9.b 2015 audit report and financial statementsCITY OF SCANDIA, MINNESOTA
REPORT TO MEMBERS
OF GOVERNANCE
APRIL 5, 2016
CITY OF SCANDIA, MINNESOTA
TABLE OF CONTENTS
Introductory Letter ..................................................................................................................................................... 1
Required Communications ......................................................................................................................................... 2
Exhibit A – Summary of Recorded Audit Adjustments
St. Cloud Little Falls Albany Maple Lake Monticello
630 Roosevelt Rd. Ste. 201 109 E. Broadway 115 6th St. 220 Hwy. 55 North, Ste. 4 114 W. 3rd St.
P.O. Box 1496 P.O. Box 365 P.O. Box 268 P.O. Box 385 P.O. Box 755
St. Cloud, MN 56302 Little Falls, MN 56345 Albany, MN 56307 Maple Lake, MN 55358 Monticello, MN 55362
320.251.0286 320.632.6311 320.845.2940 320.963.5414 763.295.5070
April 5, 2016
Members of Governance
City of Scandia, Minnesota
We are pleased to present this report related to our audit of the basic financial statements of the City of Scandia (the
City) for the year ended December 31, 2015. This report summarizes certain matters required by professional
standards to be communicated to you in your oversight responsibility for the City’s financial reporting process.
This report is intended solely for the information and use of the members of governance and is not intended to be and
should not be used by anyone other than these specified parties. It will be our pleasure to respond to any questions
you have regarding this report. We appreciate the opportunity to continue to be of service to the City.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
CITY OF SCANDIA, MINNESOTA
REQUIRED COMMUNICATIONS
2
Generally accepted auditing standards (AU-C260, The Auditor’s Communication with Those Charged with
Governance) require the auditor to promote effective two-way communication between the auditor and those charged
with governance. Consistent with this requirement, the following summarizes our responsibilities regarding the
financial statement audit as well as observations arising from our audit that are significant and relevant to your
responsibility to oversee the financial reporting process.
Auditor's Responsibility under Professional Standards
Our responsibilities under auditing standards generally accepted in the United States of America have been described
to you in our arrangement letter dated October 22, 2013.
Overview of the Planned Scope and Timing of the Financial Statement Audit
We have issued a separate communication regarding the planned scope and timing of our audit and have discussed
with you our identification of and planned audit response to significant risks of material misstatement.
Accounting Practices
Preferability of Accounting Policies and Practices
Under accounting principles generally accepted in the United States of America, in certain circumstances,
management may select among alternative accounting practices. In our view, in such circumstances, management has
selected the preferable accounting practice.
Adoption of, or Change in, Accounting Policies
Management has the ultimate responsibility for the appropriateness of the accounting policies used by the City.
Effective December 31, 2015, the City adopted Governmental Accounting Standards Board (GASB) Statement No.
68, Accounting and Financial Reporting for Pensions and Statement No. 71, Pension Transition for Contributions
Made Subsequent to the Measurement Date. The effect of the implementation reflects the City’s share of the
applicable Public Employees Retirement Association retirement plans’ net pension asset/liability and related balances
on the Statement of Net Position.
Significant or Unusual Transactions
We did not identify any significant or unusual transactions or significant accounting policies in controversial or
emerging areas for which there is a lack of authoritative guidance or consensus.
Alternative Treatments Discussed with Management
We did not discuss with management any alternative treatments within generally accepted accounting principles for
accounting policies and practices related to material items during the current audit period.
Management’s Judgments and Accounting Estimates
Accounting estimates are an integral part of the preparation of financial statements and are based upon management's
current judgment. The process used by management encompasses their knowledge and experience about past and
current events and certain assumptions about future events. You may wish to monitor throughout the year the process
used to compute and record these accounting estimates. There are no accounting estimates that we have deemed
significant to the financial statements.
CITY OF SCANDIA, MINNESOTA
REQUIRED COMMUNICATIONS
3
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other
than those that are trivial, and communicate them to the appropriate level of management.
There were no uncorrected misstatements discovered during the course of our audit.
Audit adjustments recorded by the Organization are shown on the attached Exhibit A.
Disagreements with Management
We encountered no disagreements with management over the application of significant accounting principles, the
basis for management’s judgments on any significant matters, the scope of the audit, or significant disclosures to be
included in the financial statements.
Consultations with Other Accountants
We are not aware of any consultations management had with other accountants about accounting or auditing matters.
Significant Issues Discussed with Management
No significant issues arising from the audit were discussed or were the subject of correspondence with management.
Difficulties Encountered in Performing the Audit
We did not encounter any difficulties in dealing with management during the audit.
Letter Communicating Material Weaknesses
We have separately communicated the material weaknesses identified during our audit of the financial statements, and
this communication is included within the compliance section of the City’s financial report for the year ended
December 31, 2015.
Certain Written Communications Between Management and Our Firm
We have requested certain representations from management that are included in the management representation letter
dated April 5, 2016.
EXHIBIT A
SUMMARY OF RECORDED
AUDIT ADJUSTMENTS
4/7/2016
10:19 AM
Client:3559 - City of Scandia
Engagement:12-15 AUD - City of Scandia
Period Ending:12/31/2015
Trial Balance:3000.00 - TB
Workpaper:0204.00 - Adjusting Journal Entries Report
Account Description W/P Ref Debit Credit
Adjusting Journal Entries JE # 1
408-43100-36210 Interest Income 731.00
408-10100 Cash 731.00
Total 731.00 731.00
Adjusting Journal Entries JE # 2
101-41000-31000 Washington Cty. Tax Settlement 463.00
101-41000-31000 Washington Cty. Tax Settlement 683.00
101-41000-31000 Washington Cty. Tax Settlement 1,147.00
101-41000-36210 Interest Income 2,293.00
Total 2,293.00 2,293.00
Adjusting Journal Entries JE # 3
408-43100-36210 Interest Income 1,232.00
602-43210-36210 Interest Income 331.00
408-43100-36100 Special Assessments 1,232.00
602-43210-36100 Special Assessments 331.00
Total 1,563.00 1,563.00
Adjusting Journal Entries JE # 4
101-10700 Taxes Receivable-Delinquent 28,826.00
101-22201 Deferred Rev Delinquent Tax 28,826.00
Total 28,826.00 28,826.00
Adjusting Journal Entries JE # 5
307-22200 Special Assessment Revenue 26,426.00
602-12300 Special Assess Rec-Deferred 2,019.00
307-12300 Special Assess Rec-Deferred 26,426.00
602-43210-36100 Special Assessments 2,019.00
Total 28,445.00 28,445.00
Adjusting Journal Entries JE # 6
408-20200 Accounts Payable 9,877.00
408-43100-530 Capital Impr Other Than Bldgs 9,877.00
Total 9,877.00 9,877.00
To record interest for year end and tie out bank reconciliation.
To reverse journal entries made by the client between interest earnings
and property tax revenues.
To reverse impact of closing entries 2015-1 and 2015-2, which improperly
reallocated special assessment revenue to interest revenue.
To adjust delinquent property tax receivables to agree to the outstanding
balance per the levybook from the County.
To adjust special assessment receivables based on reports from the
County.
To record AP in fund 408 that was eliminated from the 101 fund via client
JE #6.
1 of 3
4/7/2016
10:19 AM
Client:3559 - City of Scandia
Engagement:12-15 AUD - City of Scandia
Period Ending:12/31/2015
Trial Balance:3000.00 - TB
Workpaper:0204.00 - Adjusting Journal Entries Report
Account Description W/P Ref Debit Credit
Adjusting Journal Entries JE # 7
101-10100 Cash 198.00
101-10100 Cash 1,238.00
401-48000-530 Capital Impr Other Than Bldgs 1,238.00
408-43100-530 Capital Impr Other Than Bldgs 198.00
101-43000-303 Engineering Fees 518.00
101-43000-303 Engineering Fees 720.00
101-43000-319 Other Services 198.00
401-10100 Cash 1,238.00
408-10100 Cash 198.00
Total 2,872.00 2,872.00
Adjusting Journal Entries JE # 8
602-16310 Accumulative Depreciation 1,226.00
602-43210-420 Depreciation Expense 1,226.00
Total 1,226.00 1,226.00
Adjusting Journal Entries JE # 9
602-17000 Deferred Outflows - Pension 696.00
602-25301 Fund Balance - Change in Accounting Principle 13,910.00
612-17000 Deferred Outflows - Pension 172.00
612-25301 Fund Balance - Change in Accounting Principle 4,151.00
602-24000 Net Pension Liability 13,910.00
602-25301 Fund Balance - Change in Accounting Principle 696.00
612-24000 Net Pension Liability 4,151.00
612-25301 Fund Balance - Change in Accounting Principle 172.00
Total 18,929.00 18,929.00
Adjusting Journal Entries JE # 10
602-17000 Deferred Outflows - Pension 1,827.00
602-43210-120 Pension Expense 398.00
612-17000 Deferred Outflows - Pension 515.00
612-43210-120 Pension Expense 149.00
602-24000 Net Pension Liability 1,451.00
602-24100 Deferred Inflows - Pension 774.00
612-24000 Net Pension Liability 433.00
612-24100 Deferred Inflows - Pension 231.00
Total 2,889.00 2,889.00
Adjusting Journal Entries JE # 11
101-10600 DUE FROM OTHER FUNDS 144.00
612-10100 Cash 144.00
101-10100 Cash 144.00
612-23000 DUE TO OTHER FUNDS 144.00
Total 288.00 288.00
To reallocate capital asset expenses to proper funds, per discussion with
Colleen.
To eliminate negative balance in Uptown Sewer fund.
To adjust accumulated depreciation in the proprietary funds to agree to
capital asset schedules.
To record adjustment to beginning fund balances for pension liability and
outflow balances at the beginning of the year.
To record current year activity related to changes in pension liability,
deferred inflows and outflows, and expense.
2 of 3
4/7/2016
10:19 AM
Client:3559 - City of Scandia
Engagement:12-15 AUD - City of Scandia
Period Ending:12/31/2015
Trial Balance:3000.00 - TB
Workpaper:0204.00 - Adjusting Journal Entries Report
Account Description W/P Ref Debit Credit
Adjusting Journal Entries JE # 12
307-12300 Special Assess Rec-Deferred 26,108.00
307-22200 Special Assessment Revenue 26,108.00
Total 26,108.00 26,108.00
To record receivable and related deferral for additional deferred
assessments due to the City.
3 of 3
SCHLENNER WENNER & CO.
Certified Public Accountants
& Business Consultants
CITY OF SCANDIA, MINNESOTA
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2015
CITY OF SCANDIA, MINNESOTA
TABLE OF CONTENTS
INTRODUCTORY SECTION:
CITY COUNCIL AND OFFICIALS ................................................................................................................................ 1
FINANCIAL SECTION:
INDEPENDENT AUDITORS' REPORT ......................................................................................................................... 2
REQUIRED SUPPLEMENTARY INFORMATION:
Management’s Discussion and Analysis ........................................................................................................................ 5
BASIC FINANCIAL STATEMENTS:
Government-wide Financial Statements
Statement of Net Position ..................................................................................................................................... 15
Statement of Activities ......................................................................................................................................... 16
Fund Financial Statements
Balance Sheet-Governmental Funds ..................................................................................................................... 17
Reconciliation of the Balance Sheet-Governmental Funds
to the Statement of Net Position .................................................................................................................... 18
Statement of Revenues, Expenditures, and
Changes in Fund Balances-Governmental Funds .......................................................................................... 19
Reconciliation of Changes in Fund Balance of Governmental
Funds to the Statement of Activities .............................................................................................................. 20
Statement of Net Position-Proprietary Funds ....................................................................................................... 21
Statement of Revenues, Expenses, and
Changes in Net Position-Proprietary Funds .................................................................................................. 22
Statement of Cash Flows-Proprietary Funds ........................................................................................................ 23
Statement of Fiduciary Net Position ..................................................................................................................... 24
Notes to the Basic Financial Statements ...................................................................................................................... 25
REQUIRED SUPPLEMENTARY INFORMATION:
Budgetary Comparison Schedule-General Fund .......................................................................................................... 49
Schedule of City’s Proportionate Share of Net Pension Liability ................................................................................ 50
Schedule of City Contributions .................................................................................................................................... 50
Schedule of Changes in Net Pension Liability (Asset) ................................................................................................ 51
OTHER SUPPLEMENTARY INFORMATION:
Supplemental Combining Balance Sheet-Debt Service Fund ...................................................................................... 52
Supplemental Combining Schedule of Revenues, Expenditures, and
Changes in Fund Balance-Debt Service Fund ...................................................................................................... 53
OTHER REPORTS:
Independent Auditors’ Report on Internal Control Over Financial
Reporting and on Compliance and Other Matters Based on an
Audit of Financial Statements Performed in Accordance with
Government Auditing Standards .......................................................................................................................... 54
Schedule of Findings and Responses ........................................................................................................................... 56
Independent Auditors’ Report on Minnesota Legal Compliance ................................................................................. 57
INTRODUCTORY
SECTION
1
CITY OF SCANDIA, MINNESOTA
CITY COUNCIL AND OFFICIALS
FOR THE YEAR ENDED DECEMBER 31, 2015
CITY COUNCIL Term Expires
Randall Simonson Mayor January 1, 2017
Bob Hegland Council Member January 1, 2019
Dan Lee Council Member January 1, 2017
Chris Ness Council Member January 1, 2017
Jim Schneider Council Member January 1, 2019
CITY OFFICIALS
Neil Soltis City Administrator
Colleen Firkus Treasurer
FINANCIAL
SECTION
St. Cloud Little Falls Albany Maple Lake Monticello
630 Roosevelt Rd. Ste. 201 109 E. Broadway 115 6th St. 220 Hwy. 55 North, Ste. 4 114 W. 3rd St.
P.O. Box 1496 P.O. Box 365 P.O. Box 268 P.O. Box 385 P.O. Box 755
St. Cloud, MN 56302 Little Falls, MN 56345 Albany, MN 56307 Maple Lake, MN 55358 Monticello, MN 55362
320.251.0286 320.632.6311 320.845.2940 320.963.5414 763.295.5070
INDEPENDENT AUDITORS' REPORT
April 5, 2016
Honorable Mayor and City Council
City of Scandia, Minnesota
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major
fund, and the aggregate remaining fund information of the City of Scandia, Minnesota, as of and for the year ended December 31,
2015, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in
the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting
principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of
internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance
with auditing standards generally accepted in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly,
we express no such opinion. An audit also includes evaluating the appropriateness of a ccounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
3
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, 2015, 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.
