9.a) 2014 Audited Financial Statements - FinalCITY OF SCANDIA, MINNESOTA
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2014
SCHLENNER WENNER & CO.
Certified Public Accountants
& Business Consultants
CITY OF SCANDIA, MINNESOTA
TABLE OF CONTENTS
INTRODUCTORY SECTION:
CITY COUNCIL AND OFFICIALS................................................................................................................................1
FINANCIAL SECTION:
INDEPENDENT AUDITORS' REPORT.........................................................................................................................2
REQUIRED SUPPLEMENTARY INFORMATION:
Management's Discussion and Analysis........................................................................................................................4
BASIC FINANCIAL STATEMENTS:
Government -wide Financial Statements
Statementof Net Position..................................................................................................................................... l l
Statementof Activities.........................................................................................................................................12
Fund Financial Statements
Balance Sheet -Governmental Funds..................................................................................................................... 13
Reconciliation of the Balance Sheet -Governmental Funds
to the Statement of Net Position.................................................................................................................... 14
Statement of Revenues, Expenditures, and
Changes in Fund Balances -Governmental Funds..........................................................................................15
Reconciliation of Changes in Fund Balance of Governmental
Funds to the Statement of Activities..............................................................................................................16
Statement of Net Position -Proprietary Funds.......................................................................................................17
Statement of Revenues, Expenses, and
Changes in Net Position -Proprietary Funds..................................................................................................18
Statement of Cash Flows -Proprietary Funds........................................................................................................19
Statement of Fiduciary Net Position.....................................................................................................................20
Notes to the Basic Financial Statements......................................................................................................................21
REQUIRED SUPPLEMENTARY INFORMATION:
Budgetary Comparison Schedule -General Fund.......................................................................................................... 39
OTHER SUPPLEMENTARY INFORMATION:
Combining Balance Sheet-Nonmajor Governmental Funds........................................................................................ 40
Combining Statement of Revenues, Expenditures, and
Changes in Fund Balances-Nommajor Governmental Funds................................................................................ 41
Supplemental Combining Balance Sheet -Debt Service Fund......................................................................................42
Supplemental Combining Schedule of Revenues, Expenditures, and
Changes in Fund Balance -Debt Service Fund...................................................................................................... 43
OTHER REPORTS:
Independent Auditors' Report on Internal Control Over Financial
Reporting and on Compliance and Other Matters Based on an
Audit of Financial Statements Performed in Accordance with
Government Auditing Standards.......................................................................................................................... 44
Schedule of Findings and Responses........................................................................................................................... 46
Independent Auditors' Report on Minnesota Legal Compliance................................................................................. 48
INTRODUCTORY
SECTION
CITY OF SCANDIA, MINNESOTA
CITY COUNCIL AND OFFICIALS
FOR THE YEAR ENDED DECEMBER 31, 2014
CITY COUNCIL
Randall Simonson Mayor
Dan Lee Council Member
Chris Ness Council Member
Jim Schneider Council Member
Sally Swanson Council Member
CITY OFFICIALS
Kristina Handt City Administrator
Colleen Firkus Treasurer
Term Expires
January 1, 2015
January 1, 2017
January 1, 2017
January 1, 2015
January 1, 2015
FINANCIAL
SECTION
SCHLENNER
WENNELt&Q0.
CERTIFIED PUBLIC ACCOUNTANTS
& BUSINESS CONSULTANTS
INDEPENDENT AUDITORS' REPORT
March 24, 2015
Honorable Mayor and City Council
City of Scandia
Scandia, Minnesota
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major
fund, and the aggregate remaining fund information of the City of Scandia, Minnesota, as of and for the year ended December 31,
2014, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in
the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting
principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of
internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance
with auditing standards generally accepted in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards issued by the Comptroller General ofthe United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe City's internal control. Accordingly,
we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
An Independently Owned Member, McGladrey Alliance
St. Cloud
Little Falls
Albany
Maple Lake
Monticello
630 Roosevelt Rd. Ste. 201
109 E. Broadway
115 6th St.
220 Hwy. 55 North, Ste. 4
114 W. 3rd St.
P.O. Box 1496
P.O. Box 365
P.O. Box 268
P.O. Box 385
P.O. Box 755
St. Cloud, MN 56302
Little Falls, MN 56345
Albany, MN 56307
Maple Lake, MN 55358
Monticello, MN 55362
320.251.0286
320.632.6311
320.845.2940
320.963.5414
763.295.5070
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, 2014, and the respective changes in financial position, and, where applicable, cash
flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's discussion and analysis
and budgetary comparison information as shown in the table of contents be presented to supplement the basic financial statements.
Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards
Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information
in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for consistency with management's
responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial
statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not
provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic
financial statements. The introductory section, combining and individual nonmajor fund financial statements, and supplementary
combining debt service fund schedules are presented for the purposes of additional analysis and are not a required part of the basic
financial statements.
The introductory section, combining and individual nonmajor fund financial statements, and supplementary combining debt service
fund schedules have not been subject to the auditing procedures applied in the audit of the basic financial statements, and
accordingly, we do not express an opinion or provide any assurance on them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated March 24, 2015 on our consideration of
the City of Scandia's internal control over financial reporting and our tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal
control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the City of Scandia's internal control over financial reporting and compliance.
Report on Other Legal and Regulatory Requirements
In accordance with Minnesota Statutes, we have also issued our report dated March 24, 2015, on our consideration of City of
Scandia's compliance with provisions of the Minnesota Legal Compliance Audit Guide forPolitical Subdivisions, promulgated by
the State Auditor pursuant to Minnesota Statute Section 6.65. The purpose of the report is to determine if the City has complied
with Minnesota laws and regulations. That report is an integral part of an audit performed in the State of Minnesota.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
REQUIRED SUPPLEMENTARY
INFORMATION
CITY OF SCANDIA, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2014
Our discussion and analysis of the City of Scandia's financial performance provides an overview of the City's financial activities
for the year ended December 31, 2014. Please read it in conjunction with the independent auditor's report on page two and the
City's financial statements, which begin on page eleven.
FINANCIAL HIGHLIGHTS
The City's net position increased $493,384 compared to the prior year as a result of this year's operations.
In the City's business -type activities, revenues decreased approximately $10,815 (or 10.53 percent), while operating
expenses increased $29,315 (or 28.81 percent).
Total cost of all of the City's programs decreased $99,395 (or 4.26 percent).
The City's General Fund generated more revenue than budgeted of $131,199. Expenditures were less than budgeted by
$190,277, including transfers to other funds which equaled budgeted amounts.
USING THIS ANNUAL REPORT
This annual report consists of series of financial statements. The Statement of Net Position and the Statement of Activities (on
pages eleven and twelve) provide information about the activities of the City as a whole and present a longer-term view of the
City's finances. Fund financial statements start on page thirteen. For governmental activities, these statements tell how these
services were financed in the short term as well as what remains for future spending. Fund financial statements also report the
City's operations in more detail than the government -wide statements by providing information about the City's most significant
funds. The remaining statements provide financial information about activities for which the City acts solely as an agent for the
benefit of those outside of the government.
Reporting the City as a Whole
Our analysis of the City as a whole begins on the following page. One of the most important questions asked about the City's
finances is, "Is the City as a whole better off or worse off as a result of the year's activities?" The Statement of Net Position and
the Statement of Activities report information about the City as a whole and about its activities in a way that helps answer this
question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the
accounting used by most private -sector companies. All of the current year's revenues and expenses are taken into account
regardless of when cash is received or paid.
These two statements report the City's net position and changes net position. You can think of the City's net position (the
difference between assets and liabilities) as one way to measure the City's financial health, or financial position. Over time,
increases or decreases in the City's net position are one indicator of whether its financial health is improving or deteriorating. You
will need to consider other nonfinancial factors, however, such as changes in the City's property tax base and the condition of the
City's roads, to assess the overall health of the City.
In the Statement of Net Position and the Statement of Activities, we divide the City into two kinds of activities:
Governmental Activities — Most of the City's basic services are reported here, including law enforcement, fire, public works,
parks departments, and general administration. Property taxes, special assessments, licenses, permits and fees, and state aids
finance most of these activities.
Business -type Activities — The City charges a fee to customers to help it cover all or most of the cost of certain services it
provides. The City's 201 sewer and uptown sewer systems are reported here.
4
CITY OF SCANDIA, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2014
USING THIS ANNUAL REPORT (Continued)
Reporting the City's Most Significant Funds
Our analysis of the City's major funds begins on page seven. The fund financial statements begin on page thirteen and provide
detailed information about the most significant funds -not the City as a whole. Some funds are required to be established by State
law and by bond covenants. However, the City Council may establish other funds to help it control and manage money for
particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money. The City's
three kinds of funds (governmental, proprietary, and fiduciary) use different accounting approaches.
Governmental Funds — Most of the City's basic services are reported in governmental funds, which focus on how money
flows into and out of those funds and the balances left at year-end that are available for spending. These funds are
reported using an accounting method called modified accrual accounting, which measures cash and all other financial
assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view ofthe
City's general government operations and the basic services it provides. Governmental fund information helps you
determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's
programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of
Net Position and the Statement of Activities) and governmental funds in reconciliations following the fund financial
statements.
Proprietary Funds — When the City charges customers for the services it provides these services are generally reported in
proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net
Position and the Statement of Activities. In fact, the City's enterprise funds are the same as the business -type activities
we report in the government -wide statements but provide more detail and additional information, such as cash flows, for
proprietary funds.
Fiduciary Fund — This fund is used to account for resources held for the benefit of parties outside ofthe City. Accounting
for fiduciary funds is much like that used for proprietary funds.
THE CITY AS A WHOLE
The City's combined net position increased $493,384 from a year ago. Our analysis below focuses on the net position (Table 1)
and changes in net position (Table 2) of the City's governmental and business -type activities.
Current & Other Assets
Net Capital Assets
Total Assets
Current & Other Liabilities
Long -Tenn Debt Outstanding
Total Liabilities
Net Position:
Net Investment in
Capital Assets
Restricted
Unrestricted
Total Net Position
Table 1
Net Position
Governmental
Activities
2014 2013
Business -Type
Activities
2014 2013
Total
Government
2014 2013
$ 3,478,568
$ 3,071,252
$ 132,766 $
153,969
$ 3,611,334 $
3,225,221
8,970,406
9,143,882
971,176
985,013
9,941,582
10,128,895
12,448,974
12,215,134
1,103,942
1,138,982
13,552,916
13,354,116
188,162
191,862
5,727
1,611
193,889
193,473
1,030,000
1,325,000
-
-
1,030,000
1,325,000
1,218,162
1,516,862
5,727
1,611
1,223,889
1,518,473
7,940,406
7,818,882 971,176
985,013 8,911,582
8,803,895
580,833
767,135 -
- 580,833
767,135
2,709,573
2,112,255 127,039
152,358 2,836,612
2,264,613
$ 11,230,812
$ 10,698,272 $ 1,098,215
$ 1,137,371 $ 12,329,027
$ 11,835,643
CITY OF SCANDIA, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2014
THE CITY AS A WHOLE (Continued)
The net position of the City's governmental activities increased by $532,540 (or 4.98 percent). Unrestricted net position (the part
of net position that can be used to finance day-to-day operations without constraints established by debt covenants, enabling
legislation, or other legal requirements) increased by $597,318 (or 28.28 percent) compared to the prior year.
