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HomeMy WebLinkAbout2011 Financial ReportsCITY OF GEM. LAKE, MINNESOTA FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED DECEMBER 31, 2011 CITY OF GEM LAKE .4200 OTTER LAKE ROAD GEM LAKE, MINNESOTA.55110 CITY OF GEM LAKE, MINNESOTA TABLE OF CONTENTS YEAR ENDED DECEMBER 31, 2011 I. FINANCIAL. SECTION INDEPENDENT AUDITORS' REPORT 1 BASIC FINANCIAL STATEMENTS STATEMENT OF NET ASSETS 3 STATEMENT ❑F ACTIVITIES 4 BALANCE SHEET- GOVERNMENTAL FUNDS 5 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS - GOVERNMENTAL ACTIVITIES 7 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -- GOVERNMENTAL FUNDS 8. RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUN❑ BALANCE TO THE STATEMENT OF ACTIVITIES -- GOVERNMENTAL ACTIVITIES 10 STATEMENT OF NET ASSETS - PROPRIETARY FUND 1'i STATEMENT OF REVENUES, EXPENSES AND CHANGE IN NET ASSETS - PROPRIETARY FUND 12 STATEMENT OF CASH FLOWS - PROPRIETARY FUND 13 NOTES TO BASIC FINANCIAL STATEMENTS 14 REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGE.IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL FUND 29 .NOTE TO REQUIRED SUPPLEMENTARY INFORMATION 30 SUPPLEMENTARY INFORMATION NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET 31 COMBINING STATEMENT OF REVENUES,.EXPENDITURES AND CHANGE IN FUND BALANCE 32 CITY OF GEM LAKE, MINNESOTA TABLE OF CONTENTS (CONTINUED) YEAR ENDED DECEMB.ER 311 2011 II. OTHER REQUIRED REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORME❑ IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 33 REPORT ON MINNESOTA LEGAL COMPLIANCE 35 SCHEDULE OF FINDINGSAND RESPONSES 36 FINANCIAL SECTION •nLarsonA4len LLP ftorilarsonallen.com CliftanLar! INDEPENDENT AUI = Honorable Mayor Members of the City Council and Citizens City of Gem Lake Gem Lake, Minnesota We have audited the accompanying financial statemei ,overnmental activities, the business - type activities, each major fund, and the aggregate rema, .und informatlon of the City of Gem Lake (the City), Minnesota as of and for the year ended Decemi ar 31, 2011, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United State of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Gem Lake, Minnesota as of December 31, 2011', and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. As discussed in the notes to the financial statements, the City adopted the provisions of Government Accounting Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, as of and for the year ended December 31, 2011. This statement results in the City reporting nonspendable, restricted, assigned, and unassigned fund balances in its governmental fund types. In accordance with Government Auditing Standards, we have also issued our report dated June 14, 2012 on our consideration of the City of Gem Lake, Minnesota's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. (1) Honorable Mayor Members of the City Council and Citizens City of Oem. Lake Accounting principles generally accepted in the United States of America required that the budgetary comparison information as listed in the table of contents., be presented to supplement the basic. financial statements. Such information, although not a part of the basic financial. statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the. basic financial statements in an appropriate operational, economic,. or historical context. We have applied certain. limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the .United States of America, which consisted of inquiries of management about: the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. Wei do not express an opinion or provide any .assurance on the information. because the limited procedures do not provide us with sufficient evidence to express an opinion. or provide: any assurance. The City of Gem Lake has not presented the management's discussion and analysis that the Government Accounting Standards Board has. determined to be necessary to supplement, although not required to be part of, the basic financial statements.. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying combining fund financial. statements., as listed in the table of contents., are presented for purposes of additional analysis and are not a required part of the basic. financial statements. The combining fund financial statements are the responsibility of management and were derived from and relate directly. to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the. underlying accounting and other records used to prepare the financial statements, or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the .United States of America. In our opinion, the information. is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Minneapolis; Minnesota June14, 2012 zz Cli'fEonLarsonAll'en LLP (2) This Page Has Been Intentionally Left Blank. BASIC FINANCIAL STATEMENTS CITY OF GEM LAKE, MINNESOTA STATEMENT OF NET ASSETS DECEMBER 31, 2011 ASSETS Cash and investments Taxes Receivable Special Assessments Receivable Accounts Receivable Accrued. Interest Prepaid Expenses Unamortized Bond Issue Costs Capital Assets: Capital Assets Being Depreciated Accumulated Depreciation Total .Assets LIABILITIES Vouchers and Accounts Payable Ac.crued Interest Payable Unearned Revenue. Long -Term Liabilities: Amounts Due Within fine Year Amounts Due in More than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Deft Service Restricted for Park Improvements Unrestricted Total Net Assets Government@[ Business -Type Activities Activities Total $ 8121292 $- 303268 s 1,11.5,5.00 2.4,68.5 - 24,685 326,518 4,681 331,199 14486. 16,458 80,944 2,968 1,25.9 4,227 1,186 7,029 8,215 26,394 - 26,394 1;628,210 617,539 .2.245,749 (368,364). (86,973) (455,337) 2,468,375 863.,201 3,331,576 20,013 444 20,157 21,700 - 21,700 5280 - 5,280 1.00,452 - 100.;452 1,141,230 - 1,141,230 1,288,675 144 1,288,819 1.8;165 530,566 648,731 578,769 578,769 38,044 -. 38,.044 544,722 332A91 877,213 $ 1,179,700 $. 863,05.7 $ 2,042,757 Sea accompanying Notes to Basic Financial Stateiietits. (3) This Page Has Been intentionally Left. Blank. F.UNC` IONSlPROCRAMS. GO VERNMENTAL ACTIVITIES Genera[ Government Public Safety Public Wanks Conservationand Development Interest and. Fiscal .Charges Total Govemmental Activities BUSINESS -TYPE ACTIVITIES Sewer Total. Primary Government CITY OF GEM LAKE, MINNESOTA STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2011 Net. (Expense) Revenue and Program Revenues: Changes in Net Assets Fees, Charges, Operating Capital Business - Fines. and Grants and Grants and Governmenta TYpe Expenses Other. Contributions Contributions I Activities Act1VItl®s Total $ 113,445 $ 48;748 8,299 $ - $ (56,398) $ - $ (58,398) 100;675 - - (100,675) - {100,675}. 68;837 13,548. - 16,552 (3%737) - (38,737) 33,977 - - - (33,977) - (33977) 58,094. - - (58,094) - {58,094} .3751028 62,295 8,299 15,552 (287,8a1) _ (287,881) 35,719 49;783.: - - _ 14,064. 