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2012 Financial Reports
CITY OF GEM LAKE, MINNESOTA FINANCIAL STATEMENTS AN©� SUPPLEMENTARY INFORMATION YEAR ENDED D.ECEMSEI�31, 2012 CITY OF GEM LAKE .4200 OTTER LAKE ROAD GEM LAKE, MINNESOTA;55110 CITY OF GEM LAKE, MINNESOTA TABLE OF CONTENTS YEAR ENDED DECEMBER 31, 2012 I. FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT 1 BASK FINANCIAL STATEMENTS STATEMENT OF NET POSITION 4 STATEMENT OF ACTIVITIES 5 BALANCE SHEET - GOVE RN M ENTAL. FU N DS. 6 ,. RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION - GOVERNMENTAL ACTIVITIES 8 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -:GOVERNMENTAL FUNDS 9 RECONCILIATION .OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AN.D CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES - GOVERNMENTAL ACTIVITIES... 11 STATEMENT OF NET POSITION - PROPRIETARY FUND 1 STATEMENT OF REVENUES, EXPENSES AND CHANGE IN NET POSITION - PROPR1ETARY FUND 13 STATEMENT OF CASH FLOWS.- PROPRIETARY FUN❑ 14 NOTES TO BASIC FINANCIAL STATEMENTS is REQUIRED SUPPLEMENTARY.INFORMATION BUDGETARY COMPARISON. INFORMATION SCHEDULE' OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE BUDGET AND. ACTUAL --GENERAL FUND 30 NOTE TO REQUIRED SUPPLEMENTARY INFORMATION 31 SUPPLEMENTARY INFORMATION NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET 32 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND. CHANGE IN FUND BALANCE 33 CITY OF GEM LAKE, MINNESOTA TABLE. OF CONTENTS (CONTINUED) YEAR ENDED ❑ECEMBER.31, 2012 II. OTHER REQUIRED REPORTS INDEPENDENT AUDITORS' 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 34 INDEPENDENT AUDITOR'S REPORT ON MINNESOTA LEGAL COMPLIANCE 36 SCHEDULE OF FINDINGS. AND RESPONSES 37 FINANCIAL. SECTION 6AW CliftonLarsonAtlen INDEPENDENT AUDITORS' REPORT Honorable Mayor Members of the City Council and Citizens City of Gem Lake Gem Lake, Minnesota ChftonLa rsonAllen .LLP www.d ifton larson al le n.Gam Report on the Financial. Statements We have audited the accompanying financial statements of the. governmental activities, the business - type activities, each major fund, .and the aggregate remaining fund information of the City of Gem Lake (the City),. Minnesota as of and. for the year ended December 3'1 2012, and. the related notes to.the financial statements, which collectively comprise the City's basic. financial statements as listed in the table of contents. The prior year partial comparative information has. Been derived from the City's 2011. financial statements, and in our report.dated June 14, 20[2, we expressed unqualified opinions on.the respective financial statements of the governmental activities, business -type activities, each major fund, and aggregate remaining fund information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles genera Ily;accepted. in the .United States ofArrierica; this includes the design, .implementation, and maintenance of internal control relevant to the. preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, Auditors' Responsibility 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. States 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the. amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks. of material misstatement of the financial statements, whether due to fraud. or error. In making those risk assessments, the auditor considers internal control relevant to the entity's: preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness. of the -entity's internal control_ Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. ■ An lydcperclord m—bL of H-a lrlw=a M �,�.� I NT£R.v AT 1OVAL Honorable Mayor Members of the City Council and Citizens City of Gem Lake Auditors' Responsibility (Continued) We believe that the audit evidence we have obtained is sufficient.and appropriate to provide a basis for our audit opinions. opinion 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 3.1, 2012; and the respective changesin 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. Other Matters Required .Supplementary Information 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. We 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, Management has omitted the management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing. 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 t3asc financial statements in an appropriate operations,. economic, or historical context. Our opinion on the basic financial statements is not affected. by this missing information. Supplementary Information 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 non -major fund financial statements, as listed in the table of contents, are presented for purposes of additiona€ d analysis an.are: not. a.. required part of the basic financial statements. (2a Honorable.Mayor Members of the City Council and Citizens City of Gem Lake Other Matters (Continued Supplementary Information (Continued) The combining non -major 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 supplementary information is fairly stated in all