issued our report thereon dated May 7, 2010. Professional standards require
that we provide you witb the following information related to our audit.
Our Responsibility under U.S.Generally Accepted Auditing Standards and Government Auditing Standards
As stated in our engagement letter dated January 7, 2010, our responsibility, as described by professional
standards, is to express opinions about whether the financial statements prepared by management with your
oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting
principles. Our audit of the financial statements does not relieve you or management of your responsibilities.
As part of our audit, we considered the internal control of the City. Such considerations were solely for the
purpose of determining our audit procedures and not to provide any assurance concerning such internal control.
As part of obtaining reasonable assurance about whether the financial statements are free of material
misstatement, we performed tests of the City's compliance with certain provisions of laws, regulations, contracts,
and grants.However,the objective of our tests was not to provide an opinion on compliance with such provisions.
1. Our responsibility is to plan and perform the audit to obtain reasonable, but not absolute, assurance that
the financial statements are free of material misstatement.
2. We are responsible for communicating significant matters related to the audit that are, in our professional
judgment,relevant to your responsibilities in overseeing the financial reporting process. However,we are
not required to design procedures specifically to identify such matters.
3. We are also responsible for communicating matters regarding the provisions of the Minnesota Legal
Compliance Audit Guide for Local Government, promulgated by the State Auditor pursuant Minnesota
Statute 6.65.
Other Information in Documents Containing Audited Financial Statements
Our audit opinion, the audited financial statements, and the notes to financial statements should only be used in
their entirety. Inclusion of the audited financial statements in a client prepared document, such as an annual
report, should be done only with our prior approval and review of the document. Our responsibility for other
information in documents containing the City's financial statements and report does not extend beyond the
financial information identified in the report. We do not have an obligation to perform any procedures to
conoborate other information contained in such documents.
Planned Scope and Timing of the Audit
We performed the audit according to the planned scope and timing previously communicated to you in our
meeting about planning matters on February 9,2010.
j LarsonAllen LLP is a member of Nexia lnternational,a worldwide network of independent accounting and consulting firms.
IN7"FR�:��iTIt3RAt.
City Council
City of Scandia
Page 2
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. In accordance with the
terms of our engagement letter, we will advise management about the appropriateness of accounting policies and
their application. The significant accounting policies used by City of Scandia are described in Note 1 to the
financial statements. As described in Note 1, the City adopted Governmental Accounting Standards Board
(GASB) Statement No. 45,Accounting and FinanciaZ Reporting by Employers for Postemployment Benefits Other
Than Pensions, which was effective for the year ended December 31, 2009. Accordingly, the accounting change
for other postemployment benefits has been applied prospectively beginning in 2009, as permitted by GASB
Statement No. 45. on the City's financial statements. There was no impact on the City's financial statements for
adopting GASB Statement No. 45. Also in 2009, the City recorded all capital assets, including infrastructure, in
its financial statements; as a result,net assets for the governmental activities and for the sewer fund were restated.
We noted no transactions entered into by the City during the year for which there is a lack of authoritative
guidance or consensus. All significant transactions have been recognized in the financial statements in the proper
period.
Accounting estimates are an integral part of the financial statements prepared by management and are based on
management's knowledge and experience about past and cunent events and assumptions about future events.
Certain accounting estimates are particularly sensitive because of their significance to the financial statements and
because of the possibility that future events affecting them may differ significantiy from those expected. The most
sensitive estimate affecting the financial statements was:
Estimated useful lives of depreciable capital assets - Management's estimate of useful lives for depreciable
assets is based on guidance recommended by authoritative accounting literature and past experiences. The
useful life of a depreciable asset determines the amount of depreciation that will be recorded in any given
reporting period as well as the amount of accumulated depreciation that is reported at the end of a reporting
period.
We evaluated the key factors and assumptions used to develop the above estimates in determining that it is
reasonable in relation to the financial statements taken as a whole.
Certain financial statement disclosures are particularly sensitive because of their significance to financial
statement users. The most sensitive disclosure affecting the financial statements was the restatement of net assets
for the governmental activities and for the sewer fund to record all capital assets including infrastructure.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likety misstatements identified during the audit,
other than those that are trivial, and communicate them to the appropriate level of management. Management has
corrected all such misstatements. Management did not identify and we did not notify them of any uncorrected
financial statement misstatements.
In addition, we proposed audit adjustments to convert the City's records from cash to accrual basis as a result of
audit procedures in the areas of cash, receivables, accounts payable, accrued liabilities, fund balance, net assets,
revenues and expenditures. These audit adjustments were recorded by management.
City Council
City of Scandia
Page 3
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a financial
accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to
the financial statements or the auditors' report. We are pleased to report that no such disagreements arose during
the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management representation
letter dated May 7, 2010.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters,
similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an
accounting principle to the City's financial statements or a determination of the type of auditors' opinion that may
be expressed on those statements, our professional standards require the consulting accountant to check with us to
determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with
other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing
standards, with management each year prior to retention as the City's auditors. However, these discussions
occurred in the normal course of our professional relationship and our responses were not a condition to our
retention.
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This report is intended solely for the use of the City Council and management of the City of Scandia and is not
intended to be and should not be used by anyone other than these specified parties.
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LarsonAllen LLP
Minneapolis,Minnesota
May 7,2010
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' CITY OF SCANDIA, MINNESOTA
FINANCIAL STATEMENTS AND
' SUPPLEMENTARY INFORMATION
YEAR ENDED DECEMBER 31, 2009
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' City of Scandia
14727 209`h Street North
' Scandia, Minnesota 55073
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' CITY OF SCANDIA, MINNESOTA
TABLE OF CONTENTS
' YEAR ENDED DECEMBER 31, 2009
' I. INTRODUCTORY SECTION
' Elected and Appointed Officials
II. FINANCIAL SECTION
' Independent Auditors' Report �
REQUIRED SUPPLEMENTARY INFORMATION
, Management's Discussion and Analysis 3
Basic Financial Statements
' Statement of Net Assets 14
Statement of Activities 15
' Balance Sheet— Governmental Funds 17
Reconciliation of the Governmental Funds Balance Sheet to the Statement of
' Net Assets— Governmental Activities 19
Statement of Revenues, Expenditures, and Changes in Fund Balance —
Governmental Funds 20
' Reconciliation of the Governmental Funds Statement of Revenues,
Expenditures, and Changes in Fund Balance to the Statement of Activities—
Governmental Activities 22
' Statement of Net Assets — Proprietary Funds 23
Statement of Revenues, Expenses, and Changes in Net Assets— Proprietary
' Funds 24
Statement of Cash Flows — Proprietary Funds 25
' Statement of Net Assets — Fiduciary Fund 26
Notes to Basic Financial Statements 27
, Required Supplementary Information — Budgetary Comparison Information
Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget
and Actual — General Fund 44
' Notes to Required Supplementary Information 46
Combining Fund Financial Statements
' Combining Balance Sheet— Nonmajor Governmental Funds 47
Combining Statement of Revenues, Expenditures and Changes in Fund
Balance— Nonmajor Governmental Funds 48
' Statement of Changes in Assets and Liabilities— Fiduciary Funds 49
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, CITY OF SCANDIA, MINNESOTA
' TABLE OF CONTENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 2009
' III. OTHER REQUIRED REPORTS
, Report on Minnesota Legal Compliance 50
Repo�t 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 51
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' INTRODUCTORY
SECTION
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' CITY OF SCANDIA MINNESOTA
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' ELECTED AND APPOINTED OFFICIALS
DECEMBER 31, 2009
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' Elected Position
Dennis Seefeldt Mayor
� Dolores Peterson Council Member
Pete Crum Council Member
, Connie Amos Council Member
, John Lindell Council Member
Appointed
� Colleen Firkus Treasurer
Brenda Ekiund Deputy Clerk
' Anne Hurlburt Administrator
, Steve Thorp Building Code Enforcement Official
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' II.
, FINANCIAL
SECTION
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Lars�nAllen
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CPr'�s, Consul�ants & Advisars
www.larsonalle�.com
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INDEPENDENT AUDITORS' REPORT
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' Honorable Mayor
Members of the City Council and Citizens
� City of Scandia, Minnesota
We have audited the accompanying financial statements of the governmental activities, the business-
1 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, 2009, which collectively comprise the City's
basic financial statements as listed in the table of contents. These financial statements are the
, responsibility of the City's management. 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. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
� statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our 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, 2009, and the respective changes in financial position and, where applicable, cash flows
thereof for the year then ended in conformity with accounting principles generally accepted in the
� United States of America.
As discussed in Note 3 and 11, certain errors resulting in an understatement of capital assets and net
assets of governmental activities were corrected. As a result, the January 1, 2009, balance of capital
' assets and net assets has been restated.
In accordance with Government Auditing Standards, we have also issued a report dated May 7, 2010
' on our consideration of the City of Scandia, Minnesota's internal control over financial reporting and on
our tests of its compliance with certain provisions of laws, regulations, contracts, 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
the internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards and should be considered in assessing
� the results of our audit.
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' '+1� LarsonAllen LLP is a member of Nexia lnternation(�I,)a worldwide networic of independent accounting and consulting firms.
INTERNATIONAL
Honorable Mayor �
Members of the City Council and Citizens
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The managemenYs discussion and analysis and budgetary comparison information as listed in the '
table of contents is not a required part of the basic financiai statements but suppiementary information
required by U.S. generally accepted accounting principles. We have applied certain limited procedures, '
which consisted principally of inquires of management regarding the methods of ineasurement and
presentation of the required supplementary information. However, we did not audit the information and
express no opinion on it. '
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the City's basic financial statements. The accompanying supplementary �
information, including the introductory section and combining fund financial statements listed in the
table of contents are presented for purposes of additional analysis and are not a required part of the
basic financial statements. Such information, except for the introductory section on which we express
no opinion, has been subjected to the auditing procedures applied in our audit of the basic financial '
statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
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LarsonAllen LLP �
Minneapolis, Minnesota
May 7, 2010 '
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, REQUIRED SUPPLEMENTARY INFORMATION
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CITY OF SCANDIA, MINNESOTA ,
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED DECEMBER 31, 2009 �
ment of the Cit we offer readers of the Cit 's financial statements this narrative overview �
As manage y, Y
and analysis of the financial activities of the City for the fiscal year ended December 31, 2009. �
Financial Highlights
o The City's net assets of its governmental activities increased by $320,591 during the year to ,
$9,745,251 at year-end.
o The General Fund balance increased by $281,942 during the year to $805,391 at year-end.
o The net assets of the City's business-type activities (201 Sewer Enterprise Fund) increased by '
$10,048 during the year to $1,060,503.
o The 201 Sewer Enterprise Fund reported an operating gain of $12,190. !
