8.a Approved Financial Statements 2019
SCHLENNER WENNER & CO.
Certified Public Accountants
& Business Consultants
CITY OF SCANDIA, MINNESOTA
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2019
CITY OF SCANDIA, MINNESOTA
TABLE OF CONTENTS
INTRODUCTORY SECTION:
CITY COUNCIL AND OFFICIALS ................................................................................................................................ 1
FINANCIAL SECTION:
INDEPENDENT AUDITORS' REPORT ......................................................................................................................... 2
REQUIRED SUPPLEMENTARY INFORMATION:
Management’s Discussion and Analysis ........................................................................................................................ 4
BASIC FINANCIAL STATEMENTS:
Government-wide Financial Statements
Statement of Net Position ..................................................................................................................................... 13
Statement of Activities ......................................................................................................................................... 14
Fund Financial Statements
Balance Sheet – Governmental Funds .................................................................................................................. 15
Reconciliation of the Balance Sheet – Governmental Funds
to the Statement of Net Position .................................................................................................................... 16
Statement of Revenues, Expenditures, and
Changes in Fund Balances – Governmental Funds ....................................................................................... 17
Reconciliation of Changes in Fund Balance of Governmental
Funds to the Statement of Activities .............................................................................................................. 18
Statement of Net Position – Proprietary Funds .................................................................................................... 19
Statement of Revenues, Expenses, and
Changes in Net Position – Proprietary Funds ................................................................................................ 20
Statement of Cash Flows – Proprietary Funds ...................................................................................................... 21
Notes to the Basic Financial Statements ...................................................................................................................... 22
REQUIRED SUPPLEMENTARY INFORMATION:
Budgetary Comparison Schedule – General Fund ....................................................................................................... 46
Schedule of City’s Proportionate Share of Net Pension Liability ................................................................................ 48
Schedule of City Pension Contributions ...................................................................................................................... 49
Schedule of Changes in Net Pension Liability (Asset) ................................................................................................ 50
Notes to the Required Supplementary Information...................................................................................................... 51
SUPPLEMENTARY INFORMATION:
Supplemental Combining Balance Sheet – Major Governmental Fund – Debt Service Fund ..................................... 54
Supplemental Combining Schedule of Revenues, Expenditures, and
Changes in Fund Balance – Major Governmental Fund – Debt Service Fund ..................................................... 55
Combining Balance Sheet – All Nonmajor Governmental Funds ............................................................................... 56
Combining Statement of Revenues, Expenditures, and
Changes in Fund Balances – All Nonmajor Governmental Funds........................................................................ 57
Schedules of Indebtedness ........................................................................................................................................... 58
OTHER REQUIRED 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 .......................................................................................................................... 59
Schedule of Findings and Responses ........................................................................................................................... 61
Corrective Action Plans ............................................................................................................................................... 63
Independent Auditors’ Report on Minnesota Legal Compliance ................................................................................. 65
INTRODUCTORY
SECTION
1
CITY OF SCANDIA, MINNESOTA
CITY COUNCIL AND OFFICIALS
FOR THE YEAR ENDED DECEMBER 31, 2019
CITY COUNCIL Term Expires
Christine Maefsky Mayor January 1, 2021
Jerry Cusick Council Member January 1, 2023
Steve Kronmiller Council Member January 1, 2021
Chris Ness Council Member January 1, 2021
Patty Ray Council Member January 1, 2023
CITY OFFICIALS
Ken Cammilleri City Administrator
Colleen Firkus Treasurer
FINANCIAL
SECTION
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INDEPENDENT AUDITORS' REPORT
April 29, 2020
Honorable Mayor and City Council
City of Scandia, Minnesota
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major
fund, and the aggregate remaining fund information of the City of Scandia, Minnesota (the City) as of and for the year ended
December 31, 2019, and the related notes to the financial statements, which collectively comprise the City’s basic financial
statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting
principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal
control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance
with auditing standards generally accepted in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal
control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of
the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City
of Scandia, Minnesota as of December 31, 2019, and the respective changes in financial position and, where applicable, cash flows
thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
3
Emphasis of Matter
Change in Accounting Principle
As discussed in Note 1.G. to the financial statements, City of Scandia, Minnesota has adopted Governmental Standards Board
Statement No. 84, Fiduciary Activities. Our opinions are not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis,
Budgetary Comparison Schedule, Schedule of City’s Proportionate Share of Net Pension Liability, Schedule of City Pension
Contributions, and Schedule of Changes in Net Pension Liability (Asset) 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.
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic
financial statements. The introductory section, supplementary combining debt service fund schedules, combining and individual
nonmajor fund financial statements, and schedules of indebtedness, as listed in the table of contents, are presented for the purposes
of additional analysis and are not a required part of the basic financial statements.
The introductory section, supplementary combining debt service fund schedules, combining and individual nonmajor fund
financial statements, and schedules of indebtedness, have not been subject to the auditing procedures applied in the audit of the
basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated April 29, 2020 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 solely to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on
the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed
in accordance with Government Auditing Standards in considering the City of Scandia’s internal control over financial reporting
and compliance.
Report on Other Legal and Regulatory Requirements
In accordance with Minnesota Statutes, we have also issued our report dated April 29, 2020, on our consideration of the City of
Scandia’s compliance with provisions of the Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State
Auditor pursuant to Minnesota Statute Section 6.65. The purpose of the report is to determine if the City has complied with
Minnesota laws and regulations. That report is an integral part of an audit performed in the State of Minnesota.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
REQUIRED SUPPLEMENTARY
INFORMATION
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2019
4
Our discussion and analysis of the City of Scandia’s financial performance provides an overview of the City’s financial activities
for the year ended December 31, 2019. Please read it in conjunction with the independent auditor’s report on page two and the
City’s financial statements, which begin on page thirteen.
FINANCIAL HIGHLIGHTS
The City’s net position increased $357,884 compared to the prior year as a result of this year’s operations.
The City’s General Fund generated more revenue than budgeted of $101,587. Expenditures were less than budgeted by
$19,192, including transfers to other funds which did not exceed budgeted amounts.
The unassigned fund balance in the General Fund of $1,259,442 is 58.9 percent of the 2019 General Fund budgeted
expenditures, including budgeted transfers to other funds.
In the City’s Sewer utility funds, revenues increased $1,388 (or 1.28 percent), while operating expenses increased
$16,379 (or 14.14 percent). The City’s utility funds ended 2019 with a net loss of $24,966, with the cash position
decreasing $2,726, due to minimal capital improvements during 2019.
The City’s General Fund generated more revenue than budgeted of $101,587, excluding transfers in from other funds.
Expenditures were less than budgeted by $22,192, excluding transfers to other funds. See additional detail pertaining to
differences between budgeted and actual amounts at the General Fund’s Budgetary Comparison Schedule on page forty-
six.
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 thirteen and fourteen) 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 fifteen. For governmental activities, these statements tell how these
services were financed in the short term as well as what remains for future spending. Fund financial statements also report the
City’s operations in more detail than the government-wide statements by providing information about the City’s most significant
funds. The remaining statements provide financial information about activities for which the City acts solely as an agent for the
benefit of those outside of the government.
Reporting the City as a Whole
Our analysis of the City as a whole begins on page six. One of the most important questions asked about the City’s finances is, “Is
the City as a whole better off or worse off as a result of the year’s activities?” The Statement of Net Position and the Statement of
Activities report information about the City as a whole and about its activities in a way that helps answer this question. These
statements include all assets, liabilities and deferred outflows/inflows of resources using the accrual basis of accounting, which is
similar to the accounting used by most private-sector companies. All of the current year’s revenues and expenses are taken into
account regardless of when cash is received or paid.
These two statements report the City’s net position and changes net position. You can think of the City’s net position (the
difference between assets and liabilities, adjusted for deferred outflows/inflows) as one way to measure the City’s financial health,
or financial position. Over time, increases or decreases in the City’s net position are one indicator of whether its financial health is
improving or deteriorating. You will need to consider other nonfinancial factors, however, such as changes in the City’s property
tax base and the condition of the City’s roads, to assess the overall health of the City.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2019
5
USING THIS ANNUAL REPORT (Continued)
Reporting the City as a Whole (Continued)
In the Statement of Net Position and the Statement of Activities, we divide the City into two kinds of activities:
Governmental Activities – Most of the City’s basic services are reported here, including law enforcement, fire, public works,
parks, planning, and general administration. Property taxes, special assessments, licenses, permits and fees, and state aids
finance most of these activities.
Business-type Activities – The City charges a fee to customers to help it cover all or most of the cost of certain services it
provides. The City’s 201 Sewer and Uptown sewer systems are reported here.
Reporting the City’s Most Significant Funds
Our analysis of the City’s major funds begins on page eight. The fund financial statements begin on page fifteen and provide
detailed information about the most significant funds-not the City as a whole. Some funds are required to be established by State
law and by bond covenants. However, the City Council may establish other funds to help it control and manage money for
particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money. The City’s
two kinds of funds (governmental and proprietary) use different accounting approaches.
Governmental Funds – Most of the City’s basic services are reported in governmental funds, which focus on how money
flows into and out of those funds and the balances left at year-end that are available for spending. These funds are
reported using an accounting method called modified accrual accounting, which measures cash and all other financial
assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the
City’s general government operations and the basic services it provides. Governmental fund information helps you
determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s
programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of
Net Position and the Statement of Activities) and governmental funds in reconciliations following the fund financial
statements.
Proprietary Funds – When the City charges customers for the services it provides these services are generally reported in
proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net
Position and the Statement of Activities. In fact, the City’s proprietary funds are the same as the business-type activities
we report in the government-wide statements but provide more detail and additional information, such as cash flows, for
proprietary funds.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2019
6
THE CITY AS A WHOLE
The City’s combined net position increased $357,884 from a year ago. Our analysis below focuses on the net position (Table 1)
and changes in net position (Table 2) of the City’s governmental and business-type activities.
Table 1
Net Position
Governmental Business-Type Total
Activities Activities Government
2019 2018 2019 2018 2019 2018
Assets
Current and Other Assets 4,747,461$ $4,568,829 111,395$ $117,716 4,858,856$ 4,686,545$
Noncurrent Assets 14,123,434 14,543,652 895,786 915,419 15,019,220 15,459,071
Total Assets 18,870,895 19,112,481 1,007,181 1,033,135 19,878,076 20,145,616
Deferred Outflows of Resources 69,168 64,496 2,244 5,219 71,412 69,715
Liabilities
Curent and Other Liabilities 208,467 478,346 5,643 2,248 214,110 480,594
Noncurrent Liabilities 4,429,186 4,733,441 19,674 24,255 4,448,860 4,757,696
Total Liabilities 4,637,653 5,211,787 25,317 26,503 4,662,970 5,238,290
Deferred Inflows of Resources 115,704 161,334 4,189 6,966 119,893 168,300
Net Position
Net Investment in
Capital Assets 9,898,338 10,001,968 895,786 915,419 10,794,124 10,917,387
Restricted 29,505 10,762 - - 29,505 10,762
Unrestricted 4,258,863 3,791,126 84,133 89,466 4,342,996 3,880,592
Total Net Position 14,186,706$ 13,803,856$ 979,919$ 1,004,885$ 15,166,625$ 14,808,741$
The net position of the City’s governmental activities increased by $382,850 (or 2.77 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 $467,737 (or 12.34 percent) compared to the prior year.
The net position of the City’s business-type activities decreased by $24,966 (or 2.48 percent), while the unrestricted net position
decreased from $89,466 to $84,133 due to the depreciation of capital assets included in Net Investment in Capital Assets.
Operations were comparable to the prior year.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2019
7
THE CITY AS A WHOLE (Continued)
Table 2
Changes in Net Position
Governmental Business-Type Total
Activities Activities Government
2019 2018 2019 2018 2019 2018
Program Revenues
Charges for Services 233,576$ $383,403 101,773$ 106,865$ 335,349$ 490,268$
Grants and Contributions 140,117 108,632 4,824 611 144,941 109,243
Taxes 2,268,165 2,275,014 - - 2,268,165 2,275,014
Franchise Fees 24,934 17,454 - - 24,934 17,454
Intergovernmental 45,549 74,909 46 186 45,595 75,095
Investment Income 65,463 41,396 3,226 819 68,689 42,215
Other 145,682 16,606 - - 145,682 16,606
Total Revenues 2,923,486 2,917,414 109,869 108,481 3,033,355 3,025,895
Program Expenses
General Government 528,579 543,395 - - 528,579 543,395
Public Safety 409,616 476,398 - - 409,616 476,398
Public Works 1,347,433 965,452 - - 1,347,433 965,452
Parks and Recreation 124,141 130,215 - - 124,141 130,215
Economic Development 10,950 15,908 - - 10,950 15,908
Debt Service 122,557 150,744 - - 122,557 150,744
201 Sewer - - 118,015 98,411 118,015 98,411
Uptown Sewer - - 14,180 17,405 14,180 17,405
Total Expenses 2,543,276 2,282,112 132,195 115,816 2,675,471 2,397,928
Transfers 2,640 - (2,640) - - -
Change in Net Position 382,850 635,302 (24,966) (7,335) 357,884 627,967
Net Position - Beginning of Year 13,803,856 13,168,554 1,004,885 1,012,220 14,808,741 14,180,774
Net Position - End of Year 14,186,706$ 13,803,856$ 979,919$ 1,004,885$ 15,166,625$ 14,808,741$
The City’s total revenues increased by $7,460 (or 0.25 percent). Operations were comparable to the prior year, but various
changes of significance include:
A decrease in building permits revenue from 2018 of $150,637 is reflected in the Charges for Services decrease of
$154,919 from 2018.
