HomeMy WebLinkAbout2011 Management Report
CITY OF OAK PARK HEIGHTS, MINNESOTA
AUDIT MANAGEMENT LETTER
December 31, 2011
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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 very brief summary is as
follows:
Report Name Elements of Report Overview
Annual Financial Report
(AFR)
Unqualified (“clean”)
Financial statements
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
One internal control finding
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
Statement of Activities
Statement of Activities
One of the financial statement presentations required by GASB 34 is the Statement of
Activities. This schedule presents the net cost of providing various activities and the extent
to which these activities are funded by property taxes, and investment earnings.
Program RevenuesNet (Expense) Revenue and
OperatingCapitalChanges in Net Assets
Charges ForGrants andGrants andGovernmentalBusiness-Type
Functions/ProgramsExpensesServicesContributionsContributionsActivitiesActivitiesTotal
Bldg
Admin Charges to
permits,
Park donations
State police aid
Enterprise Funds
fines
(1)
Governmental activities:
General government$1,381,589$101,999$4,000$ - ($1,275,590)$ - ($1,275,590)
Public safety1,411,690293,35374,248 - (1,044,089) - (1,044,089)
Public works999,47346,68518,1544,443(930,191) - (930,191)
Parks and recreation239,100 - - 11,500(227,600) - (227,600)
Interest on long-term debt275,196 - - - (275,196) - (275,196)
Total governmental activities4,307,048442,03796,40215,943(3,752,666)0(3,752,666)
Business-type activities:
Water472,040648,6634,594 - - 181,217181,217
Sanitary sewer746,656782,266 - - - 35,61035,610
Storm sewer48,36066,740 - - - 18,38018,380
Total business-type activities1,267,0561,497,6694,59400235,207235,207
Total $5,574,104$1,939,706$100,996$15,943(3,752,666)235,207(3,517,459)
General revenues:
General property taxes3,934,309 - 3,934,309
Grants and contributions not
restricted to specific programs2,040 - 2,040
Unrestricted investment earnings239,76317,780257,543
Gain on sale of capital assets8,960 - 8,960
Other17,718 - 17,718
Transfers(20,285)20,285 -
Total general revenues and transfers4,182,50538,0654,220,570
Change in net assets429,839273,272703,111
Net assets - January 1, as previously reported26,063,0757,919,82133,982,896
Prior period adjustment - (92,627)(92,627)
Net assets - January 1, as restated26,063,0757,827,19433,890,269
Net assets - December 31$26,492,914$8,100,466$34,593,380
(1)
Includes General, Special Revenue, Debt Service and Capital Project Funds.
3
City of Oak Park Heights,
Minnesota
Audit Management Letter
Analysis of Selected Accounts
ASA
NALYSIS OF ELECTEDCCOUNTS
Summary of Financial Activity
The schedule below presents a condensed financial summary of all funds:
All Funds Financial Summary - 2011
Increase
(Decrease) inFund Balance/
Revenue ExpendituresFund Balance/Net
and Otherand OtherTransfersNetAssets
FundSourcesUses(Net)Assets12/31/11
General
1$4,138,125$3,038,121($812,240)$287,764$3,261,561
Special Revenue Funds:
2Forfeiture and Seizure3,47449,340 - (45,866)8,155
3Economic Development5793,831 - (3,252)31,198
Debt Service Funds:
4Bonds of 2008402,458392,525 - 9,93399,508
5Bonds of 2009492129,150134,0005,34213,063
Capital Project Funds:
6Capital Revolving28,09024,013 - 4,077298,858
7Budgeted Projects and Equipment Revolving28,003392,763402,59037,8301,025,943
8Street Reconstruction32,806 - 320,000352,8062,133,008
9City Hall Improvements8,28782,496 - (74,209)115,659
10Park Development13,155 - (21,450)(8,295)745,712
11Moelter Park10,91010,332 - 578627,700
12Renewal and Replacement72,013 - 184,258256,2714,378,791
13Storm Sewer Renewal/Replacement4,569 - 78,00082,569322,522
14Sanitary Sewer Connection 9,664 - - 9,664407,401
