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HomeMy WebLinkAbout2013 FINANCIAL STATEMENTCITY OF GEM LAKE, MINNESOTA FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED DECEMBER 31, 2013 CITY OF GEM LAKE 4200 OTTER LAKE ROAD GEM LAKE, MINNESOTA 55110 CITY OF GEM LAKE, MINNESOTA TABLE OF CONTENTS YEAR ENDED DECEMBER 31, 2013 I. FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT 1 BASIC FINANCIAL STATEMENTS STATEMENT OF NET POSITION 4 STATEMENT OF ACTIVITIES 5 BALANCE SHEET- GOVERNMENTAL FUNDS 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 AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES - GOVERNMENTAL. ACTIVITIES 11 STATEMENT OF NET POSITION - PROPRIETARY FUND 12 STATEMENT OF REVENUES, EXPENSES AND CHANGE IN NET POSITION - PROPRIETARY FUND 13 STATEMENT 0F'CASH FLOWS --PROPRIETARY FUND 14 NOTES TO BASIC FINANCIAL. STATEMENTS 15 REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGE 1N FUNO 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 GENE LAKE, MINNESOTA TABLE OF CONTENTS (CONTINUED) YEAR ENDED ©ECEMBER 31, 2013 IL OTHER REQUIRED REPORTS INDEPENDENT AUaITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AN❑ ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 34 INDEPENDENT AUDITOR'S REPORT ON MINNESOTA LEGAL COMPLIANCE 36 SCHEDULE OF FINDINGS AN❑ RESPONSES 37 FINANCIAL SECTION i ` CiiftonLarsonAlien LLP i yr CLAconnect.com CliftonLarsonAllen I N D E P E N D E NT AUDITORS' REPORT Honorable Mayor Members of the City Council and Citizens City of Gem Lake Gem Lake, Minnesota 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 31, 2013, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as fisted in the table of contents. 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 generally accepted in the United Statesof America; 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 City'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 City'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. We believe that the audit evidence we have obtained is sufficient and appropriate. to provide a basis for our audit opinions. 4 1I:TEA1:AYlONAL Anin*pmdat mwW d Ne 1r1wn=rw `�� Honorable Mayor Members of the City Council and Citizens City of Gem Lake 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, 2013, 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. Report on Summarized Comparative information. We have. previously audited the City of Gem Lake's 2012 financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information, and we expressed unmodified audit opinions on those financial statements in our report dated June 18, 2013. In our opinion, the summarized comparative information presented herein as of and for the year ended. December 31, 2012 is. consistent, in all material respects, with the audited financial statements from which it has been derived. 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..rnethods 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 partof financial reporting for placing the basic 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 time table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. 0 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 our report dated May 1, 2014 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 purposeof 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. Clifton LarsonAl len LLP Minneapolis, Minnesota May 1, 204 (3) BASIC FINANCIAL STATEMENTS CITY OF GEM LAKE, MINNESOTA STATEMENT OF NET POSITION DECEMBER31, 2013 ASSETS Cash.:and .Investments Taxes Receivable Special Assessments Receivable Accounts Receivable Due from Other Governments. Accrued Interest. .Prepaid Expenses Capital Assets: Capital.Assets Being Depreciated Accumulated Depreciation t.. Total Assets LIABILITIES Vouchers and Accounts. Payable Accrued Interest Payable Due to Other Governments Long -Tears Liabilities: Amounts ❑ue 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 Total Net Position Governmental Activities. Business -Type Activities Total $ 585,989 $ 371,072. $ 95.7,061 18,009 - 18,009. 138,787 5,44.1 1.441228 8540 180516 27;056. 814 737 1.;551 8,486 4,825 1 a'311 941. 1,818 2,750 1,6281210 617,539 212455749 _(492,677). (111,887) (604,564) 1,897,099 908,061 218051160 183906 4 18,910 1.3,856 - 131866. 14,292 10,542 24,834. 1.5,000 - 15,000 753,330. - 753,830 815,384 10,546 825,930 367;213 127,242 38,779. 548,481 $ 1.,081,715 $ 505,652. 