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Home My WebLink About2008 FINANCIAL STATEMENTSCITY OF GEM LAKE, MINNESOTA FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED DECEMBER 31, 2008 CITY OF GEM. LAKE 4200 OTTER LAKE ROAD GEM LAKE, MINNESQTA 55110 CITY OF GEM LAKE, MINNESOTA TABLE OF CONTENTS YEAR ENDED DECEMBER 31, 2008 1. FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT 1 BASIC FINANCIAL.STATEMENTS STATEMENT OF NET ASSETS 3 STATEMENT OF ACTIVITIES 4 BALANCE SHEET-- GOVERNMENTAL FUNDS 5 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS -- GOVERNMENTAL FUNDS 7 STATEMENT OF REVENUES, EXPENDITURES AN CHANGES IN FUND BALANCE -- GOVERNMENTAL FUNDS 8 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES - GOVERNMENTAL FUNDS 10 STATEMENT OF NET ASSETS PROPRIETARY FUNDS 11 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS- PROPRIETARY FUNDS 12 STATEMENT OF CASH FLOWS -- PROPRIETARY FUNDS 13 NOTES TO BASIC FINANCIAL STATEMENTS 14 REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL -GENERAL FUND. 27 NOTES TO REQUIRE❑ SUPPLEMENTARY INFORMATION 28 COMBINING FUND FINANCIAL STATEMENTS NONMAJOR GOVERNMENTAL FUNDS. COMBINING BALANCE SHEET 29 COMBINING STATEMENT OF REVENUES, EXPENDITURES AN 1) CHANGES IN FUND BALANCES 30 CITY 'OF GEM LAKE, MINNESOTA. TABLE OF CONTENTS (CONTINUED) YEAR ENDED DECEMBER 31, 2008 II. OTHER REQUIRED REPORTS 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 REPORT ON MINNESOTA LEGAL COMPLIANCE SCHEDULE OF FINDINGS AN❑ RESPONSES I 3 31 33 34 I21,11F Il lelf l SECTION f,arsonAllen" Consultants & Advisors wwwAsrsonallemeom INDEPENDENT AUDITORS' REPORT Honorable Mayor .Members of the City Council -and Citizens City of Gera Lake.. Gem Lake, Minnesota We have audited the accompanying financial statements of the governmental activities, the business type activities; each major fund, and the aggregate remaltting fund information of the City of Gem Lake, Minnesota as of and for the year ended December 31., 2008, which collectively comprise the City's basie.financial statements as fisteld in the table •of. contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions -on these financial -statements based on our audit. The prior year partial comparative information has been derived from ( •the City's 2007 financial statements and, in our report dated August 29, 2008, we expressed ! unqualified: opinions on the respective financial statements of the governmental activities,. the business - type activities, each major fund, and the aggregate remaining fund information. We conducted -our audit in accordance with U.S. generally accepted auditing standards 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 apdft- to obtain reasonable assurance about whether the financial statements are. free of material misstatement. An audit includes examining, on a test basis; evidence suppd 1i..ng the amounts and disclosures in the. financial statements. An audit also includes :assessing the accounting principles used. and. significant ostimates made by management; as Well as evaluating the overall financial statement presentation. We believe that our audit provides`a reasonable basis.for'our opinions. In our opinion, the financial statements referred to above. present fairly., in .all material respects, the. financial position of •the: governmental activities, the- business -type activities, each major fund, and the Aggregate remainirig fund information of the C:fty ,6f -Gem Lake, Minnesota as. of December 31, 2008, and the respective changes .irr financial position and cash flows, where applicable, thereof. for the year then ended in conformity with U.S. -generally accepted accounting principles. In accordance with Govemfi-lent Auditing. Standards,. we. have also issued.a report dated April 24, 2009 on our consideration of the.City.of Gem Lake, Minnesota',s internal control -over financial reporting and on our tests of fts 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. Govemmeht Auditing Standards and. should be considered in assessing the results of -our audit. i.arwnAilrn LI.P ti member qr Kcaip Isflcritwibnut; a �.tiufdwiale urr�tcuk ear irHtrpenderrt accarriting aril conWiliing: irons. Hongrabie Mayor Members of the City Council and Citizens City of Gem Lake The budgetary co..mparison information as listed in the. table of conten% is not a required part of the basic financial statements, but supplementary information required .by U.S. generally accepted accounting principles. We have applied certain limited procedures, which consisted principally of inquires of management regarding. the methods of measurement and. presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. The. City of Gem Lake has not presented the management's discussion and analysis that the U.S. generally accepted* accounting principles have determined is necessary to supplement, although not required to be part.of, the basic financial statements. Our audit was conducted. for the purpese of. forming opinions on the. financial statements that collectively comprise `the City's basic financial statements. The accompanying supplementary information, made up of the combining ft hd financial statements listed in 111e table of contents, are presented for purposes of additional analysis :and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in our audit of the basio financial stateriients-:and, in our opinion, is fairly stated in :all material respects in relation to the basio:financialstatemehts*taken as a wliole. Minneapolis, Minnesota Aprit.-24; 409. LarsonAllen LLP (2) BASIC FINANCIAL STATEMENTS CITY OF GEM LAKE, MINNESOTA STATEMENT OF NET ASSETS DECEMBER-.31., 2008 (WITH COMPARATIVE DATA AS OF DECEMBER 31, 2007) ASSETS Cash and Investments Taxes. Receivable Special Assessments Receivable Accounts Receivable. Accrued Interest Prepaid Expenses Unarnorl+zed Bond Issue..Cosis Capital Assets: Capital. Assets Not Being Depreciated Capital Assets Being Depreciated Accumulated Depreciation Total Assets LIABILITIES Vouchers and Accounts Payable Accrued Interest Payable Long -Term Liabilities: Amounts Due Within One Year Amounts.Due in.More than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Retated Debt Restricted for Debt Service Unrestricted Total Net. Assets 2008 2007 Governmental Susiness-7ype Governmental Business -Type Activities. Mlyitley Total Activities Activities $ 6.72;152 S. 177,201 $ 849,353. $ 610,944 $ 12$,,370 9.123 9;123 .24,788 533;208 482 .533,696 555,722 1,723 7,945 14,933 .22;878 6,880. 