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5.1. SR 06-01-2009REQUEST FOR ACTION To Item Number Ci Council 5.1 Agenda Section Meeting Date Prepared by Administration une 1, 2009 Tim Simon, Finance Director Item Description Reviewed by Presentation of the Comprehensive Annual Financial Report and Audit Results for the Year Ended December 31, 2008 Reviewed by Action Requested The City Council is asked to review and accept the Comprehensive Annual Financial Report for the City of Elk River for the year ended December 31, 2008. Background/Discussion Andrew Berg, Governmental Services Partner with Abdo, Eick, & Meyers will present a powerpoint presentation of the City's 2008 Comprehensive Annual Financial Report (CAFR) and audit results. The presentation on the CAFR will review the general fund activity, some of the special revenue funds, and all the enterprise funds. Much of this information is summarized in the City of Elk River Management Letter. The Fire Relief report will be briefly discussed as a formal presentation was made at the quarterly board meeting earlier today (June 15~. The CAFR will be available on the City's website shortly after this Council meeting. The following are some highlighted areas of the CAFR and corresponding page numbers. Transmittal letter -page 1-4 Independent Auditor's report -page 8-9 Management's Discussion and Analysis -page 10-19 Budget and Actual (General Fund) -page 29 Enterprise Funds -page 30-37 Statistical Section -page 88-117 Financial Impact None Attachments The following items have been distributed to the Mayor and Council • Comprehensive Annual Financial Report for the year ended December 31, 2008 • Federal Financial Award Programs and Other Reports (Legal compliance/Internal control) • City of Elk River Management Letter • Elk River Fire Department Relief Association Financial Statements and Supplementary Information • Elk River Fire Relief Management Letter ACtIOn Morton by Second by Vote S:\Council\Tim\2009\2008Auditpresentation.doc Action Motion by Second by Vote Follow Up ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA MANAGEMENT LETTER YEAR ENDED DECEMBER 31, 2008 a r~~ i :1k3D0 E1CK & r ., y RS LLP Certified Public Accountants & Consultants I~ ~ ~ ~ ABDO IV. ; EIGK 8z ~t ®I ~~ _ ~Y.~~~ 1 l~l t~J LLP Cert~ Public Accountants & Consultaa~ts 5201 Eden Avenue Suite 370 Edina, MN 55436 i~ i~ Board of Trustees and Plan Participants Elk River Fire Department Relief Association Elk River, Minnesota May 12, 2009 We have audited the fmancial statements of the Elk River Fire Department Relief Association (the Association) for the years ended December 31, 2008 and 2007, and have issued our report thereon dated May 12, 2009. Professional standards require that we provide you with the following information related to our audit. Our Responsibility under Auditing Standards Generally Accepted in the United States of America As stated in our engagement letter, our responsibility, as described by professional standards, is to express an opinion about whether the fmancial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the fmancial statements does not relieve you or management of your responsibilities. Our responsibility is to plan and perform the audit to obtain reasonable, but not absolute, assurance that the fmancial statements are free of material misstatement. As part of our audit, we considered the internal control of the Association. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the fmancial reporting process. However, we are not required to design procedures specifically to identify such matters. Significant Audit Findings Our consideration of internal control over fmancial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over fmancial reporting that might be significant deficiencies or material weaknesses. A control deficiency 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 misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Organization's ability to initiate, authorize, record, process, or report fmancial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Organization's fmancial statements that is more than inconsequential will not be prevented or detected by the Organization's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that result in more than a remote likelihood that a material misstatement of the fmancial statements will not be prevented or detected by the Organization's internal control. We noted no matters involving the internal control over fmancial reporting or compliance and its operation that we consider to be material weaknesses. 952.835.9090 Fax 952.835.3261 svww.aemcpas.com Elk River Fire Department Relief Association May 12, 2009 Page 2 Summary of Prior Year Findings 2007-1: Limited Segregation of Duties over Cash Receipts and Disbursements Condition: During our audit we reviewed procedures over cash disbursements and cash receipts and found the Association to have limited segregation of duties related to these transaction cycles. Criteria: There are four general categories of duties: authorization, custody, record keeping and reconciliation. In an ideal system, different employees perform each of these four major functions. In other words, no one person has control of two or more of these responsibilities. Current year status: The Association implemented additional compensating controls during the year and this is not reported as a finding for the 2008 audit. Compliance As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of compliance with certain provisions of laws, regulations, contracts and grants. However, the objective of our tests was not to provide an opinion on compliance with such provisions. We noted no instances of noncompliance with Minnesota statutes. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing. Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Association are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year. We noted no transactions entered into by the Association during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate affecting the financial statements was the actuarial accrued liability. This is based on the funding formula prescribed by the State of Minnesota. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the financial statements taken as a whole. The disclosures in the financial statements are neutral, consistent, and clear. 952.835.9090 Fax 952.835.3261 www.aemcpas.com ii ,:. w~ t; I ~~_ Ells River Fire Department Relief Association May 12, 2009 Page 3 t I 1 ii Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. There were no misstatements noted during the audit Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated May 12, 2009. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the Association's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Association's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. 952.835.9090 Fax 952.835.3261 www.aemcpas.com t i i 1 I~ 1 1 1 1 1 1 1 1 1 i 1 1 Elk River Fire Department Relief Association May 12, 2009 Page 4 Other Matters Investment Return A summary of the investment rate of return is summarized below: Year 2004 2005 2006 2007 2008 Net Assets Appreciation Total Held in (Depreciation) Investment Trust for Investment Interest of Income Pension Rate of Income Investments (loss) Benefits Return $ 2,159 $ 119,871 $ 122,030 $ 1,646,533 8.13 3,168 75,276 78,444 1,886,585 4.44 2,954 201,347 204,301 2,092,351 10.27 52,211 120,572 172,783 2,420,742 7.66 32,524 (713,435) (680,911) 1,696,356 (33.08) Investment Rate of Return 16.00% 6.00% (4.00%) (14.00%) (24.00%) (34.00%) (44.00%) 8.13% 10.27% 7.66% 4.44% (33.08%) 2004 2005 2006 2007 2008 952.835.9090 Fax 952.835.3261 www.aemcpas.com Elk River Fire Department Relief Association May 12, 2009 Page 5 Peer Group Comparisons The following are two comparisons of statistics that will provide information on how your organization compares with other fire relief associations around the State. We used averages from approximately 40 fire relief associations with under $200,000 in assets to several million in assets. These averages include a 5-year trend of the rate of return and a 5-year trend of funding percentage as compared to averages of the other 40 relief associations. Year Averages Calculation 2004 2005 2006 2007 2008 Average rate of returns Net investment income/ 8.1 % 4.4% 10.3% 7.7% (33.1 %) average net assets 6.8% 5.0% 9.5% 6.0% N/A Percentage funded Net assets/accrued liability 98.9% 105.9% 114.8% 114.7% 70.9% 1.08.1 % 104.1 % 110.0 % 109.8 % N/A Client Name Fire Relief Association Peer Group Rate of Return The rate of return is calculated by taking the net investment income and dividing it by the beginning net assets. This will show a trend of your returns over a 5-year period and show your performance related to other relief associations. 40.0% 30.0% 20.0% 10.0% (10.0%) (20.0%) (30.0%) (40.0%) 8.1% 0 10.3% 7.7% 5.0 /o 9.5% 6.8% 4.4% 6.0% (33.1%) 2004 2005 2006 2007 2008 ~ Fire relief rate f Peer group average 952.835.9090 Fax 952.835.3261 www.aemcpas.com Elk River Fire Department Relief Association May 12, 2009 Page 6 Funding Percentage The funding percentage is calculated by taking the Special fund net assets and dividing it by the accrued pension liability. This graph will show your funding percentage fora 5-year period and compare your percentage to other relief associations. 170.0% 150.0% 130.0% 110.0% 90.0% 70.0% 50.0% 114.8% 114.7% 108.1% 105.9% 110.0% 109.8% 98.9% 104.1 70.9% 2004 2005 2006 2007 2008 -*-Fire relief percent f Peer group average Market Concern There was a significant downturn in the investment income during the 4th quarter of 2008 that resulted in considerable losses. The State has also decreased state aid by approximately 14 percent in 2008 and with possible additional cuts in 2009. This decrease was due to past overstated amounts of insurance premiums that dealt with fire insurance and fewer taxes collected on insurance premiums. Fire state aid is dedicated funds and the decrease is not due to the large budget deficit the State is currently facing. These decreases will have a significant impact on the required municipal contributions in future years until the market changes. 