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HomeMy WebLinkAbout2024 Management ReportManagement Report %r City cif Gem.Lake. Minnesota. December 31,.20.24 THIS PAGE I:NFTENTIONALLY LEFT BLAINK L13 CARLSON To the City Council and Management City of Gem Lake, Minnesota We have prepared this management report in conjunction with our audit of the City of Gem Lake, Minnesota's (the City) financial statements for the year ended December 31, 2024. We have organized this report into the following sections: • Audit Summary • Governmental Funds Overview • Enterprise Funds Overview • Government -Wide Financial Statements • Accounting and Auditing Updates We would be pleased to further discuss any of the information contained in this report or any other concerns that you would like us to address. We would also like to express our thanks for the courtesy and assistance extended to us during the course of our audit. The purpose of this report is solely to provide those charged with governance of the City, management, and those who have responsibility for oversight of the financial reporting process comments resulting from our audit process and information relevant to city finances in Minnesota. Accordingly. this report is not suitable for any other purpose. Respectfully submitted, Z-19 ; ��- LB CARLSON, LLP Minneapolis, Minnesota August 28, 2025 THIS PAGE JNTENTIONALLY LEFT BLANXC AUDIT SUMMARY The following is, a.:summary of our audit work. key conclusions, and other information that we consider important or that is. required to bc• communicated to the City Council, adininistration, or those charged f with governance of the City. l ~- U4R RESPONSIBILITY UNDER AUDITING. STANDARDS GENERALLY ACCEPTED: IN THE UNITED I STATES OF.AMERICAAND Goi,ERN,4fEN7AtlDirlNGSrAIvDARDS We have audited the financial statements of the governmental activities, the business -type activities. and each major fund of the: City as of and for the year ended ]December 3.1, 2024. Professional standards require that we provide:yoir*with information about our respdiisibilities under auditing standards generally accepted irT :the United States of America and Government Auditing Stcwdrneli ., as -well as certain: information related to the planned. scope and timing of bur audit. We have communicated such information -to you verbally, in. our audit engagement letter-: Professional. standards%also require that we commutiicate the following infQrmation.related to our audit. PLANNED SCOPE AND TIMING oF.TAEAum We pej-formedthe audit according -to the planned scope and timing previously discussed and coordinated. in order to obtaiin.suffcient audit*evidence�ind complete:an effective audit. AIM IT. OPINIONS•AND FINDING$. Based on our audit of the City's financial stateiitents for the year ended December 3.1. 2014: • We have issued unmodified opinions on the City's basic financial statements. We .reported two deficiencies inf the- City's internal control over .financial reporting that we. considered to be a material weakness and a significant deficiency: 1. Due to the limited size of the City's office staff, the City -has limited segregation of duties in certain areas: w. The City completed a software conversion to a -new accounting system in tiie * current year. Daring. our testing. of this conversion to the new accounu.jig system, -we: noted certain detailed transaction information is.pp.longer available to the. City. We;ai$o noted during our testing, the City reported an:erxor correction to beginning -net position balance in the. Sewer Enterprise Fond since the ending balances of the previous accounting- •systein did not agree to the beginning balances in the new accosting system in. this fund. • The results of our testing'disciosed no -instances of noncompliance-regtiired to lie reported under Got-erinnew Auditing Sncmtlurds, • We reported no findings. based on our testing of the City's compliat ee-with Minnesota laws and regulations. OTHER OBSERVA'r[O,NS AN REcomrsIENDATIONS Unclaimed Property Tli.e City did not file an unclaimed property report to the state of Minnesota prior to the.. -deadline for reporting. We recommend the City file this report on a timely basis in the future. Withholding Tables During the testing.afthe.payroll transactions, we noted the City used payroll tax. withholding tables that are provided by•tlte state of Minnesota and the internal Revenue Service that were not current and up-to-date. We recommended .that the City work with.. its software provider to ensure current rates. and amounts amwilbhold from employee paychecks as part of payroll related transactions in the fitture. SIGNIMAN'r ACCOIJNTING•POLICIES Management is. responsible.for *the selection and use of -appropriate: accounting policies. The significant accounting. policies used by the City are described in Note.1 of the notes to basic financial statements. No new accounting policies were adopted, and the application .of existing -policies was not changed during -the year•ended.December 3 T, !L24. Vc noted no transactions entered into by. the City during the year for which• there. is.a. lack of author..itatjtre guidance or consensus: All significant transactions have been recognized in the financial statements in the proper period. ACCOUNTING E$TIMAT.ES .AND MANAGEMENT RIDGMENTS• Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about -past and current events and assumptions about future events. Certain. accounti.ng estimates are•particularly sensitive. because of their significance` -to the financial statements and because of the possibility. • that future events affecting them may differ significantly from those -expected.-'The. most sensitive estitnate aMct'ing the fnancial statements. was: The- depreciafion of capitat assets involves estimates. pertaining to useful lives.. We•evaluated the key factors and assiimptioits used •by management to develop these• accounting estimates in deterininirig that they are reasonable in relation to the.basic financial statements taken.as a:whole. The financial statement disclosun�s are neutral, consistent, and clear. DIFFICGLTIE5•ENC0UNTEREb•1N PERFORMING THE AUDIT We encountered no significant difficulties in dealing with management in•perfotinlrig and completing. oar audit. CORRECTED AND UNCORRECTED.MiSSTATEMENTS Professional standards require us to accumulate -all known and likely tnisstatements: dentified .during the audit. other than those that .are. clearly trivial,. and communicate them to the appropriate level of management. Management has corrected all such misstatements. -2- 'In addition, none. of the -misstatements. detected .as :a result -of audit procedures grid corrected by management Vere material, either individually or in the. aggregate;. to each opinion unit's financial smteinents taken as -a whole.. The City passed on the recording bf-state-wide pension liabilities, deferred `infloWs/outtlows of resources totaling $29,277 on the Statement of :Net Position as .they were deemed immaterial. .DISAGREE,IIENTS WITH MANAGEMENT For purposes of this report, a disagreement with management. is a. financial accounting, reporting, or auditing; matter, whether or not resolved to. -our satisfaction, that could be significant to the financial statements of the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. MANAGE LENT REPRESENTATIONS We have requested certain representations from. management: that are included in the management representation letter dated August 2$, 2025. MANAGEMENT CONSULTATIONS WITH,OTHEIt INDEPENDENT A000UNTANTS In some cases, management may decide to coiisttit With other accountants abotii'audiiting.and accounting matters, similar to obtaining .a "second opinion" on certain. situations. If a consultation involves application of an accounting principle to the City's financial.statenients or a determination of the type of auditor's opinion that mar be expressed on those statements; dur professional standards require .the u conslting accountant -to check with us to determine that itre consultantmas all the relevant facts. Tq- our knowledge, therewere no such consultations with other accountants. OTHER AUDIT FINDINGS OR IS$UES We generally discuss a variety of matters, includhig.1he application of aceotinting printeiples and auditing standards with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course ofour professional relationship and our responses.were not a condition to our retention: OTHER MATTERS We were not"engaged to report on the introductory section, v.,hich. accompanies the financial statements, but is not required supplementary information. Such information.has not been spbjected to the auditing .procedures applied in the audit of the basic financial :statements and, accordingly, we do not express an .opinion or provide any assurance on it. 3.