10.a2 2020 Audit Financial Statements
City of Scandia,
Minnesota
Audited Financial Statements
December 31, 2020
CITY OF SCANDIA, MINNESOTA
TABLE OF CONTENTS
INTRODUCTORY SECTION:
CITY COUNCIL AND OFFICIALS ................................................................................................................................ 2
FINANCIAL SECTION:
INDEPENDENT AUDITOR’S REPORT ........................................................................................................................ 4
REQUIRED SUPPLEMENTARY INFORMATION:
Management’s Discussion and Analysis ....................................................................................................................... 7
BASIC FINANCIAL STATEMENTS:
Government-wide Financial Statements
Statement of Net Position ..................................................................................................................................... 17
Statement of Activities ......................................................................................................................................... 18
Fund Financial Statements
Balance Sheet – Governmental Funds .................................................................................................................. 19
Reconciliation of the Balance Sheet – Governmental Funds
to the Statement of Net Position .................................................................................................................... 20
Statement of Revenues, Expenditures,
and Changes in Fund Balances – Governmental Funds ................................................................................ 21
Reconciliation of Changes in Fund Balance of
Governmental Funds to the Statement of Activities ...................................................................................... 22
Statement of Net Position – Proprietary Funds .................................................................................................... 23
Statement of Revenues, Expenses, and
Changes in Net Position – Proprietary Funds................................................................................................ 24
Statement of Cash Flows – Proprietary Funds ..................................................................................................... 25
Notes to the Basic Financial Statements ...................................................................................................................... 27
REQUIRED SUPPLEMENTARY INFORMATION:
Budgetary Comparison Schedule – General Fund ....................................................................................................... 54
Schedule of City’s Proportionate Share of Net Pension Liability ............................................................................... 56
Schedule of City Pension Contributions ...................................................................................................................... 57
Schedule of Changes in Net Pension Liability (Asset) ................................................................................................ 58
Notes to the Required Supplementary Information ..................................................................................................... 59
SUPPLEMENTARY INFORMATION:
Supplemental Combining Balance Sheet – Major Governmental Fund – Debt Service Fund .................................... 64
Supplemental Combining Schedule of Revenues, Expenditures, and
Changes in Fund Balance – Major Governmental Fund – Debt Service Fund ..................................................... 65
Combining Balance Sheet – All Nonmajor Governmental Funds ............................................................................... 66
Combining Statement of Revenues, Expenditures, and
Changes in Fund Balances – All Nonmajor Governmental Funds ....................................................................... 67
Schedule of Indebtedness ............................................................................................................................................ 68
OTHER REQUIRED REPORTS:
Independent Auditor’s Report on Internal Control Over Financial
Reporting and on Compliance and Other Matters Based on an
Audit of Financial Statements Performed in Accordance with
Government Auditing Standards .......................................................................................................................... 70
Schedule of Findings and Responses ........................................................................................................................... 72
Corrective Action Plans ............................................................................................................................................... 74
1
INTRODUCTORY
SECTION
2
CITY OF SCANDIA, MINNESOTA
CITY COUNCIL AND OFFICIALS
FOR THE YEAR ENDED DECEMBER 31, 2020
CITY COUNCIL Term Expires
Christine Maefsky Mayor December 31, 2022
Jerry Cusick Council Member December 31, 2022
Steve Kronmiller Council Member December 31, 2024
Chris Ness Council Member December 31, 2020
Patti Ray Council Member December 31, 2022
CITY OFFICIALS
Ken Cammilleri City Administrator
Colleen Firkus Treasurer
3
FINANCIAL
SECTION
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www.schlennerwenner.cpa
INDEPENDENT AUDITOR’S REPORT
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, th e 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, 2020, 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 misstatemen t,
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 materi al
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 t he
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 o f 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 estim ates 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, 2020, 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.
5
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 Accounti ng
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 inf ormation 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 op inion or provide any assurance.
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the finan cial statements that collectively comprise the City’s
basic financial statements. The introductory section, supplementary combining debt service fund schedules, combining 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 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 May 18, 2021 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 o pinion 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.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
May 18, 2021
6
REQUIRED SUPPLEMENTARY
INFORMATION
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2020
7
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, 2020. Please read it in conjunction with the independent auditor’s report on page four and the
City’s financial statements, which begin on page seventeen.
FINANCIAL HIGHLIGHTS
• The City’s net position increased $404,545 compared to the prior year as a result of this year’s operations.
• The City’s General Fund generated more revenue than budgeted by $57,011, excluding transfers in from other funds.
Expenditures were less than budgeted by $229,701, excluding transfers to other funds which exceeded budgeted amounts
by $27,000. See additional detail pertaining to differences between budgeted and actual amounts at the General Fund’s
Budgetary Comparison Schedule on page fifty-four.
• The unassigned fund balance in the General Fund of $1,520,442 is 84 percent of the 2020 General Fund budgeted
expenditures, excluding budgeted transfers to other funds.
• In the City’s Sewer utility funds, revenues increased $41,053 (or 37.37 percent), while operating expenses increased
$1,093 (or 0.83 percent). The City’s utility funds ended 2020 with a net gain of $17,634, with the cash position
decreasing $45,228, due to capital improvements during 2020.
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 seventeen and eighteen) 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 nineteen. 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 re port 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 a cts 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 nine. 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, 2020
8
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 eleven. The fund financial statements begin on page nineteen 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. T he 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, 2020
9
THE CITY AS A WHOLE
The City’s combined net position increased $404,545 from a year ago. Our analysis below focuses on the net position (Table 1)
and changes in net position (Table 2) of the City’s governmental and business-type activities.
Table 1
Net Position
Governmental Business-Type Total
Activities Activities Government
2020 2019 2020 2019 2020 2019
Current and Other Assets 4,997,843$ 4,747,461$ 65,621$ 111,395$ 5,063,464$ 4,858,856$
Net Capital Assets 14,189,533 14,123,434 958,931 895,786 15,148,464 15,019,220
Total Assets 19,187,376 18,870,895 1,024,552 1,007,181 20,211,928 19,878,076
Deferred Outflows of Resources 100,726 69,168 1,923 2,244 102,649 71,412
Current Liabilities 428,303 208,467 9,702 5,643 438,005 214,110
Noncurrent Liabilities 4,189,569 4,429,186 18,316 19,674 4,207,885 4,448,860
Total Liabilities 4,617,872 4,637,653 28,018 25,317 4,645,890 4,662,970
Deferred Inflows of Resources 96,613 115,704 904 4,189 97,517 119,893
Net Position:
Net Investment in
Capital Assets 10,432,072 9,898,338 958,931 895,786 11,391,003 10,794,124
Restricted 32,356 29,505 - - 32,356 29,505
Unrestricted 4,109,189 4,258,863 38,622 84,133 4,147,811 4,342,996
Total Net Position 14,573,617$ 14,186,706$ 997,553$ 979,919$ 15,571,170$ 15,166,625$
The net position of the City’s governmental activities increased by $386,911 (or 2.73 percent). Unrestricted net position (the part
of net position that can be used to finance day-to-day operations without constraints established by debt covenants, enabling
legislation, or other legal requirements) decreased by $149,674 (or 3.51 percent) compared to the prior year.
The net position of the City’s business-type activities increased by $17,634 (or 1.80 percent), while the unrestricted net position
decreased from $84,133 to $38,622 due to the City's investment in capital assets and infrastructure throughout the year, which
resulted in a greater portion of the net position being classified as Net Investment in Capital Assets. Aside from this, operations
were comparable to the prior year.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2020
10
THE CITY AS A WHOLE (Continued)
Table 2
Changes in Net Position
Governmental Business-Type Total
Activities Activities Government
2020 2019 2020 2019 2020 2019
REVENUE
Charges for Services 202,001$ 233,576$ 95,721$ 101,773$ 297,722$ 335,349$
Operating Grants and
Contributions 59,964 140,117 - - 59,964 140,117
Capital Grants and
Contributions - - 6,844 4,824 6,844 4,824
Taxes 2,443,959 2,268,165 - - 2,443,959 2,268,165
Intergovernmental 346,296 45,549 47,213 46 393,509 45,595
Franchise Fees 25,435 24,934 - - 25,435 24,934
Investment Income 43,124 65,463 594 3,226 43,718 68,689
Other 5,115 145,682 550 - 5,665 145,682
Total Revenues 3,125,894 2,923,486 150,922 109,869 3,276,816 3,033,355
PROGRAM EXPENSES
General Government 733,481 528,579 - - 733,481 528,579
Public Safety 453,190 409,616 - - 453,190 409,616
Public Works 1,277,674 1,347,433 - - 1,277,674 1,347,433
Culture and Recreation 171,595 124,141 - - 171,595 124,141
Economic Development 881 10,950 - - 881 10,950
Debt Service 117,055 122,557 - - 117,055 122,557
201 Sewer - - 120,995 118,015 120,995 118,015
Uptown Sewer - - 12,293 14,180 12,293 14,180
Total Expenses 2,753,876 2,543,276 133,288 132,195 2,887,164 2,675,471
Gain on Sale of Assets 14,893 - - - 14,893 -
Transfers - 2,640 - (2,640) - -
Change in Net Position 386,911 382,850 17,634 (24,966) 404,545 357,884
Net Position - Beginning of Year 14,186,706 13,803,856 979,919 1,004,885 15,166,625 14,808,741
Net Position - End of Year 14,573,617$ 14,186,706$ 997,553$ 979,919$ 15,571,170$ 15,166,625$
The City’s total revenues increased by $243,461 (or 8.03 percent). Operations were comparable to the prior year, but various
changes of significance include:
• Intergovernmental revenues increased by $347,914 from 2019 primarily due to the Coronavirus Relief Aid received in
the current year.
• Taxes increased from 2019 by $175,794 primarily due to an increase in property taxes during the current year.
• Other revenues decreased by $140,017 from 2019 primarily due to the sale of City-owned land during the prior year.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2020
11
THE CITY AS A WHOLE (Continued)
The total cost of all programs and services increased by $211,693 (or 7.91 percent), primarily due to costs incurred in response to
the pandemic, using coronavirus relief funding received from the State.
Our analysis below separately considers the operations of governmental and business-type activities:
Governmental Activities
Revenue for the City’s governmental activities increased $202,408 (or 6.92 percent), while total expenses increased by $210,600
(or 8.28 percent). Revenues and expenses were generally consistent year to year, with the exception of the matters previously
noted.
Table 3 presents the cost of each of the City’s programs (general government, public safety, public works, parks and recreation,
economic development, and debt service) as well as each program’s net cost (total cost less revenues generated by the activities).
