2003-12-31 Year End Financial Audit

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CITY OF CENTERVILLE, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 Note 5: CHANGE IN ACCOUNTING PRINCIPLE During fiscal year 2003, the City implemented several new accounting pronouncements issued by the Government Accounting Standards Board (GASB). They are Statement No. 34, "Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments ", Statement No. 37, "Basic Financial Statements - and Management's Discussion and Analysis -for State and Local Governments: Omnibus ", and Statement No. 38, "Certain Financial Statement Note Disclosures ", paragraphs 6 through 11. Because of implementation of the new standards, an adjustment is required for the December 31, 2002, carry forward (net asset) balance of the governmental funds. The following schedule reconciles the January 1, 2003 balance to the December 31, 2002 net asset balance using the new accounting standards. Fund balance, December 31, 2002 Adjustments: Net book value of capital assets Bonds payable, net Accrued interest Compensated absences payable Deferred revenue on special assessments Deferred revenue on taxes $ 3,812,033 Total net assets as restated, January 1,2003 5,376,951 (2,932,237) (58,139) (14,347) 97,067 31.781 $ 6.313.109 Note 6: OTHER INFORMATION A. Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; ~uries to employees; and natural disasters for which the City carries insurance. The City obtains insurance through participation in the League of Minnesota Cities Insurance Trust (LMCIT), which is a risk sharing pool with approximately 800 other governmental units. The City pays an annual premium to LMCIT for its workers compensation and property and casualty insurance. The LMCIT is self sustaining through member premiums and will reinsure for claims above a prescribed dollar amount for each insurance event. Settled claims have not exceeded the City's coverage in any of the past three fiscal years. Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities, if any, include an amount for claims that have been incurred but not reported (IBNRs). The City's management is not aware ofany incurred but not reported claims. B. Legal Debt Margin In accordance with Minnesota statutes, the City may not incur or be subject to net debt in excess of 2 percent of the market value of taxable property within the City. Net debt is payable solely from ad valorem taxes and, therefore, excludes debt financed partially or entirely by special assessments, enterprise fund revenues or tax increments. The City does not have any debt subject to the 2 percent limit. Note7: FIRE PROTECTION DISTRICT In 1985, the City discontinued providing the frre protection services to the Centerville community. The City joined the Centennial Fire District (District), along with the cities of Circle Pines and Lino Lakes. The City contributed all frre apparatus and equipment items to the District. The City pays an annual membership fee to the District based on their percentage of the computed annual depreciation on the apparatus and equipment values. The District still houses equipment in the City's building and pays for a share of the utilities. -30-