812,865 - 127,242 - 38,779 391,863 940,344 897,515 $ 1,979,230 See. accompanying Notes to Basic Financial Statements. (4) FUNCTIONS/PROGRAMS GOVERNMENTAL ACTIVITIES General Gdvernment Public Safety Public -Works Conservation and Development Interest and Fiscal Charges Totai Governmental Activities BUSINESS -TYPE .ACTIVITIES Sewer Total Primary Government CITY OF GEM LAKE, MINNESOTA STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 21, 2013 Net (Expense) Revenue and Program Revenues Changes in Net Position Fees, T - C. ewryas, Operating. Capital Business - Fines, and Grants and Grants and Governmental Type Zgwnses. Other Contributions. Contributions Activities Activities Total S 114,47..* S 51,057 S 5,277 $ - S (58,140) S $ (59,140) 153;471 - - (153,471) - (153;471) 87,341 49.391 - 20,615' (17,335) - 417.3351 7-1 27,437 - - - (27,437) - (27.437.) 71•,587 i _ _ (71,58.7) - (71,587) 454,3i0 100.448. 51277 20,615 (327,970) - '(327,970) 44.472 52.286. - - $ 408.762 S 152,734 $ 5,217 S 26,615 GENERAL_REVENUES Taxes:' Property Taxes, Levied for General Purposes Property Taxes, Levied for Debt Service Investment Earnings (Loss) Miscellaneous Total General Revenues CHANGE IN NET POSITION Net Position - Beginning o(Year NET POSITION END OF YEAR 7,814 7,814 (327,970) 7,814 (320,156) 216,361 - 216,381 52,277 - 520VT (1,432) 1,490 W. 478 - 475. 267,684 1,490 269,174 (60,286) 9,304 (50,982) 1.142.001 888.211 2,030,212 5 1.081,715 5 897,515 S 1.979,230. S"ACCOmpan3409.Notes to Basic Financial Statements. (5) CITY OF GEM LAKE, MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2013 (WITH SUMMARIZED FINANCIAL INFORMATION AS OF DECEMBER 31, 2012) ASSETS Cash and Investments Taxes Receivable Special Assessments Receivable Accounts Receivable Due from Other Governments Accrued Interest Receivable Due from Other Funds Prepaid Expenses Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES LIABILITIES Vouchers and Accounts Payable Due to Other Governments Due to Other Funds Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable Resources FUND BALANCES Nonspend.able Restricted: .Debt Service Pack Improvements Assigned: Capital Improvements. Benefiting Individual Property Owners Unassigned Total. Fund Balances Total Liabilities, Deferred Inflows of Resources, and Fund Balances, General Fund .G.O. G.O. Improvement Improvement. .Bonds. Bonds 5eries.2004A Series 2006A $: 32.0,522 $. - $ 14,852 - - 1;173 66;277 53,198 8,540 - - 814 - - 4:,450. 56 732 81,096 - - 941 - - $ 432,388 $ 66,333 $ 53,930 $ 18,906- 14,292 - - - 64,367 1,166 33,198 64;367 11166 11,180 57;374 49,618 941 - - 3;146 387,069 (55,408) - 388.,010 (56A08) 3;146 $ 432,388 $ 66,333 $ 53,930 See accompanying Notes to Basic Financial Statements. (6) G.0, Capital 2013 Improvement Scheuneman Street Other Total Plan Bonds Road Improvements Governmental Governmental 2012 Series 2007A Fund Fund Funds Funds Totals $ 82.,430 $ - $ 127,910 $ 55,127 $. 585,989 $ 842,892 3.,1.57 - - - 18,009 9,396: - 18,139 - _ `138,787 230 707 _ - _ - 0,540 1.0,352 - - - - 814 1,605 781 (14..2) 1,770 839 8,486 6,635 - - - 81,096 40.;848. - - - - 941 1,047 $ 86,368. $ 17,997 $ 129,680 $ 55,966. $ 842,662 $ 1.1143,482 - 15,563 _ 15,563 1,944 18,107 $ - $ 18,906 $. 18.,532. - - 1.41292 - - - 81,096 40;848 - `114,294 59,380 - 138;223 229,043 - - - - 941 1,047 84,424 - - - 87,570 321,917 - - - 38,779 38,779 38,688 129,680 17,187 146;867 157,236 (15,673) - - 315,988 336,171 84,424 (15,673) 129,680 55,966 590,146 856,050 $ 86,368 $ 17,997 $ 129,680 $ 55,966 $ 842,662 $ 1,143,482 (7) CITY OF GEM LAKE, MINNESOTA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL. ACTIVITIES DECEMBER. 31,2013 TOTAL FUND BALANCES FOR GOVERNMENTAL FUNDS $ 590,1445 Total net position reported for governmental activities in the statement of net position is, different because: Capital assets. used in.governmental activities. are not financial resources and, therefore, are not reported in the funds. These capita[ assets consist of: Buildings. $ 902,232 Office Equipment 13,190 Infrastructure 712,788 Accumulated Depreciation (492,677) 1,135,533 Some of the. City's property taxes and special assessments will be collected after year-end, but are not available soon enough to pay for. the current period'.s expenditures and, therefore, are reported as unavailable resources. in the governmental funds. 