The net cost shows the financial burden that was placed on the City’s taxpayers by each of these functions. Acti vities, net of
capital outlay which is excluded from Table 3, were generally comparable to the prior year as operations remained fairly
consistent with the prior year, with the exception of the expenses incurred in response to the pandemic previously mentioned.
Table 3
Governmental Activities
Total Cost Net Cost
of Services of Services
2020 2019 2020 2019
General Government 733,481$ 528,579$ 578,549$ 355,687$
Public Safety 453,190 409,616 369,619 333,869
Public Works 1,277,674 1,347,433 1,269,558 1,302,864
Culture and Recreation 171,595 124,141 156,249 43,656
Economic Development 881 10,950 881 10,950
Debt Service 117,055 122,557 117,055 122,557
Totals 2,753,876$ 2,543,276$ 2,491,911$ 2,169,583$
Business-type Activities
Revenues of the City’s business-type activities (see Table 2) increased by $41,053 (or 37.37 percent). Expenses increased by
$1,093 (or 0.83 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 nineteen) reported a combined
fund balance of $4,393,949. This is a decrease of $67,772 (or 1.52 percent) from the prior year. This decrease in fund balance is
the net result of a multitude of transactions, but a few of the largest contributing factors unique to the current year’s operations are
as follows:
• During 2020, the City received $393,345 in intergovernmental revenues primarily for coronavirus relief, which is
$234,175 (147.12 percent) greater than 2019.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2020
12
THE CITY’S FUNDS (Continued)
• Expenditures for capital outlay had an overall increase of $647,102 (179.07 percent) from 2019.
Other operations were comparable to the prior year. The following is a summary of the City’s major governmental funds:
Increase
2020 2019 (Decrease)
General 1,535,222$ 1,267,024$ 268,198$
Fund Balance December 31,
Major Funds
The fund balance of the General Fund increased by $268,198 as a result of current year operations. In comparison to the prior
year, revenues increased 6.94 and expenditures decreased 5.42 percent.
General Fund Revenue
Taxes
Franchise Taxes
Licenses, Permits and Fees
Intergovernmental
Charges for Services
Fines
Investment Income
Miscellaneous
The City receives the majority of its funding in the General Fund in the form of taxes (83 percent), licenses, permits, and fees (8
percent), intergovernmental (4 percent), and charges for services (2 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, 2020
13
THE CITY’S FUNDS (Continued)
General Fund Expenditures
General Government
Public Safety
Public Works
Culture and Recreation
Capital Outlay
A significant portion of the City’s General Fund expenditures are used for public works (36 percent). Remaining expenditures are
used primarily on public safety (20 percent) and general government operations (34 percent). Overall, the City’s General Fund
expenditures were comparable to the prior year.
General Fund Budgetary Highlights
The City’s General Fund generated more revenue than budgeted of $74,711, including transfers from other funds. Expenditures,
including transfers out to other funds, were less than those budgeted by $202,701. See additional detail pertaining to differences
between budgeted and actual amounts within the General Fund previously discussed and at the Budgetary Comparison Schedule
on page fifty-four.
Increase
2020 2019 (Decrease)
Fund Balance December 31,
Major Funds
Capital Improvement Fund 860,659$ 1,113,754$ (253,095)$
At December 31, 2020, the Capital Improvement Fund has a cash balance of $971,990. The fund balance of the Capital
Improvement Fund decreased by $253,095. Significant activity in this fund during 2020 included the installation of a door access
system and audio-visual upgrades at the Community Center, and a John Deere Loader for Public Works.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2020
14
THE CITY’S FUNDS (Continued)
Increase
2020 2019 (Decrease)
Fund Balance December 31,
Major Funds
Local Road Improvement Fund 1,600,451$ 1,652,100$ (51,649)$
At December 31, 2020, the Local Road Improvement Fund has a cash balance of $1,633,974. The fund balance decreased by
$51,649 primarily due to capital expenditures for street reconstruction projects exceeding the revenue sources for the fund.
Debt Service 27,396$ 32,170$ (4,774)$
At December 31, 2020, the Debt Service Fund has a cash balance of $36,541. The fund balance decreased by $4,774 primarily
due to the payment of principal and interest exceeding revenues from property taxes.
Proprietary Funds
As the City completed the year, its business-type activities (as presented in the statement of net position on page twenty-three)
reported a combined net position of $997,553. This is an increase of $17,634 from the prior year. Other operations were
comparable to the prior year. The following is a summary of the City’s major proprietary funds:
Increase
2020 2019 (Decrease)
201 Sewer Fund 828,105$ 810,976$ 17,129$
Net Position December 31,
Major Funds
The 201 Sewer Fund provides sanitary sewer services to customers in the Anderson -Erickson and Bliss subdivisions. At
December 31, 2020, the fund had a cash balance of $46,438 with a decrease in cash of $44,663 for the year. The decrease in cash
is attributable to purchases of capital assets. The fund’s net position increased $17,129 during the current year, largely as a result
of Federal disaster grant funding received during the year.
Uptown Sewer Fund 169,448$ 168,943$ 505$
The Uptown Sewer Fund provides sanitary sewer services to commercial customers near the Olinda Trail / Oakhill intersection.
At December 31, 2020, the fund had a cash balance of $18,767 with a decrease in cash of $565 for the year. The decrease in cash
is attributable to repayments of amounts due to the Capital Improvement Fund. The fund’s net position increased $505 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 2020, the City had $15,148,464 invested in a broad range of capital assets, including land, buildings, equipment and
vehicles, infrastructure, improvements, and sewer systems. This amount represents a net increase of $243,151 (or 1.63 percent)
from last year.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2020
15
CAPITAL ASSET AND DEBT ADMINISTRATION (Continued)
Table 4
Capital Assets Net of Depreciation
Governmental
Activities Activities Totals
2020 2019 2020 2019 2020 2019
Land 487,735$ 487,735$ -$ -$ 487,735$ 487,735$
Construction In Progress 37,962 55,798 - 24,874 37,962 80,672
Buildings 1,232,221 1,229,278 - - 1,232,221 1,229,278
Equipment 589,747 449,294 218,055 95,159 807,802 544,453
Vehicles 745,194 799,194 - - 745,194 799,194
Infrastructure 11,003,538 10,885,529 - - 11,003,538 10,885,529
Other Improvements 93,136 102,699 - - 93,136 102,699
Sewer Plant - - 570,000 600,000 570,000 600,000
Uptown Sewer - - 170,876 175,753 170,876 175,753
Totals 14,189,533$ 14,009,527$ 958,931$ 895,786$ 15,148,464$ 14,905,313$
Business-Type
Significant capital asset acquisitions during 2020 were:
• Installation of Community Center Door Access System - $48,950
• Installation of Community Center Audio Visual Upgrades - $84,825
• Purchase of new John Deere Loader - $93,498
• Capital outlay for 2020 road improvement project - $388,535
• Bliss Lift Station control panel project - $135,538
More detailed information about the City’s capital assets is presented in Note 2.B. to the financial statements.
Debt
In 2020, the City paid off $350,000 of the $4,059,000 in debt that was outstanding at December 31, 2019. The City did not issue
any new during 2020, bringing the total year-end balance of debt outstanding at December 31, 2020 to $3,709,000. See additional
information at Note 2.C. to the financial statements.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
The City’s elected and appointed officials considered many factors when settling the year 202 1 budget, such as tax rates and fees
that will be charged for the business-type activities. Sewer rates were increased by 5-7% for the 201 and Uptown community
septic systems. Building growth and permit activity have been sustaining significant added value for the community, which is also
expected to carry forth into 2021. Overall, the City anticipates operations for 2021 to be similar to 2020.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview
of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about this rep ort or
need additional financial information, contact the City of Scandia, 14727 209th Street N, Scandia, MN 55073.