material respects in relation to the basic financial statements. taken as a whole. Other Reporting Required by Government Auditing Standards In 'accordance with Government Auditing Standards, we have;. also issued ❑ur report.dated June 18, 2013 on our consideration of the City of Gem Lake, Minnesota's in..ternal 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. CliftonLarsonAllen LLP Minneapolis,. Minnesota June 1.8, 2013. (3) BASIC FINANCIAL STATEMENTS CITY OF GEM LAKE, MINNESOTA STATEMENT OF NET POSITION DECEMBER 31, 2012 ASSETS. Cash and Investments Taxes Receivable Special Assessments Receivable Accounts Receivable Due from Other Governments Accrued Interest Prepaid Expenses Unamortized Bond Issue Costs Capital Assets: Capital Assets Being Depreciated Accumulated Depreciation Total Assets LIABILITIES Vouchers and Accounts .Payable Accrued Interest Payable Unearned. Revenue. Long -Term Liabilities' Amounts. Due Within One Year Amounts Due in. More than One Year Total Liabilities NET POSITION. Net Investment in Capital Assets Restricted for Debt Service Restricted for Park.. Improvements Unrestricted mm„ Total Net Position See accompanying Notes to Bask Financial Statements, Governmental Business -Type.. Activities Activities Total $ 842,892 $ 384,645 $ 1,177537 9,396 - 9,396 280,707 6,159 2365886 10,352. 19,11.5 29,467 1,605 - 1,605 6; 635 31046 9; 681. 1,047 7,2t7 8,314 23,567 - .23,567 1.,628,210 617,539 21245,749 4.30;804 (9.9.430) — (530,234) 21323 607 888,341 3,211,948 18,532 20,070 102, 719 1,040,294 1,181,606 130 18.5662 20,079. 102,7'10 - 1.,0431294 130 1 J.81, 736. 54,402 518;109 572,511 483,61.0 - 483,610 38;688. - 38,688 565,301 370,102 935,403 $ 1,142,001 $ 888,211 $ 2,030212. (4) CITY OF GEM LAKE, MINNESOTA STATEMENT OF ACTIVITIES YEAR ENDED QECEMBER 31, 2019 Net(Expense) Revenue and Prograrn. Revenues Changes.in Net Position Fees, Charges, Operating Capital Grants Business - Fines, and Grants and and Governmental Type FUNCTIONS1PROGRAMS Expenses Other Contributions. Contributions Activities Activities. Total T GOVERNMENTAL ACTIVITIES. General Government $. 12.0,277 $ 39,633 $ 71111 $ - $ (73.,M3) $ - $ (73,533) Public Safety 104976 - - - (102,976) (:102,976) Public Works 69,903 18,481 - 4.482 (46,940) - (46.940) Conservation. and Development 1.6,781 - - - (1E,781) - (16,781) Interest and Fiscal Charges 54,209 - - - (54,209.) - (54,2119) Total Governmental Activities 364,146 58J 14 7,111. 4,482 (294,439). - (294.439) BUSINESS -TYPE ACTIVITIES Sewer 37,463 57,139 - - - 19,676 19,675 Total Primary Government $ 401609 $ 115,253 $ 7,1.11 .. $. .4,482 . (294,439) 19,676 (274,763) GENERAL REVENUES Taxes: P rope rty Taxes, Levied far General Purposes;.. 195;156: - 195;155 Property Taxes;. Levied for Debt Service: 48,988. - 48,988 Investment Earnings 11,851 5,44:78 17,329 . Miscellaneaus 745 - 745 Total General Revenues. 256,740: .5.478 262,218 CHANGE IN. NET:P..QSITION (37,699) 2511.54 (12,545) Net Position - Beginning:of Year 1,179.700. 86.3.057 2,042,757 NET POSITION - END. -OF YEAR $ 1,142,001 $ 888;211 $ 2,0301212 See accompanying Notes to Basic Financial.. Statements. (5) G.O. Capital 2012 Improvement Seheuneman Street Other Total. Plan Bonds Road Improvements Governmental Governmental 2011 Series 20d7A Fund Fund Funds Funds Totals $. 80,666 $ - $. 130,077 $ 64,029 $ 842,892 $ 812,292 1.;373 - - - 9,396 24;685 - 39,559 - - 230,707 326,518 - - - - 10;352. 14,485 - - - - 1,605 - 532 (48.7} 1,210. 608. 6,635 2,968 - - - - . 440,848 54,385. - - - 1,047 1,186 . . $ 82,.571 $ 39,072 $ 131,287 $ 64,637 $ . 1.,143,482: $ 11236,520 $ - $ - $ - $ - $ 18,532 $. 20,013 - 40,848 _ - 40,848 54,385 1,372 38,219 - - 229,043 360,328 1,372 79,067 - _. 288;423 434,726 1,047 1,186 81.,199 - - - 321 P017 325,.181 - - - 38;688 38,688 38,044 131,287 25,949. 157,236. 951553 - (39,995) - - 3361171 341,830 81,1.99 (39,995) 131,287 64;637 855,059 801,794... $ 82,571. $. 39,072 $ 1311287 $ 64,631 $ 1,143,482 $ 1,236,520 (7) CITY OF GEM LAKE, MINNESOTA RECONCILIATION -OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT ❑F NET POSITION GOVERNMENTAL ACTIVITIES DECEMBER 3..1, 2012 TOTAL FUNS] BALANCES FOR GOVERNMENTAL FUNDS $ 855,059 R, 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, are no reported in the funds. These. capital assets consist of: Buildings $ 902,232 Office Equipment 1.3,190 Infrastructure 712,788 -- Accumulated Depreciation (430,804) 1,197,405 Some of the City's property taxes and.special assessments Will be. collectedafter 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. 229,043 Bond issue costs are reported as expenditures in. the:gavernmental funds and areshown net of accumulated amortization on -the statement of net position. 