Other revenues increased from 2018 by $129,076 primarily due to the sale of City-owned land during the current year.
Public works expenses increased by $381,981 from 2018 primarily due to greater capital purchases in the current year
and expenditures associated with the preparation of the 2020 Street Improvement Project.
The total cost of all programs and services increased by $277,543 (or 11.57 percent), primarily due to costs related to the purchase
of Parks and Recreation and Public Works equipment, costs associated with the Gateway Trail Project, and the initial debt service
payment on 2018 Street Reconstruction Bonds.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2019
8
THE CITY AS A WHOLE (Continued)
Our analysis below separately considers the operations of governmental and business-type activities:
Governmental Activities
Revenue for the City’s governmental activities increased $6,072 (or 0.21 percent), while total expenses increased by $261,164 (or
11.44 percent). Revenues and expenses were generally consistent year to year, with the exception of the matters previously noted.
Table 3 presents the cost of each of the City’s programs (general government, public safety, public works, parks and recreation,
economic development, and debt service) as well as each program’s net cost (total cost less revenues generated by the activities).
The net cost shows the financial burden that was placed on the City’s taxpayers by each of these functions. Activities, net of
capital outlay which is excluded from Table 3, were generally comparable to the prior year as operations remained fairly consistent
with the prior year, with the exception of the fluctuation in expenses for economic development previously mentioned.
Table 3
Governmental Activities
Total Cost Net Cost
2019 2018 2019 2018
General Government 528,579$ $543,395 355,687$ $231,344
Public Safety 409,616 476,398 333,869 400,400
Public Works 1,347,433 965,452 1,302,864 932,917
Parks and Recreation 124,141 130,215 43,656 58,764
Economic Development 10,950 15,908 10,950 15,908
Debt Service 122,557 150,744 122,557 150,744
Totals 2,543,276$ 2,282,112$ 2,169,583$ 1,790,077$
of Services of Services
Business-type Activities
Revenues of the City’s business-type activities (see Table 2) increased by $1,388 (or 1.28 percent). Expenses increased by
$16,379 (or 14.14 percent). Operations were comparable to those of the prior year.
THE CITY’S FUNDS
Governmental Funds
As the City completed the year, its governmental funds (as presented in the balance sheet on page fifteen) reported a combined
fund balance of $4,461,721. This is an increase of $380,358 (or 9.32 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 $16,474 (12.07 percent) and were
$150,637 (52.47 percent) less than 2018. The decrease is related to the fewer building permits issued in 2019 compared
to the activity observed in fiscal year 2018 and 2017.
During 2019, the City received $74,873 in intergovernmental revenues for capital projects, which is $41,819 (55.85
percent) greater than 2018.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2019
9
THE CITY’S FUNDS (Continued)
Expenditures for parks and recreation exceeded budgeted amounts by $11,377 (8.63 percent) and had an overall increase
of $12,607 (10.46 percent) in expenditures from 2018.
In 2019, property tax revenues and capital expenditures from the Local Road Improvement Fund decreased from 2018
amounts by $372,724 (51.41 percent) and $4,584,455 (98.12 percent), respectively. The decreases were consistent with
the City’s 2016-2020 Capital Improvement Plan which calls for a major road improvement project every two years.
Other operations were comparable to the prior year. The following is a summary of the City’s major governmental funds:
Increase
2019 2018 (Decrease)
General 1,267,024$ 1,643,215$ (376,191)$
Fund Balance December 31,
Major Funds
The fund balance of the General Fund decreased by $376,191 as a result of current year operations. In comparison to the prior
year, revenues decreased 6.76 and expenditures increased 10.31 percent, respectively.
General Fund Revenue
Taxes
Franchise Fees
Licenses, Permits, and Fees
Intergovernmental
Charges for Services
Fines
Investment Income
Miscellaneous
The City receives the majority of its funding in the General Fund in the form of taxes (81 percent), licenses, permits, and fees (16
percent), intergovernmental (4 percent), and charges for services (4 percent). Overall, the City’s General Fund revenues were
comparable to the prior year, with the exception of matters previously discussed.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2019
10
THE CITY’S FUNDS (Continued)
General Fund Expenditures
General Government
Public Safety
Public Works
Parks and Recreation
Capital Outlay
A significant portion of the City’s General Fund expenditures are used for public works (31 percent). Remaining expenditures are
used primarily on public safety (24 percent) and general government operations (37 percent). Overall, the City’s General Fund
expenditures were comparable to the prior year.
General Fund Budgetary Highlights
The City’s General Fund generated more revenue than budgeted of $101,587. Expenditures, including transfers out to other funds,
were less than those budgeted by $19,192. See additional detail pertaining to differences between budgeted and actual amounts
within the General Fund previously discussed and at the Budgetary Comparison Schedule on page forty-six.
Increase
2019 2018 (Decrease)
Fund Balance December 31,
Major Funds
Capital Improvement Fund 1,113,754$ 627,796$ 485,958$
At December 31, 2019 the Capital Improvement Fund has a cash balance of $1,046,994. The fund balance of the Capital
Improvement Fund increased by $485,958. Significant activity in this fund during 2019 included the installation of new skatepark
ramps and ballfield bleachers, a handicap door at the Community Center, and the conversion of lighting at the Public Works
Building to LEDs. Also, during 2019, there were several transfers into the Capital Improvement Fund totaling $550,602. with the
purpose of financing future capital purchases for the City. See Note 2.D. for details of interfund transactions for the City.
Local Road Improvement Fund 1,652,100$ 1,363,159$ 288,941$
At December 31, 2019 the Local Road Improvement Fund has a cash balance of $1,667,902. The fund balance increased by
$288,941 primarily due to fewer capital expenditures for street reconstruction projects in 2019 compared to 2018.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2019
11
THE CITY’S FUNDS (Continued)
Increase
2019 2018 (Decrease)
Fund Balance December 31,
Major Funds
Debt Service 32,170$ 38,961$ (6,791)$
At December 31, 2019 the Debt Service Fund has a cash balance of $36,119. The fund balance decreased by $6,791 primarily due
the difference between the increase in tax revenue related to the 2018 Street Reconstruction Bonds and the corresponding payment
of principle related to the issuance of the 2018 Street Reconstruction Bonds in the prior year.
Proprietary Funds
As the City completed the year, its business-type activities (as presented in the statement of net position on page nineteen) reported
a combined net position of $979,919. This is a decrease of $24,966 from the prior year. Other operations were comparable to the
prior year. The following is a summary of the City’s major proprietary funds:
Increase
2019 2018 (Decrease)
Net Position December 31,
Major Funds
201 Sewer Fund 810,976$ 839,668$ (28,692)$
The 201 Sewer Fund provides sanitary sewer services to customers in the Anderson-Erickson and Bliss subdivisions. At
December 31, 2019 the fund had a cash balance of $91,101 with an decrease in cash of $12,711 for the year. The decrease in cash
is attributable to increased operating expenses. The fund’s net position decreased $28,692 during the current year as a result of
operating expenses exceeding revenues from charges for services and other activities.
Uptown Sewer Fund 168,943$ 165,217$ 3,726$
The Uptown Sewer Fund provides sanitary sewer services to commercial customers near the Olinda Trail / Oakhill intersection. At
December 31, 2019 the fund had a cash balance of $19,332 with an increase in cash of $9,985 for the year. The increase in cash is
attributable to decreased operating expenses. The fund’s net position increased $3,726 during the year as a result of operating
revenues exceeding expenses from charges for services and other activities. Operations in this fund were comparable to the prior
year.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
At the end of 2019, the City had $14,905,313 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 $411,991 (or 2.69 percent)
from last year.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2019
12
CAPITAL ASSET AND DEBT ADMINISTRATION (Continued)
Table 4
Net Capital Assets at Year-End
Governmental
Activities Activities Totals
2019 2018 2019 2018 2019 2018
Land $487,735 487,735$ -$ -$ 487,735$ 487,735$
Construction in Progress 55,798 - 24,874 - 80,672 -
Buildings 1,229,278 1,247,075 - - 1,229,278 1,247,075
Equipment and Vehicles 1,248,488 1,336,419 95,159 104,789 1,343,647 1,441,208
Infrastructure 10,885,529 11,278,831 - - 10,885,529 11,278,831
Other Improvements 102,699 51,825 - - 102,699 51,825
201 Sewer System - - 600,000 630,000 600,000 630,000
Uptown Sewer - - 175,753 180,630 175,753 180,630
Totals 14,009,527$ 14,401,885$ 895,786$ 915,419$ 14,905,313$ 15,317,304$
Business-Type
Significant capital asset acquisitions during 2019 were:
Installation of Community Center Handicap Doors - $15,807
Installation of new Skatepark Ramps - $21,789
Purchase of new Fire Department Jaws of Life Equipment - $32,455
Purchase of new Public Works Vehicle - $43,506
Engineering design for 2020 road improvement project - $55,798
Engineering design for Bliss Lift Station control panel project - $24,874
More detailed information about the City’s capital assets is presented in Note 2.B. to the financial statements.
Debt
In 2019 the City paid off $285,000 of the $4,344,000 in debt that was outstanding at December 31, 2018. The City did not issue
any new during 2019, bringing the total year-end balance of debt outstanding at December 31, 2019 to $4,059,000. See additional
information at Note 2.C. to the financial statements.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
The City’s elected and appointed officials considered many factors when settling the year 2020 budget, such as tax rates and fees
that will be charged for the business-type activities. The property tax levy for 2020 increased by 7.6% over the 2019 and 2018
levies which were flat. The Levy amount allocated to the General Fund increased by $142,108 (10.6%) compared to 2019. Levies
for Capital Funds and Debt Service Funds remained almost level or decreased (0.7% to -0.5%). The budget for the General Fund
revenues increased by $160,108 (9.8%) and expenditures increased by $99,514 after accounting for the fund balance transfer of
$438,962 to the Capital Improvement Fund from the General Fund. Half of the General Fund expenditure increases is in Personnel
costs and Contractual Service. The 2020 budget does not reflect a transfer of excess General Fund balance to the Capital
Improvement Fund as has been the practice for the past five years. Sewer rates were increased by 5% for the 201 and Uptown
community septic systems.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview
of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about this report or
need additional financial information, contact the City of Scandia, 14727 209th Street N, Scandia, MN 55073.
