CITY OF LITTLE FALLS, MINNESOTA
AUDITED FINANCIAL STATEMENTS
CITY OF LITTLE FALLS, MINNESOTA
CITY OFFICIALS
December 31, 2011
ELECTED COUNCIL POSITIONS
Catherine VanRisseghem, Mayor
Brian-Paul Crowder, At Large
Loren Boyum, First Ward
LeeAnn Doucette, First Ward
Urban Otremba, Second Ward
Donald Klinker, Second Ward
Frank Gosiak, Third Ward
Jeremy Hanfler, Third Ward
NON-ELECTED POSITIONS
Gerald Lochner
Lori Kasella
Lori Kasella
TERM EXPIRES
12/31/14
12/31/14
12/31/12
12/31/14
12/31/12
12/31/14
12/31/12
12/31/14
Co-Acting City
Administrators
Finance Officer
Independent Auditor's Report
CITY OF LITTLE FALLS, MINNESOTA TABLE OF CONTENTS
Management's Discussion and Analysis BASIC FINANCIAL STATEMENTS
Government-wide Financial Statements: Statement of Net Assets
Statement of Activities Fund Financial Statements:
Balance Sheet- Governmental Funds
Reconciliation of the Balance Sheet to the Statement of Net Assets -Governmental Funds
Statement of Revenue, Expenditures and Changes in Fund Balances- Governmental Funds
Reconciliation of the Statement of Revenue, Expenditures and Changes in Fund Balances to the Statement of Activities
- Governmental Funds
Statement of Net Assets- Proprietary Funds
Statement of Revenue, Expenses and Change in Net Assets-Proprietary Funds
Statement of Cash Flows- Proprietary Funds Notes to Basic Financial Statements
OTHER REQUIRED SUPPLEMENATARY INFORMATION
Required Supplementary Information Other Than Management's Discussion and Analysis: Budgetary Comparison Schedule:
General Fund
Note to Required Supplementary Information
COMBINING & INDIVIDUAL FUND FINANCIAL STATEMENTS Non-Major Governmental Funds:
Combining Balance Sheet
Combining Statement of Revenue, Expenditures and Changes in Fund Balance Non-Major Special Revenue Funds:
Combining Balance Sheet
Combining Statement of Revenue, Expenditures and Changes in Fund Balance Non-Major Capital Projects Funds:
Combining Balance Sheet
Combining Statement of Revenue, Expenditures and Changes in Fund Balance Non-Major Enterprise Funds:
Combining Statement of Net Assets
Combining Statement of Revenue, Expenses and Change in Net Assets Combining Statement of Cash Flows
Internal Service Funds:
Combining Statement of Net Assets
Combining Statement of Revenue, Expenses and Change in Net Assets Combining Statement of Cash Flows
PAGE 1 3 8 9 10 11 12 13 14 15 16 17 38
39
40
4142
46
50
53
56 57 58 59 6061
Statements of Revenue, Expenditures and Changes in Fund Balance of Individual Funds - Budget and Actual
General Fund
Housing and Redevelopment Authority Fund Heritage Preservation Commission Fund Parks and Recreation Fund
Airport Operating Fund
Statements of Revenue, Expenses and Change in Net Assets of Individual Funds- Budget and Actual:
Water Utility Fund Wastewater Utility Fund Storm Water Utility Fund Municipal Golf Course Fund Recycling/Garbage Fund
SUPPLEMENTARY INFORMATION
Schedule of General Obligation Debt Maturities Combined Schedule of Bonds and Notes Payable Schedule of Sources and Uses of Public Funds:
Tax Increment Financing Districts: Mississippi Flats HRA District No. 1-1 Buckman Hotel Project District No. 1-10 Anda Housing Project District No. 1-11
Roach/Bridgeway Estates/Evermore Projects District No. 1-18 West River Development District No. 1-20
Highland Court Townhomes District No. 1-23 Northern United, Inc. District No. 1-26
Integrated Molding Concepts, Inc. District 1-28 North Bluff Business Park District No. 1-29 Downtown Disaster Area District No. 1-30
Our Lady of Angels Housing Redevelopment District No. 1-32 Larson Motor Services Redevelopment District No. 1-33 Walgreen's Area Redevelopment District No.
1-35
Minnesota Veterinary Associates District No. 1-36 Trident Housing District No. 1-37AirBorn Expansion and Relocation Project District No.
1-38
INDEPENDENT AUDITOR'S REPORTSReport 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
Schedule of Findings
Auditor's Report on Legal Compliance
62
69
70 71 7374
76
78 79 8283
84
90 91 9293
94
95
96
97
98
99
100 101 102 103 104105
106 108 109Honorable Mayor and Members of the City Council
City of Little Falls, Minnesota
INDEPENDENT AUDITOR'S REPORT
GARY
W.
PAULSON
Certified Public Accountants 61 First Avenue NE Little Falls, MN 56345
Tel. (320) 632-3656 Fax. (320) 632-3657
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Little Falls, Minnesota as of and for the year ended December 31, 2011, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Little Falls, Minnesota's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Little Falls, Minnesota as of December 31, 2011 and the respective changes in financial position, and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
As discussed in the notes to the basic financial statements, the City of Little Falls adopted the provisions of Government Accounting Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions in the year ended December 31, 2011.
In accordance with Government Auditing Standards, we have also issued our report dated June 22, 2012, on our consideration of the City of Little Falls, Minnesota's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information on pages 3 through 7 and 38 and 39 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing ·the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Little Falls, Minnesota's financial statements as a whole. The combining and individual fund financial statements are presented for purposes of additional analysis and are not a required part of the financial statements. The combining and individual fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.
Gary W. Paulson
Certified Public Accountants
City of Little Falls, Minnesota Management's Discussion and Analysis
Year Ended December 31, 2011
This section of the annual financial report of the City of Little Falls, Minnesota (the City) presents a discussion and analysis of the City's financial performance during the fiscal year ended December 31, 2011 and should be read in conjunction with the basic financial statements.