Emphasis of Matter
Change in Accounting Principle
As discussed in Note 1.G. to the financial statements, the City of Scandia, Minnesota has adopted Governmental Accounting
Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions, and Governmental Accounting Standards
Board Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. Our opinions are not
modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis,
Budgetary Comparison information, Schedules of City’s Proportionate Share of Net Pension Liability and City Contributions, and
Schedule of Changes in Net Pension Liability (Asset) be presented to supplement the basic financial statements. Such information,
although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers
it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or
historical context. We have applied certain limited procedures to the required supplementary info rmation in accordance with
auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the
methods of preparing the information and comparing the information for co nsistency 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 provi de us with
sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic
financial statements. The introductory section and supplementary combining debt service fund schedules are presented for the
purposes of additional analysis and are not a required part of the basic financial statements.
The introductory section and supplementary combining debt service fund schedules have not been subject to the auditing
procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any
assurance on them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated April 5, 2016 on our consideration of
the City of Scandia’s internal control over financial reporting and our tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal
control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the City of Scandia’s internal control over financial reporting and compliance.
4
Report on Other Legal and Regulatory Requirements
In accordance with Minnesota Statutes, we have also issued our report dated April 5, 2016, on our consideration of City of
Scandia’s compliance with provisions of the Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State
Auditor pursuant to Minnesota Statute Section 6.65 . The purpose of the report is to determine if the City has complied with
Minnesota laws and regulations. That report is an integral part of an audit performed in the State of Minnesota.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
REQUIRED SUPPLEMENTARY
INFORMATION
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2015
5
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, 2015. Please read it in conjunction with the independent auditor’s report on page two and the
City’s financial statements, which begin on page fifteen.
FINANCIAL HIGHLIGHTS
The City’s net position increased $630,204 compared to the prior year, primarily due to the City’s investment of revenues
into infrastructure/assets, net of depreciation, in the amount of approximately $486,000. This has contributed to the
current year increase in net position because these new assets will be depreciated (expensed) over future years. In
addition, there was a net reduction in the City’s outstanding debt of $285,000.
The City’s net position decreased by $216,840 due to a change in accounting principle, which recognizes the City’s share
of the net pension liability and net pension asset for the General Employee Retirement Fund and Statewide Volunteer
Firefighter’s plan administered by the State. The recognition of this pension liability is the primary reason for the
increase in Current & Other Liabilities in Table 1 on page 7.
The City’s General Fund generated more revenue than budgeted of $126,601. Expenditures were less than budgeted by
$200,491, including transfers to other funds which exceeded budgeted amounts by $11,349.
The unassigned fund balance in the General Fund of $1,737,134 is 82% of the 2016 General Fund budgeted
expenditures.
In the City’s Sewer utility funds, revenues increased $1,382 (or 1.50 percent), while operating expenses decreased
$13,051 (or 9.96 percent).
The City’s utility funds operated at a net loss of $31,787, with the cash position decreasing $102,788, due to the purchase
of capital assets.
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 fifteen and sixteen) 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 seventeen. For governmental activities, these statements tell how these
services were financed in the short term as well as what remains for future spending. Fund financial statements also report the
City’s operations in more detail than the government-wide statements by providing information about the City’s most significant
funds. The remaining statements provide financial information about activities for which the City acts solely as an agent for the
benefit of those outside of the government.
Reporting the City as a Whole
Our analysis of the City as a whole begins on page seven. One of the most important questions asked about the City’s finances is,
“Is the City as a whole better off or worse off as a result of the year’s activities?” The Statement of Net Position and the Statement
of Activities report information about the City as a whole and about its activities in a way that helps answer this question. These
statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most
private-sector companies. All of the current year’s revenues and expenses are taken into account regardless of when cash is
received or paid.
These two statements report the City’s net position and changes net position. You can think of the City’s net position (the
difference between assets and liabilities, 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, 2015
6
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 M ost Significant Funds
Our analysis of the City’s major funds begins on page nine. The fund financial statements begin on page seventeen and provide
detailed information about the most significant funds-not the City as a whole. Some funds are required to be established by State
law and by bond covenants. However, the City Council may establish other funds to help it control and manage money for
particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money. The City’s
three kinds of funds (governmental, proprietary, and fiduciary) use different accounting approaches.
Governmental Funds – Most of the City’s basic services are reported in governmental funds, which focus on how money
flows into and out of those funds and the balances left at year-end that are available for spending. These funds are
reported using an accounting method called modified accrual accounting, which measures cash and all other financial
assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the
City’s general government operations and the basic services it provides. Governmental fund information helps you
determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s
programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of
Net Position and the Statement of Activities) and governmental funds in reconciliations following the fund financial
statements.
Proprietary Funds – When the City charges customers for the services it provides these services are generally reported in
proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net
Position and the Statement of Activities. In fact, the City’s proprietary funds are the same as the business-type activities
we report in the government-wide statements but provide more detail and additional information, such as cash flows, for
proprietary funds.
Fiduciary Fund – This fund is used to account for resources held for the benefit of parties outside of the City. Accounting
for fiduciary funds is much like that used for proprietary funds.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2015
7
THE CITY AS A WHOLE
The City’s combined net position increased $630,204 from a year ago. Our analysis below focuses on the net position (Table 1)
and changes in net position (Table 2) of the City’s governmental and business-type activities.
Table 1
Net Position
Governmental Business-Type Total
Activities Activities Government
2015 2014 2015 2014 2015 2014
Assets
Current and Other Assets 3,450,395$ 3,478,568$ 39,548$ 132,766 3,489,943$ 3,611,334$
Net Capital Assets 9,456,193 8,970,406 1,036,390 971,176 10,492,583 9,941,582
Total Assets 12,906,588 12,448,974 1,075,938 1,103,942 13,982,526 13,552,916
Deferred Outflows of Resources 39,424 - 3,210 - 42,634 -
Liabilities
Current & Other Liabilities 475,490 188,162 21,844 5,727 497,334 193,889
Long-Term Debt Outstanding 745,000 1,030,000 - - 745,000 1,030,000
Total Liabilities 1,220,490 1,218,162 21,844 5,727 1,242,334 1,223,889
Deferred Inflows of Resources 39,430 - 1,005 - 40,435 -
Net Position
Net Investment in
Capital Assets 8,711,193 7,940,406 1,036,390 971,176 9,747,583 8,911,582
Restricted 195,126 580,833 - - 195,126 580,833
Unrestricted 2,779,773 2,709,573 19,909 127,039 2,799,682 2,836,612
Total Net Position 11,686,092$ 11,230,812$ 1,056,299$ 1,098,215$ 12,742,391$ 12,329,027$
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2015
8
THE CITY AS A WHOLE (Continued)
The net position of the City’s governmental activities increased by $654,927 (or 5.83 percent) as a result of the investment in
capital assets and other factors previously discussed.
Unrestricted net position (the part of net position that can be used to finance day-to-day operations without constraints established
by debt covenants, enabling legislation, or other legal requirements) increased by $70,200 (or 2.59 percent) compared to the prior
year.
The net position of the City’s business-type activities decreased by $24,723 (or 2.25 percent), with the unrestricted net position
decreasing from $127,039 to $19,909 due to the use of unrestricted funds for capital outlays, which reallocated a greater portion of
net position into Net Investment in Capital Assets. Operations were comparable to the prior year.
Table 2
Changes in Net Position
Governmental Business-Type Total
Activities Activities Government
2015 2014 2015 2014 2015 2014
Revenues
Charges for Services 227,132$ 327,863$ 86,213$ 86,187$ 313,345$ 414,050$
Grants and Contributions 55,628 51,849 6,721 5,278 62,349 57,127
Taxes 2,264,524 2,190,448 - - 2,264,524 2,190,448
Intergovernmental 87,236 19,558 - - 87,236 19,558
Investment Income 9,875 8,294 343 430 10,218 8,724
Other 23,652 35,709 - - 23,652 35,709
Total Revenues 2,668,047 2,633,721 93,277 91,895 2,761,324 2,725,616
Program Expenses
General Government 499,996 426,431 - - 499,996 426,431
Public Safety 340,909 391,752 - - 340,909 391,752
Public Works 1,050,232 1,124,948 - - 1,050,232 1,124,948
Parks and Recreation 94,646 111,619 - - 94,646 111,619
Economic Development 365 240 - - 365 240
Debt Service 26,972 46,191 - - 26,972 46,191
201 Sewer - - 101,179 113,098 101,179 113,098
Uptown Sewer - - 16,821 17,953 16,821 17,953
Total Expenses 2,013,120 2,101,181 118,000 131,051 2,131,120 2,232,232
Change in Net Position 654,927$ 532,540$ (24,723)$ (39,156)$ 630,204$ 493,384$
The City’s total revenues increased by $35,708 (or 1.31 percent), largely due to a decrease in charges for services offset partially
by various increases in other areas. Significant changes included:
The decrease in charges for services was related to a 1-time payment of escrow charges totaling $143,956 in 2014.
Building permits increased by $49,397 over 2014 (65%).
Property taxes increased by $74,076 (3.3%).
State aids received increased by $35,708 (361%).
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2015
9
THE CITY AS A WHOLE (Continued)
The total cost of all programs and services decreased by $101,112 (or 4.53 percent), primarily due to a decrease of $74,716 in
Public works expenditures for contracted road maintenance, ice and snow control, and fuel costs.
Our analysis below separately considers the operations of governmental and business-type activities:
Governmental Activities
Revenue for the City’s governmental activities increased $34,326 (or 1.30 percent), while total expenses decreased $88,061 (or
4.19 percent). Revenues and expenses were generally consistent year to year, with the exception of the significant variances
previously noted.
Table 3 presents the cost of each of the City’s programs (general government, public safety, public works, parks and recreation,
economic development, and debt service) as well as each program’s net cost (total cost less revenues generated by the activities).
The net cost shows the financial burden that was placed on the City’s taxpa yers by each of these functions. Activities, net of
capital outlay which is excluded from Table 3, were generally comparable to the prior year as operations remained fairly consistent
with the prior year, with the exception of the fluctuation in expenses for general government previously mentioned.
Table 3
Governmental Activities
Total Cost Net Cost
2015 2014 2015 2014
General Government 499,996$ 426,431$ 331,753$ 170,535$
Public Safety 340,909 391,752 262,823 326,332
Public Works 1,050,232 1,124,948 1,044,870 1,109,093
Parks and Recreation 94,646 111,619 63,577 69,078
Economic Development 365 240 365 240
Debt Service 26,972 46,191 26,972 46,191
Totals 2,013,120$ 2,101,181$ 1,730,360$ 1,721,469$
of Services of Services
Business-type Activities
Revenues of the City’s business-type activities (see Table 2) increased by $1,382 (or 1.50 percent). Expenses decreased by
$13,051 (or 9.96 percent).
THE CITY’S FUNDS
Governmental Funds
As the City completed the year, its governmental funds (as presented in the balance sheet on page seventeen) reported a combined
fund balance of $3,075,052. This is a decrease of $108,059 (or 3.39 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:
The City utilized $250,000 of the balance in the debt service fund to pay off the remaining debt used to finance the 2007
road improvement program.