The net position of the City's business -type activities decreased by $39,156 (or 3.44 percent). Operations were comparable to the
prior year.
Table 2
Changes in Net Position
Change in Net Position
$ 532,540 $ 413,056 $ (39,156) $ (6,068) $ 493,384 $ 406,988
The City's total revenues decreased by $12,999 (or 0.47 percent), largely due to a decrease in charges for services offset partially
by various increases in other areas. The total cost of all programs and services decreased by $99,395 (or 4.26 percent), primarily
due to costs incurred in the prior year for the completion of an environmental study to determine the impact of opening a local
mine.
Our analysis below separately considers the operations of governmental and business -type activities:
Governmental Activities
Revenue for the City's governmental activities decreased $2,184 (or 0.08 percent), while total expenses decreased $128,710 (or
5.77 percent). Revenues and expenses were generally consistent year to year, with the exception of decreased general government
expenses, related to the matter discussed on the prior page.
C
Governmental
Business -Type
Total
Activities
Activities
Government
2014
2013
2014
2013
2014
2013
REVENUE
Charges for Services
$ 327,863
$ 342,339 $
86,187 $
99,165 $
414,050 $
441,504
Grants and Contributions
51,849
42,817
5,278
3,055
57,127
45,872
Taxes
2,190,448
2,193,758
-
-
2,190,448
2,193,758
Intergovernmental
19,558
20,221
-
-
19,558
20,221
Investment Income
8,294
8,176
430
490
8,724
8,666
Other
35,709
28,594
-
-
35,709
28,594
Total Revenues
2,633,721
2,635,905
91,895
102,710
2,725,616
2,738,615
PROGRAM EXPENSES
General Government
426,431
584,423
-
-
426,431
584,423
Public Safety
391,752
409,771
-
-
391,752
409,771
Public Works
1,124,948
1,060,120
-
-
1,124,948
1,060,120
Parks and Recreation
111,619
109,884
-
-
111,619
109,884
Economic Development
240
-
-
-
240
-
Debt Service
46,191
65,693
-
-
46,191
65,693
201 Sewer
-
-
113,098
87,769
113,098
87,769
Uptown Sewer
-
-
17,953
13,967
17,953
13,967
Total Expenses
2,101,181
2,229,891
131,051
101,736
2,232,232
2,331,627
Transfers
-
7,042
-
(7,042)
-
-
Change in Net Position
$ 532,540 $ 413,056 $ (39,156) $ (6,068) $ 493,384 $ 406,988
The City's total revenues decreased by $12,999 (or 0.47 percent), largely due to a decrease in charges for services offset partially
by various increases in other areas. The total cost of all programs and services decreased by $99,395 (or 4.26 percent), primarily
due to costs incurred in the prior year for the completion of an environmental study to determine the impact of opening a local
mine.
Our analysis below separately considers the operations of governmental and business -type activities:
Governmental Activities
Revenue for the City's governmental activities decreased $2,184 (or 0.08 percent), while total expenses decreased $128,710 (or
5.77 percent). Revenues and expenses were generally consistent year to year, with the exception of decreased general government
expenses, related to the matter discussed on the prior page.
C
CITY OF SCANDIA, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2014
THE CITY AS A WHOLE (Continued)
Governmental Activities (Continued)
Table 3 presents the cost of each of the City's programs (general government, public safety, public works, parks and recreation,
economic development, and debt service) as well as each program's net cost (total cost less revenues generated by the activities).
The net cost shows the financial burden that was placed on the City's taxpayers by each of these functions. Activities, net of
capital outlay which is excluded from Table 3, were generally comparable to the prior year as operations remained fairly consistent
with the prior year, with the exception of the fluctuation in expenses for general government previously mentioned.
Table 3
Governmental Activities
Business -type Activities
Revenues of the City's business -type activities (see Table 2) decreased by $10,815 (or 10.53 percent). Expenses increased by
$29,315 (or 28.81 percent).
THE CITY'S FUNDS
Governmental Funds
As the City completed the year, its governmental funds (as presented in the balance sheet on page thirteen) reported a combined
fund balance of $3,183,111. This is an increase of $447,147 (or 16.34 percent) from the prior year. This increase in fund balance
is the net result of a multitude of transactions, but a few of the largest contributing factors unique to the current year's operations
are as follows:
Revenue from building permits issued by the City exceeded budgeted amounts by $29,526.
The City received escrow reimbursements of approximately $143,956 for expenditures incurred in prior years related to
the Tiller Environmental Impact Statement.
Revenue from donations to the City totaled $21,968, exceeding budgeted amounts by $13,968.
Property tax revenues of $127,704 were recorded in the Local Road Improvement Fund, but no amounts were expended
from this fund during 2014.
Expenditures for planning and buildings services were $99,315 less than budgeted. During 2014, the City began
offsetting these contracted expenditures with the related revenues, resulting in this variance from budgeted amounts.
Expenditures related to the general operations of the fire department were $48,266 less than budgeted.
Expenditures for various other City departments were less than budgeted.
Other operations were comparable to the prior year, with the exception of the issuance of the 2013 equipment certificates and
significant capital outlay expenditures incurred in the prior year. Financial information specific to the governmental funds is
detailed in Table 4. Such information was derived from the fund financials at pages thirteen and fifteen.
Total Cost
Net Cost
of Services
of Services
2014
2013
2014
2013
General Government
$ 426,431 $
584,423 $
170,535 $
307,960
Public Safety
391,752
409,771
326,332
341,601
Public Works
1,124,948
1,060,120
1,109,093
1,041,195
Parks and Recreation
111,619
109,884
69,078
88,286
Economic Development
240
-
240
-
Debt Service
46,191
65,693
46,191
65,693
Totals
$ 2,101,181 $
2,229,891 $
1,721,469 $
1,844,735
Business -type Activities
Revenues of the City's business -type activities (see Table 2) decreased by $10,815 (or 10.53 percent). Expenses increased by
$29,315 (or 28.81 percent).
THE CITY'S FUNDS
Governmental Funds
As the City completed the year, its governmental funds (as presented in the balance sheet on page thirteen) reported a combined
fund balance of $3,183,111. This is an increase of $447,147 (or 16.34 percent) from the prior year. This increase in fund balance
is the net result of a multitude of transactions, but a few of the largest contributing factors unique to the current year's operations
are as follows:
Revenue from building permits issued by the City exceeded budgeted amounts by $29,526.
The City received escrow reimbursements of approximately $143,956 for expenditures incurred in prior years related to
the Tiller Environmental Impact Statement.
Revenue from donations to the City totaled $21,968, exceeding budgeted amounts by $13,968.
Property tax revenues of $127,704 were recorded in the Local Road Improvement Fund, but no amounts were expended
from this fund during 2014.
Expenditures for planning and buildings services were $99,315 less than budgeted. During 2014, the City began
offsetting these contracted expenditures with the related revenues, resulting in this variance from budgeted amounts.
Expenditures related to the general operations of the fire department were $48,266 less than budgeted.
Expenditures for various other City departments were less than budgeted.
Other operations were comparable to the prior year, with the exception of the issuance of the 2013 equipment certificates and
significant capital outlay expenditures incurred in the prior year. Financial information specific to the governmental funds is
detailed in Table 4. Such information was derived from the fund financials at pages thirteen and fifteen.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2014
THE CITY'S FUNDS (Continued)
Governmental Funds (Continued)
Table 4
General, Special Revenue, Debt Service, and Capital Project Funds
Information Based on Fund Financials
Total Assets
Total Liabilities
Deferred Inflows of Resources
Total Revenues
Total Expenditures
Debt Service Included in
Total Expenditures
Capital Outlay Included in
Total Expenditures
Bond Proceeds
Net Transfers
Total Assets
Total Liabilities
Total Revenues
Total Expenditures
Capital Outlay Included in
Total Expenditures
Proceeds on Sale of Asset
Net Transfers
Total Assets
Total Liabilities
Deferred Inflows of Resources
Total Revenues
Total Expenditures
Debt Service Included in
Total Expenditures
Capital Outlay Included in
Total Expenditures
Bond Proceeds
Proceeds on Sale of Asset
Net Transfers
General Fund
2014
$ 1,917,489
$ 150,230
$ 51,369
$ 2,070,197
$ 1,648,722
2013
$ 1,819,453
$ 163,323
$ 61,715
$ 2,163,395
$ 1,805,675
Debt Service Fund
2014
$ 444,627
$ 435
$ 93,423
$ 349,636
$ 336,543
7013
$ 446,826
$ 109,150
$ 390,852
$ 547,639
$ - $
- $
336,543 $ 547,639
$ - $
63,871 $
- $ -
$ - $
- $
- $ 570,000
$ (300,000) $
(92,858) $
- $ (544,454)
Capital Projects Funds
?014 ?0111
$ 1,115,692
$ 227,561
$ 227,142
$ 226,013
$ 11,400
$ 300,000
$ 804,973
$ 1,100
$ 92,679
$ 388,020
$ 386,570
$ 5,905
$ 644,354
Total Governmental Funds
2014
$ 3,478,568
$ 150,665
$ 144,792
$ 2,648,394
$ 2,212,647
701 11
$ 3,071,252
$ 164,423
$ 170,865
$ 2,646,926
$ 2,741,334
$ 336,543 $ 547,639
$ 226,013 $ 450,441
$ - $ 570,000
$ 11,400 $ 5,905
$ - $ 7,042
Revenue Fund
2014
$ 760
$ 1,000
$ 240
?n VI
8
CITY OF SCANDIA, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2014
THE CITY'S FUNDS (Continued)
General Fund Budgetary Highlights
The City's General Fund generated more revenue than budgeted of $131,199. Expenditures were less than those budgeted by
$190,277. See additional detail pertaining to differences between budgeted and actual amounts within the General Fund
previously discussed on page seven and at the Budgetary Comparison Schedule on page thirty-nine.
Proprietary Funds
Financial information specific to the proprietary funds is detailed in Table 5. Such information was derived from the fund
financials at pages seventeen and eighteen.
Table 5
Proprietary Fund Information Based on Fund Financials
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
At the end of 2014, the City had $9,941,582 invested in a broad range of capital assets, including land, buildings, equipment and
vehicles, infrastructure, improvements, and sewer systems. This amount represents a net decrease of approximately $187,313 (or
1.85 percent) from last year.