952.835.9090 Fax 952.835.3261 www.aemcpas.com Ells River Fire Department Relief Association May 12, 2009 Page 7 ***** This report is intended solely for the information and use of management, Board of Trustees and Plan Participants and the Minnesota Office of the State Auditor and is not intended to be and should not be used by anyone other than these specified parties. Our audit would not necessarily disclose all weaknesses in the system because it was based on selected tests of the accounting records and related data. The comments and recommendations in the report are purely constructive in nature, and should be read in this context. If you have any questions or wish to discuss any of the items contained in this letter, please feel free to contact us at your convenience. We wish to thank you for the opportunity to be of service and for the courtesy and cooperation extended to us by your staff. May 12, 2009 Minneapolis, Minnesota ABDO, EICK & MEYERS, LLP Certified Public Accountants 952.835.9090 Fax 952.835.3261 www.aemcpas.com i~ ii i~ i~ i~ i~ t r ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEARS ENDED DECEMBER 31, 2008 AND 2007 t t 1 ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA TABLE OF CONTENTS DECEMBER 31, 2008 Page No. INTRODUCTORY SECTION Organization 1 FINANCIAL SECTION Independent Auditor's Report 2 Management's Discussion and Analysis (Unaudited) I - V Individual Fund Statements Governmental Fund General Fund Balance Sheets 3 Statements of Revenues, Expenditures and Changes in Fund Balances 4 Fiduciary Funds Special Pension Trust Fund Statements of Fiduciary Net Assets 5 Statements of Changes in Fiduciary Net Assets 6 Notes to Financial Statements 7 - 12 SUPPLEMENTARY INFORMATION Required Supplementary Information Schedule of Funding Progress 13 Schedule of Employer Contribution 13 Notes to Required Supplementary Information 13 COMPLIANCE SECTION Report on Minnesota Legal Compliance 14 t INTRODUCTORY SECTION ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA YEARS ENDED DECEMBER 31, 2008 AND 2007 ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA ORGANIZATION DECEMBER 31, 2008 Name Title Robert Dreissig President Chad Peterson Vice President Robert Pearson Secretary Rich Niemela Treasurer Scott Schmitt Trustee Keith Thorson Trustee Ex-Officio Trustees Stephanie Klinzing Mayor Tim Simon Finance Director Bruce West Fire Chief -I- t iI 1 FINANCIAL SECTION ELK RNER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA YEARS ENDED DECEMBER 31, 2008 AND 2007 1 ~ ~ABDO ~ EICK & MEYERS«P certified Public Accountants & Consultants 5201 Eden Avenue Suite 370 Edina, MN 55436 i INDEPENDENT AUDITOR'S REPORT Board of Trustees Ells River Fire Relief Association Ells River, Minnesota We have audited the accompanying fmancial statements of the governmental and fiduciary activities of the Elk River Fire Relief Association (the Association) as of and for the years December 31, 2008 and 2007, which collectively comprise the Association's basic fmancial statements as listed in the table of contents. These fmancial statements are the responsibility of the Association's management. Our responsibility is to express an opinion on the fmancial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the fmancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fmancial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall fmancial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the fmancial statements referred to above present fairly, in all material respects, the fmancial position of the governmental and fiduciary activities of the Association as of December 31, 2008 and 2007, and the results of its operations for the years then ended in conformity with accounting principles generally accepted in the United States of America. 1 The management's discussion and analysis on pages I through V is not a required part of the basic fmancial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However we did not audit the information and express no opinion on it. Our audits were conducted for the purpose of forming opinions on the fmancial statements that comprise the Association's basic fmancial statements. The supplementary information listed in the table of contents is presented for the purposes of additional analysis but is a required part of the basic fmancial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic fmancial statements and, in our opinion, is fairly stated in all material respects in relation to the basic fmancial statements taken as a whole. May 12, 2009 Minneapolis, Minnesota r~ 952.835.9090 Fax 952.835.3261 www.aemcpas.com -2- ~~4 ABDO, EICK & MEYERS, LLP Certified Public Accountants Management's Discussion and Analysis (Unaudited) The discussion and analysis of the Ells River Fire Relief Association's (the Association) financial performance provides an overview of the fmancial activities and funding conditions for the fiscal years ended December 31, 2008 and 2007. Using the Annual Report The fmancial statements, which reflect the activities of the Special Pension Trust (the Plan), are reported in the Statements of Fiduciary Net Assets (see page 1) and the Statements of Changes in Fiduciary Net Assets (see page 2). These statements are presented on a full accrual basis and reflect all trust activities as incurred. The fmancial statements also include activities of the General Fund, which is primarily used to account for the fund raising activities of the Association. Financial Highlights • The Plan's net assets decreased by $724,386 (or 30 percent) as a result of the fiscal year's activities. • The contributions from City and State decreased by $15,024. • Net investment income decreased by $853,694 from fiscal year 2007. • The average rate of return decreased from 7.66 to (33.08) percent. • Pension payments increased $181,172 due to two retirements in 2008. • The General Fund balance decreased $1,407 to $5,198. Plan Highlights The Plan's investment income was lower than last year and contributions from the State decreased and the City increased. The Plan's funding level decreased from 114.7 percent to 70.9 percent. Plan Net Assets Cash and cash equivalents Investments Receivables December 31, 2008 2007 Change $ 74,642 $ 59,651 $ 14,991 1,619,714 2,361,091 (741,377) State of Minnesota 2,000 - 2,000 Total restricted net assets $ 1,696,356 $ 2,420,742 $ (724,386) For the current fiscal year 2008 there is a net decrease of $724,386 from the previous fiscal year 2007. The previous fiscal year 2007 had a net increase of $328,391 from fiscal year 2006. -I- Management Discussion and Analysis -Continued May 12, 2009 Changes in Plan Net Assets The following comparative summary of the changes in net assets reflects the activities of the Plan: December 31 2008 2007 Change Revenues Contributions $ 143,999 $ 159,023 $ (15,024) Net investment (loss) income (680,911) 172,783 (853,694) Total revenues (536,912) 331,806 (868,718} Expenditures 187,474 3,415 184,059 Change in net assets (724,386) 328,391 (1,052,777) Net assets -January 1 2,420,742 2,092,351 328,391 Net assets - December 31 $ 1,696,356 $ 2,420,742 $ (724,386) The Association's funding policy provided for contributions from the State of Minnesota (the State) and the City of Elk River in amounts sufficient to accumulate assets to pay benefits when due. The ann ual contributions are the sum of the normal cost, the State contribution payment and the provision for administrative expenses. Plan Membership The following table reflects the Association's Plan membership as of the beginning and ending of the year: December 31, Increase 2008 2007 (Decrease) Active participants Vested Fully 10 7 3 Partially 22 23 (1) Non-vested 8 9 (1) Retirees and beneficiaries 4 4 - Total Membership 44 43 1 -II- Management Discussion and Analysis -Continued May 12, 2009 Funding Status The amount of the total accrued pension liability is based on a standardized measurement established by the Governmental Accounting Standards Board (GASB) that, with some exceptions, must be used by the relief associations for financial statement presentations. This standardized measurement is based on Minnesota statute 69.772. This pension valuation method reflects the present value of estimated pension benefits that will be paid in future years as a result of service years performed by the members of the Association. A standardized measure of the accrued pension liability was adopted by GASB to enable the readers of relief association financial statements to (a) assess the relief association's funding status on agoing-concern basis, (b) assess progress being made in accumulating sufficient assets to pay benefits when due, and (c) make comparisons among relief associations. Because the standardized measure is used only for disclosure purposes by the Association, the measurement is independent of an actuarial computation made to determine contributions to the Association. The following represents the percentage funded trend for the last six years. Year 2003 2004 2005 2006 2007 2008 $ 1,354,326 1,646,533 1,886,585 2,092,351 2,420,742 1,696,356 Prior Six Years Funding Process $3,000,000 ' $2 500 000 $2,000,000 $1 500 000 , , ! $1,000,000 ' $500,000 i $- r Funding Liabilities Percentage $ 1,378,916 98.2 1,664,129 98.9 1,781,082 105.9 1,823,195 114.8 2,110,264 114.7 2,392,353 70.9 114.7% $2,392,353 114.8% 105.9% $1,664,129 $2,110,264 $1,378,916 $1,781,082 $1,823,195 0 ° 70.9 /o 98.2% 2003 2004 2005 2006 -+-Assets -~ Liabilities -III- 2007 2008 Management Discussion and Analysis -Continued May 12, 2009 Asset Allocation The following table and graph indicates the asset allocation for December 31, 2008 and 2007. December 31, 2008 2007 Cash and CD's $ 74,642 4.4 % $ 59,651 2.5 Broker money market 228,378 13.5 - - State Board of Investments 794,803 46.9 1,451,670 60.0 Mutual funds 596,533 35.2 909,421 37.5 Total cash and investments $ 1,694,356 100.0 % $ 2,420,742 100.0 money market 13.5% MutualFund 35.2% -~- i -IV- State Board of _Investments 46.9% 2008 Asset Allocation Deposits 4.4% Investment Activities Management Discussion and Analysis -Continued May 12, 2009 Investment income is vital to the Plan's current and continued financial stability. Therefore, the Board of Trustees has a fiduciary responsibility to act prudently when making Plan investment decisions. Portfolio performance is reviewed quarterly by the Board of Trustees. The Association also has an active Investment Committee to broaden its attention to asset allocation and fund returns. Economic Factors ' The primary function of the pension trust is to (a) appropriately award and pay benefits and (b) manage investments. The opportunity available considering various investment choices is invaluable in the asset allocation and money manager ove Contacting the Plan's Financial Management The fmancial report is designed to provide citizens, taxpayers, plan participants and the marketplace's credit analysis with overview of the Plan's finances and the prudent exercise of the Board's oversight. If you have any questions regarding thi or need additional fmancial information, please contact the Elk River Fire Relief Association, 13065 Orono Parkway, Elk Minnesota 55330. rsight. an s report River, 1 n t 1 FINANCIAL STATEMENTS ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA YEARS ENDED DECEMBER 31, 2008 AND 2007 ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION, MINNESOTA ELK RIVER, MINNESOTA BALANCE SHEETS GOVERNMENTAL FUND DECEMBER 31, 2008 AND 2007 General Fund ASSETS Cash and cash equivalents FUND BALANCES Unreserved 2008 2007 $ 5,198 6,605 $ 5,198 $ 6,605 The notes to the financial statements are an integral part of this statement. -3- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION, MINNESOTA ELK RIVER, MINNESOTA STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUND YEARS ENDED DECEMBER 31, 2008 AND 2007 REVENUES Donations Fundraising events Other TOTAL REVENUES EXPENDITURES Relief events Fundraising Other TOTAL EXPENDITURES NET CHANGE IN FUND BALANCES FUND BALANCES, JANUARY 1 FUND BALANCES, DECEMBER 31 General Fund 2008 2007 $ 4,570 9,013 10,539 9,667 15,197 18,680 9,351 2,664 6,000 9,381 1,253 30 16,604 12,075 (1,407) 6,605 6,605 - $ 5,198 $ 6,605 The notes to the fmancial statements are an integral part of this statement. -4- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION STATEMENTS OF FIDUCIARY NET ASSETS FIDUCIARY FUND DECEMBER 31, 2008 AND 2007 Special Pension Trust Fund 2008 2007 ASSETS Cash and cash equivalents $ 74,642 $ 59,651 Investments 1,619,714 2,361,091 , Receivables State of Minnesota 2,000 - TOTAL ASSETS 1 $ ,696,356 $ 2,420,742 NET ASSETS Held in trust for pension benefits $ 1,696,356 $ 2,420,742 r i i 1 1 1 1 The notes to the fmancial statements are an integral part of this statement. _5_ 1 ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION STATEMENTS OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUND YEARS ENDED DECEMBER 31, 2008 AND 2007 REVENUES Contributions State of Minnesota 10% supplemental reimbursement City of Elk River Interest income Net (depreciation) appreciation in investments TOTAL REVENUES EXPENDITURES Pension benefits Salaries Professional fees Bond Miscellaneous TOTAL EXPENDITURES CHANGE IN NET ASSETS NET ASSETS, JANUARY 1 NET ASSETS, DECEMBER 31 Special Pension Trust Fund 2008 2007 $ 111,999 $ 129,223 2,000 - 30,000 29,800 32,524 52,211 (713,435) 120,572 (536,912) 331,806 181,172 - 3,175 2,355 2,749 220 348 750 30 90 187,474 3,415 (724,386) 2,420,742 328,391 2,092,351 $ 1,696,356 $ 2,420,742 The notes to the financial