23;567 Some liabilities are not due and payabia in the. current.:period.and, therefore, are not reported as fund :1iabiiities,. Balances at. year-end are: General Obligation Bonds Payable (1,154,923) Unamortized Bond Discounts 1.1,919 Accrued Interest ori:Long-Term Debt (20,070) (1,153,374) TOTAL NET. POSITION OF GOVERNMENTAL ACTIVITIES $ 1,.142,001 See -accompanying Notes to Basic Financial Statements. [8} G.O. Capital 2012 Improvement Scheunernan Street Other Total Plan Bonds Road Improvements Governmental Governmental .2011 Series 2007A. Fund Fund Funds Funds Totals $ 48.,988 $ - $. - $ -. $ 263,7.84 $ 291,842 _ 1514.79 - - 110,847 :90,021 - - - - 4,477 4,47.1 _ - - - 31,555 22,927 - - - 3,87a 2,903 - - - - 5,404. 10,278 935 (.1089) 2,625. 1,07.7 11..,851 8,969 - - - - 20,656. 22,187 49,923 14,390 2,625 11077 452,452 454,498 - - -. K839 89,442 - - - 102,976 100,675 - - - - 31,526 33N5 - - 16,7.81 33;977 -. - 1,375 - 1,375 - 15,000 - - - 100,452 98,276. 34,705 - - - .51.,238 55,089 d 49,706 `11375. - 39.9,187 411,384 218 141390 1,250 1;077 .53,265 .43,114 - 60,060 - 66,000. 70,006 - - - - (60.,000) V0,000) _ .. 60,000 218 14,390 611250 1,07.7 53,265 43,114 80,981 (54,885) 70,037 63;560 8.01,194. 755,680 $ 81,1.99 $ (39,995] 131287 $ 64,637 $ 855,059 $ 801,794 (10) CITY OF GEM LAKE,. MINNESOTA. RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT .OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES GOVERNMENTAL ACTIVITIES YEAR ENDED DECEMBER 31, 2012 NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL.FLINDS $ 53,265 Amounts reported for governmental activities in 'the statement of activities are different because: Governmental funds report. capital outlays as. expenditures. However, in the: statement of activities, assets .are capitalized and the.cost is allocated over their estimated useful lives andreported as depreciation expense. Depreciation. Expense. $ (62,440) (625440). Delinquent. and deferred,property taxes and special: assessments receivable will be collected 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 31, 2011 355;048 Deferred. Revenue - December 31, 2012 229,043 . (126,005) The governmental funds report:.bond proceeds as financing sources, while repayment of. bond principal. is reported as an expenditure! In the statement of net assets, however, issuing debt`increases long-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 governmental funds when it is :due. lathe statement: of activities,.. however; interest expense is recognized as it accrues, regardless of when it is. due. The net effect of these differences in thetreatment of general obligation bonds and related items is :as follows: Repaymentof Bond Principal 100,452 Change in Accrued Interest Payable 1,630 Amortization of Bond Issue Costs (;827) Amortization of Bond ❑iscount. (1,774) 97,481 CHANGE IN NET ASSETS OF GOVERNMENTAL. ACTIVITIES $. (37,699} See accompanying. Notes to Basic Financial. Statements. 01) CITY OF GEM LAKE, MINNESOTA STATEMENT .OF NET POSITION PROPRIETARY FUN© DECEMBER 31:, 2012 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. POSITION Net -I rivestment. in'Capital Assets Unrestricted Total Net Position. See accompanying Notes to Basic Financial Statements. (12). Sewer Utility $ 334,645. 19,115 3$046 6,159 7`,267 37.0,232 .617,839 (99,430) 518,109 888,341 130 5181109 370,1 D2 $ 888.,211 CITY OF GEM LAKE, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGE IN NET POSITION PROPRIETARY FUND YEAR ENDE❑ DECEMSER:31, 2012 Sewer utility OPERATING REVENUES. . Public Charges for Services: $ 57.,139 OPERATING EXPENSES Operating Expenses 25,006 Depreciation 12,457 Total Operating Expenses 37,4.63 OPERATING INCOME 19,616 �-- NONOPERATING REVENUES. Interest Revenue 5,478. CHANGE IN NET POSITION 2.5,154 Net Position -Beginning of Year 863,057 NET POSITION - END :OF YEAR $ 888,211 See accompanying Notes to Basic Financial Statements. w (13) CITY OF GEM LAKE, MINNESOTA. STATEMENT OF CASH FLOWS PROPRIETARY FUND YEAR ENDE❑ DECEMBER 31, 2012 Sewer utility CASH FLOWS FROM ❑AERATING ACTIVITIES Cash Received from utility Customers $ 53,004 Cash Payments. to :Suppliers. for Goods and Services (25,258) Net Cash Provided by Operating Activities 27,746 CASH. FLOWS. FRONT INVESTING ACTIVITIES Interest on investments: 3,691 NET INCREASE IN CASH AND CASH EQUIVALENTS 3.1;437 Y- Cash and Cash Equivalents - Beginning. of Year 303;208 CASH AND CASH EQUIVALENTS - END OF YEAR $ 334,645 RECONCILIATION OF OPERATING INCOME TO. NET CASH PROVIDED BY OPERATING. ACTIVITIES Operating. Income $ 19,676 Adjustments: to Reconcile ❑perating Income to Net Cash Provided by Operating Activities: Depreciation 12,45.7 Changes .in Assets and Liabilities - Customer -Accounts. Receivable (2,657) Special Assessments. Receivable. (1,478) w. Prepaid Expenses. (238) Accounts Payable (14) Net.Cash Provided by Operating Activities $ 27,746 Soo accompanying (Votes to Basic Financial Statements. (14) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2012 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 benefit 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 tobe component units of :the City. B. Basic Financial Statements 1. Government -Wide Statements The government-wide.fin ancia1 statements (i.e., the statement of.net position 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. (15) CITY OF GEM LAKE,. MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS bECEMBER 31, 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Basic Financial Statements (Continued). 