14,064. $ 410;747 $ 1.12,079 $ 8,299 ... $ 16,552 GENERAL REVENUES Taxes. Property Taxes, Levied for.General Purposes Property Taxes, Levied. for Debt. Service Investment Earnings Miscellaneous Total General Revenues CHANGE IN NET ASSETS. Net Assets - Beginning of Year NET ASSETS - END OF YEAR (287,881) 14,064 (273,817) .255,516 - :255,516 47,0.77 - 47,077 069 U58 12,627 554 - 854 312.118 3,658 315;774 24,235 1.7,722 41,951 1",155,465 845,335 2,000,800 $ 1.179,706 $ 863,057 $ 2,042,757 See accoinparrying Notes to Basic Finaiicia! Stafernents. (4) CITY OF GEM LAKE, MINNESOTA BALANCE SHEET .GOVERNMENTAL FUNDS DECEMBER 31, 2011 ASSETS Cash and Investments. Taxes Receivable Special. Assessments. Receivable Accounts: Receivable Accrued Interest Receivable Due from Other -Funds. Prepaid Expenses. Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Vouchers and Accounts. Payable Due to Other Funds Deferred Revenue Total Liabilities FUND BALANCES Nonspendable Restricted: ❑ebt Servlce Park Improvements Assigned: Capital. ImproverneMs: Benefiting Individual Property Owners Unassigned Total -Fund Balances Total.Liabilitles and. Fund Balances G.O. G.O. Improvement Improvement General Bonds Bands Fund Series 2004A Series 2006A $ 864,967 $ 1061423 $ 136,346 20;983 - - 1,050 191;00Z 80,570 14,486 - - 1;501 414 511 54,385 - - 1;186 $: 448,568 $.. 297,839 $ 217,427 $: 20.1013 $. - $ - 31;144. 190,958 80.,108 51,1V 190.,958 .80,108 106,881 137,519 395;215 - - 397,401 105; 881 1.37, 319 $ 448,559 $ 2971839 $ 217,427 See accompanying Notes to. Basic Financial Statements. (5) G.D.. Capital 2011 Improvement. Scheurieman Other Total Plan Bonds Road. Governmental Governmental Series 2007A Fund Funds Funds 81,254 $ - 1.33,302 $ 812,292 3,742: - - 24,685. - 53,896 - 326,518 - - _ 14.,486 247 - 295 2,968 54,385 85,203 $ 53,896. 133;597 $ 1,236,520 - - $a - 20,013 54,385 54.,385 41222. 53,896. 360,328 4,222 108,281 - 434,728 80;981 - - 325,181 - 38,044 3$,044 95,553 95,553. - (54,38.5) - 341,830 80,981 (5.4,385} 133,597 801,79.4 85,203 $ 53,.896 $ 133,697 1,2M,520 (6) This Page Has Been Intentionally Left Blank. CITY OF GEM LAKE, MINNESOTA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERNMENTAL ACTIVITIES ©ECEMBER 31, 201.1 TOTAL FUND BALANCES FOR. GOVERNMENTAL FUNDS Total net assets reported for governmental activities in the statement of net assets is different because: Capital assets used in governmental activities are not financial resources and, therefore,. a re no reported in the funds. These capital assets consist of:. 801,794 Buildings $ 902,232 �fflce Equipment 13,190 Infrastructure 712,788 Accumulated Depreciation (368,364) 1,269,846 Some of the City's property taxes. and speclaI assessments wi[I be collected after year-end, but are not available soon enough to pay for the current period's expenditures and, therefore, are reported as deferred revenue in the governmental funds. 355to48 Bond issue. costs, are reported as expenditures in the governmental funds and are shown net of accumulated amortization on the statement of net assets.. 26;394 Some liabilities arenot due and payable in the current: period and, therefore,, are not reported as fund Iiabilities. Balances at yearend are. General Obligation Bonds Payable (1;255,375) Unamortized Bond Discounts 13,693 Accrued Interest on Long -Terre Debt (21,700) (1,263,382) TOTAL NET.ASSETS OF GOVERNMENTAL ACTIVITIES : 1,17.9,700. See accompanying Notes to Basic Financial Statements. (7) CITY OF GEM LAKE, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES. AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2011 REVENUES Taxes Special Assessments Intergovernmental Licenses and. Permits Fines and. Forfeits Public Charges for Services Miscellaneous:. Interest Other Total Revenues EXPENDITURES Current: General Government Public Safety Public Works Conservation and. Development Debt Service: Principal Interest and Fiscal Charges Total Expenditures EXCESS OF REVENUES OVER (UNDER) EXPENDITURES. OTHER: FINANGING SOURCES (USES) Transfers In Transfers Out Tot a[ Other Financing Sources (Uses) NET CHANGE IN. FUND BALANCES Fund Balances:- Beginning of Year FUND BALANCES - END OF YEAR G.O. G.O. Improvement Improvement General Bonds Bonds Fund Series 2004A Series 2006A 244.765 $ - $ - - 44,525.. 28,849 .4,471 - - 22; 927 - 2,903 - 10,278 - - 5,808 1,131 1,417 22,187 313 339 45;656 30,266 89,442 -- - 100,675 - 33,925 - - 33,977 - -. 58,276. 25,000 - 12,366 7,418 . 258,019 70,642 32,4.1:8 55,320 (24,986) (2,152) (70,000) - 70,000) - - {14,680) (24,086) PT152) 412,081 131, 867 139,471 $ 397A01 a 106,881 $. 137,319 . See accompanying Notes to Basic Financial Statements. {8} G,Q. Capita[ I Improvement Scheunernan Other 'Total Plan Bands Road Governmental Governmental Series 200.7A Fund Funds Funds 1 $ 47,.077 $ - $. - $ 291.,842 - 17547 - qa 21 4,471 - - - 22,927 _ - 2,903 - - 10,278 69.7 (907) 823 8,969 - - - 22,1 87 473774 16,640 823 454,498 - - - 89,442 - - - 100,675. - - - .33,925 - - 33977 15,000 - - 98,276 35,305 - 55,089 50,305 - - 411,384 (21531) 16,640 823 43,114 - 7Q,.000 70,000. - - (70,000) 70,000 - (2,53.1) 1.6.640. 70,823 43,114 83,512 (71,025) 62,774 758,680 . $ 80;981 _ (54,385)_ $ 133;597 80.1,794 M This Page Has Been Intentionally Lett Blank. CITY OF GEM LAKE,MINNESOTA RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE. TO THE STATEMENT OF ACTI.VITIES GOVERNMENTAL ACTIVITIES YEAR ENDED DECEMBER 31, 2011 NET CHANGE 1N FUND BALANCES - TOTAL GOVERNMENTAL FUNDS S 43,114 Amounts reported for govern rental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures: however, in the statement of. activities, assets arecapitalized and the cast is allocated over their estimated useful lives arid, reported as deprecf ation expense: Capita[ Outlays. 31524 Depreciation Expense. (62,439) (58,915) Delinquent and .deferredproperty taxes and special assessments: receivable will be.coliected subsequent to year-end, but are not available soon enough. to pay for the current:period's expenditures and, therefore, are deferred in the governmental funds. Deferred Revenue - December 3.1, 2010 410,283 Deferred Revenue.- December 31, 2011 355,D48 (55,235) The governmental funds report bond: proceeds as .financing sources., while repayment:of bondprincipal is reported as an expenditure. In the statement of net assets, However, issuing debt increaseslong-term liabilities and does not affect the.statement of activities and repayment of principal reduces the liability, Also,. governmental funds report the effect of issuance costs, premiums and discounts when debt is first issued., whereas these amounts are deferred and amortized in the statement.of.activities. Interest is -recognized as an expenditure in the govern mental:funds when it is due. In the. statement of activities, however; interest.expense is recognized as it accrues, regardless of when it is clue. The: net effect of these. differences in the treatment .of general obligation bonds and related.items is. as foifaws: Repayment of Bond Principal 98,276 Change in Accrued Interest Payable 1,596 Amortization of Bond Issue Costs (21827) Amortization of Bond Discount (1,774). 95,271 CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES 24,236 See accompanying Notes to Basic Financial Statements. 