Overview of the Financial Statements �
This discussion and analysis is intended to serve as an introduction to the City's basic financial
statements. The City's basic financial statements comprise three components: 1) government-wide
financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report ,
also contains other supplementary information in addition to the basic financial statements.
Government-Wide Financial Statements �
The government-wide financial statements are designed to provide readers with a broad overview of
the City's finances, in a manner similar to a private-sector business.
The statement of net assets presents information on all of the City's assets and liabilities, with the �
difference between the two reported as net assets. Over time, increases or decreases in net assets
may serve as a useful indicator of whether the financial position of the City is improving or
deteriorating. �
The statement of activities presents information showing how the City's net assets changed during the
most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving �
rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses
are reported in this statement for some items that will only result in cash flows in future fiscal periods
(e.g., uncollected taxes and earned but unused vacation leave). ,
Both of the government-wide financial statements distinguish functions of the City that are principally
supported by taxes and intergovernmental revenues (governmental activities) from other functions that
are intended to recover all or a significant portion of their costs through user fees and charges �
(business-type activities). The governmental activities of the City include general government, public
safety, public works, parks and recreation, and other. The only business-type activities of the City are
the sewer operations. ,
The government-wide financial statements can be found on pages 14-16 of this report.
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� CITY OF SCANDIA, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
IYEAR ENDED DECEMBER 31, 2009
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Fund Financial Statements
, A fund is a grouping of related accounts that is used to maintain control over resources that have been
segregated for specific activities or objectives. The City, like other state and local governments, uses
fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of
' the funds of the City can be divided into two categories: governmental funds and proprietary funds.
Governmental Funds. Governmental funds are used to account for essentially the same functions
reported as governmental activities in the government-wide financial statements. Howeve�, unlike the
' government-wide financial statements, governmental fund financial statements focus on near-term
inflows and outflows of spendable resources, as well as on balances of spendable resources available
at the end of the fiscal year. Such information may be useful in evaluating a government's near-term
, � financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial
� statements, it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government-wide financial statements. By
doing so, readers may better understand the long-term impact by the government's near-term
, financing decisions. Both the governmental fund balance sheet and the governmental fund statement
of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this
comparison between governmental funds and governmental activities.
, The City maintains several individual governmental funds. Information is presented separately in the
governmental fund balance sheet and in the governmental fund statement of revenues, expenditures
and changes in fund balances for the General Fund, 2004 Improvement Bond, 2007 Improvement
� Bond, and Capital Projects Fund. Data from the other governmental funds are combined into a single,
aggregated presentation. Individual fund data for each of these nonmajor governmental funds is
provided in the form of combining statements elsewhere in these financial statements.
' The City adopts an annual appropriated budget for its General Fund. A budgetary comparison
statement has been provided for the general fund to demonstrate compliance with this budget.
' The basic governmental fund financial statements can be found on pages 17-22 of this report.
Propriefary Funds. The proprietary funds are used to report the same functions presented as
' business-type activities in the government-wide financial statements. The City uses enterprise funds to
account for its business-type activities.
� Proprietary funds provide the same type of information as the government-wide financial statements,
only in more detail_ The proprietary fund financial statements provide separate information for the 201
sewer operations. The 201 Sewer Enterprise Fund is considered to be a major fund of the City.
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CITY OF SCANDIA, MINNESOTA �
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED DECEMBER 31, 2009 �
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Fund Financial Statements (Continued)
Proprietary Funds (Continued) ,
The basic proprietary fund financial statements can be found on pages 23-25 of this report.
Notes to Financial Statements �
The notes provide additional information that is essential to a full understanding of the data provided in
the government-wide and fund financial statements. The notes to financial statements can be found on
pages 27-43 of this report. '
Other Information
The combining statements referred to earlier in connection with nonmajor governmental funds are ,
presented immediately following the notes to financial statements. Combining and individual fund
statements and schedules can be found on pages 47-48 of this report.
Government-Wide Financial Analysis �
Beginning with the year ended December 31, 2004, financial statements were presented in accordance
with the requirements of Governmental Accounting Standards Board (GASB) Statement No. 34, Basic '
Financial Statements and Management's Discussion and Analysis-for State and Local Governments.
Comparative information is included in these tables to highlight changes in financial position, shown in
Exhibits 1-2.
The government-wide statements report the City's net assets and how they have changed. Net assets, �
the difference between the City's assets and liabilities, are one way to measure the City's financial
position. Over time, increases or decreases in the City's net assets can be used as an indicator of the �
City's financial position.
The City's financial position is the product of many factors. For example, the determination of the City's �
investment in capital assets, net of related debt involves many assumptions and estimates, such as
current and accumulated depreciation amounts. A conservative versus a liberal approach to
depreciation estimates, as well as capitalization policies, will produce a very significant difference in the �
calculated amounts. For these reasons, it is important to view the net assets balance as a starting point
to evaluate future years' results, rather than to focus on the current balance.
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� CITY OF SCANDIA, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
, YEAR ENDED DECEMBER 31, 2009
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EXHIBIT 1: CITY OF SCANDIA'S NET ASSETS
� Govemmental Activities Business-Type Activities Totals
2009 2008 2009 2008 2009 2008
Current and OtherAssets $ 1,814,885 $ 1,649,919 $ 166,575 $ 127,194 $ 1,981,460 $ 1,777,113
� Capital Assets,Net 9,743,820 5,949,923 900,000 930,000 10,643,820 6,879,923
Total Assets 11,558,705 7,599,842 1,066,575 1,057,194 12,625,280 8,657,036
Current Liabilities 182,648 163,802 6,072 6,739 188,720 170,541
Long-Term Liabilities 1,630,806 2,084,657 - - 1,630,806 2,084,657
, Total Liabilities 1,813,454 2,248,459 6,072 6,739 1,819,526 2,255,198
Net Assets:
Invested in Capital Assets
� Net of Related Debt 8,113,014 3,844,923 900,000 930,000 9,013,014 4,774,923
Restricted for Debt Retirement 277,722 375,805 277,722 375,805
Unrestricted 1,354,515 1,130,655 160,503 120,455 1,515,018 1,251,110
TotalNetAssets $ 9,745,251 $ 5,351,383 $ 1,060,503 $ 1,050,455 $ 10,805,754 $ 6,401,838
� As noted earlier, net assets may serve over time as a useful indicator of a government's financial
position. In the case of the City, assets exceeded liabilities by $9,745,251 at the close of the most
I recent fiscal year. The largest portion of the City's net assets (83°/o) reflects its investment in capital
assets (e.g., land, buildings, machinery and equipment), less any related debt used to acquire those
assets that are still outstanding. It should be noted that in the current year the City recorded all capital
1 assets for the first time for governmental activities, which increased capital assets and net assets of
governmental activities at January 1, 2009, by $4,073,277 (see also Notes 3 and 11 in the financial
statements.) The comparative 2008 information in Exhibits 1 and 2 have not been adjusted for
� this change. The City uses these capital assets to provide services to citizens: consequently, these
assets are not available for future spending. Although the City's investment in its capital assets is
reported net of related debt, it should be noted that the resources needed to repay this debt must be
� provided from other sources, since the capital assets themselves cannot be used to liquidate these
liabilities. The City's debt is repaid primarily through special assessments, property tax levies for debt
of governmental activities and user charges provide the financing for the debt of the business-type
activities.
� An additional portion of the City's net assets (3%) represents resources that are subject to external
restrictions on how they may be used. The remaining balance of unrest�icted net assets ($1,354,515)
� may be used to meet the City's ongoing obligations to citizens and creditors.
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CITY OF SCANDIA, MINNESOTA �
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED DECEMBER 31, 2009 '
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EXHIBIT 2: CHANGES IN NET ASSE�S
Govemmental Activities Business-Type Activities Totals �
2009 2008 2009 2008 2009 2008
REVENUES
Program Revenues �
Charges for Services $ 192,947 $ 286,504 $ 68,457 $ 57,010 $ 261,404 $ 343,514
Operating Grants and Contributions 40,587 29,463 - - 40,587 29,463
Capital Grants and Contributions 67,299 28,484 3,763 3,328 71,062 31,812
General Revenues �
PropeRyTaxes 1,791,648 1,645,374 - - 1,791,648 1,645,374
OtherTaxes - - - - - -
Grants and Contributions Not •
Restricted for a PaRicular Purpose 16,609 42,709 - - 16,609 42,709 �
Other 21,729 41,829 1,458 2,915 23,187 44,744
Total Revenues 2,130,819 2,074,363 73,678 63,253 2,204,497 2,137,616
EXPENSES �
General Government 493,675 554,020 - - 493,675 554,020
Public Safety 429,286 385,665 - - 429,286 385,665
Public Works 667,882 419,324 - - 667,882 419,324
Highway and Streets - - - - - -
Parks and Recreation 140,424 108,059 - - 140,424 108,059 ,
Fixed and Other - - - - - -
Interest and Fiscal Charges 82,561 99,235 - - 82,561 99,235
Sewer - - 60,030 90,983 60,030 90,983
Total Expenses 1,813,828 1,566,303 60,030 90,983 1,873,858 1,657,286 �
TRANSFERS 3,600 3,339 (3,600) (3,339) - -
CHANGE IN NET ASSETS 320,591 511,399 10,048 (31,069) 330,639 480,330 �
NetAssets-Beginning of Year 5,351,383 4,839,984 1,050,455 1,081,524 6,401,838 5,921,508
Prior Period Adjustment 4,073,277 - - - 4,073,277
NETASSETS-END OF YEAR $ 9,745,251 $ 5,351,383 $ 1,060,503 $ 1,050,455 $ 10,805,754 $ 6,401,838
Governmental Activities. Governmental activities increased the City's net assets by $320,591.