1. Government -Wide Statements (Continued) In the government -wide statement of net position, 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 debt and obligations. The. City's net position is reported in three parts: (1) net investment in capital assets; (2) restricted net position; and (3.) unrestricted net position. The .City first utilizes restricted resources to finance. qualifying activities. The statement of activities demonstrates the degree to which the direct expenses of each function of the City's governmental. activities :a.nd. different husiness=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 provide 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 governmertal. and enterprise funds, with each displayed as separate columns in the fur 0-:financial statements. All remaining governmental and enterprise funds.are aggregated and reported as nonmajor funds. (16) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL. STATEMENTS DECEMBER 31, 201.2 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES .(CONTINUED) B. Basic Financial Statements (Continued) 2. Fund Financial Statements (Continued) The City reports th'e following major 9avernmentaI 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.O. Improvement Sands Series 2006A — The G.O. Improvement Bonds Series 2006A Fund accounts for all debt service activity related to .the 2006A bond. G.Q. 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 200.7A bond. 5cheuneman Road Fund The Scheuneman Road Construction Fund accounts for all activity related:`.t the.reconstruction of the Southern portion of ScheunemanRoad which was turned hack to the City from Ramsey County in .2006, Street Improvements Fund.— The Street Improvements Fund is used to account.. for the aceumulation of resources- that are restricted, committed, or assigned to .expenditures. for capital outlays, including the acquisition or construction of capital facilities. The City reportsthe. following major proprietary fund: . Sewer F u no.7. The.sewer fund accounts for:customer sewer service. charges that are used to 1inance sewer operating expenses. C. Measurement Focus and 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 area 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 for which they are levied: Grants and similar items are recognized -� as revenue as soon as all eligibility requirements imposed by the provider .have been met. (17) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS. DECEMBER 3432012 NOTE .1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Measurement Focus and Basis of Accounting (Continued) 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. 60.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 long-term 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 leases 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 goods in connection with a proprietary fund's principal ongoing operations. The.principal operating revenue ofthe 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 nonq.perating revenues and expenses. D. B.udgets. 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. CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED.). E. Cash and Investments (Continued). 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 advar:cing. 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 position 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 expensb or expenditure at the time of consumption. That .portion of the relevant funds' Balances 'equal to material prepaid items has been 5egregated. as nonspendabie. G. Property Tax Credits Property taxes . o:n 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. Thes® credits are. recognized as revenue by the City at the time of collection. H. Property Tax Revenue: Recognition The City Council annually adopts: a tax levy and. certifies it to the County in December �levylassessment date) of each year for collection in the following year. The County is responsible for h.illing and collecting all property taxes for itself, the City, the local School District 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 15 of each calendar year. Personal property taxes are: payable by taxpayers on February 28 and June.30 of each year. These taxes are collected by the County and remitted to the City on or before July 15 and December 1.5 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. CITY OF GEM LAKE, MIN NESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2012 NOTE1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. Property Tax Revenue Recognition (Continued) 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 statements. 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 "s.hared" is a portion of commerciallindustrial property valuation growth since 1971,. Property taxes paid to the City through this formula for 2012 totaled :$6,203. Receipt of property taxes from this "fiscal disparities pool" does not increase or decrease total tax. revenue. 