16
BASIC FINANCIAL STATEMENTS
CITY OF SCANDIA, MINNESOTA
STATEMENT OF NET POSITION
DECEMBER 31, 2020
See accompanying notes. 17
Governmental
Activities
Business-Type
Activities Totals
ASSETS
Cash and Cash Equivalents 4,726,305$ 65,205$ 4,791,510$
Property Taxes Receivable 82,744 - 82,744
Assessments Receivable 32,824 4,509 37,333
Accounts Receivable 28,189 14,245 42,434
Interest Receivable 1,742 - 1,742
Internal Balances 18,468 (18,468) -
Inventory 6,142 - 6,142
Prepaids 8,658 130 8,788
Noncurrent Assets:
Capital Assets Not Being Depreciated 525,697 - 525,697
Capital Assets Being Depreciated (Net) 13,663,836 958,931 14,622,767
Net Pension Asset 92,771 - 92,771
TOTAL ASSETS 19,187,376 1,024,552 20,211,928
DEFERRED OUTFLOWS OF RESOURCES
Pensions 100,726 1,923 102,649
LIABILITIES
Accounts Payable 359,925 8,551 368,476
Salaries Payable 38,085 751 38,836
Accrued Interest Payable 3,015 - 3,015
Deposits Payable 26,528 - 26,528
Unearned Revenue 750 400 1,150
Noncurrent Liabilities:
Amount Due Within One Year 350,228 - 350,228
Amount Due After One Year 3,445,461 - 3,445,461
Net Pension Liability 393,880 18,316 412,196
TOTAL LIABILITIES 4,617,872 28,018 4,645,890
DEFERRED INFLOWS OF RESOURCES
Pensions 96,613 904 97,517
NET POSITION
Net Investment in Capital Assets 10,432,072 958,931 11,391,003
Restricted 32,356 - 32,356
Unrestricted 4,109,189 38,622 4,147,811
TOTAL NET POSITION 14,573,617$ 997,553$ 15,571,170$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2020
See accompanying notes. 18
Operating Capital
Charges for Grants and Grants and Governmental Business-Type
Expenses Services Contributions Contributions Activities Activities Total
Governmental Activities:
General Government 733,481$ 151,832$ 3,100$ -$ (578,549)$ -$ (578,549)$
Public Safety 453,190 36,484 47,087 - (369,619) - (369,619)
Public Works 1,277,674 8,116 - - (1,269,558) - (1,269,558)
Culture and Recreation 171,595 5,569 9,777 - (156,249) - (156,249)
Economic Development 881 - - - (881) - (881)
Debt Service 117,055 - - - (117,055) - (117,055)
Total Governmental Activities 2,753,876 202,001 59,964 - (2,491,911) - (2,491,911)
Business-Type Activities:
201 Sewer 120,995 83,175 - 6,844 - (30,976) (30,976)
Uptown Sewer 12,293 12,546 - - - 253 253
Total Business-Type Activities 133,288 95,721 - 6,844 - (30,723) (30,723)
TOTALS 2,887,164$ 297,722$ 59,964$ 6,844$ (2,491,911) (30,723) (2,522,634)
General Revenues:
Taxes 2,443,959 - 2,443,959
Franchise and Other Tax 25,435 - 25,435
Intergovernmental 346,296 47,213 393,509
Investment Income 43,124 594 43,718
Gain on Sale of Assets 14,893 - 14,893
Miscellaneous 5,115 550 5,665
Total General Revenues 2,878,822 48,357 2,927,179
CHANGE IN NET POSITION 386,911 17,634 404,545
NET POSITION - BEGINNING OF YEAR 14,186,706 979,919 15,166,625
NET POSITION - END OF YEAR 14,573,617$ 997,553$ 15,571,170$
Functions/Programs
Program Revenues Net (Expense) Revenue and Changes in Net Position
Primary Government
CITY OF SCANDIA, MINNESOTA
BALANCE SHEET
GOVERNMENTAL FUNDS
DECEMBER 31, 2020
See accompanying notes. 19
General Fund
Capital
Improvement
Fund
Local Road
Improvement
Fund
Debt Service
Fund
Total Nonmajor
Funds
Total
Governmental
Funds
ASSETS
Cash and Cash Equivalents 1,702,574$ 971,990$ 1,633,974$ 36,541$ 381,226$ 4,726,305$
Property Taxes Receivable 72,409 - 4,172 5,452 711 82,744
Assessments Receivable - 822 32,002 - - 32,824
Accounts Receivable 26,215 - - - 1,974 28,189
Interest Receivable 1,742 - - - - 1,742
Due from Other Funds 18,652 - - - - 18,652
Inventory 6,142 - - - - 6,142
Prepaids 8,658 - - 2,640 - 11,298
Advances to Other Funds - 56,468 - - - 56,468
TOTAL ASSETS 1,836,392$ 1,029,280$ 1,670,148$ 44,633$ 383,911$ 4,964,364$
LIABILITIES
Accounts Payable 153,156$ 167,799$ 37,695$ -$ 1,275$ 359,925$
Salaries Payable 38,085 - - - - 38,085
Deposits Payable 26,528 - - - - 26,528
Due to Other Funds - - - 17,237 1,415 18,652
Unearned Revenue 750 - - - - 750
Advances from Other Funds 27,000 - - - 11,000 38,000
Total Liabilities 245,519 167,799 37,695 17,237 13,690 481,940
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue:
Property Taxes 55,651 - - - - 55,651
Special Assessments - 822 32,002 - - 32,824
Total Deferred Inflows of Resources 55,651 822 32,002 - - 88,475
FUND BALANCES
Nonspendable 14,800 56,468 - 2,640 - 73,908
Restricted - - - 37,836 175 38,011
Committed - 804,191 690,730 - 166,835 1,661,756
Assigned - - 909,721 - 205,901 1,115,622
Unassigned 1,520,422 - - (13,080) (2,690) 1,504,652
Total Fund Balances 1,535,222 860,659 1,600,451 27,396 370,221 4,393,949
TOTAL LIABILITIES, DEFERRED
INFLOWS OF RESOURCES,
AND FUND BALANCES 1,836,392$ 1,029,280$ 1,670,148$ 44,633$ 383,911$ 4,964,364$
CITY OF SCANDIA, MINNESOTA
RECONCILIATION OF THE BALANCE SHEET - GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET POSITION
DECEMBER 31, 2020
See accompanying notes. 20
Total Fund Balances - Governmental Funds 4,393,949$
Amounts reported for governmental activities in the Statement of Net Position
are different because:
Capital assets used in governmental activities are not current financial resources
and, therefore, are not reported as assets in governmental funds:
Capital Assets 22,061,107$
Accumulated Depreciation (7,871,574)
Capital Assets (Net) 14,189,533
Long-term liabilities are not due and payable in the current period and, therefore,
are not reported as liabilities in the funds:
Bond Principal Payable (3,709,000)
Bond Premium, Net of Accumulated Amortization (48,461)
Compensated Absences (38,228)
(3,795,689)
The net pension liability and related deferred outflows/inflows represent the
allocation of the pension obligations of the statewide plans to the City. Such
balances are not reported in the funds:
Net Pension Asset 92,771
Net Pension Liability (393,880)
Deferred Outflows - Pensions 100,726
Deferred Inflows - Pensions (96,613)
(296,996)
Interest on long-term debt is recognized as an expenditure when due and payable
in the governmental funds. Therefore, interest is not accrued in the governmental
funds Balance Sheet, but is accrued in the Statement of Net Position: (5,655)
Other long-term assets are not available to pay for current-period expenditures and,
therefore, are reported as unavailable in the funds:
Property Taxes 55,651
Special Assessments 32,824
TOTAL NET POSITION OF GOVERNMENTAL ACTIVITIES 14,573,617$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2020
See accompanying notes. 21
General Fund
Capital
Improvement
Fund
Local Road
Improvement
Fund
Debt Service
Fund
Total Nonmajor
Funds
Total
Governmental
Funds
REVENUES
Taxes 1,553,879$ -$ 357,831$ 467,766$ 60,693$ 2,440,169$
Franchise Taxes 5,104 - - - 20,331 25,435
Licenses, Permits, and Fees 151,164 - - - - 151,164
Intergovernmental 72,885 - - - 320,460 393,345
Charges for Services 43,276 - - - - 43,276
Fines 7,561 - - - - 7,561
Interest Income 11,463 11,020 16,749 - 3,892 43,124
Miscellaneous 18,879 - - - 14,302 33,181
TOTAL REVENUES 1,864,211 11,020 374,580 467,766 419,678 3,137,255
EXPENDITURES
Current:
General Government 535,026 - - - 154,101 689,127
Public Safety 323,316 - - - - 323,316
Public Works 568,500 - - - - 568,500
Parks and Recreation 133,534 - - - 8,663 142,197
Economic Development - - - - 881 881
Capital Outlay 23,337 276,415 426,229 - 282,485 1,008,466
Debt Service:
Principal - - - 350,000 - 350,000
Interest and Other Charges - - - 122,540 - 122,540
TOTAL EXPENDITURES 1,583,713 276,415 426,229 472,540 446,130 3,205,027
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 280,498 (265,395) (51,649) (4,774) (26,452) (67,772)
OTHER FINANCING SOURCES (USES)
Transfers In 17,700 30,000 - - - 47,700
Transfers Out (30,000) (17,700) - - - (47,700)
TOTAL OTHER FINANCING
SOURCES (USES)(12,300) 12,300 - - - -
NET CHANGE IN FUND BALANCES 268,198 (253,095) (51,649) (4,774) (26,452) (67,772)
FUND BALANCES - BEGINNING 1,267,024 1,113,754 1,652,100 32,170 396,673 4,461,721
FUND BALANCES - ENDING 1,535,222$ 860,659$ 1,600,451$ 27,396$ 370,221$ 4,393,949$
CITY OF SCANDIA, MINNESOTA
RECONCILIATION OF CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITES
FOR THE YEAR ENDED DECEMBER 31, 2020
See accompanying notes. 22
Net Change in Fund Balances - Total Governmental Funds (67,772)$
Amounts reported for governmental activities in the Statement of Activities are
different due to the following:
Capital outlays are reported in governmental funds as expenditures. However, in the
Statement of Activities, the cost of those assets is allocated over the estimated
useful lives as depreciation expense:
Capital Outlay Capitalized 799,618$
Depreciation Expense (621,005)
Loss on Disposal of Assets 1,393
180,006
The issuance of long-term debt provides current financial resources to governmental
funds while the repayment of principal of long-term debt consumes the current
financial resources of governmental funds. Neither transaction, however, has any
effect on net position. Also, governmental funds report the effect of premiums
and discounts when debt is first issued, whereas these amounts are deferred and
amortized in the Statement of Activities. The amounts below detail the effects of
these differences in the treatment of long term debt and related items:
Bond Principal Repayments 350,000
Amortization of Bond Premium 3,728
353,728
Net change in accrued interest on bonds and equipment certificates are not
reported as expenses in the funds.1,757
Under the modified accrual basis of accounting, certain revenues cannot be recognized
until they are available to liquidate liabilities of the current period:
Property Taxes 3,903
Special Revenues (113)
3,790
Some expenses reported in the Statement of Activities do not require the use of
current financial resources and, therefore, are not reported as expenditures in
the governmental funds:
Compensated Absences (10,168)
Certain liabilities do not represent the impending use of current resources.