BASIC FINANCIAL STATEMENTS
Governmental Business-Type
Activities Activities Total
ASSETS
Cash and Cash Equivalents 4,553,469$ 110,433$ 4,663,902$
Property Taxes Receivable 65,030 - 65,030
Assessments Receivable 32,937 9,244 42,181
Accounts Receivable 58,443 18,106 76,549
Interest Receivable 3,612 - 3,612
Prepaids 6,412 - 6,412
Inventory 1,170 - 1,170
Internal Balances 26,388 (26,388) -
Noncurrent Assets:
Net Pension Asset 113,907 - 113,907
Capital Assets Not Being Depreciated 543,533 24,874 568,407
Capital Assets Being Depreciated (Net)13,465,994 870,912 14,336,906
TOTAL ASSETS 18,870,895 1,007,181 19,878,076
DEFERRED OUTFLOWS OF RESOURCES
Pensions 69,168 2,244 71,412
LIABILITIES
Accounts Payable 133,129 4,167 137,296
Developer Deposits 43,219 - 43,219
Accrued Payroll, Taxes, and Benefits 27,972 443 28,415
Accrued Interest 3,497 - 3,497
Unearned Revenue 650 1,033 1,683
Noncurrent Liabilities:
Compensated Absences 28,060 - 28,060
Debt Due Within One Year 350,000 - 350,000
Debt Due After One Year 3,761,189 - 3,761,189
Net Pension Liability 289,937 19,674 309,611
TOTAL LIABILITIES 4,637,653 25,317 4,662,970
DEFERRED INFLOWS OF RESOURCES
Pensions 115,704 4,189 119,893
NET POSITION
Net Investment in Capital Assets 9,898,338 895,786 10,794,124
Restricted 29,505 - 29,505
Unrestricted 4,258,863 84,133 4,342,996
TOTAL NET POSITION 14,186,706$ 979,919$ 15,166,625$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF NET POSITION
DECEMBER 31, 2019
See accompanying notes. 13
Operating Capital
Charges for Grants and Grants and Governmental Business-Type
Functions/Programs Expenses Services Contributions Contributions Activities Activities Total
Governmental Activities:
General Government 528,579$ 172,892$ -$ -$ (355,687)$ -$ (355,687)$
Public Safety 409,616 39,009 36,738 - (333,869) - (333,869)
Public Works 1,347,433 7,458 37,000 111 (1,302,864) - (1,302,864)
Parks and Recreation 124,141 14,217 66,268 - (43,656) - (43,656)
Economic Development 10,950 - - - (10,950) - (10,950)
Debt Service 122,557 - - - (122,557) - (122,557)
Total Governmental Activities 2,543,276 233,576 140,006 111 (2,169,583) - (2,169,583)
Business-Type Activities:
201 Sewer 118,015 81,238 - 4,824 - (31,953) (31,953)
Uptown Sewer 14,180 20,535 - - - 6,355 6,355
Total Business-Type Activities 132,195 101,773 - 4,824 - (25,598) (25,598)
TOTALS 2,675,471$ 335,349$ 140,006$ 4,935$ (2,169,583) (25,598) (2,195,181)
General Revenues:
Taxes 2,268,165 - 2,268,165
Franchise Fees 24,934 - 24,934
Intergovernmental 45,549 46 45,595
Investment Income 65,463 3,226 68,689
Miscellaneous 5,269 - 5,269
Net Gain on Disposal of Assets 140,413 - 140,413
Total General Revenues 2,549,793 3,272 2,553,065
Transfers 2,640 (2,640) -
CHANGE IN NET POSITION 382,850 (24,966) 357,884
NET POSITION - BEGINNING OF YEAR 13,803,856 1,004,885 14,808,741
NET POSITION - END OF YEAR 14,186,706$ 979,919$ 15,166,625$
Primary Government
Program Revenues
CITY OF SCANDIA, MINNESOTA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2019
Net (Expense) Revenue and Changes in Net Position
See accompanying notes. 14
CITY OF SCANDIA, MINNESOTA
BALANCE SHEET
GOVERNMENTAL FUNDS
Capital Local Road Debt Total Total
General Improvement Improvement Service Nonmajor Governmental
Fund Fund Fund Fund Funds Funds
ASSETS
Cash and Cash Equivalents 1,391,037$ 1,046,994$ 1,667,902$ 36,119$ 411,417$ 4,553,469$
Property Taxes Receivable 60,191 - 2,003 2,651 185 65,030
Assessments Receivable - 935 32,002 - - 32,937
Accounts Receivable 32,722 23,638 - - 2,083 58,443
Interest Receivable 3,612 - - - - 3,612
Prepaids 6,412 - - 3,915 - 10,327
Inventory 1,170 - - - - 1,170
Due from Other Fund 10,515 - - - - 10,515
Advance to Other Fund - 43,388 - - - 43,388
TOTAL ASSETS 1,505,659$ 1,114,955$ 1,701,907$ 42,685$ 413,685$ 4,778,891$
LIABILITIES
Accounts Payable 115,046$ 266$ 17,805$ -$ 12$ 133,129$
Developer Deposits 43,219 - - - 43,219
Accrued Payroll, Taxes, and Benefits 27,972 - - - - 27,972
Unearned Revenue 650 - - - - 650
Due to Other Funds - - - 10,515 - 10,515
Advance from Other Fund - - - - 17,000 17,000
Total Liabilities 186,887 266 17,805 10,515 17,012 232,485
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue:
Property Taxes 51,748 - - - - 51,748
Special Assessments - 935 32,002 - - 32,937
Total Deferred Inflows of Resources 51,748 935 32,002 - - 84,685
FUND BALANCES
Nonspendable 7,582 43,388 - 3,915 - 54,885
Restricted - - - 36,742 175 36,917
Committed - 1,070,366 759,128 - 157,842 1,987,336
Assigned - - 892,972 - 238,656 1,131,628
Unassigned 1,259,442 - - (8,487) - 1,250,955
Total Fund Balances 1,267,024 1,113,754 1,652,100 32,170 396,673 4,461,721
TOTAL LIABILITIES, DEFERRED INFLOWS
OF RESOURCES, AND FUND BALANCES 1,505,659$ 1,114,955$ 1,701,907$ 42,685$ 413,685$ 4,778,891$
DECEMBER 31, 2019
See accompanying notes. 15
CITY OF SCANDIA, MINNESOTA
RECONCILIATION OF THE BALANCE SHEET – GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET POSITION
Total Fund Balance for Governmental Funds 4,461,721$
Amounts reported for governmental activities in the Statement of Net Position
are different because:
Capital assets (net of accumulated depreciation of $7,293,197) used in
governmental activities are not financial resources and, therefore,
are not reported in the funds. 14,009,527
Other long-term assets are not available to pay for current-period expenditures
and, therefore, are reported as unavailable in the funds.
Property Taxes Receivable 51,748$
Special Assessments Receivable 32,937 84,685
Some expenses reported in the Statement of Activities do not require the use
of current financial resources and, therefore, are not reported as expenditures
in the governmental funds:
Accrued/Prepaid Interest (7,412)
Compensated Absences (28,060) (35,472)
Long-term liabilities are not due and payable in the current period and,
therefore, they are not reported in the governmental funds:
Unamortized Bond Premium and Discounts (52,189)
Debt Due Within One Year (350,000)
Debt Due After One Year (3,709,000) (4,111,189)
The net pension asset/liability and related deferred outflows/inflows of resources
represent the allocation of the pension obligations of the statewide plans to
the City. Such balances are not reported in the funds:
Net Pension Asset 113,907
Net Pension Liability (289,937)
Deferred Outflows - Pensions 69,168
Deferred Inflows - Pensions (115,704) (222,566)
TOTAL NET POSITION OF GOVERNMENTAL ACTIVITIES 14,186,706$
DECEMBER 31, 2019
See accompanying notes. 16
CITY OF SCANDIA, MINNESOTA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
Capital Local Road Debt Total Total
General Improvement Improvement Service Nonmajor Governmental
Fund Fund Fund Fund Funds Funds
REVENUES
Taxes 1,409,921$ - 352,326 466,152$ 32,543$ 2,260,942$
Special Assessments - 146 693 - - 839
Franchise Fees 6,613 - - - 18,321 24,934
Licenses, Permits, and Fees 150,876 - - - - 150,876
Intergovernmental 67,105 74,873 - - 17,192 159,170
Charges for Services 66,979 - - - 3,000 69,979
Fines 7,831 - - - - 7,831
Investment Income 21,631 12,751 23,740 - 7,341 65,463
Miscellaneous 12,223 21,500 - - 3,245 36,968
TOTAL REVENUES 1,743,179 109,270 376,759 466,152 81,642 2,777,002
EXPENDITURES
Current:
General Government 514,691 - - - 18,668 533,359
Public Safety 408,622 - - - - 408,622
Public Works 624,818 4,733 - - - 629,551
Parks and Recreation 120,523 - - - 2,472 122,995
Economic Development - - - - 10,950 10,950
Debt Service:
Principal - - - 285,000 - 285,000
Interest and Other Charges - - - 187,943 - 187,943
Capital Outlay 5,754 169,181 87,818 - 98,611 361,364
TOTAL EXPENDITURES 1,674,408 173,914 87,818 472,943 130,701 2,539,784
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 68,771 (64,644) 288,941 (6,791) (49,059) 237,218
OTHER FINANCING SOURCES (USES)
Proceeds on Sale of Assets - - - - 140,500 140,500
Operating Transfers In - 550,602 - - - 550,602
Operating Transfers Out (444,962) - - - (103,000) (547,962)
TOTAL OTHER FINANCING
SOURCES (USES)(444,962) 550,602 - - 37,500 143,140
NET CHANGE IN FUND BALANCES (376,191) 485,958 288,941 (6,791) (11,559) 380,358
FUND BALANCES - BEGINNING 1,643,215 627,796 1,363,159 38,961 408,232 4,081,363
FUND BALANCES - ENDING 1,267,024$ 1,113,754$ 1,652,100$ 32,170$ 396,673$ 4,461,721$
FOR THE YEAR ENDED DECEMBER 31, 2019
See accompanying notes. 17
Net Change in Fund Balances - Total Governmental Funds 380,358$
Amounts reported for governmental activities in the Statement of
Activities are different due to the following:
Governmental funds report capital outlays as expenditures while
governmental activities report depreciation expense to allocate those
expenditures over the life of the assets. Gains (losses) related to the
disposal of such assets are reported in the Statement of Activities,
while governmental funds only report cash proceeds:
Capital Outlay Capitalized 224,716$
Loss on Sale of Assets (87)
Depreciation Expense (616,987) (392,358)
Revenues in the Statement of Activities that do not provide current financial
resources are not reported as revenues in the funds:
Change in Long-Term Receivables 6,495
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 and Equipment Certificate Principal Payments 285,000
Net change in accrued interest on bonds and equipment certificates are not
reported as expenses in the funds. 61,658
The effects of bond premiums and discounts are reported in the
governmental fund financial statements upon issuance of the debt.
These amounts are deferred and amortized in the Statement of Activities: 3,728
Some expenses reported in the Statement of Activities do not require
the use of current financial resources and, therefore, are not reported
as expenditures in governmental funds:
Change in Compensated Absences 13,506
Net pension asset/liability balances do not represent the impending use of
current resources. Therefore, the change in the asset/liability and the
related deferrals is not reported in the governmental funds. 24,463
CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES 382,850$
CITY OF SCANDIA, MINNESOTA
RECONCILIATION OF CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2019
TO THE STATEMENT OF ACTIVITIES
See accompanying notes. 18
201 Sewer Uptown Sewer
Fund Fund Totals
ASSETS
Current Assets
Cash and Cash Equivalents 91,101$ 19,332$ 110,433$
Accounts Receivable 12,268 5,838 18,106
Assessments Receivable 9,244 - 9,244
Total Current Assets 112,613 25,170 137,783
Noncurrent Assets
Capital Assets Not Being Depreciated 24,874 - 24,874
Capital Assets Being Depreciated (Net)695,158 175,754 870,912
Total Noncurrent Assets 720,032 175,754 895,786
TOTAL ASSETS 832,645 200,924 1,033,569
DEFERRED OUTFLOWS OF RESOURCES
Pensions 1,755 489 2,244
LIABILITIES
Current Liabilities
Accounts Payable 3,739 428 4,167
Accrued Salaries 326 117 443
Unearned Revenue 1,033 - 1,033
Total Current Liabilities 5,098 545 5,643
Noncurrent Liabilities
Net Pension Liability 15,109 4,565 19,674
Advance from Other Fund - 26,388 26,388
Total Noncurrent Liabilities 15,109 30,953 46,062
TOTAL LIABILITIES 20,207 31,498 51,705
DEFERRED INFLOWS OF RESOURCES
Pensions 3,217 972 4,189
NET POSITION
Net Investment in Capital Assets 720,032 175,754 895,786
Unrestricted 90,944 (6,811) 84,133
TOTAL NET POSITION 810,976$ 168,943$ 979,919$
CITY OF SCANDIA, MINNESOTA
PROPRIETARY FUNDS
DECEMBER 31, 2019
STATEMENT OF NET POSITION
See accompanying notes. 19
201 Sewer Uptown Sewer
Fund Fund Totals
OPERATING REVENUES
Charges for Services 81,238$ 20,535$ 101,773$
OPERATING EXPENSES
Wages and Benefits 19,476 4,385 23,861
Materials and Supplies 996 205 1,201
Professional Services 20,978 579 21,557
Repairs and Maintenance 17,863 1,258 19,121
Other Services and Charges 19,072 2,876 21,948
Depreciation 39,630 4,877 44,507
TOTAL OPERATING EXPENSES 118,015 14,180 132,195
NET OPERATING INCOME (LOSS)(36,777) 6,355 (30,422)
NONOPERATING INCOME
Special Assessments 4,824 - 4,824
Intergovernmental 35 11 46
Investment Income 3,226 - 3,226
TOTAL NONOPERATING INCOME 8,085 11 8,096
CHANGE IN NET POSITION PRIOR TO TRANSFERS (28,692) 6,366 (22,326)
TRANSFERS
Operating Transfers Out - (2,640) (2,640)
CHANGE IN NET POSITION (28,692) 3,726 (24,966)
NET POSITION - BEGINNING OF YEAR 839,668 165,217 1,004,885
NET POSITION - END OF YEAR 810,976$ 168,943$ 979,919$
CITY OF SCANDIA, MINNESOTA
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2019
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
See accompanying notes. 20
201 Sewer Uptown Sewer
Fund Fund Totals
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers 82,104$ 20,458$ 102,562$
Cash Paid to Suppliers (57,374) (4,490) (61,864)
Cash Paid to Employees (22,250) (5,994) (28,244)
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,480 9,974 12,454
CASH FLOWS FROM NONCAPITAL FINANCING
ACTIVITIES
Intergovernmental Cash Receipts 35 11 46
Special Assessments 4,824 - 4,824
Net Advances from Other Funds - 2,640 2,640
Net Operating Subsidies and
Transfers to Other Funds - (2,640) (2,640)
NET CASH PROVIDED BY NONCAPITAL
FINANCING ACTIVITIES 4,859 11 4,870
CASH FLOW FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Purchases of Capital Assets (23,276) - (23,276)
CASH FLOW FROM INVESTING ACTIVITIES
Investment Income 3,226 - 3,226
Net Increase (Decrease) in Cash and Cash Equivalents (12,711) 9,985 (2,726)
Cash and Cash Equivalents - Beginning of Year 103,812 9,347 113,159
Cash and Cash Equivalents - End of Year 91,101$ 19,332$ 110,433$
RECONCILIATION OF NET OPERATING INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Net Operating Income (Loss) (36,777)$ 6,355$ (30,422)$
Adjustments to Reconcile Net Operating Income (Loss)
to Net Cash Provided by Operating Activities
Depreciation Expense 39,630 4,877 44,507
Change in Assets, Liabilities, and Deferred Outflows/Inflows
Accounts Receivable (118) (77) (195)
Assessments Receivable 1,150 - 1,150
Accounts Payable 1,535 428 1,963
Accrued Wages (25) 25 -
Unearned Revenue (166) - (166)
Deferred Outflows of Resources - Pension 2,140 835 2,975
Net Pension Liability (2,926) (1,655) (4,581)
Deferred Inflows of Resources - Pension (1,963) (814) (2,777)
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,480$ 9,974$ 12,454$
CITY OF SCANDIA, MINNESOTA
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2019
STATEMENT OF CASH FLOWS
See accompanying notes. 21
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
22
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the City of Scandia (the City) have been prepared in conformity with accounting principles generally
accepted in the United States of America (GAAP) as applied to governmental units. GAAP includes all relevant Governmental
Accounting Standards Board (GASB) pronouncements.