201 Sewer Fund
Uptown Sewer Fund
2014
2013
2014
2013
Total Assets
$
935,997 $
972,196
$
204,553
$ 207,114
Total Liabilities
$
3,971 $
1,136
$
38,364
$ 40,803
Total Revenues
$
74,064 $
83,897
$
17,831
$ 18,813
Total Expenditures
$
113,098 $
87,769
$
17,953
$ 13,967
Net Transfers
$
- $
(2,972)
$
-
$ (4,070)
Change in Net Position
$
(39,034) $
(6,844)
$
(122)
$ 776
Total
Proprietary Funds
2014
2013
Total Assets
$
1,140,550 $
1,179,310
Total Liabilities
$
42,335 $
41,939
Total Revenues
$
91,895 $
102,710
Total Expenditures
$
131,051 $
101,736
Net Transfers
$
- $
(7,042)
Change in Net Position
$
(39,156) $
(6,068)
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
At the end of 2014, the City had $9,941,582 invested in a broad range of capital assets, including land, buildings, equipment and
vehicles, infrastructure, improvements, and sewer systems. This amount represents a net decrease of approximately $187,313 (or
1.85 percent) from last year.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2014
CAPITAL ASSET AND DEBT ADMINISTRATION (Continued)
Capital Assets (Continued)
Table 6
Net Capital Assets at Year -End
More detailed information about the City's capital assets is presented in Note 3.B. to the financial statements.
Debt
At year-end, the City had $1,030,000 in debt versus $1,325,000 last year (a decrease of 22.26 percent), as shown in Table 7.
Table 7
Outstanding Debt at Year -End
Governmental Business -Type
Activities Activities
'>nln 7n11
Totals
1An 7n11 1A1A 71111
General Obligation Debt $ 1,030,000 $ 1,325,000 $ - $ - $ 1,030,000 $ 1,325,000
See additional information at Note 3.C. to the financial statements.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES
The City's elected and appointed officials considered many factors when setting the year 2015 budget, such as tax rates and fees
that will be charged for the business -type activities. Citizens were asked for feedback on how to fund road improvements. A
majority favored general tax dollars rather than special assessments or franchise fees so the 2015 budget increased slightly to
allocate more dollars to the Local Road Improvement Fund. For the second year, the Council elected to make no changes to the
sewer rates. The Council expects operations in 2015 to remain fairly consistent with those of 2014. Overall budget amounts for
2015 are slightly higher than 2014's budget and operations mainly due to an increase in capital expenditures.
CONTACTING THE CITY'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview
of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report or
need additional financial information, contact the City of Scandia, 14727 2091h Street N, Scandia, MN 55073.
10
Governmental
Business -Type
Activities
Activities
Totals
2014
2013
2014
2013
2014
2013
Land
$ 487,735
$ 487,735 $
- $
-
$ 487,735
$ 487,735
Construction in Progress
-
25,761
-
-
-
25,761
Buildings
1,414,369
1,423,564
-
-
1,414,369
1,423,564
Equipment and Vehicles
1,130,261
1,037,192
21,039
-
1,151,300
1,037,192
Infrastructure
5,869,724
6,095,784
-
-
5,869,724
6,095,784
Other Improvements
68,317
73,846
-
-
68,317
73,846
201 Sewer System
-
-
750,000
780,000
750,000
780,000
Uptown Sewer
-
-
200,137
205,013
200,137
205,013
Totals
$ 8,970,406
$ 9,143,882 $
971,176 $
985,013
$ 9,941,582
$ 10,128,895
More detailed information about the City's capital assets is presented in Note 3.B. to the financial statements.
Debt
At year-end, the City had $1,030,000 in debt versus $1,325,000 last year (a decrease of 22.26 percent), as shown in Table 7.
Table 7
Outstanding Debt at Year -End
Governmental Business -Type
Activities Activities
'>nln 7n11
Totals
1An 7n11 1A1A 71111
General Obligation Debt $ 1,030,000 $ 1,325,000 $ - $ - $ 1,030,000 $ 1,325,000
See additional information at Note 3.C. to the financial statements.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES
The City's elected and appointed officials considered many factors when setting the year 2015 budget, such as tax rates and fees
that will be charged for the business -type activities. Citizens were asked for feedback on how to fund road improvements. A
majority favored general tax dollars rather than special assessments or franchise fees so the 2015 budget increased slightly to
allocate more dollars to the Local Road Improvement Fund. For the second year, the Council elected to make no changes to the
sewer rates. The Council expects operations in 2015 to remain fairly consistent with those of 2014. Overall budget amounts for
2015 are slightly higher than 2014's budget and operations mainly due to an increase in capital expenditures.
CONTACTING THE CITY'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview
of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report or
need additional financial information, contact the City of Scandia, 14727 2091h Street N, Scandia, MN 55073.
10
BASIC FINANCIAL STATEMENTS
The basic financial statements include integrated sets of financial statements as required by the GASB. The sets of statements
include:
Government -wide financial statements
Fund financial statements:
Governmental funds
Proprietary (enterprise) funds
Fiduciary Fund
In addition, the notes to the financial statements are included to provide information that is essential to a user's understanding of
the basic financial statements.
CITY OF SCANDIA, MINNESOTA
STATEMENT OF NET POSITION
DECEMBER 31, 2014
ASSETS
Cash and Cash Equivalents
Property Taxes Receivable
Assessments Receivable
Accounts Receivable
Prepaids
Inventory
Internal Balances
Capital Assets:
Capital Assets not Being Depreciated
Capital Assets Being Depreciated (Net)
TOTAL ASSETS
LIABILITIES
Accounts Payable
Accrued Payroll, Taxes, and Benefits
Accrued Interest
Unearned Revenue
Noncurrent Liabilities:
Compensated Absences
Debt Due Within One Year
Debt Due After One Year
TOTAL LIABILITIES
NET POSITION
Net Investment in Capital Assets
Restricted
Unrestricted
TOTAL NET POSITION
Governmental
Business -Type
Activities
Activities
Total
$ 3,256,386
$ 153,973 $
3,410,359
62,772
-
62,772
93,423
4,919
98,342
20,094
10,482
30,576
4,818
-
4,818
4,467
-
4,467
36,608
(36,608)
-
487,735
-
487,735
8,482,671
971,176
9,453,847
12,448,974
1,103,942
13,552,916
126,792
5,727
132,519
21,229
-
21,229
8,110
-
8,110
2,644
-
2,644
29,387
-
29,387
250,000
-
250,000
780,000
-
780,000
1,218,162
5,727
1,223,889
7,940,406
971,176
8,911,582
580,833
-
580,833
2,709,573
127,039
2,836,612
$ 11,230,812
$ 1,098,215 $
12,329,027
See accompanying notes. 11
CITY OF SCANDIA, MINNESOTA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2014
Functions/Programs
Expenses _
Governmental Activities:
19,558
General Government
$ 426,431 $
Public Safety
391,752
Public Works
1,124,948
Parks and Recreation
111,619
Economic Development
240
Debt Service
46,191 _
Total Governmental Activities
2,101,181
Program Revenues Net (Expense) Revenue and Changes in Net Position
Operating Capital Primary Government
Charges for Grants and Grants and Governmental Business -Type
Services Contributions Contributions Activities Activities Total
255,896 $ - $ - $ (170,535) $
35,594 29,826 - (326,332)
10,342 - 5,513 (1,109,093)
26,031 16,510 - (69,078)
- - - (240)
- - - (46,191) _
327,863 46,336 5,513 (1,721,469)
Business -Type Activities:
201 Sewer 113,098 68,356 - 5,278
Uptown Sewer 17,953 17,831 - -
Total Business -Type Activities 131,051 86,187 - 5,278
TOTALS $ 2,232,232 $ 414,050 $ 46,336 $ 10,791
General Revenues:
Taxes
Intergovernmental
Investment Income
Miscellaneous
Gain on Disposal of Assets
Total General Revenues
CHANGE IN NET POSITION
NET POSITION -BEGINNING OF YEAR
NET POSITION -END OF YEAR
- $ (170,535)
(326,332)
- (1,109,093)
- (69,078)
(240)
(46,191)
(1,721,469)
(39,464) (39,464)
(122) (122)
(39,586) (39,586)
(1,721,469) (39,586) (1,761,055)
2,190,448
-
2,190,448
19,558
-
19,558
8,294
430
8,724
24,309
-
24,309
11,400
-
11,400
2,254,009
430
2,254,439
532,540
(39,156)
493,384
10,698,272
1,137,371
11,835,643
$ 11,230,812 $
1,098,215 $
12,329,027
See accompanying notes. 12
CITY OF SCANDIA, MINNESOTA
BALANCESHEET
GOVERNMENTAL FUNDS
DECEMBER 31, 2014
FUND BALANCES
Nonspendable
9,285
- -
34,308
Total
Restricted
135,298
350,769 9,453
Debt
Equipment
Nonmajor
Total
- -
General
Service
Replacement
Governmental
Governmental
201,067
Fund
Fund
Fund
Funds
Funds
1,571,307
Total Fund Balances
1,715,890
350,769 451,023
665,429
ASSETS
TOTAL LIABILITIES, DEFERRED
Cash and Cash Equivalents
$ 1,823,041
$ 351,201
$ 451,023
$ 631,121
$ 3,256,386
Property Taxes Receivable
62,769
3
-
-
62,772
Assessments Receivable
-
93,423
-
-
93,423
Accounts Receivable
20,094
-
-
-
20,094
Prepaids
4,818
-
-
-
4,818
Inventory
4,467
-
-
-
4,467
Due from Other Fund
2,300
-
-
-
2,300
Advance to Other Fund
-
-
-
34,308
34,308
TOTAL ASSETS
$ 1,917,489
$ 444,627
$ 451,023
$ 665,429
$ 3,478,568
LIABILITIES
Accounts Payable
$ 126,357
$ 435
$ -
$ -
$ 126,792
Accrued Payroll, Taxes, and Benefits
21,229
-
-
-
21,229
Unearned Revenue
2,644
-
-
-
2,644
Total Liabilities
150,230
435
-
-
150,665
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue:
Property Taxes
51,369
-
-
-
51,369
Special Assessments
-
93,423
-
-
93,423
Total Deferred Inflows of Resources
51,369
93,423
-
-
144,792
FUND BALANCES
Nonspendable
9,285
- -
34,308
43,593
Restricted
135,298
350,769 9,453
-
495,520
Committed
-
- -
430,054
430,054
Assigned
-
- 441,570
201,067
642,637
Unassigned
1,571,307
- -
-
1,571,307
Total Fund Balances
1,715,890
350,769 451,023
665,429
3,183,111
TOTAL LIABILITIES, DEFERRED
INFLOWS OF RESOURCES,
AND FUND BALANCES
$ 1,917,489 $
444,627 $ 451,023 $
665,429
$ 3,478,568
See accompanying notes. 13
CITY OF SCANDIA, MINNESOTA
RECONCILIATION OF THE BALANCE SHEET -GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET POSITION
DECEMBER 31, 2014
Total fund balance for governmental funds
Amounts reported for governmental activities in the Statement of Net Position are
different because:
Capital assets (net of accumulated depreciation of $5,331,258) used in
governmental activities are not financial resources and, therefore
are not reported in the funds.
Other long-term assets are not available to pay for current -period expenditures
and therefore are reported as unavailable revenue in the funds.
Some expenses reported in the Statement of Activities do not require the use
of current financial resources and therefore are not reported as expenditures
in the governmental funds.
Accrued Interest
Compensated Absences
Long-term liabilities are not due and payable in the current period and,
therefore, they are not reported in the governmental funds.
