HomeMy WebLinkAbout2016 Audit Management Report
CITY OF OAK PARK HEIGHTS, MINNESOTA
AUDIT MANAGEMENT LETTER
December 31, 2016
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To the Honorable Mayor and
Members of the City Council
City of Oak Park Heights, Minnesota
We have completed the 2016 audit of the City of Oak Park Heights, Minnesota and
have issued our report thereon. Our Independent Auditor’s Report is included in the City’s
Annual Financial Report.
This Management Letter provides a summary of audit results along with comparisons
and trend analysis of financial results.
Thank you for the opportunity to serve the City. We are available to discuss this report
with you.
REDPATH AND COMPANY, LTD.
St. Paul, Minnesota
April 17, 2017
4810 White Bear Parkway, St. Paul, MN, 55110 651.426.7000 www.redpathcpas.com
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City of Oak Park Heights,
Minnesota
Audit Management Letter
Report Summary
Report Summary
Several reports are issued in conjunction with the audit. A brief summary is as follows:
Report Name Elements of Report Overview
Annual Financial Report (AFR)
Financial statements Unmodified (“clean”)
opinion on the Financial
Footnotes
Statements
Required supplementary
information
Statistical information
Report on Internal Control and on Results of testing
No findings of
Compliance and Other Matters
Internal controls over financial noncompliance
reporting
No internal control findings.
Compliance with laws,
regulations, contracts and
grants
State Legal Compliance Report
Results of testing certain No findings of
provisions of Minnesota noncompliance
Statutes
Audit Management LetterIntended to be a working tool for
City Council
Comparisons and trend analysis
Outside factors influencing
City financial reporting
Policies and procedures
2
City of Oak Park Heights,
Minnesota
Audit Management Letter
Analysis of Selected Accounts
A NALYSIS OF S ELECTED A CCOUNTS
Summary of Financial Activity
The schedule below presents a condensed financial summary of all funds:
Increase
(Decrease) inFund Balance/
Revenue ExpendituresFund Balance/Net
and Otherand OtherTransfersNetPosition
FundSourcesUses(Net)Position12/31/16
1General$5,987,426$3,467,623($2,142,004)$377,799$5,010,332
Special Revenue Funds:
2Forfeiture and Seizure11,36513,093 - (1,728)7,368
3Economic Development316 - - 31633,568
4TIF District #1186,347150,630 - 35,717122,058
5TIF District #279 - - 79(405,964)
Debt Service Funds:
6Bonds of 20081,5635,298,0005,200,438(95,999) -
7Bonds of 2009432143,173142,000(741)19,000
8G.O. CIP Refunding Bonds of 2012A47,038114,052(4,760,438)(4,827,452)114,273
9Bonds of 2014231,638482,425139,000(111,787)1,052,932
Capital Project Funds:
10Capital Revolving379,88530,190 - 349,695375,884
11Budgeted Projects and Equipment Revolving75,250291,0821,120,871905,0393,328,036
12Street Reconstruction49,644426,813563,745186,5761,868,617
13City Hall Improvements882 - - 88293,681
14Park Development22,91852,852100,00070,066731,530
15Moelter Park3,550156,538 - (152,988)243,249
16Renewal and Replacement29,9551,171203,446232,2303,436,453
17Storm Sewer Renewal/Replacement4,160 - 31,57035,730476,449
18Sanitary Sewer Connection 5,607 - - 5,607460,035
19Water Connection12,507 - - 12,507625,266
20Storm Sewer Connection10,642 - - 10,6421,009,817
21Water Tower Rehabilitation42,27811,34940,47971,408440,013
22Well Rehabilitation1,2084,92910,4896,768134,487
23Sewer Rehabilitation501 - 1,9382,43955,616
Enterprise Funds:
24Water3,446,532582,062(431,914)2,432,5568,955,285
25Sanitary Sewer2,558,169797,744(208,387)1,552,0384,839,691
26Storm Sewer85,14362,819(11,233)11,091188,095
27$13,195,035$12,086,545$0$1,108,490$33,215,771
Total
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City of Oak Park Heights,
Minnesota
Audit Management Letter
Analysis of Selected Accounts
Property Taxes
A summary of property tax activity for the past five years is as follows:
20122013201420152016
Tax levy certified$4,228,062$4,538,193$4,784,896$5,022,731$5,191,593
Plus excess tax increment1,86211,23819,06322,14824,007
Net levy4,229,9244,549,4314,803,9595,044,8795,215,600
Receipts:
Current property taxes4,176,1254,515,2024,730,3425,029,8145,242,860
Delinquent property taxes5,82033,252(176,758)(6,734)23,803
Total receipts4,181,9454,548,4544,553,5845,023,0805,266,663
Adjustments(30,356) - ($289,042)($21,976)$22,588
Increase (decrease) in delinquent taxes receivable17,623977(38,667)(177)(28,475)
Delinquent taxes - January 182,734100,357101,33462,66762,490
Delinquent taxes - December 31$100,357$101,334$62,667$62,490$34,015
Current collection as a percent of current levy98.7%99.2%98.5%99.7%100.5%
Total collections as a percent of current levy98.9%100.0%94.8%99.6%101.0%
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City of Oak Park Heights,