15Water Connection21,385 - - 21,385435,480
16Storm Sewer Connection18,237 - - 18,237936,855
17Water Tower Rehabilitation31,393432,651113,875(287,383)52,996
18Well Rehabilitation1,374 - 13,33314,70793,433
19Sewer Rehabilitation747 - - 74743,594
Enterprise Funds:
20Water1,093,567481,769(270,610)341,1885,017,003
21Sanitary Sewer789,246760,422(133,456)(104,632)2,952,629
22Storm Sewer69,881117,492(8,300)(55,911)130,834
23 Total$6,778,455$5,914,905$0$863,550$23,131,903
4
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:
20072008200920102011
Tax levy certified$2,789,655$3,367,480$3,657,865$3,754,704$3,964,704
Less market value homestead credit deduction(81,066)(81,250)(83,010)(92,249)(93,934)
Net levy2,708,5893,286,2303,574,8553,662,4553,870,770
Receipts:
Current property taxes2,646,4213,211,3923,417,6013,584,0273,819,220
Delinquent property taxes19,56236,77030,36474,11892,269
Total receipts2,665,9833,248,1623,447,9653,658,1453,911,489
Adjustments658(48,826)(59,731)(9,992)(9,361)
Increase (decrease) in delinquent taxes receivable43,264(10,758)67,159(5,682)(50,080)
Delinquent taxes - January 138,83182,09571,337138,496132,814
Delinquent taxes - December 31$82,095$71,337$138,496$132,814$82,734
Current collection as a percent of current levy97.7%97.7%95.6%97.9%98.7%
Total collections as a percent of current levy98.4%98.8%96.5%99.9%101.1%
5
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 2008 through 2012 is as follows:
20082009201020112012
Taxable market value$673,570,600$718,753,400$682,742,100$669,938,700$643,608,300
Tax capacity values:
Real estate$10,168,436$11,011,415$10,486,193$10,335,277$10,095,639
Personal property82,32987,62386,68192,02390,840
Subtotal10,250,76511,099,03810,572,87410,427,30010,186,479
Fiscal disparity contribution(1,508,660)(2,177,678)(2,492,111)(2,117,456)(2,336,411)
Fiscal disparity distribution532,706556,955546,593508,498405,806
Total$9,274,811$9,478,315$8,627,356$8,818,342$8,255,874
Tax capacity rates36.343 38.732 43.845 45.027 51.710
Tax levy$3,367,480$3,657,865$3,754,704$3,964,704$4,228,062
6
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
20102011
Percent ofPercent of
AmountCity TotalAmountCity Total
Real estate:
Agricultural$7990.0% $7990.0%
Seasonal1,7630.0% 3,1260.0%
Residential homestead2,226,22521.1% 2,146,10420.7%
Residential nonhomestead1,076,12210.2% 1,053,38310.1%
Commercial/industrial3,865,34236.6% 3,673,10735.2%
Public utility3,311,71631.3% 3,454,88033.1%
Railroad4,2260.0% 3,8780.0%
Total real estate10,486,19399.2% 10,335,27799.1%
Personal property86,6810.8% 92,0230.9%
Total tax capacity$10,572,874100.0% $10,427,300100.0%
Tax Capacity by Property Class -2011
Personal Property 0.9%
Residential
Homestead 20.7%
Public Utility 33.1%
Residential
Nonhomestead 10.1%
Commercial/Industrial
35.2%
7
City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
GF
ENERALUND
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:
Property TaxesState AidsAll OtherTotal Revenue
YearAmountPercentAmountPercentAmountPercentAmountPercent
2002$1,748,63471%$160,3816%$566,93823%$2,475,953100%
20031,859,203 71%60,410 2%706,210 27%2,625,823 100%
20041,910,848 72%61,479 2%671,683 26%2,644,010 100%
20052,218,213 71%78,137 3%819,616 26%3,115,966 100%
20062,423,246 77%92,370 3%633,057 20%3,148,673 100%
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%
Major Revenue Sources -2011
State Aids
2%
All Other
11%
Property Taxes
87%
8
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:
$3,600,000
General Fund
$3,400,000
Revenue by
$3,200,000
Source
$3,000,000
$2,800,000
$2,600,000
State Aids
$2,400,000
All Other
$2,200,000
$2,000,000
Property Taxes
$1,800,000
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$ -
2002200320042005200620072008200920102011