Debt Due Within One Year
Debt Due After One Year
TOTAL NET POSITION OF GOVERNMENTAL ACTIVITIES
3,183,111
8,970,406
144,792
(8,110)
(29,3 87)
(250,000)
(780,000)
$ 11,230,812
See accompanying notes. 14
CITY OF SCANDIA, MINNESOTA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2014
REVENUES
Taxes
Special Assessments
Licenses, Permits, and Fees
Intergovernmental
Charges for Services
Fines
Investment Income
Miscellaneous
TOTAL REVENUES
EXPENDITURES
Current:
General Government
Public Safety
Public Works
Parks and Recreation
Economic Development
Debt Service:
Principal
Interest and Other Charges
Capital Outlay
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
Proceeds on Sale of Assets
Operating Transfers In
Operating Transfers Out
TOTAL OTHER FINANCING
SOURCES (USES)
NET CHANGE IN FUND BALANCES
FUND BALANCES - BEGINNING
FUND BALANCES - ENDING
$ 1,650,184 $ 327,506 $
- 21,240
83,659 -
43,926 -
227,736 -
13,468 -
4,947 890
46,277 -
2,070,197 349,636
- $ 223,104
Total
Debt Equipment
Nonmajor Total
General Service Replacement
Governmental Governmental
Fund Fund Fund
Funds Funds
$ 1,650,184 $ 327,506 $
- 21,240
83,659 -
43,926 -
227,736 -
13,468 -
4,947 890
46,277 -
2,070,197 349,636
- $ 223,104
$ 2,200,794
- -
21,240
- -
83,659
- -
43,926
- 3,000
230,736
- -
13,468
1,313 1,144
8,294
- -
46,277
1,313 227,248
2,648,394
411,615
-
-
-
411,615
336,313
-
-
-
336,313
798,551
-
-
1,129
799,680
102,243
-
-
-
102,243
-
-
-
240
240
-
295,000
-
-
295,000
-
41,543
-
-
41,543
-
-
190,048
35,965
226,013
1,648,722
336,543
190,048
37,334
2,212,647
421,475
13,093
(188,735)
189,914
435,747
-
-
11,400
-
11,400
-
-
100,000
200,000
300,000
(300,000)
-
-
-
(300,000)
(300,000)
-
111,400
200,000
11,400
121,475
13,093
(77,335)
389,914
447,147
1,594,415
337,676
528,358
275,515
2,735,964
$ 1,715,890 $ 350,769 $ 451,023 $ 665,429 $ 3,183,111
See accompanying notes. 15
CITY OF SCANDIA, MINNESOTA
RECONCILIATION OF CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2014
Net change in fund balances - total governmental funds
Amounts reported for governmental activities in the Statement
of Activities are different due to the following:
Governmental funds report capital outlays as expenditures
while governmental activities report depreciation expense
to allocate those expenditures over the life of the assets:
Capital Outlay
Depreciation Expense
Revenues in Statement of Activities that do not provide
current financial resources are not reported as revenues
in the funds:
Change in Long-term Receivables
Proceeds from the issuance of long-term debt is an other financing
source in the governmental funds, while repayment of debt principal
is an expenditure in the governmental funds. However, neither
transaction has any effect on net position:
Bond Payments
Net change in accrued interest on bonds is not reported as an
expenditure in the funds:
Some expenses reported in the Statement of Activities do not
require the use of current financial resources and therefore are
not reported as expenditures in governmental funds:
Change in Accrued Compensated Absences
CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES
$ 226,013
(399,489)
447,147
(173,476)
(26,073)
295,000
(4,648)
(5,410)
$ 532,540
See accompanying notes. 16
CITY OF SCANDIA, MINNESOTA
STATEMENT OF NET POSITION
PROPRIETARY FUNDS
DECEMBER 31, 2014
ASSETS
Current Assets
Cash and Cash Equivalents
Accounts Receivable
Assessments Receivable
Total Current Assets
Noncurrent Assets
Capital Assets Being Depreciated (Net)
TOTAL ASSETS
LIABILITIES
Current Liabilities
Accounts Payable
Due to Other Funds
Total Current Liabilities
Noncurrent Liabilities
Advance from Other Funds
TOTAL LIABILITIES
NET POSITION
Net Investment in Capital Assets
Unrestricted
TOTAL NET POSITION
201 Sewer Uptown Sewer
Fund Fund Totals
$ 153,877 $
6,162
4,919
164,958
96 $ 153,973
4,320 10,482
- 4,919
4,416 169,374
771,039 200,137 971,176
935,997 204,553 1,140,550
3,971 1,756 5,727
2,300 2,300
3,971 4,056 8,027
34,308 34,308
3,971 38,364 42,335
771,039 200,137 971,176
160,987 (33,948) 127,039
$ 932,026 $ 166,189 $ 1,098,215
See accompanying notes. 17
CITY OF SCANDIA, MINNESOTA
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2014
201 Sewer Uptown Sewer
OPERATING REVENUES
Charges for Services
$ 68,356 $
17,831 $
86,187
OPERATING EXPENSES
Wages and Benefits
19,512
5,739
25,251
Materials and Supplies
2,767
9
2,776
Professional Services
5,484
199
5,683
Repairs and Maintenance
44,500
4,571
49,071
Other Services and Charges
10,599
2,559
13,158
Depreciation
30,236
4,876
35,112
TOTAL OPERATING EXPENSES
113,098
17,953
131,051
NET OPERATING LOSS
(44,742)
(122)
(44,864)
NONOPERATING INCOME
Special Assessments
5,278
-
5,278
Investment Income
430
-
430
TOTAL NONOPERATING INCOME
5,708
-
5,708
CHANGE IN NET POSITION
(39,034)
(122)
(39,156)
NET POSITION -BEGINNING OF YEAR
971,060
166,311
1,137,371
NET POSITION -END OF YEAR
$ 932,026 $
166,189 $
1,098,215
See accompanying notes. 18
CITY OF SCANDIA, MINNESOTA
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2014
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments to Capital Improvement Fund - (2,640) (2,640)
Purchases of Capital Assets (21,275) - (21,275)
NET CASH USED BY CAPITAL AND
RELATED FINANCING ACTIVITIES
201 Sewer
Uptown Sewer
(23,915)
CASH FLOW FROM INVESTING ACTIVITIES
Fund
Fund
Totals
Investment Income
430
-
CASH FLOWS FROM OPERATING ACTIVITIES
Net Increase (Decrease) in Cash and Cash Equivalents
(21,673)
96
Cash Received from Customers
$ 74,154
$ 15,612
$ 89,766
Cash Paid to Suppliers
(60,515)
(6,057)
(66,572)
Cash Paid to Employees
(19,512)
(5,739)
(25,251)
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
(5,873)
3,816
(2,057)
CASH FLOWS FROM NONCAPITAL FINANCING
ACTIVITIES
(44,742) $
(122) $
(44,864)
Special Assessments
5,045
-
5,045
Net Advances to/from Other Funds
-
(1,080)
(1,080)
Cash Flows Reported in Other Categories:
NET CASH PROVIDED (USED) BY NONCAPITAL
Depreciation Expense
30,236
4,876
FINANCING ACTIVITIES
5,045
(1,080)
3,965
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments to Capital Improvement Fund - (2,640) (2,640)
Purchases of Capital Assets (21,275) - (21,275)
NET CASH USED BY CAPITAL AND
RELATED FINANCING ACTIVITIES
(21,275)
(2,640)
(23,915)
CASH FLOW FROM INVESTING ACTIVITIES
Investment Income
430
-
430
Net Increase (Decrease) in Cash and Cash Equivalents
(21,673)
96
(21,577)
Cash and Cash Equivalents -Beginning of Year
175,550
-
175,550
Cash and Cash Equivalents -End of Year $
153,877 $
96 $
153,973
RECONCILIATION OF NET OPERATING LOSS TO NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
Net Operating Loss $
(44,742) $
(122) $
(44,864)
Adjustments to Reconcile Net Operating Loss
to Net Cash Provided by Operating Activities
Cash Flows Reported in Other Categories:
Depreciation Expense
30,236
4,876
35,112
Change in Assets and Liabilities:
Accounts Receivable
5,798
(2,219)
3,579
Accounts Payable
2,835
1,281
4,116
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $
(5,873) $
3,816 $
(2,057)
See accompanying notes. 19
CITY OF SCANDIA, MINNESOTA
STATEMENT OF FIDUCIARY NET POSITION
FIDUCIARY FUND
DECEMBER 31, 2014
ASSETS
Cash and Cash Equivalents
LIABILITIES
Accounts Payable
Agency
Fund
$ 71,067
$ 71,067
See accompanying notes. 20
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
INDEX
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Financial Reporting Entity
B. Basis of Presentation
C. Measurement Focus and Basis of Accounting
D. Use of Estimates
E. Assets, Liabilities, Deferred Inflows of Resources, and Equity
F. Revenues, Expenditures, and Expenses
G. Reclassifications
NOTE 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
A. Fund Accounting Requirements and Deposits and Investments Laws and Regulations
B. Budgetary Information
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS
A. Cash, Cash Equivalents, and Investments
B. Capital Assets
C. Long -Term Debt
D. Interfund Transactions and Balances
E. Fund Equity
NOTE 4 OTHER NOTES
A. Employee Defined Benefit Pension Plans — Statewide
B. Employee Defined Contribution Pension Plan — Statewide
C. Statewide Volunteer Firefighter Retirement Plan
D. Risk Management
E. Commitments
F. New Accounting Standards
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the City of Scandia (the City) have been prepared in conformity with accounting principles generally
accepted in the United States of America (GAAP) as applied to governmental units. GAAP includes all relevant Governmental
Accounting Standards Board (GASB) pronouncements.
The City has a mayor -council form of government that is governed by an elected mayor and four -member council. The City
provides the following services: sanitation, recreation, public improvements, public safety, planning and zoning, and general
administrative services.
LA. FINANCIAL REPORTING ENTITY
The City's financial reporting entity is comprised of the primary governmental unit of the City of Scandia, Minnesota.
In determining the financial reporting entity, the City complies with the provisions of GASB No. 14, The Financial Reporting
Entity, and includes all component units of which the City appointed a voting majority of the units' board; the Cityis either able to
impose its will on the unit or a financial benefit or burden relationship exists.
Blended Component Units
Blended component units are separate legal entities that meet the component unit criteria describe above and whose governing
body is the same or substantially the same as the City Council or the component unit provides services entirely to the City. These
component units' funds are blended into those of the City's by appropriate activity type to compose the primary government
presentation. The City's blended component units consist of:
Economic Development Authority — The City created an Economic Development Authority (EDA) by resolution of its City
Council. The EDA is governed by a five -member board appointed by the City Council. Although it is legally separate from
the City, the EDA is reported as if it were part of the primary government because its purpose is to approve the City's
redevelopment plans. The EDA cannot issue bonded debt without the City's approval.
Discretely Presented Component Units
Discretely presented component units are separate legal entities that meet the component unit criteria described above but do not
meet the criteria for blending. Currently, the City has no discretely presented component units.
1.B. BASIS OF PRESENTATION
Government -wide Financial Statements
The Statement of Net Position and Statement of Activities display information about the reporting government as a whole. They
include all funds of the reporting entity except for fiduciary funds. The fiduciary fund is only reported in the Statement of
Fiduciary Net Position at the fund financial statement level. The statements distinguish between governmental and business -type
activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange
revenues. Business -type activities are financed in whole or in part by fees charged to external parties for goods and services.