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. 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_ (20) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31,:201.2 NOTE 1 SUMMARY OF SIGNIMCANT ACCOUNTING POLICIES (CONTINUE©.) 1. Special Assessment Revenue Recognition (Continued) 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 specia l. assessments not 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 season a[ recreational land in which event the property is subject. to such .sale after five years, J. Capital Assets Capita[ 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 maintenarice and repairs that do not add to the value of the asset or rnaterialiy 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. Depreciation on exhaustible assets is recorded as an allocated expense in the. statement of activities with accumulated depreciation reflected in the statement of net position. Since surplus`: assets are sold for an immaterial amount when declared as. no longer needed for City purposes, no salvage value is taken into consideration for depreciation purposes. Capital assets not being depreciated include construction in progress. Depreciation Estimated Assets Method Useful Life Buildings. Straight=Line. 40 Years Office Equipment Straight -Line 5 -1.0 Years Utility Systems Straight=Line 20 - 50 Years Infrastructure Strai.ght�Line 20 - 50 Years .(21) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS ©ECEMBER 31, 20.1.2 NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) K. Long -Terra Obligations .In the entity -wide financial statements, long-term. debt and other long-term obligations are reported as liabilities 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 amort ized. over the term of the related debt using the straight-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. L. Net Position/Fund Balance Net position represents: the difference b6tween assets. and liabilities in the government wide. and proprietary fund financial statements..N.et investment in capital assets consists of capital `assets, net.of accumulated depreciation, reduced. by the out balance of any long-term debt used to: build or acquire the capital assets. Net position is reported as restricted when there are limitations .:imposed on their use through external restrictions imposed by creditors, grantors; or laws or regulations of other governments.. 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: classificatioris 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, band 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 is 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. (22) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 315.2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) L. Net Position/Fund Balance (Continued.) When an expenditure. is incurred for purposes for which committed, assigned and unassigned amounts are available, it is the City's policy to use committed first, then assigned, and finally unassigned amounts. M. Interfund 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 from it that are properly applicable to another fund, are recorded as expenditureslexpenses 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_ Pill interfund transactions are eliminated except. for activity between governmental activities and business -type activities for presentation in the entity -wide statements of net position and statements of activities. NOTE 2 DEPOSITS AND INVESTMENTS` A. Deposits The. City maintains...a. cash and investment pool that is available far use by all funds. Each fund type's portion of this pool is.displayed on the statement of net position 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. Custodial Credit Risk -- Custodial credit risk for deposits is the. risk that in the event of a bank failure, the Citj's deposits may not .be returned to it. The City does hot 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 bond; or collateral. The rnarket•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 "AX 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. At December 31, 2012 the City's bank balances were: fully covered. by federal depository insurance or by surety bonds and collateral in accordance with Minnesota Statutes. (23) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DEC EMBER 31, 2012 NOTE 2 DEPOSITS AND INVESTMENTS (CONTINUED) B. Investments The City may also invest. idle funds as authorized by Minnesota. Statutes as follows: 0 ❑irect 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 1.3 months or less. „ • General obligations rated "A" or better; revenue. obligations rated "AA" or better. C 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. Y Commercial paper issued by United .States banks corporations or their Canadian subsidiaries, of highest quality category by a least 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 reversepurchase..