Therefore, the change in such liabilities and related deferrals are not reported
in the governmental funds:
Net Pension Liability and Deferred Outflows/Inflows of Resources (74,430)
CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES 386,911$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF NET POSITION
PROPRIETARY FUNDS
DECEMBER 31, 2020
See accompanying notes. 23
Nonmajor
201 Sewer Fund
Uptown Sewer
Fund Totals
ASSETS
Current Assets
Cash and Cash Equivalents 46,438$ 18,767$ 65,205$
Assessments Receivable 4,509 - 4,509
Accounts Receivable 11,621 2,624 14,245
Prepaids 130 - 130
Total Current Assets 62,698 21,391 84,089
Noncurrent Assets
Capital Assets Being Depreciated (Net)788,054 170,877 958,931
TOTAL ASSETS 850,752 192,268 1,043,020
DEFERRED OUTFLOWS OF RESOURCES
Pensions 1,534 389 1,923
LIABILITIES
Current Liabilities
Accounts Payable 8,189 362 8,551
Salaries Payable 580 171 751
Unearned Revenue 400 - 400
Total Current Liabilities 9,169 533 9,702
Noncurrent Liabilities
Advances from Other Funds - 18,468 18,468
Net Pension Liability 14,306 4,010 18,316
Total Noncurrent Liabilities 14,306 22,478 36,784
TOTAL LIABILITIES 23,475 23,011 46,486
DEFERRED INFLOWS OF RESOURCES
Pensions 706 198 904
NET POSITION
Net Investment in Capital Assets 788,054 170,877 958,931
Unrestricted 40,051 (1,429) 38,622
TOTAL NET POSITION 828,105$ 169,448$ 997,553$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2020
See accompanying notes. 24
Nonmajor
201 Sewer Fund
Uptown Sewer
Fund Totals
OPERATING REVENUES
Charges for Services 83,175$ 12,546$ 95,721$
OPERATING EXPENSES
Wages and Benefits 19,012 4,710 23,722
Materials and Supplies 1,195 80 1,275
Repairs and Maintenance 36,668 135 36,803
Professional Services 6,851 1,119 7,970
Utilities 1,793 584 2,377
Miscellaneous 12,833 788 13,621
Depreciation 42,643 4,877 47,520
TOTAL OPERATING EXPENSES 120,995 12,293 133,288
NET OPERATING INCOME (LOSS)(37,820) 253 (37,567)
NONOPERATING INCOME
Special Assessments 6,844 - 6,844
Intergovernmental 47,202 11 47,213
Investment Income 353 241 594
Miscellaneous 550 - 550
TOTAL NONOPERATING INCOME 54,949 252 55,201
CHANGE IN NET POSITION 17,129 505 17,634
NET POSITION - BEGINNING OF YEAR 810,976 168,943 979,919
NET POSITION - END OF YEAR 828,105$ 169,448$ 997,553$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2020
See accompanying notes. 25
Nonmajor
201 Sewer Fund
Uptown Sewer
Fund Totals
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers 83,189$ 15,760$ 98,949$
Cash Paid to Suppliers (55,020) (2,772) (57,792)
Cash Paid to Employees (21,851) (5,885) (27,736)
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,318 7,103 13,421
CASH FLOWS FROM NONCAPITAL FINANCING
ACTIVITIES
Intergovernmental 47,202 11 47,213
Other Receipts from Customers 550 - 550
NET CASH PROVIDED BY NONCAPITAL FINANCING
ACTIVITIES 47,752 11 47,763
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Special Assessments 11,579 - 11,579
Purchases of Capital Assets (110,665) - (110,665)
Payments on Interfund Advances - (7,920) (7,920)
NET CASH USED BY CAPITAL AND (99,086) (7,920) (107,006)
RELATED FINANCING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Investment Income 353 241 594
Net Change in Cash and Cash Equivalents (44,663) (565) (45,228)
Cash and Cash Equivalents - Beginning of Year 91,101 19,332 110,433
Cash and Cash Equivalents - End of Year 46,438$ 18,767$ 65,205$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF CASH FLOWS (Continued)
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2020
See accompanying notes. 26
Nonmajor
201 Sewer Fund
Uptown Sewer
Fund Totals
RECONCILIATION OF NET OPERATING INCOME (LOSS) TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Net Operating Income (Loss)(37,820)$ 253$ (37,567)$
Adjustments to Reconcile Net Operating Income (Loss)
to Net Cash Provided by Operating Activities:
Depreciation Expense 42,643 4,877 47,520
Changes in Assets, Liabilities, and Deferrals:
Accounts Receivable 647 3,214 3,861
Assessments Receivable (633) - (633)
Prepaids (130) - (130)
Accounts Payable 4,450 (66) 4,384
Salaries Payable 254 54 308
Net Pension Liability (803) (555) (1,358)
Deferred Outflows or Resources - Pensions 221 100 321
Deferred Inflows or Resources - Pensions (2,511) (774) (3,285)
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,318$ 7,103$ 13,421$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
27
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 governmen tal and proprietary
categories.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
28
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.B. BASIS OF PRESENTATION (Continued)
A fund is considered major if it is the primary operating fund of the City or meets the following criteria:
• Total assets and deferred outflows, liabilities and deferred inflows, revenues or expenditures/expenses of that individual
governmental or 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. Basi s 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, 2020
29
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING (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 pres ented 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, 2020
30
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.E. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY (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 an d 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 acco unts
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, 2020
31
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.E. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY (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.
Long-Term Debt
The accounting treatment of long-term debt depends on whether the assets are used in governmental fund operations or
proprietary fund operations and whether they are reported in the government-wide or fund financial statements.
All long-term debt to be repaid from governmental and business-type resources are reported as liabilities in the government-wide
statements. The long-term debt consists 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, 2020
32
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.E. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY (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.
See Notes 3 and 5 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 exp enditure 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, 2020 consist of inventory,
prepaid expenditures, and advances to other funds.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
33
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.E. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY (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 th e
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 ex tent
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 sp ecial
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 deliver ing
goods and/or services. It also includes all revenue and expenses not related to capital and noncapital financing or investin g
activities.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
34
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.F. REVENUES, EXPENDITURES, AND EXPENSES (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.
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, 2020
35
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
2.A. CASH, CASH EQUIVALENTS, AND INVESTMENTS (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, 2020, 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, 2020
36
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
2.B. CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2020 is as follows:
Balance at Balance at
01/01/20 Additions Disposals Transfers 12/31/20
Governmental Activities:
Capital Assets not Being
Depreciated
Land 487,735$ -$ -$ -$ 487,735$
Construction In Progress 55,798 497,473 - (515,309) 37,962
Total Capital Assets not Being
Depreciated 543,533 497,473 - (515,309) 525,697
Capital Assets Being
Depreciated
Buildings 2,339,643 54,710 - 2,394,353
Equipment 1,120,827 230,735 (4,622) - 1,346,940
Vehicles 1,548,033 18,200 (32,980) - 1,533,253
Infrastructure 15,523,525 - - 515,309 16,038,834
Other Improvements 227,163 - (5,133) - 222,030
Total Capital Assets Being
Depreciated 20,759,191 303,645 (42,735) 515,309 21,535,410
Less: Accumulated Depreciation
Buildings (1,110,365) (51,767) - - (1,162,132)
Equipment (671,533) (90,282) 4,622 - (757,193)
Vehicles (748,839) (72,093) 32,873 - (788,059)
Infrastructure (4,637,996) (397,300) - - (5,035,296)
Other Improvements (124,464) (9,563) 5,133 - (128,894)
Total Accumulated
Depreciation (7,293,197) (621,005) 42,628 - (7,871,574)
Total Capital Assets Being
Depreciated, Net 13,465,994 (317,360) (107) 515,309 13,663,836
Capital Assets, Net 14,009,527$ 180,113$ (107)$ -$ 14,189,533$
Depreciation is charged to governmental activities as follows:
General Government 17,405$
Public Safety 67,794
Public Works 518,174
Parks and Recreation 17,632
Total Depreciation Expense 621,005$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
37
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
2.B. CAPITAL ASSETS (Continued)
Balance at Balance at
01/01/20 Additions Disposals Transfers 12/31/20
Business-Type Activities:
Capital Assets not Being
Depreciated
Construction In Progress 24,874$ 110,665$ -$ (135,539)$ -$
Capital Assets Being Depreciated
Sewer Plant 1,500,000 - - - 1,500,000
Equipment 134,195 - - 135,539 269,734
Uptown Sewer 243,827 - - - 243,827
Total Capital Assets Being
Depreciated 1,878,022 - - 135,539 2,013,561
Less: Accumulated Depreciation
Sewer Plant (900,000) (30,000) - - (930,000)
Equipment (39,036) (12,643) - - (51,679)
Uptown Sewer (68,074) (4,877) - - (72,951)
Total Accumulated
Depreciation (1,007,110) (47,520) - - (1,054,630)
Total Capital Assets Being
Depreciated, Net 870,912 (47,520) - 135,539 958,931
Business-Type Activities 895,786$ 63,145$ -$ -$ 958,931$
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, 2020
38
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
2.C. NONCURRENT LIABILITIES (Continued)
Debt Detail
As of December 31, 2020, 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 - $65,000 0.80-3.10%7/23 570,000$ 180,000$
2017 Equipment Certificate 8/17 $32,000 2.35-2.75%8/22 160,000 64,000
Total Equipment Certificates Payable 244,000
Equipment Certificates Due Within One Year 92,000
Equipment Certificates Due After One Year 152,000$
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 - $315,000 3.00-3.13%12/33 3,835,000$ 3,465,000$
Bonds Due Within One Year 220,000
Bonds Due After One Year 3,245,000$
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,
2020:
Amounts Due
Balance Balance Within
Type of Debt 1/1/20 Additions Deductions 12/31/20 One Year
Governmental Activities:
Bonds 3,680,000$ -$ (215,000)$ 3,465,000$ 220,000$
Unamortized Bond Premium 52,189 - (3,728) 48,461 -
Equipment Certificates 379,000 - (135,000) 244,000 92,000
Compensated Absences 28,060 39,121 (28,953) 38,228 38,228
Total 4,139,249$ 39,121$ (382,681)$ 3,795,689$ 350,228$
Interest and other fiscal charges total $117,055 in the Statement of Activities (included in Debt Service line). Interest and other
fiscal charges total $122,540 for the Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds
(included in the line Interest and Other Charges).
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
39
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
2.C. NONCURRENT LIABILITIES (Continued)
Governmental activity debt is typically funded through the Debt Service Fund. Compensated absences is funded through the
funds to which the respective employees’ wages are allocated.
Annual Debt Service Requirements
At December 31, 2020, the estimated annual debt service requirements to maturity, including principal and interest, are as follows:
Years Ending
December 31, Principal Interest Total
2021 312,000$ 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 250,000 76,825 326,825
2026-2030 1,365,000 267,275 1,632,275
2031-2033 920,000 57,594 977,594
Totals 3,709,000$ 790,772$ 4,499,772$
Governmental Activities
2.D. INTERFUND TRANSACTIONS AND BALANCES
Operating transfers consist of the following for the year ended December 31, 2020:
Transfers Capital
Major Funds Out General Improvement Total
General 30,000$ -$ 30,000$ 30,000$
Capital Improvement 17,700 17,700 - 17,700
Total 47,700$ 17,700$ 30,000$ 47,700$
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, 2020
40
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
2.D. INTERFUND TRANSACTIONS AND BALANCES (Continued)
The interfund balances are as follows:
Due To Fund Due From Fund Amount Reason
Capital Improvement Uptown Sewer 18,468$ Sewer improvements
Capital Improvement Park Capital Improvement 11,000 Lilleskogen Park improvements
Capital Improvement General Fund 27,000 Community Center LED lighting improv.