State Aids
State aids of the General Fund have consisted of the following for the past seven years:
State Aid2005200620072008200920102011
Market value homestead credit$ - $ - $81,066$40,625$ - $ - $ -
LGA - 27,79827,98414,028 - - -
Police aid61,09762,53266,52560,40469,39258,93063,278
Utility valuation transition aid - - - - 178,390102,947 -
Other state revenue17,0402,0405,6585,6442,04018,29712,582
Totals$78,137$92,370$181,233$120,701$249,822$180,174$75,860
Change$14,233$88,863($60,532)$129,121($69,648)($104,314)
% Change18% 96% (33%)107% (28%)(58%)
9
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:
Description2005200620072008200920102011
Licenses and permits$365,512$306,266$155,820$203,041$100,074$197,181$131,081
Charges for services:
Enterprise94,14064,46563,20062,04064,40066,42069,425
Construction/engineering fee5,8592,35412,5682,602 - - -
Other31,25111,94656,78915,6789,89077,38618,127
Inspections84,719 - - - - - -
Fines and forfeits69,85081,23066,18963,60270,10258,36557,862
Earnings on investments55,43179,61093,95790,00455,43950,67541,378
(1)
Other
112,85487,18691,647155,571139,238223,942150,895
Total$819,616$633,057$540,170$592,538$439,143$673,969$468,768
(1)
The significant increase in other revenue from 2009 to 2010 occurred because the City
received a $73,895 Federal Energy Efficiency and Conservation Block Grant in 2010, which
is classified in this category.
10
City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
Budget Versus Actual Comparison
The General Fund balance increased by $287,764. A strong property tax collection rate
and collecting more licenses and permit revenue than budgeted resulted in higher than
anticipated revenue. Expenditures in most City departments were also less than budgeted.
Positive budget variances in City administration ($15,800), engineering ($18,400), police
department ($71,100), snow removal ($28,300) and parks and recreation ($49,200)
accounted for the largest budget to actual variances. A summary is as follows:
BudgetActualVariance
Revenue$3,986,220$4,128,115$141,895
Expenditures3,305,4803,038,121267,359
Revenue over expenditures680,7401,089,994409,254
Other financing sources (uses):
Sale of property - 10,01010,010
Transfers out(780,740)(812,240)(31,500)
Net change in fund balance($100,000)$287,764$387,764
11
City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
General Fund Reserves
The fund balance of the General Fund increased in 2011. The schedule below reflects the
General Fund balance for the past fifteen years:
Year EndedFundIncrease
December 31,Balance(Decrease)
1997$1,246,347($66,246)
19981,186,663(59,684)
19991,191,0814,418
20001,280,10189,020
20011,173,118(106,983)
20021,329,229156,111
20031,694,611365,382
20041,847,608152,997
20052,103,743256,135
20062,302,502198,759
20072,515,620213,118
20082,616,370100,750
20092,720,012103,642
20102,973,797253,785
20113,261,561287,764
12
City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
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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
Special
with unexpected events
Unanticipated
Projects
Expenditures
13
City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
In 1987, the City adopted Resolution 87-10-42 establishing General Fund reserves/
designations for cash flow, employee benefits and general contingency based upon formulas
for each category. The formula for the designation for contingent employee benefits was
amended by the City Council on December 11, 2001 and on November 25, 2008. In
response to the issuance of GASB Statement No. 54, Fund Balance Reporting and
Governmental Fund Type Definitions, the City adopted a Fund Balance Policy 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.
