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HomeMy WebLinkAbout2024 Financial Statements?-'LTY OF GEM LAKE. RAMSE.Y COUNTY, MINNESOTA Financial Statements and Other Information Year Elided December 31....2024 THIS PAGE INTENTIONALLY --LEFT BLANK CITY OF GEM LAKE RAMSEY COUNTY, MINNESOTA Table of Contents Page INTRODUCTORY SECTION Crier COUNCIL AN. )*-Q iER o-MCIIALS FINANCL4L SECTION INDEPENDENT AUDITOR'S REPORT-4 BASIC FINANCIAL STATEMENTS Governnkht-Wide Financial Statements Statement of Net. Position, 5 Statement of Activifies- 6�-7 Fund Financial Statements Governmental Funds Balance. Sheet 9--9 Reconciliation of the Balance Sheet to the. Statement of Nef Position 1:.0 Statement of Revenue; Expenditures, acid Changes in Fund Balances l I-12 Reconciliation of the StatementpfRevenue, Expenditures, and Changes in -Fund Balancesto the Statement- of Activities . 13 Statement of Revenue; Expenditures; and Changes in Fund Balances — Budget and Actual -- General Fund 14 Proprietary Funds $tatemept of Net Position 5 Statement of Revenue, Expenses, aiid Changes in —Net —Position 16 Stateinerit-of Cash Flows 1.7 Notes to Basic Financial Statements 18: 31 OTHER REQUIRED REPORTS Independent Auditor's Report on;lnternal Controi Over Financial Reporting. and on Compliance and Otl ter Matters Based: on an Audit of Financial Statements Performed in Accordance With Government AudithigStandalds 32 33 Independent Auditor's Report on Minnesota Legal Compliance 34 Schedule of Findings and Responses. 3 3 G TINS PA GE. INTENTIONALLY LEFT BLANK INTRODUCTORY SECTION THIS. PAGE INTENTIONALLY LEFT BLANK CITY OF GEM LAKE RAMSEY COUNTY, MINNESOTA City. Council and Other Officials as of Dece.mber 31, 22024 CITY COUNCIL Gretchen Artig-Swomley Leonard Cacoppo '8ea Johnson lames Lindner Joshua Patrick OTHER OFFICIALS Melissa Lawrence Tom Kelly Don Cun` mings . Mayor Councilmember C'ouncilmember Counci lmember Councilmember City Clerk City Treasurer Planning Commission Chair THIS PAGE INTENTIONALLY LEFT t.LANK FINANCIAL SECTION THIS PAGE INTENTIONALLY LEFT BLANK L13 CARLSON INDEPENDENT AUDITOR'S REPORT To the City Council and Management City of Gem Lake. Minnesota REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS OPINIONS We have audited the accompanying financial statements of the governmental activities, the business -type activities, and each major fund of the City of Gem Lake, Minnesota (the City) as of and for the year ended December 31. 2024, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. 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, and each major fund of the City as of December 31, 2024. and the respective changes in financial position, and, where applicable, cash flows thereof, and the budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. BASIS FOR OPINIONS 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. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. RESPONSIBILITIES OF MANAGEMENT FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for 12 months beyond the financial statements date, including any currently known information that may raise substantial doubt shortly thereafter. (continued) -2- AUDITOR's RESPONSIBILITIES FOR THE AUDIT OF THE .FINANCIAL: STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial. statementsas a whole are. ! free from material misstatement:. whether due' to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance; but is not absolute assurance and, therefore.. is not a guarantee that an audit conducted in accordance -with generally accepted. auditing standards and Gouer>tinei7t.Atidiiiiig.Stai?dar"ds will always detect a material misstatement when it exists. 'The risk of not detecting a material misstatement resulting from fraud Is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are .considered material if there: is a substantial likelihood that. individually or in the.aggregate they would influence the jutigeirieiit made by a reasonable user based on the financial statements. µ In performing an. audit irtr accordance with generally accepted. auditing standards and Gbventrtieni* Auditing.Slandar,*., we:: • Exercise professional judgment and niaintaiif ptofessional skepticism throughout the. audit, • Identifv and assess the%risk$�.of material misstatement of the statements; whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures- include examining; on a test basis, evidence regarding the amounts and disclosures in the financial statenietits: • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the* circur6stances, but not for the purpose of expressing an opinion on the effectiveness Of the City's internal control. Accordingly', .no such .opinion is expressed. • Evaluate the appropriateness. of accounting policies. used and the reasonableness of*s gnificant accounting. estimates made. by management, as well as evaluate the overall presentation of the financial statements. Conclude whether, in our judgement, there are conditions or events, considered iii the aggregate, that"raise substantial doubt -about the City's ability to continue as a going concern for a reasonable period of time.. We are: required to coMmui*ate with those-charsed with governance regarding, among other matters, the planned .scope. and timing. of- the audit,. significant audit findings, and certain internal. cor#trol related matteFs that we identified during the. audit, REQUIRED SUPPLEMENTARY IN1:OI01AT16N Management has omitted the management's discussion and analysis than accounting principles.generally accepted in the .United States of America require to be presented to supplement the basic financial statements. Such missing infoiniation, aithoiggli not a part..of the basic financial .statements; is required.by the Go.vernmentdl Accounting Standards Board, wlio considers it to be -an essential. part .of financial reporting for placing the. basic financial statements in an appropriate operational, *econoin`ic, or histbkical context. Our opinion -on the basic financial statements is'not affected by this missing, information. (continued) -3=. OTHER INFORMATION Management is ie;.�ponsible for. the other infonnation included in the annual -report. The other information comprises the *introductoty -section, but does not include the basic financial statements and our auditor's report thereon. Our o0inions on the basic financial statementsdo not cover the other information, and we do notexpress an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the 'other information and consider whether a material inconsistency exists between the other information -and- the ;gasicfinancial statements, or the other information otherwise appears to be materially misstated,: f.,. based on'the work:performed. we conclude that an uncorrected material misstatement of the other information exists; v►&&6 regiiired to describe ifiabur-report. OTHEtt REPORTING REQUIRED SY QOYERN.41ENTA'UD1T1A'G STASDARDS In accordance with Government Arrclitbrg..Slandards, we have also issued our report. dated August 28,. .2025,, on.. our consideration of '.the City'.s internal control over financial reporting and on our tests of its cothplianee with certain provisions o£laws, regulations: contracts.. grant agteements, and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results ofthattesting, and not to.provide an opinion on the -effectiveness of the. City's internal control over financial reporting or on compliance. That report is air integral part of an audit perfornied in accordance with Gove�IiinrenrAuditingStandaids in considefing.