Building permits increased by $49,397 (65%) over 2014 and $60,968 over the 2015 bu dget.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2015
10
THE CITY’S FUNDS (Continued)
Governmental Funds (Continued)
State aids received increased by $35,708 with total state aids exceeding the budget by $44,878.
In 2014, property tax revenues of $127,704 were recorded in the Local Road Improvement Fund, but no amounts were
expended from this fund. In 2015, revenues and transfers from other funds exceeded expenditures by $74,819. These
funds will be used to help fund the 2016 road reconstruction projects.
Other operations were comparable to the prior year. The following is a summary of the City’s major governmental funds:
Increase
2015 2014 (Decrease)
General 1,746,587$ 1,715,890 30,697$
Fund Balance December 31,
Major Funds
The fund balance of the General Fund increased by $30,697 as a result of current year operations. In comparison to the prior year,
revenues and expenditures decreased approximately 6.09 and 5.57 percent, respectively.
General Fund Revenue
Taxes
Licenses, Permits, and Fees
Intergovernmental
Charges for Services
Fines
Investment Income
Miscellaneous
The City receives the majority of its funding in the General Fund in the form of taxes (83 percent) and licenses, permits, and fees
(7 percent). Overall, the City’s General Fund revenues were comparable to the prior year .
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2015
11
THE CITY’S FUNDS (Continued)
Governmental Funds (Continued)
General Fund Expenditures
General Government
Public Safety
Public Works
Parks and Recreation
Capital Outlay
A significant portion of the City’s General Fund expenditures are used for public works (45 percent). Remaining expenditures are
used primarily on public safety (19 percent) and general government operations (31 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 $126,601. Expenditures were less than those budgeted by
$200,491. See additional detail pertaining to differences between budgeted and actual amounts within the General Fund
previously discussed and at the Budgetary Comparison Schedule on page forty-nine.
Increase
2015 2014 (Decrease)
Fund Balance December 31,
Major Funds
Debt Service 113,260$ 350,769$ (237,509)$
The subfunds that comprise the Debt Service Fund had a cash balance of $112,793 at December 31, 2015. The Council has
designated the cash balance ($42,467) and the deferred special assessments receivable ($76,301) in the 2007 Road Reconstruction
project subfund be utilized to fund future road improvement projects. The fund balance of the Debt Service Fund decreased by
$237,509. This decrease is the result of the City using excess funds available in the Debt Service Fund to prepay the remaining
balance due on the 2007 Improvement Bonds.
Equipment Replacement Fund 470,608$ 451,023$ 19,585$
At December 31, 2015 the Equipment Replacement Fund has a cash balance of $470,608. The fund balance of the Equipment
Replacement Fund increased by $19,585, primarily due to a transfer from the City’s General Fund. Significant activity in this fund
during 2015 includes the City’s issuance of 2015 Equipment Certificates in the amount of $215,000, for the purpose of financing
the acquisition of a fire tanker.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2015
12
THE CITY’S FUNDS (Continued)
Governmental Funds (Continued)
Increase
2015 2014 (Decrease)
Fund Balance December 31,
Major Funds
Capital Improvement Fund 356,057$ 335,465$ 20,592$
At December 31, 2015 the Capital Improvement Fund has a cash balance of $289,389. The fund balance increased by $20,592,
primarily due to the accumulation of funds to be spent for pending capital improvements.
Park Capital Improvement Fund (19,812)$ 1,067$ (20,879)$
At December 31, 2015 the Park Capital Improvement Fund has a cash balance of $15,188. The fund balance decreased by
$20,879, primarily due to the outlay of funds for a parking lot at Lilleskogen Park.
Local Road Improvement Fund 402,956$ 328,137$ 74,819$
At December 31, 2015 the Local Road Improvement Fund has a cash balance of $425,608. The fund balance increased by
$74,819, primarily due to the transfer of funds from the General Fund to assist in financing the Quinnell Avenue Road
Reconstruction project.
Proprietary Funds
As the City completed the year, its business-type activities (as presented in the statement of net position on page twenty-one)
reported a combined net position of $1,056,299. This is a decrease of $24,723 from the prior year, excluding the impact of
adopting new accounting principles in the current year. See Note 1.G. in the Notes to the Basic Financial Statements for further
information on new accounting principles adopted. Other operations were comparable to the prior year. The following is a
summary of the City’s major proprietary funds:
Change in
Accounting Increase
2015 2014 Principle (Decrease)
201 Sewer Fund 892,727$ 932,026$ (13,214)$ (26,085)$
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, 2015 the fund had a cash balance of $51,185 with a decrease in cash of $102,692 for the year. The decrease in cash
is attributable to the replacement of controls for the Anderson-Erickson drainfield. The fund’s net position decreased $26,085
during the current year as a result of operating expenses exceeding revenues from c harges for services and other activities.
Uptown Sewer Fund 163,572$ 166,189$ (3,979)$ 1,362$
The Uptown Sewer Fund provides sanitary sewer services to customers near the Olinda Trail / Oakhill intersection. At December
31, 2015 the fund had a negative cash balance of $144 (reclassified as due to the General Fund) with a decrease in cash of $240 for
the year (including the negative cash balance). The fund’s net position increased $1,362. Operations in this fund were comparable
to the prior year.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2015
13
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
At the end of 2015, the City had $10,492,583 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 approximately $551,001 (or
5.54 percent) from last year.
Table 4
Net Capital Assets at Year-End
Governmental
Activities Activities Totals
2015 2014 2015 2014 2015 2014
Land 487,735$ 487,735$ -$ -$ 487,735$ 487,735$
Construction in Progress 42,484 - - - 42,484 -
Buildings 1,364,529 1,414,369 - - 1,364,529 1,414,369
Equipment and Vehicles 1,239,092 1,130,261 121,130 21,039 1,360,222 1,151,300
Infrastructure 6,259,565 5,869,724 - - 6,259,565 5,869,724
Other Improvements 62,788 68,317 - - 62,788 68,317
201 Sewer System - - 720,000 750,000 720,000 750,000
Uptown Sewer - - 195,260 200,137 195,260 200,137
Totals 9,456,193$ 8,970,406$ 1,036,390$ 971,176$ 10,492,583$ 9,941,582$
Business-Type
Significant capital asset acquisitions during 2015 were:
Reconstruction of Quinnell Avenue - $586,000
Replacement of Fire Department tanker truck - $215,000
Construction of Lilleskogen Park parking lot - $46,000
Replacement of control equipment for 201 sewer system - $95,000
More detailed information about the City’s capital assets is presented in Note 3.B. to the financial statements.
Debt
In 2015 the City paid off $500,000 of the $1,030,000 in debt that was outstanding at December 31, 2014. The City issued debt
totaling $215,000 to fund the purchase of a tanker truck for the Fire Department. The year -end the debt outstanding totaled
$745,000. See additional information at Note 3.C. to the financial statements.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
The City’s elected and appointed officials considered many factors when setting the year 2016 budget, such as tax rates and fees
that will be charged for the business-type activities. Citizens were asked for feedback on capital project priorities based on projects
identified by the citizen Capital Improvement Committee with street maintenance receiving the highest priority ranking. The
property tax levy for 2016 increased $40,000 over 2016 (1.82%) with increases in funding for the Local Road Improvement Fund
($231,000) being offset by decreases in funding for debt service and operations. The budget for General Fund revenues and
expenditures increased by $145,000 and $111,000 respectively. The largest increase in budgeted General Fund expenditures was
for increasing the transfer to the Local Road Improvement Fund ($137,000). For the third consecutive year, the Council elected to
make no changes to the sewer rates.
CITY OF SCANDIA, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
DECEMBER 31, 2015
14
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview
of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about this report or
need additional financial information, contact the City of Scandia, 14727 209th Street N, Scandia, MN 55073.
BASIC FINANCIAL STATEMENTS
The basic financial statements include integrated sets of financial statements as required by the GASB. The sets of statements
include:
Government-wide financial statements
Fund financial statements:
Governmental funds
Proprietary (enterprise) funds
Fiduciary Fund
In addition, the notes to the financial statements are included to provide information that is essential to a user’s understanding of
the basic financial statements.
Governmental Business-Type
Activities Activities Total
ASSETS
Cash and Cash Equivalents 3,153,085$ 51,185$ 3,204,270$
Property Taxes Receivable 63,130 - 63,130
Assessments Receivable 76,301 6,938 83,239
Accounts Receivable 22,546 13,237 35,783
Prepaids 1,300 - 1,300
Inventory 8,115 - 8,115
Internal Balances 31,812 (31,812) -
Noncurrent Assets:
Net Pension Asset 94,106 - 94,106
Capital Assets not Being Depreciated 530,219 - 530,219
Capital Assets Being Depreciated (Net)8,925,974 1,036,390 9,962,364
TOTAL ASSETS 12,906,588 1,075,938 13,982,526
DEFERRED OUTFLOWS OF RESOURCES
Pensions 39,424 3,210 42,634
LIABILITIES
Accounts Payable 139,996 1,632 141,628
Accrued Payroll, Taxes, and Benefits 20,423 267 20,690
Accrued Interest 3,988 - 3,988
Unearned Revenue 3,959 - 3,959
Noncurrent Liabilities:
Net Pension Liability 285,824 19,945 305,769
Compensated Absences 21,300 - 21,300
Debt Due Within One Year 168,000 - 168,000
Debt Due After One Year 577,000 - 577,000
TOTAL LIABILITIES 1,220,490 21,844 1,242,334
DEFERRED INFLOWS OF RESOURCES
Pensions 39,430 1,005 40,435
NET POSITION
Net Investment in Capital Assets 8,711,193 1,036,390 9,747,583
Restricted 195,126 - 195,126
Unrestricted 2,779,773 19,909 2,799,682
TOTAL NET POSITION 11,686,092$ 1,056,299$ 12,742,391$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF NET POSITION
DECEMBER 31, 2015
See accompanying notes.15
Operating Capital
Charges for Grants and Grants and Governmental Business-Type
Functions/Programs Expenses Services Contributions Contributions Activities Activities Total
Governmental Activities:
General Government 499,996$ 168,243$ -$ -$ (331,753)$ -$ (331,753)$
Public Safety 340,909 32,248 45,838 - (262,823) - (262,823)
Public Works 1,050,232 2,324 - 3,038 (1,044,870) - (1,044,870)
Parks and Recreation 94,646 24,317 6,752 - (63,577) - (63,577)
Economic Development 365 - - - (365) - (365)
Debt Service 26,972 - - - (26,972) - (26,972)
Total Governmental Activities 2,013,120 227,132 52,590 3,038 (1,730,360) - (1,730,360)
Business-Type Activities:
201 Sewer 101,179 68,030 - 6,721 - (26,428) (26,428)
Uptown Sewer 16,821 18,183 - - - 1,362 1,362
Total Business-Type Activities 118,000 86,213 - 6,721 - (25,066) (25,066)
TOTALS 2,131,120$ 313,345$ 52,590$ 9,759$ (1,730,360) (25,066) (1,755,426)
General Revenues:
Taxes 2,264,524 - 2,264,524
Intergovernmental 87,236 - 87,236
Investment Income 9,875 343 10,218
Miscellaneous 28,001 - 28,001
Loss on Disposal of Assets (4,349) - (4,349)
Total General Revenues 2,385,287 343 2,385,630
CHANGE IN NET POSITION 654,927 (24,723) 630,204
NET POSITION-BEGINNING OF YEAR 11,230,812 1,098,215 12,329,027
CHANGE IN ACCOUNTING PRINCIPLE (199,647) (17,193) (216,840)
NET POSITION-END OF YEAR 11,686,092$ 1,056,299$ 12,742,391$
Primary Government
Program Revenues
CITY OF SCANDIA, MINNESOTA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2015
Net (Expense) Revenue and Changes in Net Position
See accompanying notes.16
CITY OF SCANDIA, MINNESOTA
BALANCE SHEET
GOVERNMENTAL FUNDS
Park Loacal Nonmajor
Debt Equipment Capital Capital Road Economic Total
General Service Replacement Improvement Improvement Improvement Development Governmental
Fund Fund Fund Fund Fund Fund Authority Fund Funds
ASSETS
Cash and Cash Equivalents 1,834,103$ 112,793$ 470,608$ 289,389$ 15,188$ 425,608$ 5,396$ 3,153,085$
Property Taxes Receivable 62,663 467 - - - - - 63,130
Assessments Receivable - 76,301 - - - - - 76,301
Accounts Receivable 22,546 - - - - - - 22,546
Prepaids 1,300 - - - - - - 1,300
Inventory 8,115 - - - - - - 8,115
Due from Other Fund 144 - - - - - - 144
Advance to Other Fund - - - 66,668 - - - 66,668
TOTAL ASSETS 1,928,871$ 189,561$ 470,608$ 356,057$ 15,188$ 425,608$ 5,396$ 3,391,289$
LIABILITIES
Accounts Payable 117,344$ -$ -$ -$ -$ 22,652$ -$ 139,996
Accrued Payroll, Taxes, and Benefits 20,423 - - - - - - 20,423
Unearned Revenue 3,959 - - - - - - 3,959
Advance from Other Fund - - - - 35,000 - - 35,000
Total Liabilities 141,726 - - - 35,000 22,652 - 199,378
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue:
Property Taxes 40,558 - - - - - - 40,558
Special Assessments - 76,301 - - - - - 76,301
Total Deferred Inflows of Resources 40,558 76,301 - - - - - 116,859
FUND BALANCES
Nonspendable 9,415 - - 66,668 - - - 76,083
Restricted 38 113,260 9,515 - - - - 122,813
Committed - - - 289,389 - 171,383 5,396 466,168
Assigned - - 461,093 - - 231,573 - 692,666
Unassigned 1,737,134 - - - (19,812) - - 1,717,322
Total Fund Balances 1,746,587 113,260 470,608 356,057 (19,812) 402,956 5,396 3,075,052
TOTAL LIABILITIES, DEFERRED INFLOWS
OF RESOURCES, AND FUND BALANCES 1,928,871$ 189,561$ 470,608$ 356,057$ 15,188$ 425,608$ 5,396$ 3,391,289$
DECEMBER 31, 2015
See accompanying notes.17
CITY OF SCANDIA, MINNESOTA
RECONCILIATION OF THE BALANCE SHEET-GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET POSITION
Total fund balance for governmental funds 3,075,052$
Amounts reported for governmental activities in the Statement of Net Position are
different because:
Capital assets (net of accumulated depreciation of $5,659,677) used in
governmental activities are not financial resources and, therefore
are not reported in the funds.9,456,193
Other long-term assets are not available to pay for current-period expenditures
and therefore are reported as unavailable revenue in the funds.116,859
Some expenses reported in the Statement of Activities do not require the use
of current financial resources and therefore are not reported as expenditures
in the governmental funds.