Financial Highlights
o The assets of the City exceed liabilities by $40,027,854. The unrestricted portion of the net assets available to meet ongoing obligations is $18,193,124.
o The City's governmental funds reported fund balances of $9,362,172. Of this amount, the restricted balance is $1,060,528.
o Net assets of the enterprise funds are $15,531,404, of which $3,972,641 is unrestricted.
o At the end of the current fiscal year, the unassigned fund balance of the general fund was $575,139, or 18% of the general fund expenditures.
Overview of the Financial Statements
The discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.
Government-wide Financial Statements- The government-wide financial statements aredesigned'to provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business.
The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the
two
reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenue and expenses are reported in this statement for some items that will only result in cash flows in future periods (e.g. uncollected taxes and earned, but unused, vacation leave).
Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works, culture/recreation, community development and airport operations. The business-type activities of the City include water, wastewater, golf, recycling/garbage and storm water.
The government-wide financial statements can be found on page 8-9 of this report.
Fund Financial Statements- A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds.
Governmental Funds - Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financial requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statement. By doing so, readers may better understand
the long-term impact of the City's near term financial decisions. Both the governmental funds balance sheet and governmental funds statement of revenue, expenditures and change in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
The City maintains three individual major governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenue, expenditures and changes in fund balances for the general fund, one special revenue fund, and the debt service fund, all of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report.
The City adopts an annual appropriated budget for its general and some non-major special revenue funds. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with the budget. The basic governmental fund financial statements can be found on pages 10-13 of this report.
Proprietarv Funds- The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the governmental-wide financial statements. The City uses enterprise funds to account for its water, wastewater, golf, recycling/garbage and storm water operations. Internal service funds are accounting devices used to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for its severance, liability insurance and health insurance activities. Their activity has been consolidated in the government-wide statements.
Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water and wastewater funds. The golf, recycling/garbage and storm water operations are combined in the non-major column. All internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 14-16 of this report.
Notes to the Financial Statements- The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 17-37 of this report.
Other Information- In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information. Required supplementary information can be found on pages 38-39 of this report.
Government-Wide Financial Analysis
Our analysis below focuses on the net assets of the City.
Current and other assets Capital assets
Total Assets
Current and other liabilities Long-term liabilities
Total Liabilities Net Assets:
Invested in capital assets, net of related debt Restricted
Unrestricted Total Net Assets
Statement of Net Assets
Governmental Business-Type
Activities Activities
Current Previous Current Previous
Year Year Year Year
$ 20,500,208 $23,383,183 $ 33,192 $ 1 ,530, 719 3,076,725 20,814,296 23,891,021 9,215,439 1,060,528 14,158,703 $ 24,434,670 27,574,354 20,295,954 20,311,261 50,957,537 20,329,146 21,841,980 7,214,222 697,394 2,081,650 21,364,531 4,038,568 4,409,568 28,578,753 4, 735,962 6,491 ,218 9,732,393 875,407 11 770,984 $22,378,784 11,558,763 9,811,486 4,034,421 5,539,276 $15,593,184 $15,350,762 Total Primary Government Current Previous 9,295,872 25,774,099 35,069,971 20,77 4,202 19,543,879 1 ,060,528 875,407 18,193,124 17,310,260 $ 40,027,854 $ 37,729,546
Total current assets of the City decreased $4,380,502. In the prior year, the City had $5,067,456 in escrow to call the 2005A, 20058, 2005C and 20050 bond issues. These were defeased in February 2011, and thus the escrow balance at year-end was $0. The cash and investment balances rose by $708,858 or 6%. Capital assets increased due to new asset acquisitions exceeding depreciation expense.
Short term liabilities decreased $5,521,753 over the prior year. The final payment of principal and interest on the refunded debt issues discussed in the previous paragraph were included in current liabilities in the prior year. With the call of the bonds that liability decreased. Accounts payable in the current year have decreased due to construction payables and the fire truck purchase payable in the prior year. Long-term liabilities have decreased in both the governmental and business-type activities due to the payment of bonded debt principal.
A portion of the City's net assets represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets totaling $18,193,124 may be used to meet the City's ongoing obligations to citizens and creditors. Net assets of the City as a whole increased by 6%, with increases in both the governmental and business-type activities.
The change in net assets of the City is shown below:
Governmental Business-Type
Activities Activities Total
Current Previous Current Previous Current Previous
Year Year Year Year Year Year
Revenue
Program revenue
Charges for services $ 494,785 $ 456,371 $ 4,050,279 $ 4,042,875 $ 4,545,064 $ 4.499,246 Operating grants/contributions 195,987 806,827 195,987 806,827 Capital grants/contributions 1,761,338 1,324,313 1,761,338 1,324,313 General revenue Property tax 2,836,156 2,648,891 2,836,156 2,648,891 other taxes 740,504 712,355 740,504 712,355 Grants/contributions not
restricted to specific programs 2,181,136 2,181,840 2,181,136 2,181,840 Investment earnings 129,226 85,143 122,814 117,470 252,040 202,613 Other 590 118 230,504 34024 32,222 624,142 262.726 Total Revenue 8,929,250 8,446,244 4,207,117 4,192,567 13,136,367 12,638,811 Expenses General government 676,558 690,861 676,558 690,861 Public safety 1,787,297 1,783,596 1,787,297 1,783,596 Public works 2,011 '144 1,837,585 2,011 '144 1,837,585
Culture and recreation 682,874 680,205 682,874 680,205
Community development 494,884 482,409 494,884 482,409
Airport operations 520,220 503,859 520,220 503,859
Unallocated depreciation 55,915 55,915 55,915 55,915
Interest on long-term debt 874.472 905,586 874,472 905,586
Water 1,159,614 1,430,871 1,159,614 1.430,871 Wastewater 1,680,109 1,665,473 1,680,109 1,665,473 Storm water 36,178 15,105 36,178 15,105 Golf 452,422 473,385 452,422 473,385 Recycling/garbage 335,437 339,705 335,437 T alai Expenses 7,103,364 6,940,016 3,920,271 10,771,392 10,860,287 Change in Net Assets Before
Transfers 1,825,886 1,506,228 539,089 272,296 2,364,975 1,778,524
Transfers 230,000 230,000 (230,000) (230,000)
Change in Net Assets 2,055,886 1,736,228 309,089 42,296 2,364,975 1,778,524 Net Assets, Beg of Year, as restated 22,378,784 20,642,556 15,284,095 15,241,799 37,662,879 35,884,355 Net Assets, End of Year $ 24,434,670 $22,378,784 $ 15,593,184 $ 15,284,095 $ 40,027,854 $ 37,662,879
The governmental activities' net assets increased by $2,055,886 during the current fiscal year. Total revenue of the governmental activities increased $483,006 or 6%. The largest increases were in capital grants and contributions where street project reimbursements from federal and state and special assessments were more substantial than in the prior year. Tax levies were also increased. The change in other revenue is due to the recognition of revenue in the debt fund for interfund loan activity. The largest current year reduction in revenue is in operating grants. In the prior year the City received $600,000 in DEED grants for revolving loan purposes.