- THIS PAGE INTENTIONALLYIEFT BLANK GOVERNMENTAL FUNDS OVERVIEW This section of the report provides you with an overview of the financial trends and activities of the City's governmental funds, which include the General, special revenue, debt service, and capital project funds. These funds are used to account for the basic services the City provides to all of its citizens, which are financed primarily with property taxes. The governmental fund information in the City's financial statements focuses on budgetary compliance and the sufficiency of each governmental fund's current assets to finance its current liabilities. PROPERTY TAXES Minnesota cities rely heavily on local property tax levies to support their governmental fund activities. For the 2022 fiscal year (the most recent comparative state-wide data available), local and valorem property tax levies provided 44.1 percent of the total governmental fund revenues for cities over 2,500 in population, and 35.2 percent for cities under 2,500 in population. Total property taxes levied by all Minnesota cities for taxes payable in 2024 increased 7.5 percent compared to the prior year, and 7.7 percent for taxes payable in 2025. The taxable net tax capacity value of property in Minnesota cities increased about 8.4 percent for the 2024 levy year. The tax capacity values used for levying property taxes are based on the assessed market values for the previous fiscal year (e.g., tax capacity values for taxes levied in 2024 were based on assessed market values as of January 1, 2023), so the trend of change in these tax capacity values lags somewhat behind the housing market and economy in general. The City's taxable market value increased 3.7 percent for taxes payable in 2023 and 7.7 percent for taxes payable in 2024. The following graph shows the City's changes in taxable market value over the past nine years: $180,000, 000 $160,000.000 $140,000.000 $120,000,000 $100,000.000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 Total Market Value 2016 2017 2018 2019 2020 2021 2022 2023 2024 -4- Tax capacity is considered the actual base available for taxation. It is calculated by applying the state's property classification system to each property's market value. Each property classification, such as commercial or residential, has a different calculation and uses different rates. Consequently, a cty's total tax capacity will change at a different rate than its total market value, as tax capacity is affected by the proportion of its tax base that is in each property classification from year-to-year, as well as legislative changes to tax rates. The City's tax capacity increased 8.7 percent and increased 11.8 percent for taxes payable in 2024 and 2023, respectively. The following graph shows the City's change in tax capacities over the past nine years: Local Tax Capacity $2,000,000 $1,800.000 - $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 — $400,000 $200,000 2016 2017 2018 2019 2020 2021 2022 2023 2024 The following table presents the average tax rates applied to city residents for each of the last three levy years: Rates Expressed as a Percentage of Net Tax Capacity City of Gem Lake 2022 2023 2024 Average tax rate City 38.1 40.8 39.0 County 48.1 44.9 45.5 School 34.8 32.4 34.0 Special taxing entities 8.1 7.1 7.4 Total 129.1 125.1 125.9 The average tax rates for the City decreased in the current year, while the total average tax rate increased_ mainly the result of an increase in the school rate. -5- GOVERRMENTAu FUND BAI AI9CES The.following table summarizes: the changes: in the fund balances of the. Qty's governmental funds during the.year ended December 31, :2024, presented both by fund balance classification and by major fund: Governmental Funds Change in Fund Balance Fund Balance as.ofDecember 31. 2024 7023 Change Fund balances of governmental funds Total by classification ivonspendable S 119,939 S 120,520 S. (590) Restricted 1'93,267 1.79,652 13,615 Assigned. 324,193 250,086 74,.107 Unassigned. 659,435. ^3D9,7L5 1.49,720 . 'total goverrimcntal•fun& :S 1,296.834 S .1.,059..982 S 23.0,852 Total by fund General S 660.755 S 511,411 S 149,344 0.0. Capital Improvement Plan Bonds Series 2615A 143,8$2 T38,01 5,2$1 G.O. Capital lniproventem Plan. Bonds Series 2018A 114,829 108,025 6,804 Street. improvements Capital Project 324,193 250,086 74,107 Parks and Playground Capital Project 53,175 51.4820 1,346 Total governmental funds S 1,296,834 S 1.059,992 S. 236,851 In total. the fund balances of the City's governmental funds increased by $2�A&52 during- the year. .Assigned fund balance increased $74,107, primarily in tht Street Improvemen s Capitol. Project Fund. as revenuesand transfers in exceeded expenditures. Unassigned fund balance increased $1.49,720, mainly from the inerease.in fund balance in the General Fund. -6- GOVERNMENTAL FUNDS :REVEN`UE AND EXPENDITURES The following table presents the. per- capita revenue of* the City's- governmental funds: tbr the past three years, along Nvith state-Nvide averages. We have included the most recent comparative state-wide averages available. from the Office of the Sxate Auditor -to provide a benchmark for interpreting -die.lCity's data. The -amounts received from the typical major sources of governmental fund revenue will naturally vary betvueen:dities based on :factors such as a pity's stage .of development, location, size.. and density of .its population, property values, services it provides. and .other. attributes —It will atso- differ from .year-to=year, due to the effect of inflation and changes in its operation- Also, certain data in these tables may be classified differently than how they -appear in the City's. financial statements in. order to. be .more comparable to the state-wide information, particularly in separating capital expenditures from current expenditures.. We have designed this section of our management report using per capita data inorder to better.identify unique or. unusual trends and activities of the -City. An inherent difficult} in presenting. 