The City has a mayor-council form of government that is governed by an elected mayor and four-member council. The City
provides the following services: sanitation, recreation, public improvements, public safety, planning and zoning, and general
administrative services.
1.A. FINANCIAL REPORTING ENTITY
The City’s financial reporting entity is comprised of the primary governmental unit of the City of Scandia, Minnesota.
In determining the financial reporting entity, the City complies with the provisions of GASB No. 14, The Financial Reporting
Entity, and includes all component units of which the City appointed a voting majority of the units’ board; the City is either able to
impose its will on the unit or a financial benefit or burden relationship exists.
Blended Component Units
Blended component units are separate legal entities that meet the component unit criteria describe above and whose governing
body is the same or substantially the same as the City Council or the component unit provides services entirely to the City. These
component units’ funds are blended into those of the City’s by appropriate activity type to compose the primary government
presentation. The City’s blended component units consist of:
Economic Development Authority – The City created an Economic Development Authority (EDA) by resolution of its City
Council. The EDA is governed by a five-member board appointed by the City Council. Although it is legally separate from
the City, the EDA is reported as if it were part of the primary government because its purpose is to approve the City's
redevelopment plans. The EDA cannot issue bonded debt without the City's approval.
Discretely Presented Component Units
Discretely presented component units are separate legal entities that meet the component unit criteria described above but do not
meet the criteria for blending. Currently, the City has no discretely presented component units.
1.B. BASIS OF PRESENTATION
Government-wide Financial Statements
The Statement of Net Position and Statement of Activities display information about the reporting government as a whole. They
include all funds of the reporting entity. The government-wide statements distinguish between governmental and business-type
activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange
revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods and services.
Fund Financial Statements
Fund financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting
entity. Each fund is accounted for by providing a separate set of self-balancing accounts that constitute its assets, deferred
outflows, liabilities, deferred inflows, fund equity, revenues, and expenditures/expenses. Funds are organized into two major
categories: governmental and proprietary. An emphasis is placed on major funds within the governmental and proprietary
categories.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
23
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
A fund is considered major if it is the primary operating fund of the City or meets the following criteria:
Total assets and deferred outflows, liabilities and deferred inflows, revenues or expenditures/expenses of that individual
governmental or enterprise fund are at least 10 percent of the corresponding total for all funds of that category or type;
and
Total assets and deferred outflows, liabilities and deferred inflows, revenues or expenditures/expenses of that individual
governmental or enterprise fund are at least 5 percent of the corresponding total for all governmental and enterprise funds
combined.
The City reports the following major governmental funds:
The General Fund is the primary operating fund. It accounts for all financial resources of the general government, except
those required to be accounted for in another fund.
The Capital Improvement Fund accounts for financial resources to be used for the acquisition or construction of capital
projects (other than those financed by proprietary funds).
The Local Road Improvement Fund is a capital project fund used to account for financial resources to be used for the
construction or improvement of roads within the City.
The Debt Service Fund accounts for the accumulation of financial resources for the payment of interest and principal on
general long-term debt of the City other than debt service payments made by enterprise funds. Ad valorem taxes and
special assessments are used for the payment of principal and interest on the City’s judgment.
The City reports the following major proprietary funds:
The 201 Sewer and Uptown Sewer Funds account for business-like activities related to the operation of sewer systems
provided to the general public. These activities are financed primarily by user charges, and the measurement of financial
activity focuses on the net income measurement similar to the private sector.
Additionally, the government reports the following nonmajor fund types:
The Special Revenue Fund accounts for funds received by the City with a specific purpose.
The Capital Projects Funds account for financial resources to be used for the acquisition or construction of capital
projects (other than projects financed by proprietary funds).
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 on the next page.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
24
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In the fund financial statements, the “current financial resources” measurement focus or the “economic resources” measurement
focus is used as appropriate:
All governmental funds utilize a current financial resources measurement focus. Only current financial assets and
liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available
spendable financial resources during a given period. These funds use fund balance as their measure of available
spendable financial resources at the end of the period.
The government-wide financial statements and proprietary funds utilize an economic resources measurement focus. The
accounting objectives of this measurement focus are the determination of operating income, changes in net position,
financial position, and cash flows. All assets, deferred outflows, liabilities, and deferred inflows (whether current or
noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net position.
Basis of Accounting
In the government-wide Statement of Net Position and Statement of Activities, both governmental and business-like activities are
presented using the “accrual” basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned
and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and
liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place.
In the fund financial statements, governmental funds are presented on the “modified accrual” basis of accounting. Under this
modified accrual basis of accounting, revenues are recognized when “measurable and available.” Measurable means knowing or
being able to reasonable estimate the amount. Available means collectible within the current period or within sixty days after year
end. Expenditures (including capital outlay) are recorded when the related fund liability is incurred, except for general obligation
bond principal and interest which are reported when due.
All proprietary funds utilize the accrual basis of accounting.
1.D. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows,
liabilities, and deferred inflows, and disclosure of contingencies related to these balances at the date of the financial statements.
Estimates also affect reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates.
1.E. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY
Cash and Cash Equivalents
For purposes of the Statement of Net Position and proprietary fund Statement of Cash Flows, “cash and cash equivalents” includes
all demand, savings, certificates of deposit, and money market accounts for the City. Certificates of deposit are stated at cost,
which approximates fair value.
See Note 2.A. for additional information related to Cash and Cash Equivalents.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
25
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Interfund Transactions and Balances
During the course of operations, transactions occur between individual funds that may result in amounts owed between funds.
Those related to good and services type transactions are classified as “due to and from other fund.” Short-term interfund loans are
reported as “due to and from other fund.” Long-term interfund loans are reported as “advances from and to other funds.” Interfund
receivables and payables between funds within governmental activities and interfund receivables and payables between funds
within business-type activities are eliminated in the Statement of Net Position. See Note 2.D. for details of interfund transactions,
including receivables and payables at year-end.
Prepaids
Prepaids represent costs paid during the current year to be recognized in future periods.
Inventories
Inventory is valued at the lower of average cost or market based on physical counts. Inventory in the General Fund consists of
expendable supplies held for consumption and is equally offset by a nonspendable fund balance classification. The cost of
inventory is recorded as an expense when purchased and adjusted at year-end.
Receivables
In the government-wide statements, receivables consist of all revenues earned at year-end and not yet received. Allowances for
uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts receivable and are not
deemed necessary at year end. Major receivable balances for the governmental activities include charges for services, fines, fees,
taxes, and special assessments. Business-type activities report utility charges and assessments as their major receivables.
In the fund financial statements, material receivables in governmental funds include revenue accruals such as taxes, franchise fees,
fines and charges for service since they are usually both measurable and available. Revenues collectible but not available are
deferred in the fund financial statements in accordance with modified accrual, but not deferred in the government-wide financial
statements in accordance with the accrual basis. Interest and investment earnings are recorded when earned only if paid within 60
days since they would be considered both measurable and available. Proprietary fund material receivables consist of all revenues
earned at year-end and not yet received. Utility accounts receivable and assessments compose the majority of proprietary fund
receivables. 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
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
26
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Government-wide Statements
In the government-wide financial statements, capital outlay expenditures are accounted for as capital assets. All capital assets are
valued at historical cost or estimated historical cost if actual is unavailable, except for donated capital assets which are recorded at
their estimated acquisition value at the date of donation.
Depreciation of all exhaustible capital assets is recorded as an allocated expense in the Statement of Activities, with accumulated
depreciation reflected in the Statement of Net Position. Depreciation is provided over the assets’ estimated useful lives using the
straight-line method of depreciation.
Fund Financial Statements
In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay
expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the
same as in the government-wide statements.
Noncurrent Liabilities
The accounting treatment of long-term debt depends on whether the assets are used in governmental fund operations or proprietary
fund operations and whether they are reported in the government-wide or fund financial statements.
All long-term debt to be repaid from governmental and business-type resources are reported as liabilities in the government-wide
statements. The long-term debt consists of general obligation bonds and certificates payable.
Long-term debt for governmental funds is not reported as liabilities in the fund financial statements. The debt proceeds are
reported as other financing sources and payment of principal and interest are reported as expenditures. The accounting for
proprietary funds is the same in the fund statements as it is in the government-wide statements.
Net Pension Asset/Liability
The net pension asset represents the City’s allocation of its pro-rata share of the Statewide Volunteer Firefighter Fund net pension
asset. The net pension liability represents the City’s allocation of its pro-rata share of the Statewide General Employees
Retirement Fund net pension liability.
PERA
For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension expense, information
about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from
PERA’s fiduciary net position have been determined on the same basis as they are reported by PERA, except that PERA’s fiscal
year end is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments,
and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
Deferred Outflows/Inflows of Resources
In addition to assets, the Statements of Net Position report a separate section for deferred outflows of resources. This element
represents a consumption of net position that applies to future periods, and therefore, will not be recognized as an outflow of
resources (expense) until that time. The City reports deferred outflows of resources in the government-wide and proprietary fund
Statements of Net Position in relation to the activity of the pension funds in which City employees participate.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
27
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In addition to liabilities, the Statements of Net Position and Balance Sheet report a separate section for deferred inflows of
resources. This element represents an acquisition of net position or fund balance that applies to future periods, and therefore, will
not be recognized as an inflow of resources (revenue) until that time. The City reports property taxes and special assessments as
deferred inflows of resources in the governmental fund financial statements, in accordance with the modified accrual basis of
accounting. In addition, the City reports deferred inflows of resources in the government-wide and proprietary fund Statements of
Net Position in relation to the activity of pension funds in which City employees participate. Accordingly, such amounts are
deferred and recognized as inflows of resources in the period that they become available.
See Note 3 for additional information pertaining to the deferred outflows and deferred inflows recorded to account for pension
activities.
Compensated Absences
It is the City’s policy to permit employees to accumulate a limited amount of earned but unused leave. All leave pay is accrued
when incurred in the government-wide and proprietary fund financial statements.
A liability for these amounts is reported in governmental funds only if they have matured, for example, as the result of an
employee’s resignation or retirement. In the event a liability is recorded in the governmental funds, General Fund resources would
be used to liquidate the compensated absences.
Equity Classifications
Government-wide Statements
Equity is classified as net position and displayed in three components:
Net Investment in Capital Assets – Consists of capital assets including restricted capital assets, net of accumulated
depreciation and reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable
to the acquisition, construction, or improvement of those assets.
Restricted – Consists of net position with constraints placed on the use either by 1) external groups such as creditors, grantors,
contributors, or laws or regulations of other governments; or 2) law through constitutional provisions or enabling legislation.
Unrestricted – Remaining balance of net position that does not meet the definition of “restricted” or “net investment in capital
assets.”
It is the City’s policy to consider restricted net position to its depletion before unrestricted net position is applied.
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, 2019 consist of inventory,
prepaid expenditures, and advances to other funds.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
28
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Restricted – Includes the portion of fund balance which is not available for appropriation or which has been legally segregated
for a specific purpose.
Committed – Amounts that can only be used for specific purposes pursuant to constraints imposed by formal action
(resolution) of the City Council, which is the highest level of decision making authority. Committed amounts cannot be used
for any other purpose unless the City Council modifies or rescinds the commitment by resolution.
Assigned – Amounts that are constrained by the City’s intent to be used for specific purposes, but are neither restricted nor
committed. The City Administrator or his/her designee shall have the authority to assign fund balance.
Unassigned – This classification represents fund balance that has not been assigned to other funds and that has not been
restricted, committed, or assigned to specific purposes within the general fund. The City has formally adopted a policy under
which it strives to maintain a minimum unassigned general fund balance equal to approximately 35%-50% of annual General
Fund operating expenditures.
See Note 2.E. for additional disclosures.
Proprietary Fund Financial Statements – Proprietary fund equity is classified the same as in the government-wide statements, as
described above.
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 for collection the following year. The County creates the
tax list for all taxable property in the City and applies the applicable tax rate to the tax capacity of individual properties to arrive at
the actual tax for each property. The County also collects all special assessments, except for certain prepayments paid directly to
the City. The County collects all taxes and assessments, except as noted above. The County mails copies of all real estate and
personal property tax statements. Each year, property owners are required to pay one half of their real estate taxes by May 15 and
the balance by October 15. Penalties and interest are assessed to property owners who do not pay their property taxes and special
assessments by the due dates.