Expenses increased by $163,348 or 2% over that of the prior year. Most areas saw only modest increases or decreases in expenses from the prior year. There were two areas with larger increases. Public works expense increased due to capital projects activity and airport had approximately $17,000 more in improvement costs to the facility. Because economic conditions affected revenue, the City sought ways to reduce expenses to preserve the net asset balance.
In the business-type activities, net assets increased $539,089 due to less expense during the current year of $252,243 or 6%. The water fund had the largest decrease in expense. Utilities, supplies, repair and maintenance and other improvements all had decreased expense in the current year. Revenue in the business-type activities saw little change with an increase of $14,550 over the prior year.
The cost and net cost of all programs are detailed below:
2011 2010
Total Cost of Net Cost Total Cost of Net Cost of
SeiVices of Services Services Services
General government $ 676,558 $ 618,735 $ 690,861 $ 617,345
Public safety 1,787,297 1,382,257 1,783,596 1,416,099
Public works 2,011 '144 292,604 1,837,585 544,121
Culture and recreation 682,874 653,690 680,205 659,168
Community development 494,884 494,884 482,409 (118,731)
Airport operations 520,220 278,697 503,859 273,002
Unallocated depreciation 55,915 55,915 55,915 55,915
Interest on long-term debt 874,472 874,472 905,586 905,586 7,103,364 4,651,254 6,940,016 4,352,505 Water 1,159,614 (389,952) 1,430,871 (178,025) Wastewater 1,680,109 5,391 1,665,473 1,162 Storm water 36,178 (41,123) 15,105 (62,263) Golf 452,422 75,720 473,385 83,885 Recycling/garbage 339 705 (32,287) (34,030) 3,668,028 (382,251) (189,271) $ 10,771,392 $ 4,269,003 $ 4,163,234
Financial Analysis of the City's Funds
Governmental Funds
At the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $9,362,172 a decrease of $2,585,151 when compared to the prior year. The escrow balance of debt proceeds of the prior year used to call four issues in 2011 decreased the assets of the governmental funds, while new bond proceeds of $1,738,600 causes an increase in fund balance. Some of the fund balance ($1,060,528) has been reserved and is not available for new spending.
Genera! Fund Revenue
Licenses and pennits--..__ Fines
Intergovernmental revE>nUE>--...::o
Investment income and other
Taxes
General Fund Expenditures
Culture and recreation General government
Public safety I
The general fund reports a fund balance of $854,194 at year end; an increase of $56,806 from the prior year. The economic development loan fund had an ending fund balance of$319,822; an increase of$95, 710 from the prior year. The loan repayments exceeded new loans expended.
The debt service fund had a decrease of $3,568,737 ending the year with a fund balance of $5,082,787. Included in principal payments expenditures during the current year was the call of four bond issues.
Enterprise Funds
The change in net assets of all enterprise funds at year end amounted to $306,361. The water fund reported an increase in net assets of $34 7,406 while the wastewater fund experienced a decrease of $19,423. The water fund had a reduction of expenses in the current year because of less repairs and improvements. The wastewater fund is comparable to the prior year.
Budgetary Highlights
The original budget was not amended during 2011.
Capital Assets
Net capital asset additions were $1,450,773 in the governmental funds and $929,718 in the business-type activities.
Refer to Note 7 of the basic financial statements for a schedule showing the City's capital asset activity.
Long-Term Debt
At year-end, the City had bonded indebtedness of $27,347,235 compared to $33,401,235 at December 31, 2010. New debt consisted of three issues totaling $1,738,600. The proceeds were used to fund improvement projects and to purchase a jetting machine and a fire truck. The principal payments for the year amounted to $7,792,600.
Refer to Note 8 of the basic financial statements for a schedule showing the City's long-term debt activity. The City's Standard and Poor's bond rating was A+; unchanged from the prior year's rating.
Economic Factors and Next Year's Budget
The City Council and Staff considered many factors when setting the fiscal year 2012 budget, including: rates and fees that will be charged for business type activities, cuts in local government aid funding, cuts and or the elimination of market value credits and staffing options. Taxable market values in the City have declined somewhat and new development has leveled off. The City continues to be concerned about the effects of the economy on our local budget. We are making efforts to control spending and balance that with needed updates to our aging infrastructure.
Contacting the City's Financial Management
This financial report is designed to provide our citizens, customers and creditors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have any questions about this report or need additional information, contact the City of Little Falls; 100 7'" Avenue NE; Little Falls, MN 56345 or call (320) 616-5500.