Accrued Interest (3,988)
Compensated Absences (21,300)
Long-term liabilities are not due and payable in the current period and,
therefore, they are not reported in the governmental funds.
Debt Due Within One Year (168,000)
Debt Due After One Year (577,000)
The net pension asset/liability and related deferred outlows/inflows of resources
represent the allocation of the pension obligations of the statewide plans to the City.
Such balances are not reported in the funds:
Net Pension Asset - PERA Volunteer Firefighter Retirement Plan 94,106
Net Pension Liability - PERA General Employees Retirement Fund (285,824)
Deferred Outflows - Pensions 39,424
Deferred Inflows - Pensions (39,430)
TOTAL NET POSITION OF GOVERNMENTAL ACTIVITIES 11,686,092$
DECEMBER 31, 2015
See accompanying notes.18
CITY OF SCANDIA, MINNESOTA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
Park Local Nonmajor
Debt Equipment Capital Capital Road Economic Total
General Service Replacement Improvement Improvement Improvement Development Governmental
Fund Fund Fund Fund Fund Fund Authority Fund Funds
REVENUES
Taxes 1,622,644$ 272,691$ -$ 30,000$ -$ 345,000$ 5,000$ 2,275,335$
Special Assessments - 20,160 - - - - - 20,160
Licenses, Permits, and Fees 138,740 - - - - - - 138,740
Intergovernmental 56,208 - - - 3,186 31,028 - 90,422
Charges for Services 67,281 - - - 6,000 - - 73,281
Fines 12,711 - - - - - - 12,711
Investment Income 5,847 734 1,523 967 28 775 1 9,875
Miscellaneous 40,755 - - - 5,831 - - 46,586
TOTAL REVENUES 1,944,186 293,585 1,523 30,967 15,045 376,803 5,001 2,667,110
EXPENDITURES
Current:
General Government 477,480 - - - - - - 477,480
Public Safety 288,896 - - - - - - 288,896
Public Works 693,175 - 2,000 8,987 - - - 704,162
Parks and Recreation 82,999 - - - 1,567 - - 84,566
Economic Development - - - - - - 365 365
Debt Service:
Principal - 500,000 - - - - - 500,000
Interest and Other Charges - 31,094 - - - - - 31,094
Capital Outlay 14,417 - 214,938 1,388 45,706 627,157 - 903,606
TOTAL EXPENDITURES 1,556,967 531,094 216,938 10,375 47,273 627,157 365 2,990,169
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 387,219 (237,509) (215,415) 20,592 (32,228) (250,354) 4,636 (323,059)
OTHER FINANCING SOURCES (USES)
Bond Proceeds - - 215,000 - - - - 215,000
Operating Transfers In - - 20,000 - 11,349 325,173 - 356,522
Operating Transfers Out (356,522) - - - - - - (356,522)
TOTAL OTHER FINANCING
SOURCES (USES)(356,522) - 235,000 - 11,349 325,173 - 215,000
NET CHANGE IN FUND BALANCES 30,697 (237,509) 19,585 20,592 (20,879) 74,819 4,636 (108,059)
FUND BALANCES - BEGINNING 1,715,890 350,769 451,023 335,465 1,067 328,137 760 3,183,111
FUND BALANCES - ENDING 1,746,587$ 113,260$ 470,608$ 356,057$ (19,812)$ 402,956$ 5,396$ 3,075,052$
FOR THE YEAR ENDED DECEMBER 31, 2015
See accompanying notes.19
Net change in fund balances - total governmental funds (108,059)$
Amounts reported for governmental activities in the Statement
of Activities are different due to the following:
Governmental funds report capital outlays as expenditures
while governmental activities report depreciation expense
to allocate those expenditures over the life of the assets:
Capital Outlay 903,606$
Loss on the Sale of Assets (4,349)
Depreciation Expense (413,470) 485,787
Revenues in Statement of Activities that do not provide
current financial resources are not reported as revenues
in the funds:
Change in Long-Term Receivables (27,933)
Proceeds from the issuance of long-term debt is an other financing
source in the governmental funds, while repayment of debt principal
is an expenditure in the governmental funds. However, neither
transaction has any effect on net position:
Bond Proceeds (215,000)
Bond Payments 500,000
Net change in accrued interest on bonds is not reported as an
expenditure in the funds:4,122
Some expenses reported in the Statement of Activities do not
require the use of current financial resources and therefore are
not reported as expenditures in governmental funds:
Change in Compensated Absences 8,087
Net pension asset/liability balances do not represent the impending use or
acquisition of current resources. Therefore, the change in the asset/liablity
and the related deferrals is not reported in the governmental funds:7,923
CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES 654,927$
CITY OF SCANDIA, MINNESOTA
RECONCILIATION OF CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2015
TO THE STATEMENT OF ACTIVITIES
See accompanying notes.20
201 Sewer Uptown Sewer
Fund Fund Totals
ASSETS
Current Assets
Cash and Cash Equivalents 51,185$ -$ 51,185$
Accounts Receivable 8,693 4,544 13,237
Assessments Receivable 6,938 - 6,938
Total Current Assets 66,816 4,544 71,360
Noncurrent Assets
Capital Assets Being Depreciated (Net)841,130 195,260 1,036,390
TOTAL ASSETS 907,946 199,804 1,107,750
DEFERRED OUTFLOWS OF RESOURCES
Pensions 2,523 687 3,210
LIABILITIES
Current Liabilities
Accounts Payable 1,429 203 1,632
Accrued Salaries 178 89 267
Due to Other Fund - 144 144
Total Current Liabilities 1,607 436 2,043
Noncurrent Liabilities
Net Pension Liability 15,361 4,584 19,945
Advance from Other Fund - 31,668 31,668
Total Noncurrent Liabilities 15,361 36,252 51,613
TOTAL LIABILITIES 16,968 36,688 53,656
DEFERRED INFLOWS OF RESOURCES
Pensions 774 231 1,005
NET POSITION
Net Investment in Capital Assets 841,130 195,260 1,036,390
Unrestricted 51,597 (31,688) 19,909
TOTAL NET POSITION 892,727$ 163,572$ 1,056,299$
CITY OF SCANDIA, MINNESOTA
PROPRIETARY FUNDS
DECEMBER 31, 2015
STATEMENT OF NET POSITION
See accompanying notes.21
201 Sewer Uptown Sewer
Fund Fund Totals
OPERATING REVENUES
Charges for Services 68,030$ 18,183$ 86,213$
OPERATING EXPENSES
Wages and Benefits 26,760 7,573 34,333
Materials and Supplies 3,181 271 3,452
Professional Services 1,143 - 1,143
Repairs and Maintenance 29,314 964 30,278
Other Services and Charges 8,222 3,136 11,358
Depreciation 32,559 4,877 37,436
TOTAL OPERATING EXPENSES 101,179 16,821 118,000
NET OPERATING INCOME (LOSS)(33,149) 1,362 (31,787)
NONOPERATING INCOME
Special Assessments 6,721 - 6,721
Investment Income 343 - 343
TOTAL NONOPERATING INCOME 7,064 - 7,064
CHANGE IN NET POSITION (26,085) 1,362 (24,723)
NET POSITION-BEGINNING OF YEAR 932,026 166,189 1,098,215
CHANGE IN ACCOUNTING PRINCIPLE (13,214) (3,979) (17,193)
NET POSITION-END OF YEAR 892,727$ 163,572$ 1,056,299$
CITY OF SCANDIA, MINNESOTA
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2015
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
See accompanying notes.22
201 Sewer Uptown Sewer
Fund Fund Totals
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers 65,499$ 17,958$ 83,457$
Cash Paid to Suppliers (44,402) (5,923) (50,325)
Cash Paid to Employees (26,184) (7,335) (33,519)
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (5,087) 4,700 (387)
CASH FLOWS FROM NONCAPITAL FINANCING
ACTIVITIES
Special Assessments 4,702 - 4,702
Net Advances to/from Other Funds - (2,640) (2,640)
Net Operating Subsidies and
Transfers to/from Other Funds - (2,156) (2,156)
NET CASH PROVIDED (USED) BY NONCAPITAL
FINANCING ACTIVITIES 4,702 (4,796) (94)
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Purchases of Capital Assets (102,650) - (102,650)
CASH FLOW FROM INVESTING ACTIVITIES
Investment Income 343 - 343
Net Decrease in Cash and Cash Equivalents (102,692) (96) (102,788)
Cash and Cash Equivalents-Beginning of Year 153,877 96 153,973
Cash and Cash Equivalents-End of Year 51,185$ -$ 51,185$
RECONCILIATION OF NET OPERATING INCOME (LOSS) TO NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
Net Operating Income (Loss)(33,149)$ 1,362$ (31,787)$
Adjustments to Reconcile Net Operating Income (Loss)
to Net Cash Provided (Used) by Operating Activities
Depreciation Expense 32,559 4,877 37,436
Change in Assets and Liabilities:
Accounts Receivable (2,531) (224) (2,755)
Accounts Payable (2,542) (1,553) (4,095)
Accrued Wages 178 89 267
Deferred Outflows of
Resources - Pension (1,827) (515) (2,342)
Net Pension Liability 1,451 433 1,884
Deferred Inflows of
Resources - Pension 774 231 1,005
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (5,087)$ 4,700$ (387)$
CITY OF SCANDIA, MINNESOTA
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2015
STATEMENT OF CASH FLOWS
See accompanying notes.23
Agency
Fund
ASSETS
Cash and Cash Equivalents 52,774$
LIABILITIES
Accounts Payable 52,774$
CITY OF SCANDIA, MINNESOTA
STATEMENT OF FIDUCIARY NET POSITION
FIDUCIARY FUND
DECEMBER 31, 2015
See accompanying notes.24
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
25
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 a bove and whose governing
body is the same or substantially the same as the City Council or the component unit provides services entirely to the City. These
component units’ funds are blended into those of the City’s by appropriate activity type to compose the primary government
presentation. The City’s blended component units consist of:
Economic Development Authority – The City created an Economic Development Authority (EDA) by resolution of its City
Council. The EDA is governed by a five-member board appointed by the City Council. Although it is legally separate from
the City, the EDA is reported as if it were part of the primary government because its purpose is to approve the City's
redevelopment plans. The EDA cannot issue bonded debt without the City's approval.
Discretely Presented Component Units
Discretely presented component units are separate legal entities that meet the component unit criteria described above but do not
meet the criteria for blending. Currently, the City has no discretely presented component units.
1.B. BASIS OF PRESENTATION
Government-wide Financial Statements
The Statement of Net Position and Statement of Activities display information about the reporting government as a whole. They
include all funds of the reporting entity except for fiduciary funds. The fiduciary fund is only reported in the Statement of
Fiduciary Net Position at the fund financial statement level. The statements distinguish between governmental and business-type
activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange
revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods and services.