Delinquent taxes receivable include the past six years’ uncollected taxes. Delinquent taxes have been offset by deferred inflows of
resources for taxes not received within 60 days after year end in the fund financial statements.
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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
29
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 2.D.
1.G. RECENTLY ISSUED ACCOUNTING STANDARD
Effective for the year ended December 31, 2019, the City adopted GASB Statement No. 84, Fiduciary Activities. This statement
establishes standards for identifying activities that are fiduciary in nature and that should be reported as a separate fiduciary fund in
the basic financial statements. The new standard did not have a material impact on the City’s results of operations or financial
condition.
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS
The following notes present detail information to support the amounts reported in the basic financial statements for its various
assets, liabilities, deferred outflows/inflows of resources, equity, revenues, and expenditures/expenses.
2.A. CASH, CASH EQUIVALENTS, AND INVESTMENTS
Deposits
In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council.
Minnesota Statutes require that all City deposits be protected by insurance, surety bond, or collateral. The market value of
collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds. The City complies with such laws.
Authorized collateral in lieu of a corporate surety bond includes:
United States Government Treasury bills, Treasury notes, Treasury bonds;
Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service
available to the government entity;
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
30
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
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. The selection should be approved by the City.
At December 31, 2019, the City’s deposits were not exposed to custodial credit risk. The City’s deposits were sufficiently covered
by federal depository insurance or by collateral held by the City’s agent in the City’s name.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
31
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
2.B. CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2019 is as follows:
Balance at Balance at
01/01/19 Additions Disposals 12/31/19
Governmental Activities:
Capital Assets not Being
Depreciated
Land 487,735$ -$ -$ 487,735$
Construction In Progress - 55,798 - 55,798
Total Capital Assets not Being
Depreciated 487,735 55,798 - 543,533
Capital Assets Being
Depreciated
Buildings 2,305,416 34,227 - 2,339,643
Equipment 1,093,626 32,455 (5,254) 1,120,827
Vehicles 1,504,527 43,506 - 1,548,033
Infrastructure 15,523,525 - - 15,523,525
Other Improvements 168,433 58,730 - 227,163
Total Capital Assets Being
Depreciated 20,595,527 168,918 (5,254) 20,759,191
Less: Accumulated Depreciation
Buildings (1,058,341) (52,024) - (1,110,365)
Equipment (593,011) (83,689) 5,167 (671,533)
Vehicles (668,723) (80,116) - (748,839)
Infrastructure (4,244,694) (393,302) - (4,637,996)
Other Improvements (116,608) (7,856) - (124,464)
Total Accumulated
Depreciation (6,681,377) (616,987) 5,167 (7,293,197)
Total Capital Assets Being
Depreciated, Net 13,914,150 (448,069) (87) 13,465,994
Capital Assets, Net 14,401,885$ (392,271)$ (87)$ 14,009,527$
Depreciation is charged to governmental activities as follows:
General Government 16,127$
Public Safety 78,551
Public Works 506,506
Parks and Recreation 15,803
Total Depreciation Expense 616,987$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
32
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
Balance at Balance at
01/01/19 Additions Disposals 12/31/19
Business-Type Activities:
Capital Assets not Being
Depreciated
Construction In Progress -$ 24,874$ -$ 24,874$
Capital Assets Being Depreciated
Sewer Plant 1,500,000 - - 1,500,000
Equipment 134,195 - - 134,195
Uptown Sewer 243,827 - - 243,827
Total Capital Assets Being
Depreciated 1,878,022 - - 1,878,022
Less: Accumulated Depreciation
Sewer Plant (870,000) (30,000) - (900,000)
Equipment (29,406) (9,630) - (39,036)
Uptown Sewer (63,197) (4,877) - (68,074)
Total Accumulated
Depreciation (962,603) (44,507) - (1,007,110)
Total Capital Assets Being
Depreciated, Net 915,419 (44,507) - 870,912
Business-Type Activites 915,419$ (19,633)$ -$ 895,786$
2.C. NONCURRENT LIABILITIES
The City’s long-term debt is segregated between the amounts to be repaid from governmental activities and amounts to be repaid
from business-type activities (none). All bonds and certificates set forth below are direct obligations of the City and pledge the full
faith and credit of the City.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
33
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
Debt Detail
As of December 31, 2019, the long-term debt of the financial reporting entity consists of the following:
Governmental Activities
Issue Annual Interest Maturity Original Remaining
Type of Debt Date Payment Rate(s)Date Amount Amount
2013 Equipment Certificate 7/13 $50,000 - $65,000 0.80-3.10% 7/23 570,000$ 240,000$
2015 Equipment Certificate 7/15 $43,000 1.40-2.30% 7/20 215,000 43,000
2017 Equipment Certificate 8/17 $32,000 2.35-2.75% 8/22 160,000 96,000
Total Governmental Activities Equipment Certificates Payable 379,000
Equipment Certificates Due Within One Year 135,000
Equipment Certificates Due After One Year 244,000$
Equipment Certificates
Issue Annual Interest Maturity Original Remaining
Type of Debt Date Payment Rate(s)Date Amount Amount
G.O. Bonds, Series 2018A 5/18 $155,000 - $315,000 3.00-3.13% 12/33 3,835,000$ 3,680,000$
Bonds Due Within One Year 215,000
Bonds Due After One Year 3,465,000$
General Obligation Bonds
Changes in Noncurrent Liabilities
The following is a summary of changes in noncurrent liabilities, excluding net pension liability, for the year ended December 31,
2019:
Amounts Due
Balance Balance Within
Type of Debt 1/1/19 Additions Deductions 12/31/19 One Year
Governmental Activities:
Bonds 3,835,000$ -$ (155,000)$ 3,680,000$ 215,000$
Unamortized Bond Premium 55,917 - (3,728) 52,189 -
Equipment Certificates 509,000 - (130,000) 379,000 135,000
Compensated Absences 41,566 27,637 (41,143) 28,060 -
Total 4,441,483$ 27,637$ (329,871)$ 4,139,249$ 350,000$
Interest and other fiscal charges total $122,557 in the Statement of Activities (included in Debt Service line). Interest and other
fiscal charges total $187,943 for the Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds
(included in the line Interest and Other Charges).
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
34
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
Governmental activity debt is typically funded through the Debt Service Fund. Compensated absences is funded through the funds
to which the respective employees’ wages are allocated.
Annual Debt Service Requirements
At December 31, 2019, the estimated annual debt service requirements to maturity, including principal and interest, are as follows:
Years Ending
December 31, Principal Interest Total
2020 350,000$ 120,274$ 470,274$
2021 312,000 110,953 422,953
2022 322,000 101,795 423,795
2023 295,000 92,155 387,155
2024 245,000 84,175 329,175
2025-2029 1,325,000 307,025 1,632,025
2030-2033 1,210,000 94,669 1,304,669
Totals 4,059,000$ 911,046$ 4,970,046$
Governmental Activities
2.D. INTERFUND TRANSACTIONS AND BALANCES
Operating transfers consist of the following for the year ended December 31, 2019:
Transfers Capital
Major Funds Out Improvement Total
General 444,962$ 444,962$ 444,962$
Sewer Uptown 2,640 2,640 2,640
447,602 447,602 447,602
Nonmajor Funds
Park Capital Improvement 103,000 103,000 103,000
Total 550,602$ 550,602$ 550,602$
Major Fund
Transfers In
Transfers are used to (a) move revenues from the fund that statute or budget requires to collect them to the fund that statute or
budget require to expend them and to (b) use unrestricted revenues collected in the General Fund to finance various programs
accounted for in other funds in accordance with budgetary authorizations.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
35
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
The interfund balances are as follows:
Due To Fund Due From Fund Amount Reason
Uptown Sewer Capital Improvement 26,388$ Sewer improvements
Park Capital Improvement Capital Improvement
17,000 Finance parking lot
Governmental Funds Advances To/From 43,388
Due To Fund Due From Fund
General Fund Debt Service
10,515 Eliminate sub-fund negative cash
Total Interfund Balances 53,903$
Governmental Fund Elimination (27,515)
Government-wide Internal Balances 26,388$
Long-Term Advances
Short-Term Balances
The Uptown Sewer Fund monies owed to the Capital Improvement Fund will be repaid as future sewer charges are collected and
the cash flows become available. The Park Capital Improvement Fund monies owed to the Capital Improvement Fund will be
repaid as park dedication fees and donations are received. The Debt Service Fund monies owed to the General fund will be repaid
as cash flows become available.
2.E. FUND EQUITY
At December 31, 2019, governmental fund equity consists of the following:
General Fund
Nonspendable - Prepaids and Inventory 7,582$
Unassigned 1,259,442
Total General Fund Balance 1,267,024$
Capital Improvements Fund
Nonspendable - Advance to Other Fund 43,388$
Committed for Capital Improvements 1,070,366
Total Capital Improvement Fund 1,113,754$
Local Road Improvement Fund
Committed for Local Road Improvements 759,128$
Assigned for Local Road Improvement 892,972
Total Local Road Improvement Fund 1,652,100$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
36
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
Debt Service Fund
Nonspendable - Prepaids 3,915$
Restricted for Debt Service 36,742
Unassigned (8,487)
Total Debt Service Fund Balance 32,170$
Nonmajor Governmental Funds
Restricted for Trail Development 175$
Committed for Economic Development 23,205
Committed for Park Improvements 134,637
Assigned for Equipment Replacement 233,786
Assigned for Cable TV 4,870
Total Nonmajor Governmental Funds Balance 396,673$
NOTE 3 PENSIONS
3.A. DEFINED BENEFIT PENSION PLANS - STATEWIDE
Plan Description
The City participates in the following cost-sharing multiple-employer defined benefit pension plans administered by the Public
Employees Retirement Association of Minnesota (PERA). PERA’s defined benefit pension plans are established and administered
in accordance with Minnesota Statutes Chapters 353 and 356. PERA’s defined benefit pension plans are tax qualified plans under
Section 401 (a) of the Internal Revenue Code.
General Employees Retirement Plan
All full-time and certain part-time employees of the City are covered by the General Employees Plan. General Employees Plan
members belong to the Coordinated Plan. Coordinated Plan members are covered by Social Security.
Benefits Provided
PERA provides retirement, disability, and death benefits. Benefit provisions are established by State Statute and can only be
modified by the State Legislature. Vested terminated employees who are entitled to benefits, but are not receiving them yet, are
bound by the provisions in effect at the time they last terminated their public service.
General Employees Plan Benefits
General Employees Plan benefits are based on a member’s highest average salary for any five successive years of allowable
service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated
Plan members. Members hired prior to July 1, 1989, receive the higher of Method 1 or Method 2 formulas. Only Method 2 is
used for members hired after June 30, 1989. Under Method 1, the accrual rate for Coordinated members is 1.2 percent of average
salary for each of the first 10 years of service and 1.7 percent of average salary for each additional year. Under Method 2, the
accrual rate for Coordinated members is 1.7 percent of average salary for all years of service. For members hired prior to July 1,
1989, a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or
after July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
37
NOTE 3 PENSIONS (Continued)
Annuities, disability benefits, and survivor benefits are increased effective every January 1. Beginning January 1, 2019, the
postretirement increase will be equal to 50 percent of the cost-of-living adjustment (COLA) announced by the SSA, with a
minimum increase of at least 1 percent and a maximum of 1.5 percent. Recipients that have been receiving the annuity or benefit
for at least a full year as of the June 30 before the effective date of the increase will receive the full increase. For recipients
receiving the annuity or benefit for at least one month but less than a full year as of the June 30 before the effective date of the
increase will receive a reduced prorated increase. For members retiring on January 1, 2024, or later, the increase will be delayed
until normal retirement age (age 65 if hired prior to July 1, 1989, or age 66 for individuals hired on or after July 1, 1989).
Members retiring under Rule of 90 are exempt from the delay to normal retirement.
Contributions
Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified
by the State Legislature.
General Employees Fund Contributions
Coordinated Plan members were required to contribute 6.50 percent of their annual covered salary in fiscal year 2019 and the City
was required to contribute 7.50 percent for Coordinated Plan members. The City’s contributions to the General Employees Fund
for the year ended December 31, 2019 were $29,072. The City’s contributions were equal to the required contributions as set by
State Statute.
Pension Costs
General Employees Fund Pension Costs
At December 31, 2019, the City reported a liability of $309,611 for its proportionate share of the General Employees Fund’s net
pension liability. The City of Scandia’s net pension liability reflected a reduction due to the State of Minnesota’s contribution of
$16 million to the fund in 2019. The State of Minnesota is considered a non-employer contributing entity and the State’s
contribution meets the definition of a special funding situation. The State of Minnesota’s proportionate share of the net pension
liability associated with the City totaled $9,666. The net pension liability was measured as of June 30, 2019, and the total pension
liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City’s
proportionate share of the net pension liability was based on the City’s contributions received by PERA during the measurement
period for employer payroll paid dates from July 1, 2018, through June 30, 2019, relative to the total employer contributions
received from all of PERA’s participating employers.
At June 30, 2019, the City’s proportionate share was 0.0056 percent which was a decrease of 0.0001 percent from its proportion
measured as of June 30, 2018.