Governmental Funds Advances To/From 56,468
Due To Fund Due From Fund
General Fund COVID Relief 1,415 Eliminate fund negative cash
General Fund Debt Service 17,237 Eliminate sub-fund negative cash
Total Interfund Balances 75,120$
Governmental Fund Elimination (56,652)
Government-wide Internal Balances 18,468$
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 General Fund monies owed to the Capital Improvement Fund will
be repaid via an annual payment of $3,000 per year. The remaining short -term balances above will be repaid as cash flows
become available in the COVID Relief and Debt Service Funds.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
41
NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
2.E. FUND EQUITY
At December 31, 2020, governmental fund equity consists of the following:
General Fund
Nonspendable - Prepaids and Inventory 14,800$
Unassigned 1,520,422
Total General Fund Balance 1,535,222$
Capital Improvements Fund
Nonspendable - Advance to Other Fund 56,468$
Committed for Capital Improvements 804,191
Total Capital Improvement Fund 860,659$
Local Road Improvement Fund
Committed for Local Road Improvements 690,730$
Assigned for Local Road Improvements 909,721
Total Local Road Improvement Fund 1,600,451$
Debt Service Fund
Nonspendable - Prepaids 2,640$
Restricted for Debt Service 37,836
Unassigned (13,080)
Total Debt Service Fund Balance 27,396$
Nonmajor Governmental Funds
Restricted for Trail Development 175$
Committed for Economic Development 27,008
Committed for Park Improvements 139,827
Assigned for Cable TV 22,090
Assigned for Equipment Replacement 183,811
Unassigned (2,690)
Total Nonmajor Governmental Funds Balance 370,221$
Additionally, funds with deficit fund balances at December 31, 2020 are as follows:
Fund
Deficit
Nonmajor Special Revenue
COVID Relief 2,690$
Fund
This fund deficit is expected to be covered from future revenues, tax levies or transfers.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
42
NOTE 3 DEFINED BENEFIT PENSION PLANS - STATEWIDE
Plan Description
The City participates in the following cost-sharing multiple-employer defined benefit pension plans administered by the Public
Employees Retirement Association of Minnesota (PERA). PERA’s defined benefit pension plans are established and administered
in accordance with Minnesota Statutes Chapters 353 and 356. PERA’s defined benefit pension plans are tax qualified plans under
Section 401 (a) of the Internal Revenue Code.
General Employees Retirement Plan
The General Employees Retirement Plan covers certain full time and part-time employees of the City. General Employees Plan
members belong to the Coordinated Plan. Coordinated Plan members are covered by Social Security.
Public Employees Police and Fire Plan
The Police and Fire Plan, originally established for police officers and firefighters not covered by a local relief association, now
covers all police officers and firefighters hired since 1980. Effective July 1, 1999, the Police and Fire Plan also covers po lice
officers and firefighters belonging to local relief associations that elected to merge with and transfer assets and administration to
PERA.
Benefits Provided
PERA provides retirement, disability, and death benefits. Benefit provisions are established by State Statute and can only be
modified by the State Legislature. Vested terminated employees who are entitled to benefits, but are not receiving them yet, are
bound by the provisions in effect at the time they last terminated their public service.
General Employees Plan Benefits
General Employees Plan benefits are based on a member’s highest average salary for any five successive years of allowable
service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated
Plan members. Members hired prior to July 1, 1989, receive the higher of Method 1 or Method 2 formulas. Only Method 2 is
used for members hired after June 30, 1989. Under Method 1, the accrua l rate for Coordinated members is 1.2 percent of average
salary for each of the first 10 years of service and 1.7 percent for each additional year. Under Method 2, the accrual rate f or
Coordinated members is 1.7 percent for all years of service. For members hired prior to July 1, 1989, a full annuity is available
when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal
retirement age is the age for unreduced Social Security benefits capped a t 66.
Benefit increases are provided to benefit recipients each January. The postretirement increase is equal to 50 percent of the cost-of-
living adjustment (COLA) announced by the SSA, with a minimum increase of at least 1 percent and a maximum of 1.5 pe rcent.
Recipients that have been receiving the annuity or benefit for at least a full year as of the June 30 before the effective da te 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.
Police and Fire Plan Benefits
Benefits for Police and Fire Plan members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis from 50
percent after five years up to 100 percent after ten years of credited service. Benefits for Police and Fire Plan members fir st hired
after June 30, 2014, vest on a prorated basis from 50 percent after ten years up to 100 percent after twenty years of credited
service. The annuity accrual rate is 3 percent of average salary for each year of service. For Police and Fire Plan members w ho
were first hired prior to July 1, 1989, a full annuity is available when age plus years of service equal at least 90.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
43
NOTE 3 DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
Benefit increases are provided to benefit recipients each January. The postretirement increase will be fixed at 1 percent. Recipients
that have been receiving the annuity or benefit for at least 36 months as of the June 30 before the effective date of the increase will
receive the full increase. Recipients receiving the annuity or benefit for at least 25 mo nths but less than 36 months as of the June
30 before the effective date of the increase will receive a reduced prorated increase.
Contributions
Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates ca n 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 2020 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, 2020 were $32,939. The City’s contributions are equal to the required contributions as set by
State Statute.
Police and Fire Fund Contributions
Police and Fire member’s contribution rates increased from 11.30 percent of their a nnual salary to 11.80 percent and employer
rates increased from 16.95 percent to 17.70 percent on January 1, 2020. The City’s contributions to the Police and Fire Fund for
the year ended December 31, 2020 were $7,652. 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, 2020, the City reported a liability of $335,746 for its proportionate share of the General Employees Fund’s net
pension liability. The City’s net pension liability reflected a reduction due to the State of Minnesota’s contribution of $16 million.
The State of Minnesota is considered a non-employer contributing entity and the State’s contribution meets the definition of a
special funding situation. The State of Minnesota’s proportionate share of the net pension liability associated with the City totaled
$10,402. The net pension liability was measured as of June 30, 2020, and the total pension liability used to calculate the net
pension liability was determined by an actuarial valuation as of that date. The City’s proportion ate share of the net pension
liability was based on the City’s contributions received by PERA during the measurement period for employer payroll paid date s
from July 1, 2019, through June 30, 2020, relative to the total employer contributions received from all of PERA’s participating
employers. The City’s proportionate share was 0.0056 percent at the end of the measurement period and 0.0056 percent for the
beginning of the period.
City’s proportionate share of the net pension liability: $335,746
State of Minnesota’s proportionate share of the net pension
liability associated with the City 10,402
Total $346,148
For the year ended December 31, 2020, the City recognized pension expense of $29,815 for its proportionate share of the General
Employees Plan’s pension expense. In addition, the City recognized an additional $905 as pension expense (and grant revenue)
for its proportionate share of the State of Minnesota’s contribution of $16 million to the General Employees Fund.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
44
NOTE 3 DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
At December 31, 2020, the City reported its proportionate share of the General Employees Plan’s deferred outflows of resources
and deferred inflows of resources related to pensions from the following sources:
Deferred Outflows of Deferred Inflows of
Resources Resources
Differences between expected
and actual economic experience 3,062$ 1,270$
Changes in actuarial assumptions - 12,514
Difference between projected
and actual investment earnings 6,382 -
Changes in proportionate share 6,384 2,774
Contributions paid to PERA subsequent
to the measurement date 16,525 -
Total Deferred Outflows/Inflows 32,353$ 16,558$
The $16,525 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the
measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 20 21. Other
amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense
as follows:
Year ended
December 31: Pension Expense
2021 (13,407)$
2022 (1,817)$
2023 6,383$
2024 8,111$
Police and Fire Fund Pension Costs
At December 31, 2020, the City reported a liability of $18,316 for its proportionate share of the Police and Fire Fund’s net pension
liability. The net pension liability was measured as of June 30, 2020, and the total pension liability used to calculate the net
pension liability was determined by an actuarial valuation as of that da te. 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 date s
from July 1, 2019 through June 30, 2020, relative to the total employer con tributions received from all of PERA’s participating
employers. The City’s proportionate share was 0.0058 percent at the end of the measurement period and 0 percent for the
beginning of the period.
The State of Minnesota contributed $13.5 million to the Police and Fire Fund in the plan fiscal year ended June 30, 2020. The
contribution consisted of $4.5 million in direct state aid that does meet the definition of a special funding situation and $9.0
million in supplemental state aid that does not meet the definition of a special funding situation. The $4.5 million direct state was
paid on October 1, 2019. Thereafter, by October 1 of each year, the state will pay $9 million to the Police and Fire Fund unt il full
funding is reached or July 1, 2048, whichever is earlier. The $9 million in supplemental state aid will continue until the fund is 90
percent funded, or until the State Patrol Plan (administered by the Minnesota State Retirement System) is 90 percent funded,
whichever occurs later.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
45
NOTE 3 DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
The State of Minnesota is included as a non -employer contributing entity in the Police and Fire Retirement Plan Schedule of
Employer Allocations and Schedule of Pension Amounts by Employer, Current Reporting Period Only (pension allocation
schedules) for the $4.5 million in direct state aid. Police and Fire Plan employers need to recognize their proportionate share of
the State of Minnesota’s pension expense (and grant revenue) under GASB 68 special funding situation accounting and financial
reporting requirements. For the year ended December 31, 2020, the City recognized pension expense of $23,508 for its
proportionate share of the Police and Fire Plan’s pension expense. The City recognized $551 as grant revenue for its proportionate
share of the State of Minnesota’s pension expense for the contribution of $4.5 million to the Police and Fire Fund.
The State of Minnesota is not included as a non-employer contributing entity in the Police and Fire Pension Plan pension
allocation schedules for the $9 million in supplemental state aid. The City recognized $522 for the year ended December 31, 2020
as revenue and an offsetting reduction of net pension liability for its proportionate share of the State of Minnesota’s on -behalf
contributions to the Police and Fire Fund.
City’s proportionate share of the net pension liability: $76,450
State of Minnesota’s proportionate share of the net pension
liability associated with the City 1,790
Total $78,240
At December 31, 2020, the City reported its proportionate share of the Police and Fire Plan’s deferred outflows of resources and
deferred inflows of resources related to pensions from the following sources:
Deferred Outflows of Deferred Inflows of
Resources Resources
Differences between expected
and actual economic experience 1,467$ -$
Changes in actuarial assumptions - 1,198
Difference between projected
and actual investment earnings 13,242 -
Changes in proportionate share 51,456 -
Contributions paid to PERA subsequent
to the measurement date 4,131 -
Total Deferred Outflows/Inflows 70,296$ 1,198$
The $4,131 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the
measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2021. Other
amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense
as follows:
Year ended
December 31: Pension Expense
2021 13,655$
2022 13,655$
2023 13,655$
2024 13,655$
2025 10,347$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
46
NOTE 3 DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
Total Pension Expense
The total pension expense for all plans recognized by the City for the year ended December 31, 2020, including amortization
of prior year deferred balances, was negative $7,542 .
Actuarial Assumptions
The total pension liability in the June 30, 2020, actuarial valuation was determined using an individual entry-age normal actuarial
cost method and the following actuarial assumptions:
Assumptions General Employees Fund Police and Fire Fund
Inflation 2.25 percent per year 2.50 percent per year
Active Member Payroll Growth 3.00 percent per year 3.25 percent per year
Investment Rate of Return 7.50 percent 7.50 percent
Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors, and disabilitants
were based on Pub-2010 General Employee Mortality table for the General Employees Plan and RP 2014 tables for the Police and
Fire Plan 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. For the Police and Fire Plan,
cost of living benefit increases for retirees are 1.00 percent per year as set by State Statute.