Fund Financial Statements
Fund financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting
entity. Each fund is accounted for by providing a separate set of self-balancing accounts that constitute its assets, deferred
outflows, liabilities, deferred inflows, fund equity, revenues, and expenditures/expenses. Funds are organized into three major
categories: governmental, proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and
proprietary categories.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
26
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.B. BASIS OF PRESENTATION (Continued)
Fund Financial Statements (Continued)
A fund is considered major if it is the primary operating fund of the City or meets the following cri teria:
Total assets and deferred outflows, liabilities and deferred inflows, revenues or expenditures/expenses of that individual
governmental or enterprise fund are at least 10 percent of the corresponding total for all funds of that category or type;
and
Total assets and deferred outflows, liabilities and deferred inflows, revenues or expenditures/expenses of that individual
governmental or enterprise fund are at least 5 percent of the corresponding total for all governmental and enterprise funds
combined.
The City reports the following major governmental funds:
The General Fund is the primary operating fund. It accounts for all financial resources of the general government, except
those required to be accounted for in another fund.
The Debt Service Fund accounts for the accumulation of financial resources for the payment of interest and principal on
general long-term debt of the City other than debt service payments made by enterprise funds. Ad valorem taxes and
special assessments are used for the payment of principal and interest on the City’s judgment.
The Equipment Replacement Fund is a capital project fund used to account for financial resources to be used for the
various equipment purchases made by the City.
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 Park Capital Improvement Fund is a capital project fund used to account for financial resources to be used for
acquisitions or construction projects related to parks within the City.
The Local Road Improvement Fund is a capital project fund used to account for financial resources to be used for the
construction or improvement of roads within the City.
The City reports the following major proprietary funds:
The 201 Sewer and Uptown Sewer Funds account for business-like activities related to the operation of sewer systems
provided to the general public. These activities are financed primarily by user charges, and the measurement of financial
activity focuses on the net income measurement similar to the private sector.
Additionally, the government reports the following non-major fund types:
The Special Revenue Fund accounts for funds received by the City with a specific purpose.
The Agency Fund accounts for assets held by the City as an agent for other parties outside the organization. These assets
cannot be used to finance the City’s own operating programs.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
27
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING
Measurement focus is a term used to describe “which” transactions are recorded within the various financial statements. Basis of
accounting refers to “when” transactions are recorded regardless of the measurement focus applied.
Measurement Focus
On the government-wide Statement of Net Position and the Statement of Activities, both governmental and business-like activities
are presented using the “economic resources” measurement focus as defined in the second bullet point below.
In the fund financial statements, the “current financial resources” measurement focus or the “economic resources” measurement
focus is used as appropriate:
All governmental funds utilize a current financial resources measurement focus. Only current financial assets and
liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available
spendable financial resources during a given period. These funds use fund balance as their measure of available
spendable financial resources at the end of the period.
The government-wide financial statements, proprietary, and fiduciary funds utilize an economic resources measurement
focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net
position, financial position, and cash flows. All assets, deferred outflows, liabilities, and deferred inflows (whether
current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net position.
Basis of Accounting
In the government-wide Statement of Net Position and Statement of Activities, both governmental and business-like activities are
presented using the “accrual” basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned
and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and
liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place.
In the fund financial statements, governmental funds are presented on the “modified accrual” basis of accounting. Under this
modified accrual basis of accounting, revenues are recognized when “measurable and available.” Measurable means knowing or
being able to reasonable estimate the amount. Available means collectible within the current period or within sixty days after year
end. Expenditures (including capital outlay) are recorded when the related fund liability is incurred, except for general obligation
bond principal and interest which are reported when due.
All proprietary and fiduciary funds utilize the accrual basis of accounting.
1.D. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows,
liabilities, and deferred inflows, and disclosure of contingencies related to these balances at the date of the financial statements.
Estimates also affect reported amounts of revenues and expenses during the reporting period. Actual results could differ fro m
those estimates.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
28
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.E. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY
Cash and Cash Equivalents
For purposes of the Statement of Net Position, “cash and cash equivalents” includes all demand, savings, and money market
accounts for the City. For the purpose of the proprietary fund Statement of Cash Flows, “cash and cash equivalents” include all
demand, savings, and money market accounts.
See Note 3.A. for additional information related to Cash and Cash Equivalents.
Interfund Transactions and Balances
During the course of operations, transactions occur between individual funds that may result in amounts owed between funds.
Those related to good and services type transactions are classified as “due to and from other fund.” Short-term interfund loans are
reported as “due to and from other fund.” Long-term interfund loans (noncurrent portion) are reported as “advances from and to
other funds.” Interfund receivables and payables between funds within governmental activities are eliminated in the Statement of
Net Position. See Note 3.D. for details of interfund transactions, including receivables and payables at year-end.
Prepaids
Prepaids represent costs paid during the current year to be recognized in future periods.
Inventories
Inventory is valued at the lower of average cost or market based on physical counts. Inventory in the General Fund consists o f
expendable supplies held for consumption and is equally offset by a nonspendable fund balance classification. The cost of
inventory is recorded as an expense when purchased and adjusted at year-end.
Receivables
In the government-wide statements, receivables consist of all revenues earned at year-end and not yet received. Allowances for
uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts receivable and are not
deemed necessary at year end. Major receivable balances for the governmental activities include charges for services, fines, fees,
taxes, and special assessments. Business-type activities report utility charges and assessments as their major receivables.
In the fund financial statements, material receivables in governmental funds include revenue accruals such as taxes, franchise fees,
fines and charges for service since they are usually both measurable and available. Nonexchange transactions collectible but not
available are deferred in the fund financial statements in accordance with modified accrual, but not deferred in the government-
wide financial statements in accordance with the accrual basis. Interest and investment earnings are recorded when earned only if
paid within 60 days since they would be considered both measurable and available. Proprietary fund material receivables consist
of all revenues earned at year-end and not yet received. Utility accounts receivable and assessments compose the majority of
proprietary fund receivables. Allowance for uncollectible accounts receivable are based upon historical trends and the periodic
aging of accounts receivable. No allowances are deemed necessary at year end.
Capital Assets
The accounting treatment over property, plant and equipment (capital assets) depends on whether the assets are used in
governmental or proprietary fund operations and whether they are reported in the government-wide or fund financial statements.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
29
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.E. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY (Continued)
Capital Assets (Continued)
Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 and must have an estimated
useful life in excess of one year.
The range of estimated useful lives by type of asset is as follows:
Buildings and Structures 40 years
Machinery and Equipment 5-25 years
Vehicles 25 years
Infrastructure 50 years
Government-wide Statements
In the government-wide financial statements, capital outlay expenditures are accounted for as capital assets. All capital assets are
valued at historical cost or estimated historical cost if actual is unavailable, except for donated capital assets which are recorded at
their estimated fair value at the date of donation.
Depreciation of all exhaustible capital assets is recorded as an allocated expense in the Statement of Activities, with accumulated
depreciation reflected in the Statement of Net Position. Depreciation is provided over the assets’ estimated useful lives using the
straight-line method of depreciation.
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 expe nditures. 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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
30
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.E. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY (Continued)
Compensated Absences
It is the City’s policy to permit employees to accumulate a limited amount of earned but unused leave. All leave pay is accrued
when incurred in the government-wide and proprietary fund financial statements.
A liability for these amounts is reported in governmental funds only if they have matured, for example, as the result of an
employee’s resignation or retirement. In the event a liability is recorded in the governmental funds, General Fund resources would
be used to liquidate the compensated absences.
Deferred Outflows/Inflows of Resources
In addition to assets, the Statements of Net Position report a separate section for deferred outflows of resources. This element
represents a consumption of net position that applies to future periods, and therefore, will not be recognized as an outflow of
resources (expense) until that time. The City reports deferred outflows of resources in the government-wide and proprietary fund
Statements of Net Position in relation to the activity of the pension funds in which City employees participate.
In addition to liabilities, the Statements of Net Position and Balance Sheet report a separate section for deferred inflows of
resources. This element represents an acquisition of net position or fund balance that applies to future periods, and therefore, will
not be recognized as an inflow of resources (revenue) until that time. The City reports property taxes and special assessments as
deferred inflows of resources in the governmental fund financial statements, in accordance with the modified accrual basis of
accounting. In addition, the City reports deferred inflows of resources in the government-wide and proprietary fund Statements of
Net Position in relation to the activity of pension funds in which City employees participate. Accordingly, such amounts are
deferred and recognized as inflows of resources in the period that they become available.
See Note 4 for additional information pertaining to the deferred outflows and deferred inflows recorded to account for pension
activities.
Equity Classifications
Government-wide Statements
Equity is classified as net position and displayed in three components:
Net Investment in Capital Assets – Consists of capital assets including restricted capital assets, net of accumulated
depreciation and reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable
to the acquisition, construction, or improvement of those assets.
Restricted – Consists of net position with constraints placed on the use either by 1) external groups such as creditors, grantors,
contributors, or laws or regulations of other governments; or 2) law through constitutional provisions or enabling legislation.
Unrestricted – Remaining balance of net position that does not meet the definition of “restricted” or “net investment in capital
assets.”
It is the City’s policy to consider restricted net position to its depletion before unrestricted net position is applied.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
31
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.E. ASSETS, LIABILITIES, DEFERRED OUTFLOWS/INFLOWS OF RESOURCES, AND EQUITY (Continued)
Equity Classifications (Continued)
Fund Statements
Governmental Fund Financial Statements – In the fund financial statements, governmental funds report fund balances as either
nonspendable, restricted, committed, assigned, or unassigned. When the City incurs an expenditure for which it may use either
restricted or unrestricted fund balances, it uses restricted fund balances first unless unrestricted fund balances will have to be
returned because they were not used. When the City incurs an expenditure for purposes for which amounts in any unrestricted
fund balance classification could be used, it uses fund balances in the following order: Committed, assigned, unassigned.
Nonspendable – Includes amounts that cannot be spent because they are either not in spendable form, or legally or
contractually required to be maintained intact. The nonspendable fund balances at December 31, 2015 consist of inventory,
prepaid expenditures, and advances to other funds.
Restricted – Includes the portion of fund balance which is not available for appropriation or which has been legally segregated
for a specific purpose.
Committed – Amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the City
Council.
Assigned – Amounts that are constrained by the City’s intent to be used for specific purposes, but are neither restricted nor
committed.
Unassigned – This classification represents fund balance that has not been assigned to other funds and that has not been
restricted, committed, or assigned to specific purposes within the general fund. The City has formally adopted a policy under
which it strives to maintain a minimum unassigned general fund balance equal to approximately 35%-50% of annual General
Fund operating expenses.
See Note 3.E. for additional disclosures.
Proprietary Fund Financial Statements – Proprietary fund equity is classified the same as in the government-wide statements, as
described on the prior page.
1.F. REVENUES, EXPENDITURES, AND EXPENSES
Property Tax
Under state law, municipalities are limited in their ability to levy a property tax. The City levies its property tax for the subsequent
year during the month of December. The County of Washington is the collecting agency for the levy and remits the collections to
the City. In the fund financial statements, property taxes are recorded as revenue in the period levied to the extent they a re
collected within 60 days of year-end.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
32
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.F. REVENUES, EXPENDITURES, AND EXPENSES (Continued)
Property Tax (Continued)
December 31 is the last day the City can certify a tax levy to the County Auditor for collection the following year. The County
Auditor makes up the tax list for all taxable property in the City and applies the applicable tax rate to the tax capacity of individual
properties to arrive at the actual tax for each property. The County Auditor also collects all special assessments, except for certain
prepayments paid directly to the City. The County Auditor remits a list of taxes and special assessments to be collected on each
parcel of property to the County Treasurer in January of each year. The County Treasurer collects all taxes and assessments,
except as noted above. The County Treasurer mails copies of all real estate and personal property tax statements. Each year,
property owners are required to pay one half of their real estate taxes by May 15 and the balance by October 15. Penalties a nd
interest are assessed to property owners who do not pay their property taxes and special assessments by the due dates.
Delinquent taxes receivable include the past six years’ uncollected taxes. Delinquent taxes have been offset by deferred inflows of
resources for taxes not received within 60 days after year end in the fund financial statements.
Operating Revenues and Expenses
Operating revenues and expenses for proprietary funds are those that result from providing services and producing and delivering
goods and/or services. It also includes all revenue and expenses not related to capital and noncapital financing or investing
activities.
Expenditures/Expenses
In the government-wide financial statements, expenses are classified by function for both governmental and business-type
activities.
In the fund financial statements, expenditures are classified as follows:
Governmental Funds – By Character Current (further classified by Function)
Debt Service
Capital Outlay
Proprietary Fund – By Operating and Nonoperating
In the fund financial statements, governmental funds report expenditures of financial resources. Proprietary funds report expenses
relating to use of economic resources.
Interfund Transfers
Permanent reallocations of resources between funds of the reporting entity are classified as interfund transfers. For the purpose of
the Statement of Activities, all interfund transfers between individual governmental funds, as well as all interfund transfers between
individual proprietary funds, have been eliminated. See additional information at Note 3.D.