-th6 Cit�'s internal. control over financial reporting and compliance. Respectfully submitted, LB CARLSON, LLP Minneapolis, Minnesota. Auguat.28, 2025 -4- THIS -PAGE INTENTIONALLY LEFT BLANK BASIC FINANCIAL STATEMENTS THIS -PAGE. MTE�iTIONAILLTLEFT VL A ` NK CITY OF GEM. LAKE Statement of Net .Position December 31., .2024 Governmental Business -Type . Activities Activities Total Assets Cash and investments $ 1;ZQ1,009- $ 407,071 $ 14068,680. Receivables Accounts 1.3,12.1 27,193 40,924 Accrued interest 3..277 1,'5.54 4.831 Property taxes 10,975 — 10.975 Special assessments 527,466 — 527.466 Due from other governments 2,951 — 2,951 Prepaid items 110,039'. -- 1 19.939. Capital :assets Not.being depreciated 2,500 — 2,500 Depreciated, net of accumulated depreciation 1,540,233 1,161,98.1 2.702,214 Total assets $ 3,421A7) S 1,659.009 $ 5,080.,480 Liabilities Accounts and contracts payable $ 18,030 S. 3 S 18,033 Accrued interest payable 10391 — I0,351 Due to. -other governments 11022 6,133 19.155 Accrued salaries payable 3,891 -- .3,891* Deposits payable lOt) Unearned revenue 6,14,0. — .6,-140 Long-term liabilities Amounts due in one.year 105,000. — 105,000 Amounts due in more than one year 655.953 — GSS,953. Total liabilities .015,527' 6,130 821,663 Net position Net investment in capital assets 7.91,780. 1,161,98.1 -.I,943,7.61: Restricted for tlebt. service. ti17,541 — 617;541 . Restricted for park 'improvements 53.11-5- — 53,175 Unrestricted 1,153 44:8- 490.Ml 1,644,540 Total net position 2.6..05,944 1j652,873 4,259,817 Total liabilities and net position. 3442.1,471 S 1,659,009 $ 5,090,480 See:notes:to basic financial. statements -5.- CITY OF GEM .LAKE 1 Statement of:Activities Year Ended .December 31, 2024 .Program :Revenues Operating Capital Charges for Grants and Grants and Functions -Programs Expletises Services Contributions Contributions Governmental activities General government S. 249,527 'S 6.7.807 S 18,85..2 S 480 Public safety 207:710 — 1,076 — Public works 114.598 36;823 — 26;508 Conservation and development 89,298. - — -- .Interest. and esca oarges . 24,871 — — — Total governmental activities 686,004 104,030 19,928 L0;988 Business-typeactivities Water 36,464 24,1`62 -- - Sewer 910;0 80,251 — — Total Business-type`acf iifies .129,494 _ 104;357 — Total S. 815,498 $ 208.987 S 19,928. $ 20;988 General revenues. Property takes General: purposes Debt service. Franchise fees Giants and:eontributimis not restricted Investment earnings Other Total general revenues Change in net.position Net position — beginning of year; as previo.us,ly. reported Error correction Net .position — beginning of year, as restated Net. position — end of year See notes to basic financial. statements -6- Net (Expense)Revenue and Changes in Net Position Governmental Business -Type Activities Activities Total S. (1.62,3..85) $. — .$ (162,388) (204,634) — (206;634) (37,267) — (5.7,267) (89298) (24,871) — (24,8.71) l.. {{ (546,458) — (540A58) -- (I2,362) (I?,362) — (12.775) (.1.2;775) — (25,13.7) (25513.7) (540,458)1. (25,137) (565;595) 6181000 - 619.900 80.940 — 8:0,940 9.200 — 9;2.00 10,719 — 10719 37,164 18,570 55.734 .8 — 8 756,931 1.8.570 y75501 216,473. (`6,567) 2209,906 2.389,471 1,649,664 4,639.135 — 9,776 9,776 :293$9,471 1.659,440 4,048,911 ( $ 2,605,944 $ 1,652,873 $ 44 I-8&& 17 -7- CITY QF GPM LAKE Balance Sheef :Governmental Funds December.31, 2624 G,O..Capital G.Q. Capital. Improvement Improvement Plan Bonds Plan Bonds Street General Series 20.15A Series 2018A _ Iri'ipr6bements. Assets Cash and investments $ 74.209 S 65,378 S: �13,291 Receivables Accounts. 13,-121 — Accrued interest 1.694 279 226 902 Property taxes Delinquent 9,48 l., 7 117 — Special assessments Delinquent. 720 - 1,627 — Deferred — — 366,102 -159.017 Due from other governments .2,951 — — — Prepaid "items 1,320 69.394 49225 — Total assets S 714,421 S: 145,257 S 482,675 $. 483-210 Liabilities Accounts and.coptracts payable S 18,030 S — 'S — S — Due to other governments 13,022 — — — Accrued salaries payable 3.891 — — — Deposits payable — Unearned revenue 6.140 — — Total liabilities 44,183 — — — Deferred inflows of resources Unavailable revenue 0,40 .1,375 367,846. .159,01*7 Fund balances Nonspendable: 1320 60.394 40,22.5 — Restricted for debt service — 74.488. 63,604 — Res.ticted foupark improvements -- — — — Assigned for capital improvements — — 324,1:93 Unassigned 659.435 — — — Total fund balances -'660,755 1R3;882 114;820 324.193 ToW liabilities,.deferred inflows .Of rosources,.andfitndbalances -S '714,421' S 345,257 S 482.675 S 4.83.,2:10 See notes to basic financial statements 4- Parks and Total Playgrounds Governmental S. $2;9o9 s 1.;10L;009- - 13,111 176 3,277 10,475 -- 2,341 525,119 - 2,951 -- 119;9.39. $ 53,17.5 $ 1,878,739 13,022 - 3,891 - 3.100 -- 046 44,183 - n..7..721 -- 1I9,939 - -1.40.092 53,175 53,175 -- 124,193 53,.175 1,296.834 53,175 $ 1,$78,738 .g THIS -PAGE INTENTIONA.LLY LEFT BLANK C.lTY.QF GEM LAKE Reconciliation of the. Balance Sheet to the Statement ofNet Position Governmental Activities December 31,.2024 Total fund balances - governmental funds Antouhl.8 reported for governmental activities in the Statement of'Net Position are different because: Capital assets used in governmental activities are not financial resources .and,. therefore, -are not. .reported as assets in go vertunzntal funds. Cast. of capital assets Less accumulated depreciation Certain revenues (including taxes and special. assessmepts) are. included in.net position, but :are excluded from fund balances until they are available to*Hquidate. liabilities of the current period. Long-term liabilities, including bonds pa) - able, are not.due and payable in .the current period and, therefore, -are not reported in the governmental funds. Bonds. payable Unamortiied bond premiums Interest on long=term debt. is included in the change in net position.as it accrues, regardless of when. payment is due.. however, it is included in the change in fund balances when due. Total net position— goverunental activities 1.2..96...834 2,928,612 '(I 385.879) 537,721 (750;000) (10;953) (1.0,391) S -1.665,944 See notes to basic financial. statements. -10- dt'Y OF GEM. LAKE Statement of Revenue, Expenditures; and Changes in Fund Balances: Governmental Funds. Year Ended December 31, 2024 G.O. Capital G.O.. Capital Improvement Improvement Plan Bonds. Plan Bonds Street. General Series 2015A Series 20.18A Improvements Revenue Taxes Property tai es . $ 611;952 S 7.5,494. '& 5,256 S — Franchise fees 9,200 — — — Special assessments 4.80 — 57,154 38;91 l intergovernmental 30x647 — — — Licenses and permits 46,144 — — -- Fines and forfeitures .843 — — — Charges. for services 3.1.756 — -- - Investment earnings 13.1262 3,53,1. 2,711 15;1-96 Facilitv rental. 7:5.10 — — — Miscellaneous. 18.377 -- 8 — Total revenue. 770J71 1912.15 65;179 $4,101 Expenditures:. Current Generai government 222,349 — — Public. safety. 207 -710 — — — 'Publi"c works. 30;297 — — — Conservation and development. — Capital outlay 53:041 — — — Debt. service Principal — 6000 40,000 — Interest and fiscal charges. 8,064 18,325 — Total expenditures 600;827 73,964 58,325. — Exces54fievenue over expenditures. 1.69:344 5 251 6,804 54,107 Other financing sources ('uses) Transfers in - - - 20,000 Transfers (out) (20,000) — — —. Total other financinIg sources (.uses) (.20.00) — — 20.000 Net change,in Aind.balances 14044 5,2a1 6,804 74:107 Fund balances Beginning..of year 511,41 P 13.8,63.1 108,025 250.086 .End of year $ 660,755 S 143,882 $' 114.829 $ 324.193 See notes to.basic financial statements -11- Parks and Total Playgrounds Governmental 692,892 9,200 — 9b.545 — 30:647 401144 .843 31.756 2,40.. 37.164 -- 7,510 — 18.385 2,464 971,086 222349 207,710 30197 1.118 88;548 — 51041 -- 105.000 -- 27,289 1.118 734,234 1;346: 236;852 20:000 (20.000) .1.346- 236;95� 51;829_ 1.059,982 S 51175 $ 1.2.90,834 -12- THIS PAGE.IN.TENTIONALLY LI I T BLANK CIV O1= OEM LAKE Reconciliation ofthe Statement of Revenue, &j)enditures, and Changes in fund Balances to the Statement of:Activities -Gov:emmental Activities. Year Ended December 31,. 