statements are an integral part of this statement. -6- THIS PAGE IS LEFT BLANK i INTENTIONALLY i 1 1 i 1 1 1 1 1 ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 Note 1: PLAN DESCRIPTION A. The Financial Reporting Entity Firefighters of the City of Ells River (the City) are members of the Ells River Fire Relief Association (the Association). The Association is the administrator of asingle-employer defined benefit pension plan (the Plan) available to firefighters. The Plan was established in 1922 under the provisions of Minnesota Laws 1965, chapter 446 as amended and Minnesota statute, chapters 69 and 424. It is governed by a Board of Trustees made up of six members elected by the members of the Association for three year terms, and the Mayor, Finance Director and Fire Chief, who serve as ex-officio voting members of the Board of Trustees. For fmancial reporting purposes, the Association's fmancial statements are not included with the City fmancial statements because the Association is not a component unit of the City. The Association does not have any component units. B. Membership Information As of December 31, 2008 and 2007, membership data related to the Association were: 2007 2007 Retirees and beneficiaries currently receiving benefits and terminated employees entitled to benefits but not yet receiving them Active plan participants Vested Fully Partially Nonvested Total 4 4 10 7 22 23 8 9 44 43 ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 Note 1: PLAN DESCRIPTION -CONTINUED C. Pension Benetiis The Association operates under a defined benefit plan. The pension liability is calculated by the number of active service years multiplied by a set benefit level. The Association's current level is at $5,091per active year According to the bylaws of the Association and pursuant to Minnesota statute 424A.02, subdivisions 2 and 4, members who retire with less than 20 years of service and have reached the age of 50 years and have completed at least five years of active membership are entitled to a reduced service pension not to exceed the amount calculated by multiplying the member's service pension for the completed years of service times the applicable non-forfeitable percentage of pension as follows: Completed years of service 7 8 9 10 11 12 13 14 15 16 17 18 19 20 and thereafter Non-forfeitable percentage of pension amount 40% 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100 If a member of the Association shall become totally and permanently disabled, with a service related disability (injured in the line of duty) to the extent that a physician or surgeon acceptable to the Board shall certify that such disability will permanently prevent said member from performing said member's duties in the Department, the Association shall pay to such member the sum of the current pension amount for each year and fractions of a year that the member has served as an active member of the Department, without regard to minimum or partial vesting requirements. If a member who has received such a disability pension should subsequently recover and return to active duty in the Department, any amount paid to said member as a disability pension shall be deducted from said member's service pension. n ~I~ i~ J C~ Upon the death of any member of the Association who is in good standing at the time of said member's death, the Association shall pay to the surviving spouse, if any, and if there is no surviving spouse, to child or children, if any, and if no child or children survive, to the estate of such deceased member, the credited sum of said member's pension. -8- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PLAN ASSET MATTERS A. Measurement Focus, Basis of Accounting and Basis of Presentation 0 0 Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Revenues susceptible to accrual include contributions from the State of Minnesota and the City of Ells River and investment revenue, including interest on deposits and dividends. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. The fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. B. Description of Fund The resources of the Association are accounted for in two funds. Each fund is accounted for as an independent entity. Descriptions of the funds included in this report are: Major governmental funds: The General fund is a governmental fund that accounts for the resources not accounted for in other funds. It is used for the good and benefit of the Association as determined by Association bylaws. Its resources consist of fundraising proceeds, investment earnings, and miscellaneous sources. The Fiduciary fund accounts for assets held by the Association in a trustee capacity for its members. 0 The Fiduciary fund is a special pension trust fund for the accumulation of resources to be used for retirement, dependency and disability annuity payments of appropriate amounts and at appropriate times in the future. Resources are contributed by the City at amounts determined by law (taxes), and from the two-percent insurance premium tax and amortization aid from the State of Minnesota. C. Comparative Data C Comparative data for the prior year have been presented in the accompanying financial statements to provide an understanding of changes in the Association's financial position and operations. -9- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 Note 3: DETAILED NOTES ON ACCOUNTS Deposits and Investments Deposits The custodial credit risk for deposits and investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. The Reliefls investment policy does not address custodial credit risk but typically limits its exposure by purchasing insured or registered investments. Minnesota statutes require that all Association 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. Authorized collateral includes the legal investments described below, as well as certain first mortgage notes, and certain other State or local government obligations. Minnesota statutes require that securities pledged as collateral be held in safekeeping by the Association or in a fmancial institution other than that furnishing the collateral. Following is a summary of the deposits covered by FDIC insurance at December 31, 2008: Fund General Special pension trust Total Book Bank $ 5,198 $ 5,348 74,642 74,642 $ 79,840 $ 79,990 Following is a summary of the deposits covered by FDIC insurance at December 31, 2007: Fund General Special pension trust Total Book Bank $ 6,605 $ 8,151 59,651 59,651 $ 66,256 $ 67,802 -10- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 Note 3: DETAILED NOTES ON ACCOUNTS -CONTINUED Investments Investment policy. The Association has adopted an investment policy with regard to investing the financial assets of the Association. All assets will be invested in accordance with this policy, Minnesota statutes chapter 69.775 and written administrative procedures. It shall be the policy of the Association to invest the assets in accordance with the minimum and maximum range for each asset class as stated below: Asset Class Stocks Bonds Non-Fluctuating Share Value Cash At year end, the Association had the following investments that are insured or registered, or securities held by the Association or its agent in the Association's name: Ci i~ L II r Type of Investment Credit Quality/ Ratin s 1 Pooled investments State Board of Investments Common Stock Index N/A Growth Share N/A International Share N/A Income Share N/A Total State Board of Investments Broker money market N/A Mutual Funds Total pooled investments Concentration Segmented of Time Credit Risk Distribution (2) Minimum Percentage Maximum Percentage 25% 75% 0% 50% 0% 10% 0% 10% 'Fair Value and Carrying Amount 2008 2007 N/A less than 6 months $ 105,308 $ 274,930 N/A less than 6 months 67,067 109,322 N/A less than 6 months 193,827 354,125 N/A less than 6 months 428,601 713,293 794,803 1,451,670 N/A N/A N/A N/A 228,378 - N/A 596,533 909,421 $ 1,619,714 $ 2,361,091 1. Ratings are provided by various credit rating agencies where applicable to indicate associated credit risk. 2. Interest rate risk is disclosed using the segmented time distribution method. N/A indicates not applicable or available. Concentration of credit risk -The Association is required to disclose debt investments greater than five percent of total investments. Investments are carried at fair value. Investment and dividend income are recognized as revenue when earned. -11- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ' ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS , DECEMBER 31, 2008 AND 2007 Note 4: FUNDING STATUS AND PROGRESS The amount of the total accrued pension liability is based on a standardized measurement established by the ~ Governmental Accounting Standards Board (GASB) that, with some exceptions, must be used by the relief associations for financial statement presentation. This standardized measurement is based on Minnesota statute 69.772. This , pension valuation method reflects the present value of estimated pension benefits that will be paid in future years as a result of service years performed by the members of the Association. A standardized measure of the accrued pension liability was adopted by GASB to enable the readers of relief association fmancial statements to (a) assess the relief association's funding status on agoing-concern basis, (b) assess progress being made in accumulating sufficient assets to pay benefits when due, and (c) make comparisons among relief associations. Because the standardized measure is used only for disclosure purposes by the Association, the measurement is independent of an actuarial computation made to determine contributions to the Association. Note 5: CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE , The Association's funding policy provided for contributions from the State and the City in amounts sufficient to accumulate sufficient assets to pay benefits when due. The annual contribution is the sum of the normal cost, the State contribution payment and the provision for administrative expenses. ' The Association is comprised of volunteers; therefore, there are no payroll expenditures or covered payroll percentage calculations. A required contribution of $111,999 plus an additional supplemental benefit amount of $2,000 was made by the State in accordance with Minnesota statute for the year ended December 31, 2008. A required contribution of $129,223 was , made by the State in accordance with Minnesota statute for the year ended December 31, 2007. Voluntary contributions of $30,000 and $29,800 were made by the City for the years ended December 31, 2008 and 2007, respectively. Note 6: RISK MANAGEMENT , The Association is exposed to various risks of loss related to theft of assets for which the Association carried commercial insurance policies. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any part of the past three fiscal years. The Association invests in mutual funds that are subject to market value fluctuations. u -12- 1 J ~1 ~_ SUPPLEMENTARY INFORMATION ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA YEAR ENDED DECEMBER 31, 2008 THIS PAGE IS LEFT BLANK , INTENTIONALLY ' ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2008 A. Schedule of Funding Progress Actuarial Actuarial Valuation Value of 12/31/08 $ 1,696,356 12/31/07 2,420,742 12/31/06 2,092,351 12/31/05 1,886,585 12/31/04 1,646,533 12/31/03 1,354,326 B. Schedule of Em ployer Contributions Year Ending 12/31/08 12/31/07 12/31/06 12/31 /OS 12/31 /04 12/31 /03 C. Notes to Supplementary Information Valuation date Actuarial cost method Amortization method Remaining amortization period Normal cost Prior service cost Asset valuation method Actuarial assumptions Investment rate of return Projected salary increases Inflation rate Cost of living adjustments Assets in Excess of Actuarial (Unfunded) Accrued Accrued Liability Liability $ 2,392,353 $ (695,997) 2,110,264 310,478 1,823,195 269,156 1,781,082 105,503 1,664,129 (17,596) 1,378,916 (24,590) Benefit Funded per Year Rate of Service 70.9 % $ 5,091 114.7 4,450 114.8 4,175 105.9 4,000 98.9 4,000 98.2 3,575 Annual Pension Percentage of APC $ 143,999 159,023 177,405 164,529 173,389 13 8,246 100.0 100.0 100.0 100.0 100.0 100.0 12/31 /08 Entry age normal Level dollar closed 20 years 5 years Market 5% N/A N/A None -13- THIS PAGE IS LEFT BLANK ' INTENTIONALLY ii '~ I~ COMPLIANCE SECTION ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA YEAR ENDED DECEMBER 31, 2008 THIS PAGE IS LEFT BLANK INTENTIONALLY 0 CI 0 ii ABDO EICK & ®r •~ `~11/IEYERSLLP Certifi'cd Public Accountants & Consultants 5201 Eden Avenue Suite 370 Edina, MN 55436 REPORT ON MINNESOTA LEGAL COMPLIANCE Board of Trustees Elk River Fire Relief Association Elk River, Minnesota ' We have audited the fmancial statements of the governmental and fiduciary funds of the Elk River Fire Relief Association (the Association) as of and for the years ended December 31, 2008 and 2007, and have issued our report thereon dated, May 12, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the provisions of the Minnesota Legal Compliance Audit Guide for Local Government, promulgated by the Minnesota Office of the State Auditor pursuant to Minnesota statute 6.65. Accordingly, the audit included such tests of accounting records and such other auditing procedures as we considered necessary in the circumstances. 1 The Minnesota Legal Compliance Audit Guide for Local Government covers three main categories of compliance to be tested in audits of relief associations: deposits and investments, conflicts of interest, and public relief associations. Our study included all of the listed categories. The results of our tests indicate that for the items tested, the Association complied with the material terms and conditions of applicable legal provisions. This report is intended solely for the information and use of the Board of Trustees, City of Elk River, members, and the Minnesota Office of the State Auditor, and is not intended to be and should not be used by anyone other than these specified parties. May 12, 2009 Minneapolis, Minnesota i~ L -14- 952.835.9090 Fax 952.835.3261 www.aemcpas.com ABDO, EICK & MEYERS, LLP Certified Public Accountants CITY OF ELK RIVER ELK RIVER, MINNESOTA FEDERAL FINANCIAL AWARD PROGRAMS AND OTHER REPORTS YEAR ENDED DECEMBER 31, 2008 ~ • 'ABDO IV, ~ EICK & ~t I ~~ _ 1WLLP Certified Public Accountants & Consultants CITY OF ELK RIVER, MINNESOTA TABLE OF CONTENTS DECEMBER 31, 2008 Page No. I. FEDERAL FINANCIAL AWARD PROGRAMS Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 1 - 2 Schedule of Expenditures of Federal Awards 3 Notes to Schedule of Expenditures of Federal Awards 4 Schedule of Findings and Questioned Costs 5 IL OTHER REPORTS Report on Minnesota Legal Compliance 6 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 7 - 8 FEDERAL FINANCIAL AWARD PROGRAMS CITY OF ELK RIVER ELK RIVER, MINNESOTA YEAR ENDED DECEMBER 31, 2008 ABDO EICK & o-~ ~, ~ ~V.1J~ 1 l~l t,J LLP Certified Public Aocountants & Consultants 5201 Eden Avenue Suite 370 Edina, MN 55436 REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Honorable Mayor and Council City of Elk River, Minnesota Compliance We have audited the compliance of the City of Elk River, Minnesota (the City), with the types of compliance requirements described in the U.S. Off ce of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended December 31, 2008. The City's major federal programs are identified in the summary of auditor's results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to fmancial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion: Our audit does not provide a legal determination on the City's compliance with those requirements. In our opinion, the City complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended December 31, 2008. ' 952.835.9090 Fax 952.835.3261 -1 www.aemcpas.com Page Two Internal Control Over Compliance The management of the City is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the City's internal control over compliance with the requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. A control deficiency in an entity's internal control over compliance 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 noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected by the entity's internal control. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be significant deficiencies or material weaknesses, as defined above. This report is intended solely for the information and use of the Council, management, others within the City, the Minnesota Office of the State Auditor, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. May 7, 2009 Minneapolis, Minnesota ABDO, EICK & MEYERS, LLP Certified Public Accountants 952.835.9090 Fax 952.835.3261 -2 www.aemcpas.com CITY OF ELK RIVER, MINNESOTA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED DECEMBER 31, 2008 Federal Domestic Assistance Program Funding Source Number Name/Number Department of Transportation Deparhnent of Transportation Department of Justice Department of Homeland Security Department of Housing and Urban Development Total 20.608 Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.703 Interagency Hazardous Materials Public Sector Training and Planning Grants 16.607 Bulletproof Vest Partnership Program 97.044 Assistance to Firefighters Grant 14.228 Community Development Block Grant/ State Program Program Expenditures $ 30,825 2,160 2,353 20,250 500,000 $ 555,588 -3- CITY OF ELK RIVER, MINNESOTA NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED DECEMBER 31, 2008 2. General The accompanying Schedule of Expenditures of Federal Awards presents the activity of major federal award programs of the City of Elk River, Minnesota (the City). The City's reporting entity is defined in Note lA to the City's financial statements. All federal fmancial assistance received directly from federal agencies as well as federal fmancial assistance passed through other government agencies is included on the schedule. Basis of Accounting The accompanying Schedule of Expenditures of Federal Awards is presented using the modified accrual basis of accounting, which is described below. Under the modified accrual basis of accounting, revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenue to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. -4- CITY OF ELK RIVER, MINNESOTA SCHEDULE OF FINDINGS AND QUESTIONED COSTS DECEMBER 31, 2008 A. Summary of Auditors Results Financial Statements 1. The auditor's report expresses an unqualified opinion on the fmancial statements of the City. 2. No significant deficiencies were disclosed in the audit of the fmancial statements. 3. There were no instances ofnon-compliance material to the financial statements. Federal Awards 1. The auditor's report on compliance for major federal award programs for the City expresses an unqualified opinion on all major federal award programs. 2. There are no audit fmdings to be reported under Section 510(a) of OMB Circular A-133. 3. The programs tested as major programs include: CFDA Community Development Block Grant/State Program 14.228 4. The threshold for distinguishing between types A and B programs was $300,000. 5. The City was determined not to be a low-risk auditee, under section 530 of Circular A-133 and therefore, the auditors have not reduced the extent of substantive tests. B. Findings Related to the Financial Statements None. C. Findings and Questioned Costs -Major Federal Awards Program None. -5- u n L OTHER REPORTS CITY OF ELK RIVER ELK RIVER, MINNESOTA YEAR ENDED DECEMBER 31, 2008 C L i~ i~ n i~ ABDO EICK & ®,r •~ ~ 11r1~~ 1 L1L.7 Lr~ Certified Public Accountants & Consultaaits 5201 Eden Avenue Suite 370 Edina, MN 55436 REPORT ON MINNESOTA LEGAL COMPLIANCE Honorable Mayor and Council City of Elk River, Minnesota We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major filed, and the aggregate remaining fund information of the City of Elk River, Minnesota (the City), as of and for the year ended December 31, 2008 which collectively comprise the City's basic fmancial statements as listed in the table of contents and have issued our report thereon dated May 7, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the ' provisions of the Minnesota Legal Compliance Audit Guide for Local Government, promulgated by the Minnesota Office of the State Auditor pursuant to Minnesota statute 6.65. Accordingly, the audit included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. ' The Minnesota Legal Compliance Audit Guide for Local Government covers seven main categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, tax increment financing, and miscellaneous provisions. Our study included all of the listed categories. ' The results of our tests indicate that for the items tested, the City complied with the material terms and conditions of applicable legal provisions. ' This report is intended solely for the information and use of the Council, management and the Minnesota Office of the State Auditor and is not intended to be and should not be used by anyone other than these specified parties. May 7, 2009 1 Minneapolis, Minnesota -6- 952.835.9090 Fax 952.835.3261 www.aemcpas.com ABDO, SICK & MEYERS, LLP Certified Public Accountants I~ 0 L~ ~' 'ABDO w~C;EICK& ®/ ~, _ ~Vll~ 1 L'~l L-J LLP Certified Public Accountants & Consultants 5201 Eden Avenue Suite 370 Edina, MN 55436 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS Honorable Mayor and Council City of Elk River, Minnesota We have audited the fmancial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Elk River, Minnesota (the City), as of and for the year ended December 31, 2008, which collectively comprise the City's basic fmancial statements and have issued our report thereon dated May 7, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to fmancial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over fmancial reporting as a basis of designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over fmancial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over fmancial reporting. A control deficiency 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 misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City's ability to initiate, authorize, record, process, or report fmancial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the City's fmancial statements that is more than inconsequential will not be prevented or detected by the City's internal control over fmancial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the City's internal control over fmancial reporting. Our consideration of internal control over fmancial reporting was for the limited purpose described in the first paragraph of this ' section and would not necessarily identify all deficiencies in internal control over fmancial reporting that might be significant deficiencies or material weakness. We did not identify any deficiencies in internal control over fmancial reporting that we consider to be material weaknesses, as defined above. -7- 952.835.9090 Fax 952.835.3261 www.aemcpas.com i~ Page Two I!