16128 4,131 1,166 5,297 5,273 3,911 396 7.364 7.760 396 1,437' •34,87T 34,877 37,704 - - - - 81 4; 132 - 1,611..680 $70,778 2,182,455 701.032 570;775: (201,607) .(50;558) (252:1$5) 049,976) (39;142) •2r67.1,905•• 721,363 3,393,268 21605,995 681.,2.02 27,i49 104 27,253 47,077 48 -26213 - 26,21.3 3.6.818 - $9,156 89,156 72,267 1.,4256817 - 1,425,817. 1.513,200 1,568;335 104 1,568.439 1,663.302. 48 (1041900) 520,217 415,317 (220;219) 531,633 881.71.4 - 881.714. 891.602 326,756 201.042 527,798 271,310: 149.521 S 1,103,570 $ 721.259 $ 1.,824,829 S 942,693. $ 681.154 See accompanying Notes to Basic Financial. Statements. (3) CITY OF GEM LAKE, MINNESOTA STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2008 (WITH COMPARATIVE DATA FOR THE YEAR ENDED DECEMBER 31, 2007) FUNCTIONSIPROGRAP.IS .I GOVERNMENTAL ACTIVITIES General G_vernmen; PLIbIC SaletV Pvtlll V•lorF� Conservation and Dev._lopment tn;erest and Fise-11 Charges Total Govnrnmr.•nial A.CLVaies BUSINESS -TYPE ACTIVITIES Ewei 1 Totai.Primary Govgrnmeol 2008 2007 Net (E,.penso) P.evenur end Net fExpense) Revenue and Propram RevonoeS_ Chances in Net Assets Chances m Nnr Assets Fens, Total CFiarges, Operating Capital Grants D3sine — Total BusrneSA Fines, and Gronts and and Governmenta Tyre Gov.--mmonlal Typn Expensos dither CipnlfiWions Contribution I Activilies ACtwil,o; Tat, I Artivitie; Ac:ivi;'eS S 111.802 S 25,244 S 14;611 S 5 (72,007) S S f72.007) 5 (85.223) S - 69.166 18.508 71,418 20,760 20.760 (40,414) 40.960 - (40,960) - t40.960) (25.695) 69:369 - - - _ (i9. E i'_•'i.'s69) 63.165) 384247 4317;2: 1:4,611 71.416, (254,4661 (254,466j (2;10.429) 38.932 50.706 - S 423;179 S 94A58 S 1c•611 S 71,418 GENERAL REVENUES Taxes. Property T4xcs. Levied for Geheral Purposes Prmpeny Taxes Le:•,ed Ior Debt Service Giants and Cnnleb-,: i_nr1 .Not Restricted lot a Parlfcular Purpose InvestUnent Earnings 1•A is, etlai,.Pr�u5 Transicrs Total Genotal Rovenwa CHANGE.IN NET ASSETS NM Assets-13erynW4of Yew i NET ASSETS -'END OF YEAR • It774 11,774 - (11.532) (254,466) 11.774 (242;692) (290.429) {1.1,53p 370,61;. 370.645 398.724 e•"aa t 52.441 2,80b 2:808. 14,443 3,331 17,774 28.422 7.264 g - 0 324 - f25.000) 25.000 (5,0001 5,000 415..4;, 28.331 .443.674 422.470 12,264 100,877 40.105. :200.982 132.041 732 9r2;693 68t,154 1.623.847 81 1w .680,422 S 1,103,570. S 721.259 S 1:824,829 .S 942.693 5 681,154 Sege accompanying Notes to-Basic.Financial Statements. (aj CITY OF GEM LAKE, MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2008 (WITH COMPARATIVE DATA. AS OF DECEMBER 31, 200.7) ASSETS Cash and Investments Taxes Receivable Special Assessments Receivable Accounts Receivable Accrued Interest Receivable Due from Other.Funds Prepaid Expenses Total .Assets LIABILITIES AND FUND BALANCES LIABILITIES Vouchers and Accounts Payable Due to Other Funds Deterred Revenue Total Liabilities FUND BALANCES Reserved for Prepaid Expenses Unreserved, Undesignated Reported In: General.F.und Special Revenue Funds Debt Service Funds Capital Projeots Funds. Total Fund Balances: Total Liabilities and Fund Balances G.4. G. -ID: G.O. Capital Improvement Improverrient .tmprovernent General Bonds Bonds Plan Bonds Fund Series'2004A teries2006A Series2007A $ 263,501 $. ?35,940 $' 127,633 $ 108,923 8,727 396 547 S03j207 1:69,454 - 7;945 - - - 1;476 845 825 704 27;098 - - - 396 - - $ 30.9,690 $ 499,992 $' 297,91.2 $ 110,023. $ 27,149 $ - $ - $ - 91890 363,180 169,454 . 887 .87,039 363,180. 169.,454 887 396 - - - 272,255 - - 136,812 126,458. 109,136 272,651 136,812 128,458 109,136 $ 309,690 $ 499.992 $ 297,912 $ 110,023 See accompanying Notes to.Baslc Financial Statements.. (5) I .2008 City Hall Other Total C6nstrudtion Governmental Governmental 2007 Fund funds Funds 7otais $• - $ 36,155 $ 6721152 $ .610,044 - 91123 24.788 533,208 555,722 7.9945 6,880 •281 4,131 51273 •27i098• - 396 396 $ - $ 36,436 $: 1,Z54,053. $1,203,1i 03 $: - $ - $ . 21,149 $ 47,0.77 27.098 - 27,098 - - - 5.43,411 565,476 .27,098 - 597,658 612,553 - - 396 .396 - - 272,255 173A7 - 36,436 363436 :4629 - - 374,406.66,F01 (27,098) - (27.,098) 1.4,257 } (27,098)• 36,436 656,395 .590,550 S. - $ 36,436 5 1,254;053 $1•,203,1.03 . (6) CITY.OF GEM LAKE, MINNESOTA RECONCILIATION OF THE GOVERNMENTAL. FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERNMENTAL FUNDS ❑ECEMBER 31, 2008 (WITH COMPARATIVE DATA AS OF DECEMBER 31, 2007) TOTAL FUND BALANCES FOR GOVERNMENTAL FUNDS. Total net assets reported for governmental activities in the statement of net assets is different because: Capital .assets used in governmental. activities are.not financial. resources and., therefore; are no reported in the funds. These capital assets. consist of. Buildings S. 898,706 Office: Equipment 13,190 Infrastructure 699,782 Accumulated Depreciation (201,607) Some% of the Gitys property taxes and special assessments. will be collected after year-end, but are not available soon enough to pay tor .the . currentperiod`s expenditures and, therefore,:are, reported as deferred revenue in the.governtrmental funds. Bond issue costs. are: reported as..ekpen ..itures. in the governmental f unds and are shown net of accumulated amortization on the statement of net assets. Sorne liabilities are. not due and payable in the current period and; therefore, are trot reported as fund kiabilities: Balances at year-end are: General Obligation Bonds Payable Unamortized Bond Discounts Accrued Interest on Long -Term Debt TOTAL. NET ASSETS OF GOVERNMENTAL ACTIVITIES 2008 2007 $ 656,395 S 590,550 1,410,07.3 11365,188 543,411 565,47.6 3.4,877 W,704 (1„533,9.86) 1:9,013. (26;213) (1,541.,186) (1,616,225). S 1,103,570, S 942,693 See accompanying. Notes to Basic: Financial Staternents. r t CITY Ofr OEM LAKE, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES.AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2008 (WITH COMPARATIVE DATA FOR THE YEAR ENDED DECEMBER.31, 20.07) REVENUES Taxes Special Assessments Intergovernmental Licenses and Permits' Fines.And Forfeits Public Charges for Services Miscellaneous: Jnterest 'Qiher Total Revenues EXPENDITURES . Current; General Government Public Safety Public Works: .Conservation and Oevelopmenl Capital COutlay Debt Service: Principal Interest and Fiscal Charges Total Expenditures EXCESS OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers In Transfers Out. Issuance.of Bonds Bond Discount Total Other Financing. Sourcos (Uses) NET CHANGE IN FUND BALANCES - Fund Balances- Beginning of Year FUND BALANCES -.END OF YEAR GA. G.D. G.O. Capital Improvement Improvement Improvement General Bonds Bonds Plan Bonds Fund Series 2004A Series 2006A Series 2007A $ 3701862 S. - $. - $ 52441 - 68,076 25 J.02 - 12,982 - - - 25,108 - - - 2,255 - 3,761 - - - 10,323 1,373- 706 10798 17,069 1 - - '442:360 69,4'49 25A98 54,239 1.26,651 - - 92,890 - 38,4.71 - - - 40,9.60. - - - 52,207 20,000 - - 18,434 10,104.. 