138,223 Some liabilities are hot .due:and payable in the current period and, therefore,. are not reported as fund liabilities: Balances at year-end are: General Obligation Bonds. Payable (775,000.) U.namortized Bond Discounts 6.570 Accrued Interest on Long -Term Debt (13;856.) (782,186) TOTAL NET POSITION OF GOVERNMENTAL ACTIVITIES $ 1,061,715 See accompanying Notes to Basic Financial Statements. (S} CITY OF GEM LAKE, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND.CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS t. YEAR ENDED: DECEMBER 31, 20'13 (WITH SUMMARIZED FINANCIAL INFORMATION FOR THE YEAR ENDED DECEMBER 3.1, 2012) REVENUES Taxes Special Assessments Intergovernmental Licenses and Permits Fines and Forfeits Public Charges:for Services Miscellaneous: Earnings (Loss) on Investments Other Total Revenues EXPENDITURES Current: General Government Public Safety Public Works Conservation and Development Capital.Outlay Debt Service: Principal Interest and Fiscal Charges Total Expenditures EXCESS OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES Fund Balances - Beginning of Year FUND BALANCES - END OF YEAR G.O. G.D. Improvement Improvement General Bonds: Bonds Fund. Series 2004A Series.2006A $ 213,806 $ - $ - - 70,628 20,056 3,260 - - 71,595 4,903 - - 4,936 - - 999 (2,230) (1,681) 21,519 - 321,008 58;398. 18,425 93,282 - - 115;034 - - 77,458 - 24,437 - - 229,923 1.35,000 - 8,719 61161 310,211 238,642 141,161 10,797 (170,244) (122,736) 10,.797 (110,244) (122,786.) 377,213 114, 836 125,882 $ 388,010 $ {55;408] $ 3,146 See accompanying Notes to Basic. Financial Statements. 101 G.O. Capital 2013 Improvement Scheuneman Street Other Total Plan -Bonds. Road Improvements Governmental Governmental 20..12. Series 2007A Fund Fund Funds Funds Totals $ 52,277 $ 53 52,330 - $ - $ - $ 266,083 $ 263,784 23,306 - - 113,990 110,847 - - - 3,250 4,477 » - 71,595 31,555 - - 4,903 3,878 - - 4,936 51404 1,016: 296 65 (1,432)' 11,851 - - - 2.1,519 20,656 24,322 296 65 484,844 452,452 - - - - 93,282 K839 - - - - 1-15,034 102,976 - - - - 77,468. 31,$26 - - - 24,437 1*6;781 - - 1,903 8,736 10,639 1.,375. 1:5,000 - - - 379,923 100.452 34;105 - 48;985 51,238 49,105 - 1,903 8,736. 749,158. 3991187 3,225 24,322 (1,607) (8,671) (264,914) 530265 - - - - - 60,000 - - - - - (M000) 3,225 24,322 (1,607) (8,671) (264,914) 53,265 81,199 (39,995) 131,287 64,637 855,059. 801,794 $ 84,424 $ (15.673} $ 129,680 $ 55.966 $ 590,145 $_855.059 (10) CITY OF GEM LAKE, MINNESOTA RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXIPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES GOVERNMENTAL ACTIVITIES YEAR ENDED DECEMBER 31, 2013 NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ (264,914.) 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 and reported as depreciation expense. Depreciation Expense (61,873) Delinquent and deferred property.taxes and special assessments receivable will be colleted subsequent to year-end, but are not available soon enough to pay: for the current periods. expenditures. and, therefore, are unavailable resources in the governmental funds. Unavailable Resources - December 31., 201.2 $ .229,043 Unavailable Resources - December 31, 2013 138,223 (90,820) The governmental funds report bond proceeds as financing sources, while repayment of bond principal is reported aa.an expenditure. In the statement of net position, however, issuing debt increases long-term 116bilities and does not affect the statement of activities and repayment. of principal reduces the liability. Also, .governmental funds report the effect premiums and discounts when debt is f rst. 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. In. the statement of activities; however,. interest expense is recognized as it accrues, regardless. of when it is; due. The net effect of these differences in the treatment of general obligation bonds%and related items isas follows: Repayment of Bond Principal 379,923 Change in Accrued Interest Payable .6,214 Write -Off of Previous Years' Bond Issuance Costs (23;567) Amortization of Bond Discount (5,249) 857.321 CHANGE IN NET POSITION OF GOVERNMENTAL.ACTIVITIES. $: (60,286) See accompanying Notes -to Basic Financial Statements. (11) CITY OF GEM LAKE, MINNES"OTA STATEMENT OF NET POSITION PROPRIETARY FUND DECEMBER 31, 2013, ASSETS Cash. and Cash Equivalents. Customer Accounts Receivable Accrued Interest Receivable Special Assessments Receivable Due from Other Governments Prepaid Expenses. Total Current Assets Capital -Assets: Utility. Plant in Service Accumulated Depreciation Net Capital .Assets Total Assets LIABILITIES Accounts Payable Dueto Other Governments Total Liabilities NET POSITION Net Investment in Capital Assets Unrestricted Total. Net Position Sewer Utility $ 371.,072 18,516 4;825 5,441 737 1,818 402,409 617,539 (11.1,887) - 505,652 a� 4 10,542 10,546 505,652 391,863 $ 897,515 See accompanying Notes to Basic Financial Statements. (u) CITY OF GEM LAKE, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGE IN