~J Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's fmancial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of fmancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to management of the City, in a separate letter dated May 7, 2009. This report is intended solely for the information and use of the Council, management, others within the City, the Minnesota Office of the State Auditor, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. May 7, 2009 Minneapolis, Minnesota l~~ ~ Q~~u~~ `~ ABDO, EICK & MEYERS, LLP Certified Public Accountants CITY OF ELK RIVER ELK RIVER, MINNESOTA MANAGEMENT LETTER YEAR ENDED DECEMBER 31, 2008 f ~~~ J ABDO EICK & /1 ~~ ~ 1 W LLP Certified Public Accountants & Co~~sultants ~i 1 ~ ~ •ABD 0 ~ IVY ~~ EICK ~ ®I ~~ _ 1VJ1~ 1 1~1 l,J LLP ' Cen~d Public Accountants & Consultants May 7, 2009 r LI t 5201 Eden Avenue Suite 370 Edina, MN 55436 Management, Honorable Mayor and Council City of Ells River, Minnesota We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Ells River, Minnesota (the City) for the year ended December 31, 2008 and have issued our report thereon dated May 7, 2009. Professional standards require that we provide you with the following information related to our audit. Our Responsibility Under Auditing Standards Generally Accepted in the United States of America and OMB Circular A-133 As stated in our engagement letter, our responsibility, as described by professional standards, is to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the fmancial statements does not relieve you or management of your responsibilities. In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide assurance on the internal control over financial reporting. We also considered internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133. Our responsibility is to plan and perform the audit to obtain reasonable, but not absolute, assurance that the financial statements are free of material misstatement. We are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures specifically to identify such matters. Significant Audit Findings Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over fmancial reporting that might be significant deficiencies or material weaknesses. A control deficiency 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 misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City's ability to initiate, authorize, record, process, or report fmancial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the City's financial statements that is more than inconsequential will not be prevented or detected by the City's internal control. 952.835.9090 Fax 952.835.3261 www.aemcpas.com ~i ii i~ i~ t t 1 t City of Elk River May 7, 2009 Page 2 A material weakness is a significant deficiency, or combination of significant deficiencies, that result in more than a remote likelihood that a material misstatement of the fmancial statements will not be prevented or detected by the City's internal control. We noted no matters involving the internal control over financial reporting or compliance and its operation that we consider to be material weaknesses. Compliance As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, 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. Also, in accordance with OMB Circular A-133, we examined, on a test basis, evidence about the City's compliance with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement applicable to each of its major federal programs for the purpose of expressing an opinion on the City's compliance with those requirements. While our audit provides a reasonable basis for our opinion, it does not provide a legal determination on the City's compliance with those requirements. There were no instances of noncompliance that are required to be reported under Government Auditing Standards or Minnesota statutes. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you. Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the fmancial statements. As discussed in Note 4F to the basic financial statements, the City adopted Governmental Accounting Standards Board Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions for the year ended December 31, 2008. The application of existing policies was not changed during the year. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statement in a different period than when the transaction occurred. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. Significant estimates affecting the financial statements include depreciation on capital assets as well as the liability for the City's Other Post Employment Benefits (OPEB). Management's estimate of depreciation is based on estimated useful lives of the assets. Management's estimate of its OPEB liability is based on several factors including, but not limited to, anticipated retirement age for active employees, life expectancy, turnover, and healthcare cost trend rate. We evaluated the key factors and assumptions used to develop depreciation and the OPEB liability in determining that it is reasonable in relation to the financial statements taken as a whole. The disclosures in the fmancial statements are neutral, consistent, and clear. Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. 952.835.9090 Fax 952.835.3261 www.aemcpas.com t Corrected and Uncorrected Misstatements City of Elk River May 7, 2009 Page 3 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. Management has corrected all such misstatements. In total we prepared 2 journal entries, 1 of which was considered an audit adjustment. These entries are necessary to adjust balances to the proper year end amounts. Adjusting Journal Entries JE # Z To record 2/1/09 TIF payment related to 2008 revenue 462-4-7000-4440 Miscellaneous 462-2020 Accounts Payable Total Disagreements with Management Debit Credit $ 86,807 $ 86,807 $ 86,807 $ 86,807 For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting or auditing matter that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representations letter dated ' May 7, 2009. Management Consultations with Other Independent Accountants e In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management prior to retention as the City's auditors. However, these discussions occurred in the normal course of our ' professional relationship and our responses were not a condition to our retention. 952.835.9090 Fax 952.835.3261 www.aemcpas.com u i~ i~ i~ ii i~ n t City of Elk River May 7, 2009 Page 4 Financial Position and Results of Operations Our principal observations and recommendations are summarized on the following pages. These recommendations resulted from our observations made in connection with our audit of the City's financial statements for the year ended December 31, 2008. General Fund The General fund is used to account for resources traditionally associated with government, which are not required legally or by sound principal management to be accounted for in another fund. The General fund balance decreased $161,342 from 2007. The fund balance of $5,190,662 is 41 percent of the 2009 budgeted expenditures. We recommend the fund balance be maintained at a level sufficient to fund operations until the major revenue sources are received in June. We feel a reserve of approximately 40 to 50 percent of planned expenditures and transfers out is adequate to meet working capital and small emergency needs. Minnesota cities must maintain substantial amounts of fund balance in order to meet their liquidity and working capital needs as an operating entity. That is because a substantial portion of your revenue sources (taxes and intergovernmental revenues) are received in the last two months of each six-month cycle. The Office of the State Auditor (the OSA) has issued a Statement of Position relating to fund balance stating "a local government should identify fund balance separately between reserved and unreserved fund balance. The local government may assign and report some or all of the fund balance as designated and undesignated." We recommend local governments adopt a formal policy on the level of unreserved fund balance that should be maintained in the general and special revenue funds. This helps address citizen concerns as to the use of fund balance and tax levels. The purposes and benefits of a General fund balance are as follows: • Expenditures are incurred somewhat evenly throughout the year. However, property tax and state aid revenues are not received until the second half of the year. An adequate fund balance will provide the cash flow required to finance the General fund expenditures until these revenue sources are received. • The City is vulnerable to legislative actions at the State and Federal level. The State imposed reductions of market value credit aid and local government aid for some cities at the end of 2008 and more reductions are anticipated for 2009. Levy limits have also been implemented for municipalities in past legislative sessions. An adequate fund balance will provide a temporary buffer against those aid adjustments and levy limits. • Expenditures not anticipated at the time the annual budget was adopted may need immediate Council action. These would include capital outlay replacement, lawsuits and other items. An adequate fund balance will provide the financing needed for such expenditures. • A strong fund balance will assist the City in obtaining, maintaining or improving its bond rating. The result will be better interest rates in future bond sales. 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 7, 2009 Page 5 A table summarizing the General fund balance in relation to the following years' budget follows: Fund General Balance Budget Fund Year December 31 Year Budget 2003 $ 3,732,049 2004 $ 7,875,400 2004 3,967,380 2005 9,366,600 2005 4,601,381 2006 10,596,550 2006 4, 816,3 86 2007 11,648,000 2007 5,352,004 2008 12,572,000 2008 5,190,662 2009 12,636,100 Fund Balance as a Percent of Next Year's Budget $14,000,000 - $12,000,000 - $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- Percent of Fund Balance to Budget 47.4 42.4 43.4 41.3 42.6 41.1 $12,572,000 $12,636,100 $11,648,000 $10,596,550 $9,366,600 $7,875,40 42.8% 41.1 43.4% 41.3% 47.4% 42.4% 2003 2004 2005 2006 2007 2008 2009 tActualFund Balances tBudget 952.835.9090 Fax 952.835.3261 www.aemepas.com City of Elk River May 7, 2009 Page 6 The 2008 operations are summarized as follows: Revenues Expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Variance with Final Final Budget - Budgeted Actual Positive Amounts Amounts (Negative) $ 11,819,150 $ 11,238,930 $ (580,220) 12,251,850 11,543,643 708,207 (432,700) (304,713) 127,987 463,500 463,500 - (320,150) (320,129) 21 143,350 143,371 21 (289,350) (161,342) 128,008 Fund balances, January 1 5,352,004 5,352,004 - Fund balances, December 31 $ 5,062,654 S x.190.662 S I?8.008 The City amended the General fund budget during the year. The amendment resulted in a decrease of revenues ($210,800), an increase of expenditures ($26,850) and a increase in transfers out $51,700. The final budget called for a decrease of $289,350 from fund balance reserves. Actual change in fund balance was a decrease of $161,342. Some of the line items with significant variances from the final budget are highlighted below: • The City received $470,308 less than anticipated from intergovernmental revenues, of which $467,089 was due to the State of Minnesota's unallotment for LGA and market value credit to the City. • The current general government department expenditures were $337,152 under budget. • The current public safety department expenditures were $164,121 under budget. 