40,836 29B;B72 . 70641. .30,1.04 40;83.6. 1431388 (11192.) (4,206) 13,403 (45,00.0) - - - 98,388. (1.102) (4,206) 13;463' 1:74;263 138,004 -132,664 95;733 $ 272,651 $' 136.812 $ 128.4,58 $ 10 f36 See accompanying.NPtos. to Basic Financial Statements. (8) 0 City Hall Other Total. Construction .Governmental Governmental 2007 Fund Funds Funds Totals $ _ $ - $ 423,303 398,967 _ - 93,268 116;357 r 12,982 -10,953V _. - 25,108 231*108. _ - 2,255 2',585 31761 9,907 (564) 807 14,443 28,422 - 1.7.069. 324 (554) 807 592,189 590,623 - 126,651 120,634 _ 92,890 85,932 _ 38,47.1 74,161 _ - 40,960 25,695 60,791 - 60,791 814132 - 72;207 50;327 69;374 52,783 60;791 w 501,3444 1.223,664 (61,355) 807 90,845 (633,.041) 20,000 20,000 37.;486 = (45,000) (42,486). 850,000 20,000 � - (25,000) 835,284. (41,355) 807 65,846: 202,243 14;257 35,629 590.550.. 388,307 $ W.0 A& .5 _ 656.395 $ 590,550 t (9) CITY OFGEM LAKE, MINNESOTA RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES --IN FUND:BALANCE TO THE *STATEMENT OF ACTIVITIES - GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31,208 (WITH COMPARATIVE DATA FOR THE YEAR ENDED DECEMBER 31, 2007) 2008 2007 NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS S 65,845 5 202,243 Amounts reported for governmental activities in the statement'cf aetfvities•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. This is the. amount by .which capitaloutlays exceeded depreciation in the current period. Capital Outlays 596,516: Depreciation Expense 51,631 44,885 784,468 Delinquent and deterred property taxes and .special assessments receivable will.be collected subsequent to year-end, but are not. available soon enough to pay for the current peiiod's expenditures :and, therefore;. are deferred in the governmental funds. Deferred Revenue - December 31•, 200.7 565,476 Deferred: Reveriu.e - December3l, 2008 543,411 (22,065) (64,33.1) The governmental funds report bond proceeds as financing sources, white repayment of bond principal is reported as an expenditure. In the.statement.of net assets, however, issuing debt increases.fong-term liabilities and does not affect the statement of activities and repayment of principal reduces the liability.. Also, govemmental funds report the effect :af issuance. costs, premiums and discounts when debt. is first 'issued, whereas these amounts.are deterred and amortized in the statement of activities. Interest is recognized as art 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 itisAue. The net effect ofthese differences in ihe.treatment of general obligation bonds and related items• is -as. follows: Repayment of Bond Principal 72,207 Change in.Accrued Interest Payable. d:ti05 A3nortizaW.n'of Bond Issue Costs (2:Q27)' Amortization.of Bond Discount (1..7.73) 72,212 (790,3�0)� CHANGE IN NET ASSETS OF GOVERNMENTAL.ACTIVITIES $ 160.877 $ 132,041 See accompanying' Notes to Basic Financial Statements. (1 0) CITY OF GEM LAKE, MINNESOTA STATEMENT OF NET ASSETS PROPRIETARY FUND DECEMBER 31, 2008 (WITH COMPARATIVE DATA AS OF DECEMBER 31, 2007) ASSETS Cash -'and Ca8h Equivalents Custornbe Accounts Receivable Accrued Interest. Special Assessments. Receivable Prepaid Expenses. Total Current Assets. Capital,Assets: Utility Plant in Service Accumulated Depreciation Net Capital: Assets Total Assets LIABILITIES Accounts Payable NET ASSETS Invested in Capital Assets, Net of Related Debt Unrestricted Total Net Assets See accompanying Notes to Basic Financial Statements. 01 ) 2008 Sewer 2007 Utility Totals $ 177.1201 $ 1.26,370 14,933 16,128 1,166 3;911 48Z 1,72S 7,364 1,437 201,1.46 1491569' ,570,775. 570,775 (50;558. (39,142). 520,217 531.,633 721,363 $81,202 10.4 48 520,217 531,633 201,042. 149,521 $ 721,25.9. $ 681,154 CITY OF GEM LAKE, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUND YEAR ENDED DECEMBER31, 2008 (WITH COMPARATIVE DATA. FOR THE YEAR ENDED DECEMBER 31, 2007) 2008 Sewer 2007 Utility Totals OPERATING REVENUES Public Qharges.for.5.ervice8 $ 50,706 $ 52,172 ❑PERATING EXPENSES Operating Expenses 27,516 521288 Depreciation 11;41.6 11,416. Total Operating Expenses 38,932 63,704 OPERATING INCOME (LOSS) 11,774 (11,532) NONOPERATING REVENUES Interest Revenue 3,331 71264. INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 1.5J 05 (4,268) CAPITAL CONTRIBUTIONS AND TRANSFERS Transfers In 250.00 5,000 CHANGE IN NET ASSETS 40,105 732: Net. Assets - Beginning of Year 681;154 680,422 NET ASSETS. - END OF YEAR $ 7211259 681 1.54 See accompanying Notes to: Basic Financial Statements, (12). CITY OF GEM LAKE, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUND YEAR ENDED DECEMBER 31, 2008 (WITH. COMPARATIVE DATA FOR THE YEAR ENDED DECEMBER 31, 2007) CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Utility Customers Cash Payments to Suppliers for -Goo * ds and Services Net Cash Provided (Used) band Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments CASH FLOWS FROM NONCAPITAL FINANCITJG-ACTIVITIES Transfers In. NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and Cash Equivalents - Beginning of Year CASH AND CASH EQUIVALENTS - END OF YEAR RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating Income (Loss) Adjustments to Reconcile; Operating. Income (Loss). to Net Cash Provided (Used) by:Operating Activities: Depreciation Changes in Assets and Liabilities: Customer. Accounts Receivable Special Assessments Receivable Prepaid Expenses Accounts Payable Net Cash Provided (Used) by Operating Activities 2008 Sewer 2007 Utility Totals $ 53,142 $ 46,162 (33,387) (52,992) 19,755 (6,290) 5,076 25.000 50,831 � 2s,37a $ 177:201 $ 11,774 6,641 5.000 5,351 121,0.1.9 126.370 11,41.6 11.416 1,1.95 (3,747) 1,241 (1,723) (5,927) (?78). 