Minnesota
Audit Management Letter
Analysis of Selected Accounts
Tax Levies, Tax Rates and Tax Capacity
A comparison of values for taxes payable in 2013 through 2017 is as follows:
20132014201520162017
Taxable market value$663,496,300$640,880,000$689,680,000$710,998,000$739,385,400
Tax capacity values:
Real estate$10,257,139$10,165,672$10,715,786$10,998,502$11,409,785
Personal property95,16895,59089,89693,89498,140
Subtotal10,352,30710,261,26210,805,68211,092,39611,507,925
Tax increment(108,254)(126,677)(185,870)(187,904)(217,932)
Fiscal disparity contribution(2,346,765)(2,467,230)(2,214,196)(2,292,994)(2,485,407)
Fiscal disparity distribution392,002386,218415,839388,319434,020
Total$8,289,290$8,053,573$8,821,455$8,999,817$9,238,606
Tax capacity rates54.898 59.400 56.803 57.725 56.217
Tax levy$4,538,193$4,784,896$5,022,731$5,191,593$5,193,661
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City of Oak Park Heights,
Minnesota
Audit Management Letter
Analysis of Selected Accounts
A schedule of tax capacity by classification is as follows:
CITY OF OAK PARK HEIGHTS
20152016
Percent ofPercent of
AmountCity TotalAmountCity Total
Real estate:
Agricultural$1,1720.0% $24,9830.2%
Seasonal1,5200.0% 1,4340.0%
Residential homestead1,954,15418.1% 1,975,92217.8%
Residential nonhomestead1,324,77512.3% 1,487,81513.4%
Commercial/industrial3,280,23230.3% 3,271,74829.6%
Public utility4,148,06338.4% 4,228,71038.1%
Railroad5,8700.1% 7,8900.1%
Total real estate10,715,78699.2% 10,998,50299.2%
Personal property89,8960.8% 93,8940.8%
Total tax capacity$10,805,682100.0% $11,092,396100.0%
As shown above, the City’s major taxpayer (Xcel Energy) is 38.1% of total tax capacity.
Tax Capacity by Property Class -2016
All Other
Residential Homestead
1.10%
17.8%
Public Utility
38.1%
Residential Nonhomestead
13.4%
Commercial/Industrial
29.6%
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City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
Pension Liability
In 2015, the City implemented GASB Statement No. 68, which required the reporting of
the City of Oak Park Heights’ proportionate share of the PERA Net Pension Liability (NPL).
During 2016, the City’s share of PERA’s NPL increased. The schedule below presents the
components of the change in NPL. During 2016, the City paid it’s required contribution to
the Plan. The required contribution is a percentage of eligible wages.
GeneralPolice
Employeesand Fire
PlanPlanTotal
Change in net pension liability:
(1)
Change in actuarial assumptions
$188,000$2,010,000$3,176,000
(2)
Change in proportion
(12,000)(9,000)(127,000)
(3)
Experience difference(57,000)(284,000)(554,000)
(4)
Earnings difference138,000422,0001,003,000
Oak Park Heights' share of 2016 pension expense129,000619,0001,194,000
Contributions to the plan by City of Oak Park Heights(55,000)(143,000)(366,000)
Contributions to the plan by State of Minnesota - (8,000)(10,000)
Increase in net pension liability331,0002,607,0004,316,000
Beginning net pension liability627,0001,045,0003,546,000
Ending net pension liability$958,000$3,652,000$7,862,000
1. The assumed investment return was changed from 7.9% to 7.5% for General and to 5.6% for Police and Fire.
The assumed post-retirement benefit increase was reduced.
2. The City's proportionate share of the total NPL decreased.
3. This is the change between expected and actual experience in the measurement of the
pension liability.
4. This is the difference between projected and actual earnings on plan investments.
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City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
G ENERAL F UND
The General Fund of the City is maintained to account for expenditures common to all
cities (general government, public safety, public works, and parks and recreation). A ten-
year history of major revenue sources that support the General Fund are as follows:
(1)
Property TaxesState AidsAll OtherTotal Revenue
YearAmountPercentAmountPercentAmountPercentAmountPercent
20072,687,730 79%181,233 5%547,531 16%3,416,494 100%
20083,156,807 82%120,701 3%592,538 15%3,870,046 100%
20093,134,378 82%249,822 7%439,143 11%3,823,343 100%
20103,305,004 79%180,174 4%673,969 17%4,159,147 100%
20113,583,487 87%75,860 2%468,768 11%4,128,115 100%
20124,245,360 90%69,677 1%423,580 9%4,738,617 100%
20134,433,202 87%86,775 2%568,367 11%5,088,344 100%
20144,620,521 89%79,354 2%481,640 9%5,181,515 100%
20155,104,956 89%135,133 2%492,192 9%5,732,281 100%
20165,347,035 89%87,542 1%549,159 10%5,983,736 100%
(1)
Since 2010, the General Fund has levied property taxes which have been transferred out to Debt Service Funds.
Those levies were $620,000, $608,000, and $559,000 for the years ended December 31, 2016, 2015, and 2014, respectively.