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 $10,000,090, 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: (24) CITY OF GEM LAKE, MINNESOTA NOTES TO BASK FINANCIAL STATEMENTS: DECEMBER 31, 2012. NOTE 2 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 Build Arrierioa Bonds - 5horaview $ 171,867 $ - $ - 5 - $ 171,867 Negotiable Certificates of Deposit. 625,820 - 140,000 344,512 41,30.8 Wells. Fargo Prima Investment Fund 257,781 257.781 - - Total $ 955A58 S. 257,781 $ 140,000 5 484,512 $ 213.175. Credit Risk Generally, credit risk is the. risk that an issuer of a.n.investment will 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 organizatibm The City's investment policy doesn't specifically address credit risk. The following: chart summarizes year-end ratings for the City's investments as rated by Moody's Investors Services: Credit Type Quality Rating Amount Government IVloney.Market Mutual.. Funds NR $ 257781 Build America Bonds AAA 171,867 Negotiable Certificates of Deposit; GE.Gapital Bank CD NR 2445458 Goldman Sarhs Bank CD NR 141.,362 5afra. National Bank C❑ NR 140,000 Total Negotiable Certificates of Deposits 525.820 Total $ 955,468. NR = Not Rated Concentration of Credit. Risk The City places no limit. on the amount that: tine City may invest in any one issuer. The following is.. a fist. of i.n.Vestments Which individually comprise. n-more than 5% of the City's total investments: Type Amount Percentage Government.Money Market Mutual Funds $257781 26:98% Build America Bonds - Shoreview 171:867 17,09% Negotiable Certificates of Deposit 525,820 551030% Total $ 955,468. {25) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS. DECEMBER 31, 2012 NOTE-3 CAPITAL ASSETS Capital asset: activity for the year ended December 31, 2012 was as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities Captai.Assets Being Depreciated; Buildings $: 902,232 $ - $ - $ 902;M 0.ffice. Equipment 13090 -. - 13,1.90 Infrastructure 712,788 - - 712,788 Totat Capital Assets Being Depreciated 1,628,210. - - 1,628,210 Accumulated Depreciation: Buildings (87;092) (22,497) - (109,589) :Office. Equipment (6;014) (1,506)-. {7,.520) Infrastructure (275.,258) (88,431) (313 695) Total Accumulated Depreciation (368,364) (62,440) -. (430,804) . Net Capital Assets - Capital Activities $...1,259,846: $ (621440)... $ - $ 11107,406 Depreciation.. expense Was charged to the governmental.funotions as follows.: General Government $ 24,003 Public. Works 38,437 Total Depreciation - Governmental Activities $ 62`,440 Beginning Ending Balance Increases Decreases Balance Sewer tJtitity Capital Assets Being Depreciated: infrastructure $. 617,539. $ - $. - $ 61.7,539 Less: AccdMulated.Depreciativn (8.6;973) (12,457) - (99;430) Net CapitaI.Assets = Sewer: Utility $. 530,566. $ (12;457) $ - $ 518;1 D9 (26) CITY OF GEM LAKE, MINNESOTA NOTES TO. BASIC FINANCIAL STATEMENTS DECEMBER 31, 2012 NOTE 4 CITY INDEBTEDNESS City indebtedness at December 31, 2012 is. composed of the following:. Final Issue Maturity Interest original Balance Gate Date Rate issue 121311.12 Governmental Activities: General obligation Bonds; ' 2004A Improvement Bonds 11103/2004.. 02/01/2016 3.700/6 $ 586100a $ 229,M 2006A ImprovementBonds 08/23/2006 02/01/2017 4.3 % 245,000 135,000 2007A Capital Improvement Bonds 0612012007 02101/2028 4.00-4.66% 850,000 7.90,000 Total Long -Term Debt 11681,000 11154,923 Una.mcrtized Bond Discount {25,141] (11.919) Total $ 1,655;889 S 11.143;004 The following is a. schedule of changes in City indebtedness for the year ended December3'1, 2012: Balance Balance Due Within 12131/11 Additions Reductions 12/31/12 one Year Long -Term Deb..t Governmental Activities General dhligatlon Bonds $ 1,255.375 $ - $ 100,452 $ 111543923 S 102,710 Unamortized.Bond Discount (13.,693) - (1;774) {11,919} - Total Long Term Debt $ 1,241 682 $. - $ 98,679 $ 1,143;004 $ 102,710 All long-term bonded indebtedness outstanding at December 31, 2012 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. Minimum annual principal and interest payments required to retire long-term debt are as follows: Year Ending December 31,. Principal Interest Total 2013 $ 102,710 $. 46,755 $ 149,465 2014 105,052 42,738 147;790 2015 107,481 38,634 14.6,.115 2016 79,68o 34,331 114,011 201.7 80.,000 31.,075 11.1,075 2018-2022 275,000 1191324. 394,324 .2023-2027 330,000 54,5.26 384,526 2028-2029 75,000 1,688 76,688 Total $ 1,154,923 $ 369,071 $ 1,523,994 (27) CITY OF GEM LAKE, MINNESOTA NOTES TO:BASIC FINANCIAL STATEMENTS DECEMBER:31,.2012 NOTE 4 CITY INDEBTEDNESS (CONTINUED) Description and Restrictions of Long -Term Debt. General Obligation Bands — The bonds were issued. for improvements or projects which benefited the City as. a whole and are, therefore, repaid from ad valorem levies. NOTE 5 STEWARDSHIP COMPLIANCE AND. ACCOUNTABILITY Deficit Fund Balances The City has deficit fund.balances at December 31, 2012 as follows: Fund Balance Deficit Scheunema.n Road Fund $ 39,995 The City intends to fund these deficits thro agh future tax levies, transfers from other funds, and various other sources. NOTE 6 INTERFUND BALANCES AND ► cTIVITIES Due To/From Other Funds Individual fund receivable and payable. balances at December 31 2012 are as follows: Interfund. Interfund Receivable Payable Governmental Activity: General. Fund $ 40,848 $ Capital Projects Fund - Scheuneman Road - 40,848 $ 40,848 $ 40,84.8 Interfund receivable and payable balances represent the: elimination of negative cash between funds. Transfers Transfers to/from other funds for the year ended December 31, 2012 consisted of the follow: Transfer Transfer In ❑ut Governmental Activity: General Fund $ - $ 60.,000 Street improvement. Fund 60,0.00 - $ . 