Actuarial assumptions used in the June 30, 2020 valuation were based on the results of actuarial experience studies. The most
recent four-year experience study for the General Employees Plan was completed in 2019. The assumption changes were adopted
by the Board and became effective with the July 1, 2020 actuarial valuation. The four-year experience study used for the Police
and Fire Plan was completed in 2016. Inflation and investment return assumptions for the Police and Fire Plan are based on the
General Employees Retirement Plan experience study completed in 2019. The most recent four -year experience studies for the
Police and Fire Plan were completed in 2020. The recommended assumptions for those plans were adopted by the Board and will
be effective with the July 1, 2021 actuarial valuations if approved by the Legislature.
The following changes in actuarial assumptions and plan provisions occurred in 2020:
General Employees Fund
Changes in Actuarial Assumptions:
• The price inflation assumption was decreased from 2.50 percent to 2.25 percent.
• The payroll growth assumption was decreased from 3.25 percent to 3.00 percent.
• Assumed salary increase rates were changed as recommended in the June 30, 2019 experience study. The net effect is
assumed rates that average 0.25 percent less than previous rates.
• Assumed rates of retirement were changed as recommended in the June 30, 2019 experience study. The changes result in
more unreduced (normal) retirements and slightly fewer Rule of 90 and early retirements.
• Assumed rates of termination were changed as recommended in the June 30, 2019 experience study. The new rates are
based on service and are generally lower than the previous rates for years 2 -5 and slightly higher thereafter.
• Assumed rates of disability were changed as recommended in the June 30, 2019 experience study. The change results in
fewer predicted disability retirements for males and females.
• The base mortality table for healthy annuitants and employees was changed from the RP -2014 table to the Pub-2010
General Mortality table, with adjustments. The base mortality table for disabled annuitants was changed from the RP-
2014 disabled annuitant mortality table to the PUB-2010 General/Teacher disabled annuitant mortality table, with
adjustments.
• The mortality improvement scale was changed from Scale MP-2018 to Scale MP-2019.
• The assumed spouse age difference was changed from two years older for females to one year older.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
47
NOTE 3 DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
• The assumed number of married male new retirees electing the 100 percent Joint & Survivor option changed from 35
percent to 45 percent. The assumed number of married female new retirees electing the 100 percent Joint & Survivor
option changed from 15 percent to 30 percent. The correspo nding number of married new retirees electing the Life
annuity option was adjusted accordingly.
Changes in Plan Provisions:
• Augmentation for current privatized members was reduced to 2.0 percent for the period July 1, 2020 through December
31, 2023 and 0.0 percent after. Augmentation was eliminated for privatizations occurring after June 30, 2020.
Police and Fire Fund
Changes in Actuarial Assumptions:
• The mortality projection scale was changed from MP-2018 to MP-2019.
Changes in Plan Provisions:
• There have been no changes since the prior valuation.
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
Asset Class Target Allocation of Return
Domestic Stocks 35.5% 5.10%
International Stocks 17.5% 5.30%
Bonds (Fixed Income) 20.0% 0.75%
Alternative Assets (Private Markets) 25.0% 5.90%
Cash 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 G eneral Employees Fund and the Police and Fire Fund
were projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term
expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total
pension liability.
Pension Liability Sensitivity
The following presents the City’s proportionate share of the net pension liability for all plans it participates in, calculated using the
discount rate disclosed in the preceding paragraph, as well as what the City’s proportionate share of the net pension liability would
be if it were calculated using a discount rate one percentage point lower or one percentage point higher than the current dis count
rate:
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
48
NOTE 3 DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
6.50% $ 538,084 6.50%152,376$
7.50%335,746$ 7.50%76,450$
8.50%168,833$ 8.50%13,635$ 1% Increase in Discount Rate
Current Discount Rate
1% Decrease in Discount Rate
Sensitivity Analysis
General Employees Fund Police and Fire Fund
Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in a separately-issued PERA financial report that
includes financial statements and required supplementary information . That report may be obtained on the Internet at
www.mnpera.org.
NOTE 4 DEFINED CONTRIBUTION PENSION PLAN - STATEWIDE
The council members of the City of Scandia are covered by the Defined Contribution Plan, a multiple -employer deferred
compensation plan administered by PERA. The Defined Contribution Plan is a tax qualified plan under Section 401(a) of the
Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal.
Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota
Statutes, Chapter 353D.03, specifies plan provisions, including the employee and employer contribution rates for those qualified
personnel who elect to participate. An eligible elected official who decides to participate contributes five percent of salary which
is matched by the elected official's employer. For ambulance service personnel, employer contributions are determined by the
employer, and for salaried employees contributions must be a fixed percentage of salary. Employer contributions for volunteer
personnel may be a unit value for each call or period of alert duty. Employees who are paid for their services may elect to m ake
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 contribu tions 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 2020 were:
Contribution Amounts Percentage of Covered Payroll Required
Employee Employer Employee Employer Rate
$711 $711 5% 5% 5%
NOTE 5 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 volu nteer
firefighters of municipal fire departments or independent nonprofit firefighting corporations that have elected to join the p lan. As
of December 31, 2020, the plan covered 22 active firefighters and 5 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, 2020
49
NOTE 5 STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
Benefits Provided
The Volunteer Firefighter Plan provides retirement, death, and supplemental benefits to covered firefighters and survivors.
Benefits are paid based on the number of years of service multiplied by a benefit level approved by the City. 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 $34,426 in fire state aid to
the plan for the year ended December 31, 2020. 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, 2020 were $0.
Pension Costs
At December 31, 2020, the City of Scandia reported a net pension asset of $92,771 for the Volunteer Firefighter Fund. The net
pension asset was measured as of December 31, 2019. The total pension liability used to calculate the net pension asset in
accordance with GASB 68 was determined by PERA applying an actuarial formula to specific census data certified by the fire
department. The following table presents the changes in net pension asset during the year.
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability (Asset)
Beginning Balance 12/31/18 490,428$ 604,335$ (113,907)$
Service Cost 31,774 - 31,774
Interest on Pension Liability 31,332 - 31,332
Actuarial Experience (Gains)/Losses (8,940) - (8,940)
Projected Investment Earnings - 112,533 (112,533)
Changes in Benefit Level 114,980 - 114,980
Contributions (State)- 36,266 (36,266)
PERA Administrative Fee - (750) 750
SBI Investment Fee - (39) 39
Net Changes 169,146 148,010 21,136
Balance End of Year 12/31/19 659,574$ 752,345$ (92,771)$
For the year ended December 31, 2020, the City recognized pension expense of $80,320.
At December 31, 2020, the City of Scandia reported deferred inflows of resources and deferred outflows of resources if
contributions were made after the measurement date and for State contributions received by PERA after the measurement date ,
which can be found on the website for Minnesota Department of Revenue’s Fire State Aid, related to pensions from the following
sources:
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
50
NOTE 5 STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
Deferred Outflows of Deferred Inflows of
Resources Resources
Differences between expected
and actual economic experience -$ 41,803$
Difference between projected
and actual investment earnings - 37,958
Total Deferred Outflows/Inflows -$ 79,761$
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
2021 (28,841)$
2022 (26,390)$
2023 (7,487)$
2024 (17,043)$
Actuarial Assumptions
The total pension liability at December 31, 2020, 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 2019.
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 th at
assumption and considering the funding ratio of t he 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.
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 78,056$ 92,771$ 106,852$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
51
NOTE 5 STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
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 inve stment management and
consulting organizations. The asset class estimates and the target allocations were then combined to produce a geometric, lo ng-
term expected real rate of return for the portfolio. Inflation expectations were applied to derive the nominal rate of return for the
portfolio.
Description of significant investment policy changes during the year
The SBI made no significant changes to their investment policy during Fiscal Year 2019 for Volunteer Firefighter Fund.
Pension Plan Fiduciary Net Position
Detailed information about the Volunteer Firefighter Fund’s fiduciary net position as of December 31, 2019, 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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2020
52
NOTE 6 OTHER NOTES
6.A. RISK MANAGEMENT
Claims and Judgements
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omi ssions;
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 financi al
statements. There were no significant reductions in insurance from the previous year settlements in excess of insurance for any of
the past two years.
Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated.
Liabilities, if any, include an amount for claims that have been incurred but not reported (IBNRs). The City’s management is not
aware of any incurred but unreported claims.
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 t ypes 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.
6.B. COMMITMENTS
Law Enforcement Services
The City receives law enforcement services under an agreement with Washington County. Such agreement automatically renews
on an annual basis and calls for the City to compensate the County based on the actual costs incurred while providing service s
under the agreement. Based on the 2021 contract budget, expenditures anticipated under this agreement for 2021 are estimated at
$147,118.
6.C. SUBSEQUENT EVENTS
Construction Projects
Subsequent to year-end and prior to issuance of these financial statements, the City approved a contract for the 2021 Street
Improvement Project at an approximate cost of $602,418.