56 (426)' $ 19:755 $ t 6,2901 See accompanying Notes to Basic Financial Statements. (13) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31,.2009 DOTE 4 SUMMARY QF:SIGNIFICANT ACCOUNTING POLICIES The: financial statements of the City 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 I1.$, generally. accepted accounting principles, the financial �tatements- 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 tie. component unit -would render the financial statements of -the primary government misleading. The .criteria used to �fetermine if the primary goverrtinent is financially accountable for a..coraponent:.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 componert unit, is in a relationship of financial benefit orburden with the. potential component uriit,..,or is fiscally depended upon by the potential component unit. Based on these criteria, there are. -no organizations.corisidered-to be component units of the City. B. Basic Financial Statements 1. Government -Wide Statements The government. -wide financial statements (i.e., the statement of net assets. and the statement of activities) -display. information about -the primary government and its component. units. These statements holudeAhe 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 sxient -on fees and 'charges to.:external parties for support. In the government -wide statement of net assets, both the governmental and business -type. activities columns: (a) are presented on a consolidated basis by column; and (b) are. reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The City's net assets are reported in three parts:. (1) invested in capital assets, netof. related debt; (2) restricted net assets; and (3) unrestricted net assets. The City first utilizes restricted resources to finance qualifying activities:. (14) CITY OF GEM LAKE, MINNESOTA _ NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 3112008 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING. POLICIES (CONTINUED) B. Basic Financial .Statements (Continued) 1. Government -Wide Statements. (Continued) The statement ofactiaiities: 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)feee,. fines, and charges paid by the recipients of .ggods, services., or privileges: provided by a given function or :activity; and (2). grants and. contributions that .araxestricted to. meeting the operatio0al 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 " :furacis..are.aggregated and reported. as nonmajor funds. The City reports the following major governmental funds: General Fund The General Fund is the City's primary operating fund. It accounts for all financial resources,. of the general gov6majent, except those required. to be accounted for in anotherfund. G.O. Improvement Bonds Series 2004A The G.O. Irriprovement Bonds Series 2004A Fund accounts for all debt service activity related to the 2004A bond. 0.10. Improvement- Bonds Series 2006A — The Q..Q. Improvement Bonds Series. 2606A. Fund accounts for all debt service activity related* to .the :2006A bond. G.O. Capital Improvement Plan Bonds Series .2007A -- The. 0.10. Capital Improvement Plan Bonds. Series. 2007A Fund .accounts for all debt service activity related to the 2007A bond. City Hall Construction Fund — The. City Hall Construction Fund accounts -for all activity related to the construction of the City's:new city hall. 04 0- CITY OF GEM LAKE, MINNESOTA _. NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31,.2000 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Basic Financial Statements (Continued). 2. Fund Financial Statements (Continued) The City reports the following major proprietary fund: Sewer Fund — The sewer fund accounts toe customer sewer service charges that are used to finance sewer operating expenses. C. Measurement Focus and Basis of Accounting The government -wide, proprietary fund; and fiduciary 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 recogr»zed,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 grave been met. Private -sector standards Of accounting and financial reporting issued on or before November 30, 1989, generally are followed`irx both the government -wide and proprietary fund financial statements to the extent that. those .standards do not conflict with or` --- :contradict .guidance of the Governmental Accounting Standards Board. GoVemments also have the option:of following subsequent private=sector guidance for their business - type activities and.enterprise funds, subject to this. same limitation, The City has elected not to follow subsequent. pOvate-sector guidance. Governmental fund financial statements are reported using the current financial resources measurement focus and the.:modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available: .The City considers all revenues to be available if they are collected within 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 lortg4orni debt, compensated -absences,. arid .claims and judgments,. which are recognized. as expenditures tag* 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'ss 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 sates and services, administrative expenses, and depreciation :on capitall assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. 00 CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2008 11 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 41� 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 Furitf-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 ayailable 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 T investment pool.. The city provides temporary advances to. funds that have insufficient cash balances by means .of an advance from another fund shown. as interfund receivables in the advancing fund i6the governmental fund financial statements, and an interfund payable in the fund .with the deficit, until adequate resources are received. These interfund payables are eliminated for statement of net assets presentation. Investments are stated ai 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.. Alf of the cash and investments allocated to the proprietary fund types Have original maturities, of W days or Jess. 