'per capita information is the.aceuracy of the populatioweount, which far most years is based on estiiriates. Governmental Funds. Revenue per Capita With State -Wide Aver..ages-by Population Class State -Wide -0-of 66m.Lake Year 2022 2022 2623 2024 Population 2,000.-2;500 530: 557 557 Property taxes Tax increments Franchise and other taxes. Special assessments Licenses and permits. Intergovernmental revenues Charges for services Other Total revenue S 591 .$ 14032 S 1,I15 S' 1,244 3.1 — — 31 37 IT 17 44 188 170 t73 29 66 43 83 447 35 143. -55 177 7 10 5-7101 (7) 87- 1-15 S 1,451 $. 11358 S 1,665 S. 1,744 The City's, governmental funds..revenue-for, 2024 was: $911.68 , an increase of $44,269 (4.8 percent), or $79 per capita, from the prior year: T'he.. largest changes in the-table.above. occurred -in intergovernmental revenues, licenses and permits, and charges for services. Intergovernmental revenues decreased $88 per capita from the prior year, due to the City spending federal COVID-19-related fiscal recovery funds in the prior year, along with receiving new pub€ic safety state aid in the._prior year. -Licenses and -permits and charges for services increased related to building activity at -the school district: -7 The expenditures of governmental funds will also vary fr6ni state -Wide averages and from year-to-year, based on the City's,circumstances. Expenditures are classified .intoxlrree:types as.follows: o Current — These are typically the general operating type expenditures occurring on an annual basis; and are primarily funded by general sources. such as. taxes and intergovernmental revenues. • Capital Outlay and Constrsctiain - These expendituies:do-not occur on a cons stent,basis.. more typically iluctuatin significantly fronx. year-to-year, Many *of these expenditures are project -oriented and are often funded by specific sources 'that have l�eiiefited from the expenditure; such as special assessment improvement projects: • Debt Service — Although: the expenditures for debt service:' maybe relatively consistent over the term of the respective debt, the funding source is the important factor. Some debt may be repaid Ihr.Qugh.specifc:.sources, such as special assessments or redevelopment funding, while other debt may be repaid with general property takes. The City's .expenditures -per capita of -its goverrtmental funds for the past three years; together :With comparative, state -Wide averages, -.are presented in -the following table: Year Population. Governmental Funds Expenditures per -capita With State. -Wide Averages by Population Class State -Wide City ofGem'Lake 2022 2022 2023 2024 2,000-2,500. 530 557 557 .Current General government S 239 $ 441 $. 356 S. 3.99 Public safety �57 228 263 37.3 Streets and highways 1..91. 67 85 54 Culture. and recreation 10 - - All other: 96 I39 139 159 Total current 1,Q1.5 875 843 985. Capital -butlhY and cbmtructimi 414 13 382 95 Debt service Principal Interesrand-fiscal charges Total debt service Total expenditures 1*95 1.98 189 189 51 63 61 49 2.4t 261 250 239 S 1.;615- S 1.149 9 1,475 S 1.,318 Total expenditures. in the* CiVs: govemmental funds for 20?4 were $734,234, a decrease of $87,233 (10.6 percent), or $ i 57 per capita,. from. the prior year,. Public safety cdstsinereased:relatedto increases in outsouited public sa*ty costs, including costs.forn6v public. safety buildings in the City of White Bear Lake. Capital outlay and construction expenditures decreased $28.7 per capita, due. to road and pond construction projects and casts for the City's software ir0rovetnent projects in th;e prior. year: :g: 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. General Fund Financial Position Year Ended December 31. Corm nnn .DOVV,VVV $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $- — 2020 2021 2022 2023 2024 Fund Balance $263,187 $253,845 $310,856 $51 1,411 S660,755 o Cash (Net) $294,991 $313,020 $379,587 $538,457 $685,132 Expenditures $353,621 $514,334 $464,669 $497,359 $600,827 The City's General Fund cash and investments balance at December 31, 2024, was $685,132, an increase of $146,675 from the previous year. The total fund balance of the City's General Fund increased $149,344 in 2024, as compared to a budget that projected no change in fund balance. 