Major Revenue Sources -2016
State Aids
1%
All Other
10%
Property Taxes
89%
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City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
A graph of property taxes, state aids, and other revenue for the General Fund is as follows:
5,200,000
5,000,000
4,800,000
General Fund
4,600,000
Revenue by Source
4,400,000
4,200,000
4,000,000
3,800,000
State Aids
3,600,000
All Other
3,400,000
3,200,000
Property Taxes
3,000,000
Property Taxes without Debt
2,800,000
Levy
2,600,000
2,400,000
2,200,000
2,000,000
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
2007200820092010201120122013201420152016
State Aids
State aids of the General Fund have consisted of the following for the past seven years:
State Aid2010201120122013201420152016
Police aid58,930$ 63,278$ 61,242$ 70,031$ 76,839$ 78,435$ 85,502$
Utility valuation transition aid102,947 - - - - - -
Small cities grant - - - - - 54,188 -
Other state revenue18,29712,5828,43516,7442,5152,5102,040
Totals$180,174$75,860$69,677$86,775$79,354$135,133$87,542
Change($104,314)($6,183)$17,098($7,421)$55,779($47,591)
% Change(58%)(8%)25% (9%)70% (35%)
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City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
Other General Fund Revenue
Other revenue of the General Fund has consisted of the following for the past seven
years:
Description2010201120122013201420152016
Licenses and permits$197,181$131,081$163,986$90,910$137,543$125,704$214,182
Charges for services:
(1)
Enterprise66,42069,4253,8304,1804,2484,2424,400
Other77,38618,12713,698300,22380,618144,39984,382
Fines and forfeits58,36557,86255,02351,36056,53764,51540,876
(2)
Earnings on investments50,67541,37836,791(23,982)73,41218,62132,754
(3)
Other223,942150,895150,252145,646129,282135,177172,565
Total$673,969$468,768$423,580$568,337$481,640$492,658$549,159
(1)
Beginning in 2012, an administrative fee is charged only to the Storm Sewer Fund. As
a result, the transfers from Water and Sewer to the Renewal and Replacement Fund were
increased.
(2)
Earnings on investments is negative in 2013 due to a market value adjustment.
Although the City holds its investments to maturity and will receive par value at maturity,
accounting standards require the City to report its investments at market value at year-end.
The change in market value for 2013 resulted in an adjustment of $185,738.
(3)
The significant increase in other charges for services from 2012 to 2013 occurred
because the City received a $207,600 closing fee when Presbyterian Homes refinanced their
conduit debt agreement
10
City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
Budget Versus Actual Comparison
The General Fund balance increased by $378,000. Charges for services revenue
exceeding budget resulted in higher than anticipated revenue. Expenditures in most City
departments were also less than budgeted. A summary is as follows:
2016
Favorable
(Unfavorable)
BudgetActualVariance
Revenue:
General property taxes:
Current and delinquent$5,191,593$5,295,590$103,997
Abatement of property taxes- (23,549) (23,549)
Payment in lieu of taxes72,45074,9942,544
Total general property taxes5,264,0435,347,03582,992
Intergovernmental87,040111,14124,101
Licenses and permits86,677214,182127,505
Charges for services58,80088,78229,982
Fines and forfeits50,00040,876(9,124)
Earnings on investments - 32,75432,754
Refunds and reimbursements75,000148,96673,966
Donations and contributions - - -
Other - - -
Total revenue5,621,5605,983,736362,176
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City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
2016
Favorable
(Unfavorable)
BudgetActualVariance
Expenditures:
General government:
Mayor and council$119,002$86,166$32,836
City administration288,123268,57719,546
Legal 45,00019,27625,724
General management and building 191,160166,31324,847
Elections 11,1006,1204,980
Finance 198,620194,0404,580
Computer system 51,10036,72414,376
Audit 30,50025,2465,254
Insurance 399,177352,27946,898
Assessing 23,50023,068432
Planning and zoning 32,00027,8734,127
Engineering 42,85018,83324,017
General contingency 15,00076814,232
Total general government1,447,1321,225,283221,849
Public safety:
Police department 1,404,4361,288,956115,480
Building inspections 110,10497,90012,204
Fire protection 233,201235,587(2,386)
Civil defense3,600973,503
Animal control 1,6501781,472
Capital outlay - - -
Total public safety1,752,9911,622,718130,273
Public works:
Street maintenance 100,42157,70142,720
Snow removal 252,00093,779158,221
Sanitation210,150204,4345,716
Street lighting 72,00065,2326,768
Arborist 5,1504304,720
Tree removal and planting 35,00033,7351,265
Total public works674,721455,311219,410
Recreation:
Parks, playgrounds and rinks 183,241164,31118,930
Total expenditures4,058,0853,467,623590,462
Revenue over expenditures1,563,4752,516,113952,638
Other financing sources (uses):
Sale of property - 3,6903,690
Transfers to Debt Service Fund(620,000)(620,000) -
Transfers to Capital Project Fund(1,522,004)(1,522,004) -
Transfers to Enterprise Fund - -
Transfers to Nonmajor Governmental Fund - - -
Total other financing sources (uses)(2,142,004)(2,138,314)3,690
Net increase (decrease) in fund balance($578,529)$377,799$956,328
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City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
Transfers to other funds for 2016 and 2015 included the following amounts:
Fund20162015
Street Reconstruction364,200$ 353,600$
Storm Sewer Renewal/Replacement86,50084,000
Debt Service - 2008 Bonds440,000430,000
Debt Service - 2009 Bonds142,000140,000
Debt Service - 2014 Bonds38,00038,000
Budgeted Projects Fund971,304479,275
Park Development Fund100,000 -
Forfeiture and Seizure Fund - 3,000
$2,142,004$1,527,875