Fund Financial Statements
Fund financial statements of the reporting entity are organized into funds, each of which is considered to be separate accounting
entities. Each fund is accounted for by providing a separate set of self -balancing accounts that constitute its assets, liabilities,
deferred inflows, fund equity, revenues, and expenditures/expenses. Funds are organized into three major categories:
governmental, proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and proprietary
categories.
21
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
I.B. BASIS OF PRESENTATION (Continued)
Fund Financial Statements (Continued)
A fund is considered major if it is the primary operating fund of the City or meets the following criteria:
Total assets, liabilities and deferred inflows, revenues or expenditures/expenses of that individual governmental or
enterprise fund are at least 10 percent of the corresponding total for all funds of that category or type; and
Total assets, liabilities and deferred inflows, revenues or expenditures/expenses of that individual governmental or
enterprise fund are at least 5 percent of the corresponding total for all governmental and enterprise funds combined.
The funds of the financial reporting entity are described below
Governmental Funds
General Fund
The General Fund is the primary operating fund of the City and is always classified as a major fund. It is used to account for all
activities except those legally or administratively required to be accounted for in other funds.
Debt Service Fund
The Debt Service Fund accounts for the accumulation of financial resources for the payment of interest and principal on general
long-term debt of the City other than debt service payments made by enterprise funds. Ad valorem taxes are used for the payment
of principal and interest on the City's judgment.
Capital Projects Funds
The Capital Projects Improvement Funds are used to account for financial resources to be used for the acquisition or construction
of capital projects (other than funds financed by proprietary funds).
Special Revenue Fund
The Special Revenue Funds account for funds received by the City with a specific purpose.
Proprietary Fund
Enterprise Funds
Enterprise Funds are used to account for business -like activities provided to the general public. These activities are financed
primarily by user charges and the measurement of financial activity focuses on net income measurement similar to the private
sector.
Fiduciary Fund
Agency Fund
This fund accounts for assets held by the City as an agent for other parties. These assets cannot be used to finance the City's own
operating programs.
MA
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
I.B. BASIS OF PRESENTATION (Continued)
Fund Financial Statements (Continued)
Major and Nonmajor Funds
The funds are further classified as major and nonmajor as follows:
Fund
Major:
General
Debt Service Fund
Capital Project Fund:
Equipment Replacement Fund
Proprietary Funds:
201 Sewer and Uptown Sewer
Nonmaj or:
Special Revenue Fund
Capital Project Funds
Fiduciary Fund
See description above.
See description above.
See description above.
Accounts for the activities of the City for providing sewer services to
the public.
See description above.
See description above.
See description above.
1.C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING
Measurement focus is a term used to describe "which" transactions are recorded within the various financial statements. Basis of
accounting refers to "when" transactions are recorded regardless of the measurement focus applied.
Measurement Focus
On the government -wide Statement of Net Position and the Statement of Activities, both governmental and business -like activities
are presented using the "economic resources" measurement focus as defined in the second bullet point below.
In the fund financial statements, the "current financial resources" measurement focus or the "economic resources" measurement
focus is used as appropriate:
All governmental funds utilize a current financial resources measurement focus. Only current financial assets and
liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available
spendable financial resources during a given period. These funds use fund balance as their measure of available
spendable financial resources at the end of the period.
The government -wide financial statements, proprietary, and fiduciary funds utilize an economic resources measurement
focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net
position (or cost recovery), and financial position. All assets and liabilities (whether current or noncurrent) associated
with their activities are reported. Proprietary fund equity is classified as net position.
Basis of Accounting
In the government -wide Statement of Net Position and Statement of Activities, both governmental and business -like activities are
presented using the "accrual" basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned
and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and
liabilities resulting from exchange and exchange -like transactions are recognized when the exchange takes place.
23
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
I.C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING (Continued)
Basis of Accounting (Continued)
In the fund financial statements, governmental funds are presented on the "modified accrual" basis of accounting. Under this
modified accrual basis of accounting, revenues are recognized when "measurable and available." Measurable means knowing or
being able to reasonable estimate the amount. Available means collectible within the current period or within sixty days after year
end. Expenditures (including capital outlay) are recorded when the related fund liability is incurred, except for general obligation
bond principal and interest which are reported when due.
All proprietary and fiduciary funds utilize the accrual basis of accounting.
1.D. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.
I.E. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND EQUITY
Cash and Cash Equivalents
For purposes of the Statement of Net Position, "cash and cash equivalents" includes all demand, savings, and money market
accounts for the City. For the purpose of the proprietary fund Statement of Cash Flows, "cash and cash equivalents" include all
demand, savings, and money market accounts.
See Note 3.A. for additional information related to Cash and Cash Equivalents.
Interfund Receivables and Payables
During the course of operations, transactions occur between individual funds that may result in amounts owed between funds.
Those related to good and services type transactions are classified as "due to and from other funds." Short-term interfund loans are
reported as "due to/from other fund." Long-term interfund loans (noncurrent portion) are reported as "advances from and to other
funds." Interfund receivables and payables between funds within governmental activities are eliminated in the Statement of Net
Position. See Note 3.D. for details of interfund transactions, including receivables and payables at year-end.
Prepaids
Prepaids represent costs paid during the current year to be recognized in future periods.
Inventories
Inventory is valued at the lower of average cost or market based on physical counts. Inventory in the General Fund consists of
expendable supplies held for consumption and is equally offset by a nonspendable fund balance classification. The cost of
inventory is recorded as an expense when purchased and adjusted at year-end.
24
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
I.E. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND EQUITY (Continued)
Receivables
In the government -wide statements, receivables consist of all revenues earned at year-end and not yet received. Allowances for
uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts receivable and are not
deemed necessary at year end. Major receivable balances for the governmental activities include charges for services, fines, fees,
taxes, and special assessments. Business -type activities report utility charges as their major receivables.
In the fund financial statements, material receivables in governmental funds include revenue accruals such as taxes, franchise fees,
fines and charges for service since they are usually both measurable and available. Nonexchange transactions collectible but not
available are deferred in the fund financial statements in accordance with modified accrual, but not deferred in the government -
wide financial statements in accordance with the accrual basis. Interest and investment earnings are recorded when earned only if
paid within 60 days since they would be considered both measurable and available. Proprietary fund material receivables consist
of all revenues earned at year-end and not yet received. Utility accounts receivable compose the majority of proprietary fund
receivables. Allowance for uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts
receivable. No allowances are deemed necessary at year end.
Capital Assets
The accounting treatment over property, plant and equipment (capital assets) depends on whether the assets are used in
governmental or proprietary fund operations and whether they are reported in the government -wide or fund financial statements.
Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 and must have an estimated
useful life in excess of one year.
The range of estimated useful lives by type of asset is as follows:
Buildings and Structures
40 years
Machinery and Equipment
5-25 years
Vehicles
25 years
Infrastructure
50 years
Government -wide Statements
In the government -wide financial statements, capital outlay expenditures are accounted for as capital assets. All capital assets are
valued at historical cost or estimated historical cost if actual is unavailable, except for donated capital assets which are recorded at
their estimated fair value at the date of donation.
Depreciation of all exhaustible capital assets is recorded as an allocated expense in the Statement of Activities, with accumulated
depreciation reflected in the Statement of Net Position. Depreciation is provided over the assets' estimated useful lives using the
straight-line method of depreciation. Prior to January 1, 2014, the City followed a policy under which a full year of depreciation
was taken on an asset in the year of its acquisition.
Fund Financial Statements
In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay
expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the
same as in the government -wide statements.
25
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
I.E. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND EQUITY (Continued)
Long -Term Debt
The accounting treatment of long-term debt depends on whether the assets are used in governmental fund operations or proprietary
fund operations and whether they are reported in the government -wide or fund financial statements.
All long-term debt to be repaid from governmental and business -type resources are reported as liabilities in the government -wide
statements. The long-term debt consists primarily of general obligation bonds and certificates payable.
Long-term debt for governmental funds is not reported as liabilities in the fund financial statements. The debt proceeds are
reported as other financing sources and payment of principal and interest are reported as expenditures. The accounting for
proprietary funds is the same in the fund statements as it is in the government -wide statements.
Compensated Absences
It is the City's policy to permit employees to accumulate a limited amount of earned but unused leave. All leave pay is accrued
when incurred in the government -wide and proprietary fund financial statements.
A liability for these amounts is reported in governmental funds only if they have matured, for example, as the result of an
employee's resignation or retirement. In the event a liability is recorded in the governmental funds, General Fund resources would
be used to liquidate the compensated absences.
Deferred Inflows of Resources
In addition to liabilities, the balance sheet reports a separate section for deferred inflows of resources. This element represents an
acquisition of fund balance that applies to future periods and therefore will not be recognized as an inflow of resources (revenue)
until that time. The City reports property taxes and special assessments as deferred inflows of resources and accordingly, these
amounts are deferred and recognized as inflows of resources in the period that they become available. Because this type of
unavailable revenue is only reported under a modified accrual basis of accounting, deferred inflows ofresources are only reported
in the governmental funds balance sheet.
Equity Classifications
Government -wide Statements
Equity is classified as net position and displayed in three components:
Net Investment in Capital Assets — Consists of capital assets including restricted capital assets, net of accumulated
depreciation and reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable
to the acquisition, construction, or improvement of those assets.
Restricted — Consists of net position with constraints placed on the use either by 1) external groups such as creditors, grantors,
contributors, or laws or regulations of other governments; or 2) law through constitutional provisions or enabling legislation.
Unrestricted — Remaining balance of net position that does not meet the definition of "restricted" or "net investment in capital
assets."
It is the City's policy to consider restricted net position to its depletion before unrestricted net position is applied.
26
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
I.E. ASSETS, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND EQUITY (Continued)
Equity Classifications (Continued)
Fund Statements
Governmental Fund Financial Statements — In the fund financial statements, governmental funds report fund balances as either
nonspendable, restricted, committed, assigned, or unassigned. When the City incurs an expenditure for which it may use either
restricted or unrestricted fund balances, it uses restricted fund balances first unless unrestricted fund balances will have to be
returned because they were not used. When the City incurs an expenditure for purposes for which amounts in any unrestricted
fund balance classification could be used, it uses fund balances in the following order: Committed, assigned, unassigned.
Nonspendable — Includes amounts that cannot be spent because they are either not in spendable form, or legally or
contractually required to be maintained intact. The nonspendable fund balances at December 31, 2014 consist of inventory
and prepaid expenditures.
Restricted — Includes the portion of fund balance which is not available for appropriation or which has been legally segregated
for a specific purpose.
Committed — Amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the City
Council.
Assigned — Amounts that are constrained by the City's intent to be used for specific purposes, but are neither restricted nor
committed.
Unassigned — This classification represents fund balance that has not been assigned to other funds and that has not been
restricted, committed, or assigned to specific purposes within the general fund. The City has formally adopted a policy under
which it strives to maintain a minimum unassigned general fund balance equal to approximately 35%-50% of annual General
Fund operating expenses.