53
REQUIRED SUPPLEMENTARY INFORMATION
CITY OF SCANDIA, MINNESOTA
BUDGETARY COMPARISON SCHEDULE – GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2020
54
Budget Actual Variance with
Amounts- Amounts Budget
Original and Budgetary Over
Final Basis (Under)
REVENUES
Taxes
Property Taxes 1,495,500$ 1,533,411$ 37,911$
Franchise Taxes 11,500 5,104 (6,396)
Gravel Tax 10,000 20,468 10,468
Total Taxes 1,517,000 1,558,983 41,983
Licenses and Permits 133,900 151,164 17,264
Intergovernmental Revenue
State Revenue
Market Value Credit 10,000 13,008 3,008
Police and Fire Aid 35,300 37,484 2,184
Other State Grants and Aids 8,000 11,293 3,293
County Revenue
Other County Grants and Aids 7,900 8,000 100
Local Revenue
Other Local Grants 4,500 3,100 (1,400)
Total Intergovernmental Revenue 65,700 72,885 7,185
Charges for Services
General Government 23,900 (1,323) (25,223)
Police and Fire Contracts 36,500 36,484 (16)
Streets and Highways 3,300 2,546 (754)
Parks and Recreation 9,400 5,569 (3,831)
Total Charges for Services 73,100 43,276 (29,824)
Fines and Forfeitures 9,000 7,561 (1,439)
Miscellaneous Revenue
Investment Earnings 5,000 11,463 6,463
Refunds and Reimbursements - 720 720
Contributions and Donations 3,000 13,764 10,764
Other Miscellaneous 500 4,395 3,895
Total Miscellaneous Revenue 8,500 30,342 21,842
TOTAL REVENUES 1,807,200 1,864,211 57,011
EXPENDITURES
General Government
Mayor and Council 20,400 19,114 (1,286)
Administration and Finance 220,300 205,155 (15,145)
Other General Government 315,100 310,757 (4,343)
Capital Outlay 7,600 9,648 2,048
Total General Government 563,400 544,674 (18,726)
CITY OF SCANDIA, MINNESOTA
BUDGETARY COMPARISON SCHEDULE – GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2020
55
Budget Actual Variance with
Amounts- Amounts Budget
Original and Budgetary Over
Final Basis (Under)
Public Safety
Police
Current 139,100 120,532 (18,568)
Fire
Current 294,714 202,784 (91,930)
Capital Outlay 1,400 9,967 8,567
Total Public Safety 435,214 333,283 (101,931)
Public Works
Street Maintenance and Storm Sewers 621,100 534,731 (86,369)
Snow and Ice Removal 41,000 17,500 (23,500)
Street Engineering 16,000 9,342 (6,658)
Street Lighting 12,600 6,927 (5,673)
Capital Outlay - Other - 190 190
Total Public Works 690,700 568,690 (122,010)
Culture and Recreation
Parks and Recreation
Current 124,100 133,534 9,434
Capital Outlay - 3,532 3,532
Total Culture and Recreation 124,100 137,066 12,966
TOTAL EXPENDITURES 1,813,414 1,583,713 (229,701)
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES (6,214) 280,498 286,712
OTHER FINANCING SOURCES (USES)
Transfers
From Other Funds - 17,700 17,700
To Other Funds (3,000) (30,000) (27,000)
TOTAL OTHER FINANCING SOURCES (USES)(3,000) (12,300) (9,300)
NET CHANGE IN FUND BALANCES (9,214)$ 268,198 277,412$
FUND BALANCES - BEGINNING 1,267,024
FUND BALANCES - ENDING 1,535,222$
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF CITY’S PROPORTIONATE
SHARE OF NET PENSION LIABILITY
LAST TEN YEARS (Presented Prospectively)
56
City's
Proportionate
Share of the Net City's
Pension Liability Proportionate Plan
City's State's and the State's Share of the Net Fiduciary Net
Proportionate Proportionate Proportionate Pension Liability Position as a
For the City's Share of the Share of the Net Share of the Net (Asset) as a Percentage
Measurement Proportion of the Net Pension Pension Liability Pension Liability City's Percentage of of the Total
Year Ended Net Pension Liability Associated with Associated with Covered its Covered Pension
June 30 Liability (Asset)(Asset) (a)the City (b)the City (a+b)Payroll (c)Payroll ((a+b)/c)Liability
General Employees Retirement Pension Plan
2020 0.0056%335,746$ 10,402$ 346,148$ 403,027$ 85.9%79.1%
2019 0.0056%309,611$ 9,666$ 319,277$ 370,760$ 86.1%80.2%
2018 0.0057%316,213$ 10,395$ 326,608$ 380,371$ 85.9%79.5%
2017 0.0053%338,349$ 4,251$ 342,600$ 338,175$ 101.3%75.9%
2016 0.0057%462,812$ 6,071$ 468,883$ 357,680$ 131.1%68.9%
2015 0.0059%305,769$ -$ 305,769$ 342,106$ 89.4%78.2%
Public Employees Police and Fire Pension Plan
2020 0.0058%76,450$ 1,790$ 78,240$ 20,323$ 385.0%87.2%
Note: The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 and is intended to show a ten year trend. Additional years will be
reported as they become available. 2020 was the first year during which City employees participated in the Public Employees Police and Fire Pension Plan.
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF CITY PENSION CONTRIBUTIONS
LAST TEN YEARS (Presented Prospectively)
57
Contributions in
Relation to the Contributions as
For the Fiscal Statutorily Statutorily Contribution City's a Percentage of
Year Ended Required Required Deficiency Covered Covered
December 31 Contribution Contribution (Excess)Payroll Payroll
General Employees Retirement Pension Plan
2020 32,939$ 32,939$ -$ 439,187$ 7.50%
2019 29,072$ 29,072$ -$ 387,627$ 7.50%
2018 27,150$ 27,150$ -$ 362,002$ 7.50%
2017 27,172$ 27,172$ -$ 362,292$ 7.50%
2016 24,941$ 24,941$ -$ 334,592$ 7.45%
2015 25,468$ 25,468$ -$ 348,155$ 7.32%
Public Employees Police and Fire Pension Plan
2020 7,652$ 7,652$ -$ 43,232$ 17.70%
Statewide Volunteer Firefighter Pension Plan
2020 -$ -$ -$ N/A N/A
2019 -$ -$ -$ N/A N/A
2018 -$ -$ -$ N/A N/A
2017 -$ -$ -$ N/A N/A
2016 -$ -$ -$ N/A N/A
2015 -$ -$ -$ N/A N/A
Note: The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 and is intended to
show a ten year trend. Additional years will be reported as they become available. 2020 was the first year during which City
employees participated in the Public Employees Police and Fire Pension Plan.
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF CHANGES IN NET PENSION LIABILITY (ASSET)
STATEWIDE VOLUNTEER FIREFIGHTER FUND
LAST TEN YEARS (Presented Prospectively)
58
2019 2018 2017 2016 2015 2014
Changes in Total Pension Liability (TPL)
Balance at January 1st 490,428$ 545,327$ 617,019$ 654,741$ 636,294$ 629,967$
Service Cost 31,774 25,342 28,912 24,777 23,343 22,874
Interest on the TPL 31,332 31,414 34,163 38,089 38,665 38,350
Actuarial Experience (Gains)/Losses (8,940) (17,415) (54,911) (11,188) (13,108) (27,553)
Changes in Benefit Level 114,980 - 73,244 - - -
Benefit Payments - (94,240) (153,100) (89,400) (30,453) (27,344)
Balance at December 31st 659,574$ 490,428$ 545,327$ 617,019$ 654,741$ 636,294$
Plan Fiduciary Net Position (PFNP)
Balance at January 1st 604,335$ 687,094$ 723,513$ 735,277$ 730,400$ 658,422$
Fire State Aid 27,954 26,919 26,278 26,738 27,129 24,368
Fire Supplemental Aid 6,472 6,405 6,359 6,486 6,638 5,896
Supplemental Benefit Reimbursement 1,840 3,000 2,000 - 1,000 2,955
Municipal Contributions - - - - - 18,259
Adjustment to Initial Asset Transfer - - - - - 5,368
Net Investment Income (Loss)112,533 (23,964) 83,014 45,186 1,367 43,226
Total Additions 148,799 12,360 117,651 78,410 36,134 100,072
Benefit Payments - (94,240) (153,100) (89,400) (30,453) (27,344)
Administrative Expenses (789) (879) (970) (774) (804) (750)
Total Reductions (789) (95,119) (154,070) (90,174) (31,257) (28,094)
Balance at December 31st 752,345$ 604,335$ 687,094$ 723,513$ 735,277$ 730,400$
Net Pension Liability (Asset) - December 31st (92,771)$ (113,907)$ (141,767)$ (106,494)$ (80,536)$ (94,106)$
Plan Fiduciary Net Position as a Percentage of
Total Pension Liability (Asset)114%123%126%117%112%115%
Measurement Year Ended December 31,
Note: The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 (December 31, 2014 measurement date) and is intended to show a
ten year trend. Additional years will be reported as they become available.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31, 2020
59
NOTE 1 PUBLIC EMPLOYEES RETIREMENT PLAN – GENERAL EMPLOYEES FUND
2020 Changes
Changes in Actuarial Assumptions
• The price inflation assumption was decreased from 2.50 percent to 2.25 percent.
• The payroll growth assumption was decreased from 3.25 percent to 3.00 percent.
• Assumed salary increase rates were changed as recommended in the June 30, 2019 experience study. The net effect is
assumed rates that average 0.25 percent less than previous rates.
• Assumed rates of retirement were changed as recommended in the June 30, 2019 experience study. The changes result in
more unreduced (normal) retirements and slightly fewer Rule of 90 and early retirements.
• Assumed rates of termination were changed as recommended in the June 30, 2019 experience study. The new rates are
based on service and are generally lower than the previous rates for years 2 -5 and slightly higher thereafter.
• Assumed rates of disability were changed as recommended in the June 30, 2019 experience study. The change results in
fewer predicted disability retirements for males and females.
• The base mortality table for healthy annuitants and employees was changed from the RP -2014 table to the Pub-2010
General Mortality table, with adjustments. The base mortality table for disabled annuitants was changed from the RP-
2014 disabled annuitant mortality table to the PUB-2010 General/Teacher disabled annuitant mortality table, with
adjustments.
• The mortality improvement scale was changed from Scale MP-2018 to Scale MP-2019.
• The assumed spouse age difference was changed from two years older for females to one year older.
• The assumed number of married male new retirees electing the 100 percent Joint & Survivor option changed from 35
percent to 45 percent. The assumed number of married female new retirees electing the 100 percent Joint & Survivor
option changed from 15 percent to 30 percent. The corresponding number of married new retirees electing the Life
annuity option was adjusted accordingly.
Changes in Plan Provisions
• Augmentation for current privatized members was reduced to 2.0 percent for the period July 1, 2020 through December
31, 2023 and 0.0 percent after. Augmentation was eliminated for privatizations occurring after June 30, 2020.
2019 Changes
Changes in Actuarial Assumptions
• The mortality projection scale was changed from MP-2017 to MP-2018.
Changes in Plan Provisions
• The employer supplemental contribution was changed prospectively, decreasing from $31.0 million to $21.0 million per
year. The State’s special funding contribution was changed prospectively, requiring $16.0 million due per year through
2031.
2018 Changes
Changes in Actuarial Assumptions
• The mortality projection scale was changed from MP-2015 to MP-2017.
• The assumed benefit increase was changed from 1.00 percent per year through 2044 and 2.50 percent per year thereafter
to 1.25 percent per year.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31, 2020
60
NOTE 1 PUBLIC EMPLOYEES RETIREMENT PLAN – GENERAL EMPLOYEES FUND (Continued)
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 mem ber 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 contribution for the Minneapolis Employees Retirement Fund equals $16,000,000 in 2017 and 2018, and
$6,000,000 thereafter.