NET POSITION PROPRIETARY FUND YEAR ENDED DECEMBER 31, 2013 OPERATING REVENUES .Public. Charges for Services OPERATING EXPENSES Operating Expenses Depreciation Total Operating Expenses OPERATING INCOME NONOPERATING REVENUES Interest Revenue CHANGE IN NET POSITION Net Position - Beginning of Year NET POSITION - END OF YEAR Sewer Utility $ 52,286 32,015 12,457 44,472 7,814 1,490 9,304 888,211 $ 897,515 See accompanying. Notes to.Basic Financial Statements. CITY OF GEM LAKE, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUND YEAR ENDED. DEC EMBER 31, 2013 f Sewer utility j. CASH FLOWS FROM OPERATING. ACTIVITIES Cash Received from Utility Customers $ 52,866 Cash Payments. to Suppliers for Goods and Services (17,929) Net Cash provided by Operating Activities 34,937 CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments 1,490 NET INCREASE IN CASH AND CASH EQUIVALENTS 361427 Cash and Cash Equivalents - Beginning of Year 334,645 CASH AND CASH EQuivALENTS - END OF YEAR $ 371,0,72 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating Income $ 7;814 Adjustments to Reconcile Operating, Income to Net Cash: Provided by Operating Activities:. Depreciation 12,457 Changes in Assets. and Liabilities: Accounts Receivable (:1,18DJ .Due from Other Governments (737) Special Assessments Receivable 718 Prepaid Expenses 5,449 Accounts Payable (126} Due to Other Governments 10,542 Net Cash Provided by Operating Activities $ 34,937 See accompanying Notes to Basic Financial. Statements. .(14) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 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. gene rally 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 primarygovernment is financially accountable for component include whether or not the primary government appoints the: voting majority of the potential component units 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 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: 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-ccunting 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 DECEMBER 311, 2013 NOTE T 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. riot 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 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 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 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. (16) CITY OF GEM LAKE, MINNESOTA NOTES TO BASK FINANCIAL STATEMENTS DECEMBER 31, 2013. NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES .(CONTINUED) B. Basic Financial .Statements (Continued) 2. Fund Financial Statements (Continued) The City reports the following ma'or 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.O. 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 debtservice activity related to the 2007A bond. Scheuneman Road Fund — The Scheuneman Road Construction Fund accounts for all activity related to the reconstruction of the Southern portion of Scheuneman Road which was turned back. to the City from Ramsey County in. 2006: Street Improvements Fund.-- The Street Improvements Fund is used to account for the accumulation of resources that are restricted, committed, or assigned to expenditures for capital outlays, including the acquisition or construction of capital facilities. 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 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 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 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 31, 2013 NOTE 'I 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 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: 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 1?y Minnesota Statutes. Earnings from investments are allocated to individual funds on the basis of the funds. equity to the cash and investment pool. (18) CITY OF GEM LAKE, MINNESOTA, NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER $1, 2013 { 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 advancing fund in the governmental fund financial statements, and an interfund payable 1 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 expense or expenditure at the time of consumption. That portion of the relevant funds' balances equal to material prepaid 4tems has been segregated as nonspendable. 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. 