�
Business-Type Activities. Business-type expenses by program-governmental activity (the 201 Sewer �
Enterprise Fund) increased the City's net assets by $10,048.
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CITY OF SCANDIA, MINNESOTA
� MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED DECEMBER 31, 2009
�
The following is a graphical representation of the various sources of the City's governmental revenues
� (excluding transfers) of$2,130,819:
Governmental Activities Revenues by Source 2009
� ■Fees, Charges,and
�Other General Other ■Operating Grants
Revenue g.�% - and Contributions
� 1.0% 1.9%
❑Capital Grants and
Contributions
3.2%
�
O Grants and
� Contributions not
Restricted for a
■Property Taxes Particular Purpose
84.1% 0.8%
�
� The following is a graphical representation of the various sources of the City's governmental expenses
of$1,813,828 and program revenues of$300,833:
� Expenses and Program Revenues -Governmental Activities
� $aoo,000 �___ __ '
� ■Expenses
$700,000 _ _ _ ---- _ _ ___ _
- —_ .
rogram evenues ,.
� $600,000
�
$500,000 !, __ _ --
� $4�0,��� _ .
$300,000 e ,, . .
� $200,000 _ --_ ___ _ �
$100,000 ;' __ _ __
E
� � �- '�,: ._ ..__ '___' . .. t
General Public Safety Public Works Parks and Interest and Fiscal
Government Recreation Charges
� - -_ -------- ------ — --_ ___ . . _ _ -- --
�
�8)
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CITY OF SCANDIA, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS �
YEAR ENDED DECEMBER 31, 2009
The f II win i a ra hical re resentation of the various sources of th i ' in - r v ,
0 o g s g p p e C ty s bus ess type e enues
of$73,678:
�
Revenue by Source - Business-Type Activities
Grants&Contributions Other �
13.7% 2.0%
�
�
Charges for Services �
92.9%
�
The following is a graphical representation of the various sources of the City's business-type expenses
of$60,030 and program revenues of$72,220: �
Expenses and Program Revenues-Business-Type Activities �
80,000 ____ --------__.... _._ �.--
-_,__ --�_� .._�.__. ._ _.
■Expenses � ,
70,000 '
',�Program Revenues i
60,000 � -- -- � �
50,000
40,00o i
30,000
20,000 '
,o.000 __ __ i
;
, Sewer �
�9� �
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CITY OF SCANDIA, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
� YEAR ENDED DECEMBER 31, 2009
'
Financiai Analysis of the GovernmenYs Funds
� As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-
related legal requirements.
� Governmental Funds. The focus of the City's governmental funds is to provide information on near-
term inflows, outflows and balances of spendable resources. Such information is useful in assessing
the City's financing requirements. In particular, unrese►ved fund balance may serve as a useful
� measure of a government's net resources available for spending at the end of the fiscal year.
As of the end of the current fiscal year, all of the City's governmental funds together reported combined
ending fund balances of $1,330,311, an increase of $148,375 in comparison with the prior year. Of the
� $1,330,311 fund balance, approximately 58.5% ($778,290) constitutes unreserved fund balance, which
is available for spending at the City's discretion. The remainder of fund balance is reserved to indicate
that it is not available for new spending because it has already been committed to pay debt service
� ($283,083).
The General Fund is the chief operating fund of the City. At the end of the current year, unreserved
I fund balance of the General Fund was $781,309, an increase of $257,860 over the prior fiscal year.
, Key factors in this change in fund balance are as follows:
� o Actual expenditures totaled $1,345,937 (excluding transfers) for 2009 compared to budgeted
expenditures of$1,698,312.
o Actual revenues totaled $1,664,279 for 2009 compared to budgeted revenues of $1,772,369, a
� net unfavorable variance of $108,090 (before transfers). Property taxes and charges for
services (in particular, zoning and hearing fees) account for most of the difference between
budgeted and actual revenues.
� As a measure of the General Fund's liquidity, it may be useful to compare the fund balance to total
fund expenditures. Unreserved fund balance ($781,309) represents 57% of total 2009 General Fund
expenditures of $1,382,337 ($1,345,937 + $36,400 (net transfers out)).
� Because property tax revenues are not received until the middle of the budget year, it is important that
the city carry fund balances sufficient to cover anticipated expenses for the first half of the budget year.
� If not, the city would be forced to borrow (and pay interest on) the funds necessary to meet basic
expenses such as payroll. The 57% unreserved balance in the General Fund is adequate for cash flow
purposes. A good long-term goal would be to maintain fund balances of 45% or 50% of total
� expenditures.
�
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CITY OF SCANDIA, MINNESOTA ,
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED DECEMBER 31, 2009 �
General Fund Budgetary Highlights
�
Detail of the General Fund original budget, final budget and actual revenues and expenditures can be �
found beginning on page 44 of this report. The net change in the General Fund Balance was $281,942.
The City Council approved the following budget amendments during the year: �
o General Government (Administration and Finance Depa�tment) increased by $2,900 for safety
programs. �
o Public Safety (Fire Department) decreased by $20,000 due to a reduction in the contribution to
the fire relief.
Actual expenditures were less than budgets in several departments. Spending in the Public Works �
Department was $228,609 less than budgeted (largely due to under-spending the budget for
contractual road maintenance) and spending in the General Government departments (Administration,
and Finance, Elections, Planning and Building and City Council) was $94,862 less than budgeted, �
which largely explains the net spending of $352,375 less than the overall General Fund Budget.
Property tax revenues were less than expected in 2009 by $72,241, primarily due to a reduction in the �
State of Minnesota's Market Value Homestead Credit (MVHC) by $61,647.
Proprietary Funds. The City's proprietary funds provide the same type of information found in the �
government-wide financial statements, but in more detail.
Unrestricted net assets of the 201 Sewer operations at the end of the year amounted to $160,503. �
�
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� CITY OF SCANDIA MINNESOTA
,
� MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED DECEMBER 31, 2009
�
Capital Asset and Debt Administration
� Capital Assets. The City's investment in capital assets for its governmental and business type
activities as of December 31, 2009, amounts to $9,743,820 (net of accumu►ated depreciation). This
investment in capital assets includes land, buildings, office equipment and furniture, vehicles,
' machinery and equipment, other capital assets, and infrastructure. This represents an increase in the
City of Scandia's investment in capital assets (net of accumulated depreciation) of 55%. This increase
is entirely due to this being the first year capital assets have been accounted for at the City. Additional
� information on the City's capital assets can be found in Note 3 to the financial statements.
CITY OF SCANDIA'S CAPITAL ASSETS
� (Net of Depreciation)
Governmental Business-Type
Activities Activities Totals
� 2009 2008 2009 2008 2009 2008
Land $ 487,735 $ 715,450 $ $ $ 487,735 $ 715,450
Construction in Process - - - - - -
� Buildings 2,193,375 1,966,800 = = 2,193,375 1,966,800
Equipment and Vehicles 1,192,856 1,011,494 1,192,856 1,011,494
Infrastructure 9,353,763 1,464,379 9,353,763 1,464,379
Other improvements 162,647 - - - 162,647 -
� Fumiture and Fixtures = 372,362 = _ = 372,362
Miscellaneous Assets 419,438 419,438
Sewer System 1,500,000 1,500,000 1,500,000 1,500,000
Less:Accumulated Depreciation (3,646,556) - (600,000) (570,000) (4,246,556) (570,000)
Total $ 9,743,820 $ 5,949,923 $ 900,000 $ 930,000 $ 10,643,820 $ 6,879,923
�
Long-Term Debt. At the end of the current fiscal year, the City had total bonded debt outstanding of
� $1,645,000. All debt is backed by the full faith and credit of the City.
CITY OF SCANDIA'S OUTSTANDING DEBT
� (General Obligation)
Governmental Activities Business-Type Activities Totals
2009 2008 2009 2008 2009 2008
LONG-TERM OBLIGATIONS
� Long-Term Debt:
General Obligation Notes $ 1,645,000 $ 2,105,000 $ $ $ 1,645,000 $ 2,105,000
Unamortized Bond Discount (31,798) (36,043) - - (31,798) (36,043)
Compensated Absences 17,604 15,700 - - 17,604 15,700
' Total $ 1,630,806 $ 2,084,657 $ - $ - $ 1,630,806 $ 2,084,657
Additional information on long-term debt is presented in Note 4 of this report.
�
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� (12)
CITY OF SCANDIA, MINNESOTA �
STATEMENT OF ACTIVITIES
YEAR ENDED DECEMBER 31, 2009 �
�
Program Revenues �
Operating Capital Grants
Charges for Grants and and
FUNCTIONS/PROGRAMS Expenses Service Contributions Contributions
Government Activities: ,
General Government $ 493,675 $ 103,234 $ 3,600 $ -
Public Safety 429,286 29,266 20,832 -
Public Works 667,882 1,770 - 67,299 �
Parks and Recreation 140,424 52,720 16,155 -
Interest and Fiscal Charges 82,561 5,957 - -
Total Governmental Activities 1,813,828 192,947 40,587 67,299 �
Business-Type Activities:
Sewer 60,030 68,457 - 3,763 �
Total Pnmary Government $ 1,873,858 $ 261,404 $ 40,587 $ 71,062
GENERAL REVENUES �
Taxes:
Property Taxes, Levied for General Purposes
Grants and Contributions not Restricted for a Particular Purpose �
Investment Earnings
Miscellaneous
Transfers �
Total General Revenues
CHANGE IN NET ASSETS
Net Assets - Beginning of Year, as Previously Reported �
Prior Period Adjustment
Net Assets - Beginning of Year, as Restated i
NET ASSETS - END OF YEAR �
�
�
�
�
See accompanying Notes to Basic Financial Statements.