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 consumptioh method ano recorded -as an expense or expendiitUre :at the time d consumption: That portion of the relevant funds` balances equal to -.material prepaid items has .been reserved. G. Property Tax Credits Property. taxes on homestead property .(as defined by State Statutes) are partially reduced'by property tail credits. These credits are paid to the City by the State .in:lieu of taxes levied against homestead property. The State remits these predits through installments: each year. These credits are recognized as .revenue by the City at the time of collection. (17) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31.;'2008 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. Property Tax Revenue Recognition The City Council annually adopts a tax levy and certifies it to the County in December (levy/assessment date) of each year for collection in the following year. The County is responsible for billing and collecting all property taxes foritself, the City, the focal 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 properly owners) on May 15 and October 1*5 of each calendar year. Personal property taxes 'are. payable. by taxpayers on February 28 and June 30 of each year. These taxes are collected by th6 County and remitted to the City on. or -before .July -15 and December 15 of the same year. Delinquent collections for.November-�and December are received'the following January. The City has no ability to enforce payment of property taxes by property*ouvriers: The.County possesses. this authority. With i'rr 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 anal the following January are. recognized as revenueJor 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 loot collected by the City ih January is fully offset by, .deferred revenue because it fs not available. to -- finance current expenditures. Deferred revenue, in governmental activities is susceptible to full adcrual on the government -wide statements: The. CiWs .property 'tax revenue includes payments from the. Metropolitan Revenue Distribution (Fiscal Disparities Formula) per Minnesota Statute 473F. This statute providbs -a means of spreading a portion of the taxable valuation of commerciaYindustrial :veal property. to Various taxing authorities within the defined metropolitan. area. The valuation "shared" is a portion of commercial/industrial property. valuation growth since 1971. Property taxes paid to the: City through this. formula for 2008 totaled $10,7'��1. 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 by the County Auditor in the same manner as property taken. Property .owners.are allowed to (and often do) prepay future installments vothout. interest or prepayment penalties. CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2008 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 1. Special Assessment Revenue Recognitfoty (Continued) Within the brid financial statements, the revenue from special assessments is recognized Icy thye. City when it becomes measurable and .available. to finance expenditures of the current fiscal period. In practice, current arid. 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 rerhain.ing delinquent, deferred .and special deferred. asses8inents receivable in governmental funding are completely offset by deferred revenues. Deferred revenue in governmental activities is susceptible to full accrual off the government -wide statements. Once a -special assessment roll is adopted, the amount attributed to each .parcel is a Wrt 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. *It* special assessments are allowed. to go delinquent, the property is subject to tax forfeit sale. and the first proceeds of that sale (after costs, penalties and :expenses of* sale) are.. remitted to the City. In payment. of delinquent special assessments. Generally., the: City will collect the full amount of its special assessmerits not adjusted bythb-City's rxity Council or court action. Pursuant.to. State. Statutes, a property shall be subject to a tax forfeit sale after three years unless it is homesteaded; agricultural or seasonal recreational land in which event the property is subject to such sale after fiveyears. J. Capital Assets Capital assets, which kiciade property, plant, :equipment, and infrastructure assets (e.g., roads, sidewalks,. street. lights, and similar items) are reported in the applicable governmental' or business -type activities. columns in the government -wide 'financial statements: Capital assets are recorded at historical cost or estimated: historical cost if purchased or constructed. The cost of normal maintenance and repairs. -that do not add to the value of the asset or materially extend asset lives. are not capitalized. Major outlays for capital assets. and improvements are capitalized as projects -are constructed. The government. reports infrastructure assets on -a network and.subsystem basis. In the case. of the initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the :government chose to include all :such. items regardless of their acquisition date or amount. 101 CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2008 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) J. Capital Assets (Continued) Depreciation on exhaustible assets is recorded. as an allocated expense in the Statement of -Aictivities with accumulated depreciation reflected in the Statement of Net Assets. Since surplus assets are sold for an immaterial amount when declared as no longer needed :for City purposes, no salvage value :is taken into. ,consideration for depreciation purposes. Capital assets not being depreciated include *construction- in progress. Depreciation Estimated Assets Method Useful Life Buildings Straight -Line 40 Years Office Equipment Straight-Line-10:Years Utility Systems Straight -Line 20.: 5Q Years Infrastructure Straight -Line go- 50.Years K. Long -Term Obligations: r hT the entity -wide financial statements, long-term debt and other long-term obligations -are reported as liabilitiesJ4 the applicable governmentafactivities: 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 arid .amortized 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 arnount*-of the debt, issue is reported as on -otheer financing source. Pre* rriiurrls. received-on.debt issuances are reported as other financing. sources.