60,000 $ .60,000 (28). CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER, 31, 2012 NOTE 7 RISK MANAGEMENT The City is exposed to various risks of foss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City carries 'comm.ercial insurance for all risks of loss., including disability and. employee health insurance: There were no significant reductions in insurance fro.m.the previous year or settlements in excess of insurance coverage for any of the past.three fiscal years.. 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., 2012, are as follows: A. Restricted for Debt Service — This represents amounts which are restricted for future.debt payments. B. Restricted for Park Improvernents _ Represents amounts which are received through. park dedication ` fees . and are. restricted for park acquisitions and improvements. r- C.. Assigned for Capital improvements Benefitting Individual Property Owners -- Represents amounts which are assigned by the City to finance future road improvement projects beriefitting .individual property owners.. (29) REQUIRE❑ SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON INFO RMATIGN CITY OF GEM LAKE, MINNESOTA. SCHEDULE. OF REVENUES; EXPENDITURES AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND YEAR ENDED DEC EMBER.31, 2012 Budgeted Amounts Actual Variance: with Original Final Amounts Final Budget REVENUES Taxes. $ .222;111 $ 2221171 $ 214,796 $ (7,375} Intergovernmental 4,430 4,430 4,477 4.7 Licenses and Permits 15,105 15,105 31,555 16.450 Fines:and.Forfeits 41060 4;060 3,878 (182) Public Charges for Services 4,000 4,000. 5,404. 1,404 Miscellaneous: Interest 4,500 4,500 51108 668 Other 28,672 28,672 20,656 (8,016) - Total Revenues 2821938 282;938 285,934 2,996 EXPENDITURES General Government 155,122. 155;122 94,839. 60,283 Public Safety 108 500 108,500 102,976 5,524 Public Works 65;965 �65,965. 31.,52E 34,4.39 Conservation and. Development 29,800. 29,800 16;781 13,019 Total. Expenditures 359;387 3591387 246,122 113,266 EXCESS OF REVENUE OVER (UNDER) EXPENDITURES (76449) (76,449) 39,812 116,261 OTHER FINANCING USES Transfers. Out (60,000) (60,000) (6.0,000) - NET CHANGE IN FUND. BALANCE $ (1MAO) $ (136.449). (20,188) $ 116,261. . Fund Balance - Beginhing of Year 397,401 F.UND,BALANCE - END OF YEAR $ 377,213 See accompanying Note to Required. Supplementary Information.. (30). CITY OF GEM LAKE, MINNESOTA NOTE TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31,.2012 STEWARDSHIP COMPLIANCE AND. ACCOUNTABILITY - BUDGET The. General Fund budget is legally adapted on a basis consistent with U.S. generally accepted accounting principles. Actual expenditures did not. exceed budgets during 2012. SUPPLEMENTARY INFORMATION CITY OF GEM LAKE, MINNESOTA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS DECEMBER 317201.2 ASSETS Cash and Investments Accrued Interest Receivable Total Assets LIABILITIED. AND FUND BALANCES Restricted: Park Improvements Assigned: Capital Improvements: Benefiting Individual Property Owners Total Liabilities and fund Balances Special Capital Revenue Projects. Parks and Hoffman Total. Playground Road Nonmajor Fund Fund Funds. $ 38;324 $ 25,70.5 $ 64,829. 364 244 60 $ 38,688 $ 25.949 $ 64,637 $ 38,688. $. - $ 38,688 `2559.49 251949 $. 88,688 $ 25,949 $ 64,637 (32) _..... ...... .... . ....... ......... ........ _..... ... ... ... ........ ....... .... .... .... ..... ...................................................................... ........................... _ CITY OF GEM LAKE, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES .AND CHANGE IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2012 REVENUES Interest EXPENDITURES Capital Gutiay NET CHANGE IN FUND BALANCES Fund Balance - Beginning of Year FUND BALANCE- END OF YEAR Special Capital Revenue Projects Parks and Hoffman Total Playground Road Nonmajor Fund Fund Funds 644 $ 433 $ 1,077 .644 433 107 38,044 251.516 63,560 $ 38,688 $ 25,949 $ 64,637 (33). OTHER REQUIRED REPORTS C[iftonLarsonAlien LLP avtvw.clif#onla wnalIen.caM CliftonLarsonAllen IINDEPEND ENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING 77-1 AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Mayor and Members of the City Council City of Gem Lake, Minnesota. r, We have audited, in accordance with the auditing standards generally accepted in the United States of .America and the standards applicable to financial. audits contained. in