(15) �
�
�
�
Net(Expense) Revenue and
� Changes in Net Assets
Governmental Business-Type
' Activities Activities Total
$ (386,841) $ - $ (386,841)
(379,188) - (379,188)
� (598,813) _ (598,813)
(71,549) (71,549)
(76,604) - (76,604)
� (1,512,995) - (1,512,995)
- 12,190 12,190
� (1,512,995) 12,190 (1,500,805)
�
1,791,648 - 1,791,648
� 16,609 - 16,609
21,729 1,458 23,187
� 3,600 (3,600)
1,833,586 (2,142) 1,831,444
320,591 10,048 330,639
� 5,351,383 1,050,455 6,401,838
4,073,277 - 4,073,277
� 9,424,660 1,050,455 10,475,115
' $ 9,745,251 $ 1,060,503 $ 10,805,754
'
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� (16)
CITY OF SCANDIA, MINNESOTA �
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
PROPRIETARY FUND �
YEAR ENDED DECEMBER 31, 2009
�
Sewer �
Enterprise
Fund
OPERATING REVENUES
Charges for Service $ �2,220 ,
OPERATING EXPENSES
Depreciation 30,000 �
Utilities 1,625
Maintenance and Other 28,405
Total Operating Expenses 60,030 �
OPERATING GAIN 12,190
NONOPERATING REVENUE �
Interest Revenue 1,458
GAIN BEFORE TRANSFERS 13,648 �
CONTRIBUTIONS AND TRANSFERS
Transfer Out (3,600) '
CHANGE IN NET ASSETS 10,048
Net Assets- Beginning of Year 1,050,455 I
NET ASSETS -END OF YEAR $ 1,060,503 �
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�
See accompanying Notes to Basic Financial Sfatements.
(24) ,
'
CITY OF SCANDIA, MINNESOTA
� STATEMENT OF CASH FLOWS
PROPRIETARY FUND
YEAR ENDED DECEMBER 31, 2009
�
� Sewer
Enterprise
Fund
� CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers $ 60,907
Cash Paid to Suppliers for Goods and Services (30,697)
Net Cash Provided by Operating Activities 30,210
� CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfer Out (3,600)
� CASH FLOWS FROM INVESTING ACTIVITIES
interest on Investments 1,458
� NET INCREASE IN CASH AND CASH EQUIVALENTS 28,068
Cash and Cash Equivalents- Beginning of Year 118,986
I � CASH AND CASH EQUIVALENTS - END OF YEAR $ 147.054
' RECONCILIATION OF OPERATING LOSS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
' Operating Loss $ 12,190
Adjustments to Reconcile Operating Loss to
Net Cash Provided by Operating Activities:
Depreciation Expense 30,000
� Changes in Asset and Liability Accounts:
Decrease in Special Assessments Receivable (5,610)
Decrease in Other Accounts Receivable (10,372)
� Increase in Due from County 4,669
Increase in Accounts Payable {667)
Net Cash Provided by Operating Activities $ 30,210
'
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See accompanying Notes to Basic Financial Statements.
' (25)
CITY OF SCANDIA, MINNESOTA '
STATEMENT OF NET ASSETS
FIDUCIARY FUND �
DECEMBER 31, 2009
�
Agency Fund �
ASSETS
Current Assets:
Cash and Investments $ 118,821
�
LIABILITIES
Current Liabilities: �
Contractor Deposits $ 118,821
�
�
�
'
�
� �
�
'
�
�
�
�
See accompanying Notes to Basic Financial Statements.
�26� '
' F CANDIA MINNESOTA
CITY O S ,
NOTES TO BASIC FINANCIAL STATEMENTS
�, ' DECEMBER 31, 2009
'
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
' The City of Scandia (City) is a public corporation formed under Minnesota Statute 412. As
such, the City is under statutory city regulations and applicable statutory guidelines.
' The basic financial statements of the City have been prepared in conformity with U.S.
generally accepted accounting principles as applied to governmental units by the
Governmental Accounting Standards Board (GASB). The following is a summary of the
� significant accounting policies:
A. FINANCIAL REPORTING ENTITY
, As required by U.S. generally accepted accounting principles, the financial statements
of the reporting entity include all funds, departments, agencies, boards, commissions,
� and other organizations over which City officials exercise oversight responsibility.
Component units are legally separate entities for which the City (primary government) is
' financially accountable, or for which the exclusion of the component unit would render
the financial statements of the Primary Government misleading. The criteria used to
determine if the Primary Government is financially accountable for a component unit
' include whether or not the Primary Government appoints the voting majority of the
potential component unit's governing body, is able to impose its will on the potential
component unit, is in a relationship of financial benefit or burden with the potential
' component unit, or is fiscally depended upon by the potential component unit.
Based on these criteria, there are no organizations considered to be component units
of the City.
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CITY OF SCANDIA MINNESOTA '
,
NOTES TO BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2009 '
'
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. BASIC FINANCIAL STATEMENTS '
1. Government-Wide Statements '
The government-wide financial statements (i.e., the statement of net assets and the
statement of activities) display information about the primary government. These
statements include the financial activities of the overall City government, except for '
fiduciary activities. Governmental activities, which normally are supported by taxes
and intergovernmental revenues, are reported separately from business-type
activities, which rely to a significant extent on fees and charges to external parties '
for support. As a general rule, the effect of interfund activity has been eliminated
from the government-wide financial statements. Exceptions to this general rule are
charges between the City's enterprise fund and various other functions of '
government. Eliminations of these charges would distort the direct costs and
program revenues reported for the various functions concerned.
In the government-wide statement of net assets, both the governmental and '
business-type activities columns: (a) are presented on a consolidated basis by
column; and (b) are reported on a full accrual, economic resource basis, which t
recognizes all long-term assets and receivables as well as long-term debt and
obligations. The City's net assets are reported in three parts: (1) invested in capital
assets, net of related debt; (2) restricted net assets; and (3) unrestricted net assets. '
The statement of activities demonstrates the degree to which the direct expenses of
each function of the City's governmental activities and different business-type
activities are offset by program revenues. Direct expenses are those that are clearly �
identifiable with a specific function or activity. Program revenues include: (1) fees,
fines, and charges paid by the recipients of goods, services, or privileges provided
by a given function or activity; and (2) grants and contributions that are restricted to '
meeting the operational or capital requirements of a particular function or activity.
Revenues that are not classified as program revenues, including all taxes, are
presented as general revenues. �
2. Fund Financial Statements
The fund financial statements provide information about the City's funds, including ,
its fiduciary fund. Separate statements for each fund category (governmental,
proprietary, and fiduciary) are presented. The emphasis of governmental and '
proprietary fund financial statements is on major individual governmental and
enterprise fund, with each displayed as separate columns in the fund financial
statements. All remaining governmental funds are aggregated and reported as
nonmajor funds. '
1
(2s) '
' CITY OF SCANDIA MINNESOTA
,
' NOTES TO BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2009
'
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
' B. BASIC FINANCIAL STATEMENTS (CONTINUED)
, 2. Fund Financial Statements (Continued)
Proprietary fund operating revenues, such as charges for services, result from
' exchange transactions associated with the principal activity of the fund. Exchange
transactions are those in which each party receives and gives up essentially equal
values. Nonoperating revenues, such as subsidies and investment earnings, result
from nonexchange transactions or incidental activities.
' The City reports the following major governmental funds:
' General Fund
The general fund is the City's primary operating fund. It accounts for all financial
resources of the general government, except those required to be accounted for in
' another fund.
Capital Improvements
, This fund records all revenues and expenditures related to various infrastructure
improvement projects within the City, except those projects paid from business type
activities (enterprise fund).
' 2004 and 2007 Debt Service Funds
These debt service funds account for debt service payments used to finance the
' City's various improvement projects.
The City reports the following major proprietary fund:
' Sewer Fund
The sewer fund accounts for customer sewer service charges that are used to
' finance sewer operating expenses.
Additionally, the City reports the following fiduciary fund:
' Aqencv Fund
To account for assets held as an agent for individuals, private organizations, other
' governmental units, and/or other funds. The City's agency fund accounts for pass-
through contractor's deposits relating to prospective developments.
,
'
' (29)
CITY OF SCANDIA MINNESOTA '
,
NOTES TO BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2009 ,
'
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING t
The government-wide and proprietary fund financial statements are reported using the '
economic resources measurement focus and the accrual basis of accounting. The
Agency fund, which is included in the Fiduciary Fund, do not have a measurement
focus. Revenues are recorded when earned, and expenses are recorded when a
liability is incurred, regardless of the timing of related cash flows. Property taxes are '
recognized as revenues in the year for which they are levied. Grants and similar items
are recognized as revenue as soon as all eligibility requirements imposed by the
provider have been met. '
Private-sector standards of accounting and financial reporting issued on or before
November 30, 1989, generally are followed in both the government-wide and '
proprietary fund financial statements to the extent that those standards do not conflict
with or contradict guidance of the Governmental Accounting Standards Board.
Governments also have the option of following subsequent private-sector guidance for '
their business-type activities and enterprise fund, subject to this same timitation. The
City has elected not to follow subsequent private-sector guidance.
Governmental fund financial statements are reported using the current financial t
resources measurement focus and the modified accrual basis of accounting. Revenues
are recognized as soon as they are both measurable and available. The City considers
all revenues to be available if they are collected within 60 days after the end of the '
current period. Property and other taxes, licenses, and interest are all considered to be
susceptible to accrual. Expenditures are recorded when the related fund liability is
incurred, except for principal and interest on general long-term debt, compensated '
absences, and claims and judgments, which are recognized as expenditures to the
extent that they have matured. Proceeds of general long-term debt and acquisitions
under capital leases are reported as other financing sources. '
When both restricted and unrestricted resources are available for use, it is the City's
policy to use restricted resources first, then unrestricted resources as they are needed. '
Amounts reported as program revenues include: (1) Charges to customers or
applicants for goods, services, or privileges provided, (2) operating grants and ,
contributions, and (3) capital grants and contributions, including special assessments.
