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CCP 05-13-2002
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CCP 05-13-2002
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<br /> <br />City of Arden Hills <br />April 10, 2002 <br />Page Three <br /> <br />. <br /> <br />Other Matters <br />The following are areas that came to our attention during the audit that we feel should be reviewed: <br />General Fund <br /> <br />. <br /> <br />Most of the general fund revenue comes from property taxes and property tax credits. These two categories represent 69 <br />percent of 2001 revenue. This type of revenue is received during the second half of the year. As a result, a reserve for <br />working capital needs to be established around 35 percent of planned expenditures. The City has excellent reserves for <br />working capital from several sources. The total fund balance in the general fund is $713,704. This represents 26 percent of <br />200 1 expenditures. The general fund draws any additional working capital from several permanent reserve funds that have <br />total fund balances of approximately $9,600,000. The State has recently indicated they may consider reviewing fund balance <br />reserves of local governments when adjusting the local government aid formulas. This may negatively impact the City if <br />reserves in excess of the amount needed for working capital are not designated. A designation indicates intended use of fund <br />balance. The City has done a good job of showing intended use of fund balance by transferring out amounts in excess of what <br />is needed for working capital in the general fund to permanent reserve funds. Formal designations of those reserves should be <br />considered annually. <br /> <br />It is important to maintain an adequate fund balance for the following reasons: <br /> <br />Expenditures are incurred somewhat evenly throughout the year. However, property tax and state aid revenues are not <br />received until the second half of the year. An adequate fund balance will provide the cash flow required to finance the <br />General Fund expenditures. <br /> <br />The City is vulnerable to legislative actions at the State and Federal level. The State eliminated HACA aid with the 2001 <br />legislative session. Levy limits have also been implemented for municipalities in past legislative sessions. An adequate <br />fund balance will provide a temporary buffer against those aid adjustments and levy limits. <br /> <br />. Expenditures not anticipated at the time the annual budget was adopted may need immediate Council action_ These <br />would include capital outlay replacement, lawsuits and other items. An adequate fund balance will provide the financing <br />needed for such expenditures. <br /> <br />A strong fund balance has assisted the City in determining its bond rating. The City received an AAA rating from <br />Standard and Poors on its 1998 bond issne. <br /> <br />A summary of the 2001 operations is as follows: <br /> <br />. <br /> <br />Revenue <br />Expenditures <br /> <br />Excess of revenue over expenditures <br /> <br />Other financing sources (uses) <br />Operating transfers in <br />Operating transfer out <br /> <br />Total other financing sources (uses) <br /> <br />Excess of revenue and other financing sources <br />over expenditures and other financing uses <br /> <br />Fund balance, January 1 <br /> <br />Fund balance, December 31 <br /> <br />The category of revenue with the greatest variance was nonbusiness licenses and permits. It had a favorable variance of <br />$221,135 when compared to budget or 68 percent or the total revenne variance. <br /> <br />The largest category of expenditure variance was in capital outlay. This function was $43,072 over a budget of <br />$184,500. <br /> <br /> Variance - <br /> Favorable <br /> B ud~et Actual (Unfavorable) <br />$ 2,775,374 $ 3,103,695 $ 328,321 <br /> 2.453.941 2,613.114 059.173 ) <br /> 321.433 490.581 169.148 <br /> 15,000 51,583 36,583 <br /> (333.750) (463.750) (130.000 ) <br /> (318.750) (412.167) (93.417) <br />L-__2,6S3. 78.414 $ 75731 <br /> 635.290 <br /> $ 713.704 <br /> <br />. <br /> <br />. <br /> <br />. Transfers out were over budget due to the policy of transferring excess revenue to reserve funds. <br />
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