0 0): CITY OF GEM LAKE, MINNESOTA STATEMENT OF NET ASSETS PROPRIETARY FUND DECEMBER 1, 20111 ASSETS Cash and Cash Equivalents Customer Accounts Receivable Accrued Interest Receivable Special Assessments Receivable: Prepaid,Expenses Total Current Assets Capital Assets: Utility Plant in Service Accumulated Depreciation Net Capital Assets Total Assets LIABILITIES Accounts. Payable NET ASSETS Invested Jn Capital Assets, Net of Related. Debt Unrestricted Total Net Assets Sewer Utility :$ 303;208 16,458 1,259 4,68:1 7,029 332635. 6.17;539 (86,973) 530;566 863,201 1.44 . 530,556 332,491 $ 853.,057 see accompanying dotes to Basic Financial Statements. (11) CITY OF GEM LAKE, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGE IN NET ASSETS PROPRIETARY FUND YEAR ENOED DECEMBER 31, 2011 OPERATING REVENUES Public Charges for Services ❑PERATING EXPENSES Operating Expenses Depreciation Total Operating Expenses ❑PERATING INCOME NONOPERATING REVENUES Interest Revenue CHANGE IN NET ASSETS Net Assets - Beginning ❑f Year .NET ASSETS - END OF. YEAR Sewer utility $ 4.9,783 23,263 12,465 36,719. 14,064 8,658. 17,722 845,3.35. $ 863,057 See accompanying Notes to Basic FOahcia.15tatements. (1 2). CITY OF GEM LAKE, MINNESOTA. STATEMENT OF CASH FLOWS PROPRIETARY FUND YEAR ENDED DECEMBER 31, 2011 CASH FLOWS FROWOPERATING ACTIVITIES Cash Received from Utility Custorners Cash Payments to Suppliers for Goods.and Services Net Cash Provided by Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments NET INCREASE IN: CASH AND CASH EQUIVALENTS Cash and Cash Equivalents - Beginning of Year CASH AND CASH EQUIVALENTS - END OF YEAR. RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating Income Adjustments to Reconcile Operating Income to Net Cash Provided.byOperating Activities, Depreciation Changes in Assets and Liabilities: Customer Accounts Receivable Special: Assessments Receivable Prepaid Expenses Accounts Payable Net Cash Provided by Operating:Activities Sewer Utility S. 47,634 (25,061) 22,573 3;809 25,382 276, 826 3Q3;208 $ 14,06.4 12,456 (2,625) 476. 278 $ 22,573 See .accompanying Notes to -Basic Financial Statements. (1:3} CITY OF GENT LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2011 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the City of Gem Lake (the City), Minnesota have been prepared in conformity with U.S. generally accepted accounting principles as applied to. governmental units by the Governmental Accounting Standards Board (GASB). The following is a summary of the significant accounting policies.. A. Financial Reporting Entity As required by U,S. generally accepted accounting principles; the. financial statements of the reporting entity include those of the City of Gem Lake and its component units._A component unit is a legally separate entity 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 include 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 unit; is in a relationship; of financial bianefit.or burden with the potential component unit, or is fiscally depended upon by the. potential component unit. Based on these criteria, there are no organizations considered to be component units of the City. B. Basic Financial Statements 1. Government -Wide Statements The government -wide financial statements (i:e., the statement of net assets and the statement of activities) display information about the primary government and Its.. component units. These statements. include the financial activities of the overall City government. Eliminations have been made. to minimize the double -counting of internal activities. 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 fees and charges to external parties for support. In the government -wide statement of net assets, both the. governmental and business -type activities columns: (a) are. presented on a consolidated basis by column; and (b) are reported on a full accrual, economic resource. basis, which recognizes all long-term assets and receivables as well, as long-term deist and obligations. The. City's net :assets are reported in three parts: (1) invested in capital assets, net of related debt; (2..) restricted net `assets; and .(3). unrestricted. net. assets. The City first utilizes restricted resources.to finance qualifying. activities. (14) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2011 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Basic Financial Statements (Continued) 1. Government Wide Statements (Continued) The statement of activities demonstrates the degree to which the direct expenses of each function of the. City's governmental activities and different business -type: activity are offset by program revenues. Direct. expenses are those that are clearly identifiable With a specific function or activity. Program revenues include: (1) fees, fines, and charges paid :by the recipients of goods, services, or privileges provided by a given function or activity; and (2): grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or activity.. Revenues that are not classified as program revenues, including all. taxes, are. presented as general revenues. 2. Fund Financial Statements The fund financial statements provider information about the City's funds. Separate. statements for each fund category, governmental and proprietary, are presented.. The emphasis of governmental and proprietary fund financial statements is on major individual governmental and enterprise funds, with each displayed as separate columns .in the. fund financial statements. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. The City reports the following major governmental funds: General Fund — The General Fund is the City's. primary operating fund. - It accounts for all financial resources of the general government, except those required to be accounted for in another fund.. G:O. Improvement Bonds .Series 2004A -- The G.O. improvement Bonds -Series 2004A Fund accounts for all debt service activity related to the 2004A bond. G.G. Improvement Bonds Series 2006A - The G.O. Improvement Bonds Series 2006A Fund accounts for all debt service activity related to the 2006A bond. G.O. Capital Improvements Plan Bonds Series 2007A -- The G.O.. Capital Improvement: Plan Bonds Series 2007A Fund accounts for all debt. service activity related to the 2Q07A bond. Scheuneman Road Fund — The Scheuneman Road Construction Fund. accounts for all activity related to the reconstruction. of the Southern portion of Scheunernan. Road which was turned back to the City from Ramsey County in 2006. CITY CE GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL: STATEMENTS DECEMBER 31, 2011 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING PoL.ICIES (CONTINUED) B. Basic Financial Statements (Continued) �. Fund Financial. Statements (Continued) The City reports the following major proprietary fund: Sewer Fund — The sewer fund accounts for customer sewer service charges that are used to finance sewer operating expenses. C. Measurement. Focus acid Basis of Accounting The government -wide and proprietary fund financial statements. are reported using the