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 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.. (19) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 NOTE 1 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 inflows of resources because it is not available to finance current expenditures. Deferred inflows of resources: in governmental 1, 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 "shared" is a portion of commercial/industrial property. va I uation growth since 1971. Property taxes paid `to the City through this formula for 2013. totaled $5,730.. Receipt of property taxes from. this "fiscal disparities pool" does not increase or decrease total tax revenue. 1. 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 4y 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 inflows of resources. Deferred inflows of resources in governmental activities. is susceptible to full accrual on the government -wide statements. (20) CITY OF GSM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS ❑15C15 1BER;3.1., 2613 } NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 1. :Special Assessment Revenue Recognition (Continued) Once a special assessment roll is adopted, the amount attributed to each parcel is a lie P p n 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:rem(tted to the City in payment of* :delinquent special assessments. Generally, the City will collect the full amount .of its -special assessments not adjusted by the City's City Council or court action. Pursuant to State Statutes, a property -shall be subject to a lax forfeit sale after three. years unless It is h6mesteaded, agricultural or seasonal. recreational land in wliicli event the property is. subject to such sale after five years. J. Capital Assets Capital assets, which include property, plant; equiprnentr 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 nonnal.`mairiterlance 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 repoft infrastructure assets 9n 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 anv 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 Oftide Equipment Straight -Line 5 - 10 Years :Utility'Systems Straight -Line 20 - 50 Years Infrastmeture Straight -Line 20 - 50 Years (21.) ` CITY OF GEM LAKE, MINNESOTA NOTES TO BASfC FINANCIAL STATEMENTS DECEMBER 31, 2013 NOTE'l SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) K. Long -Term 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, are expnesed as a current period cost with the adoption of Governmental Accounting Standards Board Statement No. 65. 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 between assets and liabilities in the government wide and proprietary fund financial statements. Net investment in. capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding 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 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 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. When an expenditure is incurred for purposes for which committed, assigned and unassigned amounts are .available, if is the City's policy to :use committed first, then assigned, and. finally unassigned amounts. (22) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DEC EMBER 31, 2013 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 expend ituresiexpenses 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 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 for 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 City's 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 bond., 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. At December 31, 2013, the .carrying amount of the City's deposits were $256,925. Of these deposits. $6,925 were not insured or collateralized. (23) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 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 13 months or less.. ■ General obligations rated "A" or better; revenue obligations rated "AA" or better. 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 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.:collateraI 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 $10,000,0.00, a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York, or certain Minnesota securities broker -dealers.. • .Any security which is an obligation of a school district with an original maturity not exceeding 13 months and. (i) rated in the highest category by a national bond rating service (H) enrolled in athe cedit enhancement program pursuant to Minnesota Statute. §126C.55 Custodial Credit Risk For an investment, custodial credit risk. is the risk that, in the event of failure of the cou nterpa rty, the City will not be able to recover 4he. 