*while-.discounts are reported.as other financing uses. Issue costs are repotted as debt service expenditures. L. Fund Balance In the .governmental fund financial statements, teservations of fund. balance represent those -portions of fund balance not appropriable for -expenditure or legally restricted by outside parties fipr use for a specific: purpose.. Designated fund balances represent -tentative plans for future use of financial resources that are subject to change. (20) CITY .OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2008 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) M. Interfund. Transactions Interfund services provided and used are accounted for.as-revOriues, expenditures or* expenses. Transactions that constitute. reirnburserrrerits to a fitrid for expenditures/ expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses 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 assets and statements of activities. NOTE 2 DEPOSITS AND INVESTMENTS A. Deposits The C..ity . maintains a cash and investment pool that is available for use by all funds. Each fund type°s.portion of this pool is, displayed on the statement -of net assets and the balance sheet as "Cash and lnvestments:' In accordance with .Minnesota Statutes the City maintains deposits. at financial. institutions which are :au#horized by the City CQuncil. Custodial Cradit 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 policjr for custodial credit risk and* follows Minnesota Statutes for deposits. Minnesota. Statutes require that all deposits be. protected by insurance, surety bond, or- collatetal.3..he 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 ar *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 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 institlition not. owned or controlled :by the. deposkory. The carrying -value and bank balanced the City's deposits in banks at December 31, 2008 is $783,057 and .$783,248, respectivelyi and were entirety covbred by federal depository insurance or by surety bonds and collateral in acco.rdanca wit Minnesota Statutes.. --; (21) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2008 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 irtvgstment companies. registered under the Federal Investment Company Adt of 194b and received the highest Credit rating, are rated in one of the two highest rating categories by a statistical. rating agenEy and all -of the investments have a finial maturity of thirteen months or less. 9 General obligations rated "A" or better;. revenue obligations rated "AAA or better. General obligations o'f theMinnesota 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 ih 270 days or less.. •. Guaranteed investment contracts guaranteed by United States commercial. banks or domestic branches of foreign banks or United States insurance companies it similar*debt obligations of the issuer or the collateral pledged by the issuer is in the.top two:*rating categories. • repurchase or reverse purchase agreement and securities lending agreements financial institutions. qualified as a "depository" by the government entity, with banks that are members of the- Federal Reserve System wiih capitalization .exceeding $10,000,006, -.a primary-repord ig dealer in U.S. government securities to the Federal Reserve .Bank. of New York, or certain .Min esota securities broker -dealers. At December 31, 2008, the City's investment balance consisted of $66,297. **held in a Wells Fargo Advantage. Nr ie Investment Money Market Mutual Fund. " 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. The Wells Fargo Advantage Prime Investment. Money Market.Mutual Fund is fully liquid and does not have a maturity date. (22) NOTE 2 CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2008 DEPOSITS AND INVESTMENTS (CONTINUED) B. Investments (Continued) Credit Risk Generalljr; 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 ass'ignrriant of a rating by a nationally recognized statistical rating organization. The City's invesfinent policy doesn't* specifically address. credit risk. The Wells Fargo Advantage Prime Investment Money Market Mutual Fund is not rated. Concentrafiort of Credit Risk The City places no limit on the amount that the City may invest in any one.issuer. NOTE 3 CAPITAL ASSETS. Capital asset act!Vdy*forthe, year ended Deoember 31., 2008. Was as follows: Governmenfat activities: Capital Assets Not Being Depreciated: Construction in: Progress . Capital Assets Being Qepreciatod: Buildings Office Equipment Infrastructure Total Capital. Assets -Being Depreciated Total Caioitai Assets Accumulated Depreciation. - Buildings Office: Equipment Infrastructure Total Accumulated Depreciation Nel-Capita[Assets -'capital Activities Beginning Ending, Balance Increases Decreases Balance $. 8.14,132 $. - .$ (814,132) $. "VI wr 1;250 11,940 - 13,190 699,782 - 699,782 701.,.032 910,648 - 1.,611,680 1.,515,.164. 910,648 (814,1.32) 1,611,680 (1g;659) (19,659) (219) (1;277) -. (1,496) (149,157) (30,6951 - (1.80,452) -. (149,97.6) . (51,631) - (M ,607) $ 1,365,188 . $ 869,017 $ (t4132) $1,410,073 . Depreciation expense was charged to the.governmental functions as follows:. General.Govemment. $ 20,936 Public Works 30,695 Total Depreciation.- Governmental Activities $ 51,631 l23). CITY OF GEM LAKE, MINNESOTA NOTE$ TO. BASIC FINANCIAL STATEMENTS DECEMBER 31, 2008 NOTE 3 CAPITAL ASSETS (CONTINUED) Beginning Ending. Balance Increases Decreases Balance Sewer Utiility Capital Assets: Being Depreciated: Infrastructure S 570,775 S - $ $ 510,775 Less: Accumulated Depreciation (39;142) (11,416) (50.558) Net Capital Assets.