economic. resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned, and expenses are recorded when a liability` is incurred, regardless of the. timing of related cash flows. Property taxes are recognized as revenues in the year far which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been rriet. Private -sector standards of accounting and financial reporting: issued on or before November 30, 1989, generally are followed in both the government -wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental ,Accounting Standards Board. Governments also have the option of following subsequent private -sector guidance for their business - type activities and. enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private -sector guidance. Governmental fund financial statements are reported using the current. financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. The City considers all revenues. to be available if they are collected within 69 days after the end of the current period. Property and other taxes, licenses, and interest are all considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general longterm debt, compensated absences, and claims and judgments, which are recognized as expenditures to the extent that they have matured. Proceeds of general long-term debt and acquisitions under capital. teases are reported as other financing sources,. Proprietary. funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goads. in connection with a proprietary fund's principal ongoing operations. The principal operating revenue of the City's enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets.. All revenues and expenses not meeting this definition are reported as nonoperating revenues.and expenses. (? 6) CITY OF GEM LAKE,. MINNESOTA. NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2011 NQTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Budgets Budgets are adopted on a basis consistent with U.S. generally accepted accounting principles. An annual appropriated budget is adopted for the. General Fund. Budgeted expenditure appropriations lapse at year-end. E. Cash and Investments Cash and investment balances from all funds are pooled and invested to the extent available in investments authorized by Minnesota. Statutes. Earnings from investments are allocated to individual funds on the basis. of the fund's equity in the cash and. investment pool.. The City provides temporary advances to funds that have insufficient cash balances by means of an advance from another fund shown as interfund receivables in the advancing fund in the governmental fund financial statements, and an interfund payable in the fund with the deficit, until adequate resources are received. These interfund payables are eliminated for statement of net assets presentation, Investments are stated at fair .value as of the balance sheet date. Interest earnings are accrued at the balance sheet date. For purposes of the statement of cash flows. the Proprietary Fund considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. All of.the cash and investments allocated to the proprietary fund types have original maturities of 90. days or less. Therefore, the. entire balance.in such. fund types is considered cash equivalents. F. Prepaid Expenses Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepayments. Prepaid items are reported using the consumption method and recorded as an expense or expenditure at the. time of consumption. That Portion of the relevant funds' balances equal to material prepaid items has been reserved.. G. Property Tax: Credits Property taxes on. homestead property (as defined by state statutes) are partially reduced by property tax. credits. These credits are paid to the City by the state in lieu of taxes levied against. homestead property.. The state remits. these credits through installments each year: These credits are recognized as revenue by the. City at the. time of collection. r CITY OF GEM LAKE, MINNESOTA NOTES TO BASiG FINANCIAL STATEMENTS. DECEMBER 31, 2011 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. Property Tax Revenue Recognition The City Council annually adopts a. tax levy and certifies it to the County in December (levy/assessment date) of each year for collection in the following year. The County is responsible for billing and. collecting all property taxes for itself, the City, the local School ❑istrict and other taxing authorities. Such taxes become a lien on January 1 and are recorded as receivables by. the City at that date: Real property taxes are payable (by property owners) on May 15 and October 1.5 of each calendar year. Personal property taxes are payable by taxpaYers on February 28 and. June 30 of each yea.r.. These taxes. are collected. by the County and remitted to the City on or before July 15 and Decerber 15 of the same year. Delinquent collections for November and December are received the following January. The City has no ability to enforce payment of property taxes by property owners. The, County possesses this authority. Within the governmental fund financial statements.; the City recognizes property tax. revenue .when it becomes both measurable and available to finance expenditures of the current period: In practice, current and delinquent. taxes and. State credits received by the City in July,. December and the. following January are recognized as revenue for the current year. Taxes and credits not received at the year-end. are classified as delinquent and due from County taxes receivable. The portion of delinquent taxes not collected by the City in January. is fully offset by deferred revenue because it. is not available to finance. current expenditures. Deferred revenue in governmental activities is susceptible to full accrual on the government -wide state ments. The City's. property tax revenue includes payments from the Metropolitan Revenue Distribution (Fiscal Disparities Formula) per Minnesota Statute 473F. This statute provides a means of spreading a. portion of the taxable valuation of commercial/industrial real property to various taxing authorities within the defined metropolitan area: The valuation "shared" is a portion of commerciallindustrial property valuation growth since 1.971. Property taxes paid to the City through this formula for 2911 totaled $3,199. Receipt of property taxes from this "fiscal. disparities pooi" does not increase or decrease total tax revenue.. I. Special Assessment Revenue Recognition Special assessments are levied against benefited properties for the cost or a portion of the cost of special assessment improvement projects. in accordance with state statutes. These assessments are collectible by the City over a term of years usually consistent with the term of the related bond issue. Collection of annual installments (including .interest) is handled by the County Auditor in the same manner as property taxes. Property owners are allowed to (and often do) prepay future installments without interest or prepayment penalties. (18) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL. STATEMENTS DECEMBER 31., 2011 NOTE 1 SUMMARY