1.G. RECENTLY ISSUED ACCOUNTING STANDARDS
Effective December 31, 2015, the City adopted governmental Accounting Standards Board (GASB) Statement No. 68, Accounting
and Financial Reporting for Pensions and Statement No. 71, Pension Transition for Contributions Made Subsequent to the
Measurement Date. These statements incorporated the City’s share of the Public Employees Retirement Association unfunded
asset/liability into the Statement of Net Position.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
33
NOTE 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
2.A. FUND ACCOUNTING REQUIREMENTS AND DEPOSITS AND INVESTMENTS LAWS AND REGULATIONS
By its nature as a local government unit, the City is subject to various federal, state, and local laws and contractual regulations.
The City complies with all state and local laws and regulations requiring the use of separate funds.
In accordance with state law, all uninsured deposits of municipal funds in financial institutions must be secured with acceptable
collateral valued at the lower of market or par. Minnesota Statutes require that all deposits with financial institutions be
collateralized in an amount equal to 110% of deposits in excess of FDIC or FSLIC insurance (100% if collateral pledged is
irrevocable standard letters of credit issued by the Federal Home Loan Bank). The City complies with such laws.
2.B. BUDGETARY INFORMATION
Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America.
All annual appropriations lapse at fiscal year-end. The City does not use encumbrance accounting.
2.C. DEFICIT FUND BALANCE
At December 31, 2015, the City has a deficit fund balance of $19,812 in its Park Capital Improvement Fund. Such deficit is
expected to be covered through future revenues or transfers from other funds.
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS
The following notes present detail information to support the amounts reported in the basic financial statements for its various
assets, liabilities, deferred outflows/inflows of resources, equity, revenues, and expenditures/expenses.
3.A. CASH, CASH EQUIVALENTS, AND INVESTMENTS
Deposits
In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council.
Minnesota Statutes require that all City deposits be protected by insurance, surety bond, or collateral. The market value of
collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds (100% if collateral pledged is
irrevocable standard letters of credit issued by the Federal Home Loan Bank). Authorized collateral in lieu of a corporate surety
bond includes:
United States government Treasury bills, Treasury notes, Treasury bonds;
Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service
available to the government entity;
A general obligation of a state or local government, with taxing powers, rated “A” or better;
A revenue obligation of a state or local government, with taxing powers, rated “AA” or better;
Unrated general obligation securities of a local government, with taxing powers, pledged as collateral against funds
deposited by that same local government entity;
Irrevocable standby letter of credit issued by a Federal Home Loan Bank accompanied by written evidence that the
Federal Home Loan Bank’s public debt is rated “AA” or better by Moody’s or Standard and Poor’s; or
Time deposits insured by any federal agency.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
34
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.A. CASH, CASH EQUIVALENTS, AND INVESTMENTS (Continued)
Deposits (Continued)
Minnesota Statutes require that all collateral shall be placed in safekeeping in a restricted account at a Federal Reserve Bank, or in
an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial
institution furnishing the collateral.
At December 31, 2015, the City’s deposits were not exposed to custodial credit risk. The City’s deposits were sufficiently covered
by federal depository insurance or by collateral held by the government’s agent in the government’s name.
Investments
The City may also invest idle funds as authorized by Minnesota Statutes as follows: direct obligations guaranteed by the United
States or its agencies; shares of investment companies registered under the Federal Investment Company Act of 1940 that received
the highest credit rating, are rated in one of the two highest rating categories by a statistical rating agency, and all of t he
investments have a final maturity of 13 months or less; general obligations rated “A” or better; revenue obligations rated “AA” or
better; general obligations of the Minnesota Housing Finance Agency rated “A” or better; bankers’ acceptances of United States
banks eligible for purchase by the Federal Reserve System; commercial paper issued by United States corporations or their
Canadian subsidiaries, rated of the highest quality category by at least two nationally recognized rating agencies, and maturing in
270 days or less; Guaranteed Investment Contracts guaranteed by a United States commercial bank, domestic branch of a foreign
bank, or a United States insurance company, and with a credit quality in one of the top two highest categories; repurchase or
reverse purchase agreements and securities lending agreements with financial institutions qualified as a “depository” by the
government entity, with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a
primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York, or certain Minnesota securities
broker-dealers. The City does not have any investment policies that would further limit investment choices.
At December 31, 2015, the City does not hold any investments.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
35
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.B. CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2015 is as follows:
Balance at Balance at
01/01/15 Additions Disposals Transfers 12/31/15
Governmental Activities:
Capital Assets not Being
Depreciated
Land 487,735$ -$ -$ -$ 487,735$
Construction In Progress - 42,484 - - 42,484
Total Capital Assets not Being
Depreciated 487,735 42,484 - - 530,219
Capital Assets Being
Depreciated
Buildings 2,272,131 - - 2,272,131
Equipment 855,419 14,417 (5,900) - 863,936
Vehicles 1,239,813 214,938 - - 1,454,751
Infrastructure 9,283,919 631,767 (83,500) - 9,832,186
Other Improvements 162,647 - - - 162,647
Total Capital Assets Being
Depreciated 13,813,929 861,122 (89,400) - 14,585,651
Less: Accumulated Depreciation
Buildings (857,762) (49,840) - - (907,602)
Equipment (392,959) (65,332) 5,900 - (452,391)
Vehicles (572,012) (55,193) - - (627,205)
Infrastructure (3,414,195) (237,576) 79,151 - (3,572,620)
Other Improvements (94,330) (5,529) - - (99,859)
Total Accumulated
Depreciation (5,331,258) (413,470) 85,051 - (5,659,677)
Total Capital Assets Being
Depreciated, Net 8,482,671 447,652 (4,349) - 8,925,974
Capital Assets, Net 8,970,406$ 490,136$ (4,349)$ -$ 9,456,193$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
36
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.B. CAPITAL ASSETS (Continued)
Balance at Balance at
01/01/15 Additions Disposals 12/31/15
Business-Type Activities:
Capital Assets Being Depreciated
Sewer Plant 1,500,000$ -$ -$ 1,500,000$
Equipment 21,275 102,650 - 123,925
Uptown Sewer 243,827 - - 243,827
Total Capital Assets Being
Depreciated 1,765,102 102,650 - 1,867,752
Less: Accumulated Depreciation
Sewer Plant (750,000) (30,000) - (780,000)
Equipment (236) (2,559) - (2,795)
Uptown Sewer (43,690) (4,877) - (48,567)
Total Accumulated
Depreciation (793,926) (37,436) - (831,362)
Total Capital Assets Being
Depreciated, Net 971,176 65,214 - 1,036,390
Business-Type Activites 971,176$ 65,214$ -$ 1,036,390$
Depreciation is charged to governmental activities as follows:
General Government 16,202$
Public Safety 49,254
Public Works 338,194
Parks and Recreation 9,820
Total Depreciation Expense 413,470$
3.C. LONG-TERM DEBT
The reporting the City’s long-term debt is segregated between the amounts to be repaid from governmental activities and amounts
to be repaid from business-type activities (none). All bonds and certificates set forth below are direct obligations of the City and
pledge the full faith and credit of the City.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
37
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.C. LONG-TERM DEBT (Continued)
As of December 31, 2015, the long-term debt of the financial reporting entity consists of the following:
Governmental Activities
Issue Annual Interest Maturity Original Remaining
Date Payment Rate(s)Date Amount Amount
2010 Equipment Certificate 7/10 $40,000 2.20-3.55%2/16 200,000$ 40,000$
2011 Equipment Certificate 7/11 $30,000 2.75-3.95%12/16 150,000 30,000
2013 Equipment Certificate 7/13 $50,000 - 65,000 0.80-2.50%7/23 570,000 460,000
2015 Equipment Certificate 5/15 $43,000 1.40-2.30%7/20 215,000 215,000
Total Governmental Activities Bonds Payable 745,000
Bonds Due Within One Year 168,000
Bonds Due After One Year 577,000$
General Obligation Debt
Changes in Long-Term Debt
The following is a summary of changes in long-term debt for the year ended December 31, 2015:
Amounts Due
Balance Balance Within
Type of Debt 1/1/15 Additions Deductions 12/31/15 One Year
Governmental Activities:
General Obligation Notes 1,030,000$ 215,000$ (500,000)$ 745,000$ 168,000$
Compensated Absences 29,387 17,716 (25,803) 21,300 21,300
Total Long-Term Debt 1,059,387$ 232,716$ (525,803)$ 766,300$ 189,300$
Interest expense totals $26,477 in the Statement of Activities (included in Debt Service line). Interest expense totals $30,599 for
the Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds (included in the line Interest and
Other Charges).
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
38
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.C. LONG-TERM DEBT (Continued)
Annual Debt Service Requirements
At December 31, 2015, the estimated annual debt service requirements to maturity, including principal and interest, are as follows
for the City’s governmental activities:
Years Ending
December 31, Principal Interest Total
2016 168,000$ 16,003$ 184,003$
2017 98,000 12,627 110,627
2018 98,000 10,874 108,874
2019 98,000 8,859 106,859
2020 103,000 6,555 109,555
Thereafter 180,000 8,220 188,220
Totals 745,000$ 63,138$ 808,138$
Governmental Activities
Governmental activity debt is typically funded through the Debt Service Fund. Compensated absences are typically funded through
the General Fund.
3.D. INTERFUND TRANSACTIONS AND BALANCES
Operating transfers consist of the following for the year ended December 31, 2015:
Transfers Equipment Park Capital Local Road
Out Replacement Improvement Fund Improvement Fund Total
General 356,522$ 20,000$ 11,349$ 325,173$ 356,522$
Major Funds
Major Funds
Transfers In
Transfers are used to (a) move revenues from the fund that statute or budget requires to collect them to the fund that statut e 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, 2015
39
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.D. INTERFUND TRANSACTIONS AND BALANCES (Continued)
The interfund balances are as follows:
Due To Fund Due From Fund Amount Reason
Capital Improvement Uptown Sewer 31,668$ Sewer improvements
Capital Improvement Park Capital Improvement 35,000 Finance parking lot
Governmental funds advances to/from 66,668$
Due To Fund Due From Fund
General Fund Uptown Sewer 144 Eliminate negative cash
Total Interfund Balances 66,812$
Governmental Fund Elimination (35,000)
Government-wide Internal Balances 31,812$
Long-Term Advances
Short-Term Balances
The Uptown Sewer Fund monies owed to the General Fund and Capital Improvement Fund will be repaid as future sewer charges
are collected and the cash flows become available. The Park Capital Improvement monies owed to the Capital Improvement Fund
will be repaid as park dedication fees and donations are received.
3.E. FUND EQUITY
At December 31, 2015, governmental fund equity consists of the following:
General Fund
Nonspendable - Prepaids and Inventory 9,415$
Restricted for Erickson Ballfield 38
Unassigned 1,737,134
Total General Fund Balance 1,746,587$
Debt Service Fund
Restricted for Debt Service 113,260$
Equipment Replacement Fund
Restricted for Equipment Replacement 9,515$
Assigned for Equipment Replacement 461,093
Total Equipment Replacement Fund Balance 470,608$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
40
NOTE 3 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
3.E. FUND EQUITY (Continued)
Capital Improvement Fund
Nonspendable - Advance to Other Fund 66,668$
Committed for Capital Improvements 289,389
Total Capital Improvement Fund 356,057$
Park Capital Improvement Fund
Unassigned (19,812)$
Local Road Improvement Fund
Committed for Local Road Improvements 171,383$
Assigned for Local Road Improvement 231,573
Total Local Road Improvement Fund 402,956$
Other Governmental Funds
Committed for Economic Development 5,396$
NOTE 4 OTHER NOTES
4.A. EMPLOYEE DEFINED BENEFIT PENSION PLANS - STATEWIDE
Plan Description
The City participates in the following cost-sharing multiple-employer defined benefit pension plans administered by the Public
Employees Retirement Association of Minnesota (PERA). PERA’s defined benefit pension plans are established and administered
in accordance with Minnesota Statutes, Chapters 353 and 356. PERA’s defined benefit pension plans are tax qualified plans under
Section 401 (a) of the Internal Revenue Code.
General Employees Retirement Fund (GERF)
All full-time and certain part-time employees of the City of Scandia are covered by the General Employees Retirement Fund
(GERF). GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by
Social Security and Basic Plan members are not. The Basic Plan was closed to new members in 1967. All new members must
participate in the Coordinated Plan.
Benefits Provided
PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can only b e
modified by the state legislature.
Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. Members
in plans that are at least 90% funded for two consecutive years are given 2.5 0% increases. Members in plans that have not
exceeded 90% funded, or have fallen below 80%, are given 1% increases.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
41
NOTE 4 OTHER NOTES (Continued)
4.A. EMPLOYEE DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
Benefits Provided (Continued)
The benefit provisions stated in the following paragraphs of this section are current provisions and apply to active plan
participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions
in effect at the time they last terminated their public service.