City’s proportionate share of the net pension liability: $309,611
State of Minnesota’s proportionate share of the net pension
liability associated with the City 9,666
Total $319,278
For the year ended December 31, 2019, the City recognized pension expense of $25,964 for its proportionate share of the General
Employees Plan’s pension expense. In addition, the City recognized an additional $724 as pension expense (and grant revenue)
for its proportionate share of the State of Minnesota’s contribution of $16 million to the General Employees Fund.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
38
NOTE 3 PENSIONS (Continued)
At December 31, 2019, the City reported its proportionate share of the General Employees Plan’s deferred outflows of resources
and deferred inflows of resources related to pensions from the following sources:
Deferred Outflows of Deferred Inflows of
Resources Resources
Differences between expected
and actual economic experience 8,374$ -$
Changes in actuarial assumptions - 23,827
Net collective difference between projected
and actual investment earnings - 29,811
Changes in proportion 12,768 12,280
Contributions paid to PERA subsequent
to the measurement date 13,813 -
Total Deferred Outflows/Inflows 34,955$ 65,918$
The $13,813 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the
measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2020. Other
amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense
as follows:
Year ended
December 31: Pension Expense
2020 (18,283)$
2021 (19,291)$
2022 (7,701)$
2023 499$
Total Pension Expense
The total pension expense for all plans recognized by the City for the year ended December 31, 2019, was $25,964.
Actuarial Assumptions
The total pension liability in the June 30, 2019, actuarial valuation was determined using an individual entry-age normal actuarial
cost method and the following actuarial assumptions:
Assumptions Rates
Inflation 2.50 percent per year
Active Member Payroll Growth 3.25 percent per year
Investment Rate of Return 7.50 percent
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
39
NOTE 3 PENSIONS (Continued)
Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors, and disabilitants for
all plans were based on RP 2014 tables for males or females, as appropriate, with slight adjustments to fit PERA’s experience.
Cost of living benefit increases after retirement for retirees are assumed to be 1.25 percent per year for the General Employees
Plan.
Actuarial assumptions used in the June 30, 2019 valuation were based on the results of actuarial experience studies. The most
recent four-year experience study in the General Employees Plan was completed in 2019. Economic assumptions were updated in
2018 based on a review of inflation and investment return assumptions.
The following changes in actuarial assumptions and plan provisions occurred in 2019:
General Employees Fund
Changes in Actuarial Assumptions:
The morality projection scale was changed from MP-2017 to MP-2018.
Changes in Plan Provisions:
The employer supplemental contribution was changed prospectively, decreasing from $31.0 million to $21.0 million per
year. The State’s special funding contribution was changed prospectively, requiring $16.0 million due per year through
2031.
The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular
basis of the long-term expected rate of return using a building-block method in which best-estimate ranges of expected future rates
of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by
weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of
geometric real rates of return for each major asset class are summarized in the following table:
Long-Term Expected
Real Rate of Return Asset Class Target Allocation
Domestic Equity 35.5% 5.10%
Private Markets 25.0% 5.90%
Fixed Income 20.0% 0.75%
International Equity 17.5% 5.90%
Cash Equivalents 2.0% 0.00%
Total 100%
Discount Rate
The discount rate used to measure the total pension liability in 2019 was 7.50 percent. The projection of cash flows used to
determine the discount rate assumed that contributions from plan members and employers will be made at rates set in Minnesota
Statutes.. Based on these assumptions, the fiduciary net position of the General Employees Fund was projected to be available to
make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension
plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
40
NOTE 3 PENSIONS (Continued)
Pension Liability Sensitivity
The following presents the City’s proportionate share of the net pension liability for all plans it participates in, calculated using the
discount rate disclosed in the preceding paragraph, as well as what the City’s proportionate share of the net pension liability would
be if it were calculated using a discount rate one percentage point lower or one percentage point higher than the current discount
rate:
1% Decrease in 1% Increase in
Discount Rate (6.5%) Discount Rate (7.5%) Discount Rate (8.5%)
Net Pension Liability 508,985$ 309,611$ 144,989$
Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in a separately-issued PERA financial report that
includes financial statements and required supplementary information. That report may be obtained on the Internet at
www.mnpera.org.
3.B. DEFINED CONTRIBUTION PENSION PLAN - STATEWIDE
The council members of the City of Scandia are covered by the Defined Contribution Plan, a multiple-employer deferred
compensation plan administered by PERA. The Defined Contribution Plan is a tax qualified plan under Section 401(a) of the
Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal.
Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota
Statutes, Chapter 353D.03, specifies plan provisions, including the employee and employer contribution rates for those qualified
personnel who elect to participate. An eligible elected official who decides to participate contributes five percent of salary which is
matched by the elected official's employer. For ambulance service personnel, employer contributions are determined by the
employer, and for salaried employees contributions must be a fixed percentage of salary. Employer contributions for volunteer
personnel may be a unit value for each call or period of alert duty. Employees who are paid for their services may elect to make
member contributions in an amount not to exceed the employer share. Employer and employee contributions are combined and
used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering
the plan, PERA receives two percent of employer contributions and twenty-five hundredths of one percent (0.25 percent) of the
assets in each member's account annually.
Total contributions made by the City during fiscal year 2019 amount to $795.
3.C. STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN
Plan Description
The Scandia Fire/Rescue participates in the Statewide Volunteer Firefighter Retirement Plan (Volunteer Firefighter Plan accounted
for in the Volunteer Firefighter Fund), an agent multiple-employer lump-sum defined benefit pension plan administered by the
Public Employees Retirement Association of Minnesota (PERA). The Volunteer Firefighter Plan covers volunteer firefighters of
municipal fire departments or independent nonprofit firefighting corporations that have elected to join the plan. As of December
31, 2019, the plan covered 21 active firefighters and 4 vested terminated fire fighters whose pension benefits are deferred. The
plan is established and administered in accordance with Minnesota Statutes, Chapter 353 G.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
41
NOTE 3 PENSIONS (Continued)
Benefits Provided
The Volunteer Firefighter Plan provides retirement, death, and supplemental benefits to covered firefighters and survivors.
Benefits are paid based on the number of years of service multiplied by a benefit level approved by the City. Members are eligible
for a lump-sum retirement benefit at 50 years of age with five years of service. Plan provisions include a pro-rated vesting
schedule that increases from 5 years at 40 percent through 20 years at 100 percent.
Contributions
The Volunteer Firefighter Plan is funded by fire state aid, investment earnings and, if necessary, employer contributions as
specified in Minnesota Statutes, and voluntary City contributions. The State of Minnesota contributed $33,324 in fire state aid to
the plan for the year ended December 31, 2018. Required employer contributions are calculated annually based on statutory
provisions. The City of Scandia’s statutorily-required contributions to the Volunteer Firefighter Plan for the year ended December
31, 2019 were $0.
Pension Costs
At December 31, 2019, the City of Scandia reported a net pension asset of $113,907 for the Volunteer Firefighter Fund. The net
pension asset was measured as of December 31, 2018. The total pension liability used to calculate the net pension asset in
accordance with GASB 68 was determined by PERA applying an actuarial formula to specific census data certified by the fire
department. The following table presents the changes in net pension asset during the year.
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability (Asset)
Beginning Balance 12/31/17 545,327$ 687,094$ (141,767)$
Service Cost 25,342 - 25,342
Interest on Pension Liability 31,414 - 31,414
Actuarial Experience (Gains)/Losses (17,415) - (17,415)
Projected Investment Earnings - 41,227 (41,227)
Contributions (State) - 36,324 (36,324)
Asset (Gain)/Loss - (65,191) 65,191
Benefit Payouts (94,240) (94,240) -
PERA Administrative Fee - (879) 879
Net Changes (54,899) (82,759) 27,860
Balance End of Year 12/31/18 490,428$ 604,335$ (113,907)$
For the year ended December 31, 2019, the City recognized pension expense of negative $33,201.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
42
NOTE 3 PENSIONS (Continued)
At December 31, 2019, the City of Scandia reported deferred inflows of resources and deferred outflows of resources if
contributions were made after the measurement date and for State contributions received by PERA after the measurement date,
which can be found on the website for Minnesota Department of Revenue’s Fire State Aid, related to pensions from the following
sources:
Deferred Outflows of Deferred Inflows of
Resources Resources
Differences between expected
and actual economic experience -$ 53,975$
Net collective difference between projected
and actual investment earnings 36,456 -
Total Deferred Outflows/Inflows 36,456$ 53,975$
Amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as
follows:
Year ended
December 31: Pension Expense
2020 (5,929)$
2021 (11,799)$
2022 (9,347)$
2023 9,556$
Actuarial Assumptions
The total pension liability at December 31, 2018, was determined using the entry age normal actuarial cost method and the
following actuarial assumptions:
Retirement eligibility at the later of age 50 or 20 years of service
Investment rate of return of 6.0 percent
Inflation rate of 3.0 percent
There were no changes in actuarial assumptions in 2018.
Discount Rate
The discount rate used to measure the total pension liability was six percent. The projection of cash flows used to determine the
discount rate assumed that contributions to the Volunteer Firefighter Fund will be made as specified in statute. Based on that
assumption and considering the funding ratio of the plan, the fiduciary net position was projected to be available to make all
projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on
pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
43
NOTE 3 PENSIONS (Continued)
Pension Liability Sensitivity
The following presents the City’s net pension asset for the Volunteer Firefighter Fund, calculated using the discount rate disclosed
in the preceding paragraph, as well as what the City’s net pension asset would be if it were calculated using a discount rate one
percent lower or one percent higher than the current discount rate:
1% Decrease in 1% Increase in
Discount Rate (5.0%)Discount Rate (6.0%)Discount Rate (7.0%)
Net Pension Asset 101,757$ 113,907$ 125,585$
Plan Investments
Investment Policy
The Minnesota State Board of Investment (SBI) is established by Article XI of the Minnesota Constitution to invest all state funds.
Its membership as specified in the Constitution is comprised of the governor (who is designated as chair of the board), state
auditor, secretary of state and state attorney general.
All investments undertaken by the SBI are governed by the prudent person rule and other standards codified in Minnesota Statutes,
Chapter 11A and Chapter 353G.
Within the requirements defined by state law, the SBI, with assistance of the SBI staff and the Investment Advisory Council,
establishes investment policy for all funds under its control. These investments policies are tailored to the particular needs of each
fund and specify investment objectives, risk tolerance, asset allocation, investment management structure and specific performance
standards. Studies guide the on-going management of the funds and are updated periodically.
Asset Allocation
To match the long-term nature of the pension obligations, the SBI maintains a strategic asset allocation for the Volunteer
Firefighter Plan that includes allocations to domestic equity, international equity, bonds and cash equivalents. The long-term target
asset allocation and long-term expected real rate of return is the following:
Long-Term Expected
Asset Class Target Allocation Real Rate of Return
Domestic Stocks 35% 5.10%
International Stocks 15% 5.30%
Bonds 45% 0.75%
Unallocated Cash 5% 0.00%
The six percent long-term expected rate of return on pension plan investments was determined using a building-block method.
Best estimates for expected future real rates of return (expected returns, net of inflation) were developed for each asset class using
both long-term historical returns and long-term capital market expectations from a number of investment management and
consulting organizations. The asset class estimates and the target allocations were then combined to produce a geometric, long-
term expected real rate of return for the portfolio. Inflation expectations were applied to derive the nominal rate of return for the
portfolio.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
44
NOTE 3 PENSIONS (Continued)
Description of significant investment policy changes during the year
The SBI made no significant changes to their investment policy during Fiscal Year 2018 for Volunteer Firefighter Fund.
Pension Plan Fiduciary Net Position
Detailed information about the Volunteer Firefighter Fund’s fiduciary net position as of December 31, 2018, is available in a
separately-issued PERA financial report that includes financial statements and required supplementary information. That report
may be obtained on the Internet at www.mnpera.org.
NOTE 4 OTHER NOTES
4.A. RISK MANAGEMENT
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions;
injuries to employees; and natural disasters. To manage these risks, the City purchases commercial insurance. The City retains
risk for the deductible portions of the insurance. The amounts of these deductibles are considered immaterial to the financial
statements. There were no significant reductions in insurance from the previous year settlements in excess of insurance for any of
the past two years.
Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated.
Liabilities, if any, include an amount for claims that have been incurred but not reported. The City’s management is not aware of
any incurred but unreported claims.
4.B. COMMITMENTS
Law Enforcement Services
The City receives law enforcement services under an agreement with Washington County. Such agreement automatically renews
on an annual basis and calls for the City to compensate the County based on the actual costs incurred while providing services
under the agreement. Based on the 2020 contract budget, expenditures anticipated under this agreement for 2020 are estimated at
$138,754.
Construction Contracts
The City entered into various contracts during the year for construction services. At December 31, 2019, remaining commitments
under these contracts total $103,000.
Purchase Commitments
During the year ended December 31, 2019, the City contracted for the purchase of a loader vehicle. The remaining balance on this
contract for which the City is committed as of December 31, 2019 totals $93,498.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2019
45
NOTE 4 OTHER NOTES (Continued)
4.C. SUBSEQUENT EVENTS
Construction Projects
Subsequent to year-end and prior to issuance of these financial statements, the City awarded the 2020 Street Improvement Project
at an approximate cost of $505,848.