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. 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 80.7 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 2024 fiscal year represents 106.2 percent of annual expenditures and transfers out based on 2024 levels. -9- The following graph reflects the City's General Fund revenue sources for 2024 compared to budget: Taxes Intergovernmental Fines and Forfeits Charges for Services Licenses and Permits /.•lIIWO ITM General Fund Revenue Budget and Actual ems° ��� ��so &��, ��'r ��%, �`�r �A�b Ju Ir s�b �sr �61 �T �o 'OMO o °o 'Oo °o °o 'Oo °o 'Oo 'Oo °o 'Oo 'Oo 0 0 0 o a o a o 0 0 0 0 ■Budget ■ Actual General Fund revenue for 2024 was $770,171, which was $102,846 (15.4 percent) more than budget. Intergovernmental revenues were over budget by $29,635, due to the City not budgeting for charitable gambling donations to the City in the current year. Charges for services were $29,106 higher than the prior year, due to higher -than -expected planning and construction fees in the current year. The following graph presents the City's General Fund revenues by source for the last five years. The graph reflects the City's reliance on tax sources of revenue. $65 S60 $55 $50 $45 S40 $35 $30 $25 S20 $15 $10 $5 SO General Fund Revenue by Source Year Ended December 31. U.VVV 0.000 0,000 0.000 0.000 0.000 — 0,000 0.000 0.000 0,000 — --- 0,000 0.000 0,000 D.000) Taxes Intergovernmental Fines and Forfeits Charges for Semces Licenses and Permits All Other 02020 $472,092 $9.885 $620 $1,662 $31.439 $15.843 02021 $453,686 $48,792 $267 $1,957 $27.109 $(1,809) 02022 $481.016 $18,573 1 $970 1 $3,942 1 $35.072 1 $2.107 02023 $590,580 $79.647 $902 $5.329 $24.208 $17,248 ■2024 $621,152 $30.647 $843 $31,756 $46,144 $39.629 Total General Fund revenue for 2024 was $52,257 (7.3 percent) higher than last year. Taxes increased by $30,572, due to an increase in the tax levy. Intergovernmental revenues were $49,000 less than the prior year, due to the City receiving new public safety state aid in the prior year, as well as spending COVID-19-related federal stimulus dollars in the prior year, as previously mentioned. Charges for services increased $26,427 for reasons discussed previously on this page. -10- The following graph illustrates the components of General Fund spending for 2024 compared to budget: General Fund Expenditures Budget and Actual General Government Public Safety Public Works All Other &o, 4, ,8� 1900 0 1900 s1900 �0°0 2�°°0 moo°°o ,zr 00 �s°°o �0°°o ,s°°o °°o ■ Budget ■ Actual General Fund expenditures for 2024 were $600,827, which was $46,498 (7.2 percent) under budget. Public works expenditures were $49,103 under budget, which was spread across multiple categorical areas, including streets, salt and sand, and snowplowing. General government was lower than budget by $57,191, mainly in legal fees. All other was over budget, due to higher than anticipated costs for the City's software conversion. The following graph presents the City's General Fund expenditures by function for the last five years: General Fund Expenditures by Function Year Ended December 31, $250,000 $225,000 $200,000 $175,000 $150,000 $125,000 $100,000 $75,000 $50,000 $25,000 $- Government Public Satety Public Works All Other ■2020 $141,395 $106,319 $48,720 $57,187 ■ 2021 $185,608 $11 1,465 $67,942 $149,319 02022. $233,886 $120,607 $35,642 $74,534 j i ■2023 $198,546 $146,518 $47,128 $105,167 L��024 $222,349 $207,710 $30,297 $140,471 Total General Fund expenditures for 2024 were $103,468 (20.8 percent) more than the previous year. Public safety costs were higher by $61,192, related to increased outsourced public safety costs. All other increased $35,304 related to software conversion costs previously discussed. ENTERPRISE FUNDS OVERVIEW The City maintains two -.enterprise funds to account for services the City provides that -are financed* primarily through fees charged to those -utilizing the service. This section of -the report provides you with ,an overview of the financial trends aitd activities of the City's enterprise ftinds, which include the Water Fund and Sewer Fund. ENTERPRISt .F1;mm FINANCIAL POSITION The following table summarizes -the. changes in the financial position of the City's enterprise funds during the year ended December 31, 2024;.presented both. by classificatidb and by fund:. Enterprise Funds ChangcAn. Financial.Position Net position of entetpHse fluids Total by classification Net. investment in capital assets. Unrestricted. Total enterprise funds Total by fund Water. Sewer Total..enterprise funds Net Position as of December 31, 2024 2023 Change $ j.,l-0;981 $ 1,193,870 S (31,889) 490;892 455,794. 