2024. Total net change in fund. -balances —governmental funds .Amounts reported. forgovernmental activities in the Statement of.Activities are.di fferent because: Capital atitiays:are: reported in ;governmental .funds as, expenditures. However, in the. Statement of Activities. the cost: of those assets is allocated dyer the estirtiated useful lives as depreciation expense.. Capital outlays. Depreciation expense A Bain or loss on -tbe- disposal of capital .assets, including the difference beiNviieri the carrying value and any related -sale -proceeds..is jliclitded in the change in net position. Hoy+never, only the sale. proceeds are. included in. the change in fetid balance. Net book value of capital assets disposed Certain revenues (including taxes and special assessments) are included ` ithe change in net position.. but are excluded from the change :in:.fund balances until they are available to )igWdaw liabilities of the current period.. Repayment of bond principal is an expenditure in the.governmental funds, but reduces. Iong-term liabilities. in the Statement of Net Position. 5 236,852 '53,502 (T1-2.169) (521) (68,609) -1 Q5,000 Some: expenses reported in -the Statetnetit'of Activities da.not re juire the -We of current financial resources and, therefore, are not reported as expenditures in governmental: fitntis. .Amortization of bond premiums 1,282 Accrued .interest 1;136 Change in net position —governmental activities $: 21.6.473 See notes to basic. financial statements. -1;- TI-II.S PAGE I..NTENTIONAI.LY LEFT BLANK CITY OF GEM: LAKE General.Fund Statement of.Revenue; Expenditures,. and` Changes in Fund'Balances � Budget and Actual Year Ended. December- 31, 2024 Original and Over (Under) Final Budget AetuaI. -Viral Budget Revenue Taxes Property taxes S 615pW' S 611,9 ? S (3;575) Franchise fees. 7,000 9,200 2,300 Special assessments — 480 480 Intergovernmental 1,012 30 647 29,635 Licenses and permits 30,675- 46,144. 15,469 Fines and forfeitures. .800: 843 .43 Charges for services. 450 31 756 29,106 Investment earnings 4 61 1 1.262 9,001 Facility rental 4,500 7,510 .3,010 Miscellaneous. 900 .18"377 -17,477 Total revenue 667,325 710,171 1Q2,946 :Expenditures Current. General government. 279,540 222J49 (57,191) Public safety 199,685 207,710 .8,02.5 Public works 79AOO. 30.297 (4.9,103j Conservation arid -development 74.700 81,430. 12,730 Capital outlay 14,000 53,041 39041 Total expenditures 641,325 600;827 (46;499j Excess of revenues over expenditures 26,000 16.9,344 149,344. Other financing (uses) Transfers:(out) 00,000} {20,0003: Net change in fund balances $ — 149i344 & 149,344 Fund balances Beginning of year 511,411 End ofyear $ -001,755 Seenotes. to.basicfnaftcial statements. -14- CITY OF GEMLAKE Statement of Net Position Proprietary Funds. December 51,.2024 _ Business -Type Activities — E1iterprise:.Funds Water Sewer Total Assets Current. assets Cash and. investments S 1.773 �. 465,898 S .467,671 RecciimWs Accounts 5,837 21,966 21,803 Accrued.. interest (charges) (265) 1,s0 1,554 Due from other funds — 82,277 82.277 Total currentassets 7,345- .57.1,960 579.305 Noncurrent assets Capital assets Infrastructure 7:34,262 91.3;679 1,5.47,940 Uss:accuntulated depreciation (1-122,366) 273 593 (385,959) Total capital assets, net of accumulated depreciation 621;896 546:085 1,161,9$1. Total assets 5: 629,241 S 111121045 S 1,741?86 Liabilities Current llabilities Accounts and contracts. paytible S — S. 3 3 Due to other funds 82,271 — 82,277 Due to other govemments 5,69.1 1,042 .0.133: Total.liabilitk 87,368 1,045 88,413 Net position Net investment in capital assets 621.896 540,085 I,161.,981. Unrestricted (80,023) 570,915 490,892 Total* net position .541,873 1,111,000 1,652 873, Total .liabilities. and net position S. 629,241 S 1.112.04.5 1,.741.2*86 See. notes to basic financial statements -15- CITY OF GEM LAKE Siatemed -&-Revenue. Expenses; awid.Ohatiges m. Net Position Proprietary Funds Year Ended December 31*,1024 Operating revenue. Charges for services Operating expenses Operating. expenses Depreciation 'total operating expenses Operating income (loss) Nonoperating income (expense} Investment earnings (charges.) Change in -net position Net position Beginning i►fyear, as-previouslyreported Error correction Beginning,of.year, as restated End of year Business -Type. Activities.— Enterprise: Funds Water Sewer Total S 24.102 S 80,255 S 104.357 .20,954 76,651 97;605 15;510 16,379 31,889. 36,464 93,030 129,494 (12,362) (12,775.) .(25,1.17) (3,339) 21,904 1.8;570 (1'1M1) 9,.134 (6;567) .5 57;574 .1,092,0.90 1,649,664 — 9;776 _ 9.776 .551,574 .1,101,866 1,,659A40 541;873 1,111,000 - 0552,873 See. notes to. basicfinancial statements -16- CITY OF GEM LAKE -Statement of Cash Flows Proprietary Funds Year Ended December 3.1, 2024. Cash .flows from operating activities Receipts fiom cttstoiners and users Pkymentsto vendors Error. correction Net cash fioiis. from bpetkting activities Cash flows from noncapital and related financing activities Cash received. from (paid to) other funds Cash flows from.investina activities Interest received (charged) Net change, in cash and caSh equivalents Cash.and cash equivalents — beginning. Cash and cash equivalents— ending Reconciliation of operating income (.loss) to net cash flimys from operating activities Operating income (loss) Error correction Adjustments to reconcile .operating income (loss.) to net cash. flows from operating activities Depreciation Decrease (increase) in Accounts receivable. Increase (dMease) in Accounts payable .Due to other governments Net cash flows from operating activities Business -Type Activities — Enterprise Finds Water Sewer Total S 22,13U. S 73,301 S 95,431 (.17,510) (75,.047) (93.166) — %776 .9,776 . 4,611 7,430 12,041 (3,.181). 3;181 — (3,340) 21,827 1.8,470 (1,918) 32;43s 30.520 3,691 4�3,460 -437,.151 $ 1,773 $ 46518.98 S 467.671 S (12,362) $ (.12;775) $ (25,137) 19;776 9,776 15,510 16079 3.1,889 (1,912j. (38) (38) 3;435 `1,04,2 4.477 $ 4,611 $ 7,430 $ 12,041 See .notes. .to basic financial.statements. .17- CITY Or GEM LAKE; Notes 3o BaSi& Financial Statements December 31, 2024 NOTE .I --SUMMARY OF.SIGNIFiCANT ACCOUNTING POLICIES A. Organization The City of Gem Lake, Minnesota (the City) was incorporated in 1959 and operates under the.state of Minnesota. Statutory- Plan A. form of government. The. City Council is the governing body and is composed of an elected mayor and.four count imenrbers who exercise legislative authority and determine .all matters of policy. The City Council appoiiits'personnel responsible for.the proper Administration of all affairs relating to the.:City. The accounting policies. of the City conform to* Accounting. principles. generally accepted .in tlie: United States'of America.as applicable to governmental units. The G6\,6mtrrental Accounting Standards Board is the accepted statrdard-setting body for establishing goverhOlental accounting and 'financial reporting principles. & Reporting Entity As required by. accounting principles generally accepted: in the United States of America, these financial statements include the City (the primary government) and its* component units. Component units:. are legally separate entities for which. the primary government is financially accountable, or, for which the exclusion of the component. unit would render the financial statements of the primary government misleading... The criteria used to -determine if the primary government is financially accountable for a component unit includes whether or not the .primary government appoints the voting majority of the .potential component. unit's board,. is able to impose its will. on. the potential component runt, is *in a relationship of financial benefit or burden with the potential component unit, or 'is -fiscally depended. -upon by the:potential component unit. Based onthese*akeria, there*are no organizations considered t6be component. units of the Csty.. .C. Governanent Wide Financial. Statements. The. government -wide financial statements. (Statement cif Net Position and Statement of Activities) display.infonnation about the reporting: government as a whole. These. statements include all of the :financial, activities of the City. Governmental activities. which normally are supported by taxes and intergovernmental revenues, .are reported separately from business -type activities, which rely to a -significant extent on- sales, fees, and charges £or support. 