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05-28-24-R
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05-28-24-R
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NOTE 10 — COMMITMENTS AND CONTINGENCIES <br />A. Risk Management <br />The City is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets; <br />errors and omissions; injuries to employees; and natural disasters for which the City carries insurance. <br />The City obtains insurance through participation in the League of Minnesota Cities Insurance Trust <br />(LMCIT), which is a risk -sharing pool with other governmental units. The City pays an annual premium <br />to the LMCIT for its workers' compensation and property and casualty insurance. The LMCIT is <br />self-sustaining through member premiums and will reinsure for claims above a prescribed dollar amount <br />for each insurance event. There were no significant reductions in insurance from the previous year or <br />settled claims in excess of insurance coverage for any of the past three fiscal years. <br />Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be <br />reasonably estimated. Liabilities, if any, include an amount for claims that have been incurred, but not <br />reported. The City's management is not aware of any incurred, but unreported claims. <br />B. Litigation <br />The City has the usual and customary type of miscellaneous legal claims pending at year-end. Although <br />the outcome of these lawsuits is not presently determinable, the City's management believes that the City <br />will not incur any material monetary loss resulting from these claims. No loss has been recorded on the <br />City's financial statements relating to these claims. <br />C. Federal and State Funds <br />Amounts recorded or receivable from federal and state agencies are subject to agency audit and <br />adjustment. Any disallowed claims, including amounts already collected, may constitute a liability of the <br />applicable funds. The amount, if any, of claims which may be disallowed by the grantor agencies cannot <br />be determined at this time, although the City expects such amounts, if any, to be immaterial. <br />D. Tax Increment Districts <br />The City's tax increment districts are subject to review by the Minnesota Office of the State Auditor. Any <br />disallowed claims or misuse of tax increments could become a liability of the applicable fund. <br />Management has indicated that they are not aware of any instances of noncompliance, which would have <br />a material effect on the financial statements. <br />E. Lake Johanna Volunteer Fire Department, Inc. <br />The City receives fire protection under a contract with the Lake Johanna Volunteer Fire Department, Inc. <br />The contract calls for annual payments and expires December 31, 2023, with an extension option through <br />December 31, 2038. The contract cost will be based on the budget submitted by the fire department and <br />approved by the City. Capital costs are billed separately, in addition to the contract rate. The amount <br />expended under the contract was $751,177 in 2023. The City also made capital contributions in the <br />current year totaling $168,558. <br />-44- <br />
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