'
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'
CITY OF SCANDIA, MINNESOTA
' NOTES TO BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2009
'
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
' C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING (CONTINUED)
, Proprietary funds distinguish operating revenues and expenses from nonoperating
items. Operating revenues and expenses generally result from providing services and
producing and delivering goods in connections with a proprietary fund's principal
' ongoing operations. The principal operating revenue of the City's enterprise fund is
charges to customers for sales and services. Operating expenses for enterprise funds
include the cost of sales and services, administrative expenses, and depreciation on
capital assets. All revenues and expenses not meeting this definition are reported as
, , nonoperating revenues and expenses.
D. BUDGETS
, Budgets are adopted on a basis consistent with U.S. generally accepted accounting
principles. Annual appropriated budgets are adopted for the General Fund. Budgeted
' expenditure appropriations lapse at year-end.
E. CASH AND INVESTMENTS
, Cash and investment balances from all funds are pooled and invested to the extent
available in investments authorized by Minnesota Statutes. Earnings from investments
, are allocated to individual funds on the basis of the fund's equity in the cash and
investment pool.
The City provides temporary advances to funds that have insufficient cash balances by
, means of an advance from another fund shown as interfund receivables in the
advancing fund in the governmental fund financial statements, and an interfund payable
in the fund with the deficit, until adequate resources are received. These interfund
' payables are eliminated for statement of net assets presentation.
Investments are stated at fair value as of the balance sheet date. Interest earnings are
, accrued at the balance sheet date.
For purposes of the statement of cash flows the Proprietary Fund considers all highly
liquid investments with a maturity of three months or less when purchased to be cash
� equivalents. All of the cash and investments allocated to the proprietary fund types
have original maturities of 90 days or less. Therefore, the entire balance in such fund
types is considered cash equivalents.
�
'
'
' (31)
CITY OF SCANDIA MINNESOTA '
,
NOTES TO BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2009 '
'
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
F. PROPERTY TAX CREDITS '
Property taxes on homestead property (as defined by State Statutes) are partially ,
reduced by property tax credits. These credits are paid to the City by the State in lieu of
taxes levied against homestead property. The State remits these credits through
installments each year. These credits are recognized as revenue by the City at the time
of collection. I
G. PROPERTY TAX REVENUE RECOGNITION
The City Council annually adopts a tax levy and certifies it to the County in December '
(levy/assessment date) of each year for collection in the following year. The County is
responsible for billing and collecting all property taxes for itself, the City, the local '
School District and other taxing authorities. Such taxes become a lien on January 1 and
are recorded as receivables by the City at that date. Real property taxes are payable
(by property owners) on May 15 and October 15 of each calendar year. Personal �
property taxes are payable by taxpayers on February 28 and June 30 of each year.
These taxes are collected by the County and remitted to the City on or before July 15
and December 15 of the same year. Delinquent collections for November and '
December are received the following January. The City has no ability to enforce
payment of property taxes by property owners. The County possesses this authority.
Within the governmental fund financial statements, the City recognizes property tax '
revenue when it becomes both measurable and available to finance expenditures of the
current period. In practice, current and delinquent taxes and State credits received by
the City in July, December and the following January are recognized as revenue for the '
current year. Taxes and credits not received at the year-end are classified as
delinquent and due from County taxes receivable. The portion of delinquent taxes not
collected by the City in January is fully offset by deferred revenue because it is not '
available to finance current expenditures. Deferred revenue in governmental activities is
susceptible to full accrual on the government-wide statements.
The City's property tax revenue includes payments from the Metropolitan Revenue '
Distribution (Fiscal Disparities Formula) per Minnesota Statute 473F. This statute
provides a means of spreading a portion of the taxable valuation of �
commercial/industrial real property to various taxing authorities within the defined
metropolitan area. The valuation "shared" is a portion of commercial/industrial property
valuation growth since 1971. Property taxes paid to the City through this formula for �
2009 totaled $90,539. Receipt of property taxes from this "fiscal disparities pool" does
not increase or decrease total tax revenue.
,
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�32� ,
!
CITY OF SCANDIA, MINNESOTA
' NOTES TO BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2009
'
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
� H. SPECIAL ASSESSMENT REVENUE RECOGNITION
' Special assessments are levied against benefited properties for the cost or a portion of
the cost of special assessment improvement projects in accordance with state statutes.
These assessments are collectible by the City over a term of years usually consistent
with the term of the related bond issue. Collection of annual installments (including
, interest) is handled by the County Auditor in the same manner as property taxes.
Property owners are allowed to (and often do) prepay future installments without
interest or prepayment penalties.
, Within the fund financial statements, the revenue from special assessments is
recognized by the City when it becomes measurable and available to finance
' expenditures of the current fiscal period. In practice, current and delinquent special
assessments received by the City are recognized as revenue for the current year.
Special assessments are collected by the County and remitted by December 31
� (remitted to the City the following January) and are also recognized as revenue for the
current year. All remaining delinquent and deferred special assessments receivable in
governmental funding are completely offset by deferred revenues. Deferred revenue in
� governmental activities is susceptible to full accrual on the government-wide
statements.
Once a special assessment roll is adopted, the amount attributed to each parcel is a
, lien upon that property until full payment is made or the amount is determined to be
excessive by the City Council or court action. If special assessments are allowed to go
delinquent, the property is subject to tax forfeit sale and the first proceeds of that sale
' (after costs, penalties and expenses of sale) are remitted to the City in payment of
delinquent special assessments. Generally, the City will collect the full amount of its
special assessments not adjusted by the City Council or court action. Pursuant to State
' Statutes, a property shall be subject to a tax forfeit sale after three years unless it is
homesteaded, agricultural or seasonal recreational land in which event the property is
subject to such sale after five years.
, I. CAPITAL ASSETS
Capital assets, which include property, plant, equipment, and infrastructure assets (e.g.
' roads, sidewalks, street lights, and similar items) are reported in the applicable
governmental or business-type activities columns in the government-wide financial
statements. Capital assets exceeding the City's capitalization threshold of $5,000 are
' recorded at historical cost or estimated historical cost if purchased or constructed. The
cost of normal maintenance and repairs that do not add to the value of the asset or
materially extend asset lives are not capitalized. Major outlays for capital assets and
, improvements are capitalized as projects are constructed. Infrastructure has been
capitalized as of 1980 and thereafter.
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' (33)
CITY OF SCANDIA, MINNESOTA �
NOTES TO BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2009 '
ED �
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINU )
I. CAPITAL ASSETS (CONTINUED) �
Depreciation on exhaustible assets is recorded as an allocated expense in the
Statement of Activities with accumulated depreciation reflected in the Statement of Net '
Assets. Capital assets are depreciated using the straight-line method over their
estimated useful lives. Since surplus assets are sold for an immaterial amount when
declared as no longer needed for City purposes, no salvage value is taken into ,
consideration for depreciation purposes. Useful lives vary from 3 to 30 years for
Buildings, Office Furniture and Equipment, Vehicles, Machine Shop and Equipment and
Other Assets, and 25 to 50 years for Infrastructure. Capital assets not being '
depreciated include land and construction in progress. Infrastructure was not
capitalized prior to implement of GASBS No. 34.
J. COMPENSATED ABSENCES i
It is the City's policy to permit employees to accumulate earned but unused leave �
benefits. All leave pay is accrued on a per pay period basis and recorded in the
government-wide financial statements. The current portion is calculated based on
historical trends. �
K. LONG-TERM OBLIGATIONS
In the entity-wide financial statements, long-term debt and other long-term obligations '
are reported as liabilities in the applicable governmental activities. Bond premiums and
discounts are deferred and amortized over the life of the bonds using the straight-line
method. Bond issue costs, if material, are reported as deferred charges and amortized '
over the term of the related debt using the straight-line method.
In the governmental fund financial statements, bond premiums and discounts, as well '
as bond issue costs are recognized during the current period. The face amount of the
debt issue is reported as another financing source. Premiums received on debt
issuances are reported as other financing sources while discounts are reported as ,
other financing uses. Issue costs are reported as debt service expenditures.
L. FUND BALANCE ,
In the governmental fund financial statements, reservations of fund balance represent
those portions of fund balance not appropriable for expenditure or legally restricted by
outside parties for use for a specific purpose. Designated fund balances represent '
tentative plans for future use of financial resources that are subject to change.
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, CITY F SCANDIA MINNE OTA
O , S
' NOTES TO BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2009
'
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
' M. INTERFUND TRANSACTIONS
' Interfund services provided and used are accounted for as revenues, expenditures or
expenses. Transactions that constitute reimbursements to a fund for
expenditures/expenses initially made from it that are properly applicable to another
' fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions
of expenditures or expenses in the fund that is reimbursed. All other interfund
transactions are reported as transfers.
� All interfund transactions are eliminated except for activity between governmental
activities and business-type activities for presentation in the entity-wide statements of
net assets and statements of activities.
� N. NEW ACCOUNTING PRONOUNCEMENTS
' The GASB issued Statement No. 51, Accounting and Financial Reporting for Intangible
Assets. This Statement requires that all intangible assets, including easements, water
rights, timber rights, patents, trademarks, and computer software, be classified as
' capital assets. This Statement also establishes guidance specific to intangible assets
related to amortization and provides guidance on determining the useful life of
intangible assets when the length of their life is limited by contractual or legal
' provisions. Intangible assets with indefinite useful lives should not be amortized unless
their useful life is subsequently determined to no longer be indefinite due to a change in
circumstances. The requirements of this Statement will be effective for the City's fiscal
year ending December 31, 2010, and may be implemented prospectively. The effect
' that GASB Statement No. 51 will have on the fiscal year 2010 basic financial
statements has not been determined.