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City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
General Fund Reserves
The fund balance of the General Fund increased in 2016. The schedule below reflects the
General Fund balance for the past five years:
Year EndedFundIncrease
December 31,Balance(Decrease)
2012$3,669,633$3,669,633
20133,514,371(155,262)
20143,902,807388,436
20154,632,533729,726
20165,010,332377,799
CǒƓķ.ğƌğƓĭĻ
$6,000,000
$5,000,000
$4,000,000
Actual Fund Balance
Minimum Fund
Balance per policy
$3,000,000
$2,000,000
$1,000,000
$0
20122013201420152016
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City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
Reserve balances are an important component of City financial management. When
evaluating the adequacy of reserve balances, there are a number of important factors that
must be considered. Several areas to consider are illustrated as follows:
Need for Reserve Balances
Benefits of Reserve Balances
Cash Flow Timing
Favorable bond rating Supplements revenues
Difference
indicatorwith investment income
Intergovernmental
Capital Outlay
Revenue Cutbacks
Replacement
Avoids temporary
Provides resources for
overdrafts prior to major
minor projects or
receipts
feasibility reports
Avoids overburdening
Provides the City
of annual budgets for
greater options to deal
Emergency or
certain capital outlay
Specialwith unexpected events
Unanticipated
Projects
Expenditures
15
City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
The City’s current fund balance policy was adopted on November 15, 2011. The purpose
of the policy is to establish appropriate fund balance levels for each fund that is primarily
supported by property tax revenues or user fees.
The City’s fund balance policy states the City will maintain funds for the following:
Compensated absences
Cash flow
Contingencies
The compensated absences reserve is an amount equal to 50% of accumulated vacation
leave and 100% of that portion of sick leave that would be payable under the City’s
severance pay policy.
Assigned Fund Balance For Employee Benefits
December 31,
Employee Benefit20152016
Vacation leave carryover (50%)$49,753$46,494
Severance115,36693,842
Total$165,119$140,336
Rounded amount$140,000
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City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
Cash Flow Reserve
Property taxes and related state aids have accounted for 80% to 85% of the revenue of the
General Fund in recent years. Property taxes and the majority of state aid are not received
until July and December of each year (i.e., the second half of the year). As a result, the City
is required to have sufficient reserves at the beginning of the year to fund operations of the
first half of the year. The City’s fund balance policy states that its cash flow reserve should
be equal to 45-55% of the subsequent year’s budgeted operating expenditures. The
recommended cash flow reserve is $2,365,000, computed as follows:
Cash Flow Reserve
2017 tax levy $5,193,661
Less transfers out which occur after taxes are received(462,750)
$4,730,911
Reserve amount @ 50%$2,365,000
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City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
The following graph of monthly General Fund cash balances illustrates the impact of
receiving property taxes and state aids in the second half of the year:
$4,600,000
General Fund Monthly Cash Balances
$4,400,000
$4,200,000
$4,000,000
$3,800,000
$3,600,000
$1,842,000
$3,400,000
decrease
$3,200,000
$3,000,000
$2,800,000
$2,600,000
$2,400,000
$2,200,000
$2,000,000
$1,800,000
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
12/31/20151/31/20162/29/20163/31/20164/30/20165/31/20166/30/20167/31/20168/31/20169/30/201610/31/201611/30/201612/31/2016
Cash
$4,199,693$3,936,194$3,672,838$3,476,269$3,196,877$2,957,184$2,357,542$4,377,633$4,029,768$3,830,360$3,679,327$3,464,189$4,420,723
As shown above, the cash balance decreased $1,842,000 between January 1 and June 30,
illustrating the need for the cash flow reserve.
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City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
General Contingency Reserve
The amount of General Fund reserve required to meet emergency and/or unanticipated
expenditures is not readily quantifiable. Rather, the level of this requirement must be
established by the City based on the history of the City and the philosophy of "adequate"
reserve coverage. The City’s fund balance policy states this amount should be 10-15% of the
subsequent year’s General Fund budgeted expenditures, computed as follows:
General Contingency Reserve
December 31,
Description20152016
Ensuing year's budget$5,648,560$5,639,646
Reserve amount @ 15%$847,000$846,000
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City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
General Fund Balance Summary
In summary, the fund balance of the General Fund at December 31, 2016, was as follows:
General Fund Balance
ConstraintDecember 31,
20152016
Nonspendable:
Prepaid items$57,602$63,813
Restricted:
Small Cities Grant54,188 -
Assigned for:
Employee benefits165,000140,000
Unassigned:
Cash flow reserve2,370,0002,365,000
General contingency reserve847,000846,000
Snow Plow reserve122,272137,000
Remaining balance1,016,4711,458,519
Subtotal - unassigned4,355,7434,806,519
Total fund balance$4,632,533$5,010,332
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City of Oak Park Heights,
Minnesota
Audit Management Letter
Special Revenue Funds
S PECIAL R EVENUE F UNDS
Special Revenue Funds are a classification of funds to account for revenues (and
expenditures related thereto) segregated by City policy, Federal or State statutes for specific
purposes. The City maintained three Special Revenue Funds during 2016.