0 ~'i 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 7, 2009 Page 7 A comparison between 2006, 2007 and 2008 revenues and transfers is presented below: Percent of Source 2006 2007 2008 Total General property taxes $ 6,903,177 $ 7,900,185 $ 8,751,019 74.7 Licenses and permits 1,207,368 987,708 460,108 3.9 Intergovernmental 1,379,289 1,369,707 897,492 7.7 Charges for services 845,305 749,698 692,374 5.9 Fines and forfeitures 150,401 148,904 129,504 1.1 Interest 217,751 234,780 172,239 1.5 Miscellaneous 57,552 83,932 136,194 1.2 Transfers in 432,686 441,803 463,500 4.0 Total revenues and transfers $ 11,193,529 $ 11,916,717 $ 11,702,430 100.0 A graphical presentation of 2006, 2007, and 2008 revenues and transfers follows: $10, 000, 000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- 2006 2007 2008 -~ General property taxes f Intergovernmental ~- Charges for services ~~ Other 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 7, 2009 Page 8 A comparison between 2006, 2007 and 2008 expenditures and transfers is presented below: Percent of Program 2006 2007 2008 Total General government $ 2,173,614 $ 2,377,897 $ 2,372,748 19.9 Public safety 4,873,270 5,084,372 5,511,829 46.6 Public works 1,505,213 1,750,821 1,800,494 15.2 Culture and recreation 1,340,026 1,496,202 1,640,489 13.8 Capital outlay 397,883 401,278 218,083 1.8 Transfers out 688,518 270,529 320,129 2.7 Total expenditures and transfers $ 10,978,524 $ 11,381,099 $ 11,863,772 100.0 A graphical presentation of 2006, 2007 and 2008 expenditures and transfers follows: $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- 2006 2007 2008 -~ General government --f- Public safety --}- Public works -~-Other 952.835.9090 Fax 952.835.3261 www.aemcpas.com II II i~ n t City of Elk River May 7, 2009 Page 9 Special Revenue Funds A summary of the special revenue fund balances (deficits) is shown below: Fund Nonmajor Library Ice Arena Pinewood Golf Course Senior Citizen Account Park Dedication Landfill Landfill Construction Debris Revolving Loan DTED Grant/Loan Development Fund Capital Outlay Reserve Emergency/Insurance Reserve Government Buildings Reserve Drug Forfeiture Reserve Severance Pay Reserve NSP/RDF Reserve YMCA Grant Economic Development Authority EDA DTED Loan Total Fund Balances (Deficits) December 31, Increase 2008 2007 (Decrease) $ 409,084 $ 273,788 $ 135,296 34,686 27,318 7,368 8,980 15,264 (6,284) (487,565) (303,949) (183,616) 1,359,122 1,456,847 (97,725) 664,820 638,765 26,055 803,829 1,010,949 (207,120) 644,676 135,002 509,674 433,719 485,406 (51,687) 1,369,328 2,376,519 (1,007,191) 578,455 582,358 (3,903) 2,278,057 1,997,274 280,783 14,490 4,648 9,842 138,356 132,934 5,422 531,160 413,021 118,139 1,788,215 - 1,788,215 1,001,549 749,044 252,505 213,694 212,420 1,274 $ 11,784,655 $ 10,207,608 $ 1,577,047 Following are the main reasons for some of the change in ending fund balances: • Consistent with 2007, the Park Dedication fund decreased mainly due to contract for deed payments and deferred park dedication credits. The City will eliminate this deficit fund balance with future park dedication revenues. • The DTED Grant/Loan fund received $500,000 from federal sources and did not have any related expenditures as of December 31, 2008. • The Capital Outlay Reserve fund decreased mainly due to transfers out of $1,000,000 for start up money for the City's Equipment Replacement fund. • The YMCA Grant fund increased related to a $2,000,000 Legacy grant from Sherburne County. 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 7, 2009 Page 10 Debt Service Funds Debt service funds are a type of governmental fund to account for the accumulation of resources for the payment of interest and principal on debt (other than enterprise fund debt). Debt service funds may have one or a combination of the following revenue sources pledged to retire debt as follows: • Prope .taxes -Primarily for general City benefit projects such as parks and municipal buildings. Property taxes may also be used to fund special assessment bonds which are not fully assessed. • Tax increments -Pledged exclusively for tax increment/economic development districts. • Capitalized interest portion of bond proceeds -After the sale of bonds, the project may not produce revenue (tax increments or special assessments) for a period of one to two years. Bonds are issued with this timing difference considered in the form of capitalized interest. • Special assessments -Charges to benefited properties for various improvements. In addition to the above pledged assets, other funding sources may be received by Debt Service funds as follows: • Residual project proceeds from the related capital projects fund • Investment earnings • State or federal grants • Transfers from other funds 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 7, 2009 Page 11 All debt service funds with the total assets and debt remaining to be paid are shown below: Cash and Final Temporary Total Bonds Maturity Debt Service Fund Investments Assets Outstanding Date Improvement Bonds $ 983,392 $ 2,863,719 2003A G.O. Improvement Bonds $ 520,000 02/01/14 2005A G.O. Improvement Bonds 870,000 02/01/16 2007C G.O. Improvement Bonds 3,090,000 02/01/18 State-Aid Road Bonds 277,946 08/20/13 Government Building Bonds 989,507 1,032,115 1997 City Hall and Law Enforcement Facility Revenue Refunding Bonds 670,000 02/01/11 2002A Public Safety Building Lease Revenue Bonds 6,500,000 02/01/23 1996C G.O. Ice Arena Bonds 850,000 12/01/13 2006C G.O. Capital Improvement Bonds 3,135,000 02/01/27 Equipment Certificates 353,054 377,152 2005D G.O. Equipment Certificates 293,500 02/01/10 2006B G.O. Equipment Certificates 262,200 02/01/11 2007B G.O. Equipment Certificates 200,333 02/01/10 TIF Bonds - - 2000A G.O. Tax Increment Bonds 505,000 02/01/15 Storm Sewer Revenue Bonds 73,990 81,380 1994C G.O. Storm Sewer Revenue Bonds 105,000 12/01/09 YMCA Bonds 330,976 346,307 2007D EDA G.O. Bonds 10,000,000 02/01/33 2008A EDA G.O. Bonds 2,000,000 02/01/15 Total Debt Service Funds $ 2,730,919 $ 4,700,673 $ 29,278,979 A summary ofnon-enterprise fund bonds outstanding relative to market va lue and population follows: Bonds Taxable Payable in Less Ratio of Market Debt Service Amount Net Debt Fiscal Population Value Funds Available Net to Market Net Debt Year (1) (2) (3) (4) Debt Value per Capita 2008 23,620 $2,200,817,140 $ 29,278,979 $ 2,792,614 $ 26,486,365 1.2 % $ 1,121 2007 23,187 2,012,917,400 28,740,350 2,212,639 26,527,711 1.3 1,144 2006 22,550 1,786,411,900 13,786,834 2,262,414 11,524,420 0.6 511 2005 21,548 1,540,274,950 19,977,701 6,595,667 13,382,034 0.9 621 2004 20,240 1,310,625,938 20,436,967 5,879,804 14,557,163 2.9 719 (1) Provided by City (2) Provided by County (3) Bonds reported in Debt Service funds (4) Available fund balance in the Debt Service funds 952.835.9090 Fax 952.835.3261 www.aemcpas.com ,~ ~ w~,. ~~ ~• I City of Elk River May 7, 2009 Page 12 Capital Projects Funds The fund balances of all capital projects funds are summarized below: Capital Projects Fund Major Street Improvement Improvement Projects YMCA Tax Increment Financing Districts Fund Balances December 31, 2008 2007 $ 4,976,353 $ 5,744,814 3,837,325 3,149,417 127,647 5,883,231 (312,050) 285,005 Increase (Decrease) $ (768,461) 687,908 (5,755,584) (597,055) Total major Nonmaj or Equipment Replacement Park Improvements 8,629,275 15,062,467 (6,433,192) 1,010,697 61,943 1,010,697 61,943 Total nonmajor 1,072,640 - 1,072,640 Total $ 9,701,915 $ 15,062,467 $ (5,360,552) The City has multiple individual projects that make up the funds presented above. The City should continue to monitor each individual project. The Tax Increment Financing Districts fund has a deficit fund balance at the end of the year. Council should review planned project sources for these funds and consider whether they will be available within a sufficient timeframe to cover current activity. 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 7, 2009 Page 13 Enterprise Funds The activities of the Enterprise funds include the municipal liquor, garbage, sewer, water and electric. The electric and water operations, under the direction of the Utilities Commission, are included in the financial statements since Council has the ultimate oversight responsibility for their operations. Municipal Liquor Fund The following is a summary of operations in the Municipal Liquor fund for the past three years: 2006 2007 2008 Amount Percent Amount Percent Amount Percent Sales $ 5,897,950 100.0 % $ 6,036,756 100.0 % $ 6,209,322 100.0 Cost of sales (4,233,420) (71.8) (4,318,304) 71.5 (4,421,064) (71.2) Gross profit 1,664,530 28.2 1,718,452 28.5 1,788,258 28.8 Operating revenues 8,818 0.1 6,332 0.1 4,335 0.1 Operating expenses (919,166) (15.6) (931,356) 15.4 (995,100) (16.0) Operating income 754,182 12.7 793,428 13.2 797,493 12.9 Nonoperating revenues 35,612 0.6 80,814 1.3 76,277 1.2 Transfers out (233,300) (4.0) (267,700) (4.4) (471,548) (7.6) Change in net assets $ 556,494 9.3 % $ 606,542 10.1 % $ 402,222 6.5 Cash and investments $ 2,277,746 $ 2,977,703 $ 3,400,274 Bonds payable $ 1,200,000 $ 1,150,000 $ 1,075,000 Municipal Liquor Fund Operations Summary $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- 28.2% 28.5% 28.8% 2006 2007 2008 o Sales -a- Gross profit -~ Operatingincome + Change in net assets ~-Cash and investment Sales, gross profit, and operating income all increased each year since 2006. Change in net assets was less than previous years mostly due to the increase in transfers out to other funds. 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 7, 2009 Page 14 The Office of the State Auditor annually publishes a report analyzing the operation of municipal liquor stores in the State. The most recent year of published information is for the year ended December 31, 2007. The statewide averages for all operations are summarized below. Off Sale 2005 2006 2007 Percent Percent Percent of Sales of Sales of Sales Sales 100.0 % 100.0 % 100.0 Cost of sales 75.2 75.3 74.9 Gross profit 24.8 24.7 25.1 Operating expenses 17.0 17.2 17.2 Operating income 7.8 7.5 7.9 Nonoperating revenue 0.2 0.5 0.8 Income before transfers 8.0 % 8.0 % 8.7 Source: Analysis of Municipal Liquor Store Operations, for the year ended December 31, 2007 Published by the Minnesota Office of the State Auditor The gross profit percent of the City remains above the state-wide average by approximately 3.5 percent . Also, the City's operating income percent is above the statewide averages. 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 7, 2009 Page 15 Garbage Fund The following is a summary of operations in the Garbage fund for the past three years: 2006 2007 2008 Amount Percent Amount Percent Amount Percent Operating revenues $ 1,116,063 100.0 % $ 1.146,973 100.0 % $ 1,183,132 100.0 Operating expenses 1,094,788 98.1 1,114,133 97.1 1,166,709 98.6 Operating income 21,275 1.9 32,840 2.9 16,423 1.4 Nonoperating revenues 5,695 0.5 9,872 0.9 11,055 0.9 Transfers in 47,667 4.3 26,860 2.3 37,883 3.2 Change in net assets $ 74,637 6.7 % $ 69,572 6.1 % $ 65,361 5.5 Cash and investments $ 192,402 $ 242,528 $ 308,640 Garbage Fund Operations Summary $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- ^Operatingrevenues ^Operatingexpenses ^Operatingincome ~Changein net assets ^Cashandinvestments The expenses of this fund are mainly contracted services that are generally fixed in amount and relate to the number of users. As a result, it is not necessary to carry a large cash reserve. The current level appears adequate. Cash has increased each of the last three years. 952.835.9090 Fax 952.835.3261 www.aemcpas.com 2006 2007 2008 ~i i~ i~ i~ City of Elk River May 7, 2009 Page 16 Sewer Fund The following is a summary of operations in the Sewer fund for the past three years: 2006 2007 2008 Amount Percent Amount Percent Amount Percent Operating revenues $ 1,352,647 100.0 % $ 1,454,219 100.0 % $ 1,511,165 100.0 Operating expenses 1,654,489 122.3 1,731,676 119.1 1,798,778 119.0 Operating loss (301,842) (22.3) (277,457) (19.1) (287,613) (19.0) Nonoperating revenues 1,188,785 87.9 1,248.210 85.8 491,357 32.5 Capital contributions 1,134,740 83.9 229,715 15.8 - - Transfers out (272,175) (20.1) (35,000) 2.4 (56,000) (3.7) Change in net assets $ 1.749,508 129.4 % $ 1,165,468 80.1 % $ 147,744 9.8 Cash and investments $ 5,537,681 $ 6,638.091 $ 3,837,262 Bonds payable $ 1.660,000 $ L~20.000 $ 1,375,000 Sewer Fund Operations Summary $7,000,000 $6,000,000 $5,000,000 $4,000,000 3 $3,000,000 $2,000,000 $1,000,000 ~'< $- $(1,000,000) 2006 2007 2008 ^Operatingrevenues ^Operatingexpenses ^Operatingloss ~Changeinnetassets ~Cashandinvestments The cash balance remains strong relative to operations. The decrease in cash from previous years is related to $3,746,547 used to acquire capital assets during 2008. The nonoperating revenue is made up mainly of connection fees This has been a large factor in the increase in cash over the last several years. These connection fees ultimately provide for current debt service and future expansion of the system. There have been operating losses for the past five years. Depreciation expense was $838,424 in 2008, which is included in the operating expenses. We recommend the City annually evaluate rates to insure revenues are covering costs. 