GASB Statement No. 54 categorizes fund balance of governmental funds into five areas:
Nonspendable, Restricted, Committed, Assigned and Unassigned. The City’s fund balance
policy states the City will maintain funds for compensated absences in 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. This amount has been assigned by the City at
December 31, and is computed based upon accrued, but unpaid, employee benefits as
follows:
Assigned Fund Balance For Employee Benefits
December 31,
Employee Benefit20102011
Vacation leave carryover (50%)$41,120$41,410
Severance131,366137,101
Total$172,486$178,511
Rounded amount$179,000
14
City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
The fund balance policy also states the City will maintain an unassigned fund balance in
the General Fund sufficient to meet the cash flow needs of the City (Cash Flow Reserve) and
to provide for emergencies or contingencies such as revenue short falls or unexpected budget
over runs (General Contingency Reserve).
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 $1,910,531, computed as follows:
Cash Flow Reserve
2012 tax levy $4,228,062
Less transfers out which occur after taxes are received(407,000)
$3,821,062
Reserve amount @ 50%$1,910,531
15
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:
$3,400,000
General Fund Monthly Cash Balances
$3,200,000
$3,000,000
$2,800,000
$1,645,000
$2,600,000
decrease
$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
12/31/20101/31/20112/28/20113/31/20114/30/20115/31/20116/30/20117/31/20118/31/20119/30/201110/31/201111/30/201112/31/2011
Cash
$3,006,856$2,742,380$2,586,183$2,362,676$2,082,063$1,875,514$1,361,584$2,933,854$2,723,591$2,512,375$2,325,405$2,136,133$3,250,191
As shown above, the cash balance decreased $1,645,000 between January 1 and June 30,
illustrating the need for the cash flow reserve.
16
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,
Description20102011
Ensuing year's budget$4,086,217$4,654,684
Less 50% of transfers out(390,370) -
Total$3,695,847$4,654,684
Reserve amount @ 15%$554,000$698,000
Using guidelines of the City’s new fund balance policy established in 2011, it is no
longer the intent to exclude certain transfers from the calculation.
17
City of Oak Park Heights,
Minnesota
Audit Management Letter
General Fund
General Fund Balance
In summary, the fund balance of the General Fund at December 31, 2011, was as follows:
General Fund Balance
Constraint
December 31,
20102011
Nonspendable:
Prepaid items$ - $2,057
Assigned for:
Employee benefits172,000179,000
Ensuing year's budget100,000 -
Subtotal - assigned272,000179,000
Unassigned:
Cash flow reserve1,593,0001,911,000
General contingency reserve554,000698,000
Remaining balance554,797471,504
Subtotal - unassigned2,701,7973,080,504
Total fund balance$2,973,797$3,261,561
18
City of Oak Park Heights,
Minnesota
Audit Management Letter
Special Revenue Funds
SRF
PECIALEVENUEUNDS
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 two Special Revenue Funds during 2011.
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
Years2011Total
Revenue:
Intergovernmental - bulletproof vests$9,825$ - $9,825
Earnings on investments15,63251416,146
Reimbursements8,601 - 8,601
Confiscated property163,2962,960166,256
Sale of municipal property5,046 - 5,046
Total revenue$202,400$3,474205,874
Expenditures:
Public safety:
Materials and supplies$57,671$12,94470,615
Contractual services21,1994,78925,988
Capital outlay69,50931,607101,116
Total expenditures$148,379$49,340197,719
Fund balance - December 31, 2011$8,155
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."
19
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
Years2011Total
Revenue:
Earnings on investments$34,401$579$34,980
Interfund loan interest1,113 - 1,113
Refunds and reimbursements2,531 - 2,531
Sale of municipal property76 - 76
Transfer from Capital Revolving Fund410,000 - 410,000
Total revenue$448,121$579448,700
Expenditures:
Community development:
Materials and supplies$457$ - 457
Contractual services42,0833,83145,914
Interfund loan interest70,000 - 70,000
Capital outlay290,018 - 290,018
Transfer to Capital Revolving Fund11,113 - 11,113
Total expenditures$413,671$3,831417,502
Fund balance - December 31, 2011$31,198
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.