Forfeiture and Seizure Fund
This fund was established in 1991 to account for property forfeited pursuant to MS
609.531. A summary of the financial activity of this fund from inception is as follows:
Prior
Years2016Total
Revenue:
Intergovernmental $9,825$ - $9,825
Earnings on investments16,4658116,546
Reimbursements8,6014219,022
Confiscated property182,19310,863193,056
Sale of municipal property5,046 - 5,046
Transfer from General Fund3,000 - 3,000
Total revenue$219,376$11,365$236,495
Expenditures:
Public safety:
Materials and supplies$85,920$13,093$99,013
Contractual services28,998 - 28,998
Capital outlay101,116 - 101,116
Total expenditures$216,034$13,093$229,127
Fund balance - December 31, 2016$7,368
The use of these funds is restricted by MS 609.531 subd. 5 to "supplement the agency's
operating fund or similar fund for use in law enforcement."
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City of Oak Park Heights,
Minnesota
Audit Management Letter
Special Revenue Funds
Economic Development Fund
This fund was established in 1998 to account for the activity of the Oak Park Heights
Economic Development Authority. A summary of the financial activity of this fund is as
follows:
Prior
Years2016Total
Revenue:
Earnings on investments$36,221$316$36,537
Interfund loan interest1,113 - 1,113
Refunds and reimbursements3,532 - 3,532
Sale of municipal property76 - 76
Transfer from Capital Revolving Fund410,000 - 410,000
Total revenue$449,709$316451,258
Expenditures:
Community development:
Materials and supplies$645$ - 645
Contractual services45,914 - 45,914
Interfund loan interest70,000 - 70,000
Capital outlay290,018 - 290,018
Transfer to Capital Revolving Fund11,113 - 11,113
Total expenditures$417,690$0417,690
Fund balance - December 31, 2016$33,568
During 1998, the City purchased the Bell property and demolished the building in 1999.
In prior years, this fund had a deficit that was funded by a $260,000 interfund loan from the
Capital Revolving Fund. This fund did not have the resources to repay the interfund loan.
Therefore, the interfund loan was forgiven. If a sale of the Bell property occurs, the proceeds
should be receipted in the Capital Revolving Fund.
During 2010, the City purchased property on Osgood Avenue, with the intent to resell the
property. The purchase was funded by a $150,000 transfer from the Capital Revolving Fund.
This was not a loan from the Capital Revolving Fund, but the intent is to transfer back sales
proceeds to the Capital Revolving Fund once the property is sold.
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City of Oak Park Heights,
Minnesota
Audit Management Letter
Special Revenue Funds
TIF District #1 Fund
This fund was established in 2012 to account for Tax Increment District 1-1 (Oakgreen
Commons). A summary of the financial activity of this fund from inception is as follows:
Prior
Years2016Total
Revenue:
Tax increment$442,878$185,539$628,417
Investment income6288081,436
Transfer in from TIF #25,049 - 5,049
Total revenue$263,965$186,347$634,902
Expenditures:
General government:
TIF note payment$360,879$148,432$509,311
Other 1,3352,1983,533
$362,214$150,630$512,844
Fund balance - December 31, 2016$122,058
The City issued a TIF Note in the principal sum of $1,200,000. The TIF Note is payable
solely from “available” tax increment revenue. Available tax increment revenue is an
amount equal to 80% of tax increment revenue received by the City. The City has no
obligation on the note after February 21, 2026.
23
City of Oak Park Heights,
Minnesota
Audit Management Letter
Special Revenue Funds
TIF District #2 Fund
This fund was established in 2014. A summary of the financial activity is as follows:
Prior
Years2016Total
Revenue:
Investment income$25$79$104
Refunds and reimbursements 1,000 - 1,000
Total revenue$1,025$79$1,104
Expenditures:
Land purchase$341,710$ - $341,710
Other60,309 - 60,309
Transfer to TIF #15,049 - 5,049
Total expenditures$407,068$0$407,068
Fund balance - December 31, 2016($405,964)
The fund deficit was financed by an internal loan from the General Fund.
24
City of Oak Park Heights,
Minnesota
Audit Management Letter
Debt Service Funds
D EBT S ERVICE F UNDS
Debt Service Funds are a type of governmental fund to account for the accumulation of
resources for the payment of interest and principal on debt (other than Enterprise Fund debt).
The City maintained three Debt Service Funds during 2016.
25
City of Oak Park Heights,
Minnesota
Audit Management Letter
Debt Service Funds
Capital Improvement Bonds of 2008/2012A
The bond was issued to finance construction of City Hall. The repayment of the bond
issue is being funded by property tax levies. Taxes for 2009-2011 were levied in the Debt
Service Fund. Since 2012, property taxes have been levied in the General Fund and
transferred into the Debt Service Fund. In 2012, the Crossover Refunding Bonds of 2012A
were issued to refund the 2008 Bonds on December 15, 2016. The refunding resulted in a
debt service savings of $404,000. A schedule of actual and projected tax levies (per the bond
resolution) and debt payments are as follows:
City of Oak Park Heights, Minnesota
Projection of Cashflow
Capital Improvement Bonds of 2008/2012A
Cash and CurrentTotalCash and Current
Assets BalancePropertyBondInvestmentProjectedDebtAssets Balance
YearJanuary 1TaxesProceedsInterestReceiptsPaymentsDecember 31
2008$ - $ - $242,303$7,457$249,760$122,513$127,247
2009127,247336,292 - 3,250339,542380,02586,764
201086,764392,805 - 1,656394,461391,65089,575
201189,575400,902 - 1,556402,458392,52599,508
201299,508400,0005,191,2835,1975,596,480403,0305,292,958
20135,292,958410,000 - (7,988)402,012521,6775,173,293
20145,173,293420,000 - 45,662465,662526,7765,112,179
20155,112,179430,000 - 30,720460,720535,1755,037,724
20165,037,724440,000 - 48,601488,6015,412,052114,273
2017114,273410,000 - 782410,782409,758115,297
2018115,297420,000 - 804420,804418,658117,443
2019117,443430,000 - 829430,829432,258116,014
2020116,014440,000 - 844440,844445,458111,400
2021111,400460,000 - 843460,843458,258113,985
2022113,985475,000 - 873475,873470,658119,200
2023119,200490,000 - 925490,925492,658117,467
2024117,467505,000 - 944505,944509,058114,353
2025114,353520,000 - 964520,964539,95895,359
202695,359535,000 - 900535,900560,05871,201
202771,201550,000 - 800550,800569,29452,707
202852,707575,000 - 745575,745597,57630,876
Total$9,039,999$5,433,586$146,364$14,619,949$14,589,073
Assumptions
Property tax collection rate.....................................100%
Investment interest rate...........................................0.50%
Negative interest charged to funds?.....................no
26
City of Oak Park Heights,
Minnesota
Audit Management Letter
Debt Service Funds
Capital Improvement Bonds of 2009
The bond was issued as additional financing for construction of City Hall. The
repayment of the bond is being funded by property tax levies. Taxes are levied in the
General Fund and then transferred into the Debt Service Fund. A schedule of actual and
projected tax levies (per the bond resolution) and debt payments are as follows:
Cash and CurrentTransfers/TotalCash and Current
Assets BalancePropertyBondInvestmentProjectedDebtAssets Balance
YearJanuary 1TaxesProceedsInterestReceiptsPaymentsDecember 31
2009$ - $ - $21,582$1,357$22,939$7,588$15,351
201015,351122,000 - 720122,720130,3507,721
20117,721134,000 - 492134,492129,15013,063
201213,063136,000 - 460136,460132,65016,873
201316,873138,000 - 133138,133135,76019,246
201419,246139,000 - 586139,586138,56020,272
201520,272140,000 - 327140,327140,85819,741
201619,741142,000 - 432142,432143,17319,000
201719,000143,000 - 392143,392144,11418,278
201818,278144,000 - 393144,393150,08412,587
201912,587145,000 - 346145,346155,3262,607
Total$1,383,000$21,582$5,638$1,410,220$1,407,613
Assumptions
Property tax collection rate................................100%
Investment interest rate....................................1.00%
Negative interest charged to funds?..................no
27
City of Oak Park Heights,
Minnesota
Audit Management Letter
Debt Service Funds
Capital Improvement Bonds of 2014A
The bond was issued as financing for the 2015 street reconstruction project. The
repayment of the bond is being funded by property tax levies and special assessments. Taxes
are levied in the General Fund and then transferred into the Debt Service Fund. Assessments
are levied in the Debt Service Fund. A schedule of actual and projected tax and assessment
levies (per the bond resolution) and debt payments are as follows:
City of Oak Park Heights, Minnesota
Projection of Cashflow
Capital Improvement Bonds of 2014A
Bond
Cash and CurrentTransfers/ProceedsTotalCash and Current
Assets BalancePropertySpecialand OtherInvestmentProjectedDebtAssets Balance
YearJanuary 1TaxesAssessmentsReceiptsInterestReceiptsPaymentsDecember 31
2014$ - $ - $218,041$87,054$2,021$307,116$45,859$261,257
2015261,257411,314381,071359,0122,1651,153,562250,1001,164,719
20161,164,719139,000220,052 - 11,586370,638481,8001,053,557
20171,053,557152,000118,419 - 460270,879473,800850,635
2018850,635142,000114,424 - 133256,557465,800641,393
2019641,393144,000110,430 - 586255,016432,800463,609
2020463,609145,000106,436 - 327251,763425,300290,072
2021290,072147,000102,442 - 327249,769392,800147,041
2022147,041149,00098,448 - 1,678249,126385,80010,366
202310,366150,00094,453 - 348244,801353,800(98,632)
2024(98,632)152,00090,459 - - 242,459344,050(200,223)
2025(200,223)153,00037,760 - - 190,760319,300(328,763)
Total$1,884,314$1,692,435$446,066$19,631$4,042,446$4,371,209
Assumptions
Special assessment collection rate....................100%
Property tax collection rate................................100%
Investment interest rate....................................1.00%
Negative interest charged to funds?..................no
28
City of Oak Park Heights,
Minnesota
Audit Management Letter
Capital Project Funds
C APITAL P ROJECT F UNDS
A summary of the financial activity of the Capital Project Funds for the year ended
December 31, 2016 is as follows:
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29
City of Oak Park Heights,
Minnesota
Audit Management Letter
Capital Project Funds
Budgeted Projects and Equipment Revolving Fund
The Budgeted Projects and Equipment Revolving Fund (formerly Capital Improvements
Fund) was established in 1978 to account for monies set aside for various capital
improvements.
This fund is budgeted annually by the City Council in conjunction with the City's budget
process. As part of such process, the City allocates the monies in this fund to specific
projects and/or programs. Such allocation/designations were as follows at December 31,
2016:
FundRevenuesFund
BalanceandBalance
Purpose12/31/15TransfersExpenditures12/31/16
1Sealcoat/crack seal$102,493$100,000$27,610$174,883
2Mill and overlay100,000504,1882,161602,027
3Fire station100,000100,00092,822107,178
4City Hall parking lot9,094 - - 9,094
5Municipal building262,51915,000 - 277,519
6Recreation:
7 Park and trail improvements209,57650,000 - 259,576
8 Trail maintenance94,30020,00039,80074,500
9 Park building maintenance167,00050,000 - 217,000
10 Brekke Park memorial fund394 - - 394
11Computers57,66621,7006,61072,756
12CHIP digital maps - 10,000 - 10,000
13Vehicles:
14 Police165,25739,37575,587129,045
15 Public works189,89934,668 - 224,567
16 Building official238 - - 238
17Furniture and equipment:
18 General - - - -
19 Building inspections - - - -
20 Police 3451,9215701,696
21Trees72,48353,60030,77595,308
22Emerald ash borer120,000 - - 120,000
23Public works equipment328,21640,5009,007359,709
24Police radio equipment41,0803,000 - 44,080
25Police computer equipment20,1265,000 - 25,126
26Police Equipment - 5,4205,420 -
27Backup software9,388 - - 9,388
28Coalition of utility cities16,000 - - 16,000
29Civil defense16,000 - - 16,000
30Meter change out118,30079,100 - 197,400
31Generator replacement10,5003,500 - 14,000
32Comprehensive plan - 37,50072036,780
33Unallocated212,12321,649 - 233,772
Totals$2,422,997$1,196,121$291,082$3,328,036
30
City of Oak Park Heights,
Minnesota
Audit Management Letter
Enterprise Funds
E NTERPRISE F UNDS
Enterprise funds account for water, sanitary sewer and storm sewer operations.
Water Utility Fund
A chart of income from operations for the past seven years is as follows:
$1,200,000
Water Operating
Revenue & Expense
$1,000,000
$800,000
Depreciation
Transfer Out
All Other Expenses
$600,000
Contractual Services
Personal Services
Operating Revenue
$400,000
$200,000
$-
2010201120122013201420152016
31
City of Oak Park Heights,
Minnesota
Audit Management Letter
Enterprise Funds
Sewer Utility Fund
A chart of income from operations for the past seven years is as follows:
$1,200,000
Sewer Operating
Revenue & Expense
$1,000,000
$800,000
Depreciation
Transfer Out
Personal Services
$600,000
All Other Expenses
MCES
Operating Revenue
$400,000
$200,000
$-
2010201120122013201420152016
32
City of Oak Park Heights,
Minnesota
Audit Management Letter
Enterprise Funds
The City’s water and sewer rates for the past seven years are as follows:
Monthly
RateQuarterly Rate
EffectiveEffectiveEffectiveEffectiveEffectiveEffectiveEffectiveEffective
Type of Charge07/01/0901/01/1001/01/1101/01/1201/01/1301/01/1401/01/1501/01/16
Water:
Base fee$28.31$28.31$29.91$30.70$30.70$30.70$38.19$38.19
Charge per 1,000 gallons for:
Usage between 15,000 and 50,000 gallons$1.96$1.96$2.48$2.55$2.55$2.55$3.05$3.05
Usage between 50,000 and 99,000 gallons$2.68$2.68$2.97$3.05$3.05$3.05$3.55$3.55
Usage between 99,000 and 200,000 gallons$3.23$3.23$3.81$3.92$3.92$3.92$4.42$4.42
Usage in excess of 200,000 gallons$3.23$3.91$4.61$4.74$4.74$4.74$5.24$5.24
Sewer:
Base fee$54.28$56.99$60.41$62.10$66.00$66.00$66.00$70.50
Charge per 1,000 gallons for:
Usage between 15,000 and 50,000 gallons$3.70$4.07$4.31$4.43$4.60$4.80$4.90$5.20
Usage in excess of 50,000 gallons$3.70$4.50$4.77$4.90$4.90$5.20$5.30$5.60
33
City of Oak Park Heights,
Minnesota
Audit Management Letter
Enterprise Funds
Storm Sewer Utility Fund
The City created the stormwater utility during 1999. A monthly fee (effective October 1,
1999) was established at $1 per household and $10 per acre for commercial properties. The
fee for vacant residential property is 50 cents per month and undeveloped commercial
property is $1.50 an acre per month.
A chart of income from operation for the past seven years is as follows:
$100,000
Storm Sewer Operating
Revenue & Expense
$90,000
$80,000
$70,000
$60,000
Transfer Out
All Other Expenses
Contractual Services
$50,000
Personal Services
Operating Revenue
$40,000
$30,000
$20,000
$10,000
$-
2010201120122013201420152016
34
City of Oak Park Heights,
Minnesota
Audit Management Letter
Communication With Those Charged With Governance
C OMMUNICATION W ITH T HOSE C HARGED W ITH G OVERNANCE
We have audited the financial statements of the governmental activities, the business-
type activities, each major fund, and the aggregate remaining fund information of the City of
Oak Park Heights, Minnesota (the City) for the year ended December 31, 2016. Professional
standards require that we provide you with information about our responsibilities under
generally accepted auditing standards and the standards applicable to financial audits
contained in Government Auditing Standards, as well as certain information related to the
planned scope and timing of our audit. We have communicated such information in our
letter to you dated January 4, 2017. Professional standards also require that we communicate
to you the following information related to our audit.
Qualitative Aspects of Accounting Practices
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 to the financial
statements. No new accounting policies were adopted and the application of existing policies
was not changed during 2016. However, the City implemented the following accounting
standards during 2016:
GASB Statement No. 72, Fair Value Measurements and Application. This standard
enhanced disclosures regarding investments.
GASB Satement No. 79, Certain External Investment Pools and Pool Participants.
This standard enhanced disclosures regarding investments.
GASB Statement No. 77, Tax Abatement Disclosures. This standard enhanced
disclosures regarding pay-as-you-go tax increment agreements.
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.
35
City of Oak Park Heights,
Minnesota
Audit Management Letter
Communication With Those Charged With Governance
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 estimates affecting the financial statements were management’s
estimation of the net pension liability, pension related deferred inflows and outflows of
resources, and pension expense. We evaluated the key factors and assumptions used to
develop these estimates in determining that they are reasonable in relation to the financial
statements taken as a whole. The pension estimates are based on actuarial studies.
Certain financial statement disclosures are particularly sensitive because of their
significance to financial statement users. The most sensitive disclosure affecting the
financial statements are in Note 7 – Defined Benefit Pension Plans.
The disclosures in the financial statements are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no 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. There were no uncorrected misstatements that have an
effect on our opinion on the financial statements.
36
City of Oak Park Heights,
Minnesota
Audit Management Letter
Communication With Those Charged With Governance
Disagreements with Management
For purposes of this letter, 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.
Management Representations
We have requested certain representations from management that are included in the
management representation letter dated April 17, 2017.
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
governmental unit’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
governmental unit’s auditors. However, these discussions occurred in the normal course of
our professional relationship and our responses were not a condition to our retention.
37
City of Oak Park Heights,
Minnesota
Audit Management Letter
Communication With Those Charged With Governance
Strengthen Internal Controls
There are two areas where we believe internal controls can be strengthened. First, in
accounts payable, the Finance Director has the ability to manually sign checks and has access
to the Mayor’s signature date. We recommend improving controls by having the Accountant
document review of checks signed by the Finance Director. Second, in payroll, controls can
be strengthened by having someone other than the Finance Director or Accountant review
the payroll report on a periodic basis.
Other Information in Documents Containing Audited Financial Statements
We applied certain limited procedures to the management’s discussion and analysis, the
budgetary comparison information and the schedules of proportionate share of pension
liability, which required supplementary information (RSI) that supplements the basic
financial statements. Our procedures consisted of inquiries of management regarding the
methods of preparing the information and comparing the information for consistency with
management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We did not audit
the RSI and do not express an opinion or provide any assurance on that RSI.
We were engaged to report on the combining and individual nonmajor fund financial
statements and schedules, which accompany the financial statements but are not RSI. With
respect to this supplementary information, we made certain inquiries of management and
evaluated the form, content, and methods of preparing the information to determine that the
information complies with accounting principles generally accepted in the United States of
America, the method of preparing it has not changed from the prior period, and the
information is appropriate and complete in relation to our audit of the financial statements.
38
City of Oak Park Heights,
Minnesota
Audit Management Letter
Communication With Those Charged With Governance
We compared and reconciled the supplementary information to the underlying accounting
records used to prepare the financial statements or to the financial statements themselves.
We are not engaged to report on the introductory section, statistical section and other
information section, which accompany the financial statements but are not RSI. We did not
audit or perform other procedures on this other information and we do not express an opinion
or provide any assurance on it.
Closing
This information is intended solely for the information and use of the City Council and
Management of the City of Oak Park Heights, Minnesota and is not intended to be, and
should not be, used by anyone other than these specified parties.
39