Public Health Emergency
On January 30, 2020, the World Health Organization declared the coronavirus outbreak a "Public Health Emergency of
International Concern" and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the
spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of
public places and businesses. The coronavirus and actions taken to mitigate it have had and are expected to continue to have an
adverse impact on the economies and financial markets of many countries, including the geographical area in which the City
operates. While it is unknown how long these conditions will last and what the complete financial effect will be to the City, to
date, the City has not experienced any significant negative effects on its operations.
REQUIRED SUPPLEMENTARY INFORMATION
Budget Actual Variance with
Amounts- Amounts Budget
Original and Budgetary Over
Final Basis (Under)
REVENUES
Taxes
Property Taxes 1,351,092$ 1,381,844$ 30,752$
Franchise Taxes 3,000 6,613 3,613
Gravel Tax 10,000 28,077 18,077
Total Taxes 1,364,092 1,416,534 52,442
Licenses and Permits 132,600 150,876 18,276
Intergovernmental Revenue
State Grants
Market Value Credit 10,000 12,535 2,535
PERA Aid - 723 723
Police and Fire Aid 41,300 45,291 3,991
Other State Grants and Aids 7,900 8,556 656
Total Intergovernmental Revenue 59,200 67,105 7,905
Charges for Services
General Government 8,000 18,252 10,252
Police and Fire Contracts 35,000 35,769 769
Streets and Highways 2,100 3,391 1,291
Parks and Recreation 7,500 3,128 (4,372)
Other Service Charges 10,600 6,439 (4,161)
Total Charges for Services 63,200 66,979 3,779
Fines and Forfeitures 10,000 7,831 (2,169)
Miscellaneous Revenue
Investment Earnings 5,000 21,631 16,631
Contributions and Donations 2,500 3,714 1,214
Other Miscellaneous 5,000 8,509 3,509
Total Miscellaneous Revenue 12,500 33,854 21,354
TOTAL REVENUES 1,641,592 1,743,179 101,587
EXPENDITURES
General Government
Mayor and Council 30,400 28,944 (1,456)
Administration and Finance 194,600 177,261 (17,339)
Other General Government 277,700 308,486 30,786
Capital Outlay 2,600 3,055 455
Total General Government 505,300 517,746 12,446
CITY OF SCANDIA, MINNESOTA
BUDGETARY COMPARISON SCHEDULE – GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2019
46
Budget Actual Variance with
Amounts- Amounts Budget
Original and Budgetary Over
Final Basis (Under)
Public Safety
Police
Current 136,000 135,945 (55)
Fire
Current 261,000 272,677 11,677
Capital Outlay 1,400 1,606 206
Total Public Safety 398,400 410,228 11,828
Public Works
Street Maintenance and Storm Sewers 590,700 566,711 (23,989)
Snow and Ice Removal 41,000 34,342 (6,658)
Street Engineering 16,000 12,073 (3,927)
Street Lighting 11,300 11,692 392
Capital Outlay - Other 2,000 1,093 (907)
Total Public Works 661,000 625,911 (35,089)
Culture and Recreation
Parks and Recreation
Current 131,900 120,523 (11,377)
TOTAL EXPENDITURES 1,696,600 1,674,408 (22,192)
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES (55,008) 68,771 123,779
OTHER FINANCING USES
Transfers
To Other Funds (441,962) (444,962) (3,000)
NET CHANGE IN FUND BALANCE (496,970)$ (376,191) 120,779$
FUND BALANCE - BEGINNING 1,643,215
FUND BALANCE - ENDING 1,267,024$
BUDGETARY COMPARISON SCHEDULE – GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2019
CITY OF SCANDIA, MINNESOTA
47
City's
Proportionate
Share of the Net City's
Pension Liability Proportionate Plan
City's State's and the State's Share of the Net Fiduciary Net
Proportionate Proportionate Proportionate Pension Liability Position as a
For the City's Share of the Share of the Net Share of the Net (Asset) as a Percentage
Measurement Proportion of the Net Pension Pension Liability Pension Liability City's Percentage of of the Total
Year Ended Net Pension Liability Associated with Associated with Covered its Covered Pension
June 30 Liability (Asset)(Asset) (a)the City (b)the City (a+b)Payroll (c)Payroll ((a+b)/c)Liability
Public Employees Retirement Association
2019 0.0056%309,611$ 9,666$ 319,278$ 370,760$ 86.1% 80.2%
2018 0.0057%316,213$ 10,395$ 326,608$ 380,371$ 85.9% 79.5%
2017 0.0053%338,349$ 4,251$ 342,600$ 338,175$ 101.3% 75.9%
2016 0.0057%462,812$ 6,071$ 468,883$ 357,680$ 131.1% 68.9%
2015 0.0059%305,769$ -$ 305,769$ 342,106$ 89.4% 78.2%
Note: The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 and is intended to show a ten year trend. Additional
years will be reported as they become available.
LAST TEN YEARS (Presented Prospectively)
SHARE OF NET PENSION LIABILITY
SCHEDULE OF CITY'S PROPORTIONATE
CITY OF SCANDIA
48
Contributions in
Relation to the Contributions as
For the Calendar Statutorily Statutorily Contribution City's a Percentage of
Year Ended Required Required Deficiency Covered Covered
December 31 Contribution Contribution (Excess)Payroll Payroll
Public Employees Retirement Association
2019 29,072$ 29,072$ -$ 387,627$ 7.5%
2018 27,150$ 27,150$ -$ 362,002$ 7.5%
2017 27,172$ 27,172$ -$ 362,292$ 7.5%
2016 24,941$ 24,941$ -$ 334,592$ 7.5%
2015 25,468$ 25,468$ -$ 348,155$ 7.3%
Statewide Volunteer Firefighter Pension Plan
2019 -$ -$ -$ N/A N/A
2018 -$ -$ -$ N/A N/A
2017 -$ -$ -$ N/A N/A
2016 -$ -$ -$ N/A N/A
2015 -$ -$ -$ N/A N/A
Note: The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 and is
intended to show a ten year trend. Additional years will be reported as they become available.
LAST TEN YEARS (Presented Prospectively)
SCHEDULE OF CITY PENSION CONTRIBUTIONS
CITY OF SCANDIA
49
2018 2017 2016 2015 2014
Changes in Total Pension Liability (TPL)
Balance at January 1st 545,327$ 617,019$ 654,741$ 636,294$ 629,967$
Service Cost 25,342 28,912 24,777 23,343 22,874
Interest on the TPL 31,414 34,163 38,089 38,665 38,350
Actuarial Experience (Gains)/Losses (17,415) (54,911) (11,188) (13,108) (27,553)
Changes in Benefit Level - 73,244 - - -
Benefit Payments (94,240) (153,100) (89,400) (30,453) (27,344)
Balance at December 31st 490,428$ 545,327$ 617,019$ 654,741$ 636,294$
Plan Fiduciary Net Position (PFNP)
Balance at January 1st 687,094$ 723,513$ 735,277$ 730,400$ 658,422$
Fire State Aid 26,919 26,278 26,738 27,129 24,368
Fire Supplemental Aid 6,405 6,359 6,486 6,638 5,896
Supplemental Benefit Reimbursement 3,000 2,000 - 1,000 2,955
Municipal Contributions - - - - 18,259
Adjustment to Initial Asset Transfer - - - - 5,368
Net Investment Income (Loss)(23,964) 83,014 45,186 1,367 43,226
Total Additions 12,360 117,651 78,410 36,134 100,072
Benefit Payments (94,240) (153,100) (89,400) (30,453) (27,344)
Administrative Expenses (879) (970) (774) (804) (750)
Total Reductions (95,119) (154,070) (90,174) (31,257) (28,094)
Balance at December 31st 604,335$ 687,094$ 723,513$ 735,277$ 730,400$
Net Pension Liability (Asset) - December 31st (113,907)$ (141,767)$ (106,494)$ (80,536)$ (94,106)$
Plan Fiduciary Net Position as a Percentage of Total Pension Liability 123% 126% 117% 112% 115%
Note: The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 (December 31, 2014 measurement date) and is intended to
show a ten year trend. Additional years will be reported as they become available.
LAST TEN YEARS (Presented Prospectively)
SCHEDULE OF CHANGES IN NET PENSION LIABILITY (ASSET)
CITY OF SCANDIA, MINNESOTA
STATEWIDE VOLUNTEER FIREFIGHTER FUND
50
CITY OF SCANDIA, MINNESOTA
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31, 2019
51
NOTE 1 PUBLIC EMPLOYEES RETIREMENT PLAN – GENERAL EMPLOYEES FUND
2019 Changes
Changes in Actuarial Assumptions
The morality projection scale was changed from MP-2017 to MP-2018.
Changes in Plan Provisions
The employer supplemental contribution was changed prospectively, decreasing from $31.0 million to $21.0 million per
year. The State’s special funding contribution was changed prospectively, requiring $16.0 million due per year through
2031.
2018 Changes
Changes in Actuarial Assumptions
The morality projection scale was changed from MP-2015 to MP-2017.
The assumed benefit increase was changed from 1.00 percent per year through 2044 and 2.50 percent per year thereafter
to 1.25 percent per year.
Changes in Plan Provisions
The augmentation adjustment in early retirement factors is eliminated over a five-year period starting July 1, 2019,
resulting in actuarial equivalence after June 30, 2024.
Interest credited on member contributions decreased from 4.00 percent to 3.00 percent, beginning July 1, 2018.
Deferred augmentation was changed to 0.00 percent, effective January 1, 2019. Augmentation that has already accrued
for deferred members will still apply.
Contribution stabilizer provisions were repealed.
Postretirement benefit increases were changed from 1.00 percent per year with a provision to increase to 2.50 percent
upon attainment of 90.00 percent funding ratio to 50.00 percent of the Social Security Cost of Living Adjustment, not
less than 1.00 percent and not more than 1.50 percent, beginning January 1, 2019.
For retirements on or after January 1, 2024, the first benefit increase is delayed until the retiree reaches normal retirement
age; does not apply to Rule of 90 retirees, disability benefit recipients, or survivors.
Actuarial equivalent factors were updated to reflect revised mortality and interest assumptions.
2017 Changes
Changes in Actuarial Assumptions
The Combined Service Annuity (CSA) loads were changed from 0.80 percent for active members and 60 percent for
vested and non-vested deferred members. The revised CSA loads are now 0.00 percent for active member liability, 15.00
percent for vested deferred member liability and 3.00 percent for non-vested deferred member liability.
The assumed post-retirement benefit increase rate was changed from 1.00 percent per year for all years to 1.00 percent
per year through 2044 and 2.50 percent per year thereafter.
Changes in Plan Provisions
The State’s special funding contribution increased from $6 million to $16 million.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31, 2019
52
NOTE 1 PUBLIC EMPLOYEES RETIREMENT PLAN – GENERAL EMPLOYEES FUND (Continued)
2016 Changes
Changes in Actuarial Assumptions
The assumed post-retirement benefit increase rate was changed from 1.00 percent per year through 2035 and 2.50 percent
per year thereafter to 1.00 percent per year for all years.
The assumed investment return was changed from 7.90 percent to 7.50 percent. The single discount rate was changed
from 7.90 percent to 7.50 percent.
Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary
increases, payroll growth, the inflation were decreased by 0.25 percent to 3.25 percent for payroll growth and 2.50
percent for inflation.
Changes in Plan Provisions
There have been no changes since the prior valuation.
2015 Changes
Changes in Actuarial Assumptions
The assumed post-retirement benefit increase rate was changed from 1.00 percent per year through 2030 and 2.50 percent
per year thereafter to 1.00 percent per year through 2035 and 2.50 percent per year thereafter.
Changes in Plan Provisions
On January 1, 2015, the Minneapolis Employees Retirement Fund was merged into the General Employees Fund, which
increased the total pension liability by $1.1 billion and increased the fiduciary plan net position by $892 million. Upon
consolidation, state and employer contributions were revised; the State’s contribution of $6 million, which meets the
special funding situation definition, is due September 2015.
NOTE 2 STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN
2018 Changes
Changes in Actuarial Assumptions
There were no significant changes made to actuarial assumptions during 2018.
2017 Changes
Changes in Actuarial Assumptions
There were no significant changes made to actuarial assumptions during 2017.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31, 2019
53
NOTE 2 STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
2016 Changes
Changes in Actuarial Assumptions
There were no significant changes made to actuarial assumptions during 2016.
2015 Changes
Changes in Actuarial Assumptions
There were no significant changes made to actuarial assumptions during 2015.