OF SIGNIFICANT. ACCOUNTING POLICIES (CONTINUED) Special Assessment. Revenue Recognition (Continued) Within the fund financial statements, the revenue from special assessments is recognized. by the City when it becomes measurable and available to finance expenditures. of the current. fiscal period. In practice, current and. delinquent special assessments received by the City are recognized as revenue. for :the current year. Special assessments are 'collected by the County and remitted by December 31 (remitted to the City, the following January) and are also recognized: as revenue for the current year; All remaining delinquent, deferred and special deferred assessments receivable in governmental funding are completely offset by deferred revenues. Deferred revenue in. governmental. activities is susceptible to full accrual on the government -wide statements. Once a special assessment roll is adopted, the amount. attributed to each parcel is a lien upon that property until full payment is made or the amount is determined to be excessive by the City's City Council or court. action. If special assessments are allowed to go delinquent, the property is subject to tax forfeit sale and the first proceeds of that sale (after costs,. penalties and expenses of sale) are remitted to the. City in payment of delinquent special. assessments. Generally, the City will collect the full amount of its special assessments riot adjusted. by:the City's City Council or court action. Pursuant to State Statutes, a property shall be subject to a tax forfeit sale after three years.unless it is.homesteaded, agricultural or seasonal recreational land in which event the property is subject. to such sale. after five years. J. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, sidewalks, street lights, and similar items) are reported. in the applicable governmental or business -type activities columns in the government -wide financial statements. Capital assets are recorded at historical cost or estimated historical cost if purchased or constructed. The cost of normal maintenance and repairs that do not add to. the value of the asset or materially extend asset lives are not capitalized. Major outlays: for capital assets and improvements are capitalized as.projects are constructed. The government reports infrastructure assets.on a network and subsystem basis... In the case of the initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the City chose to include all such items regardless of their acquisition date or amount. 00 NOTE I CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2011 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) J. Capital Assets (Continued) Depreciation on exhaustible_ assets is recorded as an allocated :expense in the statement of activities with accumulated depreciation `reflected. in the statement of net assets. 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 not being depreciated include construction in progress. Assets Buildings Office Equipment Utility Systems Infrastructure K. Long -Term Obligations ❑epreciation Method :Straight�Line. Straight -Line Straight -Line Straight -Line Estimated Useful Life. 40 Years 5 -10 Years 20 - 50 Years 20 -:50 Years In th.e entity -wide. financial statements, long-term debt and other long-term obligations. are reported as liah.ilities in the applicable governmental. activities. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. Bond issue costs, if material, are reported as prepaid items and amortized over the term of the related debt.using thestraight-line method. In the governmental fund financial. statements, bond premiums and discounts, as well as bond issue costs are recognized during the current period. The face amount of the debt Issue Is reported as on other financing source. Premiums received on debt Issuances are reported as other financing sources while discounts are reported as other financing uses. Issue costs are reported as debt service. expenditures. CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS ©ECEMBER 3'I, 2011 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) L. Net AssetslFund Balance Net assets represent the difference between assets and liabilities in the government - wide acid proprietary fund. financial statements.. Net assets invested in capital assets net ofrelated debt,. consists of capital assets, riot of accumulated. depreciation, reduced by the outstanding balance of any long-term debt used to build or acquire the capital assets. Net assets are reported as restricted when there are limitations imposed on their use through external restrictions. imposed by creditors, grantors, or haws or regulations of other governments. At December 31, 2011, the City adopted GASB Statement No. 54, Fund Balance. Reporting and Governmental Fund Type Definitions.. In the fund :financial statements, governmental funds report fund balances in the classifications that disclose constraints for which amounts in those funds can be spent. These classifications are as follows: Nonspendable — portion of fund balances related to prepaids, inventories; long-term receivables, and corpus on any permanent fund. Restricted -- funds are constrained from, outside parties (statute; grantors, bond agreements, etc.). Committed — funds are established and modified by a resolution approved by the City Council. Assigned. - consists of internally imposed constraints approved by the City Finance Director. Unassigned — is the residual classification for the General Fund and also reflects the negative residual amounts in other funds, When an expenditure i.s incurred for purposes for which both restricted and unrestricted fund balance is available, it is the City's policy to use. restricted first, then unrestricted fund balance. When an expenditure is incurred for purposes for which committed, assigned and unassigned amounts are available, it is tte City's policy to use cornmitted first, then assigned, and finally unassigned. amounts. (21) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, .2011 NOTE 1.. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) M. €nterfund Transactions. Interfund services provided and used are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/ expenses initially made frorn it that are properly applicable to another fund, are recorded as expend itureslexpenses in the reimbursing fund and as reductions of expenditures. or expenses in the fund that is reimbursed: All other interfund transactions are reported as transfers. All interfund transactions are eliminated except for activity between governmental activities and lousiness -type activities for presentation in the entity -wide statements, of net assets and statements of activities. NOTE 2 DEPOSITS AND INVESTMENTS A. Deposits The City maintains a cash and investment pool that is 'available for use by all funds. Each fund type's .portion of this pool is displayed on the statement of net assets and. the balance sheet as "'Cash and Investments." In accordance with Minnesota Statutes, the City maintains deposits at financial institutions which are authorized by the City Council. Custodiat Credit Risk -- Custodial credit risk for deposits is the risk that in the event of a bank failure, the. Citys deposits may not be returned to it. The City does not have a deposit policy for custodial credit risk and follows Minnesota Statutes for deposits. Minnesota Statutes require that all deposits be protected. by insurance, surety band, or collateral.. The market value of collateral. pledged must equal 110% of the deposits not covered by insurance or corporate surety bonds. Authorized collateral include: U.S. government treasury bills, notes, or bonds; issues of a U.S. government agency; general obligations of a state or local government rated "A"or better; revenue obligations of a state or local government rated "AA" or better; irrevocable standby letter of credit issued by a Federal Home Loan Bank; and. time deposits insured by a federal agency. Minnesota Statutes require securities pledged as collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or in an account at a trust department of a commercial bank or other financial institution not. owned or controlled by the depository. The carrying value and bank balance of the City's deposits in barks at December 31, 2011 were $502,220 and $565,038, respectively,. and were entirely covered by federal depository insurance or by surety bonds and collateral in accordance with Minnesota Statutes. (22) CITY OF GEM LAKE, MINNESOTA. NOTES. TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2011 NOTE. 2 DEPOSITS AND INVESTMENTS (CONTINUED) B. Investments The City may also invest idle funds as authorized by.Minnesota Statutes as follows: Direct obligations or obligations guaranteed by the United States or its agencies. Shares of investment companies registered under the Federal Investment Company Act of 1940 and. received 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 finial maturity of thirteen months or less. General obligations rated "A" or better; revenue obligations rated "AA" or better. Q General obligations of the Minnesota Housing Finance Agency rate "A" or better. Bankers' acceptances of United States banks eligible for purchase by the Federal Reserve System. Commercial paper issued by United States banks corporations or their Canadian subsidiaries, of. highest: quality category by a feast two nationally recognized rating agencies, and maturing in 270 days or less. :® Guaranteed investment contracts guaranteed by United States commercial banks or domestic..branches of foreign banks or United States insurance. companies if similar debt obligations of the issuer or the collateral pledged by the issuer is in the top two rating categories. repurchase or reverse purchase agreement and securities. lending agreements. financial institutions qualified as a "depository' by the. government entity, with banks that are members of the Federal Reserve System with capitalization exceeding $101000,000, a primary reporting dealer in.. U.S. government securities to the Federal Reserve Bank of New York, or certain Minnesota securities broker -dealers. Custodial Credit Risk For an investment, custodial credit risk is the risk that, in the event of failure of the counterparty; the City will not be able to recover the value of its investment or collateral securities that. are in the possession of an outside party. The City's investment policy doesn't specifically address. custodial credit risk. Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The City's investment policy doesn't specifically address interest rate risk. Information about the sensitivty of the fair values of the City's investments to market interest rate risk fluctuations is provided by the following table that shows the distribution of the City's investments by maturity: (23) NOTE.:2 CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2011 DEPOSITS AND INVESTMENTS (CONTINUED) B. Investments (Continued) Interest Rafe Risk (Continued) 12 Months 13 to 24 25 to 60 More than Type Total . or Less. Months Months 60 Months Federal Farm Credit $ 200,000 5 - S. - 5 200,000 5 _ Build America Bonds - 5horeView 167,681 - - _ 167,681 Federat Home Loan Bank. $3,90..6 -. - 33,906 Wel.is Fargo Prime Investment Fund 151,093 151,693 - - Total S 553,280 $ 151,693 5 $ 200,000 5 201,587 Credit Risk Generally, credit risk is the risk that an issuer of an investment wiil not fulfill. its obligation to the holder of the. investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The City's investment policy doesn't. specifically address credit risk. The following chart summarizes yearend ratings for the City's investments as rated by Moody's Investors Services: Tvoe Government Money Market Mutual Funds Federal Farm Credit Build America Bonds Federal Home Loan Bank Total Concentration of Credit Risk Credit Quality Rating Amount NIA $ 161,693 AAA 200,000 AAA 167.,681 AAA 33,906 553;280 The City places. no limit on the amount that the City may invest in any one issuer. The folImA ing is a list of investments which individually comprise more than 5 percent of the City's total investments: Tvoe Government Money Market Mutual -Funds Federal Farm Credit Build America Bonds - Shoreview Federal Home. Loan Bank Cred it [Quality. Rating Amount Percentage idlA $ 151,693 27.42°/a AAA 200,000 36..15% AAA 167;681 30.31 % AAA 33,906 5:13°Io .(24) CITY OF G.EM LAKE, MINNESOTA NOTES TO 13ASIC FINANCIAL STATEMENTS ❑ECEMBER 31, Z0'11 NOTE 3 CAPITAL ASSETS Capital asset activity for the year ended December 31, 2011 was as follows: Beginning Ending Governmental Activities Capita[Assets. Being depreciated; Buildings Office Equipment Infrastructure Total Capital Assets Being Depreciated. Accumulated Depreciation: Buildings Office. Equipment Infrastructure Total Accumulated Depreciation Net Capital Assets - CapRai.Activities $. 898,708 $ 13,190 71.2,788: _ 1,524,686. Increases Decreases Balance. 3,524, 3,524 902,232 13,190. - 71.2.,788 1,629,210 (64.595) (22;487) - (87.692) (4,508) 0 ;506) - (51014) (236;822) (38,436) (275,258) {M5,925) (62,439) - (368;364) $ 1.,3:18,761 $ {58;915} - 5 1.,250,846 Depreciation. expense was charged to the.governmentaI furictions as follows; General Government 24,803 Public Works 38,436 Total Depreciation - Gave rnmental..Activities 621439 sevvw Utility Capital Assets Being. Depreciated` Infrastructure Less: Accumulated Depreciation .Net Capital Assets.- Sewer Utllity Beginning. Ending Balance Increases Decreases Balance s E17,5n.. $. - S - $ 617,539 (74.517) (12,456) - (86,973) 3 543,022 $ (12.456) $ S 5n,566 I (25). CITY OF GEM LAKE; MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2011 NOTE 4 CITY INDEBTEDNESS City: indebtedness at December 31, 2011 is composed of the following: Final Issue maturity Interest Original Balance Date Date Rafe Issue 1213.1111 Governmental Activities: General -obligation Bonds: 2a04A improvement Bonds 1.1/0.3/2004 0210112016. 