See Note 3.E. for additional disclosures.
Proprietary Fund Financial Statements — Proprietary fund equity is classified the same as in the government -wide statements, as
described on the prior page.
1.F. REVENUES, EXPENDITURES, AND EXPENSES
Property Tax
Under state law, municipalities are limited in their ability to levy a property tax. The City levies its property tax for the subsequent
year during the month of December. The County of Washington is the collecting agency for the levy and remits the collections to
the City. In the fund financial statements, property taxes are recorded as revenue in the period levied to the extent they are
collected within 60 days of year-end.
December 31 is the last day the City can certify a tax levy to the County Auditor for collection the following year. The County
Auditor makes up the tax list for all taxable property in the City and applies the applicable tax rate to the tax capacity of individual
properties to arrive at the actual tax for each property. The County Auditor also collects all special assessments, except for certain
prepayments paid directly to the City. The County Auditor remits a list of taxes and special assessments to be collected on each
parcel of property to the County Treasurer in January of each year. The County Treasurer collects all taxes and assessments,
except as noted above. The County Treasurer mails copies of all real estate and personal property tax statements. Each year,
property owners are required to pay one half of their real estate taxes by May 15 and the balance by October 15. Penalties and
interest are assessed to property owners who do not pay their property taxes and special assessments by the due dates.
27
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
I.F. REVENUES, EXPENDITURES, AND EXPENSES (Continued)
Property Tax (Continued)
Delinquent taxes receivable include the past six years' uncollected taxes. Delinquent taxes have been offset by deferred inflows of
resources for taxes not received within 60 days after year end in the fund financial statements.
Operating Revenues and Expenses
Operating revenues and expenses for proprietary funds are those that result from providing services and producing and delivering
goods and/or services. It also includes all revenue and expenses not related to capital and noncapital financing or investing
activities.
Expenditures/Expenses
In the government -wide financial statements, expenses are classified by function for both governmental and business -type
activities.
In the fund financial statements, expenditures are classified as follows:
Governmental Funds — By Character Current (further classified by Function)
Debt Service
Capital Outlay
Proprietary Fund — By Operating and Nonoperating
In the fund financial statements, governmental funds report expenditures of financial resources. Proprietary funds report expenses
relating to use of economic resources.
Interfund Transfers
Permanent reallocations of resources between funds of the reporting entity are classified as interfund transfers. For the purpose of
the Statement of Activities, all interfund transfers between individual governmental funds, as well as all interfund transfers between
individual proprietary funds, have been eliminated. See additional information at Note 3.D.
1.G. RECLASSIFICATIONS
Certain amounts from 2013 have been reclassified to conform to the 2014 presentation in the Management's Discussion and
Analysis section.
NOTE 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
2.A. FUND ACCOUNTING REQUIREMENTS AND DEPOSITS AND INVESTMENTS LAWS AND REGULATIONS
By its nature as a local government unit, the City is subject to various federal, state, and local laws and contractual regulations.
The City complies with all state and local laws and regulations requiring the use of separate funds.
In accordance with state law, all uninsured deposits of municipal funds in financial institutions must be secured with acceptable
collateral valued at the lower of market or par. Minnesota Statutes require that all deposits with financial institutions be
collateralized in an amount equal to 110% of deposits in excess of FDIC or FSLIC insurance (100% if collateral pledged is
irrevocable standard letters of credit issued by the Federal Home Loan Bank). The City complies with such laws.
28
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (Continued)
2.B. BUDGETARY INFORMATION
Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America.
All annual appropriations lapse at fiscal year-end. The City does not use encumbrance accounting.
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS
The following notes present detail information to support the amounts reported in the basic financial statements for its various
assets, liabilities, deferred inflows, equity, revenues, and expenditures/expenses.
3.A. CASH, CASH EQUIVALENTS, AND INVESTMENTS
Deposits
In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council.
Minnesota Statutes require that all City deposits be protected by insurance, surety bond, or collateral. The market value of
collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds (100% if collateral pledged is
irrevocable standard letters of credit issued by the Federal Home Loan Bank). Authorized collateral in lieu of a corporate surety
bond includes:
United States government Treasury bills, Treasury notes, Treasury bonds;
Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service
available to the government entity;
A general obligation of a state or local government, with taxing powers, rated "A" or better;
A revenue obligation of a state or local government, with taxing powers, rated "AA" or better;
Unrated general obligation securities of a local government, with taxing powers, pledged as collateral against funds
deposited by that same local government entity;
Irrevocable standby letter of credit issued by a Federal Home Loan Bank accompanied by written evidence that the
Federal Home Loan Bank's public debt is rated "AA" or better by Moody's or Standard and Poor's; or
Time deposits insured by any federal agency.
Minnesota Statutes require that all collateral shall be placed in safekeeping in a restricted account at a Federal Reserve Bank, or in
an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial
institution furnishing the collateral.
At December 31, 2014, the City's deposits were not exposed to custodial credit risk. The City's deposits were sufficiently covered
by federal depository insurance or by collateral held by the government's agent in the government's name.
29
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.A. CASH, CASH EQUIVALENTS, AND INVESTMENTS (Continued)
Investments
The City may also invest idle funds as authorized by Minnesota Statutes as follows: direct obligations guaranteed by the United
States or its agencies; shares of investment companies registered under the Federal Investment Company Act of 1940 that received
the highest credit rating, are rated in one of the two highest rating categories by a statistical rating agency, and all of the
investments have a final maturity of 13 months or less; general obligations rated "A" or better; revenue obligations rated "AA" or
better; general obligations of the Minnesota Housing Finance Agency rated "A" or better; bankers' acceptances of United States
banks eligible for purchase by the Federal Reserve System; commercial paper issued by United States corporations or their
Canadian subsidiaries, rated of the highest quality category by at least two nationally recognized rating agencies, and maturing in
270 days or less; Guaranteed Investment Contracts guaranteed by a United States commercial bank, domestic branch of a foreign
bank, or a United States insurance company, and with a credit quality in one of the top two highest categories; repurchase or
reverse purchase agreements and securities lending agreements with financial institutions qualified as a "depository" by the
government entity, with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a
primary reporting dealer in U.S. government securities to the Federal Reserve Bank ofNew York, or certain Minnesota securities
broker-dealers. The City does not have any investment policies that would further limit investment choices.
At December 31, 2014, the City does not hold any investments.
30
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.B. CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2014 is as follows:
Balance at Balance at
01/01/14 Additions Disposals Transfers 12/31/14
Governmental Activities:
Capital Assets not Being
Depreciated
Land $
487,735 $
- $
- $ - $
487,735
Construction In Progress
25,761
13,700
- (39,461)
-
Total Capital Assets not Being
Depreciated
513,496
13,700
- (39,461)
487,735
Capital Assets Being
Depreciated
Buildings
2,232,670
-
- 39,461
2,272,131
Equipment
653,256
202,163
- -
855,419
Vehicles
1,306,557
-
(66,744) -
1,239,813
Infrastructure
9,273,769
10,150
- -
9,283,919
Other Improvements
162,647
-
- -
162,647
Total Capital Assets Being
Depreciated
13,628,899
212,313
(66,744) 39,461
13,813,929
Less: Accumulated Depreciation
Buildings
(809,106)
(48,656)
- -
(857,762)
Equipment
(339,115)
(53,844)
- -
(392,959)
Vehicles
(583,507)
(55,249)
66,744 -
(572,012)
Infrastructure
(3,177,984)
(236,211)
- -
(3,414,195)
Other Improvements
(88,801)
(5,529)
- -
(94,330)
Total Accumulated
Depreciation
(4,998,513)
(399,489)
66,744 -
(5,331,258)
Total Capital Assets Being
Depreciated, Net
8,630,386
(187,176)
- 39,461
8,482,671
Capital Assets, Net $
9,143,882 $
(173,476) $
- $ - $
8,970,406
31
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.B. CAPITAL ASSETS (Continued)
Business -Type Activities:
Capital Assets Being Depreciated
Sewer Plant
Equipment
Uptown Sewer
Total Capital Assets Being
Depreciated
Less: Accumulated Depreciation
201 Sewer Plant
Equipment
Uptown Sewer
Total Accumulated
Depreciation
Total Capital Assets Being
Depreciated, Net
Business -Type Activites
Balance at
Balance at
01/01/14
Additions Disposals
12/31/14
$ 1,500,000
$ - $ -
$ 1,500,000
-
21,275 -
21,275
243,827
- -
243,827
1,743,827
21,275 -
1,765,102
(720,000)
(30,000) -
(750,000)
-
(236) -
(236)
(38,814)
(4,876) -
(43,690)
(758,814)
(35,112) -
(793,926)
985,013
(13,837) -
971,176
$ 985,013
$ (13,837) $ -
$ 971,176
Depreciation is charged to governmental activities as follows:
General Government $ 14,816
Public Safety 50,029
Public Works 325,268
Parks and Recreation 9,376
Total Depreciation Expense $ 399,489
3.C. LONG-TERM DEBT
The reporting the City's long-term debt is segregated between the amounts to be repaid from governmental activities and amounts
to be repaid from business -type activities (none). All bonds and certificates set forth below are direct obligations of the City and
pledge the full faith and credit of the City.
32
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.C. LONG-TERM DEBT (Continued)
As of December 31, 2014, the long-term debt of the financial reporting entity consists of the following:
Governmental Activities
Issue
n.,.o
2007 Improvement Bonds
5/07
2010 Equipment Certificate
7/10
2011 Equipment Certificate
7/11
2013 Equipment Certificate
7/13
Changes in Long -Term Debt
General Obligation Debt
Balance
Annual Interest
Maturity
Payment Rate(s)
Date
$125000-250,000 3.65-4.10%
12/17
$40,000 2.20-3.55%
2/16
$30,000 2.75-3.95%
12/16
$50,000 - 65,000 1.00-2.50%
7/23
Total Governmental Activities Bonds Payable
Bonds Due Within One Year
$ 1,325,000
Bonds Due After One Year
Original Remaining
Amount Amount
The following is a summary of changes in long-term debt for the year ended December 31, 2014:
1,430,000 $ 375,000
200,000 80,000
150,000 60,000
570,000 515,000
1,030,000
250,000
$ 780,000
Amounts Due
Interest expense totals $44,766 in the Statement of Activities (included in Debt Service line). Interest expense totals $40,118 for
the Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental Funds (included in the line Interest and
Other Charges).
33
Balance
Balance
Within
Type of Debt
1/1/14
Additions Deductions
12/31/14
One Year
Governmental Activities:
General Obligation Notes
$ 1,325,000
$ - $ (295,000) $
1,030,000
$ 250,000
Compensated Absences
23,977
24,231 (18,821)
29,387
29,387
Total Long -Term Debt
$ 1,348,977
$ 24,231 $ (313,821) $
1,059,387
$ 279,387
Interest expense totals $44,766 in the Statement of Activities (included in Debt Service line). Interest expense totals $40,118 for
the Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental Funds (included in the line Interest and
Other Charges).