- Sewer Utility' S 531,633:. S. (11,416) S - S 520.217 NOTE 4 CITY INDEBTEDNESS City indebtedness at.December 31, 2008 is composed of the following: Final Issue Maturity interest. original: Balance Dale Date Rate Issue 12/31/08 Governmental Activities: - General Obligation Boncls:. 2004A Improvemeni Bonds 11/03/2004 .02/01/2016 3.7004 $ 586,000. S 458,086 2006A Improvement Bonds 08/23/200.6 02/01/2017 4.30% 245;000 225;000 2007A Capital Improvement Fonds W20/2007 02/01/2026 4.0o-4.50% a50,000 850,000 Total Long -Term Debt 1,681,000 1,533,986 Unamorlized. Bond Discount (33,460) (19,0131 Total S 1,647,540. S 1,514,973. The following is a schedule of changes in City indebtedness for the year ended December 31, 2008:. Balance Balance Oue:Within 12131/07 Additiohs Reductions 12/31/08 One Year Long -Term Debt Governmental Activities General Obligation: Bonds 1,.606,193 S S 72,207 $ 1,533,986 S 89,156, Unamortized Bond Discount (20,786? (1,773) (19;013) Total Long -Term Debt $ 1,585,407 S. S 70,434 $. 1.514,973 S 8.9,156: All long-term bonded indebtedness outstanding at. December. 3i:,.2008 is backed by the. fuII faith and credit of the City,. including .special assessment :bond issues. For the governmental .activities, compensated absences are generally liquidated by the general fund, (24 ) CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2008 NOTE 4 CITY INDEBTEDNESS (CONTINUED) Minimum annual principal and interest..payments required to retire .long-term debt areas follows: Year Ending_ December 31, Principal Interest Total 2009 $ 89,1.56 $ 61,686 $ 150,842 2010 91,179 5$;203 149,382 201.1 '98,276 .54,5$9 1.52,815. 2012 1-00,452 M, 689.. 1.51,140 2013 102,710. 46,755 14.9,465 2014-2018 422,213 175,158 5971371 gp1-9K2023 285,000 f 07,541 392,541 20.24-2028 .345,000 39,6.16 384,61.6 � = Total $ 1:,533;986 $ 594.,1.86 $ 2,1.28,172 Description and Restrictions of Lona-Term Debt �w General Obligation Bonds — The bonds were issued for improvements or projects which benefited the City as:a whale and are, therefore, repaid from ad valorem levies... NOTE 5 STEWARDSHIP COMPLIANCE:AND ACCOUNTABILITY A. Excess of Ezperditures Over Appropriations Actual expenditures exceeded budgets during 2008 as follows: Final Budget Actual Excess General Fund: Public Safety $ 87,926 $ 92,890 $ (4,964) These excess expenditures were. funded by available fund balance.in the General Fund B. Deficit Fund Balances The City has. deficit fund- balances -at December 31, 2008 as follows: Fund Balance ,-I.- City Hall Construction Fund These .City intends tafund these deficits.through future:tax`levies, transfers from othex �- funds, and varigus other sourcos. (25) CITY OF GEM L..AKE, MINNESOTA NO'T`ES TO BASIC FINANCIAL STATEMENTS DECEMBER-31, 2008 NOTE 6 INTERFUND TRANSFERS Individual fund transfers for fiscal year 2008 are as follows: Transfer Transfer In Out Governmental Activity: General Fund $ - $. 45,000 City Hall Construction Fund 20,000 - Business -Type. -Activity - Sewer Fund. 25;000 - 45=000. $ 45,000 ❑uring 2008, the City made interfund transfers from the Gejteral Fund to *the City Hail Construction fund to cover tho deficit. in the City Hall Constructipn Fund. A transfer was also made from the General Fund to the Sewer Fund for payment -of loan provided hy*the Sewer Fund. NOTE-7 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 settlef eats in excess:of insurance coverage for any bf the`pasi three fiscal years. REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON INFORMATION CITY OF GEM LAKE, MINNESOTA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND YEAR ENDED DECEMBER 31, 2008 Budgeted Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Taxes $ 395,355 $ 395,355 370,862 $ (24,493) Intergovernmental 10,313 10,313 12,982 2,669 Licenses and Permits 18,700 18,700 25,108 6,408 Fines:and Forfeits - - 2,255: 2,M Public Charges. for Services 4,000 4,000 3;761 (239) Miscellaneous: Interest 4,236 4,236 10,323: 61087 Other 3,175 3,175 17,069 13;894 Total Revenues 435,779 435;779. 442,360 6,581 EXPENDITURES General Government 1.$3,213 1B3,213 126:651 .56,562 Public Safety 87;926 87,926. -921890 (4.;964) Public Works 52,500 52,500* 3E,471 i4;029 Conservation and Development. 87,140 87:14t7 40966 46,180 Total:Expenditures .41.0,779 ; 410,779' 29$.,9.72 11.1,807 n.. EXCESS (DEFICIENCY) OF REVENUE OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers Out NET CHANGE IN FUND BALANCE Fund Balance - Beginning of Year FUND BALANCE - END OF YEAR 25,ob0 25,000 143,388 118,388 (25;000) (25,000) _ (45,000) 4 20 0o0. $ - $ - 08,388 $- *98,388. See. aecomparrying Notes. to Required Supplementary Information. (27). 174,263. $. 272,651 CITY OF GEM LAKE, MINNESOTA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2008 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 2008.. (28) COMBINING FUND FINANCIAL STATEMENTS CITY OF GEM LAKE, MINNESOTA COMBINING BALANCE SHEET .NONMAJOR GOVERN MENTAL.FUND ❑ECEMBER 31,.2008 (WITH COMPARATIVE DATA AS OF DECEMBER 31, 2007) ASSETS. Cash and Investments Accrued Interest Receivable Total Assets FUND BALANCES Unreserved, Undesignated Fund Balance 2008 Special Revenue Parks and: Playground 2007 Fund Totals 36,155 $ 34,363 281 1.,266 $ 36,436 $ 35;629 $ W,436 $ 35,629 (29) CITY OF GEM LAKE, MINNESOTA COME31NING STATEMENT OF REVENUES; EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUND YEAR ENDED DECEMBER 31, 2008 (WITH COMPARATIVE DATA FOR THE YEAR ENDED DECEMBER 31, 2007.) 2008 �.. Special Revenue Parks grid g Playground: 2007 Fund Totals REVENUES Interest $: 907 $ 2,457 OTHER FINANCING SOURCES (USES) Transfers Out - (42,480)_ NET CHANGE IN FUND BALANCES 807 (40,023) Fund Balance. - Beginning of Year 35,629. 