City of Little Falls, Minnesota Statement of Net Assets
December 31, 2011
Governmental Business-Type
Activities Activities Total
Assets
Cash and temporary investments $ 9,774,904 $ 2,763,170 $ 12,538,074
Investments 125,051 1,002,514 1 '127,565 Receivables 5,915,955 434,195 6,350,150 Accrued interest 15,233 18,418 33,651 Internal balances 4,265,843 (4,265,843) Inventories 303,066 71 '183 374,249 Prepaid items 39,882 9,555 49,437 Deferred charges 60,274 60,274 Capital assets: Nondepreciable 6,144,337 882,357 7,026,694
Depreciable buildings, property
and equipment, net 4,627,786 12,357,852 16,985,638
Depreciable infrastructure, net 17,053,360 7,055,745 24,109,105
Tot a I Assets 48,325,691 20,329,146 68,654,837 Liabilities Accounts payable 267,699 187,859 455,558 Accrued wages 70,800 20,200 91,000 Retainage payable 47,033 19,054 66,087 Compensated absences 88,811 31,426 120,237
Bond interest payable 323,147 19,718 342,865
Deposits payable 48,137 48,137
Noncurrent liabilities:
Due within one year 2,279,235 371,000 2,650,235
Due in more than one year 20,716,000 3,981,000 24,697,000
Accrued severance 98,296 57,568 155,864
Total Liabilities 23,891,021 4,735,962 28,626,983
Net Assets
Invested in capital assets, net of related debt 9,215,439 11,558,763 20,774,202
Restricted for:
Tax increment financing districts 374,411 374,411
Economic development 666,403 666,403
Tourism 19,714 19,714
Unrestricted 14,158,703 4,034,421 18,193,124
Total Net Assets $ 24,434,670 $ 15,593,184 $ 40,027,854
"'
Functions/Programs Governmental Activities General government Public safely Publ'lc worksCulture and recreation Economic development Airport operations Unallocated depreciation Interest on long-term debt
Total governmental activities Business-type Activities Water Wastewater Stom1 water Golf Recycling/garbage
Total business-type activities Total Government
City of Little Falls, Minnesota Statement of Activities
Year Ended December 31, 2011
Program Revenue
Operating Capital Charges for
Services
Grants and Grants and Expenses Contributions Contributions
$ 676,558 1,787,297 2,011,144 682,874 494,884 520,220 55,915 874,472 7,103,384 1,159,614 1 ,680,109 36,178 452,422 339,705 3,668,028 $10,771,392 General revenue: $ 57,823 241,903 39,337 29,184 126,538 494,785 1,549,566 1,674,718 77,301 376,702 371,992 4,050,279 $4 545,064 $ 157,482 23,505 15,000 195,987 $ 195,987
Property taxes, levied for general purposes Tax increments
Lodging and restaurant tax Franchise and other tax
$ 5,655 1,655,698 99,985 1,761,338 $1,761,338
Grants and contributions not restricted to specific programs Recognize revenue from interfund loan activity
Interest and investment earnings
Other
Transfers
Total general revenue and transfers Change in net assets
Net assets- beginning, as restated Net assets- ending
Net (Expense) Revenue and Changes in Net Assets Governmental Business-type Activities Activities $ (618,735) (1 ,382,257) (292,604) (653,690) (494,884) (278,697) (55,915) (874,472) (4,651 ,254) (4,651 ,254) 2,836,156 355,563 140,883 244,058 2,181,136 336,073 129,226 254,045 230,000 6,707,140 2,055,886 22,378,784 $24,434,670 $ 389,952 (5,391) 41,123 (75,720) 32,287 382,251 382,251 122,814 34,024 (230,000) (73,162) 309,089 15,284,095 $15,593,184 Total $ (618,735) (1 ,382,257) (292,604) (653,690) (494,884) (278,697) (55,915) (874,472) (4,651 ,254) 389,952 (5,391) 41,123 (75,720) 32,287 382,251 (4,269,003) 2,836,156 355,563 140,883 244,058 2,181,136 336,073 252,040 288,069 6,633,978 2,364,975 37,662,879 $40,027,854
City of Little Falls, Minnesota Balance Sheet- Governmental Funds
December 31, 2011
Economic Other Total
Development Debt Governmental Governmental
General Loan Service Funds Funds
Assets
Cash and temporary investments $ 765,753 $ 319,822 $ 5,124,849 $ 3,006,380 $ 9,216,804
Investments 125,051 125,051 Receivables: Delinquent taxes 48,452 103,626 4,015 156,093 Accounts 27,122 58,365 43,625 129,112 Interest 13,602 13,602 Loans 1,781,910 766 231,385 2,014,061 Special assessments: Deferred 3,858 3,543,661 3,547,519 Delinquent 31,821 31,821
Due from other funds 110,000 4,385,191 4,495,191
Due from other governmental units 8,525 28,105 719 37,349
Inventories 250,055 53,011 303,066
Prepaid items 29000 1 357 30,357
Total Assets $ 1 242,765 $2101732 $ 13,276,384 $ 3 479 145 $ 20,100,026
Liabilities and Fund Balances Liabilities:
Accounts payable $ 159,342 $ $ 18,532 $ 87,462 $ 265,336
Wages payable 66,919 3,881 70,800
Retainage payable 47,033 47,033
Deferred revenue 162,310 1,781,910 8,065,065 235,400 10,244,685
Due to other funds 110 000 110,000
Total Liabilities 388,571 1,781,910 8,193,597 373,776 10,737,854 Fund Balances: Nonspendable 279,055 54,368 333,423 Restricted 374,411 686,117 1,060,528 Committed 995,071 995,071 Assigned 319,822 4,708,376 2,789,672 7,817,870 Unassigned 575 139 (1,419,859) (844,720)
Total Fund Balances 854,194 319 822 5 082,787 3 105 389 9362,172
Total Liabilities and Fund Balances $ 1 242 765 $ 2,101,732 $ 13,276,384 $ 3 479145 $ 20,100,026
The accompanying notes are an integral part of the financial statements.