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 7, 2009 Page 17 Water Fund The following is a summary of operations in the Water fund for the past three years: 2006 2007 Amount Percent Amount Percent Amount Percent Operating revenues $ 1,770,819 100.0 % $ 2,144,622 100.0 % $ 2,139,046 100.0 Operating expenses 1,860,439 105.1 2,112,796 98.5 2,160,261 101.0 Operating income (loss) (89,620) (5.1) 31,826 1.5 (21,215) (1.0) Nonoperating revenues (expenses) 873,948 49.4 440,752 20.6 (4,047) (0.2) Capital contributions 838,674 47.4 292,965 13.7 - - Transfers out (31,018) (1.8) (20,000) (0.9) (20,000) (0.9) Change in net assets $ 1,591,984 89.9 % $ 745,543 34.9 % $ (45,262) (2.1) Cash and investments $ 2,519,224 $ 2,394,387 $ 1,935,458 Bonds payable $ 5,736,250 $ 5,311,250 $ 5,031,250 * Net of $2,575,000 advance refunding o f 2001 A bonds. Refer to note 3G of the financi al statements for a dditional information Water Fund Operations Summary $3,000,000 $2,500,000 $2,000,000 $1,500,000 ~ ~~~~ $1,000,000 ;~ $500,000 ~~~, ~~~f.µ. $- $(500,000) 2006 2007 2008 ^Operatingrevenues •Operatingexpenses ~Operatingloss aChangeinnetassets mCashandinvestments For more information, see separately issued Elk River Municipal Utilities report. 2008 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 7, 2009 Page 18 Electric Fund A comparison of the past three year's Electric fund operations is as follows: 2006 2007 2008 Amount Percent Amount Percent Amount Percent Operating revenues $ 17,143,485 100.0 % $ 19,895,323 100.0 % $ 22,941,903 100.0 Operating expenses 15,879,150 92.6 18,264,135 91.8 21,604,910 94.2 Operating income 1,264,335 7.4 1,631,188 8.2 1,336,993 5.8 Nonoperating revenues 731,631 4.3 483,408 2.4 249,022 1.1 Transfers out (420,000) (2.4) (483,000) (2.4) (540,636) (2.4) Change in net assets $ 1,575,966 9.3 % $ 1,631,596 8.2 % $ 1,045,379 4.5 Cash and investments $ 2,041,306 $ 3,539,677 $ 4,633,052 Bonds payable $ 8,795,570 $ 11,052,804 $ 10,555,744 Electric Fund Operations Summary $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- 2006 2007 2008 ^Operatingrevenues ^Operatingexpenses ^Operatingincome ~Changeinnetassets ~Cashandinvestments For more information, see separately issued Elk River Municipal Utilities report. 952.835.9090 Fax 952.835.3261 www.aemcpas.com i~ ii II The following table gives an indication of the sources and uses of cash for the past five years: City of Elk River May 7, 2009 Page 19 Cash Provided (Used) By Beginning Non-capital Capital Ending Cash Operating Financing Financing Investing Cash Year Balance Activities Activities Activities Activities Balance 2008 $ 3,539,677 $ 4,394,357 $ (513,536) $ (2,933,272) $ 145,826 $ 4,633,052 2007 2,041,306 4,083,884 (485,85]) (2,238,249) 138,587 3,539,677 2006 2,016,433 3,053,162 (385,051) (2,804,163) 160,925 2,041,306 2005 2,361,856 3,059,049 (375,627) (3,063,265) 34,420 2,016,433 2004 1,720,813 2,917,129 (221,761) (2,076,518) 22,193 2,361,856 The cash provided by operating activities has remained relatively strong and was enough to keep up with the amount of capital and debt needs in 2008. The summary above highlights the significant amount of cash needed each year for the capital activities of the Utilities. The operations have been able to finance the capital activities for most of the last five l years. t e i 952.835.9090 Fax 952.835.3261 www.aemepas.com i~ ii II II II II City of Elk River May 7, 2009 Page 20 Ratio Analysis The following captures a few ratios from the City's financial statements that give some additional information for trend and peer group analysis. The peer group average is derived from information available on the website of the Office of the State Auditor. Different peer group averages are used for Cities of the 2°d class (population 20,000 - 100,000). The majority of these ratios facilitate the use of economic resources focus and accrual basis of accounting at the government-wide level. A combination of liquidity (ability to pay its most immediate obligations), solvency (ability to pay its long-term obligations), funding (comparison of financial amounts and economic indicators to measure changes in financial capacity over time) and common-size (comparison of financial data with other cities regardless of size) ratios are shown below. Comparative data for the peer group is unavailable for 2008. Ratio Calculation Debt to assets Debt service coverage Debt per capita Taxes per capita Total liabilities/total assets Source Government-wide Net cash provided by operations/ Enterprise funds enterprise fund debt payments Bonded debt/population Government-wide Tax revenues/population Government-wide 2005 2006 2007 2008 18.8% 18.0% 23.1% 22.9% 26.5% 23.8% 23.4% N/A 392.1% 226.5% 433.4% 338.6% 201.7% 240.8% 247.2% N/A $ 1,477 $ 1,610 $ 2,152 $ 2,190 $ 1,233 $ 1,389 $ 1,485 N/A $ 351 $ 423 $ 459 $ 514 $ 339 $ 381 $ 408 N/A Capital assets % left to Net capital assets/ Government-wide 75.7% 75.0% 74.2% 73.5% depreciate -Governmental gross capital assets 65.7% 69.7% 68.7% N/A Capital assets % left to Net capital assets/ Government-wide 70.4% 69.9% 67.9% 66.4% depreciate -Business-type gross capital assets 61.3% 64.9% 64.0% N/A Represents the City of Elk River Peer Group ratio The increase in the debt ratios from 2005 and 2006 is mainly due to the issuance of $12,000,000 of bonds related to the YMCA, along with other bonds issued. The YMCA will be paying 1 /3 of the debt payments related to the bonds issued. 952.835.9090 Fax 952.835.:3261 www.aemcpas.com City of Elk River May 7, 2009 Page 21 Debt-to-Assets Leverage Ratio (Solvency Ratio) The debt-to-assets leverage ratio is a comparison of a city's total liabilities to its total assets or the percentage of total assets that are provided by creditors. It indicates the degree to which the City's assets are financed through borrowings and other long-term obligations (i.e. a ratio of 50 percent would indicate half of the assets are financing with outstanding debt). 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 0 •5 ° 23.8% 23.4% 23.1 % 22.9% 18.8 % 18.0 2005 2006 2007 2008 ~-City ratio ~ Peer group average Debt Service Coverage Ratio (Solvency Ratio) The debt coverage ratio is a comparison of cash generated by operations to total debt service payments (principal and interest) of enterprise funds. This ratio indicates if there are sufficient cash flows from operations to meet debt service obligations. Except in cases where other nonoperating revenues (i.e. taxes, assessments, transfers from other funds, etc.) are used to fund debt service payments, an acceptable ratio would be above 100 percent. 500.0% 450.0% 400.0% 350.0% 300.0% 250.0% 200.0% 150.0% 100.0% 50.0% 0.0% 2005 2006 2007 t City ratio ~- Peer group average 392.1 % 433.4% 338.6% 226.5° 247.2 0 0 2008 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 7, 2009 Page 22 Bonded Debt per Capita (Funding Ratio) This dollar amount is arrived at by dividing the total bonded debt by the population of the city and represents the amount of bonded debt obligation for each citizen of the city at the end of the year. The higher the amount, the more resources are needed in the future to retire these obligations through taxes, assessments or user fees. $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $- $2,190 $1,477 $1,233 $1,389 $1,48 2005 2006 2007 2008 ~ City ratio -F Peer group average Taxes per Capita (Funding Ratio) This dollar amount is arrived at by dividing the total tax revenues by the population of the city and represents the amount of taxes for each citizen of the city for the year. The higher this amount is, the more reliant the city is on taxes to fund its operations. $700 $600 $500 $400 $300 $200 $100 $- $423 $459 $351 $408 $339 $381 2005 2006 2007 2008 ~ City ratio -~ Peer group average 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 7, 2009 Page 23 Capital Assets Percentage (Common-size Ratio) This percentage represents the percent of governmental or business-type capital assets that are left to be depreciated. The lower this percentage, the older the city's capital assets are and may need major repairs or replacements in the near future. A higher percentage may indicate newer assets being constructed or purchased and may coincide with higher debt ratios or bonded debt per capita. Governmental Activities 90.0% 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% 75.0% ' ° 74.2% 73.5% 0 69.7 65.7 2005 2006 2007 2008 ~-City ratio ~- Peer group average Business-type Activities 90.0% 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% 69.9% 67.9 61.3% 2005 2006 2007 t City ratio t Peer group average 2008 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 7, 2009 Page 24 Future Statute and Accounting Standard Changes 2009 Levy Limits During the 2008 legislative session, Minnesota legislators amended Statutes section 275.71 to enact levy limits for cities over 2,500 in population. This bill is in effect for taxes levied in 2008 through 2010. Annually the levy limit is multiplied by: 1. One plus the lesser of 3.9 percent or the percentage growth in the implicit price deflator. 2. One plus a percentage equal to 50 percent of the percentage increase in the number of households, if any, for the most recent 12-month period for which data is available, and 3. One plus a percentage equal to 50 percent of the percentage increase in the taxable market value of the jurisdiction due to new construction of class 3 property, as defined in section 273.13, subdivision 4, except for state-assessed utility and railroad property, for the most recent year for which data is available. In addition there are special levies that are currently allowed outside any levy limit. They are listed below: • Debt levies -includes bonds, most certificates of indebtedness and levies to pay the local share of bonds issued by another political subdivision • Voter approved levy increases • To pay federal or state matching fund requirements for programs instituted after 2001 • For costs to prepare for, or recovery from, natural disasters -upon approval by the commission of revenue • To pay amounts related to errors in levy certification in the previous year • To pay for property tax abatements • To pay increases in the employer share of PERA pension costs since 2001 • To pay operating and maintenance costs of county jails to the extent that the cost is required by the Department of Corrections Rules and Standards. • To pay for a lake improvement district • To repay a federal or state loan issued to help a local government pay the required local share of a federal or state transportation or other capital project • To pay court administration costs during the period in which court costs were being transferred from the counties to the state • To fund required police and firefighters relief funds, to the extent that the costs exceed costs in 2001 • To fund a storm sewer improvement district • To fund an animal protection society 952.835.9090 Fax 952.835.3261 www.aemcpas.com t it t i~ ~~ City of Elk River May 7, 2009 Page 25 • For counties, to pay for the increase in their share of health and human service costs caused by reductions in federal health and human service grants effective after September 30, 2007 • To fund increased costs of securing, maintaining, and demolishing foreclosed and abandoned housing in cities that have a 2007 foreclosure rate over a certain percent • To lost traffic citation revenue and