� In March 2009, Governmental Accounting Standards Board issued GASB Statement
No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. The new
standard also clarifies the definitions of individual governmental fund types. The
' statement interprets certain terms within the definition of special revenue fund types,
while further clarifying the debt service and capital projects fund type definitions. The
statement also specifies how economic stabilization or "rainy-day" amounts should be
' reported. The requirements of this Statement are effective for the City's fiscal year
ending December 31, 2011. The effect that GASB Statement No. 54 will have on the
fiscal year 2011 basic financial statements has not been determined.
'
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' (35)
CITY OF SCANDIA, MINNESOTA �
NOTES TO BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2009 '
'
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
O. OTHER POST-EMPLOYMENT BENEFITS ,
For the year ended December 31, 2009, the City implemented GASB Statement No. ,
45, Accounting and Financial Reporting by Employers for Postemployment Benefits
Other Than Pensions. The adoption of this standard did not have a material impact on
the City as of December 31, 2009.
,
NOTE 2 DEPOSITS AND INVESTMENTS
A. DEPOSITS I
The City maintains a cash and investment pool that is available for use by all funds. �
Each fund type's portion of this pool is displayed on the statement of net assets and the
balance sheet as "Cash and Investments." In accordance with Minnesota Statutes the
City maintains deposits at financial institutions which are authorized by the City Council. '
Custodial Credit Risk— Custodial credit risk for deposits is the risk that in the event of a
bank failure, the City's deposits may not be returned to it. The City does not have a
deposit policy for custodial credit risk and follows Minnesota Statutes for deposits. '
Minnesota Statutes require that all deposits be protected by insurance, surety bond, or
collateral. The market value of collateral pledged must equal 110% of the deposits not
covered by insurance or corporate surety bonds. Authorized collateral include: U.S. �
government treasury bills, notes, or bonds; issues of a U.S. government agency;
general obligations of a state or local government rated "A" or better; revenue
obligations of a state or local government rated "AA" or better; irrevocable standby '
letters of credit issued by a Federal Home Loan Bank; and time deposits insured by a
federal agency. Minnesota Statutes require securities pledged as collateral be held in
safekeeping in a restricted account at the Federal Reserve Bank or in an account at a �
trust department of a commercial bank or other financial institution not owned or
controlled by the depository.
The carrying value and bank balance of the City's deposits in banks at December 31, ,
2009 is $1,698,057 and $1,721,155, respectively, and were entirely covered by federal
depository insurance or by surety bonds and collateral in accordance with Minnesota
Statutes. '
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� CITY OF SCANDIA MINNESOTA
,
' NOTES TO BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2009
'
NOTE 3 CAPITAL ASSETS
' Capitai asset activity for the year ended December 31, 2009 was as follows:
Beginning Prior Period Restated Ending
' Balance Adiustment 1/1/2008 Addilions Disposals Balance
Governmental Activities:
Capital Assets Not Being Depreciated:
Land $ 715,450 $ (227,715) $ 487,735 $ - $ - $ 487,735
' Capital Assets Being Depreciated: -
Buildings 1,966,800 226,575 2,193,375 2,193,375
Equipment 398,649 (87,442) 311,207 43,742 354,949
Vehicles 612,845 182,398 795,243 42,664 - 837,907
Infrastructure 1,464,379 7,889,384 9,353,763 - - 9,353,763
� Fumiture and Fixtures 372,362 (372,362) - - _ -
Other Improvements 162,647 162,647 162,647
Miscellaneous Assets 419,438 (419,438) - - - -
Total Capital Assets,Being Depreciated 5,234,473 7,581,762 12,816,235 86,406 - 12,902,641
� Accumuiated Depreciation for: - -
Buildings (571,730) (571,730) (46,296) (618,026)
Equipment (170,824) (170,824) (26,051) (196,875)
Vehicles - (464,394) (464,394) (47,920) - (512,314)
� Infrastructure = (2,021,769) (2,021,769) (237,657) _ (2,259,426)
Fumiture and Fixtures
Other�mprovements (52,053) (52,053) (7,862) (59,915)
Miscellaneous Assets
Total Accumulated Depreciation - (3,280,770) (3,280,770) (365,786) - (3,646,556)
� Total Capilal Assets,Being Depreciated,Net 5,234,473 4,300,992 9,535,465 (279,380) - 9,256,085
Govemmental Activilies Capital Assets,Net $ 5,949,923 $ 4,073,277 $ 10,023,200 $ (279,380) $ $ 9,743,820
Business-Type Activities:
Sewer:
Capital Assets Being Depreciated:
� Plant $ 1,500,000 $ - $ 1,500,000 $ - $ _ $ 1,500,000
Less:Accumulated Depreciation (570,000) (570,000) (30,000) (600,000)
Net Capital Assets-Sewer Utility $ 930,000 $ - $ 930,000 $ (30,000) $ - $ 900,000
� Depreciation was charged to City functions as follows:
� General Government $ 15,759
Pub�ic Safety 39,628
Public Works 297,670
Parks and Recreation 12,729
' Total Depreciation-Governmental Activities $ 365,786
'
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� �37>
CITY OF SCANDIA, MINNESOTA '
NOTES TO BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2009 ,
'
NOTE 4 CITY INDEBTEDNESS
City indebtedness at December 31, 2009 is composed of the following: '
Final
Issue Maturity Interest Original Balance '
Date Date Rate Issue 12/31/09
Governmental Activities:
General Obligation Bonds
2005 Building Crossover Bonds 5/1/2005 12/1/2015 3.35-4.2% $ 685,000 $ 600,000 ,
2007 Improvement Bonds 5/1/2007 12/1/2017 3.65-4.1% 1,430,000 1,045,000
Total Long-Term Debt 3,315,000 1,645,000
Compensated Absences (43,090) (31,798)
Severances Payable N/A 17,604 �
Total $ 3,271,910 $ 1,630,806
The following is a schedule of changes in City indebtedness for the year ended �
December 31, 2009:
Amounts �
Balance Balance Due Within
1/1/09 Issued Retired 12/31/09 One Year
Long-Term Debt
Governmental Activities: �
General Obligation Notes $2,105,000 $ - $ (460,000) $ 1,645,000 $ 225,000
Unamortized Bond Discount (36,043) - 4,245 (31,798) -
Compensated Absences 15,700 27,011 (25,107) 17,604 11,929
Total Long-Term Debt $2,084,657 $ 27,011 $ (480,862) $ 1,630,806 $ 236,929 �
All long-term bonded indebtedness outstanding at December 31, 2009 is backed by the full
faith and credit of the City, including special assessment bond issues. For the �
governmental activities, compensated absences are generally liquidated by the general
fund.
During 2005, the City issued $685,000 of General Obligation Building Crossover Refunding i
Bonds, Series 2005A for the purpose of refunding the $1,200,000 General Obligation
Building Bonds of 2000. The crossover refunding occurred on December 1, 2008. ,
Minimum annual principal and interest payments required to retire long-term debt, not
including compensated absences payable are as follows:
Year Ending December 31. Principal Interest Total ,
2010 $ 225,000 $ 64,336 $ 289,336
2011 230,000 56,123 286,123 ,
2012 235,000 47,525 282,525
2013 235,000 38,494 273,494
2014 235,000 29,313 264,313
2015-2017 485,000 35,121 520,121 '
Total $ 1,645,000 $ 270,912 $ 1,915,912
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`38' i
� CITY OF SCANDIA, MINNESOTA
NOTES TO BASIC FINANCIAL STATEMENTS
� DECEMBER 31, 2009
'
NOTE 4 CITY INDEBTEDNESS (CONTINUED)
� Description and Restrictions of Lonq-Term Debt
General Obligation Bonds — The bonds were issued for improvements or projects which
' benefited the City as a whole and are, therefore, repaid from ad valorem levies.
The liability for compensated absences represents vested benefits earned by governmental
fund employees through the end of the year which will be paid or used in future periods.
�
' NOTE 5 DEFINED BENEFIT PENSION PLANS — STATEWIDE
A. PLAN DESCRIPTION
� All full-time and certain part-time employees of the City are covered by defined benefit
pension plans administered by the Public Employees Retirement Association of
Minnesota (PERA). PERA administers the Public Employees Retirement Fund (PERF)
' which is a cost-sharing, multiple-employer retirement plan. This plan is established and
administered in accordance with Minnesota Statutes, Chapter 353 and 356.
� PERF 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. All new
members must participate in the Coordinated Plan. All police officers, firefighters and
peace officers who qualify for membership by statute are covered by the PEPFF.
� PERA provides retirement benefits as well as disability benefits to members, and
benefits to survivors upon death of eligible members. Benefits are established by state
� statute, and vest after three years of credited service. The defined retirement 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 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 2.2% of average salary for each of the first 10 years of
service and 2.7% for each remaining year. The annuity accrual rate for a Coordinated
Plan member is 1.2% of average salary for each of the first 10 years and 1.7% for each
� remaining year. Under Method 2, the annuity accrual rate is 2.7% of average salary for
Basic Plan members and 1.7% for Coordinated Plan members for each year of service.
� For PERF members hired prior to July 1, 1989 whose annuity is calculated using
Method 1, a full annuity is available when age plus years of service equal 90. Normal
retirement age is 65 for Basic and Coordinated members hired prior to July 1, 1989.
Normal retirement age is the age for unreduced Social Security benefits capped at 66
� for Coordinated members hired on or after July 1, 1989. A reduced retirement annuity is
also available to eligible members seeking early retirement.
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� (39)
CITY OF SCANDIA, MINNESOTA ,
NOTES TO BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2009 �
— N E �
NOTE 5 DEFINED BENEFIT PENSION PLANS STATEWIDE (CONTI U D)
A. PLAN DESCRIPTION (CONTINUED) �
There are different types of annuities available to members upon retirement. A single-
life annuity is a lifetime annuity that ceases upon the death of the retiree, no survivor �
annuity is payable. There are also various types of joint and survivor annuity options
available which will be payable over joint lives. Members may also leave their
contributions in the fund upon termination of public service in order to qualify for a ,
deferred annuity at retirement age. Refunds of contributions are available at any time to
members who leave public service, but before retirement benefits begin.