GERF Benefits
Benefits are based on a member’s highest average salary for any five successive years of allowable service, age, and years of credit
at termination of service. Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The
retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under
Method 1, the annuity accrual rate for a Basic Plan member is 2.20% of average salary for each of the first ten years of service and
2.70% for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.20% of average salary for each of the
first ten years and 1.70% for each remaining year. Under Method 2, the annuity accrual rate is 2.70% of average salary for Basic
Plan members and 1.70% for Coordinated Plan members for each year of service. For members hired prior to July 1, 1989, a full
annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1,
1989, normal retirement age is the age for unreduced Social Security benefits capped at 66.
Contributions
Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified
by the State Legislature.
GERF Contributions
Basic Plan members and Coordinated Plan members were required to contribute 9.10% and 6.50%, respectively, of their annual
covered salary in calendar year 2015. The City was required to contribute 11.78% of pay for Basic Plan members and 7.50% for
Coordinated Plan members in calendar year 2015.The City’s contributions to the GERF for the year ended December 31, 2015
were $25,468. The City’s contributions were equal to the required contributions as set by state statute.
Pension Costs
GERF Pension Costs
At December 31, 2015, the City reported a liability of $305,769 for its proportionate share of the GERF’s net pension liability.
The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability
was determined by an actuarial valuation as of that date. The City’s proportion of the net pension liability was based on the City’s
contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2014, through June
30, 2015, relative to the total employer contributions received from all of PERA’s participating employers. At June 30, 2015, the
City’s proportion share was 0.0059%, which was the same proportion measured as of June 30, 2014.
For the year ended December 31, 2015, the City recognized pension expense of $40,758 for its proportionate share of the GERF’s
pension expense.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
42
NOTE 4 OTHER NOTES (Continued)
4.A. EMPLOYEE DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
Pension Costs (Continued)
At December 31, 2015, the City reported its proportionate share of the GERF’s deferred outflows of resources and deferred
inflows of resources related to pensions from the following sources:
Deferred Outflows of Deferred Inflows of
Resources Resources
Differences between expected
and actual economic experience -$ 15,416$
Difference between projected
and actual investment earnings 28,946 -
Contributions paid to PERA subsequent
to the measurement date 13,688 -
Total City Deferred Outflows/Inflows 42,634$ 15,416$
A total of $13,688 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to
the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2016. Other
amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as
follows:
Year ended
December 31: Pension Expense
2016 2,098$
2017 2,098$
2018 2,098$
2019 7,236$
Actuarial Assumptions
The total pension liability in the June 30, 2015, actuarial valuation was determined using the following actua rial assumptions:
Assumptions Rates
Inflation 2.75% per year
Active Member Payroll Growth 3.50% per year
Investment Rate of Return 7.90%
Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors and disabilitants
were based on RP-2000 tables for males or females, as appropriate, with slight adjustments. Cost of living benefit increases for
retirees are assumed to be: 1.00% effective every January 1st until 2034, then 2.50% for GERF.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
43
NOTE 4 OTHER NOTES (Continued)
4.A. EMPLOYEE DEFINED BENEFIT PENSION PLANS - STATEWIDE (Continued)
Actuarial Assumptions (Continued)
Actuarial assumptions used in the June 30, 2015 valuation were based on the results of actuarial experience studies. The
experience study in the GERF was for the period July 1, 2004 through June 30, 2008, with an update of economic assumptions in
2014.
There were no changes in actuarial assumptions in 2015.
The long-term expected rate of return on pension plan investments is 7.90%. The State Board of Investment, which manages the
investments of PERA, prepares an analysis of the reasonableness of the long-term expected rate of return on a regular basis using a
building-block method in which best-estimate ranges of expected future rates of return are developed for each major asset class.
These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the
target asset allocation percentages. The target allocation and best estimates of arithmetic real rates of return for each major asset
class are summarized in the following table:
Long-Term Expected
Real Rate of Return Asset Class Target Allocation Domestic Stocks 45% 5.50%
International Stocks 15% 6.00%
Bonds 18% 1.45%
Alternative Assets 20% 6.40%
Cash 2% 0.50%
Discount Rate
The discount rate used to measure the total pension liability was 7.9 0%. The projection of cash flows used to determine the
discount rate assumed that employee and employer contributions will be made at the rate specified in statute. Based on that
assumption, each of the pension plan’s fiduciary net position was projected to be available to make all projected future bene fit
payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments
was applied to all periods of projected benefit payments to determine the total pension liability.
Pension Liability Sensitivity
The following presents the City’s proportionate share of the net pension liability for all plans it participates in, calculated using the
discount rate disclosed in the preceding paragraph, as well as what the City’s proportionate share of the net pension liability would
be if it were calculated using a discount rate 1 percentage point lower or 1 percentage point higher than the current discount rate:
1% Decrease in 1% Increase in
Discount Rate (6.9%) Discount Rate (7.9%) Discount Rate (8.9%)
Net Pension Liability 480,777$ 305,769$ 161,239$
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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
44
NOTE 4 OTHER NOTES (Continued)
4.B. EMPLOYEE DEFINED CONTRIBUTION PENSION PLAN - STATEWIDE
The council members of the City of Scandia are covered by the Public Employees Defined Contribution Plan (PEDCP), a multiple-
employer deferred compensation plan administered by the Public Employees Retirement Association of Minnesota (PERA). The
PEDCP is a tax qualified plan under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of
employees are tax deferred until time of withdrawal.
Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota
Statutes, Chapter 353D.03, specifies plan provisions, including the employee and employer contribution rates for those qualified
personnel who elect to participate. An eligible elected official who decides to participate contributes 5 percent of salary which is
matched by the elected official's employer. Employer and employee contributions are combined and used to purchase shares in one
or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan, PERA receives 2
percent of employer contributions and twenty-five hundredths of one percent of the assets in each member's account annually.
Total contributions made by the City during fiscal year 2015 amount to $927.
4.C. STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN
Plan Description
The Scandia Fire/Rescue participates in the Statewide Volunteer Firefighter Retirement Plan (SVF), an agent multiple-employer
lump-sum defined benefit pension plan administered by the Public Employees Retirement Association of Minnesota (PERA). The
SVF plan covers volunteer firefighters of municipal fire departments or independent nonprofit firefighting corporations that have
elected to join the plan. As of December 31, 2014, the plan covered 24 active firefighters and 1 vested terminated fire fighters
whose pension benefits are deferred. The plan is established and administered in accordance with Minnesota Statutes, Chapter 353
G.
Benefits Provided
The SVF provides lump-sum 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 per year of service approved by the City of Scandia. The
benefit is selected from 71 possible levels in $100 increments ranging from $500 to $7,500 per year of service. Members are
eligible for a lump-sum retirement benefit at 50 years of age with five years of service. Plan provisions include a pro-rated vesting
schedule that increases from 5 years at 40% through 20 years at 100%.
Contributions
The SVF is funded by fire state aid, investment earnings and, if necessary, employer contributions as specified in Minnesota
Statutes. The State of Minnesota contributed $33,219 in fire state aid to the plan on behalf of the Scandia Fire/Rescue for the year
ended December 31, 2014, which was recorded as revenue. Required employer contributions are calculated annually based on
statutory provisions. The City of Scandia’s statutorily-required contributions to the SVF plan for the year ended December 31,
2015, was $0. The City of Scandia contributions were equal to the required contributions as set by state statute.
Pension Costs
At December 31, 2015, the City of Scandia reported a net pension asset of $94,106 for the SVF plan. The net pension asset was
measured as of December 31, 2014. The total pension liability used to calculate the net pension asset in accordance with GASB
68 was determined by PERA applying an actuarial formula to specific census data certified by the fire department as of December
31, 2014. The following table presents the changes in net pension asset during the year.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
45
NOTE 4 OTHER NOTES (Continued)
4.C. STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
Pension Costs (Continued)
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability (Asset)
Beginning Balance 12/31/13 629,967$ 658,422$ (28,455)$
Service Cost 22,874 - 22,874
Interest on Pension Liability 38,350 - 38,350
Actuarial Experience (Gains)/Losses (27,553) - (27,553)
Projected Investment Earnings - 39,505 (39,505)
Contributions (Employer)- 18,259 (18,259)
Contributions (State)- 33,219 (33,219)
Asset (Gain)/Loss 3,721 (3,721)
Benefit Payouts (27,344) (27,344) -
PERA Administrative Fee - (750) 750
Adjustment to Initial Asset Transfer - 5,368 (5,368)
Net Changes 6,327 71,978 (65,651)
Balance End of Year 12/31/14 636,294$ 730,400$ (94,106)$
For the year ended December 31, 2015, the City of Scandia recognized pension expense of $10,846.
At December 31, 2015, the City of Scandia reported deferred inflows of resources related to the pension from the following
sources:
Deferred Outflows of Deferred Inflows of
Resources Resources
Differences between expected
and actual economic experience -$ 22,042$
Difference between projected
and actual investment earnings - 2,977
Total City Deferred Outflows/Inflows -$ 25,019$
The City did not report any deferred outflows of resources related to pensions. Other amounts reported as deferred outflows and
inflows of resources related to pensions will be recognized in pension expense as follows:
Year ended
December 31: Pension Expense
2016 (6,255)$
2017 (6,255)$
2018 (6,255)$
2019 (6,254)$
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
46
NOTE 4 OTHER NOTES (Continued)
4.C. STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
Actuarial Assumptions
The total pension liability at December 31, 2014, was determined using the entry age normal actuarial cost method and the
following actuarial assumptions:
Retirement eligibility at the later of age 50 or 20 years of service
Investment rate of return of 6.00%
Inflation rate of 3.00%
There were no changes in actuarial assumptions in 2014.
Discount Rate
The discount rate used to measure the total pension liability was 6.00%. The projection of cash flows used to determine the
discount rate assumed that contributions to the SVF plan will be made as specified in statute. Based on that assumption and
considering the funding ratio of the plan, the fiduciary net position was projected to be available to make all projected futu re
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 SVF plan, calculated using the discount rate disclosed in the preceding
paragraph, as well as what the City’s net pension asset would be if it were calculated using a discount rate 1% lower or 1% higher
than the current discount rate:
1% Decrease in 1% Increase in
Discount Rate (5.0%)Discount Rate (6.0%)Discount Rate (7.0%)
Net Pension Asset (81,568)$ (94,106)$ (106,411)$
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 356A.
Within the requirements defined by state law, the SBI, with assistance of the SBI staff and t he 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.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
47
NOTE 4 OTHER NOTES (Continued)
4.C. STATEWIDE VOLUNTEER FIREFIGHTER RETIREMENT PLAN (Continued)
Plan Investments (Continued)
Asset Allocation
To match the long-term nature of the pension obligations, the SBI maintains a strategic asset allocation for the Statewide Volunteer
Firefighter Retirement Plan (VOLP) that includes allocations to domestic equity, international equity, bonds and cash equivalents.
The long-term target asset allocation and long-term expected real rate of return is the following:
Long-Term Expected
Asset Class Target Allocation Real Rate of Return
Domestic Stocks 35% 5.50%
International Stocks 15% 6.00%
Bonds 45% 1.45%
Cash 5% 0.50%
The 6.00% long-term expected rate of return on pension plan investments was determined using a building-block method. Best
estimates for expected future real rates of return (expected returns, net of inflation) were developed for each asset class using both
long-term historical returns and long-term capital market expectations. The asset class estimates and the target allocations were
then combined to produce a geometric, long-term expected real rate of return for the portfolio. Inflation expectations were applied
to derive the nominal rate of return for the portfolio.
Description of significant investment policy changes during the year
The SBI made no significant changes to their investment policy during Fiscal Year 2015 for the Statewide Volunteer Firefighter
Retirement Plan.
Pension Plan Fiduciary Net Position
Detailed information about the SVF plan’s fiduciary net position as of June 30, 2015, 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; by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088; or by calling (651)
296-7460 or 1-800-652-9026.
4.D. RISK MANAGEMENT
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions;
injuries to employees; and natural disasters. To manage these risks, the City purchases commercial insurance. The City retains
risk for the deductible portions of the insurance. The amounts of these deductibles are considered immaterial to the 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. The City’s management is not aware of
any incurred but unreported claims.
CITY OF SCANDIA, MINNESOTA
NOTES TO THE BASIC FINANCIAL STATEMENTS
DECEMBER 31, 2015
48
NOTE 4 OTHER NOTES (Continued)
4.E. COMMITMENTS
Law Enforcement Services
The City receives law enforcement services under an agreement with Washington County. Such agreement automatically renews
on an annual basis and calls for the City to compensate the County based on the actual costs incurred while providing service s
under the agreement. Based on the 2016 contract budget, expenditures anticipated under this agreement for 2016 are estimated at
$115,887.