Government Auditing Standards issued by the Comptroller Genera] of the United. States, 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, as of andfor the year ended December 31, 2012, and the related notes. to the financial statements, which collectively comprise. City of. Gem Lake's basic financial statements, and have issued our report thereon dated June 18, 2pt3. Internal Control Over Financial. Reporting In planning and performing our audit. of the fnancial.statements, we considered City of Genf Lake's internal control over financial reporting ('intemal control} to determine. the audit procedures. that are appropriate in the. circumstances for the. purpose of expressing our opinions on. the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the. City's internal �- control, Accordingly, we do notexpress;ah 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 material weaknesses or significant deficiencies and. therefore, material weaknesses or signifcant.deficiencies may exist that. were not identified. However,. as described in the accompanying. Schedule of Findings and Responses, we identified a deficiency in internal control that we consider to be material weakness. 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 entity'.s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiency finding number 2012-1 described in the accompanying Schedule of Findings and Responses to be. a material weakness. I M�mmbe ofN1 l arrtermYor4 ti [N T£R y'AT 10 pL (34) Honorable Mayor and Members of the City Council City of Gem Lake Compliance and Other Matters 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 not express .such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported. under Govemment Auditing Standards. City of Gem Lake's Response to the Finding The City's response to the finding identified in our audit is described in the accompanying schedule of findings and responses.. The City's: response was not subjected to the: auditing procedures applied in the audit of the.financial statements. and, accord ingly,. we express no. opinion. on'it. Purpose of this Report The purpose of this report is solely to describe the scope of 'our testing. of internal control and compliance and the result of that. testing, and not to provide an opinion on the effectiveness of the entity's internal control or on. compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards[n considering the entity's internal control and compliance. Accordingly; this communication is not suitable far any other purpose. CliftonLarsonAllen LLP Minneapolis, Minnesota June 18, 2D1 3 (35) opr C(iftonLarsonAllen GliftonLafsonAllen LLP wwar cl ihon larsonal len.com INDEPENDENT AUDITORS' REPORT ON MIINNESOTA. LEGAL COMPLIANCE Honorable Mayor, Members of the City Council, and Citizens City of Gem Lake,. Minnesota We have audited, in accordance with the auditing standards. generally accepted in the. United States of America and the standards applicable to financial audits contained in Government Auditing Standards - issued by the Comptroller General :of the United. States, the financial statements of the governmental activities, the businessAype activities, each major fund; and. the aggregate remaining fund information of the City of Gem Lake, as. of and for the year ended December 31, 2012, and the related notes to the financial statements, which collectively comprise: the. City's basic financial statements, and have issued our report thereon dated. June 18, 2013. The Minnesota Legal Compliance Audit Guide for Political Subdivisions covers seven categories of compliance to be tested: contracting and bidding, deposits and investments; conflicts of interest,. public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. In connection with our audit, nothing came to our attention that..caused us to believe that the City. of Gem Lake, failed to comply with the provisions of the. Minnesota Legal Compliance Audit Guide for Political Subdivisions. However, our audit was. not.. directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had. we performed additional procedures., other matters may have came to our attention regarding the City. of Gem Lake's noncompliance with the above -referenced provisions. The purpose of this report. is solely. to describe the scope of our testing of compliance and the results of that testing, and not to provide an : opinion. on compliance. Accordingly, this communication is not suitable for any other purpose. CllftonLarsonAllen LLP Minneapolis; Minnesota June 18, 2013 ■ .+m,rd-~ a ofk,darnte ioral i35} IN 7E RN�.710ti AL CITY OF GEM LAKE SCHEDULE OF FINDINGS AND RESPONSES. YEAR ENDED DECEMBER 31, 201 2 2012-1: 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. 11Vhile 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 not 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 irnprovi.ng 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 Citys staff, that the. additional. costs of implementing the necessary controls outweigh the benefits that would be derived. (37)