City of Little Falls, Minnesota Reconciliation of the Balance Sheet to the Statement of Net Assets - Governmental Funds
December 31, 2011
Fund balances- total governmental funds
Capital assets used in governmental activities are not financial
resources and therefore are not reported in the governmental funds. Construction in progress
Land
Land improvements and infrastructure, net of $9,989,173 accumulated depreciation Buildings and structures, net of $1,780,961 accumulated depreciation
Machinery and equipment, net of $1,122,332 accumulated depreciation Vehicles, net of $1,323267 accumulated depreciation
Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the governmental funds.
Governmental bonds payable Bond discount
Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental funds.
Accrued interest on bonds Compensated absences
Deferred revenue in the governmental funds is susceptible to full accrual on the
government-wide statements.
Internal service funds are used by management to charge the costs of its
self-insurance and severance activities to individual funds. The assets and
liabilities of these funds are included in the governmental activities in the statement of net assets.
Net assets of the governmental activities
$ 1,072,206 5,072,131 17,053,360 3,701,389 323,976 602,421 (22,995,235) $ 9,362,172 27,825,483 60,274 (22,934,961) (323, 147) (88,811) (411,958) 10,244,685 349,249 $ 24,434,670
City of Little Falls, Minnesota
Statement of Revenue, Expenditures and Changes in Fund Balances - Governmental Funds
Year Ended December 31, 2011
Economic Other Total Development Debt Governmental Governmental
General Loan Service Funds Funds
Revenue:
Taxes $ 1,118,692 $ $ 1,540,972 $ 152,427 $ 2,812,091
Franchise and other taxes 75,072 309,869 384,941
Tax increment proceeds 355,563 355,563
Special assessments 693,511 52,285 745,796
Intergovernmental revenue 2,250,503 103,200 973,280 3,326,983
Charges for service 143,134 20,825 158,331 322,290
Licenses and permits 104,547 22,635 127,182
Fines 40,653 4,660 45,313 Investment income 76 373 22,652 100,054 123,155 Other 3 875 349 618 33,409 169 687 556,589 Total Revenue 3,736,552 349,991 2,770,132 1,943,228 8,799,903 Expenditures: Current General government 538,812 32,219 47,837 618,868 Public safety 1,569,037 3,600 117,913 1,690,550 Public works 1,037,023 7,954 461,754 1,506,731
Culture and recreation 52,501 455,147 507,648
Community development 272,500 163,486 240,302 676,288
Airport operations 236,318 236,318
Capital outlay 1,450,773 1,450,773
Debt service
Principal retirement 6,195,600 6,195,600
Interest and other fiscal charges 863 121 863,121
Total Expenditures 3,197,373 272,500 7,265,980 3,010,044 13,745,897
Excess (Deficiency) of Revenue
Over Expenditures 539,179 77,491 (4,495,848) (1,066,816) (4,945,994)
Other Financing Sources (Uses):
Proceeds from sale of bonds 1,738,600 1,738,600
Bond premium (discount) (15,778) (15,778)
Utility funds debt payments 493,700 493,700
Transfers in 247,700 18,219 2,042,399 2,308,318
Transfers out (730,073) (1,289,411) (144,513) (2, 163,997)
Total Other Financing Sources (Uses) (482,373) 18 219 927,111 1,897,886 2 360 843
Net Change in Fund Balances 56,806 95,710 (3,568, 737) 831,070 (2,585, 151)
Fund Balances, Beginning 797 388 224,112 8 651 524 2,274,299 11947323
Fund Balances, Ending $ 854,194 $ 319,822 $ 5,082,787 $ 3,105,369 $ 9,362 172
The accompanying notes are an integral part of the financial statements.
City of Little Falls, Minnesota
Reconciliation of the Statement of Revenue, Expenditures, and
Changes in Fund Balances to the Statement of Activities- Governmental Funds Year Ended December 31, 2011
Net change in fund balances - total governmental funds
Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period.
Capital outlays Depreciation expense
Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayment of bond principal is an expenditure in the governmental funds, but the prepayment reduces long-term liabilities in the statement of net assets. This is the amount by which repayments exceeded proceeds.
Bond proceeds Bond premium Principal repayments Bond discount amortization
Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds.
Accrued interest on bonds Compensated absences
Revenues in the government-wide statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds.
Deferred revenue- December 31, 2011 Deferred revenue - December 31, 201 0
Internal service funds are used by management to charge the costs of its self-insurance and severance activities to individual funds. The net revenue (expense) of these funds is reported in the governmental activities in the statement of net assets.
Change in net assets of the governmental activities
$ 1,450,773 (1,199,644) (1 '738,600) 15,778 6,195,600 (80, 152) 68,801 (4,964) 10,244,685 (10,342,609)
The accompanying notes are an integral part of the financial statements.