37he Statement of Aotivlties.demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific functYon or segment: Program revenues i.ncl... l) charges to :custorrrer gr applicants who purchase; use,: or directly benefit from goods, services; or privileges.. prgvided by: a given hrnction or segment,:2) operating grants and -contributions; and 3) -capital grants and contributiohs, including special assessments that are restricted to meeting the operational or capital requiieriients of a. particular function or. segment. Taxes and other -internally -directed revenues are reported As general revenues. -18- NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The .government wide. financial statements are reported using the economic resources measurement focus l and the accrual basis of accounting. Revenues are. recorded when earned and expenses are recorded when a liability is incurred. regardless of the tithing. of related cash flows. Property taxes and special assessments are recognized as revenues -in the fiscal :year for which they are certified for. levy. Grants and similar items are.recognized as revenue When .all eligibility requirements imposed by the: provider have been met. As a general rule,.the effect of interfiind activity has been eliminated froth the government -wide financial statements. However. charges between the City's enterprise funds and other functions are not eliminated, as..that would distort the direct costs and. program revenues. reported .iJT those functions, Depreciation expense is included in the direct expenses of each function. l.nterest on, lonX term debt is considered an indirect.etpense.'and is reported separately on the Statenienrof Activities. D. Fund Financial Statement Presentation. Separate-flind finakial*statements are provided for governmental and prgprietary funds. INajor individual governmental and enterprise funds.are reported as separate columns.iti the fund, financial statements.. Governmental fund financial statements are reported using the current *financial resources measurement focus and the modified accrual basis of accounting. Under this basis of accounting, transactions are recorded in the following. manner: 1. Rdvenue Recognition — Revenue is recognized when it -becomes measurable and available. "MeastuAble" means the `amount. of the transaction -can be. determined and `'available" means collectible within th-e current period or soon enough thereafter to be used to pay I iabilities of the. eiirrent period: For this: purpose, the City considers.. revenues to be available .if collected within GO days after yearend, :Only the portion of special assessments receivable due within the. cut -rent fiscal period is. considered to .be susceptible to accrual :as- revenue: of the current period. Grants and similar items are recognized when all eligibility requirements imposed by the provider -have. been met. Debt -proceeds are reported, as other financing sources. Major reVentie that is susceptible to accrual includes :property taxes. special assessments, intergovernmental revenue. charges for services, fines and forfeitures, .facility rentals, and interest earned on investments. Major revenue. that is not susceptible to. accrual includes licenses and permits, and miscellaneous revende..Such revenue is recorded only when received because it is nO( measurable until, collected. 2. Recording of Expenditures — Expenditures are generally recorded when a liability.is-iticurred, except for principal ,and interest on long=term debt and other long-term obligations, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions: are reported. as capital buttay expenditures in the governmental funds. Proprietary fund financial statements are repotted using .the economic resources measurement focus and the accrual basis of accounting; similar to. the government-w.ide financial statements. Proprietary funds* distinguish .operating revenues and expenses from. nonoperating items. :Operating revenues 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 revenues -of the Citys enterprise funds are. charges to customers for sales and services. The operating expenses for the enterprise 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 revenues and expenses. 5011 NOTE 1— SUMMARY OF SIGNrF'ICANT ACCOUNTING POLICIES.(CONTINUED) Description of Funds The City reports the following mAjor governmental funds: General Fund —The General. Fund is the general. operating fund of -the City, It is used to account for all financial resources except those required to be accounted for in another fund. G.O. Capital Improvement Plan Bonds Senaies 2015A Debt Service. Fund - Tlie C;.O. Capital Improvement Plan Bonds Series 2015A Fund' accounts for all debt service activity. related to the 2015A bond, G.O. Capital Improvement Plant Bodds Saries '2018A Debt $brvice Fund — The. G.O. Capital. Improvement Plan Bonds Series 2018A Fund accounts for all* debt service activity related to the 26.1 &A bond. Street Improvements Capital. Project Fund — The Street Improvements Capital Project Fund is used .to account for the.. accumulation of resources that are restricted,. committed, or .assigned to expenditures.for capital outlays, includiitg.the acquisition or construction of capital faeRities. Parks and Playgrounds Capital Project Fund — The Parks and Playgrounds Capital Pcaject Fund is used to :account for the accumulation of resources that are restricted for capital outlays and other costs relatedto maintaining and improving:the City's parks and. playgrounds. The City reports the following major-propiietary funds: Water Utility. Enterprise Fund — The Water Utility Enterprise Futid' accounts for customer water service charaes..that.are used to finance water operating expenses. Sever Utility .Enterprise Fund — The Sever Utility .Enterprise Fund accounts for customer sewer service charges that are used to finance sever operating expep�es: E. Cash and Investraents Cash and temporary investments inOude balances from all. funds. that are, combined and invested to the ektent available* in various securities as authorized by state law. Earnings frorrr the pooled investments are allocated to*the respective fluids on the basis of applicable cash balance participation by each fund. .For purposes of the Statement of Cash Flows, the City considers all highly liquid instruments With an original maturity from the time of purchase by the City of three months or less to be cash equivalents.. -The proprietary funds' portion in the .government -wide cash. and im=estment management pool is. considered a cash equivalent. -2a- NOTE 1- SUMMARY OF SlIGNIFICANT ACCOUNTING POLICIES.(CONTIiNUED) The City reports all investments at fair value. The City categorizes its fair value measurements within the l fair value hierarchy established by accounting principles generally accepted in tlhe United States of America. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level I inputs are quoted prices -in active markets for identical'assets_ Level 2 inputs are. significant —other observable inputs; and bevel 3*iriputs are significant unobservable inputs. Debt securities -classified. in Level 2 of the fair value hierarchy are valued using a matrix pricing technique. Matrix pricing is used to value securities based on thie securities' relationship to benchmark - quoted prices. Investment pools/mutual funds reporting fair value measurements using NAV —filet Asset Value.have no unfunded commitments,. the redemption frequency is daily and no redemption notice is. required. See Note 2 for the City's recurring fair value measurements as of year-end. F. Receivables' Utility and miscellaneous accounts receivable are reported at gross.. Since the City is. generally able to certify delinquent. amounts to the county for. collection as special assessments, no allowance for uncollecdlble accounts has been provided on current receivables. All receivables are expected to be:. collected. wits;in one yeah with the exception of defened special 'assessments and property taxes. receivable, G. Property Taxes .Property tax levies are. set. by the City Council. by December of Bch year,. and are certified to :Ramsey County for collection in the following year, fin Minnesota; counties act as collection agents for all property taxes. The county spreads all levies over taxable pr9p�erty.. Such taxes become a lien on January 1. and are recorded as receivables by the.. City on that date. Real property taxes inay be paid by taxpayers*in mio equal installments on May IS and Octobez l S.. Personal property taxes are due in full on May 15. The county provides tax settlements to cities an4.other taxing districts three times a year; in July,. December,-and.Jonuary. Property tAkes A*re-recognized as ieventie in the year levied in the government -wide financial statements. I. t. governmental .fund financial. statements, taxes are recognized as revenue when received in. cash or within 60 days after year-end. Taxes which remain unpaid at December 31;.nre. classified as delinquent taxes receivable, and -are offset by. a%deferred inflow of resources :in the* governmental fund financial statements. H. Special. Assessments Special assessments represent the' financing for public' improvements .paid for .by -benefiting property owners. Special. assessments are reeprded as receivables upon. certifieatioi* to the. county:. Special assessments are recognized.as revenue in tite year levied in the government-wide'financial*stateinents.. In the govern 'ment''al fund financial statements, special assessments are recognized as -revenue when received in cash or within :60 days after year-end. Governmental fund special assessments receivable which remain unpaid on December•"31., are offset by a deferred inflo,.;, of resources in the governmental fund financial statements: .1. Prepaid Items Certain payments to vendors reflect costs applicable to future aceounting periods and are recorded as prepaid iterns in .bath .government -wide and fund financial statements. Prepaid :items. are reported using the consumption method and recorded as expenditures/expenses at the time of consumption. '.21- NOTE 1. —.SUMMARY OF 51GNIFICANT ACCOUNTING POLICIES (CONTINUED) J. Capital Assets Capital assets, which include property, plant; -equipment, and infrastructure assets (e.g., roads, sidewalks, streetlights. and similar items).are repotted in the applicable: governmental or business -type. activities columns in the government -wide financial statements. Such assets are capitalized at historic%[ cost or estimated historical cost for assets where actual -historical cost is not available. The City defines. capital assets as those.*with .an initial.. individual cost of $`500 or more with an estimated useful life in excess of five years. Groups of similar assets acquired at or near the same eitne for a single objective,. with individual acquisition costs below this threshold. are also capitalized if costs of the.assets is considered significant in the aggregate. Donated assets are recorded as capital assets at their acquisition valtie at -the date of donation. The cost of norinal maintenance and repairs that do not add twthe-value of the asset or materially extend asset lives are not capitalized. Major outlays for capital assets and unprovements are capitalized as projects.are constructed. The government reports infrastructure assets on a netti%orl: and subsystein basis: In*the case of`the initial capitalization of general infrastructure assets (i.e., those reported by gavemmetital* activities). the City :chose to include all such items regardless of their acquisition date. or.aniount. Capital assets are recorded in the. government -wide and proprietary fund financial statements.*but ,are'not reported.in the governmental fund financial statements. Depreciation on eAdustible assets is recorded as an allocated expense in the Statement. of Activities and proprietary funds Statement of Revenue, Expenses. and Changes in Net Position with accumulated depreciation reflected in the government -wide .and proprietary- funds Statement of Net Position. Since surplus assets are sold for an immaterial amount when declared as no longer needed for city purposes, no salvage value is .taken: into consideration .for depreciation purposes. Capital assets: are depreciated using the straight-line method over the following estimated useful lives: . Assets Buddings 0,MCC .equipment Infrastructure Estimated Useful Life 40 years 5 t. 0,10:years 20 to.5Q years Capital assets not being depreciated include land and colistructioti in progress. K. Long-Teritn Liabilities In the: gq pmment-%Vide and proprietary fund financial statements; long-term debt and other long-term obligations are reported as liabilities. If they are material, bond premiums and discounts are deferred and 'amortized ovet the life of the bonds` using the straight-liire- method. Bbnd issuance casts* afe expensed in. the period incurred, In -the governmental fund financial statements, long-term debt and other long, -term .obligations are: not reported as liabilities until due and payable.. The face amount of debt issued is reported as other financing source$. Premiums or discounts on debt issuances are reported as other financing sources or uses, respectively. Issuance costs, whether or not. withheld -from-the actual debt proceeds. received. are reported .as expenditures. *22- NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (CONTINUED) L. Compensated Absences. Payable. The City recognizes a liability* or compensated absences, for leave tune that (I) has been earned 'for serviccs. previously rendered by employees, -(Z} accumulates and is :allowed to be carried beer to subsequent Mears; and: (3) is more likely than not to: be used as titrte offor settled during or ulson separation front einploymdrit. Based bn this criteria,- ontype of leave qualifes :for liability recognition fpr compensated absences — vacation. The liability for compensated absences is. reported as. incurred in the government -wide and proprietary finds I;nanciai statements, if significant. A liability for compensated absences is recorded in the governmental funds. only if.the liability has matured because of ernployee resignations.or retirements: The .liability for compensated absences in6ludes salary -related benefits., where applicable. M. Net Position I6.the government tivide and proprietary fund financial statements, net position represents the differences between assets, deferred outflows of resources, liabilities, and deferred inflow-d-resources: Net position is displayed- in three corfnponerits: • Net Westment-in Capital Assets.— Consists`of capital assets, het of accumulated depreciation, !educed by any datstanding.debt attributable to acquire:capital assets. + Restricted Net Position — Consists of iiet positionr restricted when there are -limitations- ir.gposed on their use.through external resrrictions:imposed by -creditors; grantors; or laws or it of other governments. • Unrestricted Net Position — All other net position that does not meet the definition of "restricted" or "net investment in capitai assets." The City applies restricted resources first when. an expense is incurred for which both resitric#ed and .unrestricmd-resources are available. N. Fund Balance Classifications In the fund financial statements. governrnentaI funds report fund balance in classifications that disclose constraints for which amounts in tbpse funds can be.spent. These classifications are as follows: Nonspendable — Consists of amounts that are not *in spendable form, such *as prepaid items, inventory: and other long-terjn assets. Restricted Consists of amounts related to externally imposed constraints established by creditors, grantors, or contributors;.or constraints. imposed by:state statutory provisions. • Committed — Consists of internally imposed constraints that are established by resolutiou..of. the City Council. Those committed amounts cannot be used for any either purpose unless -the, City .Council removes. or changes the specified use by taking the same. type of action it employed to previously committhose. amounts. L23, NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) • Assigned — Consists of internaliv imposed. constraints. These constraints consist of -amounts intended to. be used by the City for .specific purposes, but do not meet the criteria to be classified as restricted or committed. In governmental funds. assigned . amounts represent intended uses established by die.goverribig--body itself or by an official.to which the governing body delegates tilt authority. • Unassigned -- The residual 0"sification for the: General Fund, which also reflects negative residual amounts in other funds: When both .restricted and unrestricted resources are available: for use, it is the City'.s. policy to first use restricted resources, then use unrestricted resources as they ate needed. When committed, assigned, or unassigned resources are available for use} it is. the City's policy to. use resources in the following order: 1) commttted,,2) assigned. and 3) anassigned. O. Budgets and BudgetatT Accounting Budget atnounks.