The benefit provisions stated in the previous 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.
PERA issues a publicly available financial report that includes financial statements and ,
required supplementary information for PERF. That report may be obtained on the
internet at www.mnpera.org, by writing to PERA at 60 Empire Drive #200, St. Paul,
Minnesota, 55103-2088 or by calling (651) 296-7460 or 1-800-652-9026. �
B. FUNDING POLICY
Minnesota Statutes Chapter 353 sets the rates for employer and employee �
contributions. These statutes are established and amended by the state legislature.
The City makes annual contributions to the pension plans equal to the amount required
by state statutes. PERF Basic Plan members and Coordinated Plan members are �
required to contribute 9.1% and 6.0% respectively, of their annual covered salary in
2009. The City is required to contribute the following percentages of annual covered
payroll: 11.78% for Basic Plan PERF members, and 6.75°/o for Coordinated Plan PERF �
members. The City's contributions to the Public Employees Retirement Fund for the
years ended December 31, 2009, 2008, and 2007 were $19,880, $21,087, and
$14,426, respectively. The City's contributions were equal to the contractually required ,
contributions for each year as set by state statute.
NOTE 6 DEFINED CONTRIBUTION PENSION PLAN ,
The council members of the City 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. ,
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� CITY OF SCANDIA, MINNESOTA
NOTES TO BASIC FINANCIAL STATEMENTS
� DECEMBER 31, 2009
'
NOTE 6 DEFINED CONTRIBUTION PENSION PLAN (CONTINUED)
� Plan benefits depend solely on amounts contributed to the plan pius investment earnings,
less administrative expenses. Minnesota Statutes, Chapter 353D.03, specifies the
employee and employer contribution rates for those qualified personnel who elect to
� participate. An eligible elected official who decides to participate contributes 5°/o 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%
of employer contributions and twenty-five hundredths of one percent of the assets in each
member's account annually.
, Total employer and employee contributions made by the City during fiscal year 2009 were
$2,922.
,
NOTE 7 COMMITMENTS AND CONTINGENCIES
` Fire Services — The City has entered into an agreement with the Capitol City Regional
Firefighter's Association whereby the Association. will provide the City with fire services.
The contract remains in force until either party withdraws. Related expenditures for fiscal
' year 2009 were $281,007.
Law Enforcement Services — The City has entered into an agreement with Washington
� County to provide law enforcement services for 2009. The agreement calls for the City to
pay Washington County based on the actual costs associated with providing services
under the agreement. Related expenditures for fiscal year 2009 were $114,284. Law
� enforcement services for 2010 are estimated to cost approximately $120,000.
Fire Department Services Aqreement— Effective January 1, 2009, the City has entered into
� an agreement with May Township to provide fire services to the Township. The contract is
for three years extending through December 31, 2011. If the contract is not renewed or
extended by December 31, 2011, the contract will continue on a prorated month-to-month
basis. Related revenues for fiscal year 2009 were $29,266. The Township shall pay the
� City $30,876 and $32,574 for 2010 and 2011, respectively.
� �
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CITY OF SCANDIA, MINNESOTA �
NOTES TO BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2009 �
NOTE 8 DESIGNATIONS AND RES
ERVATIONS OF FUND BALANCE '
At December 31, 2009, the City had designated and reserved portions of its various fund �
balance through legal restriction and City Council authorization. Major fund balance
appropriations at December 31, 2009 are shown on the various balance sheets as
segregations of the fund balance. A summary of such designations and reservations are as �
follows:
Designations �
Reserved for For Capital
Debt Service Improvements
Major Funds: '
General Fund $ - $ 24,082
2004 Improvement Bond 67,521 -
2007 Improvement Debt Service 50,907 -
Capitallmprovement - 195,731 �
Nonmajor Funds:
2000 Fire Hall Bond 164,655 -
Park Capital Improvement - 19,878 ,
Equipment Replacement - 29,24�
Total Governmental Fund Balances
at December 31, 2009 $ 283,083 $ 268,938 ,
A deficit undesignated fund balance of $12,991 exists in the sanctuary capital projects
fund. The deficit is expected to be eliminated by special assessment revenues in future �
periods.
NOTE 9 INTERFUND TRANSFERS �
Individual fund transfers for fiscal year 2009 are as follows: �
Transfer Transfer
In Out
Governmental Activity: �
General Fund $ 3,600 $ 40,000
Non-major Fund - Equipment Replacement 40,000 -
Sewer - 3,600 �
$ 43,600 $ 43,600
During 2009, the City made routine interfund transfers to allocate financial resources to the '
funds that received benefit from services provided by another fund.
�
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�42� �
� � CITY OF SCANDIA MINNESOTA
,
' NOTES TO BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2009
�
NOTE 10 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.
� The City has entered into a joint powers agreement with the League of Minnesota Cities
Insurance Trust (LMCIT) to protect the City in the event of a loss. The LMCIT is a public
entity risk pool currently operating as a common risk management and insurance program
� for Minnesota cities. The agreement for formation of the LMCIT provides that the pool will
be self-sustaining through member premiums and will reinsure through commercial
, companies for claims in excess of reserved amounts for each insured event. The pool can
make additional assessments to make the pool self —sustaining. The City has determined
that it is not possible to estimate the amount of such additional assessments, if any;
� however, they are not expected to be material to these financial statements. There have
been no significant reductions in insurance coverage during 2009 and settlements have not
exceeded insurance coverage for any of the past three fiscal years.
�
NOTE 11 PRIOR PERIOD ADJUSTMENT
� During 2009, the City established historical cost and accumulated depreciation for all of its
governmental activities' capital assets based on historical records. As disclosed in Note 3,
effective January 1, 2009, the City's capital assets and net assets for governmental
' activities were increased by $4,073,277.
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BUDGETARY COMPARISON INFORMATION
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CITY OF SCANDIA, MINNESOTA �
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL �
GENERALFUND
YEAR ENDED DECEMBER 31, 2009
�
Budgeted Amounts �
Actual Variance with
Original Final Amounts Final Budget
REVENUES �
PropertyTaxes $ 1,480,893 $ 1,480,893 $ 1,408,652 $ (72,241)
IntergovernmentaL
State Aid Credits 45,000 45,000 39,752 (5,248) ,
Recycling Grant 7,000 7,000 7,223 223
Other Grants - - 91,100 11,100
Total Intergovernmental Revenues 52,000 52,000 58,075 6,075 �
Licenses and Permits 43,375 43,375 57,543 14,168
Fines and Forfeits 15,000 15,000 12,392 (2,608)
Charges for Services: �
Zoning and Hearing Fees 114,309 114,309 50,359 (63,950)
Fire Protection 28,428 28,428 29,266 838
Cable Franchise 5,550 5,550 5,957 407 �
Total Charges for Services 148,287 148,287 85,582 (62,705)
Miscellaneous:
Interest 10,589 10,589 12,675 2,086 '
Donations and Other 22,225 22,225 29,360 7,135
Total Miscellaneous 32,814 32,814 42,035 9,221
Total Revenues 1,772,369 1,772,369 1,664,279 (108,090) �
EXPENDITURES
General Government:
Administration and Finance 347,719 350,619 316,348 (34,271) �
City Council 19,883 19,883 22,038 2,155
Elections 495 495 470 (25)
Planning and Building 199,877 199,877 137,156 (62,721)
Total General Government 567,974 570,874 476,012 (94,862) �
Public Safety:
Police 117,366 117,366 114,504 (2,862)
Fire 308,354 288,354 281,007 (7,347) �
Total Public Safery 425,720 405,720 395,511 (10,209)
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� CITY OF SCANDIA, MINNESOTA
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
, BUDGET AND ACTUAL (CONTINUED)
GENERALFUND
YEAR ENDED DECEMBER 31, 2009
,
� Budgeted Amounts
Actuai Variance with
Original Final Amounts Final Budget
� EXPENDITURES (CONTINUED)
Public Works:
Public Works $ 571,491 $ 571,491 $ 357,090 $ (214,401)
� Uptown Sewer 27,330 27,330 13,122 (14,208)
Total Public Works 598,821 598,821 370,212 (228,609)
Parks and Recreation:
� Parks 66,246 66,246 59,280 (6,966)
Community Center 56,651 56,651 44,922 (11,729)
Total Parks and Recreation 122,897 122,897 104,202 (18,695)
� Debt Service:
Principal Payments (361) (361) 361
Interest Payments 361 361 - (361)
� Total Debt Service - - - -
Total Expenditures 1,715,412 1,698,312 1,345,937 (352,375)
' OTHER FINANCING SOURCES (USES)
Transfers In 3,600 3,600 3,600
Transfers Out (40,000) (40,000) (40,000) -
� Total Other Financing Sources(Uses) (36,400) (36,400) (36,400) -
NET CHANGE IN FUND BALANCE $ 20,557 $ 37,657 281,942 $ 244,285
� Fund Balance- Beginning of Year 523,449
FUND BALANCE-END OF YEAR $ 805,391
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CITY OF SCANDIA, MINNESOTA �
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
YEAR ENDED DECEMBER 31, 2009 '
STEWARDSHIP
COMPLIANCE AND ACCOUNTABILITY - BUDGETS '
The General Fund budget is legaily adopted on a basis consistent with U.S. generally accepted �
accounting principles. Actual expenditures exceeded budgets during 2009 as follows:
Final �
Budget Actual Excess
General Fund
General Government: �
City Council $ 19,883 $ 22,038 $ (2,155)
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� COMBINING FUND FINANCIAL STATEMENTS
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CITY OF SCANDIA, MINNESOTA �
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS �
DECEMBER 31, 2009
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Debt
Service Capital Projects '
2000 Park Total
Fire Hall Capital Equipment Nonmajor
Bond Fund Sanctuary Improvement Replacement Funds
ASSETS �
Cash and Investments $ 164,575 $ (14,972) $ 19,879 $ 29,248 $ 198,730
Taxes Receivable 81 - - - 81
Special Assessments
Receivable - 19,512 - - 19,512 �
Totai Assets $ 164,656 $ 4,540 $ 19,879 $ 29,248 $ 218,323
�IABILITIES AND FUND �
BALANCES
LIABILITIES
Deferred Revenue $ 81 $ 17,531 $ - $ - $ 17,612 '
FUND BALANCES
Reserved for Debt Service 164,655 - - - 164,655 ,
Unreserved, Designated for
Capitallmprovements - - 19,878 29,247 49,125
Unreserved, Undesignated (80) (12,991) 1 1 (13,069) �
Total Fund Balance 164,575 (12,991) 19,879 29,248 200,711
Total Liabilities and
Fund Balances $ 164,656 $ 4,540 $ 19,879 $ 29,248 $ 218,323
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, CITY OF SCANDIA, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND
� CHANGES IN FUND BALANCE
NONMAJOR GOVERNMENTAL FUNDS
YEAR ENDED DECEMBER 31, 2009
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` Debt
Service Capital Projects
2000 Park Total
, Fire Hall Capital Equipment Nonmajor
Bond Fund Sanctuary Improvement Replacement Funds
REVENUES
� Taxes $ 106,777 $ _ $ _ $ _ $ 106,777
Special Assessments 6,934 6,934
Miscellaneous Revenues 1,796 7,793 930 10,519
Total Revenues 108,573 6,934 7,793 930 124,230
, EXPENDITURES
Current:
Parks and Recreation Center - - 23,493 - 23,493
� Debt Service: - _ -
Principal Payments 85,000 85,000
Interest Payments 26,565 26,565
CapitalOutlay - - - 61,699 61,699
, Total Expenditures 111,565 - 23,493 61,699 196,757
EXCESS(DEFICIENCY)OF REVENUES
OVER EXPENDITURES (2,992) 6,934 (15,700) (60,769) (72,527)
, OTHER FINANCING SOURCES(USES)
Transfer in - - - 40,000 40,000
' NET CHANGE IN FUND BALANCES (2,992) 6,934 (15,700) (20,769) (32,527)
Fund Balance-Beginning of Year 167,567 (19,925) 35,579 50,017 233,238
� FUND BALANCE-END OF YEAR $ 164,575 $ (12,991) $ 19,879 $ 29,248 $ 200,711
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CITY OF SCANDIA, MINNESOTA '
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES — FIDUCIARY FUNDS
YEAR ENDED DECEMBER 31, 2009 �
Balance Balance 1
January 1, December 31, �
2009 Additions Deductions 2009
ASSETS
Cash and Investments $ 48,777 $ 79,010 $ 8,966 $ 118,821
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LIABILITIES
Contractor Deposits $ 48,777 $ 79,010 $ 8,966 $ 118,821 �
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� III.