33
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.C. LONG-TERM DEBT (Continued)
Annual Debt Service Requirements
At December 31, 2014, the estimated annual debt service requirements to maturity, including principal and interest, are as follows
for the City's governmental activities:
Years Ending
Governmental Activities
December 31,
Principal
Interest
Total
2015
$ 250,000 $
30,598 $
280,598
2016
250,000
22,471
272,471
2017
180,000
14,688
194,688
2018
55,000
8,573
63,573
2019
55,000
7,418
62,418
Thereafter
240,000
14,280
254,280
Totals
$ 1,030,000 $
98,028 $
1,128,028
Governmental activity debt is typically funded through the Debt Service Fund.
3.D. INTERFUND TRANSACTIONS AND BALANCES
Operating transfers consist of the following for the year ended December 31, 2014:
Transfers In
Major Funds Non -major Funds
Transfers Equipment Other
Major Funds Out Replacement Governmental Total
General $ 300,000 $ 100,000 $ 200,000 $ 300,000
Transfers are used to (a) move revenues from the fund that statute or budget requires to collect them to the fund that statute or
budget require to expend them and to (b) use unrestricted revenues collected in the general fund to finance various programs
accounted for in other funds in accordance with budgetary authorizations.
The interfund balances are as follows:
Long -Term Advances
Due To Fund Due From Fund
Capital Improvement Uptown Sewer
Amount Reason
$ 34,308 Sewer improvements
Short -Term Balances
Due To Fund Due From Fund
General Fund Uptown Sewer 2,300 Eliminate negative cash
Total Interfund Balances $ 36,608
The Uptown Sewer Fund monies owed to the General Fund and Capital Improvement Fund will be repaid as future sewer charges
are collected and the cash flows become available.
34
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.E. FUND EQUITY
At December 31, 2014, governmental fund equity consists of the following:
General Fund
Nonspendable - Prepaids and Inventory
$
9,285
Restricted for Road Maintenance
Committed for Capital Improvements
124,673
Restricted for Erickson Ballfield
128,137
10,625
Unassigned
Assigned for Local Road Improvements
1,571,307
Total General Fund Balance
$
1,715,890
Debt Service Fund
Restricted for Debt Service
$
350,769
Equipment Replacement Fund
Restricted for Equipment Replacement
9,453
Assigned for Equipment Replacement
441,570
Total Equipment Replacement Fund Balance
$
451,023
Other Governmental Funds
Nonspendable - Advance to Other Fund
$ 34,308
Committed for Economic Development
760
Committed for Capital Improvements
301,157
Committed for Local Road Improvements
128,137
Assigned for Park Capital Improvements
1,067
Assigned for Local Road Improvements
200,000
Total Other Governmental Funds Balance
$ 665,429
NOTE 4 OTHER NOTES
4.A. EMPLOYEE DEFINED BENEFIT PENSION PLANS - STATEWIDE
Plan Description
All full-time and certain part-time employees of the City of Scandia are covered by defined benefit plans administered by the
Public Employees Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund
(GERF), which is a cost-sharing, multiple -employer retirement plan. This plan is established and administered in accordance with
Minnesota Statutes, Chapters 353 and 356.
GERF 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.
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 five 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.
35
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 4 OTHER NOTES (Continued)
4.A. EMPLOYEE DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
Plan Description (Continued)
Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring member receives the
higher of a step -rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity
accrual rate for a Basic Plan member is 2.2 percent of average salary for each of the first 10 years of service and 2.7 percent for
each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2 percent of average salary for each of the first
10 years and 1.7 percent for each remaining year. Under Method 2, the annuity accrual rate is 2.7 percent of average salary for
Basic Plan members and 1.7 percent for Coordinated Plan members for each year of service. For all GERF 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.
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.
PERA issues a publicly available financial report that includes financial statements and required supplementary information for
GERF. 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.
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. GERF Basic Plan members and Coordinated Plan members were required to contribute 9.1% and 6.25%, respectively, of
their annual covered salary in 2014. In 2014, the City was required to contribute the following percentages of annual covered
payroll: 11.78% for Basic Plan GERF members and 7.25% for Coordinated Plan GERF members. The City's contributions to the
General Employees Retirement Fund for the years ending December 31, 2014, 2013, and 2012 total $24,373, $21,074, and
$20,284, respectively. The City's contributions are equal to the contractually required contributions for each year as set by State
Statute. Contribution rates will increase on January 1, 2015 in the Coordinated Plan (6.5% for members and 7.5% for employers).
4.B. EMPLOYEE DEFINED CONTRIBUTION PENSION PLAN - STATEWIDE
The council members of the City of Scandia are covered by the Public Employees Defined Contribution Plan (PEDCP), a multiple -
employer deferred compensation plan administered by the Public Employees Retirement Association of Minnesota (PERA). The
PEDCP is a tax qualified plan under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of
employees are tax deferred until time of withdrawal.
36
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 4 OTHER NOTES (Continued)
4.B. EMPLOYEE DEFINED CONTRIBUTION PENSION PLAN - STATEWIDE (Continued)
Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota
Statutes, Chapter 353D.03, specifies plan provisions, including the employee and employer contribution rates for those qualified
personnel who elect to participate. An eligible elected official who decides to participate contributes 5 percent of salary which is
matched by the elected official's employer. Employer and employee contributions are combined and used to purchase shares in one
or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan, PERA receives 2
percent of employer contributions and twenty-five hundredths of one percent of the assets in each member's account annually.
Total contributions made by the City during fiscal year 2014 amount to $824.
4.C. STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN
Plan Description
Beginning January 1, 2011, the City joined the Voluntary Statewide Volunteer Firefighter Retirement Plan (the Plan) administered
by the Public Employees Retirement Association (PERA). The plan is an agent lump -sum defined benefit plan. Plan assets are
managed by the Minnesota State Board of Investment. The Plan is voluntary and open to fire departments as a replacement of their
existing volunteer firefighter retirement plan. It is also open to municipalities currently without a volunteer firefighter retirement
plan. The Plan is codified as Minnesota Statutes Chapter 353G.
The lump sum benefits payable from the Plan are funded by existing fire state aid allocated to a municipality, additional municipal
contributions, as applicable, and earnings on the investment of these funds. Each participating entity will have a separate Entity
Account in which the assets necessary to fund the benefits will be maintained.
PERA performs annual calculations for each Entity Account to assess the level of funding needed to maintain assets sufficient to
pay the benefits being earned by the participating entity's volunteer firefighters. The calculations will resemble the procedure
already defined in law for use by all existing volunteer fire relief associations. Required contributions for the coming year will be
based on service credit data provided to PERA in March of each year by each participating entity's fire chief. The City is able to
voluntarily contribute above and beyond the required contribution amount.
Retirement Benefits
The Plan provides for the payment of lump sum retirement benefits that are based on a specific dollar value paid for each year of
credited service accumulated by a volunteer firefighter who terminates service and meets the minimum requirements for receipt of
the benefits. The dollar value payable per year of service is determined by the sponsoring municipality or entity at the time an
election to participate in the Plan is made, selected from 20 possible benefit levels. An entity may elect to increase the benefit level
after joining the Plan. The benefit level approved by the City is $2,500 per year of service. To be eligible for a benefit, a firefighter
must:
Be at least 50 years old;
Be vested, which means having acquired a minimum of 5 years of "good-time" service credit in the Plan; and
Have severed his or her employment relationship with the fire department for a minimum of 30 days.
37
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2014
NOTE 4 OTHER NOTES (Continued)
4.C. STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
Retirement Benefits (Continued)
A full retirement benefit is payable to a firefighter with 20 years of service. Firefighters retiring with fewer than 20 but at least 5
years of service are eligible for a percentage of a full benefit. Former members of the fire department who were vested at the time
they left the department are also entitled to benefits when they attain age 50. Total employer contributions made during fiscal year
2014 are as follows:
City Contributions $ 18,259
State Aid 24,368
Total Contributions $ 42,627
4.D. RISK MANAGEMENT
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions;
injuries to employees; and natural disasters. To manage these risks, the City purchases commercial insurance. The City retains
risk for the deductible portions of the insurance. The amounts of these deductibles are considered immaterial to the financial
statements. There were no significant reductions in insurance from the previous year settlements in excess of insurance for any of
the past two years.
Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated.
Liabilities, if any, include an amount for claims that have been incurred but not reported. The City's management is not aware of
any incurred but no reported claims.
4.E. COMMITMENTS
Law Enforcement Services
The City receives law enforcement services under an agreement with Washington County. Such agreement automatically renews
on an annual basis and calls for the City to compensate the County based on the actual costs incurred while providing services
under the agreement. Based on the 2015 contract budget, expenditures anticipated under this agreement for 2015 are estimated at
$110,795.
201 Sewer System Upgrades
During 2014, the City accepted a proposal for upgrades to the 201 Sewer System in the amount of $94,918. Such project is
expected to be completed in 2015.
4.F. NEW ACCOUNTING STANDARDS
Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions and Statement
No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date will be implemented in the next fiscal
year. The effect of the implementation will reflect the City's share of the Public Employees Retirement Association and Fire
Relief Association net pension liability on the Statement of Net Position. The effect on net position will likely be significant.
38
REQUIRED SUPPLEMENTARY INFORMATION
Required supplementary information includes financial information and disclosures that are required by the GASB but are not
considered a part of the basic financial statements. Such information includes:
Budgetary Comparison Schedule -General Fund
CITY OF SCANDIA, MINNESOTA
BUDGETARY COMPARISON SCHEDULE -GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2014
RESOURCES (INFLOWS):
Taxes
Licenses, Permits, & Fees
Intergovernmental
Charges for Services
Fines
Investment Income
Miscellaneous
AMOUNTS AVAILABLE
CHARGES TO APPROPRIATIONS (OUTFLOWS):
General Government:
Mayor and Council
Planning and Buildings
Elections
General Government
Public Safety:
Police
Fire
Public Works
Parks and Recreation
Capital Outlay
Transfers Out
TOTAL CHARGES
BUDGETARY CHANGE IN FUND BALANCE
Budget
Actual
Variance with
Amounts-
Amounts
Final Budget
Original and
Budgetary
Over
Final
Basis
(Under)
$ 1,642,266 $
1,650,184
$ 7,918
53,795
83,659
29,864
34,583
43,926
9,343
169,244
227,736
58,492
16,000
13,468
(2,532)
7,100
4,947
(2,153)
16,010
46,277
30,267
1,938,998
2,070,197
131,199
18,839
18,406
(433)
166,200
66,885
(99,315)
6,110
5,827
(283)
342,043
320,497
(21,546)
122,068
121,113
(955)
263,466
215,200
(48,266)
819,035
798,551
(20,484)
95,738
102,243
6,505
5,500
-
(5,500)
300,000
300,000
-
2,138,999
1,948,722
(190,277)
$ (200,001) $
121,475
$ 321,476
39
OTHER SUPPLEMENTARY INFORMATION
Other supplementary information includes financial statements and schedules not required by GASB, nor a part of the basic
financial statements, but are presented for purposes of additional analysis.