75,652 FUND BALANCE - END OF YEAR $ 36,436 $: 35;629 (n) OTHER REQUIRED REPORTS LarsonAllerf (.l;Y CPAs, Cansulranrs &. Advisors www,farsonallen.com 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 the financial statements of the governmental activities, the business -type activities;. each rliajor fursd, and the aggregate remaining fund information of the City of Gem Lake, Minnesota as of. and for the year ended becember 31, 2008, which collectively comprise the City's basic financial Statements and have issued' .our report thereon dated April 24, 2009. We .conducted our audit -in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Govem- moat Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit; we. considered the City's internal controloverJinaricial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose,of expressing. -an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we. do not express an opinion on the' effectiveness of'the City's internal control over financial reporting. A control deficiency exists when the design or operation --of a control does not allow management or employees, in the normal course of performing their assigned furteiions, to prevent or detect misstatements. on a timely basis. A significant deficiency is a control deficiency, or combination. of control deficiencies,- that adversely affects the .City's ability to: initiate, authorize, record., process., or report financial data reliably in accordance with U.S. generally accepted accounting principles such that there is more than a remote likelihood that: a misstatement of the City's financial statements that is more than inconsequential will not ba prevented or:detected'hY-1he.City's internal control over financial reporting. A material. weakness is a significant deficiency, or combination.of significant deficiencies, that results in more than a remote likelihood that a material misstatement- of Aho financial statements will not be prevented or detected:by the City's internal Control. �. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph and would not necessarily identify*all deficiencies in the. internal control that might be significant deficiencies and accordingly, would not.*npcessarily -disclose aII significant deficiencies that are also considered to be material weaknesses. We consider the deficiency described as item 2008-1 in the :accompanying schedule of findings and responses to be a material weakness in internal control overfinandfal reporting., I (31} 1„rxmAllen UP is a mernb r of lexia lnlcrn�ttetmal, ;t %vorldwide network of.inderkni G nt accounting ;ind cmis ti in firms. 11,i�At. Honorable Mayor and - Vern . bers 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 almount& However; providing an opinion on -- compliance with those provisions was not an objective of our audit :and, accordingly, we;do not express such an opin[on...The results of our tests disclosed no instances of* rinoncompliance or -other matters that are. required to be reported under Govemment AUdifing Standards. This report is intended solely for the.information and use of the City Council, management, the Office of the State Auditor, and state and -federal awarding agencies and is not intended to be. and should not be used by anyone other#han these specified parties. Minneapolis, Minnesota April 24,.•2009' LarsonAllen LLP (32) Lars em nAl lent, LLP ("I'As, COW-41[call rs & Advisors www.farpohjl[6ri.com REPORT ON MINNESOTA LEGAL COMPLIANCE Honorable Mayor, Members of the City Council; and Citizens City of Gera Lake, Minnesota We have audited the firianciaf*statements of the governmental activities, the business -type activities, each major fund, and the .aggregate remaining fund information of the City of Gem Lake;. Minnesota., which collectively comprise the City's basic financial statements as of and. for the year ended. December 31, 2008,. and have issued our report thereon dated April 24, 2009, We conducted our audit in accordance with U.S. generally accepted 'auditing standards. and the *r provisions of the Minnesota Legal Compfiance Aiic t Guide for Local Government,. promulgated by the State Auditor pursuant to Minn. Stat. §6.65..Accordingly., the audit included such tests of -the* accounting records and such other auditing procedures as we considered necessary in. the: „.. circurnstances. The Minnesota Legal GnmplianceAydit Guide for Leal Government covers seven main categories of -compliance. to be tested: contracting *.and bidding; deposits and. investments, conflicts* of interest, public indebtedness, claims:.and disbursements, mispellaneous city provisions, and tax increment financing districts. Our study -included .all of the. listed categories except for tax increment financing districts because the City has no taxincrement financing districts. The results of our tests indicate that, with respect to the items tested, the.Clriy of Gern lake, Minnesota complied with the material terms..and conditions of applicable legal provisions, except as noted in the ^� schedule of findings as 2008-2. This report is inttepded solely for the information and use of management, the City Council, the Office of the. State: AudltQri and other state agencies, and is not intepoed :to be and should not be. used .by anyone*other than these.specified parties:. Minneapolis, .Minnesota April 24, 2009 LarsonAllen LLP i33y. LIP ir, a iu�aibcr��FNcaiaJiaicrnatiwltil,.a world yid +ii�.rurk o{ indgo1d nt ac"nunri i" and contiuhinglirins. CITY OF GEM LAKE -w SCHEDULE OF FINDINGS AND RESPONSES. YEAR ENDED DECEMBER 31, 2008 Internal Control Over l"ihancial Reporting 2008-1: 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. While we realize this scenario is common for :small entities, we are required to -report this issue and to advise that a concentration of duties. and responsibilities in a limited number of individuals is not desirable from an internal control perspective. Criteria: C-tenerally, a system -of internal .control conterhplates 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 inVdJved in receipt and disbursement processes. Recommendation: Controls should be reviewed periodically and consideration given to improving the r. segregation of duties. In making this review, it is important to consider the benefit derived as weighed against the cost of the improvements. w Minnesota Legal Compliance Finding: 2008-02 Declarations of Payment Finding: Minnesota Statutes Section 471.391 Subd 1 and 2 requires. that the City document that the declaration of payment requirements were met for any payment of non -payroll claims made by the City. The: declaration of -payment requirements can be met with a .declaration: printed on the backside of checks issued by the City *ih payment of claims. Management Response: The City has corrected this issue as of the completion of fieldwork. (34)