--are presented oti the- modif red. accrual basis. of accounting. Each fall, the. City Council adopts a General.Fund budget for the. follo«-ing fiscal year be 3anuary 1. The City has established budgetary control at the fund level. Budget appropriations lapse at year-end. P. .Risk Management The City is eXposed for various risks of loss related to torts: theft of; damage to, and destruction of assets; errors and omissions: injupes-t4 employees; and natural -disasters. The City continues to carry commercial insurance for all ris.l;s ofJoss, .including disability and .employee health insurance. Settled claims resulting from these risks have not exceeded insurance coverage in any of the past three -fiscal years. There were no significant reductions in insurance coverage in the current year. Q. Use of Estimates The preparation of financial. statements, in awwrdance. with account'sng principles generally accepted in the United States of America; requires niaiiagement to make estimates and assumptions that affect aniounts reported in the financial statements during the.reporting.period. Actual results.could diffei•fro0i such estimates. R. Interfund Receivables and Pavables In the fund. financial statements, activity between. funds. that is representative of lending or borrowing arrangements is reported as either `'due to/from other*funds" (cuiretit portion} or "advances to/from other funds." All other outstanding balances between funds are reported as."due to/from other funds." Any residual balances outstanding between the .governmental activities and: business -type activities are. :reported in the government wide financial statements as."internal balances,"' -24- NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) S. Defelrxed Outflows/Inflows of Resources In addition :to assets and liabilities, statements of financial position, or balance sheets, will sometimes report deferred outflows or inflows of resources. Time. -separate financial statement elements represent a consumption or acquisition of net. position that applies -to a future period and so will not be recognized as an ou#flow ofreso..urces.{expense/expenditure) or an inflow of financial resources (revenue) until then. Unavailable revenue arises only .under a modified accrual basis of accounting .and,: therefore, .is only reported in the governmental funds financial statements. The governmental funds report unavailable .revenue from two souxoes: property taxes and special assessments. These aimount3 am deferred *and recognized as infloWs.ofresources in the period they becone.available. NOTE 2 — DEPOSITSANI) INVESTMENTS A. Components of Deposlis and Investments Cash and investments at year-end consist of the following: Deposits S 489,405 Investments 1.,179.275 Total S 1.6.68.680 B. Deposits In accordance with Minnesota Statutes, the City maintains deposits at financial institutions which are authorized -by the City Council,. including checking accounts and oeitificates of deposit. The following is considered the most significant risk associated with deposits: Custodial Credit Risk— In the. case of deposits. this is the risk that in the event of a bank failure, the City's deposits.maybe lost. Minnesota Statutes require-thatall deposits .be protected by federaC deposit insurance, .corporate suret}, bond, nr collateral. The market -value, of collateral pledged must equal 110 percent of the deposits not covered by federal deposit insurance or corporate surety bonds. Authorized collateral includes ti easu1y .bills..notes, and bonds; issues of.*U:S. �govetnment: agencies; general obligations rated "A" or better revenue obligations rated "AA" or better: irrevocable standard letters of credit. issued by the .Federal Home Loan Bank; and :certificates of deposit. Minnesota Statutes :requite. that securities pledged as collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or in an account. at a trust. depart,nent of a commercial bank or other financial institution that i$ not owned or-eontrolled by the financial institution furnishing the. collateral. The -City has no -additional deposit policies addressing custodial credit risk. At :year end, the carrying amount of the City's deposits was $489,405, while the balance on the bank records was: $495,395. At December )1.� 2024. all deposits were fuliv covered by federal deposit insurance.. surety bands, or by collateral held by the City's agent in the City'-s name. -25- NOTE- 2— DEPOSITS' ANDINVESTMENTS (CONTINUED) C. Investments The City has•the following investments.at Year-end: Interest Risk — Maturitv.Duration in Years Fair Value No Credit Risk Measurcmezits Maturity Uss Investment Type Rating Agency Using Date: Than 1 I to 5 Total Municipal bonds AA Moody's Level 2 $ - 5 - S 139,062 S. 139.062 Municipal bands AA S&P Leven 2 - - 506,921 50.61822 Negotiable certificates ofdq)osit N/R NA Level.2 - 318.34 188;337 51(055 Investtnentpooisltnutual funds Aa>A .Moody's N:AV 1�6,537 16,537. Total. invcstinents. S 16,537 S 328.518 5 834.220 S11179.276 N R - Not hated NiA - Not Applicable NAV. --- Net Asset. Val.uc; No Unfunded E ommittaents, No. Redemption Restrictioi)q Investments are -subject to various risks, the following of which a0e considered th6-mlostsigniffaant:* -Custodial Credit Risk — For investments, this is -the risk; that. in .the event of :a failure of the countetparly to. an -investment transaction (typically a broker:dealer), the City. -v•\-ould not, be able to recover. the value .Qf its investments or collateral securities that are in the possession :nf ari outside party. The Gity'*investment. policy does. not further address this risk. Credit Risk— This is the risk that an issuer or other counterparty to an investment will.. not fulfill. its obligations. Minnesota Statutes limit the City's investments to direet obligations or obligations buaranteed by the United Mates or its agencies; shares of investment companies registered under the Federal -Investment Company Act of 1940 that receive the highest credit rating, are rated in one.of the two highest rating categories by a statistical rating Agency, and all of the investments Have a final tnatuiity•of•l:3 months or less; general obligations rated `.A" or better; revenue. obi igations-rated "AA" or better,•generarl obligations of the Minnesota Housing Finance Agency rated "A" or better; bankers' acceptances of United States barnks eligible for purchase by the Federal Resen'eystem; commercial pap er•issued by United States corporations or their Canadian subsidiaries,. rated. of the -highest quality category by at least nvo nationally recognized rating agencies, and maturing- in 270 dais 'or less: Guaranteed .lovestment Contracts guaranteed by it United States commercial.bank, doinestic b>iang4 of a foreign bank; or a Uriittd• States insurance company, :and with .a credit quality in one -of the top two highest categories: repurchase orreverse purchase agreements and securities .lending agreements with financial institutions qualified as a "depository" by .the government entity, with banks that. are members of the Federal. Re.se>Ive System with capitalization exceeding .