unreimbursed costs of redeployed traffic control agents due to the collapse of the Interstate 35W bridge • To fund certain cost increases in police and firefighter costs • To recoup losses due to any unallotment of city and county general purpose aids and credits We recommend that the City review all of the options presented when calculating future years levies. There is further guidance provided by League of Minnesota Cities on how to estimate the 2009 levy limit on their website: www.lmc.org. The following Governmental Accounting Standards Board (GASB) Statements have been issued and may have an impact on future City financial statements: GASB Statement No. 51 -Accounting and Financial Reporting for Intangible Assets This statement was issued in June 2007 and is effective for periods beginning after June 15, 2009. The new standard characterizes an intangible asset as an asset that lacks physical substance, is nonfinancial in nature, and has an initial useful life extending beyond a single reporting period. Examples of intangible assets include easements, computer software, water rights, timber rights, patents, and trademarks. This statement requires that intangible assets be classified as capital assets (except for those explicitly excluded from the scope of the new standard, such as capital leases). Relevant authoritative guidance for capital assets should be applied to these intangible assets. The statement provides additional guidance that specifically addresses the unique nature of intangible assets, including: • Requiring that an intangible asset be recognized in the statement of net assets only if it is considered identifiable • Establishing aspecified-conditions approach to recognizing intangible assets that are internally generated (for example, patents and copyrights) • Providing guidance on recognizing internally generated computer software • Establishing specific guidance for the amortization of intangible assets. 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River 2008 Audit Abdo, Eick & Meyers, LLP Presented by Andrew Berg ri~pp 1 ]_I_JLO ^~ N E/I~,C~JK~[,~& lVLL'~ 1 Jul W LLk' C~er~,ifled PuGlir Accuarvl¢nls & (.i~nseJ«n7s 2008 Audit Results • Audit opinion -unqualified or "clean" - Including Federal Single Audit • No audit findings • No Minnesota Legal compliance findings • No difficulties or disagreements ,~~ ~ :s. ~` ABDO SICK & lVLL'~ 1 Jul W LLY (,'enifled Publir Accuanl¢n~s & (.itna'uflrtnls Accounting Standards • GASB 45 - Postemployment Benefits Other Than Pensions (OPEB} - Successfully implemented for 2008 • GASB 54 - Fund Balance Reporting and Governmental Fund Type Definitions • Clearer, more structured fund balance classifications • Clarify definitions of existing governmental fund types - Early implementation planned for 2049 or 2414 ,~~ ~ :s. ~` ABDO SICK & lVLL'~ 1 Jul W LLY (,'enifled Publir Accuanl¢n~s & (.itna'uflrtnls General Fund Ending Fund Balance as a percent of Budget ~l~,aoo,aao $1_,aaa,a0a $1 a,0ap,a~0 ~~,aaa,aao ~~.aop.a~o ~,oao,aoa ~_,aoa,aao ~- ~13,~a=~(~~~ ~1_,~~3~,lr~~k ~11.c~4~,~~~ ~la,~~t*,~'~i ~~3,~~~,~aa ~~ ~ ~11~~ ~~ ~~~ ~~ ~~m ~1 ~~~ ~~~ ~aa.~ ~aa~+ _aa~ ~aa~ ~aaa ~aa~ ~aa~ -e~ctuelFut-dB~len~c~es tBud~et ri~pp 1 ]_I_JLO ^~ N E/I~,C~JK~[,~& lVLL'~ 1 Jul W LLk' C~er~,ifled PuGlir Accuarvl¢nls & (.i~nseJ«n7s 2008 General Fund Operations lZe~'e11UeS EZpendihues EZCess {deticienc~-) of revenues o~-~er (under) expenditures Other linancin~ sources (uses} Transfers ill Transfers ottt Tot1~l other financing sources (uses) Net cliallae 111 hllld balallCes ~-ar1a11Ce 1Vit11 Final Final Budget - Blul~eted Achkzl Positive :-~111o1111tS _~1110L111tS (Negative) $ 11,819,150 $ 11,238,930 $ {580,220} 12,251,550 11,x-43,C~-13 708,207 {-132.700> (30-1,713> -163, 500 X63, 500 (320,150} (320,129} 1-13,350 13,371 {289,350) {161,32} 127,987 21 21 128,008 Fluid balances, Janual~- 1 5,352,00-1 5,35? Ot)-4 - Fund balances, December 31 $ 5,OG2,65~ $ 5,190,662 $ 125,008 ,~~ ~ :~. ~` ABDO SICK & lVLL'~ 1 Jul W LLY (,'enifled Publir Accuanl¢n~s & (.itna'uflrtnls General Fund Revenue by Source ~io.~a~.~ao $~.oao.o®a ~~,ooo.ooo ~f.1flf6l.{fV0.i ~~. V V o. 0410 $.~,ooo,ooo ~,ooo.ooo ~.ooo,ooo ~a,ooo,ooo xl.ooo.oc~o ~- 3ot}~ ?t)o~ 300 -*-~ ~~elprals~texe~ -f! l~tergov~uus~utel ~ Cliergafarasrwice~ -~t?t1i~ ,~~ ~ :s. ~` ABDO r SICK & lVLL'~ 1 Jul W LLY (,'enifled Publir Accuanl¢n~s & (.itna'uflrtnls General Fund Expenditures by Program ~~0000.~00 ~S.OOO~OOD x.000.000 X3,000,00® $3.000,000 ~1.000.!~00 :~- 3006 3007 3001; ~ ~iat~al a~~s~uueut # Fubli~ ~e&#}~ -~ PuWI~ r+rorka -~ t)t1-er ABDO ' ~EI~C~JK~[,~& lV1L'~ 1 Jul W LLk' Ccr~,ified Public /lcc~uanl~uu~s & (.iu~su/,lttnle Special Revenue Fund Fund Noiuna j or Libran~ Ice arena Pinewood Uolf i"ourse Se7iior Citizen .~ccoiuit Park Dedication Landfill Landfill Coilshuction Debris Revolvin~~ Loan DTED Cirant!Loan Development Fluid Capital Outla~~ keseati~e Emersrenc~~~Ti~stnance Reserve Uover~mlent Buildvi~~s Reserve Di~r~ Furfeihue kese~n-e Severance Pav Reserve NSPiRDF Resert<e Yl~~k' a Urant Economic Development ~uthorit~~ ED:-~ DTED Loan Total FunclBalances (Deficits) December 31, Increase X003 ?0(:)7 (Decrease} $ ~U9,03~ $'73,733 $ 13>,'9(i -1,636 '7, ~ 13 7,363 3,931) 1 ~?6-4 (C?3-3) (-437, ~6 } (303,0-1~) i (133,616) 1,3~9,1Z 1,~36,3~7 t97,7?~> 66-1,3.'0 633J6; ''6,0;; 303,3'9 1,010,99 {.'07,1.'0) Ci~~,676 133.003 5C}9.67-4 -133,719 -13),-106 (.31,637) 1,369,3?3 ?,37G,~19 {.1,007,191) 37S,~» >3?,;33 (3,903) '?73,0;7 1,997,~'7~ X30,733 1-1,-490 ~,6~3 9, 3=4.' 1;3,336 13?,934 ,~~-, X31,160 X13,021 113,139 1,733,21) - 1,733?1 1,001,39 7~9,0~4 2>2 50 213,69 212,20 1,27-1 $ 11,73-4,6~~ $ 10,2(_!7,003 $ 1,77,1)-47 ri~pp 1 ]_I_JLO ^~ N E/I~,C~JK~[,~& lVLL'~ 1 Jul W LLk' C~er~,ifled PuGlir Accuarvl¢nls & (.i~nseJ«n7s Debt Service Fund Cash and Finial Temporat~ Total Bonds 1\iaturit<~ Debt Service Ftuid Invesh»ents Assets Outst<uxling Date Improvement Bonds $ 943,392 $ 2,463J19 2003A (i_U. Itllhl Ovelllellt BOl1i1S ~ ?2~),~)OO ~)~~ O1 ~ 14 2UOSA G_( ). It11pTOVe111el1t BO]1dS 470,0(.)(.) U2!O1? 16 20070. G.O. Improvement Bonds 3,090,000) 02!01 i 1 Suite-Aid Road Bonds 277..946 04!20!'13 Govennnellt BLllldlll~~ BO]1dS ~)~~'~), ~O7 1.O ~ ~,1 1 J 1997 City- Hall and Law Enforcement Facilit<' Revenue Refiuxlit~ BonCls 670,000) 0''U l i 11 20C)2A 1?ub11C Satet<' Bulldlll~T, L0aS0 Reve]1Lte BOndS O,500,0)O(.) 02!01 ~~23 19960, G.O. Ice Arena Bonds 450,000) L!Olili 20060 G.O. Capital Improvement Bonds 3,135,000) 02i0L'27 Equipment Certificates 353,054 377.1 ~~ 2()05D G.t=>. Equipment Certificates 293,500) 02101110) 20C)6B tT.O. Equipment Certificates 262,200 02i0U'11 '0078 G (~ Equipment Certificates 200,333 0201J1{) TIF Bonds - - ?000~ : (r.C). Tam Increment Bonds 303.000 0~'Ol l l i Sturm Sewer Revenue BoncLs 73,990 41.34(1 19940 G.O. Stone Sewer Revenue BimcLs 105.0fx) 12/01109 I'It~ICABoncLs 330),976 346,307 3007I)EI).-~Ci_O. Bonds 10.000.000 0~ 0133 2004AEDA G_O. Bonds 2,000,00)0 02!01115 Tot<zl Debt Service Ftuxls $ 2.730,919 $ -1,700.673 $ 29?74,979 ABDO & ~ EICK ~ ~ ' lVLL ~ 1 Jul W LLk' Cerlifiad Public Accuanl¢nrs & (.i~nsullan~.c Capital Projects Fund Fund Balances December 31, Increase ects Fund 2008 2007 (Decreasel Major Street Improvement Improvement Projects YMCA Tax Increment Financing Districts $ 4,976,353 $ 5,744,814 $ (768,461) 3,837,325 3,149,417 687,908 127,647 5,883,231 (5,755,584) (312,050) zs5,oo5 (s97,o55) Total major Nonmajor Equipment Replacement Park Improvements Total nonmajor 8,629,275 15,062,467 (6,433,192) 1,010,697 61,943 1,072,640 - 1,010,697 - 61,943 - 1,072,640 Total $ 9,701,915 $ 15,06'?,467 $ (5,360,552) ,~~ ~ :~. ~` ABDO SICK & lVLL'~ 1 Jul W LLY (,'enifled Publir Accuanl¢n~s & (.itna'uflrtnls Liquor Fund Operations ~7.afla,Ofl4 ~~,oaa,aaa ~~,oao,aaa ~,oaa,aaa ~,oao,aaa ~~.aoa,aaa ~i,aaa,aaa s- ,s s4 ,~ ,~~ ~s.;a.o _~._ ioa~ =ao~ ~aa~ 09eter {C~roasps~5t ~aperatiu~iuooaue ~~t7~o~-~e~ueto~oi~ =~~-Ceesliand~r~hrxevt ~' ABDO I!~ SI.C JK~ ~& lVLL'~ 1 Jul l~J LLY Cer~,ificd PuGlir Accuanl~an~s & (.i~nsul(ren7.~ Garbage Fund ~1.~~.~~ ~~~~~a~o ~~~~.~A~ ~Id W aL/{d~ ~~~~~~~~ ~~ ?~06 ?D09 ~OC?7~ p r;t~sei,+turq~l ~+-eutse~ 0 t:~}ss~ ahutt~ e~su~e~ D F~sa ~tut~tiu~+MUa D c'lz.+up~o m uet c~etr D t: ;~v w+~ ~ugx~huouF~ ,~~ ~ ,s. ~` ABDO SICK & lVLL'~ 1 Jul W LLY (,'enifled Publir Accuanl¢n~s & (.itna'uflrtnls Sewer Fund ~~,aao,aao ~~.oao,aaa ~.DOO,DQO ~3,QDa.OQO ~~,aQ0,DD0 ~1.aQA,DAa ~- ~ti.ooo.oao~ ~aa~ .aaa _Qa~ pt;~soi,tui~»~ani~sg 0~;;~ssi~hu.~er~s~ea 0~;?~+r~~}m~lr~m OC'1~~uq~ouivat+~At~ OCt+p~,~udiu~-e~tu~~xi~ ,~~ ~ :s. ~` ABDO SICK & lVLL'~ 1 Jul W LLY (,'enifled Publir Accuanl¢n~s & (.itna'uflrtnls Water Fund .~~.~~ ~..aao.ra~o ~l.~oo.aeo J ~t~9~~~ ~~ ~~ d' ~t1a~H~~ ~~~~ r~u~ ~~~~ ^opezariu~mrouues ^~psntiu;+zpauser ^Dga~~lora OC'tiau~eiuueta~erde orestiaudiut ,~~ ~ :s. ~` ABDO SICK & lVLL'~ 1 Jul W LLY (,'enifled Publir Accuanl¢n~s & (.itna'uflrtnls Electric Fund ~:~,Q[4A,4D0 ~a~rl~fal~4RNeA~V ~i~,aon,n~o ~i~,anA,aao ~- 3Q[}b .OI}7 3DC~8 ^ t3perat~u~ retrouuar ^ [3peratiu~ espauae ^ ~pentiu; iuo®aue o C'l~w~s iu ust asset o Ceeh eud~urw~ua~ ,~~ ~ :s. ~` ABDO SICK & lVLL'~ 1 Jul W LLY (,'enifled Publir Accuanl¢n~s & (.itna'uflrtnls Debt-to-Assets Leverage Ratio (Solvency Ratio) ~~~~4 3~.t~o .3~.~D ~~.~b ~o.o~a l~.t~o 1D.Q'?a i.4° ~ R.~° ~ R4 ~... 4 i h.~Qfi ~,9.~Q"4 ~~.i~ ~~.~~o l ~.~e~o- l ~.OQ ~OQ~ _t~D6 3DQ7 ~c~tyrerie ~Paeap~upn,e~~e _naa ri~pp 1 ]_I_JLO ^~ N E/I~,C~JK~[,~& lVLL'~ 1 Jul W LLk' C~er~,ifled PuGlir Accuarvl¢nls & (.i~nseJ«n7s Debt Service Coverage Ratio (Solvency Ratio) ~on~a~~ ~O~.D°a 3:~0.1~?b 3DO.U°~ ~~Q.~"a 1~4.t)°o 1D~.Q4~ i0.0? a O,t~°~ s~~.~~ ~~":a¢¢ ?Al.'~'a 2al~.~p~ :OUi 3R[~l~ 3[~D7 t['ityr~~ #Peorp+aupan°era~e ~[~0~ ri~pp 1 ]_I_JLO ^~ N E/I~,C~JK~[,~& lVLL'~ 1 Jul W LLk' C~er~,ifled PuGlir Accuarvl¢nls & (.i~nseJ«n7s Bonded Debt per Capita (Funded Ratio) ~.~~ ~.~~~ ~,aoo ~=.500 ~~.000 ~i.500 ~i.00o X500 ~- x.1911 ~`~~la~ ~1.~~'~ ~1~?~7,i $1~~~R! ~l.~~a _o0s _0~~ _ooa :~0$ ABDO 1V1L'~ 1 Jul l~J LLk' (;er~,i~ied Public l~ll'~Lllld(1R15 & (.i~nsuJ(undc Taxes per Capita (Funding Ratio) -~~ ~~oo ~~ao ~Qp 3~[~D ~~00 ~1QD ~- ~~la ~~~~ ~~~~ ~3~1 ~~~~ ~+ifd ~ ~~1 _aQ~ _o~~ =ao~ ~c~o~ ABDO lVLL'~ 1 Jul W LLk' (,'enified PuGlir Accuarvl~¢nls & (.iuiseJ(~n7s Governmental Activities -Capital Asset Percentage ~o.o~ Q ~~.Q9a ~D.tY°a ~~o~l! ~°~.~D ~~.~4 ~Q.~~ ~~.~~ ~O.t1°o "~.D°a ~R~TQ~ T.J.~~'O ~~.~ #+0 ~~.T ~+d ~tR~~¢~ f,RKf'~Q~ _t~0 ~ 3t~OtS 3t}t~7 _D~~ ABDO lVLL'~ 1 Jul W LLk' Certified PuGlir Accuanl~¢nls & (.i~nseJ«n7s Business-type Activities -Capital Asset Percentage ~~,+~ ~~.~"a ~0.0'~b ~i.0°i~ 7~.Q'~!~ 6i.D~a 6[~o~°~a 3~.~°b iR~[~°o ~~-.!~ ~Q.~~6 ~1.3~~a 3Q03 _t~p6 ~~.~° ~.1.1~°"a 3~~i 30t~8 ri~pp 1 ]_I_JLO ^~ N E/I~,C~JK~[,~& lVLL'~ 1 Jul W LLk' C~er~,ifled PuGlir Accuarvl¢nls & (.i~nseJ«n7s Elk River Fire Relief Association averages I`ear c.'alculation '0(:)-1 ~'00~ ~'00C~ '007 ~'00~ average rate of retitt~l5 Net investment income) 8.1% ~.-~% 111.3% 7.7% -33.1% a~'era~e net assets (i.8% ~.0% 9.~% 6.0% N/a Yercenta~~e landed Net assztsraccrued liabilih~ 98.9% lOS.9% 11-4.8% 11.4.7% 7U.9% 111x,1% 111-4.1% 111.1.1.1% l1i9.8% N/~ Client Name Fire Relief association Peer (Troup ,~~ ~ :s. ~` ABDO SICK & lVLL'~ 1 Jul W LLY (,'enifled Publir Accuanl¢n~s & (.itna'uflrtnls Rate of Return ~~,~~ 3~~(~a :~,~~ 1~.Q1°a (1 D.Om A) (~o.k~®) (3D.I~' e) (~0~0°~~ ~3.1~0 1~l_.~'~~x ? '~~ ;.tea ~ §~~ -33 1'~ ~ '_QCl~ sppr; 30t~6 ~~Pirereliefreto #Feorp+onpm°ero~e '_00~ 3~[)7~ ri~pp 1 ]_I_JLO ^~ N E/I~,C~JK~[,~c~ lVLL'~ 1 Jul W LLk' C~er~,ifled PuGlir Accuarvl¢nls & (.i~nseJ«n7s Fund Percentage l aD.D~D ~ - 1~~.iY'a - 13D.D'D~a - 11D.0°o - 9(!.0° c - 'D,(}°o - ~~:0°a , 11~ ~ 11~'a~a 1~~~ 1"~~ 1t?i..~~ 110,I~~ 10~ ~ 1 El-41a !~~'. ~ a '~# !~' ~ _~(~# ~QD~ 3I~~~ -1h~s~aLef'~S~~aut Fa~a ~1ai+~S,r4~~_~z =[~(1' ~OD'~ ri~pp 1 ]_I_JLO ^~ N E/I~,C~JK~[,~& lVLL'~ 1 Jul W LLk' C~er~,ifled PuGlir Accuarvl¢nls & (.i~nseJ«n7s