1706/a $ 58$,000 $ 290;375 2006A Improvement. Bonds 08/23/2006 02101/2017 4,30% 2451000 160io0o 2007A Capital Improvement Bonds 061201.2007 02/01/2028 4,00-4.50% 350,000 805,000 Total Long -Team Debt 1,681,000 1,255,375 Unamortized. Bond Discount (25,111 } 13,693 Total .5 1,655;889 5 1;241,682_ The following. is a. schedule of changes in. City indebtedness for the year ended December 31, 2011: Balance Balance. Clue Within 12131/10 Additions Reductions 12131111 one Year Long -Term Debt Governmental Activities General 0�ligatloh Bonds S 1;353,651. S - 5 98;276. $ 1.255.,375 $ 100.452 UnamOized Bond Discount {16.467) - � (1,774) � (13.693) - Total Long -Term Debt s 1:93a;184 S S 96.502 5 1.241.682 5 100.452 All long-term bonded indebtedness outstanding at December 31, 2011 is backed. by the full faith and credit of the City, including special assessment bond issues. For the governmental activities, compensated absences. are generally liquidated by the general fund. Mini.muri annual principal and interest payments required to retire longterm debt are as follows: Year Ending December 31. Principal Interest Total _ 2012 $ 100;452 $ .50,688 $ 151,140 2013.102,710 46,755 149,465 2014 105,052 .42,738 147,790 20.15 107,481. 38,634 146,115 2016 79,660. 34,331 114,011 2017-2021 2951000 131,221 426 22:1 2022-�2026 .320,000 68,754 .388,75.4 2027-20.28 145,000. 6,637 151,637 Total $ 1.,255,375 $ 4.19,758 $ 1,675;133 (26) CIMOF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2011 NOTE 4 CITY INDEBTEDNESS (CONTINUED) Description and Restrictions „of Lon_g-Term ❑ebt General obligation Bonds -- The bonds were .iss.ued for improvements or projects which benefited. the. City as a whale and are, therefore, repaid from ad valorem levies, NOTES STEWARDSHIP COMPLIANCE.AND ACCOUNTABILITY Deficit Fund Balances The City has deficit fund balances at December 31, 211 as follows: Scheuneman Road. Fund Fund Balance Deficit $ 54;385: The City intends to fund these deficits through future tax levies, transfers from other funds., and various other sources. NOTE 6 INTERFUND RECEIVABLE AND PAYABLE Individual fund receivable and payable balances at December 31, 2011 are as. follows: Governmental Activity: General Fund Capital. Projects Fund = Scheuneman Road Interfund Interfund Receivable Payable $ 54,385 $ - 5.4,385 $ 54,386 Interfund receivable and. payable balances represent the eliimination of negative cash between funds. NOTE 7 RISK MANAGEMENT The City is exposed to various risks of lass related. to. tarts; theft. of, damage to and i destruction of assets; errors and. omissions; injuries to employees; and natural disasters. The City carries commercial insurance for all risks of loss, including disability Arid employee € Health insurance.. 1 There were no significant reductions in insurance from the previous year or settleiments in excess of insurance coverage for any of the::past three fiscal years. i (27) CITY OF GEM LAKE, MINNESOTA. NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31,.2011 NOTE 8 FUND BALANCES Certain portions. of fund balance are restricted to provide for funding on certain long-term liabilities or as required by other outside parties. Restricted, Committed and Assigned fund balances at December.31, 2011, are as follows: A. Restricted for Debt Service -- This represents amounts which are restricted. for future debt payments. B. Restricted for Park Improvements -- Represents amounts which are received through park dedication ;fees and are restricted for park acquisitions and improvements. C. Assigned for Capital Improvements Benefitting Individual Property Owners — Represents amounts which are assigned `by the City to finance future road improvement projects benefitting individual property owners. This:Page. Has Been [ntentiona€€y Left B€an€c. REQUIRED SUPPLEMENTARY INFORMATION. BUDGETARY COMPARISON INFORMATION CITY OF GEM LAKE, MINNESOTA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL. GENERAL. FUND YEAR. ENDED DECEMBER 31., 20.11 REVENUES Taxes intergovernmental Licenses and Permits Fines and Forfeits Public Charges for Services Miscellaneous:: Interest Other Total Revenues EXPENDITURES General Government Public Safety Public Works Conservation and Development Total. Expenditures EXCESS OF REVENUE OVER (UNDER) EXPENDITURES OTHER FINANCING USES. Transfers Out NET CHANGE IN FUND BALANCE Fund .Balance -.Beginning of Year FUND BALANCE - END OF YEAR Budgeted Amounts r Actual Variance with Original Final Amounts Final Budget 268,234 $ 268,234 $ 244,765 $ (23,469) 6,796 6,79E 4,471 (2,325) 12,980 12,9.80 22,927 9,947 1,700 1,700 2,903 1,203 4,000 4,000 10,278: 6,278 4,000 .4,000 5,808 1,808 28;446 28,446 22,187 (6,259) 326,156 326,156 3 13,339 (12,817) 168;915 168,91'5 89,442. 79,473 1.01,537 101,537 100.675 862 77,803 77180,3 3.3,925 43,873 3$,500 38,500 33,977 4,623 386,7.55 3861755 258,019 . 128,736 (60,599) (60,590) 55,.320 115,919 (25,000) (25,000). (76,000 {45,000) $ (85;599) $ (85,599} (14,680) $ 705919 See accompanying Note to Required Supplementary Information, {29} 4.1.2,081 $. 397;461 This Page Has .Been Intentionally Left Blank. CITYOF GEM LAKE, MINNESOTA NOTE TO REQUIRED SUPPLEMENTARY INFORMATION ❑ECEMBER 31, 2011 STEWARDSHIP COMPLIANCE AND ACCOUNTABILITY _ BUDGET The General Fund budget is legally adopted on a basis consistent with U.S. generally accepted accounting principles. Actual expenditures did not exceed .budgets during 2011. �30} This. Page Has Been Intentionally Left Blank. SUPPLEMENTARY INFORMATION CITY OF GEM LAKE; MINNESOTA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS DECEMBER 31, 2011 ASSETS Cash and Investments Accrued Interest. Receivable Total Assets LIAI3ILIT[ ED. AND FLIND BALANCES Restricted: Park Improvements Assigned:. Capital Improvements Benefiting: Individual Property Owners Total. Fund Balance Total Liabilities and Fund Balances Special Capital Revenue Projects Parks and Street Hoffman Total Playground Iinprovernents Road Nonrnajor Fund Fund Fund Funds $ 87,880 $. 70,014 $ .25,408 $ 133,302 1.64 23 108. 29.5 $ 38,044 $ 70,03.7 $ 25,616 $ 133,597 $ 38,044 $ - $. $ 38,044 70,037 25;516 95,553:. 3.8,044 70,037 25,51.E 1.33,597 $ 38;044 $ 70,037 $ .251516 $ 133,597 (3.1) CITY OF GEM LAKE, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2011 REVENUES Interest OTHER FINANCING SOURCES Transfers In NET CHANGE IN FUND BALANCES Fund Balance - Beginning of Year FUND BALANCE- END OF YEAR Special Capital Revenue Projects. Parks and Street Hoffman Playground. Improvements Road Fund Fund Fund $ 473 $ 37 $ 313. Total Nonmajor Funds $ 823 70,000 70,.000 473 70,037 3.13 70,823. 37,571 - 25,208 .K,774 38,044 $ 70,037 $. 25,515 $ 133,697.. (32) OTHER REQUIRED REPORTS GliftcriamonAllen LLP YNAv_difto nlarsonailen.com CliftonLarsonAllen REPORT ON INTERNAL~ CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL. STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNNIENTAUDITING STANDARDS Honorable Mayor and Members of the City Council City of Gem Lake, Minnesota In planning and performing our audit of the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of:City of Gem Lake (the City) as of and for the year ended December 31, 2011, in accordance with :auditing standards generally accepted in the United States of America, we considered City of Gem Lake's internal control over financial reporting (internal control) as a basis for designing our auditing procedures 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. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be significant deficiencies or m.ateria] weaknesses and, therefore, there can. be. no assurance that all such deficiencies have been identified. However, as discussed below, we identified: certain deficiencies in internal control that we consider to be material weaknesses. 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 weakness 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, a detected and corrected on a timely basis. Our consideration. of the internal. control aver financial reporting was for the limited. purpose described in the fimt paragraph of this. section and was not designed to identify :all deficiencies in internal control over financial reporting that might he deficiencies, significant deficiencies, or .material weaknesses.. However, as. described in. the accompanying Schedule: of Findings and Responses, we identified deficiencies.in internal control. that we consider to be material weaknesses. W) Honorable Mayor and. Members of the City Council City of Gem Lake As part of obtaining reasonable. assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the. determination of financial statement amounts. However, providing. an opinion on. compliance with those provisions was not an objective of our audit, and accordingly; we do riot express such an opinion. The resuits of our tests disclosed no instances of noncarripliance or other matters that. are required to be reported.under Government' Auditing Standards. The City's responses to the findings identified in our audit are described in the accompanying schedule of findings and responses. We did not audit the City's responses and, accordingly, we, express no opinion on them. This report is intended solely for the information and use of the City Council, management, the Office of the State Auditor, and. state and federal awarding agencies and is.not intended to be and should not be used by anyone other than these specified parties. Minneapolis, Minnesota June 14, 2012 zz->Z-? CliftonLarsonAllen LLP (34) This Page Has Been Intentionally Left Blank. QiftonLarsonMen LLP www.cliftorilarson8llen.com CfiftonLarsonAllen REPORT ON MINNESOTA LEGAL COMPLIANCE Honorable Mayor,. Members of the City Council; and Citizens City of Gem Lake., Minnesota We have audited the financial statements of tide governmental activities, the business -type activities, each Ma;or fund, and the aggregate remaining fund information of the City of Gem Lake, Minnesota, which collectively comprise the City's basic financial statements as of and for the year ended December 31, 20115 and have issued our report thereon dated June 1.4, 2012, We conducted our audit in. accordance with U.S. generally accepted auditing standards and the provisions of the Minnesota Legal Compliance Audit Guide far Political Subdivisions, promulgated by the State Auditor pursuant to Minnesota Statutes. §5.E5. Accordingly, the audit included .such. tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The Minnesota Legal 'Compliance Audit Guide for Political Subdivisions covers seven main categories of compliance to be tested: contracting and. bidding, deposits and investments, conflicts of interest, public indebtedness claims.. and disbursements, miscellaneous city provisions, and. tax increment financing districts. Our study included all of the listed categories except for tax increment financing districts because the City has no tax increment financing districts. The results of our tests. indicate that, with respect to the items tested, the City of Gem Lake, Minnesota complied with the material terms and conditions of applicable legal provisions. This report is intended sc[ely for the information and. use of management, the City Council, the Office of the State Auditor, and other state. agencies, and is not intended to be and should not be used by anyone other than these specified parties. Minneapolis., Minnesota June 14, 2012 CliftonLarsonAllen LLP (M) This. Page. Has Been Intentionally Left Blank. CITY OF GEM LAKE SCHEDULE OF FINDINGS AND RESPONSES YEAR ENDED DEC EMBER 31., 2011. 2011-1 O.versight of the. Financial Reporting Process Condition: The City does not have a system of internal controls that would enable management to conclude the financialstatements and related. disclosures are complete and presented in accordance with U.S. generally accepted accounting principles (GAAP), As such, management requested us to prepare a .draft of the financial. statements, including. the related footnote disclosures. Criteria: The City should have controls in place to conclude the financial statements and. related disclosures are complete and presented in accordance with U.S. GAAP. Effect: The City is unable to conclude .on the accuracy of the financial statements. Cause: The City relies on the audit firm to prepare the annual financial. statements and related footnote disclosures. However, they have reviewed and approved the annual financial statements and related footnote disclosures. Recommendation; We recommend that the City continue to evaluate its internal control processes to determine if. additional internal control procedures should be implemented to ensure that the financial statements are complete and presented in accordance with U.S. GAAP. Management Response: Management has decided, due to the small size of the City's staff, that the additional costs of implementing the necessary controls outweigh the benefits that would be derived. (36) CITY OF GEM LAKE SCHEDULE= OF FINDINGS AND RESPONSES YEAR ENDED DECEMBER 31, 20.11 2011-2: Limited Segregation of Duties Condition: Due' to the small size of the: City's staff, there: is by definition a lack of segregation. of the accounting functions that is necessary to ensure adequate internal. accounting control. While we realize this scenario is common for small entities, we are required to report this issue and to advise that a concentration of duties and `responsibilities in a limited number of individuals is hat desirable from an internal control perspective. Criteria: Generally, a system of internal control contemplates Separation of duties such that no individual has responsibility to execute a transaction, Have physical access to the related assets, and have responsibility or authority to record the transaction. Effect: The City is unable. to maintain segregation of incompatible duties... Cause: The condition is due to a limited number of personnel involved in receipt and disbursement processes. Recommendation: Controls should. be reviewed periodically and consideration .given to. improving the Segregation of duties. In making this review, it is important to consider the benefit derived as. weighed against the cost of the improvements. Management Response: Management has decided, due to the small size. of the City's staff, that the additional costs of implementing the necessary controls outweigh the benefits.that would be derived. (37)