Such statements and schedules include:
Combining Statements — Nonmajor Governmental Funds
Combining Schedules — Nonmajor Debt Service Fund
ASSETS
Cash and Cash Equivalents
Advance to Other Fund
TOTAL ASSETS
FUND BALANCES
Nonspendable
Committed
Assigned
TOTAL FUND BALANCES
CITY OF SCANDIA, MINNESOTA
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
DECEMBER 31, 2014
Economic
Development
Authority
Fund
Capital
Improvement
Fund
760 $ 301,157 $
34,308
Park
Capital
Improvement
Fund
1,067 $
Local
Road
Improvement
Fund
Total
Nonmaj or
Governmental
Funds
328,137 $ 631,121
- 34,308
$ 760 $ 335,465 $ 1,067 $ 328,137 $ 665,429
760
34,308 $ - $ - $ 34,308
301,157 - 128,137 430,054
- 1,067 200,000 201,067
$ 760 $ 335,465 $ 1,067 $ 328,137 $ 665,429
40
CITY OF SCANDIA, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2014
REVENUES
Taxes
Charges for Services
Investment Income
TOTAL REVENUES
EXPENDITURES
Current:
Public Works
Economic Development
Capital Outlay
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES
Operating Transfers In
NET CHANGE IN FUND BALANCES
FUND BALANCES - BEGINNING
FUND BALANCES - ENDING
Economic
Park
Local
Total
Development
Capital
Capital
Road
Nonmajor
Authority
Improvement
Improvement
Improvement
Governmental
Fund
Fund
Fund
Fund
Funds
$ 1,000
$ 94,400
$ -
$ 127,704
$ 223,104
-
-
3,000
-
3,000
-
699
12
433
1,144
1,000
95,099
3,012
128,137
227,248
-
1,129
-
-
1,129
240
-
-
-
240
-
26,036
9,929
-
35,965
240
27,165
9,929
-
37,334
760
67,934
(6,917)
128,137
189,914
-
-
-
200,000
200,000
760
67,934
(6,917)
328,137
389,914
-
267,531
7,984
-
275,515
$ 760
$ 335,465
$ 1,067
$ 328,137
$ 665,429
41
ASSETS
Cash and Cash Equivalents
Property Taxes Receivable
Assessments Receivable
TOTAL ASSETS
LIABILITIES
Accounts Payable
DEFERRED INFLOWS OF
RESOURCES
Unavailable Revenue:
Special Assessments
FUND BALANCE
Restricted
TOTAL LIABILITIES, DEFERRED
INFLOWS OF RESOURCES
AND FUND BALANCES
CITY OF SCANDIA, MINNESOTA
SUPPLEMENTAL COMBINING BALANCE SHEET
DEBT SERVICE FUND
DECEMBER 31, 2014
2007 2010 2011 2013 Total
Improvement 2000 Equipment Equipment Equipment Debt
Bond Fire Hall Bond Certificates Certificates Certificates Service
$ 287,053 $
3
93,423
$ 380,479 $
$ 50,930 $ 5,099 $ 8,119 $ 351,201
- - - 3
- - - 93,423
$ 50,930 $ 5,099 $ 8,119 $ 444,627
- $ - $ - $ 435 $ 435
93,423 - - - - 93,423
287,056 - 50,930 5,099 7,684 350,769
$ 380,479 $ - $ 50,930 $ 5,099 $ 8,119 $ 444,627
42
CITY OF SCANDIA, MINNESOTA
SUPPLEMENTAL COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE
DEBT SERVICE FUND
FOR THE YEAR ENDED DECEMBER 31, 2014
REVENUES
Taxes
Special Assessments
Investment Income
TOTAL REVENUES
EXPENDITURES
Debt Service:
Principal
Interest and Other Charges
TOTAL EXPENDITURES
EXCESS OF REVENUES
OVER EXPENDITURES
OTHER FINANCING SOURCES (USES)
Operating Transfers In
Operating Transfers Out
TOTAL OTHER FINANCING
SOURCES (USES)
NET CHANGE IN FUND BALANCE
FUND BALANCE - BEGINNING
FUND BALANCE - ENDING
2007
40,000
2010
2011
2013
Total
Improvement
2000
Equipment
Equipment
Equipment
Debt
Bond
Fire Hall Bond
Certificates
Certificates
Certificates
Service
$ 134,609
$ 42,852
$ 45,297
$ 34,965
$ 69,783 $
327,506
21,240
-
-
-
-
21,240
698
49
129
14
-
890
156,547
42,901
45,426
34,979
69,783
349,636
130,000
40,000
40,000
30,000
55,000
295,000
20,388
2,135
3,330
3,300
12,390
41,543
150,388
42,135
43,330
33,300
67,390
336,543
6,159
766
2,096
1,679
2,393
13,093
19,321
-
-
-
-
19,321
-
(19,321)
-
-
-
(19,321)
19,321
(19,321)
-
-
-
-
25,480
(18,555)
2,096
1,679
2,393
13,093
261,576
18,555
48,834
3,420
5,291
337,676
$ 287,056 $
- $
50,930 $
5,099 $
7,684 $
350,769
43
OTHER REPORTS
SCHLENNER
WENNELt&Q0.
CERTIFIED PUBLIC ACCOUNTANTS
& BUSINESS CONSULTANTS
INDEPENDENT AUDITORS' REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE
AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
March 24, 2015
Honorable Mayor and City Council
City of Scandia
Scandia, Minnesota
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General ofthe United States,
the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining
fund information of the City of Scandia (the City) as of and for the year ended December 31, 2014, and the related notes to the
financial statements, which collectively comprise the City of Scandia's basic financial statements, and have issued our report
thereon dated March 24, 2015.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City of Scandia's internal control over financial
reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of
expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the
City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to
identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material
weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying Schedule of
Findings and Responses, we identified certain deficiencies in internal control that we consider to be material weaknesses and
significant deficiencies.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the
normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material
weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a
material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We
consider the following deficiencies described in the accompanying Schedule ofFindings and Responses to be material weaknesses:
2013-1 and 2013-3.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material
weakness, yet important enough to merit attention by those charged with governance. We consider the following deficiency
described in the accompanying Schedule of Findings and Responses to be a significant deficiency: 2013-2.
An Independently Owned Member, McGladrey Alliance
St. Cloud
Little Falls
Albany
Maple Lake
Monticello
630 Roosevelt Rd. Ste. 201
109 E. Broadway
115 6th St.
220 Hwy. 55 North, Ste. 4
114 W. 3rd St.
P.O. Box 1496
P.O. Box 365
P.O. Box 268
P.O. Box 385
P.O. Box 755
St. Cloud, MN 56302
Little Falls, MN 56345
Albany, MN 56307
Maple Lake, MN 55358
Monticello, MN 55362
320.251.0286
320.632.6311
320.845.2940
320.963.5414
763.295.5070
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we
performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with
which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion
on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government
Auditing Standards.
City's Response to Findings
The City of Scandia's response to the findings identified in our audit is described in the accompanying Schedule of Findings and
Responses. The City's response was not subjected to the auditing procedures applied in the audit of the financial statements and,
accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that
testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral
part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
45
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF FINDINGS AND RESPONSES
FOR THE YEAR ENDED DECEMBER 31, 2014
Finding 2013-1 Limited Segregation of Duties
Condition: The City has limited segregation of accounting duties.
Criteria: The basic premise of proper segregation of duties is that no one employee should have access to both
physical assets and the related accounting records or to all phases of the transaction.
Cause: There are a limited number of employees.
Effect.• The City's lack of adequate segregation of accounting duties could adversely affect the City's ability to
initiate, record, process, and report financial data consistent with the assertions of management in the
financial statements.
Recommendation: Although the number of employees may not be large enough to eliminate this deficiency, we
recommend that the City evaluate current procedures and segregate where possible and implement
compensating controls.
Management's Response: Management agrees with our recommendation.
Finding 2013-2 Financial Statement Preparation
Condition: Schlenner Wenner & Co. drafted the audited financial statements and related footnote disclosures for
the City. These financial statements, including disclosures, were reviewed by management and
management has taken responsibility for them.
Criteria: Internal controls over financial reporting should be in place to provide for the preparation of financial
statements on an annual basis.
Cause: We believe management would require additional training in order to prepare the financial statements
and year-end adjustments internally.
Effect: The outsourcing of these services is not unusual in entities of the size of the City of Scandia and is the
result of management's cost benefit decision to rely on our expertise rather than incurring this internal
resource cost. However, errors can occur in the financial statements that may not be detected by
management.
Recommendation: While the City may not have adequate controls in place to eliminate this finding, the City should adopt
a formal written internal control policy to document its annual review of the financial statements and
year-end adjustments.
Management's Response: Management agrees with our recommendation.
46
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF FINDINGS AND RESPONSES
FOR THE YEAR ENDED DECEMBER 31, 2014
Finding 2013-3 Material Audit Adjustments
Condition:
Audit adjustments were required to correct material misstatements identified in the trial balance
presented for the audit.
Criteria:
The City is required to report accurate financial information.
Cause:
The City has not established controls to ensure all accounts are adjusted to their proper year-end
balances in accordance with accounting principles generally accepted in the United States of America.
Effect.•
The misstatements in the trial balance presented for the audit resulted in the need to record audit
adjustments to achieve fair financial statement presentation under accounting principles generally
accepted in the United States of America.
Recommendation:
We recommend management perform a thorough review of the trial balance prior to the audit and
ensure all accounts have been properly adjusted at year-end.
Management's Response: Management agrees with our recommendation.
47
SCHLENNER
WENNELR&CO.
CERTIFIED PUBLIC ACCOUNTANTS
& BUSINESS CONSULTANTS
INDEPENDENT AUDITORS' REPORT ON
MINNESOTA LEGAL COMPLIANCE
March 24, 2015
Honorable Mayor and City Council
City of Scandia
Scandia, Minnesota
We have audited, in accordance with auditing standards generally accepted in the United States of America, the financial
statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund
information of the City of Scandia, Minnesota (the City) as of and for the year ended December 31, 2014, and the related notes to
the financial statements, and have issued our report thereon dated March 24, 2015.
The Minnesota Legal Compliance Audit Guide for Political Subdivisions, promulgated by the State Auditor pursuant to Minnesota
Statute Section 6.65, contains seven categories of compliance to be tested: contracting and bidding, deposits and investments,
conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our
audit considered all of the listed categories, except that we did not test for compliance with the provisions for tax increment
financing as the City does not have any tax increment districts.
In connection with our audit, nothing came to our attention that caused us to believe that the City failed to comply with the
provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions. However, our audit was not directed
primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other
matters may have come to our attention regarding the City's noncompliance with the above referenced provisions.
This report is intended for the information and use of the City Council and management of the City of Scandia and the State
Auditor and is not intended to be and should not be used by anyone other than these specified parties.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
An Independently Owned Member, McGladrey Alliance
St. Cloud
Little Falls
Albany
Maple Lake
Monticello
630 Roosevelt Rd. Ste. 201
109 E. Broadway
115 6th St.
220 Hwy. 55 North, Ste. 4
114 W. 3rd St.
P.O. Box 1496
P.O. Box 365
P.O. Box 268
P.O. Box 385
P.O. Box 755
St. Cloud, MN 56302
Little Falls, MN 56345
Albany, MN 56307
Maple Lake, MN 55358
Monticello, MN 55362
320.251.0286
320.632.6311
320.845.2940
320.963.5414
763.295.5070