35,098 S. 1,652,073 S 1,649,664 S 3,2.09. S 541.,873 $ -5.57.574 $ (15001) 1.,111,600 1;092.090 M91.0r S. 1.652,813 $ 1'1640,664 $ -3,209 In total the net ppsitioft of the City°s enterprise funds increased by .$3,209 during the, *yqr* ended ❑ecember 3 T, 20�4,. which includes. an error correction previously mentioned. .12- WATER FUND The following graph presents five years of comparative operating results for the City's Water Fund: Water Fund Year Ended December 31, $80,000 $60,000 $20,000 S— $(20,000) $(40,000) $(60,000) 2020 2021 2022 2023 2024 Operating Revenue $16,042 $33,051 $26,330 $43,910 $24,102 =Operating Expenses $73,975 $36,958 $63,955 $49,576 $36,464 Oper Income (Loss) $(57,933) $(3,907) $(37,625) $(5,666) $(12,362) —Income(Loss)Before Depreciation $(44,464) $9,562 $(24,156) $15,881 $3,148 The Water Fund ended 2024 with a total net position of $541,873, a decrease of $15,701 from the prior year. Of this, $621,896 represents the investment in capital assets, leaving unrestricted net position of ($80,023). Operating revenue in the Water Fund decreased $19,808 from the prior year. The decrease is due to a decrease in consumption in the current year. Water Fund operating expenses for 2024 decreased $13,112 from the previous year. -13- SEWER FUND The following graph presents five years of comparative operating results for the City's Sewer Fund: Sewer Fund Year Ended December 31. $100,000 $90.000 $80.000 $70.000 -- -- — $60.000 — $50,000 $40.000 $30,000 $20.000 $10.000 $(10.000) $(20.000) 2020 2 0_1 2 022 _023 2024 Operating Revenue $61,943 $55.823 $61,942 $58,207 $80,255 =Operating Expenses $60.903 $54.102 $64,472 $75,447 $93,030 —operating Income (Loss) $1.040 $I,T21 $(2,530) $(17.240) $(12.775) —Tncome Before Depreciation $18,147 $17.787 $13,536 $79 $3,604 The Sewer Fund ended 2024 with a total net position of $1,111,000, an increase of $18,910 from the prior year including the error correction. Of this, $540,085 represents the investment in capital assets, leaving unrestricted net position of $570,915. Operating revenue in the Sewer Fund increased $22,048 from the prior year, due to increased sewer access fees in the current year. Sewer Fund operating expenses for 2024 increased $17,583 from the previous year. The increase is due to an increase in Metropolitan Council Environmental Services charges in the current year. BEII THI$ PAGE INTFNTIONALLY LEFT BI.:ANK GOVERNMENT -WIDE FINANCIAL STATEMENTS In addition to fund -based- ittformatipn, the current reporting model for governmental entities also Muires .the inclusion .of two government -Wide findnciaf-statements. designed to present a clear picture ol:• the City as a single: unified entity. These government=wide financial Statements provide in%rination on the total cost of delivering services, including capital assets, and long-term liabilities.. S'rATIUMEN OF NET POSITION The Statement of Net Position essentially tells you what the City*owns and owes at given point in tithe, on the last:day of the fiscal year. Theoretically, tiet position represents the resources the City has leftover to use for providing services after its debts are settled. However, those resources are. not always iii spendable form, or -.there may be..restrictions on how some of those resources can be used. Therefore, net position -isdivided into thtee components:: hotinvestment, in capital assets, restrictedL acid unrestricted. The following table presents the components of the City's net position as of Decerber 31, 2024, and 2023, for governmental activities and business -type activities: As 6fDecember*31, 2024 2023 Chango Netposition Governmental activities Net investment in capital assets . 781,780 .S 734.686 $ 47,0.94. Restricted 670,716 6.95;979. (25,263) Unrestricted 1,153,448 806 958, 194,642 Total governmental activities 2,605,944 2,38.9,471 1�,4 7 3 Business -type activities Net investment in capital assets 1;16I,981 1;:193,976 (31,889) Unrestiicted 490,892 455,7.94 35.098 Total business -type activities 1.;65.2,873 1,64rj,664 3.'09. Total net position 'S 41258;817 S 4,039:135 S .2.19,682 Tile Citj,'s total net position at December 31. 