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 Rafe 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 BASIC FINANCIAL STATEMENTS DECEMBER,31, 2013 NOTE 2 DEPOSITS AND INVESTMENTS (CONTINUED) B. Investments (Continued) Interest, Rate Risk (Continued) 12 Months. 13 to 24 25 to 60 More -than Type Total or Less Months Months 50 Months _ Build America Bonds. - Shoreview $ 166,486 $ - 5 - $ - 3 1.58,486 Negotiable Certificates of Deposit 525;508 140,301 - 345;i75 .40,032 Wells Fargo Prime Investment l=und. 26,7t71 26,701 - - - Total $ 710,695. $ 167002 $ - $ 345,175 $ 198,518 Credit Risk Generally, credit risk is the risk that an issuer of an 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 organization. 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: Government Money Market: Mutual Funds Build America Bonds Negotiable Certificates of Deposit: GE Capital Bank.CD Goldman Sachs Bank CD Safra National Bank CD Total Negotiable Certificates of.Deposits Total NR = Not Rated Credit Quality. Rating Amount NR $ 26,7U AAA 1587486 N R 245, 531 NR 139, 676 NR 1401301 5251508 $ 710695 Concentration of Credit Risk The City places no. limit on the amount that the City may invest in any one issuer.. The following is a list of investments which individually comprise more than 5% of the City's total investments: Type Build America Bonds - Shoreview Negotiable Certificates of Deposit GE Capital Bank CD Goldman Sachs Bank CD Safra National Bank CD 0 Amount Percentage 158,486 22.30% 245,531 34:55% 139,676 19.65% 140,Wi 19..74% (25) l CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 ( NOTE 3 CAPITAL ASSETS Capital asset activity for the year ended December 31, 2013 was as follows: Beginning Ending Balance Increases Decreases Balance � Governmental Activities _ Capital Assets Being Depreciated: Buildings $ 902;232. $ - $ - $ 902,232 Office Equipment 13,190 13,190 Infrastructure 712;788 = Y 712;788 Total Capital Assets Being Depreciated 1,628,210 - - 1.628,210 Accumulated Depreciation: Buildings (109589) (22,497) Office Equipment (.71520). .(939) - (8,459) Infrastructure (3i3;695) .(3B,437) - (352,132). Total Accumulated Depreciation (430,80.4) (61,873) (492,677) Net Capital Assets;- Capital Activities $ 1,197,406 $ (61;873) $ - $ 1,135533 expense Depreciation p p se was charged to the governmental functions as follows: General Government $ 23,436 Public Works 3a.,437 Total Depreciation - Governmental Activities $ 61 g73 i Beginning Ending Balance Increases Decreases Balance ( Sewer Utility €[ Capital Assets: Being Depreciated:' Infrastructure $ 61.7,539 $ - $ - $ 617539 Less: Accurulated Depreciation (99,430) (12,457) - (111,887) Net Capital Assets - Sewer Utility $ 518,1.09 $ (12.457) $ $ 505,652 (26) CITY OF GEM LAKE, MINNESOTA NOTES TO BASfC FINANCIAL STATEMENTS DECEMBER 31, 2013 NOTE 4 CITY INDEBTEDNESS City indebtedness at December 31, 2013 is composed of the following: Final Issue Maturity Interest original Balarice Date Date Rate Issue ' 2131113: Governmental Activities: General.0bligation Bonds: 2007A Capital Improvement Bonds 06/20/2007 02/01/2028 4.00-4-50% $ $50,000 $ 775,000 Unarriortized Bond Discount (25.111) (6,670). Total $ 824,889: $ 768,330 The following is a schedule of changes in City indebtedness for the year ended December 31., 2013: Balance Balance Due Within 12/31112 Additions Reductions 12131/13 One Year Long -Term Debt Governmental Activities General Obligation Bonds $ 1,154.923 $ - $: 379,9.23 $ 775,000 $ 15,000 Unamortized.Bond Discount (11,919). - .(5,249). (61670) - Total Long -Term Debt $ 1,143,004 $ - $. 374,674 $ 768,330 $ 15,000. All long-term bonded indebtedness outstanding at December 31, 2013 is backed .fay 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. During the year ended December 31, 2013, the City called the outstanding portions of the Series 20.04A and 2006A General Obligation Improvement Bonds, by using existing fund balance. Minimum annual: principal and interest payments required to retire long-term debt are as follows: Year Ending December 31, 2014 20.15. 2016. 2017 .2018 2019-2023 2024-2028 Total Principal Interest: Total $ 15,000 $ 32,955. $ 47,955 1.5,000 32,355 47,355 1-5,000 31,155. 46.,755. 5..0,000 30,430 80,430 50,000 28,380 78,380 285,000 1.07, 541 392,541 345,000 89.,616 3.84,616 $ 775,000 $ 303,032 $' 11078,032 (27) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC. FINANCIAL. STATEMENTS DECEMBER 31, 2013 NOTE 4 CITY INDEBTEDNESS (CONTINUED) Description and Restrictions .of Lang -Term Debt General Obligation Bonds .