SUPPLEMENTARY INFORMATION
CITY OF SCANDIA, MINNESOTA
SUPPLEMENTAL COMBINING BALANCE SHEET
MAJOR GOVERNMENTAL FUND – DEBT SERVICE FUND
2013 2015 2017 2018A Total
Equipment Equipment Equipment G.O. Street Debt
Certificates Certificates Certificates Bonds Service
ASSETS
Cash and Cash Equivalents 19,767$ 16,352$ -$ -$ 36,119$
Property Taxes Receivable 364 259 198 1,830 2,651
Prepaids 3,420 495 - - 3,915
TOTAL ASSETS 23,551$ 17,106$ 198$ 1,830$ 42,685$
LIABILITIES
Due to Other Funds -$ -$ 1,272$ 9,243$ 10,515$
FUND BALANCE
Nonspendable 3,420 495 - - 3,915
Restricted 20,131 16,611 - - 36,742
Unassigned - - (1,074) (7,413) (8,487)
Total Fund Balance 23,551 17,106 (1,074) (7,413) 32,170
TOTAL LIABILITIES
AND FUND BALANCES 23,551$ 17,106$ 198$ 1,830$ 42,685$
DECEMBER 31, 2019
54
2013 2015 2017 2018A Total
Equipment Equipment Equipment G.O. Street Debt
Certificates Certificates Certificates Bonds Service
REVENUES
Taxes 63,985$ 45,556$ 34,791$ 321,820$ 466,152$
EXPENDITURES
Debt Service:
Principal 55,000 43,000 32,000 155,000 285,000
Interest and Other Charges 8,491 1,891 3,328 174,233 187,943
TOTAL EXPENDITURES 63,491 44,891 35,328 329,233 472,943
NET CHANGE IN FUND BALANCE 494 665 (537) (7,413) (6,791)
FUND BALANCE - BEGINNING 23,057 16,441 (537) - 38,961
FUND BALANCE - ENDING 23,551$ 17,106$ (1,074)$ (7,413)$ 32,170$
FOR THE YEAR ENDED DECEMBER 31, 2019
MAJOR GOVERNMENTAL FUND – DEBT SERVICE FUND
SUPPLEMENTAL COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE
CITY OF SCANDIA, MINNESOTA
55
Economic Park
Development Capital Equipment Gateway Total
Authority Cable TV Improvement Replacement Trail Expansion Nonmajor
Fund Fund Fund Fund Fund Funds
ASSETS
Cash and Cash Equivalents 23,179$ 3,299$ 151,637$ 233,127$ 175$ 411,417$
Property Taxes Receivable 26 - - 159 - 185
Accounts Receivable - 1,583 - 500 - 2,083
TOTAL ASSETS 23,205$ 4,882$ 151,637$ 233,786$ 175$ 413,685$
LIABILITIES
Accounts Payable -$ 12$ -$ -$ -$ 12$
Advance from Other Fund - - 17,000 - - 17,000
Total Liabilities - 12 17,000 - - 17,012
FUND BALANCES
Restricted - - - - 175 175
Committed 23,205 - 134,637 - - 157,842
Assigned - 4,870 - 233,786 - 238,656
Total Fund Balances 23,205 4,870 134,637 233,786 175 396,673
TOTAL LIABILITIES
AND FUND BALANCES 23,205$ 4,882$ 151,637$ 233,786$ 175$ 413,685$
DECEMBER 31, 2019
ALL NONMAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEET
CITY OF SCANDIA, MINNESOTA
56
Economic Park
Development Capital Equipment Gateway Total
Authority Cable TV Improvement Replacement Trail Expansion Nonmajor
Fund Fund Fund Fund Fund Funds
REVENUES
Taxes 4,649$ -$ -$ 27,894$ -$ 32,543$
Franchise Fees - 18,321 - - - 18,321
Intergovernmental 7,892 - 9,300 - - 17,192
Charges for Services - - 3,000 - - 3,000
Investment Income 300 65 2,600 4,376 - 7,341
Miscellaneous - - 3,245 - - 3,245
TOTAL REVENUES 12,841 18,386 18,145 32,270 - 81,642
EXPENDITURES
Current:
Other General Government - 18,668 - - - 18,668
Parks and Recreation - - 2,472 - - 2,472
Economic Development 10,950 - - - - 10,950
Capital Outlay - - 22,650 75,961 - 98,611
TOTAL EXPENDITURES 10,950 18,668 25,122 75,961 - 130,701
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 1,891 (282) (6,977) (43,691) - (49,059)
OTHER FINANCING SOURCES (USES)
Proceeds on Sale of Assets - - 140,000 500 - 140,500
Operating Transfers Out - - (103,000) - - (103,000)
TOTAL OTHER FINANCING
SOURCES (USES)- - 37,000 500 - 37,500
NET CHANGE IN FUND BALANCES 1,891 (282) 30,023 (43,191) - (11,559)
FUND BALANCES - BEGINNING 21,314 5,152 104,614 276,977 175 408,232
FUND BALANCES - ENDING 23,205$ 4,870$ 134,637$ 233,786$ 175$ 396,673$
FOR THE YEAR ENDED DECEMBER 31, 2019
ALL NONMAJOR GOVERNMENTAL FUNDS
CITY OF SCANDIA, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
57
Initial Outstanding Outstanding Principal
Issue Interest Maturity Authorized Balance Balance Due in
Dates Rates Dates Issue 01/01/19 Issued Paid 12/31/19 2020
GOVERNMENTAL DEBTS
2013 Certificates of Indebtedness 7/1/2013 0.80-3.10% 7/1/2023 570,000$ 295,000$ -$ 55,000$ 240,000$ 60,000$
2015 Certificates of Indebtedness 7/1/2015 1.40-2.30% 7/1/2020 215,000 86,000 - 43,000 43,000 43,000
2017 Certificates of Indebtedness 8/1/2017 2.35-2.75% 8/1/2022 160,000 128,000 - 32,000 96,000 32,000
G.O. Street Reconstruction Bonds, Series 2018A 5/15/2018 3.00-3.13% 12/15/2033
3,835,000 3,835,000 - 155,000 3,680,000 215,000
TOTAL INDEBTEDNESS 4,780,000$ 4,344,000$ -$ 285,000$ 4,059,000$ 350,000$
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF INDEBTEDNESS
FOR THE YEAR ENDED DECEMBER 31, 2019
(UNAUDITED)
58
OTHER REQUIRED REPORTS
An Independently Owned Member, RSM US Alliance
RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm
of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International.
St. Cloud
320.251.0286
Little Falls
320.632.6311
Albany
320.845.2940
Maple Lake
320.963.5414
Monticello
763.295.5070
www.swcocpas.com
INDEPENDENT AUDITORS' REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE
AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
April 29, 2020
Honorable Mayor and City Council
City of Scandia, Minnesota
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United
States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate
remaining fund information of the City of Scandia, Minnesota (the City) as of and for the year ended December 31, 2019, and the
related notes to the financial statements, which collectively comprise the City of Scandia’s basic financial statements, and have
issued our report thereon dated April 29, 2020.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City of Scandia's internal control over financial
reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of
expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the
City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to
identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material
weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying Schedule of
Findings and Responses, we identified a certain 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 deficiency described in the accompanying Schedule of Findings and Responses to be a material
weakness: 2013-001 and 2019-001.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less sever that a material
weakness, yet important enough to merit attention by those charged with governance. We consider the following deficiency
described in the accompanying Schedule of Findings and Responses to be a significant deficiency: 2019-002.
60
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 and Corrective Action Plans. The City’s response was not subjected to the auditing procedures applied in the audit of
the financial statements and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that
testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an
integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control
and compliance. Accordingly, this communication is not suitable for any other purpose.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF FINDINGS AND RESPONSES
FOR THE YEAR ENDED DECEMBER 31, 2019
61
FINANCIAL STATEMENT FINDINGS
Finding 2013-001 Limited Segregation of Duties
Condition: The City has limited segregation of accounting duties.
Criteria: The basic premise of proper segregation of duties is that no one employee should have access to both
physical assets and the related accounting records or to all phases of the transaction.
Cause: There are a limited number of employees.
Effect: The City’s lack of adequate segregation of accounting duties could adversely affect the City’s ability to
initiate, record, process, and report financial data consistent with the assertions of management in the
financial statements.
Recommendation: Although the number of employees may not be large enough to eliminate this deficiency, we
recommend that the City evaluate current procedures and segregate where possible and implement
compensating controls. It is important that the Council is aware of this condition and monitor all
financial information.
Views of Responsible
Officials And Planned
Corrective Actions: Management agrees with the recommendation. See corresponding Corrective Action Plan.
Finding 2019-001 Material Audit Adjustments
Condition: Audit adjustments were required to correct material misstatements identified in the trial balance
presented for the audit.
Criteria: The City is required to report accurate financial information.
Cause: The City failed to record all year-end adjustments required under the accrual basis of accounting and
various other adjustments were required to correct misstatements.
Effect: The misstatements in the trial balance presented for the audit resulted in the need to record audit
adjustments to achieve fair financial statement presentation under accounting principles generally
accepted in the United States of America.
Recommendation: We recommend management perform a thorough review of the trial balance prior to the audit and
ensure all accounts have been properly adjusted at year-end.
Views of Responsible
Officials And Planned
Corrective Actions: Management agrees with the recommendation. See corresponding Corrective Action Plan.
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF FINDINGS AND RESPONSES
FOR THE YEAR ENDED DECEMBER 31, 2019
62
FINANCIAL STATEMENT FINDINGS (Continued)
Finding 2019-002 Financial Statement Preparation
Condition: Schlenner Wenner & Co. drafts the financial statements for the City. These financial statements,
including disclosures, were reviewed by management and management has taken responsibility for
them. However, we believe that management would require additional training in accounting
principles generally accepted in the United States of America to adequately apply such standards
internally.
Criteria: The City is required to report accurate financial information.
Cause: The City’s staff does not possess the expertise to prepare financial statements internally. This is not
unusual for a City of your size.
Effect: The inability to internally prepare the City’s financial statements can result in undetected errors in
financial reporting.
Recommendation: While the City may not have adequate controls in place to eliminate this finding, the City should
document its annual review of the financial statements.
Views of Responsible
Officials And Planned
Corrective Actions: Management agrees with the recommendation. See corresponding Corrective Action Plan.
CITY OF SCANDIA, MINNESOTA
CORRECTIVE ACTION PLANS
FOR THE YEAR ENDED DECEMBER 31, 2019
63
FINANCIAL STATEMENT FINDINGS
Finding 2013-001 Limited Segregation of Duties
1. Explanation of Disagreement with Audit Finding
There is no disagreement with the audit finding.
2. Actions Planned in Response to Finding
The City currently has the following procedures in place:
o The City’s Department Heads review all invoices received. The City Council also reviews the monthly
invoices and approves the expenditures.
o The City utilizes claim listings which are approved by the City Administrator.
The City will review current procedures and implement additional controls where possible.
3. Office Responsible
Ken Cammilleri, City Administrator, is the official responsible for ensuring corrective action.
4. Planned Completion Date
The Corrective Action Plan will be reviewed on an ongoing basis with no anticipated completion date.
5. Plan to Monitor Completion
The City Council will be monitoring the Corrective Action Plan.
Finding 2019-001 Material Audit Adjustments
1. Explanation of Disagreement with Audit Finding
There is no disagreement with the audit finding.
2. Actions Planned in Response to Finding
The City will continue to have Schlenner Wenner & Co. prepare certain audit adjustments and the City will review the
adjustments and schedules provided to the auditor. The City will be more diligent in the review of schedules, including
those prepared by third parties, to ensure they are correct and agree with the unaudited trial balance.
3. Office Responsible
Ken Cammilleri, City Administrator, is the official responsible for ensuring corrective action.
4. Planned Completion Date
The Corrective Action Plan will be reviewed on an ongoing basis with no anticipated completion date.
5. Plan to Monitor Completion
The City Council will be monitoring the Corrective Action Plan.
CITY OF SCANDIA, MINNESOTA
CORRECTIVE ACTION PLANS
FOR THE YEAR ENDED DECEMBER 31, 2019
64
FINANCIAL STATEMENT FINDINGS (Continued)
Finding 2019-002 Limited Segregation of Duties
1. Explanation of Disagreement with Audit Finding
There is no disagreement with the audit finding.
2. Actions Planned in Response to Finding
The City will continue to have Schlenner Wenner & Co. prepare the financial statements and will continue to document
the annual review of the financial statements and related footnote disclosures.
3. Office Responsible
Ken Cammilleri, City Administrator, is the official responsible for ensuring corrective action.
4. Planned Completion Date
The Corrective Action Plan will be reviewed on an ongoing basis with no anticipated completion date.
5. Plan to Monitor Completion
The City Council will be monitoring the Corrective Action Plan.
An Independently Owned Member, RSM US Alliance
RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm
of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International.
St. Cloud
320.251.0286
Little Falls
320.632.6311
Albany
320.845.2940
Maple Lake
320.963.5414
Monticello
763.295.5070
www.swcocpas.com
INDEPENDENT AUDITORS' REPORT ON
MINNESOTA LEGAL COMPLIANCE
April 29, 2020
Honorable Mayor and City Council
City of Scandia, Minnesota
We have audited, in accordance with auditing standards generally accepted in the United States of America, and the standards
applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United
States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate
remaining fund information of the City of Scandia, Minnesota (the City) as of and for the year ended December 31, 2019, and the
related notes to the financial statements, and have issued our report thereon dated April 29, 2020.
The Minnesota Legal Compliance Audit Guide for Cities, 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 tax increment financing, since the City has none.
In connection with our audit, nothing came to our attention that caused us to believe that the City failed to comply with the
provisions of the Minnesota Legal Compliance Audit Guide for Cities. However, our audit was not directed primarily toward
obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come
to our attention regarding the City’s noncompliance with the above referenced provisions.
This report is intended for the information and use of those charged with governance and management of the City of Scandia and
the State Auditor and is not intended to be, and should not be, used by anyone other than these specified parties.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota