HomeMy WebLinkAbout2025 Management ReportManagement Report
for
City of Gem Lake, Minnesota
December 31, 2025
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LB CARLSON
I To the City Council and Management
City of Gem Lake, Minnesota
We have prepared this management report in conjunction with our audit of the City of Gem Lake,
Minnesota's (the City) financial statements for the year ended December 31, 2025. We have organized
j this report into the following sections:
J• Audit Summary
• Governmental Funds Overview
• General Fund Overview
• Enterprise Funds Overview
• Government -Wide Financial Statements
• Accounting and Auditing Updates
We would be pleased to further discuss any of the information contained in this report or any other
concerns that you would like us to address. We would also like to express our thanks for the courtesy and
assistance extended to us during the course of our audit.
The purpose of this report is solely to provide those charged with governance of the City, management,
and those who have responsibility for oversight of the financial reporting process comments resulting
from our audit process and information relevant to city finances in Minnesota. Accordingly, this report is
not suitable for any other purpose.
Respectfully submitted,
Z_X �� I P
j LB CARLSON, LLP
JMinneapolis, Minnesota
I I
June 23, 2026
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AUDIT SUMMARY
The following is a summary of our audit work, key conclusions, and other information that we consider
important or that is required to be communicated to the City Council, administration, or those charged
with governance of the City.
OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED
STATES OF AMERICA AND GOVERNMENT AUDITING STANDARDS
We have audited the financial statements of the governmental activities, the business -type activities, and
each major fund of the City as of and for the year ended December 31, 2025. Professional standards
require that we provide you with information about our responsibilities under auditing standards generally
accepted in the United States of America and Government Auditing Standards, as well as certain
information related to the planned scope and timing of our audit. We have communicated such
information to you verbally and in our audit engagement letter. Professional standards also require that we
communicate the following information related to our audit.
PLANNED SCOPE AND TIMING OF THE AUDIT
We performed the audit according to the planned scope and timing previously discussed and coordinated
in order to obtain sufficient audit evidence and complete an effective audit.
AUDIT OPINIONS AND FINDINGS
Based on our audit of the City's financial statements for the year ended December 31, 2025:
• We have issued unmodified opinions on the City's basic financial statements.
• We reported two deficiencies in the City's internal control over financial reporting that we
considered to be material weaknesses:
1. Due to the limited size of the City's office staff, the City has limited segregation of duties
in certain areas.
2. The City's internal controls over financial reporting were not sufficient to prevent
material misstatements in the reporting of accounts payable and utility expenses that
required a material audit adjustment.
• The results of our testing disclosed no instances of noncompliance required to be reported under
Government Auditing Standards.
• We reported one finding based on our testing of the City's compliance with Minnesota laws and
regulations.
1. Minnesota Statues require unclaimed property held for more then three years (or one year
for unpaid compensation) to be reported and paid or delivered to the state Commissioner
or Commerce each year. This requirement was not completed by the City in the current
fiscal year.
-1-
FOLLOW-UP ON PRIOR YEAR FINDINGS AND RECOMMENDATIONS
As part of our audit of the City's financial statements for the year ended December 31, 2025, we
performed procedures to follow up on the findings and recommendations that resulted from our prior year
audit. We reported the following finding that was corrected by the City in the current year:
• Finding 2024-002 — Significant deficiency in internal control over financial reporting due to a
software conversion and error correction.
OTHER OBSERVATIONS AND RECOMMENDATIONS
Internal Controls Over Vendors
A relatively common method of attempting to defraud local governments involves inducing them to pay
claims from fictitious vendors for goods or services that were never provided. Strong safeguards over
adding new vendors or making changes to existing vendors within the government's account payable
system is an important control to mitigate this risk. Some considerations in this area include:
• Limiting the number of employees with access to add or alter vendor records within the accounts
payable system,
• Requiring vendor additions or changes to be reviewed and approved by supervisory personnel,
preferably one not directly involved in processing accounts payable,
• Verifying the legitimacy of vendors by obtaining a W-9 or other means,
• Verifying any changes to vendor address or banking information prior to processing payments,
and
• Periodically reviewing the vendor listing to remove inactive vendors from the system.
During our testing we noted the City did not have on file 5 of the 10 W-9 forms selected for testing.
Uniform Guidance Revisions
Although the City did not earn enough federal funding to require a Single Audit of its expenditures of
federal awards this year, if the City receives any federal funding it is obligated to maintain a
comprehensive system of internal controls over federal grant compliance that is up to date with current
requirements. The U.S. Office of Management and Budget issued a revision to Title 2 U.S. Code of
Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards (Uniform Guidance) in 2024, aiming to streamline grant management
and reduce grantor agency and recipient burden. The revised guidance is effective for new federal grant
entitlements awarded on or after October 1, 2024.
The revision includes a number of significant changes to the federal Single Audit process, including: an
increase in dollar threshold for requiring a Single Audit from $750,000 to $1,000,000; changes to the
thresholds and process used for determining major programs; an increase in the threshold for the
disposition of equipment and remitting unused supplies from $5,000 to $10,000; and an increase in the
federal de minimis indirect cost rate from 10 percent to 15 percent. Key changes to written policy
requirements for recipients include: enhancement of cybersecurity controls, inclusion of veteran -owned
businesses to the group of entities for procurement preference, and a broadened scope for reporting of
mandatory disclosures. We recommend the City review its internal control policies to ensure compliance
with current guidance.
Payroll Withholdings
Management is responsible for establishing and maintaining effective internal controls over payroll
processing. During our audit, we identified an employee who updated their Internal Revenue Service
Form W-4, but the City had not updated the payroll processing system. We recommend that the City
review its policies and procedures regarding the processing of W-4's and related payroll information to
verify all information is being updated properly into the payroll system and supporting forms are retained
on file.
-2-
SIGNIFICANT ACCOUNTING POLICIES
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by the City are described in Note 1 of the notes to basic financial statements. No
new accounting policies were adopted, and the application of existing policies was not changed during the
year ended December 31, 2025.
We noted no transactions entered into by the City during the year for which there is a lack of authoritative
guidance or consensus. All significant transactions have been recognized in the financial statements in the
` proper period.
ACCOUNTING ESTIMATES AND MANAGEMENT JUDGMENTS
Accounting estimates are an integral part of the financial statements prepared by management and are
based on management's knowledge and experience about past and current events and assumptions about
future events. Certain accounting estimates are particularly sensitive because of their significance to the
financial statements and because of the possibility that future events affecting them may differ
significantly from those expected. The most sensitive estimate affecting the financial statements was:
• Depreciation — Management's estimates of depreciation expense are based on the estimated
useful lives of the assets.
We evaluated the key factors and assumptions used by management to develop these accounting estimates
in determining that they are reasonable in relation to the basic financial statements taken as a whole.
The financial statement disclosures are neutral, consistent, and clear.
DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT
We encountered no significant difficulties in dealing with management in performing and completing our
audit.
CORRECTED AND UNCORRECTED MISSTATEMENTS
Professional standards require us to accumulate all known and likely misstatements identified during the
audit, other than those that are clearly trivial, and communicate them to the appropriate level of
management. Management has corrected all such misstatements except as noted below.
One misstatement detected as a result of audit procedures and corrected by management was material,
either individually or in the aggregate, to the applicable opinion unit's financial statements taken as a
whole.
The City passed on the recording of state-wide pension liabilities totaling $25,626 on the Statement of
Net Position as they were deemed immaterial.
DISAGREEMENTS WITH MANAGEMENT
For purposes of this report, a disagreement with management is a financial accounting, reporting, or
auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial
statements or the auditor's report. We are pleased to report that no such disagreements arose during the
course of our audit.
-3-
MANAGEMENT REPRESENTATIONS
We have requested certain representations from management that are included in the management
representation letter dated June 23, 2026.
MANAGEMENT CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS
In some cases, management may decide to consult with other accountants about auditing and accounting
matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves
application of an accounting principle to the City's financial statements or a determination of the type of
auditor's opinion that may be expressed on those statements, our professional standards require the
consulting accountant to check with us to determine that the consultant has all the relevant facts. To our
knowledge, there were no such consultations with other accountants.
OTHER AUDIT FINDINGS OR ISSUES
We generally discuss a variety of matters, including the application of accounting principles and auditing
standards with management each year prior to retention as the City's auditors. However, these discussions
occurred in the normal course of our professional relationship and our responses were not a condition to
our retention.
OTHER MATTERS
We were not engaged to report on the introductory section, which accompanies the financial statements,
but are not required supplementary information. Such information has not been subjected to the auditing
procedures applied in the audit of the basic financial statements and, accordingly, we do not express an
opinion or provide any assurance on it.
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GOVERNMENTAL FUNDS OVERVIEW
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This section of the report provides you with an overview of the financial trends and activities of the City's
governmental funds, which include the General, debt service, and capital project funds. These funds are
used to account for the basic services the City provides to all of its citizens, which are financed primarily
with property taxes. The governmental fund information in the City's financial statements focuses on
budgetary compliance and the sufficiency of each governmental fund's current assets to finance its
current liabilities.
GOVERNMENTAL FUND BALANCES
The following table summarizes the changes in the fund balances of the City's governmental funds during
the year ended December 31, 2025, presented both by fund balance classification and by major fund:
Governmental Funds Change in Fund Balance
Fund balances of governmental funds
Total by classification
Nonspendable
Restricted
Assigned
Unassigned
Total governmental funds
Fund Balance
as of December 31,
2025 2024 Change
$ 123,362 $ 119,939 $ 3,423
209,179 193,267 15,912
445,303 324,193 121,110
903,074 659,435 243,639
$ 1.680,918 $ 1.296,834 S 384.084
Total by fund
General
$ 904,378
$ 660,755
$ 243,623
G.O. Capital Improvement Plan Bonds Series 2015A
154,507
143,882
10,625
G.O. Capital Improvement Plan Bonds Series 2018A
119,868
114,829
5,039
Street Improvements Capital Project
445,303
324,193
121,110
Parks and Playground Capital Project
56,862
53,175
3.687
Total governmental funds
$ 1,680,918
$ 1,296,834
$ 384,084
In total, the fund balances of the City's governmental funds increased by $384,084 during the year. The
City's General Fund increased $243,623, which is further discussed later in this report. Assigned fund
.� balance increased $121,110, primarily in the Street Improvements Capital Project Fund as revenues and
transfers in are accumulating resources for future projects.
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GOVERNMENTAL FUNDS REVENUE
The following table presents the City's governmental funds revenue by source for the last two fiscal
years.
Governmental Funds Revenue by Source
2025
2024
Year -to -Year Change
Percent
Percent
Dollar
Percent
Revenue
of Total
Revenue
of Total
Change
Change
Property taxes
$ 712,587
62.3 %
$ 692,892
71.3 %
$ 19,695
2.8 %
Franchise and other taxes
7,441
0.6
9,200
0.9
(1,759)
(19.1) %
Special assessments
92,691
8.1
96,545
9.9
(3,854)
(4.0) %
Licenses and permits
109,010
9.5
46,144
4.8
62,866
136.2 %
Intergovernmental
20,864
1.8
30,647
3.2
(9,783)
(31.9) %
Charges for services
50,058
4.4
31,756
3.3
18,302
57.6%
Other
152,685
13.3
63,902
6.6
88,783
139.9 %
Total revenue
$ 1,145,336
100.0 %
$ 971,086
100.0 %
$ 174,250
17.9 %
In total, the City's governmental revenue increased $174,250 for the year. Other revenues increased
$88,783 from the prior year, primarily due to miscellaneous revenues increasing $47,319 due to Ramsey
County paying for its share of the project costs in the current year. Also, investment earnings increased
$35,208 due to market conditions. Licenses and permits increased $62,866 primarily due to building
activity in the current year.
PROPERTY TAXES
Minnesota cities rely heavily on local property tax levies to support their governmental fund activities.
In the 2025 fiscal year, ad valorem property taxes provided 62.7 percent of the City's total governmental
funds revenue.
The City's taxable market value increased 7.7 percent for taxes payable in 2024 and 4.4 percent for taxes
payable in 2025. The following graph shows the City's changes in taxable market value over the past
10 years:
$180,000,000
$160,000, 000
$140,000,000
$120,000,000
$100,000,000
$ 80, 000,000
$60,000,000
$40,000,000
$20, 000,000
Taxable Market Value
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
M
Tax capacity is considered the actual base available for taxation. It is calculated by applying the state's
property classification system to each property's market value. Each property classification, such as
commercial or residential, has a different calculation and uses different rates. Consequently, a city's total
tax capacity will change at a different rate than its total market value, as tax capacity is affected by the
proportion of its tax base that is in each property classification from year-to-year, as well as legislative
changes to tax rates. The City's tax capacity increased 4.2 percent and 8.7 percent for taxes payable in
2025 and 2024, respectively.
The following graph shows the City's changes in tax capacity over the past 10 years:
Local Net Tax Capacity
$2,000,000
$1,600,000
$1,200,000
$ 800,000
$400,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
The following table presents the City's certified tax levy and resulting tax rates applied to city residents
for each of the last five levy years:
Tax Levies and Rates
S 800,000
42.O4�o
$669,115 $697,018
$718,736
$700,000
41.0%
$558,210
40.8%
The City's certified levy has continued to grow over the last five years, while the tax rate has decreased
the last few years with the change in the tax base.
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GOVERNMENTAL FUNDS EXPENDITURES
The City's governmental funds expenditures are classified into three types as follows:
Current — These are typically the general operating type expenditures occurring on an annual
basis, and are primarily funded by general sources, such as taxes and intergovernmental revenues.
Capital Outlay — These expenditures do not occur on a consistent basis, more typically
fluctuating significantly from year-to-year. Many of these expenditures are project -oriented and
are often funded by specific sources that have benefited from the expenditure, such as special
assessment improvement projects.
• Debt Service — Although the expenditures for debt service may be relatively consistent over the
term of the respective debt, the funding source is the important factor. Some debt may be repaid
through specific sources, such as special assessments or redevelopment funding, while other debt
may be repaid with general property taxes.
The following table presents the City's governmental funds expenditures by type for the last two fiscal
years:
Governmental Funds Expenditures by Type
2025
2024
Year -to -Year
Change
Pcrccnt
Percent
Dollar
Percent
Expenditures
of Total
Expenditures
of Total
('11anPC
Current
General government
$ 252,079
33.1 %
$ 222,349
30.3 %
$ 29,730
13.4 %
Public safety
207,700
27.3
207,710
28.3
(10)
(0.0) %
Public works
1,812
0.2
30,297
4.1
(28,485)
(94.0) %
Conservation and development
152,710
20.1
88,548
111
64,162
72.5 %
Total current
614,301
80.7
548,904
748
65,397
1 L9 %
Capital outlay
13,975
1.8
53,041
7.2
(39,066)
(73.7) %
Debt service
132,976
17.5
132,289
18.0
687
0.5 %
Total expenditure
$ 761,252
100.0 %
$ 734,234
100.0 %
$ 27.019
3.7 %
Total expenditures in the City's governmental funds for 2025 were $761,252, an increase of $27,018
(3.7 percent).
Conservation and development increased $64,162, due to more planning activity and zoning code
updates. The increase is partially offset by decreases in capital outlay and public works of $39,066 and
$28,485, respectfully. Capital outlay decreased due to less projects in the current year. Public works
decreased due to less road repairs and tree trimming in 2025.
5.12
GENERAL FUND OVERVIEW
This section of the report focuses specifically on the financial trends and activities of the General Fund,
which accounts for the financial activity of the basic services provided to the community. The primary
1 services included within this fund include the administration of the municipal operation, police and fire
protection, permitting and building inspection, streets and highway maintenance, parks and recreation,
and economic development.
GENERAL FUND FINANCIAL POSITION
t
_ l The graph below illustrates the change in the General Fund financial position over the last five years.
{ General Fund Year -End Fund Balance
As of December 31,
a. I,V VV,VVV
$900,000
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$—
2021
2022
2023
2024
2025
❑ Unassigned
$252,617
$274,155
$509,715
$659,435
$903,074
■ Assigned
$_
$35,270
$—
$__
$__
■ Nonspendable
$1,228
$1,431
$1,696
$1,320
$1,304
The total fund balance of the City's General Fund at year-end was $904,378, which represents an increase
of $243,623 in 2025 as compared to no change in total fund balance projected in the final budget.
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The City's unassigned General Fund balance at the end of the 2025 fiscal year represents 143.7 percent of
jannual expenditures based on 2025 levels.
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The City does not have a fund balance policy in place, but has a goal to maintain a minimum unassigned
fund balance of 50.0 percent of total expenditures. The following graph presents this ratio for the last
five years compared to the goal:
Fund Balance as a Percentage of Expenditures
Year Ended December 31,
160 %
150%
140%
130%
120%
1 10%
100 %
90%
80%
70%
60%
50%
40%
2021
2022
2023
2024
2025
—4-- Fund Balance Policy
50.0%
50.0%
50.0%
50.0%
50.0%
*_ Unassigned Fund Balance
49.1%
59.0%
102.5%
109.8%
143.7%
As the graph illustrates, the City has met this goal by maintaining a year-end unassigned fund balance of
50.0 percent in the last four fiscal years.
A government, like any organization, requires a certain amount of equity to operate. A healthy financial
position allows the City to avoid volatility in tax rates; helps minimize the impact of state funding
changes; allows for the adequate and consistent funding of services, repairs, and unexpected costs; and is
a factor in determining the City's bond rating and resulting interest costs.
A trend that is typical to Minnesota local governments, especially the General Fund of cities, is the
unusual cash flow experienced throughout the year. The City's General Fund cash disbursements are
spread relatively evenly throughout the year, other than the impact of seasonal services such as
snowplowing, street maintenance, and recreation activities. Cash receipts of the General Fund are quite a
different story. Property taxes comprise about 70.6 percent of the fund's total annual revenue.
Approximately half of the City's annual property tax levy is collected and remitted to the City by the end
of June and the rest by December. Consequently, cities depend on the resources this fund balance
represents to provide adequate cash reserves to finance its everyday operations between these collections.
-10-
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GENERAL FUND REVENUE
The following graph reflects the City's General Fund revenue sources for 2025 compared to budget:
General Fund Revenue
Budget and Actual
Taxes
Intergovernmental
Fines and Forfeits
Charges for Services
Licenses and Permits
All Other
i
00
O° ' o°° ' °°o 1190, 1190, 1190, 100, 1190, ' °0, °o°
■ Budget ■ Actual
General Fund revenue for 2025 was $891,899, which was $201,012 (29.1 percent) more than budget.
Licenses and permits revenues were over budget by $79,735, due to the City budgeting conservatively
and there being more activity due to a new school addition in the current year. All other revenues are over
budget $59,813, primarily due to investment earnings being $35,951 over budget due to higher returns
than budgeted. Charges for service are over budget $46,908, primarily due to more construction and
planning activity than anticipated in the budget
The following graph presents the City's General Fund revenues by source for the last five years. The
graph reflects the City's reliance on property taxes as a source of revenue, which represents 70.6 percent
of General Fund revenues in 2025.
S70
$60
$50
$40
$3C
$2C
$1C
General Fund Revenue by Source
Year Ended December 31,
),000
),000
-
),000
-
),000
-
),000
-
r
)-000)
Fines and
Charges for
Licenses
All Other
Taxes
Intergovernmental
Forfeits
Services
and Perm its
82021
$453,686
$48,782
$267
$1,957
$27,109
$(1,809)
■2022
$481,016
$18,573
$970
$3,942
$35,072
$2,107
02023
$590,580
$79,647
$902
$5,329
$24,208
$17,248
02024
$621,152
$30,647
S843
1 $31,756
$46,144
$39,629
E20251
$636,828
$20,864
$726
1 $50,058
$109,010
1 $74413
Total General Fund revenue for 2025 was $121,728 (15.8 percent) higher than last year. Licenses and
permits increased $62,866, and all other revenues increased $34,784 for reasons discussed previously.
-11-
GENERAL FUND EXPENDITURES
The following graph illustrates components of General Fund spending for 2025 compared to budget:
General
Government
Public Safety
Public Works
All Other
General Fund Expenditures
Budget and Actual
O1 sob° o° °°°!?s°°°'°°°°°�°°°°°°o�sO°°�°°o �.°°'190
■ Budget ■ Actual
General Fund expenditures for 2025 were $628,276, which was $42,611 (6.4 percent) under budget.
Public works expenditures were $70,888 under budget, which was primarily due to projects anticipated in
the budget that did not occur. General government was $33,230 under budget due to a change in
personnel resulting in lower costs. All other expenditures were over budget $66,035, primarily in
conservation and development by $68,060, due to more planning activity than anticipated.
The following presents the City's General Fund expenditures by function for the last five years:
$275,000
$2
$2
$2
$1
$]
$1
$1
$5
General Fund Expenditures by Function
Year Ended December 31,
50,000
25.000
00,000
75,000 _
50,000
25,000
0
7
0,000
5,000 _
0,000
25, 000
� General
Government Public Safety Public Works Al] Other
■2021 $185,608 $111,465 $67,942
$149,319
■2022 $233.886 $120,607 $35,642 $74,534
112023 $198,546 $146,518 $47.128 $105,167
02024 $222,349 $207,710 $30,297 $140,471
■2025 $252,079 $207.700 $1,812 $166.685
Total General Fund expenditures for 2025 were $27,449 more than prior year. Public works was $28,485
less than prior year due to less project costs, and all other expenditures were $26,214 more than prior year
due to more planning activity.
-12-
Total General Fund expenditures for 2025 were $27,449 more than prior year. Public works was $28,485
less than prior year due to less project costs, and all other expenditures were $26,214 more than prior year
due to more planning activity.
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ENTERPRISE FUNDS OVERVIEW
The City maintains two enterprise funds to account for services the City provides that are financed
primarily through fees charged to those utilizing the service. This section of the report provides you with
an overview of the financial trends and activities of the City's enterprise funds, which include the Water
Fund and Sewer Fund.
ENTERPRISE FUNDS FINANCIAL POSITION
Tile following table summarizes the changes in the financial position of the City's enterprise funds during
the year ended December 31, 2025, presented both by classification and by fund:
Enterprise Funds Change in Financial Position
Net position of enterprise funds
Total by classification
Net investment in capital assets
Unrestricted
Total enterprise funds
Total by fund
Water
Sewer
Total enterprise funds
Net Position
as of December 31,
2025
2024
Change
$ 1,185,886 $ 1,161,981 $ 23,905
491,107 490,892 215
$ 1,676,993 $ 1,652,873 $ 24,120
$ 549,425 $ 541,873 $ 7,552
1.127.568 1,111.000 16,568
$ 1,676,993 $ 1,652,873 $ 24,120
In total, the net position of the City's enterprise funds increased by $24,120 during the year ended
December 31, 2025. Net investments in capital assets increased $23,905, due to new construction in
progress started in the current year.
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WATER FUND
The following graph presents five years of comparative operating results for the City's Water Fund:
Water Fund
Year Ended December 31,
$70,000
$60,000
$50.000
$40.000
$30,000
$20,000 —
$10.000 — —
$(10,000)
$(20,000)
$(30,000)
$(40,000)
.001
2021
2022
2023
2024
2025
Operating Revenue
$33,051
$26.330
$43.910
$24.102
$49,789
=Operating Expense
$36,958
$63,955
$49.576
$36,464
$37.391
—Operating Income (Loss)
$(3.907)
$(37.625)
$(5.666)
$(11362)
$12,397
Income (Loss) Before
Depreciation
$9.562
$(24.156)
$15.881
$3,148
$27,907
The Water Fund ended 2025 with a total net position of $549,425, an increase of $7,552 from the prior
year. Of this, $662,180 represents the investment in capital assets, leaving unrestricted net position deficit
of ($112,755).
Operating revenue in the Water Fund increased $25,686 from the prior year. The increase is due to an
increase in water access charges of $31,500.
Water Fund operating expenses for 2025 increased $927 from the previous year.
-14-
SEWER FUND
The following graph presents five years of comparative operating results for the City's Sewer Fund:
Sewer Fwid
Year Ended December 31,
$1 10,000
$100,000
$90,000
$80,000
$70,000
$60,000
$50,000
$40,000
$30.000
$20,000
$10, 000
$(10,000)
$(20.000)
$(30.000)
2021
2022
2023
2024
2025
�OperatingRevenue
$557823
$61,942
$58,207
$80,255
$78,194
DOperaong Expense
$54.102
$64,472
$75,447
$93,030
$99,559
—Operating Income (Loss)
$1,721
$(2,530)
$(177240)
$(12,775)
5(21,365)
—Income (Loss) Before Depreciation
S177787
$13,536
1 $79
1 $3,604
$(4,986)
The Sewer Fund ended 2025 with a total net position of $1,127,568, an increase of $16,568 from the prior
year. Of this, $523,706 represents the investment in capital assets, leaving unrestricted net position of
$603,862.
Operating revenue in the Sewer Fund decreased $2,061 from the prior year.
Sewer Fund operating expenses for 2025 increased $6,529 from the previous year.
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THIS PAGE INTENTIONALLY LEFT BLANK
GOVERNMENT -WIDE FINANCIAL STATEMENTS
In addition to fund -based information, the current reporting model for governmental entities also requires
the inclusion of two government -wide financial statements designed to present a clear picture of the City
l as a single, unified entity. These government -wide financial statements provide information on the total
I cost of delivering services, including capital assets and long-term liabilities.
1 STATEMENT OF NET POSITION
The Statement of Net Position essentially tells you what the City owns and owes at a given point in time,
on the last day of the fiscal year. Theoretically, net position represents the resources the City has leftover
J to use for providing services after its debts are settled. However, those resources are not always in
1 spendable lone, or there may be restrictions on how some of those resources can be used. Therefore, net
position is divided into three components: net investment in capital assets, restricted, and unrestricted.
The following table presents the components of the City's net position as of December 31, 2025, and
2024, for governmental activities and business -type activities:
As of December 31,
2025
2024
Change
Net position
Governmental activities
Net investment in capital assets
$ 789,756
$ 781,780
$ 7,976
Restricted
648,965
670,716
(21,751)
Unrestricted
1,480,919
1,153.448
327,471
Total governmental activities
2,919,640
2,605,944
313,696
Business -type activities
Net investment in capital assets
1,185,886
1,161,981
23,905
Unrestricted
491,107
490,892
215
Total business -type activities
1,676,993
1,652,873
24,120
Total net position
$ 4,596,633
S 4.2A,817
S > ;7.81()
The City's total net position at December 31, 2025, was $337,816 higher than the previous year-end. Of
the increase, $313,696 came from governmental activities and a $24,120 increase from business -type
activities.
Governmental activities unrestricted net position increased, mainly from the increase in the General Fund
balance.
The change in business -type activities net position was explained in the preceding discussion of the
activities of the enterprise funds.
I
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J
STATEMENT OF ACTIVITIES
The Statement of Activities tracks the City's yearly revenues and expenses, as well as any other
transactions that increase or reduce total net position. These amounts represent the full cost of providing
services. The Statement of Activities provides a more comprehensive measure than just the amount of
cash that changed hands, as reflected in the fund -based financial statements. This statement includes the
cost of supplies used, depreciation of long-lived capital assets, and other accrual -based expenses.
The following table presents the change in the net position of the City for the years ended December 31,
2025, and 2024:
2025
2024
Program
Expenses
Revenues
Net Change
Net Change
Net (expense) revenue
Governmental activities
General government
$ 286,256
$ 102,836
$ (183,420)
$ (162,388)
Public safety
207,700
7,753
(199,947)
(206,634)
Public works
79,166
113,522
34,356
(57,267)
Conservation and development
153,460
—
(153,460)
(89,298)
Interest and fiscal charges
25,476
—
(25,476)
(24,871)
Business -type activities
Water
37,391
49,788
12,397
(12,362)
Sewer
99,559
78,194
(21,365)
(12,775)
Total net (expense) revenue
$ 889,008
S 352,093
(536,915)
(565,595)
General revenues
Property taxes
712,587
699,840
Franchise fees
7,441
9,200
Grants and contributions not restricted
10,719
Investment earnings
105,460
55,734
Other revenues
49,243
8
Total general revenues
874.731
775.501
Change in net position
S 337,816 S 2o9.9oo
One of the goals of this statement is to provide a side -by -side comparison to illustrate the difference in the
way the City's governmental and business -type operations are financed. The table clearly illustrates the
dependence of the City's governmental operations on general revenues, such as property taxes. It also
shows if the City's business -type activities are not generating sufficient program revenues (service
charges and program -specific grants) to cover expenses.
-17-
ACCOUNTING AND AUDITING UPDATES
The following is a summary of Governmental Accounting Standards Board (GASB) standards expected
to be implemented in the next few years.
GASB STATEMENT No. 103, FINANCL4L REPORTING MODEL IMPROVEMENTS
The objective of this statement is to improve key components of the financial reporting model to enhance
1 its effectiveness in providing information that is essential for decision making and assessing a
government's accountability. This statement also addresses certain application issues.