-$10,000,0.00;. that are a primary reporting dealer in U.S. government.securities to the Federal Reserve Batik -of New York; or certain Minnesota •securities broker -dealers. The City's investment policy does not further address credit risk. NOTE Z — DEPOSITS AND INVESTMENTS (CONTINUED.) Concentration Risk - This is the risk associated with investing a significant portion of the City's i0estments .(considered 5.0 percent or snore) in the securities of a single issuer,, excli4ding IJ.S. guat�anteed investments (such as. treasuries), investment pools, and mutual ftttlds. 'The City's investment policy states that no more than 5.0 percent of the overall portfolio may: be invested in the securities of a single issuer; except for the securities of the United States government, or an external investment pool. The Mlo-wing is a List .of investments, wluch individually comprise .more than 5.0 percent•ofthe City"s-total investments: Goldman Sachs Bank 7.z% Hartford County, CT 12.7%. Federal Home Loan. Mortgage Corporation: !btadison Borough, NI 18. 3 New York. State Dormitory Attoorityr 12.,1 % Texas. Exchange Bank .20.7% New York .Cit ? Transit Interest Rate Risk L This is the. risk of.pbieniial. .val•i6bility in the fair -value of fixed rate investments resulting from changes in interest rates. (the longer the. period for which ail interest rate is fixed, the greater the risk). The City's investment policy does not further: Address interest rate risk. NOTE.3 — COITAL ASSETS Capital.asset.activity for the year ended .December 31, 2024 was as follows: A. Changes -in Capita Assets Used in Governmental Activities Capital assets, not depreciated Land Coustntction in progress Total capital assets, not dcprdeiated. Capital assets, depreciated Buildings office equiptnent Infastructure Total capital assets; ilepicciated Less -accumulated dcpnciation for Buildings Office equipment Infrastructure Taal accumulated depreciation 'Ncucapi(al assets, depreciated Ma capital assets Balance — Transfers and 13cgimting comp lct¢d Balance • of Ycar Additions Deletions. Construction End of Year S 2.500 S — S — S — S 2.500 31.290. — — _ QUO) 33,790 — (31.280) 2,500' 907.712 6.54.1 — — 914.253 19.203 46.961; (2.439) 31,280 9i n0S 1.9.16,834 — -- 1;916,854 2,843.769 33;302 (2,439.) 31,290 2.926.11.2 .(362..1.69). (22390) _- — (384;559) (17178>). (C728) 1.918 — (20:595.) (8.95.674.) (85,051.) _ __ j980:7251 (1.275.628) (112,169) 1,918 — (1.385.879) 1.568.141. (594667) 020 31.380 1.5- 40:233. S 1.601,921 S (38,667) S (521) S - $ 1..342,733: -27- NOTE: 3 - CAPITAL ASSETS. (CONTINUED) B. G1talpg"Ja Capital.Assets�Used in Business -Type Activities Balance - Transfers and Beginning Completed Balance of Year additions. Deletions Construction End of Year Capital assets, depreciated Infrastructure S 1,547,940 S - $ - S Less accumulated depreciation. for Infrastructure (354:070) (31,889) - - (3$5,959) Net capital. assets S 1,193,97.0 S (3:1,889) $ - S $ 1,141,9$1. C, Depreciation Expense by Function Depreciation expense was charged to the .foliot3-ing.fttnctions; Governmental. activities General government S 27,118 Public works 84,301 Comervation.and development 7.50 Total: depreciation.expense •- governmental activities 1 T2<T69 Business -type. activities Water S 15;510 Sewer 16,379 Total depreciation expense- business-type•activitia S 31;88 NO.T.E 4 — LONG-TERM LIABILITIES A. Components.of.Long-Term Delft Governmental activities General obligation (G.O.) bonds G.O: Refunding Bonds of2015A G.O. Improvement Boriftof201SA irnamorti.md premiums Total governmental activities Iong-term :debt Final Balance - Original Issue Interest hate Issue Date Maturity Date End :of Year S 775.000 123-2.90% 06/17/2015 S. 660.000 3.00-4.00% 07/12/2013 02/01 /2 k S 275.000 02/01 /2034. 47510.00 75.000. 10.953 S 7W953 _28_ NOTE 4 — LONG-TERM LIABILITIES (CONTINUED) l3. Changes in Long-Term.Debt Balance -- Beginning Balancc - Due Within of Ycar Additions Retirements End ofYcar One Year Governmcntal activities CIA tionds G.b..Refitnding Bonds or2015A S 340.000 S. - $ 65,000 S 275.000 S 65000 G:O. Improvement Bonds of 20'18A S 15,0 40,000 475,000 40..000 t;tuunonkzed premiums 12,235. — 1,282. 10.953. Total 5 867.235 S — S 106 282 S 760,953 S. 105.000 C. Minimum Debt Payments Minimum- annuai principal and interest payments required to retire. bonds payable are. -as follows: Year Ending. December 31, 2025 ?02b 2027 .2028. 2029 2030--2034 Total p. DesjcriptiQn df Long -Term Debt Goverttmcntal Activities Principal Tntcrest S 105.,P0 110,906 T t5,0oo. I 1 %000 45,000 260.000 S 73,476 .2q,488 17,270 b.1i90 i 1,3.0.0 -26.600 S 750,000 S 113.024 General Obligation Bonds — The bonds: were issued for improvements or projeots, of to refilnd previously issued bonds, which benefited the City as a whole- and .are, therefore. repaid from ad -valorem .levies. E. Ultimate Responsibility for Debt All general obligation bonds .ate backed by the full faith -and credit of the City: F. Conduit Debt-Obligatiops Conduit -debt obligations am certain limited obligatioir revenue bonds or similar- debt.instrurn6its issued for the express purpose of providing capital financing for specific third: parties. The. City leas issued Educational Facilities. Revenue Notes, Series 1024 for a school in the .amount of $3,260,06U with a maturity date -of 2045 to provide funding to private=sector and/or nonprofit entity f6r a project deemed w be in the public interest. Although these bonds bear the name of the City; the City has no obligation for such debt. As. of Decembei 11, 2024, these bonds have. an outstanding balance in the amount of _29_ NOTE 5 — INTERFUND BALANCES AND TRANSFERS A. Due To/From Other Funds Individual fund reedivable:artd payable balances at.December 31, 2024 are. as follows: Receivable Fund Payable Fund Amount Sewer Enterprjse Water Enterprise S 82,,177 lnterfund receivable and payablebalances represent the elimination of negative -cash between funds. B. Fnterfund Transfers Individual fund transfers during the year ended. December.3.1, 2024 ate. as follows: Transfers Out Governmental .funds: General Transfers Tn Governmental Funds.. Street lmprovcmcnts Capital Project .S. 20,000 During 2024. the Cite .made intetfund hungfers to provide additional funds .for completitt upcoiiring capital projects. NOTE 6 -- NET INVESTMENT IN CAPITAL ASSETS The government -wide Statetnent 6fNet Position at December 3.1., 2024 includes th& City's net investment: in capital assets, calculated as follows: Net investment in. capital assets Capital assets Not being depreciated. Depreciated,:netbfaccufiiulated depreciation Less capital -related ldng tern debt outstanding. Total net investment in capital assets Governmental Business -Type. Activities Activities Tbml S. 2,500 S S 2,500 I ,540; 233 1,161,991 2.702,214 (7601953) — (760 953 ) S 781,780 S 1,161,981 S 1,943;76.1 -30- NOTE 7 — COMMITMENTS AND CONTINGENCIES A. Legal Claims The City has the usual and customary type of miscellaneous legal claims pending at year-end. Although. the outcome of these. lawsuits is nott presently determinable, theCity: s management believes Yhat the City wilt not incur any material monetary loss resulting from 'these claims. No loss has been recorded ott the City s financial statements relating to these claims. B. Federal: and State bonds Amounts recorded. -or receivable from federal and state. agencies are .subject to agency audit and adjustment>.Any disallowed claims, inclodirtg amounts already collected, way constitute a liability of the applicable funds: The amount; if any; of claints.