• The Employer Supplemental Contribution for the Minneapolis Employees Retirement Fund changed fro m $21,000,000
to $31,000,000 in calendar years 2019 to 2031. The state’s contribution changed from $16,000,000 to $6,000,000 in
calendar years 2019 to 2031.
2016 Changes
Changes in Actuarial Assumptions
• The assumed 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 change d
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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31, 2020
61
NOTE 1 PUBLIC EMPLOYEES RETIREMENT PLAN – GENERAL EMPLOYEES FUND (Continued)
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 $6 million, which meets the
special funding situation definition, was due September 2015.
NOTE 2 PUBLIC EMPLOYEES RETIREMENT PLAN – POLICE AND FIRE FUND
2020 Changes
Changes in Actuarial Assumptions
• The mortality projection scale was changed from MP-2018 to MP-2019.
Changes in Plan Provisions
• There have been no changes since the prior valuation.
NOTE 3 STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN
2019 Changes
Changes in Actuarial Assumptions
• There were no significant changes made to actuarial assumptions during 2019.
2018 Changes
Changes in Actuarial Assumptions
• There were no significant changes made to actuarial assumptions during 2018.
2017 Changes
Changes in Actuarial Assumptions
• There were no significant changes made to actuarial assumptions during 2017.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31, 2020
62
NOTE 3 STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
2016 Changes
Changes in Actuarial Assumptions
• There were no significant changes made to actuarial assumptions during 2016.
2015 Changes
Changes in Actuarial Assumptions
• There were no significant changes made to actuarial assumptions during 2015.
63
SUPPLEMENTARY INFORMATION
CITY OF SCANDIA, MINNESOTA
SUPPLEMENTAL COMBINING BALANCE SHEET
MAJOR GOVERNMENTAL FUND – DEBT SERVICE FUND
DECEMBER 31, 2020
64
2013 Equipment
Certificates
2015 Equipment
Certificates
2017 Equipment
Certificates
2018A G.O.
Street Bonds Total Debt Service
ASSETS
Cash and Cash Equivalents 21,089$ 15,452$ -$ -$ 36,541$
Property Taxes Receivable 796 499 401 3,756 5,452
Prepaids 2,640 - - - 2,640
TOTAL ASSETS 24,525$ 15,951$ 401$ 3,756$ 44,633$
LIABILITIES
Due to Other Funds -$ -$ 1,604$ 15,633$ 17,237$
FUND BALANCE
Nonspendable 2,640 - - - 2,640
Restricted 21,885 15,951 - - 37,836
Unassigned - - (1,203) (11,877) (13,080)
Total Fund Balance 24,525 15,951 (1,203) (11,877) 27,396
TOTAL LIABILITIES
AND FUND BALANCE 24,525$ 15,951$ 401$ 3,756$ 44,633$
CITY OF SCANDIA, MINNESOTA
SUPPLEMENTAL COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE
MAJOR GOVERNMENTAL FUND – DEBT SERVICE FUND
FOR THE YEAR ENDED DECEMBER 31, 2020
65
2013 Equipment
Certificates
2015 Equipment
Certificates
2017 Equipment
Certificates
2018A G.O.
Street Bonds Total Debt Service
REVENUES
Taxes 68,309$ 42,835$ 34,416$ 322,206$ 467,766$
EXPENDITURES
Debt Service:
Principal 60,000 43,000 32,000 215,000 350,000
Interest and Other Charges 7,335 990 2,545 111,670 122,540
TOTAL EXPENDITURES 67,335 43,990 34,545 326,670 472,540
NET CHANGE IN FUND BALANCE 974 (1,155) (129) (4,464) (4,774)
FUND BALANCE - BEGINNING 23,551 17,106 (1,074) (7,413) 32,170
FUND BALANCE - ENDING 24,525$ 15,951$ (1,203)$ (11,877)$ 27,396$
CITY OF SCANDIA, MINNESOTA
COMBINING BALANCE SHEET
ALL NONMAJOR GOVERNMENTAL FUNDS
DECEMBER 31, 2020
66
Economic
Development
Authority Fund Cable TV Fund COVID Relief
Gateway Trail
Expansion Fund
Park Capital
Improvement Fund
Equipment
Replacement Fund
Total Nonmajor
Funds
ASSETS
Cash and Cash Equivalents 26,953$ 20,116$ -$ 175$ 150,499$ 183,483$ 381,226$
Property Taxes Receivable 55 - - - 328 328 711
Accounts Receivable - 1,974 - - - - 1,974
TOTAL ASSETS 27,008$ 22,090$ -$ 175$ 150,827$ 183,811$ 383,911$
LIABILITIES
Accounts Payable -$ -$ 1,275$ -$ -$ -$ 1,275$
Due to Other Funds - - 1,415 - - - 1,415
Advances from Other Funds - - - - 11,000 - 11,000
Total Liabilities - - 2,690 - 11,000 - 13,690
FUND BALANCES
Restricted - - - 175 - - 175
Committed 27,008 - - - 139,827 - 166,835
Assigned - 22,090 - - - 183,811 205,901
Unassigned - - (2,690) - - - (2,690)
Total Fund Balances 27,008 22,090 (2,690) 175 139,827 183,811 370,221
TOTAL LIABILITIES
AND FUND BALANCES 27,008$ 22,090$ -$ 175$ 150,827$ 183,811$ 383,911$
Special Revenue Capital Project
CITY OF SCANDIA, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE S
ALL NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2020
67
Economic
Development
Authority Fund Cable TV Fund COVID Relief
Gateway Trail
Expansion Fund
Park Capital
Improvement Fund
Equipment
Replacement Fund
Total Nonmajor
Funds
REVENUES
Taxes 4,419$ -$ -$ -$ 28,137$ 28,137$ 60,693$
Franchise Taxes - 20,331 - - - - 20,331
Intergovernmental - - 311,080 - 9,380 - 320,460
Interest Income 265 126 - - 1,614 1,887 3,892
Miscellaneous - - - - 802 13,500 14,302
TOTAL REVENUES 4,684 20,457 311,080 - 39,933 43,524 419,678
EXPENDITURES
Current:
General Government - 3,237 150,864 - - - 154,101
Parks and Recreation - - - - 8,663 - 8,663
Economic Development 881 - - - - - 881
Capital Outlay - - 162,906 - 26,080 93,499 282,485
TOTAL EXPENDITURES 881 3,237 313,770 - 34,743 93,499 446,130
NET CHANGE IN FUND BALANCES 3,803 17,220 (2,690) - 5,190 (49,975) (26,452)
FUND BALANCES - BEGINNING 23,205 4,870 - 175 134,637 233,786 396,673
FUND BALANCES - ENDING 27,008$ 22,090$ (2,690)$ 175$ 139,827$ 183,811$ 370,221$
Special Revenue Capital Project
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF INDEBTEDNESS
FOR THE YEAR ENDED DECEMBER 31, 2020
(UNAUDITED)
68
Initial Outstanding Outstanding Principal
Issue Interest Maturity Authorized Balance Balance Due Within
Dates Rates Dates Issue 01/01/20 Issued Paid 12/31/20 One Year
GOVERNMENTAL INDEBTEDNESS
2013 Certificates of Indebtedness 7/1/2013 0.80-3.10%7/1/2023 570,000$ 240,000$ -$ 60,000$ 180,000$ 60,000$
2015 Certificates of Indebtedness 7/1/2015 1.40-2.30%7/1/2020 215,000 43,000 - 43,000 - -
2017 Certificates of Indebtedness 8/1/2017 2.35-2.75%8/1/2022 160,000 96,000 - 32,000 64,000 32,000
G.O. Street Reconstruction Bonds, Series 2018A 5/15/2018 3.00-3.13%12/15/2033 3,835,000 3,680,000 - 215,000 3,465,000 220,000
TOTAL INDEBTEDNESS 4,780,000$ 4,059,000$ -$ 350,000$ 3,709,000$ 312,000$
69
OTHER REQUIRED REPORTS
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320.251.0286
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320.632.6311
Albany
320.845.2940
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320.963.5414
Monticello
763.295.5070
www.schlennerwenner.cpa
INDEPENDENT AUDITOR’S REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE
AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
Honorable Mayor and City Council
City of Scandia, Minnesota
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standa rds
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, 2020, 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 May 18, 2021.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City of Scandia's internal control over
financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the
purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the
effectiveness of the City’s internal control over financial reporting. 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 designe d to
identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, ma terial
weaknesses or significant deficiencies may exist that have not been identified. However, as described in the accompanying
Schedule of Findings and Responses, we identified certain deficiencies in internal control that we consider to be material
weaknesses and significant deficiencies.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the
normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A
material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility
that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis.
We consider the following deficiencies described in the accompanying Schedule of Findings and Responses to be material
weaknesses: 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 ma terial
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.
71
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City of Scandia's financial statements are free from material
misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements,
noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on
compliance with those provisions was not an objective of our audit, and accordingly, we 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.
Minnesota Legal Compliance
In connection with our audit, nothing came to our attention that caused us to believe that the City of Scandia failed to comply with
the provisions of the contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims a nd
disbursements, miscellaneous provisions, and tax increment financing sections of the Minnesota Legal Compliance Audit Guide
for Cities, promulgated by the State Auditor pursuant to Minn. Stat. § 6.65, insofar as they relate to accounting matters. However,
our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed
additional procedures, other matters may have come to our attention regarding the City’s noncompliance with the above
referenced provisions, insofar as they relate to accounting matters.
City’s Response to Findings
The City of Scandia’s response to the internal control findings identified in our audit have been included 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 over financial reporting and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial
reporting or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering the City’s internal control over financial reporting and compliance. Accordingly, this communication is
not suitable for any other purpose.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
May 18, 2021
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF FINDINGS AND RESPONSES
DECEMBER 31, 2020
72
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, in accordance with accounting principles
generally accepted in the United States of America.
Cause: The City failed to record all year-end adjustments required under the accrual basis of accounting and
various other adjustments were required to corre ct misstatements.
Effect: The misstatements in the trial balance presented for the audit resulted in the need to record audit
adjustments to achieve fair financial statement presentation under accounting principles generally
accepted in the United States of America.
Recommendation: We recommend management perform a thorough review of the trial balance prior to the audit and
ensure all accounts have been properly adjusted at year -end.
Views of Responsible
Officials And Planned
Corrective Actions: Management agrees with the recommendation. See corresponding Corrective Action Plan.
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF FINDINGS AND RESPONSES
DECEMBER 31, 2020
73
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
DECEMBER 31, 2020
74
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
DECEMBER 31, 2020
75
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.