This statement continues the requirement that the basic financial statements be preceded by
management's discussion and analysis (MD&A), which is presented as required supplementary
information (RSI). This statement requires that the information presented in MD&A be limited to the
1 related topics discussed in five sections: (1) Overview of the Financial Statements, (2) Financial
J Summary, (3) Detailed Analyses, (4) Significant Capital Asset and Long -Term Financing Activity, and
(5) Currently Known Facts, Decisions, or Conditions. Furthermore, this statement stresses that the
"1 detailed analyses should explain why balances and results of operations changed rather than simply
I presenting the amounts or percentages by which they changed. In addition, this statement continues the
requirement that information included in MD&A distinguish between that of the primary government and
its discretely presented component units.
This statement defines unusual or infrequent items as transactions and other events that are either unusual
in nature or infrequent in occurrence, and requires governments to display the inflows and outflows
related to each unusual or infrequent item separately.
This statement requires that the proprietary fund statement of revenues, expenses, and changes in fund net
rl position continue to distinguish between operating and nonoperating revenues and expenses. In addition
i to the subtotals currently required in a proprietary fund statement of revenues, expenses, and changes in
fund net position, this statement requires that a subtotal for operating income (loss) and noncapital
subsidies be presented before reporting other nonoperating revenues and expenses.
This statement requires governments to present each major component unit separately in the reporting
entity's statement of net position and statement of activities if it does not reduce the readability of the
statements. If the readability of those statements would be reduced, combining statements of major
component units should be presented after the fund financial statements.
This statement requires governments to present budgetary comparison information using a single method
of communication—RSI. Governments also are required to present (1) variances between original and
final budget amounts and (2) variances between final budget and actual amounts. An explanation of
significant variances is required to be presented in the notes to RSI.
The requirements of this statement are effective for fiscal years beginning after June 15, 2025, and all
reporting periods thereafter. Earlier application is encouraged.
I �
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I
GASB STATEMENT No. 104, DISCLOSURE OF CERTAIN CAPITAL ASSETS
The objective of this statement is to provide users of government financial statements with essential
information about certain types of capital assets.
This statement requires certain types of capital assets to be disclosed separately in the capital assets note
disclosures required by GASB Statement No. 34. Lease assets recognized in accordance with Statement
No. 87, Leases, and intangible right -to -use assets recognized in accordance with Statement No. 94,
Public -Private and Public -Public Partnerships and Availability Payment Arrangements, should be
disclosed separately by major class of underlying asset in the capital assets note disclosures. Subscription
assets recognized in accordance with Statement No. 96, Subscription -Based Information Technology
Arrangements, also should be separately disclosed. In addition, this statement requires intangible assets
other than those three types to be disclosed separately by major class.
This statement also requires additional disclosures for capital assets held for sale. A capital asset is
considered held for sale if (a) the government has decided to pursue the sale of the capital asset and (b) it
is probable that the sale will be finalized within one year of the financial statement date. Governments
should consider relevant factors to evaluate the likelihood of the capital asset being sold within the
established time frame. Capital assets held for sale are required to be evaluated each reporting period.
Governments should disclose (1) the ending balance of capital assets held for sale, with separate
disclosure for historical cost and accumulated depreciation by major class of asset, and (2) the carrying
amount of debt for which the capital assets held for sale are pledged as collateral for each major class of
asset.
The requirements of this statement are effective for fiscal years beginning after June 15, 2025, and all
reporting periods thereafter. Earlier application is encouraged.
GASB STATEMENT No. 105, SUBSEQUENT EVENTS
The objective of this statement is to improve the financial reporting requirements for subsequent events,
thereby enhancing consistency in their application and better meeting the information needs of financial
statement users.
This statement defines subsequent events as transactions or other events that occur after the date of the
financial statements but before the date the financial statements are available to be issued. This statement
describes the date the financial statements are available to be issued as the date at which (1) the financial
statements are complete in a form and format that complies with generally accepted accounting principles
and (2) approvals necessary for issuance have been obtained. That definition modifies the subsequent
events time frame throughout the GASB literature. This statement also requires the date through which
subsequent events have been evaluated to be disclosed.
This statement clarifies the subsequent events that constitute recognized and nonrecognized events and
establishes specific note disclosure requirements for nonrecognized events.
The requirements of this statement are effective for fiscal years beginning after June 15, 2026, and all
reporting periods thereafter. Earlier application is encouraged.
SO