' OTHER REQUIRED REPORTS
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C;I'As, C;ansultants & Advesors
� www.larsonellen.eorti
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REPORT ON MINNESOTA LEGAL COMPLIANCE
�
' Honorable Mayor
Members of the City Council and Citizens
City of Scandia, Minnesota
� We have audited 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) which collectively comprise the City's basic financial statements as of and for the year ended
December 31, 2009, and have issued our report thereon dated May 7, 2010.
We conducted our audit in accordance with U.S. generally accepted auditing standards and the
� provisions of the Minnesota Legal Compliance Audit Guide for Local Government, promulgated by the
State Auditor pursuant to Minn. Stat_ §6.65. Accordingly, the audit included such tests of the accounting
records and such other auditing procedures as we considered necessary in the circumstances.
� The Minnesota Legal Compliance Audit Guide for Local Government covers seven main categories of
compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public
� indebtedness, claims and disbursements, miscellaneous City provisions, and tax increment financing
districts. Our study included all of the listed categories.
The results of our tests indicate that, with respect to the items tested, the City of Scandia, Minnesota
, complied with the material terms and conditions of applicable legal provisions.
This report is intended solely for the information and use of management, the City Council , the Office
� of the State Auditor, and other state agencies, and is not intended to be and should not be used by
anyone other than these specified parties.
` �r�..e�,,�Ql1� �.�P
LarsonAllen LLP
, Minneapolis, Minnesota
May 7, 2010
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� �� LarsonAllen LLP is a member of Nexia lnternati(a10,)woridwide network of independent accounting and consulting firms.
� itirLNv,13 io:�,�i.
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Lars�n�llen
CPAs, Consulcants & Advisors �
www.larsonallen.com
�
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 AUD1TlNG STANDARDS
�
Honorable Mayor and �
Members of the City Council
City of Scandia, Minnesota
We have audited 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, 2009, which collectively comprise the City's basic �
financial statements and have issued our report thereon dated May 7, 2010. 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 Audifing Standards, issued by the �
Comptroller General of the United States.
Internal Control Over Financial Reportinq
In planning and performing our audit, we considered the City's internal control over financial reporting �
as a basis for designing our auditing procedures 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 over financial reporting. Accordingly, we do not express an opinion on the effectiveness
of the City's internal control over financial reporting.
Our consideration of the internal control over financial reporting was for the limited purpose described �
in the preceding paragraph and was not designed to identify all deficiencies in internal control over
financial reporting that might be significant deficiencies or material weaknesses and therefore, there
can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been �
identified. However, as described below, we identified certain deficiencies in internal control over
financial reporting that we consider to be material weaknesses.
A deficiency in internal control exists when the design or operation of a control does not allow ,
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a �
combination of deficiencies, in internal control, such that there is a reasonable possibility that a material
misstatement of the entity's financial statements will not be prevented, or detected and corrected on a
timely basis. We consider the deficiencies described below to be material weaknesses. �
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LarsonAllen LLP is a member of Nexia lnternational,a worldwide network of independent accounting and consulting firms. '
INTERNA'1�]ONA[.
' Honorable Ma or and
Y
� Members of the City Council
� Limited Seqreqation of Duties
Condition: Due to the City's limited number of office personnel, segregation of the accounting
functions that is necessary to ensure adequate internal accounting control may not be possible. This is
� not unusual in an operation the size of the City; however, the City Council should constantly be aware
of this condition and realize that the concentration of duties and responsibilities in a limited number of
� individuals is not desirable from an accounting point of view.
Criteria: Generally, a system of internal control contemplates separation of duties such that no
individual has responsibility to execute a transaction, have physical access to the related assets, and
� have responsibility or authority to record the transaction.
Effect: The City is unable to maintain segregation of incompatible duties.
� Cause: Limited number of personnel involved in the finance office.
Recommendation: This area should be reviewed periodically and consideration given to improving the
� segregation of duties. In making this review, it is most important to consider the benefit derived as
weighed against the cost of the improvements. Management feels it is currently not economically
feasible for the City to hire additional staff in order to adequately segregate all incompatible duties.
� Therefore, the City Council needs to be sufficiently involved in the oversight process and controls and
responsibilities should be reviewed periodically.
� Manaqement Response:
Management has decided, due to the small size of the City's staff, that the additional costs of
implementing the necessary controls outweigh the benefits that would be derived.
� Material Audit Adiustments - Internal Control over the Financial Reportinq Process
Condition: The audit firm proposed, and the City posted to its general ledger accounts, 26 journal
� entries to correct misstatements. These entries relate to internal controls over the year-end close-out
process. The absence of a complete control procedure or process in this area is considered a material
weakness because the potential exists that a material misstatement of the financial statements could
� occur and not be prevented or detected by the City's internal control processes.
Criteria: The City should have controls in place to prevent and detect a material misstatement in the
� financial statements in a timely manner. Management is responsible for the accuracy and
completeness of all financial records and related information. Their responsibilities include adjusting
the financial statements to correct material misstatements.
� Effect: Significant audit adjustments were required to bring the financial statements into accordance
with GAAP.
� Cause: The City has not established controls to ensure that all accounts are adjusted to their
appropriate year-end balances in accordance with GAAP.
Recommendation: We recommend the City continue to evaluate its internal control processes to
� determine if additional internal control procedures should be implemented to ensure that accounts are
adjusted to their appropriate year-end balances in accordance with U.S_ generally accepted account
principles (GAAP).
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Honor bl M or nd '
a e ay a
Members of the City Council
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Manaqement Response: �
Management has decided, due to the small size of the City's staff, that the additional costs of
implementing the necessary controls outweigh the benefits that would be derived. �
Oversiqht of the Financial Reportinq Process
Condition: The City does not have an internal control policy in place over annual financial reporting �
under GAAP, therefore, the potential exists that a material misstatement of the annual financial
statements could occur and not be prevented or detected by the City's internal controls.
Criteria: The City must be able to prevent or detect a material misstatement in the annual financial �
statements, including footnote disclosures.
Effect: Departures from generally accepted in the United States of America would not necessarily be '
detected by management.
Cause: The City relies on the audit firm to prepare the annual financial statements and related footnote �
disclosures. However, they have reviewed and approved the annual financial statements and related
footnote disclosures.
Recommendation: The City should continue to evaluate their internal staff, expertise, and assigned �
duties to determine if an internal control policy over the annual financial reporting is beneficial.
Manaqement Response: �
Management has decided, due to the small size of the City's staff, that the additional costs of
implementing the necessary controls outweigh the benefits that would be derived.
Compliance and Other Matters �
As part of obtaining reasonable assurance about whether the City's financial statements are free of
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.
We noted certain matters that we reported to the management of the City of Scandia in a separate �
letter dated May 7, 2010.
This report is intended solely for the information and use of the City Council, management, the Office
of the State Auditor, and state and federal awarding agencies and is not intended to be and should not �
be used by anyone other than these specified parties.
���y��.� �
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LarsonAllen LLP '
Minneapolis, Minnesota
May 7, 2010
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