2024, was $21%682 higher than. -the previous year-end which- includes the error correction previously mentioned.. Of the increase, $216,473 carve froth governmental activities and a $3,209*increase in business -type activities. Governmental activities. -:net investment in capital assets increased, mainly from. investments in capital assets and payments on outstanding bonds. Restricted net position .decreased, Thainly for amounts restricted for debt service. Unrestricted net position increased, mainly from theincrease in the General. Fund balance. The change in business -type activities. net .position was explained in the preceding discussion of the activities. of the enterprise funds. STATEMENT OF ACTIVITIES The Statement of Activities *tracks the. City°s yearly revenues and. expenses, .as well as any other I. transactions that increase or reduce1otal d6t position. These'ainounts represent the full cost of providing. services. The :Statement of Activities:.pfovides a those comprehensive measure than just the. amount of cash that changed hands; as. reflected in the .fund -based financial statements. This statement includes the cost of supplies used, depreciation of Iong-lived capital assets. and.other.accrual-based expenses; The fgllowiiig table presents the. change in the. met Jx?sition of the .City for the years.ended Degember 31.. 2024; and 2023: Net (expense) revenue Governmental activities. General government Public safet} Public works Conservation and development Interest on lona-term debt Business -type activities Water Sewer Total.nei (expense) revenue General revenues Property taxes and franchise fees Grants and contributions not restricted Investment earnings (charges) Other revenues Total: general revenues Change in netposition. 2024 2023 Program �xpienses Revenues Net Change Net Ithange $. 249,527 S 87,.139 S. (162,388) S (179,384) 207,710 1,076. (206.634) (123,150) 114,598 57,331 (57,267) (160.570) .89,298 — (89,298) (76,701) 24,871 — (24,871) (31,617) .361464 24,102 (12,362) (5,666) 93,030 80,255. (12,775) (.11,240) S. 815.498.. S 249.9.03 (5165,595). 709,040 672;797 10;.719 27;334 55,734 581035 8 "500 775.501 761,666 $ 209,906 S 167338 One of the gdals. of this statement is to provide a side -by -side comparison to illustrate the difTerexnee in the way the. Cii governmental and business -type operatie>tns are financed. The table clearly illustrates the dependence of the C:i€y's governmental operations on general revenues, such as. property taxes and unrestricted grants: It also shows. that the City's business -type activities are not generating sufficient program revenues (service charges and program -specific :grants) to cover expenses. -1:6- ACCOUNTING AND AUDITING UPDATES. The follo-wing as a summary of Governmental Accounting Standards Board (GASB)-standards expected to be implemented in the next few years. GASB Statement No. 102; Certabi Risk Disclosures The objective of this statement is to provide users of government financial statements with essential information about risks related: to a government's vulnerabilities -due to -certain concentrations or constraints. This statement defiries*a concentration as a lack of °diversity related to an aspect. of a significant inflow of resources -or outflow of resources. A constraint is a ftjtaiion imposed.on.-a government. by an extexnal: parry :or by forma[ action of the govermnent's highest level of -decision -making -authority.. Concentrations.. and constraints may liniitA government's ability to acquirb.resources or -control spMdin9*. A goyf.-m rient. will be -required to assess whether a concentration or constraint makes flee primary govei, imerit reporting.uriit.tir other reporting units -that report -a liability f'or re%>eriue debt vulnerable to the. risk af.a substantial' impact: Additionally, a government must assess whether an event or events associated with a- concentration or constraint that could cause. the substantial impact t.ohave occurred, have. begun :to occur.. or are more likely than not to begin to occur within 12 months of the date the financial statements -are issued. If a government determines that those criteria for disclosure have been met for a concentration or constrainer it should* disclose information (as odilined in the standard) in notes .to financial statements in sufficient :detail to., enable users -of financial statements to understand the nature. of the circumstances disclosed *and -the government's vulnerability %to the risk of a substantial imI%ct.: The disclosures should also include-anv actions taken by xhe .government to mitigate the risk. The requirements of this. statement are effective for fiscal years beginning after. June 15, 2024, and all reporting peribds thereafter. Earlier application: is encouraged. GASB Statement No:103, Rmanrial *Reporfing Model Improvements The objective of this statement is to improve kev components of the financial reporting model to enhance -its effectiveness in providing information .that. is essential for decision making and assessing a government's.