$ (2,585,151) 251,129 4,392,626
63,837
(97,924) 31,369 $ 2,055,886City of Little Falls, Minnesota Statement of Net Assets - Proprietary Funds
December 31 2011
Enter12rise Funds Internal
Water Wastewater Other Service
Utilit:t: Utilit;t Enter12rise Total Funds Assets
Current Assets
Cash and temporary investments $ 466,434 $ 2,144,046 $ 130,690 $ 2,763,170 $ 556,100
Investments 400,956 501,396 100,160 1,002,514 Receivables 164,994 205,972 63,229 434,195 Accrued interest 6,955 6,620 643 16,416 1,631 Inventories 9,604 10,106 51,273 71,163 Prepaid insurance 3,226 4,314 2,015 9,555 9,525 Deferred charges
Total Current Assets 1,076,371 2,674,654 348,010 4,299,035 569,256
Capital Assets
Construction in progress 471,798 471,798
Land and land improvements 308,072 448,328 1,395,922 2,152,322
Buildings and structures 3,956,540 15,207,428 344,704 19,508,672
Mains and lines 6,531,004 6,673,643 13,204,647
Machinery and equipment 715,897 1,004,410 455,893 2,176,200
Vehicles 44,510 237,000 281,510
Less accumulated depreciation (4,761 ,685) (11,531,001) (1 ,206,509) (17,499, 195)
Total Capital Assets 7266,136 12,039,808 990 010 20,295,954
Total Assets 8,342 507 14914462 1,336,020 24,594,969 569,256 Liabilities Current Liabilities Accounts payable 66,576 64,015 35,266 167,859 2,363 Wages payable 8,092 6,662 3,426 20,200 Compensated absences 12,902 10,106 6,416 31,426 Retainage payable 19,054 19,054 Accrued interest 19,718 19,718 Deposits payable 46,137 48,137
Due to debt fund 2,044,572 2,206,190 134,429 4,365,191
Long term debt, current portion 371 000 371 000
Total Liabilities 2,201,335 2,699,711 161,539 5,062,565 2,363
Noncurrent Liabilities
Accrued severance 155.664
Bonds/lease payable, net of current 3 981 000 3 961 000
Total Noncurrent Liabilites 3 961 000 3 961 000 155 664
Total Liabilities 2,201,335 6,660 711 161 539 9 063,585 158,227
Net Assets
Invested in capital assets,
net of related debt 5,221,564 5,461,616 655,561 11,556,763
Restricted
Unrestricted 919 606 2752133 300 900 3 972 641 411 029
Total Net Assets $ 6,141,172 $ 6 233 751 $ 1156 461 $ 15531404 $ 411 029
The City uses internal service funds to charge the cost of its self-insurance activities and retirement severance. This amount consolidates a portion of the internal
service fund activity to the enterprise funds. 61,780
Net assets - business-type activities $ 15593184
City of Little Falls, Minnesota Statement of Revenue, Expenses and Change
in Net Assets- Proprietary Funds
Year Ended December 31, 2011
Enter~rise Funds Water Wastewater
Utility Utility Operating Revenue
Charges for services $ 1,547,038 $ 1,674,718
Other 2 528
Total Operating Revenue 1,549,566 1,674,718
Operating Expenses
Personal services 281,979 313,846
Utilities/waste removal 174,103 275,204
Supplies 167,248 199,848
Repair and maintenance 118,458 144,198
Insurance 6,766 8,019
Inventory for resale
Improvements 32,384 20,704
Claims
Other services and charges 57,240 44,728
Depreciation expense 272 182 592 768
Total Operating Expense 1,110360 1599315
Operating Income (loss) 439,206 75,403
Non-Operating Revenue (Expense)
Interest 45,369 55,389
Net change in fair value of investments (642) 6,691
Other revenue 7,010 2,896
Interest expense and fiscal charges (43,882) (56,853) Total Non-Operating Revenue (Expense) 7 855 8123
Income (Loss) Before Transfers 447,061 83,526
Transfers In
Transfers Out (99,655) (102,949)
Change in Net Assets 347,406 (19,423)
Net Assets - Beginning, as restated 5 793,766 8 253,174
Net Assets- Ending $ 6,141,172 $ 8,233,751
Change in net assets
The City uses internal service funds to charge the cost of its self-insurance activities and retirement severance. This amount consolidates a portion of the internal service fund activity to the enterprise funds.
Change in net assets - business-type activities
The accompanying notes are an integral part of the financial statements.
Other Enterprise $ 813,514 12 481 825,995 205,130 16,333 32,458 22,719 6,814 76,681 27,546 351,579 80 075 819 335 6,660 17,130 (1,123) 24,118 (62) 40,063 46,723 (68,345) (21,622) 1178103 $ 1156481 Internal Service Total Funds $ 4,035,270 $ 79,926 15 009 4,050,279 79,926 800,955 465,640 399,554 285,375 21,599 125,734 76,681 80,634 47,853 453,547 4,941 945 025 3 529 010 178 528 521,269 (98,602) 117,888 6,071 4,926 34,024 (100,797) 56 041 6 071 577,310 (92,531) 126,628 (270,849) 306,361 34,097 15 225 043 376 932 $ 15,531,404 $ 411 029 $ 306,361 2 728 ~ 309,089
City of Little Falls, Minnesota Statement of Cash Flows ~ Proprietary Funds
Year Ended December 31, 2011
Enter~rise Funds Internal
Water Wastewater Other Service
Utili!): Utili!): Enter~rise Total Funds
Cash Flows From Operating Activities
Receipts from customers $ 1,526,286 $ 1,693,308 $ 823,805 $ 4,043,399 $ 79,926
Payments to suppliers (753,749) (748,675) (584,370) (2,086,794) (129,744)
Payments to employees (208,426) (244,122) (159,333) (611,881) (28,855)
Claims paid (19,599)
Other receipts 7 010 3 336 24118 34464
Net Cash Provided (Used) By Operating Activities 571,121 703,847 104,220 1 ,379,188 (98,272)
Cash Flows From Noncapital Financing Activities
Transfers in from other funds 126,628
Transfers out to other funds (99,655! (102,949! (68,345! (270,949!
Net Cash Provided (Used) By Non capital
Financing Activities (99,655) (102,949) (68,345) (270,949) 126,628
Cash Flows From Capital and Related Financing Activities
Payments to debt fund (257,000) (236,700) (493,700)
Bond/lease principal payments (1 ,230,000) (367,000) (7,957) (1 ,604,957)
Bond/tease interest payments (41 ,040) (58,516) (62) (99,618)
Increase in due to debt fund 67,216 134,428 134,429 336,073
Acquisition of capital assets (660,861! (134,428! (134,429! (929,718!
Net Cash (Used) By Capital and Related
Financing Activities (2,121,685) (662,216) (8,019) (2,791 ,920)
Cash Flows From Investing Activities
Interest income 44,736 60,032 10,029 114,797 6,071
Proceeds from sate of investments 300,000 280,000 200,000 780,000
Purchase of investments (400,000! (100,000! (500,000!