-which may be disallowed by the grantor agencies cannot. be determined at this time, although the City expects such amounts, if any, to be immaterial. NOTE 8 — ERROR CORRECTION An error results from mathematical mistakes: mistakes in the application of accounting principles* or oVersight or misuse of facts that existed at the time the financial statements were issued about conditions that existed .as of the financial -statement date. lhiriug fiscal year 2024,. the City determined. an e�i %vas made in .the: businessAy-pe aetiVities and the Sewer Enterprise Fund. The City determined -that -the. beginning;net position of the $ewer Enterprise Fund was understated by $9,776. This error caused the ending net position in fiscal 2023 to bi�_understated by $9,776-and'the'related revenues or expenditures to 1 understated of*overstated, respectively by the safr►e anlUlil7t. -31- OTHER REQUIRED REPORTS THIS PAGE INTENTIONALLY LEFT BLANK L13 CARLSON INDEPENDENT AUDITOR'S REPORT 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 To the City Council and Management City of Gem Lake, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Govermnent Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business -type activities, and each major fund of the City of Gem Lake, Minnesota (the City) as of and for the year ended December 31, 2024, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated August 28, 2025. REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees. in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material wealmess is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that were not identified. We identified certain deficiencies in internal control, described in the accompanying Schedule of Findings and Responses as finding 2024-001 that we consider to be a material weakness and finding 2024-002 that we consider to be a significant deficiency. (continued) _;2_ REPORT ON COMPLIANCE AND OTHER MATTERS As part 0-obtaining reasonable assurancee about whether the City's financial statements are free from t material misstatement. we per.formed tests°.of its complia�ice with certain provisions of laws, regulations, contracts, :and grant agreements; noncompliance. with which eould-have.a direct and material effect on the financial Statements. However. providing an opinion on compliance* with those provisions was not an objective of our audit arid; accordingly; we do not express: such an opinion. The results of our tests disclosed -no instances -of noncompliance or other matters. that, are required to be reported under ( Governpiew Audiriirg Standards. !tt CIT.Y'S'Rit P¢OY tES TO FINDINGS Governnienr Auditing Standards requires the auditor to perform limited .procedures on the City's responses to the fAndings identified in our audit. and described in the accompanying Schedule of Findings -and Responses. The City's.responses were not subjected to the other auditing procedures applied in the audit of the financial statements.-and,.aecordingly., we express no opinion on the responses. PURPOSE OF THIS REPORT The purpose of this repoit. is solely to describe the scope of our testing of internal coutrol.and compliance and: thq resents Of that testing, and. not: to. provide ail opinion on the effectiveness of the. City's internal control or on compliance. This report is an integral. part of an audit performed in. accordance with G vernfitent. Awfiting Standards in considering the .City's internal control and compliance. A-ecordingly,. this report is not. suitable for any other purpose,. Respectfully submitted:. LB CARLSON, L'LP (Minneapolis, Minnesota. August 28, 2425 -33- L13 CARLSON INDEPENDENT AUDITOR'S REPORT ON MINNESOTA LEGAL COMPLIANCE To the City Council and Management City of Gem Lake. Minnesota We have audited, 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, the financial statements of the governmental activities, the business -type activities, and each major fund of the City of Gem Lake, Minnesota (the City) as of and for the year ended December 31, 2024, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated August 28, 2025. MINNESOTA LEGAL COMPLIANCE In connection with our audit, nothing came to our attention that caused us to believe that the City failed to comply with the provisions of the contracting — bid laws, depositories of public funds and public investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing sections of the Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State Auditor pursuant to Minnesota Statutes § 6.65, insofar as they relate to accounting matters. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the City's noncompliance with the above referenced provisions, insofar as they relate to accounting matters. PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of compliance and the results of that testing, and not to provide an opinion on compliance. Accordingly, this report is not suitable for any other purpose. Respectfully Submitted. LB CARLSON, LLP Minneapolis, Minnesota August 28, 2025 -14- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF GEM. LAKE Schedule of Findings :and Responses Year Ended December. 31, 2024 FINDING — MATERIAL WEAKNESS IN INTERNAL CONTROL. OVER FINANCIAL REPORTING 2024-001 IZ-4ADEQUATE;SEGREGATiON OF DUTIES Criteria — Internal control dv* financial rep'ort.ir g.. Condition — The City of Gem Lake, Minnesota (the City) has ]united segregation *of duties in a number of areas. 'including. but *not limited to; controls over cash receipts, cash. disburserrtenls,. utility billing; and pa}troll. Questioned -Costs.— Not applicable. Context — Tbe.condition applies to multiple areas as noted above: Repeat Finding — This is a current. year and prior. year finding. Cause —The limited segregation of. duties-is.primarilyd-4osed bythe limited size of'the City's office staff. Effect — One important element of internal accounting Controls is an adequate segregation of duties such that no one individual. have responsibility to execute a transaction,.have physical. access to the related assets, -and. have responsibility or authority to record the transaction. A lack of segregation of duties Subjects the. City to a, h'igher-risk that errors bt fraud could occur and not be detected in a timely manner in the*normal course of business: Recommendation -- We recommend that the City continue its efforts to segregate duties as .best it can within the Iimits: of what the City considers to be cost -beneficial. Management Response —There is no disagreement with the audit finding. The -City reviews and makesimprove tnents to its internal control structure orr aft ongoing basis to maximize the segregation of duties in all areas within the limits of*the staff available::However, the .city does not consider it cost -beneficial at this time to increase the. size of itss finance .department staff' in order to further segregate accounting. -functions.. -35- CITY OF GEM LAKE Schedule of.Findings.and Responses. (continued). Year Ended December 31, 2024. FINDING — SIGNIFICANT DEFICIENCY IN INTERNAL CONTROL OVER FINANCIAL REPORTING (CONTINUED) :2024-002 SOFTWARE CONVERSION AND ERROR CORRECTION Criteria — internal control over financial reporting. Cbridition —.The. Cite completed a: software conversion to a new accounting system in the current.year. During.our testing off this conversion to the new accounting system. '%ve noted certain detailed transaction information is no longer available tq the City: We, also noted during our testing, the City reported an error correction to the beginning net position balance in the Sex.ver Enterprise Fund since the ending balances of the pievious-accounting systemdid not agree to the beginning balances in the new aceorrnting s}=stem in this fund, Questioned Costs —Not applicable. Context -- The City does not have access to certain :detailed Accounting transaction information. Repeat Finding — This. is a current year finding. Cause — This findin- is due to an accounting sotaware conversion. Effect — The City does not have access to ali.detailed accounting transaction information. Recommendation — We recommend that the. City work with the software provider to obtain access to the City's.detailed accounting transaction information. Managem4en f. Response —:There is no disagreement Nrith the audit bnding. 46-