2023 Management Letter - Laserfiche WebLink

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-9- GENERAL FUND The City’s General Fund accounts for the financial activity of the basic services provided to the community. The primary services included within this fund are the administration of the municipal operation, police and fire protection, building inspection, streets and highway maintenance, and parks and recreation. The graph below illustrates the change in the General Fund financial position over the last five years. We have also included a line representing annual expenditures to reflect the change in the size of the General Fund operation over the same period. 2019 2020 2021 2022 2023 Fund Balance $495,267 $263,187 $253,845 $310,856 $511,411 Cash (Net)$514,910 $294,991 $313,020 $379,587 $538,457 Expenditures $376,034 $353,621 $514,334 $464,669 $497,359 $– $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 General Fund Financial Position Year Ended December 31, The City’s General Fund cash and investments balance at December 31, 2023 was $538,457, an increase of $158,870 from the previous year. The total fund balance of the City’s General Fund increased $200,555 in 2023, as compared to a budget that projected a decline in fund balance of $37,270. As the graph illustrates, the City has generally been able to maintain healthy cash and fund balance levels as the volume of financial activity has grown. This is an important factor because a government, like any organization, requires a certain amount of equity to operate. A healthy financial position allows the City to avoid volatility in tax rates; helps minimize the impact of state funding changes; allows for the adequate and consistent funding of services, repairs, and unexpected costs; and is a factor in determining the City’s bond rating and resulting interest costs. Maintaining an adequate fund balance has become increasingly important given the fluctuations in state funding for cities in recent years. A trend that is typical to Minnesota local governments, especially the General Fund of cities, is the unusual cash flow experienced throughout the year. The City’s General Fund cash disbursements are made fairly evenly during the year, other than the impact of seasonal services, such as snowplowing, street maintenance, and park activities. Cash receipts of the General Fund are quite a different story. Taxes comprise about 82.3 percent of the fund’s total annual revenue. Approximately half of these revenues are received by the City in July and the rest in December. Consequently, the City needs to have adequate cash reserves to finance its everyday operations between these payments. The City’s unassigned General Fund balance at the end of the 2023 fiscal year represents 98.5 percent of annual expenditures and transfers out based on 2023 levels.