Net Cash Provided (Used) by Investing Activities (55,264! 340 032 110,029 394 797 6,071
Net Change in Cash and Temporary Investments (1,705,483) 278,714 137,885 (1 ,288,884) 34,427
Cash and Temporary Investments at Beginning of Year 2 193 917 1 865 332 (7,195! 4 052 054 523 673
Cash and Temporary Investments at End of Year $ 488,434 $ 2 144 046 $ 130 690 $ 2 763170 $ 558 100
Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) By Operating Activities
Operating Income (Loss) $ 439,206 $ 75,403 $ 6,660 $ 521,269 $ (98,602)
Adjustments to reconcile operating income (toss) to net cash provided (used) by operating activities:
Depreciation 272,182 592,768 80,075 945,025
Non·operating revenue 7,010 2,896 24,118 34,024
Changes in Assets and Liabilities:
Receivables (23,627) 19,031 (2, 192) (6,788) Inventories (907) 17,803 (4,735) 12,161 Prepaid insurance 509 674 (213) 970 703 Accounts payable (133,299) (5,716) 440 (138,575) (373) Wages payable 50 657 (151) 556 Retainage payable 11,395 11,395 Compensated absences (1,745) 331 218 (1,196) Accrued severance Deposits payable 347 347
Net Cash Provided (Used) By Operating Activities $ 571121 $ 703 847 $ 104 220 $ 1379188 $ (98.272)
Schedule of Non·Cash Investing Activities~
Net Change in Fair Value of Investments $ (642) $ 6 691 $ (1.123) $ 4926 $ The accompanying notes are an integral
City of Little Falls, Minnesota Notes to Basic Financial Statements
December 31, 2011
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the City of Little Falls, Minnesota (the City) have been prepared in conformity with accounting principles generally accepted in the United States of America (generally accepted accounting principles), as applied to governmental units by the Governmental Accounting Standards Board (GASB). The City's significant accounting policies are described below.
The City adopted the provisions of GASB Statement No. 54 regarding fund balance reporting during the current year.
A. Financial Reporting Entity
The City of Little Falls was incorporated in 1889 and operates as a Home Rule Charter City under the "Mayor-Council Plan" form of government. Under this plan, the government of the City is directed by a "Mayor-Council composed of an elected mayor and seven council members.
In accordance with financial reporting criteria established by the Governmental Accounting Standards Board, the City of Little Falls includes all funds, departments, agencies, boards, commissions and other organizations over which City officials exercise oversight responsibility. Oversight responsibility includes such aspects as appointment of governing body members, budget review, approval of property tax levies, responsibility for outstanding debt secured by the City of Little Falls' full faith and credit, and responsibility for funding deficits. As a result of applying the component unit criteria, certain organizations have been either blended or excluded from the City's financial statements. Component units are legally separate entities that are included in the City's reporting because of the significance of their operating or financial relationship with the City.
Blended:
Little Falls/Morrison County Airport Commission
The Little Falls/Morrison County Airport Commission is a joint powers organization established pursuant to Law 1945, Chapter 303, and an agreement between the City of Little Falls and Morrison County dated January 6, 1965. The above authority provides that the City and County shall equally support the Commission, based on the Commission's annual budget estimate and related request for funds.
The activity and year-end balances of the Airport Commission are accounted for as a Special Revenue Fund by the City of Little Falls.
Economic Development Authority of the City of Little Falls
The Authority was established in 1991 pursuant to the provisions of Minnesota Statutes§ 469.090 to 469.108 to promote and provide incentives for economic development, to preserve and create jobs, enhance the City's tax base and promote the general welfare of the people. Any bonds sold or taxes levied by the Authority are subject to approval by the Little Falls City Council, who levies on their behalf. The financial activity of the Authority is performed by the City of Little Falls and treated as routine City business.
Excluded:
Little Falls Fire Relief Association
This Association is organized as a nonprofit organization by its members to provide pension and other benefits to such members in accordance with Minnesota Statutes. The board of directors is appointed by the membership of the organization. All funding is conducted in accordance with Minnesota Statutes whereby state aids flow to the Association; tax levies are determined by the Association and are included in the annual tax levy by the City. The Association pays benefits directly to its members.
Housing and Redevelopment Authoritv of Little Falls Minnesota .
The Authority is a nonprofit organization established in 1966 to promote the development of the C1ty and to administer low-rent housing projects. The City acts as a fiscal agent for the Authority's tax levies only and reflects that activity in a Special Revenue Fund.
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
B.
Basic Financial Statements • Government-Wide StatementsThe City's basic financial statements include both government-wide (reporting the City as a whole) and fund financial statements (reporting the City's major funds). Both the government-wide and fund financial statements categorize primary activities as either governmental or business type. The City's police and fire protection, parks, library, airport, public works, economic development and general administrative services are classified as governmental activities. The City's water, wastewater, storm water, golf and recycling/garbage services are classified as business-type activities.
In the government-wide Statement of Net Assets, both the governmental and business-type activities columns are presented on a consolidated basis by column and are reported on a full accrual, economic resource basis, which recognizes long-term assets and receivables as well as long-term debt and obligations. The City's net assets are reported in three parts - invested in capital assets, net of related debt; restricted net assets; and unrestricted net assets.
The government-wide Statement of Activities reports both the gross and net cost of each of the City's functions and business-type activities. The functions are also supported by general government revenue (such as property taxes). The Statement of Activities reduces gross expenses (including depreciation) by related program revenue, operating and capital grants. Program revenue must be directly associated with the function of a business-type activity. Operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital-specific grants.
The net costs (by function or business-type activity) are normally covered by general revenue (property, other taxes, intergovernmental revenues, interest income, etc). The City does not allocate indirect costs.
C. Basic Financial Statements· Fund Financial Statements
The financial transactions of the City are reported in individual funds in the fund financial statements. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets, liabilities, reserves, fund equity, revenue and expenditures/expenses. The various funds are reported by generic classification within the financial statements.
The following fund types are used by the City:
Governmental Funds
The focus of the governmental funds' measurement (in the fund statements) is on the determination of financial position and changes in financial position (sources, uses, and balances of financial resources) rather than on net income. The following is a description of the governmental funds of the City:
The General Fund is used to account for all financial resources other than those required to be accounted for in other funds as described below.
Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than special assessments or major capital projects) that are legally restricted to expenditures for specified purposes. The City had 20 Special Revenue Funds during 2011, which included three expendable trust funds.
The Debt Service Fund is used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest and related costs. It is also used to account for the financing of public improvements or services deemed to benefit the properties against which special assessments are levied. Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed solely by propnetary funds). The City had 17 Capital Project Funds during 2011.
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Proprietary Funds
The focus of proprietary fund measurement is on the determination of operating income, changes in net assets, financial position and cash flows. The generally accepted accounting principles applicable are those similar to businesses in the private sector. The following is a description of the proprietary funds of the City: Enterprise Funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises- where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered through user charges; or (b) where the governing body has decided that periodic determination of income earned, expenses incurred, or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes. The City maintains five Enterprise Funds (water, wastewater, storm water, golf and recycling/garbage).
Financial Accounting Standards Board (FASB) Statement, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Funds, provides proprietary activities with a choice of authoritative guidance issued after November 30, 1989. The City of Little Falls has elected to follow FASB pronouncements exclusively after that date.
Internal Service Funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the City. The City maintains three Internal Service Funds (Employee Severance Pay, Liability Insurance and Health Insurance).
D. Measurement Focus and Basis of Accounting
The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund statements. Revenue is recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
Amounts reported as program revenue in the government-wide statements include 1) charges to customers for goods and services provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. General revenue includes all taxes.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized as soon as both measurable and available. Revenue is considered to be available when collectible within the current period or soon enough thereafter to pay the liabilities of the current period. For this purpose, the City considers revenue to be available if it is collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures and compensated absences are recorded only when payment is due.
Property taxes, franchise taxes, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenue of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period and the balance is considered deferred revenue. All other revenue items are considered to be measurable and available only when cash is received by the City. The City reports the following major governmental funds:
The general fund is the City's primary operating fund. It accounts for current day-to-day operations of the City.
The economic development loan fund accounts for resources and payments related to economic and community development functions.
The debt service fund accounts for the resources available for the periodic payment of principal and interest in long-term debt.
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The City reports the following major proprietary funds:
The water and the wastewater funds account for the activities related to the operation of a water distribution system and a sanitary sewer collection system, respectively.
Proprietary funds distinguish operating revenue and expenses from nonoperating items. Operating revenue and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenue of the City's enterprise funds and internal service funds is charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses.
The effect of interfund activity has been eliminated from the government-wide financial statements. E. Assets, Liabilities and Net Assets or Equity
Cash and Temporary Cash Investments
Cash balances from all funds are combined and invested to the extent available in certificates of deposit and government securities. Earnings from such investments are allocated to the respective funds on the basis of applicable cash balances each month by each fund. Temporary cash investments are stated at cost which approximates fair value.
For the purpose of the Statement of Cash Flows of the Proprietary Funds, cash equivalents are defined as short-term, liquid investments that are:
a. Readily convertible to known amounts of cash, or
b. So near their maturity that they present insignificant risk of changes in value because of changes in interest rates.
Cash equivalents consist principally of cash deposits.
Investments
Investments in U.S. governmental agency securities are separately held and reported in their respective funds at fair value.
Receivables and Payables
The City calculates its allowance for uncollectible accounts using historical collection data. Accounts receivable of the City are considered to be fully collectible and, therefore, an allowance for uncollectible accounts is not provided. All utility and property tax receivables are shown at a gross amount, since both taxes and utility receivables are assessable to the property taxes and are collectible upon sale of the assessed property.
Property Taxes Receivable
Property tax levies are set by the City Council in Decem.ber each year, and are certified to Morrison County for collection in the following year. In Minnesota, counties act as collection agents for all property taxes.
The Council spreads all levies over taxable property. Such taxes become a lien on January 1 and are recorded as receivables by the City at that date. Within the fund financial statements, property taxes are accrued and recognized as revenue, excluding delinquent taxes received over 60 days after year-end. Deferred revenue in governmental activities is susceptible to full accrual on the government-wide statements.
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Real property taxes may be paid by taxpayers in two equal installments, on May
15
and October15.
Personal property taxes may be paid on February 28 and June 30. The County provides tax settlements to cities and other taxing districts three times a year, in July, December and January.In the fund financial statements, taxes that remain unpaid at December 31 are classified as delinquent taxes receivable, and are fully offset by deferred revenue because they are not known to be available to finance current expenditures. No allowance for uncollectible taxes has been provided because such amounts are not expected to be material.
Special Assessments Receivable
Special assessments are recognized as revenue when the levy against the benefitted property is adopted by the City Council and certified to the County for collection. Interest on special assessments is also recognized when levied each year.
Delinquent special assessments represent the past seven years of uncollected special assessments. Deferred special assessments in the fund financial statements is susceptible to full accrual on the government-wide statement.
lnventorv and Prepaid Items
Inventory is valued at the lower of average cost or market based on physical counts. Inventory in the General and Special Revenue Funds consist of expendable supplies held for consumption and is equally offset by a nonspendable fund balance classification. The cost of inventory is recorded as an expense when purchased and adjusted at year-end.
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements.
Capital Assets
Capital assets, which include land, buildings, structures, furniture, equipment, machinery, automobiles and infrastructure, are reported in the applicable governmental or business-type activity columns in the government-wide statements. Capital assets are defined as assets with an initial cost of more than $5,000 and an estimated useful life of greater than one year.
Capital outlays are recorded as expenditures in the City's governmental fund financial statements, which use the modified accrual basis of accounting. Capital outlays are capitalized in the City's government-wide statement of net assets, which uses the full accrual basis of accounting. All capital assets are recorded at historical cost or estimated historical cost if actual cost was not available. Other costs incurred for repair and maintenance are expensed as incurred.
Depreciation has been provided over the estimated useful lives using the straight-line method. The estimated useful lives are as follows:
Asset Land improvements Infrastructure
Buildings and structures Distribution system Machinery and equipment Vehicles Years 15-20 20-25 25-50 40-50 5-30 8