— 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, 2013 as.folIows: Fund Balance Deficit Scheuneman Road Fund $ 15,673 GO Improvement Bonds Series 2004A 55,408. The City intends. to fund these deficits through future tax levies, transfers from other funds, and various other sources. NOTE 6 INTERFUND BALANCES AND ACTIVITIES Due To/From Other Funds Individual fund receivable and payable balances at December 31, 2013 are as follows: Inter fund Interfund Receivable Payable Governmental Activity: T General Fund $ 8.1,096 $ GO. Improvement Bonds 2004A - 64,367 GO Improvement Bonds 2006A - 1,166 Capital Projects Fund -:5cheuneman Road - 15,563 81,096 Interfund receivable and payable balances represent the elimination of negative cash between funds. (2s) CITY OF GEM LAKE, MINNESOTA. NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 NOTE T RISK MANAGEMENT The City is exposed to various risks. of loss related to torts, theft of, damage to and. destruction of assets; errors and omissions; injuries to employees; and natural disasters.. The. City carries commercial insurance for all risks of loss, including disability and employee health insurance. There were no significant reductions in insurance from 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 $1, 2013, are as follows: A. Restricted for Debt Service This represents amounts which are restricted for future debt payments. 8. 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 beneftting individual property owners. (29) 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 311, 2013 j Budgeted Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Taxes $ 204,242 $ 204,242 $ 2131806 $ 9,564 Intergovernmental 41473 4,473 31250 (1,223) ( Licenses and Permits 17,000 17,000 71;595 54,595 Fines and Forfeits 2,000 2,000 4903 2903 Public Charges for Services 4,000 4,000 4,036 936 Miscellaneous: Interest 3,125 3;125 .99.9 (2,126) Other 26,039 26,039. 21.5.19. (4,520) f Total Revenues 260P879 260.879 321,008. 60;129 EXPENDITURES General Government 136,029 136,029 93,282 427747 Public Safety 105,185 105,185 115,434 (9,849) Public Works 48,1.50 48,15a 77,458 {29,308} Conservation and Development 21,980 21,980 .247437 (2,457) Total Expenditures 311,344 31.1,344 310,211 1,133 l NET CHANGE IN FUND BALANCE $ (50,4651 $ 50;465 10,797 $ 61,262 Fund Balance - Beginning of Year 377213 FUND BALANCE END OF YEAR. $ 388,01.0 See accompanying: Note -to Requires! Supplementary Information. (3a) CITY OF GEM LAKE, MINNESOTA NOTE TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2013 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 2013. (3'1) SUPPLEMENTARY INFORMATION CITY OF GEM LAKE, MINNESOTA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS DECEMBER 31, 2013 ASSETS Cash and Investments Accrued Interest Receivable Total Assets LIABILITIES AND FUNb 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 $ 38,253 $ 526 $ 38,779 $ $ 38,779 $ 16,874 $ 55,127 313 839 17,187 $ 55,966 - $ 38,779 17,187 17,187 $ 38,779 $ 17,187 $ 55,966 (32) CITY OF GEM LAKE, MINNESOTA COMBINING. STATEMENT OF REVENUES,. EXPENDITURES AND CHANGE IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2013 REVENUES Interest EXPENDITURES Capital Outlay 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 $ 91 $ (26) $ 65 - 8,736 8;736 91 (8,762) (8,671) 38,688 25,949 64,637 $ 38,779 $ 17,187 $ 55,966 (33) S CliftonLarsonAllen LLP 1 CLAconnedxom Clifton LarsonAllen ' INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Mayor and Members of the City Council 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 I activities, the business4ype activities, each major fund, and the aggregate remaining fund information of City of Gem Lake, as of and for the year ended December 31,. 2013, 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 May 1; 2014. Infernal Control Over Financial Reporting In planning and. performing our audit of the financial statements, we considered City of Gem Lake's internal control over financial reporting (internal 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 not express an opinion on the effectiveness of the City's intern al. 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 significant deficiencies may exist that were not identified. However, as described in the accompanying Schedule of Findings and Responses, t we identified a deficiency in internal control that we consider to be a 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 City's. financial statements. will not. be prevented, or detected and corrected on a. timely basis. We consider the deficiency finding number 2013-001 described in the accompanying Schedule of Findings and Responses to be a material weakness... Y ■ I Mtr r ffmw ofNualrWm& %N (34) SNTEANA7IDHA;