4.F. CHANGE IN ACCOUNTING PRINCIPLE
During the year ended December 31, 2015 the City determined adj ustments to beginning proprietary and government-wide net
position were necessary to conform to the financial statement presentation prescribed under newly adopted standards previously
discussed in Note 1.G. Adjustments were made to record the City’s proportionate share of the net pension asset/liability at the
beginning of the year for the statewide pension plans in which the City’s employees participate and to record deferred outflows for
the City’s contributions to the plans during the period subsequent to the measurement date used in the actuarial study for each plan,
but prior to December 31, 2015.
The following table depicts the impact of the change in accounting principle on proprietary funds beginning net position.
201 Uptown
Sewer Fund Sewer
Beginning Net Position 932,026$ 166,189$
Net Pension Liability at 1/1/15 (13,910) (4,151)
Deferred Outflows for Pension Contributions 696 172
Beginning Net Position - Restated 918,812$ 162,210$
The following table depicts the impact of the change in accounting principle on government-wide beginning net position.
Governmental Business-Type
Activities Activities
Beginning Net Position 11,230,812$ 1,098,215$
Net Pension Asset at 1/1/15 28,455 -
Net Pension Liability at 1/1/15 (259,091) (18,062)
Deferred Outflows for Pension Contributions 30,989 869
Beginning Net Position - Restated 11,031,165$ 1,081,022$
4.G. SUBSEQUENT EVENTS
Subsequent to year end and prior to the issuance of these financial statements, the City accepted a bid of $841,001 from a
contractor for the 2016 Seal Coat and Crack Filling Project.
REQUIRED SUPPLEMENTARY INFORMATION
Required supplementary information includes financial information and disclosures that are required by the GASB but are not
considered a part of the basic financial statements. Such information includes:
Budgetary Comparison Schedule-General Fund
Schedule of City’s Proportionate Share of Net Pension Liability
Schedule of City Contributions
Schedule of Changes in Net Pension Liability (Asset)
Budget Actual Variance with
Amounts-Amounts Final Budget
Original and Budgetary Over
Final Basis (Under)
RESOURCES (INFLOWS):
Taxes 1,602,328$ 1,622,644$ 20,316$
Licenses, Permits, & Fees 83,530 138,740 55,210
Intergovernmental 33,870 56,208 22,338
Charges for Services 59,228 67,281 8,053
Fines 12,000 12,711 711
Investment Income 4,500 5,847 1,347
Miscellaneous 22,129 40,755 18,626
AMOUNTS AVAILABLE 1,817,585 1,944,186 126,601
CHARGES TO APPROPRIATIONS (OUTFLOWS):
General Government:
Mayor and Council 20,121 19,321 (800)
Planning and Buildings 71,700 105,206 33,506
Elections 470 1,173 703
General Government 359,667 351,780 (7,887)
Public Safety:
Police 111,105 115,642 4,537
Fire 256,707 173,254 (83,453)
Public Works 827,895 693,175 (134,720)
Parks and Recreation 101,725 82,999 (18,726)
Capital Outlay 19,417 14,417 (5,000)
Transfers Out 345,173 356,522 11,349
TOTAL CHARGES 2,113,980 1,913,489 (200,491)
NET CHANGE IN FUND BALANCE (296,395)$ 30,697 327,092$
FUND BALANCE - BEGINNING 1,715,890
CASH FUND BALANCE - ENDING 1,746,587$
CITY OF SCANDIA, MINNESOTA
FOR THE YEAR ENDED DECEMBER 31, 2015
BUDGETARY COMPARISON SCHEDULE-GENERAL FUND
49
Proportionate
Share of the Plan
Net Pension Fiduciary Net
City's Liability Position as a
City's Proportionate City's as a Percentage Percentage
For the Fiscal Proportion of the Share of the Covered-of its Covered-of the Total
Year Ended Net Pension Net Pension Employee Employee Pension
June 30 Liability Liability Payroll Payroll Liability
2015 GERF 0.0059%305,769$ 342,106$ 89.38%78.20%
Contributions in Contributions as
Relation to the City's a Percentage of
For the Statutorily Statutorily Contribution Covered-Covered-
Year Ended Required Required Deficiency Employee Employee
December 31 Contribution Contributions (Excess)Payroll Payroll
2015 GERF 25,468$ 25,468$ -$ 348,155$ 0$
2015 SVF -$ -$ -$ N/A N/A
CITY OF SCANDIA
SCHEDULE OF CITY'S PROPORTIONATE
SHARE OF NET PENSION LIABILITY
LAST TEN YEARS (Presented Prospectively)
SCHEDULE OF CITY CONTRIBUTIONS
LAST TEN YEARS (Presented Prospectively)
50
STATEWIDE VOLUNTEER FIREFIGHTER FUND
2014
Changes in Total Pension Liability (TPL)
Balance at January 1st 629,967$
Service Cost 22,874
Interest on the TPL 38,350
Actuarial Experience (Gains)/Losses (27,553)
Benefit Payments (27,344)
Balance at December 31st 636,294$
Plan Fiduciary Net Position (PFNP)
Balance at January 1st 658,422$
Fire State Aid 24,368
Fire Supplemental Aid 5,896
Supplemental Benefit Reimbursement 2,955
Municipal Contributions 18,259
Adjustment to Initial Asset Transfer 5,368
Net Investment Income 43,226
Total Additions 100,072
Benefit Payments (27,344)
Administrative Expenses (750)
Total Reductions (28,094)
Balance at December 31st 730,400$
Net Pension Liability (Asset) - December 31st (94,106)$
Plan Fiduciary Net Position as a Percentage of Total Pension Liability 115%
LAST TEN YEARS (Presented Prospectively)
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF CHANGES IN NET PENSION LIABILITY (ASSET)
51
OTHER SUPPLEMENTARY INFORMATION
Other supplementary information includes financial statements and schedules not required by GASB, nor a part of the basic
financial statements, but are presented for purposes of additional analysis.
Such statements and schedules include:
Combining Schedules – Nonmajor Debt Service Fund
CITY OF SCANDIA, MINNESOTA
SUPPLEMENTAL COMBINING BALANCE SHEET
DEBT SERVICE FUND
2007 2010 2011 2013 Total
Improvement Equipment Equipment Equipment Debt
Bond Certificates Certificates Certificates Service
ASSETS
Cash and Cash Equivalents 42,467$ 53,070$ 6,735$ 10,521$ 112,793$
Property Taxes Receivable 467 - - - 467
Assessments Receivable 76,301 - - - 76,301
TOTAL ASSETS 119,235$ 53,070$ 6,735$ 10,521$ 189,561$
DEFERRED INFLOWS OF
RESOURCES
Unavailable Revenue:
Special Assessments 76,301$ -$ -$ -$ 76,301$
FUND BALANCES
Restricted 42,934 53,070 6,735 10,521 113,260
TOTAL DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES 119,235$ 53,070$ 6,735$ 10,521$ 189,561$
DECEMBER 31, 2015
52
CITY OF SCANDIA, MINNESOTA
SUPPLEMENTAL COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE
DEBT SERVICE FUND
2007 2010 2011 2013 Total
Improvement Equipment Equipment Equipment Debt
Bond Certificates Certificates Certificates Service
REVENUES
Taxes 125,395$ 44,049$ 33,926$ 69,321$ 272,691$
Special Assessments 20,160 - - - 20,160
Investment Income 512 171 20 31 734
TOTAL REVENUES 146,067 44,220 33,946 69,352 293,585
EXPENDITURES
Debt Service:
Principal 375,000 40,000 30,000 55,000 500,000
Interest and Other Charges 15,189 2,080 2,310 11,515 31,094
TOTAL EXPENDITURES 390,189 42,080 32,310 66,515 531,094
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES (244,122) 2,140 1,636 2,837 (237,509)
FUND BALANCE - BEGINNING 287,056 50,930 5,099 7,684 350,769
FUND BALANCE - ENDING 42,934$ 53,070$ 6,735$ 10,521$ 113,260$
FOR THE YEAR ENDED DECEMBER 31, 2015
53
OTHER REPORTS
St. Cloud Little Falls Albany Maple Lake Monticello
630 Roosevelt Rd. Ste. 201 109 E. Broadway 115 6th St. 220 Hwy. 55 North, Ste. 4 114 W. 3rd St.
P.O. Box 1496 P.O. Box 365 P.O. Box 268 P.O. Box 385 P.O. Box 755
St. Cloud, MN 56302 Little Falls, MN 56345 Albany, MN 56307 Maple Lake, MN 55358 Monticello, MN 55362
320.251.0286 320.632.6311 320.845.2940 320.963.5414 763.295.5070
INDEPENDENT AUDITORS' REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE
AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
April 5, 2016
Honorable Mayor and City Council
City of Scandia, Minnesota
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States,
the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining
fund information of the City of Scandia (the City) as of and for the year ended December 31, 2015, and the related notes to the
financial statements, which collectively comprise the City of Scandia’s basic financial statements, and have issued our report
thereon dated April 5, 2016.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City of Scandia's internal control over financial
reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of
expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the
City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.
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 possibi lity that a
material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A
significant deficiency is deficiency, or combination of deficiencies, in internal control that is less severe that a material weakness,
yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not
designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore,
material weaknesses or significant deficiencies may exist that were not identified. We did identify certain deficiencies in internal
control, described in the accompanying schedule of findings and questioned costs that we consider to be material weaknesses:
Findings 2013-1 and 2013-3.
55
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we
performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with
which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion
on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government
Auditing Standards.
City’s Response to Findings
The City of Scandia’s response to the findings identified in our audit is described in the accompanying Schedule of Findings and
Responses. The City’s response was not subjected to the auditing procedures applied in the audit of the financial statements and,
accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that
testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral
part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
CITY OF SCANDIA, MINNESOTA
SCHEDULE OF FINDINGS AND RESPONSES
FOR THE YEAR ENDED DECEMBER 31, 2015
56
Finding 2013-1 Limited Segregation of Duties
Condition: The City has limited segregation of accounting duties.
Criteria: The basic premise of proper segregation of duties is that no one employee should have access to both
physical assets and the related accounting records or to all phases of the transaction.
Cause: There are a limited number of employees.
Effect: The City’s lack of adequate segregation of accounting duties could adversely affect the City’s ability to
initiate, record, process, and report financial data consistent with the assertions of management in the
financial statements.
Recommendation: Although the number of employees may not be large enough to eliminate this deficiency, we
recommend that the City evaluate current procedures and segregate where possible and implement
compensating controls.
Management’s Response: Management agrees with our recommendation.
Finding 2013-3 Material Audit Adjustments
Condition: Audit adjustments were required to correct material misstatements identified in the trial balance
presented for the audit.
Criteria: The City is required to report accurate financial information.
Cause: The City has not established controls to ensure all accounts are adjusted to their proper year -end
balances in accordance with accounting principles generally accepted in the United States of America.
Effect: The misstatements in the trial balance presented for the audit resulted in the need to record audit
adjustments to achieve fair financial statement presentation under accounting principles generally
accepted in the United States of America.
Recommendation: We recommend management perform a thorough review of the trial balance prior to the audit and
ensure all accounts have been properly adjusted at year-end.
Management’s Response: Management agrees with our recommendation.
St. Cloud Little Falls Albany Maple Lake Monticello
630 Roosevelt Rd. Ste. 201 109 E. Broadway 115 6th St. 220 Hwy. 55 North, Ste. 4 114 W. 3rd St.
P.O. Box 1496 P.O. Box 365 P.O. Box 268 P.O. Box 385 P.O. Box 755
St. Cloud, MN 56302 Little Falls, MN 56345 Albany, MN 56307 Maple Lake, MN 55358 Monticello, MN 55362
320.251.0286 320.632.6311 320.845.2940 320.963.5414 763.295.5070
INDEPENDENT AUDITORS' REPORT ON
MINNESOTA LEGAL COMPLIANCE
April 5, 2016
Honorable Mayor and City Council
City of Scandia, Minnesota
We have audited, in accordance with auditing standards generally accepted in the United States of America, and the standards
applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States
the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining
fund information of the City of Scandia, Minnesota (the City) as of and for the year ended December 31, 2015, and the related
notes to the financial statements, and have issued our report thereon dated April 5, 2016.
The Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State Auditor pursuant to Minnesota Statute Section
6.65, contains seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest,
public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our audit considered all of
the listed categories, except that we did not test for compliance with the provisions for tax increment financing as the City does not
have any tax increment districts.
In connection with our audit, nothing came to our attention that caused us to believe that the City failed to comply with the
provisions of the Minnesota Legal Compliance Audit Guide for Cities. However, our audit was not directed primarily toward
obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come
to our attention regarding the City’s noncompliance with the above referenced provisions.
This report is intended for the information and use of the City Council and management of the City of Scandia and the State
Auditor and is not intended to be and should not be used by anyone other than these specified parties.
SCHLENNER WENNER & CO.
St. Cloud, Minnesota