*accountability.'Thisstatement. also. addresses certain application-issut:s. This statement continues the requirement that the basic. financial statements :ba preceded. by management's discussion and analysis (MD.&A). which is presented *as required supplementary information (RSI). This .statement requires that the information presented in MD&A. be limited to the related topics discussed in five sections: (I) Overview of 'the Financial Statements, (2) Financial Summary, (3) Detailed .Analyses, (4) Significant Capital Asset and Long -Term financing Activity, and (5) Currently Known Facts; Decisions, or Conditions. Furthennore, this statement stresses that the detailed analyses should explain why balances and results of operations changed rather titan simply presenting the amounts or percentages: by which tltey dianged.. In addition, this statement continues the requirement that information included .in MD&A distinguish between that:of the'primary government and its -discretely presented component units.. This statement defines unusual or infrequent4tems: as transactions and other events that are either unusual hfnature:or infrequent in occurrence and requires governnients todisplaythe inflows and outflows related to each unusual -or infrequent item separately. -17- Th#s:stateMent requires -that the proprietary. .fund statement-- revenues; expenses, and changes in fund net position continue to distinguish between bperatitig-acid tion-operating revenues and expenses. Jn addition f to -the subtotals currently required in a proprietary fund statement ofrevenues, expenses, and changes in l :end net position, this statement requires: that a subtotal for operating income (Joss). and :noncapital -subsidies be presented before reporting other nonoperating revenues and e..tpebses. This statement requires. governments to present each major component. unit separately in the. reporiing statement of net pOsitidn Snd -stamindri6bf activities if it does hbt reduce the readability of the' statements. If: thoe readability of those statements. would be reduced, combining statements of major component units should be presented after the fund financial statements. This*statement requires governments' to'present budgetary comparison information using. a single method. of communication=RS1. Governments also are required to present (t)-variances bet% -veep original and final budget amounts and (2) variances. between final budget *and :actual amoutim* An explanation .of significant variances is required to be presented in the notes to R-SI. The. requirements of this statement.4re e%ctive for fiscal yearn beginning alter June I5. 202; and all reporting periods thereafter. Earlier application is encouraged: ff I GASB Statement. No. 1 *,.bisclosure 0,f Certain Capital Assets The: objective of this statement is to provide users. bf government financial statements- with essential information about pertain types of"eapital.assets. This statement requires certain types of capital. assets to be,disclosed.separately in the capital assets note disclosures required by GASB. $tatement No. 34. Lease assets recognized. in accordance -with Statement No. 87, Leases,. and iritangible right -to -use assets recognized in accordance with Statement No. 94, Public -Private and Public-Ptibliie Partnerships and Availability Payment Arrangements, should :be disclosed separately by major class nfunderlying asset in the capital assets note disclosures.. Subscription assets recognized in :accordance with Statement No. 96, Subscription -Based Information Technology Arrangements, also should be separately disclosed:. In addition: this statement requires intangible assets other than.those three types to he disclosed separately by major class. Ths statement also requires :additional disclosures. for capital assets held for sale. A capital asset is Considered held for sale..if (a) the government has decided to pursue the sale of the.capital asset and(b) it is probable that `the sale. Nvi.11 be, finalized within one year of the financial statement date;. Governments should consider relevant factors `to evaluate the likelihood of the capital. asset being sold within 'the established time frame. Capital assets held for sale are required. to bq. evaluated each reporting period. Goveriunents. should disclose (1) the. ending balance of capital assets held for sale; with separate disclosure for lristorical cost and. accumulated depreciation by*:major class of asset. and (2) the -carrying antount of debt fdt. which the capital assets held for sale are pledged. as. collateral for each. major class: of asset. The requirements of this statement are effective for fiscal .years beginning after June% 15. 2025, and all. reporting periodp thereafter. Earlier application is:encouraged.