20
City of Oak Park Heights,
Minnesota
Audit Management Letter
Debt Service Funds
DSF
EBTERVICEUNDS
The financial statements for the G.O. Capital Improvement Bonds of 2008 and 2009 are
presented in Statements 15 and 16 of the 2011 Annual Financial Report. 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 two
Debt Service Funds during 2011.
21
City of Oak Park Heights,
Minnesota
Audit Management Letter
Debt Service Funds
Capital Improvement Bonds of 2008
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. A $400,000 property tax has been levied in the General Fund for 2012 and
will be transferred into the Debt Service Fund. A schedule of actual and projected tax levies
(per the bond resolution) and debt payments are as follows:
City of Oak Park Heights, Minnesota
Projection of Cashflow
Capital Improvement Bonds of 2008
Cash and CurrentTotalCash and Current
Assets BalancePropertyBondInvestmentProjectedDebtAssets Balance
YearJanuary 1TaxesProceedsInterestReceiptsPaymentsDecember 31
2008$ - $ - $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
201299,508400,000 - 2,153402,153403,03098,631
201398,631410,000 - 2,195412,195412,84597,981
201497,981420,000 - 2,246422,246422,01898,209
201598,209430,000 - 2,320432,320430,418100,111
2016100,111440,000 - 2,432442,432438,000104,543
2017104,543450,000 - 2,593452,593449,720107,416
2018107,416460,000 - 2,729462,729460,470109,675
2019109,675470,000 - 2,858472,858470,346112,187
2020112,187485,000 - 3,015488,015484,324115,878
2021115,878500,000 - 3,206503,206496,724122,360
2022122,360515,000 - 3,451518,451513,125127,686
2023127,686530,000 - 3,673533,673533,325128,034
2024128,034545,000 - 3,806548,806551,922124,918
2025124,918560,000 - 3,864563,864578,882109,900
2026109,900575,000 - 3,708578,708598,51290,096
202790,096595,000 - 3,502598,502611,20077,398
202877,398620,000 - 3,452623,452636,84064,010
Total$9,534,999$242,303$65,122$9,842,424$9,778,414
Assumptions
Property tax collection rate.....................................100%
Investment interest rate...........................................2.00%
Negative interest charged to funds?.....................no
22
City of Oak Park Heights,
Minnesota
Audit Management Letter
Debt Service Funds
Capital Improvement Bonds of 2009
The bond was issued as additional financing for construction of City Hall. The
repayment of the bond is being funded by property tax levies. Taxes for 2010 and 2011 (and
scheduled for 2012) were levied in the General Fund and are transferred into the Debt
Service Fund. A schedule of actual and projected tax levies (per the bond resolution) and
debt payments are as follows:
City of Oak Park Heights, Minnesota
Projection of Cashflow
Capital Improvement Bonds of 2009
Cash and CurrentTotalCash and Current
Assets BalancePropertyBondInvestmentProjectedDebtAssets Balance
YearJanuary 1TaxesProceedsInterestReceiptsPaymentsDecember 31
2009$ - $ - $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 - 582136,582132,65016,995
201316,995138,000 - 675138,675135,76019,910
201419,910139,000 - 744139,744138,56021,094
201521,094140,000 - 783140,783140,85821,019
201621,019142,000 - 804142,804142,67821,145
201721,145143,000 - 827143,827144,11420,858
201820,858144,000 - 837144,837150,08415,611
201915,611145,000 - 752145,752155,3266,037
Total$1,383,000$21,582$10,032$1,414,614$1,407,118
Assumptions
Property tax collection rate..............................100%
Investment interest rate....................................2.00%
Negative interest charged to funds?.................no
23
City of Oak Park Heights,
Minnesota
Audit Management Letter
Capital Project Funds
CPF
APITALROJECTUNDS
The fund balances of the Capital Project Funds were as follows at December 31, 2010
and 2011:
December 31,Increase
Fund20102011(Decrease)Comments
Capital Revolving$294,781$298,858$4,077
Budgeted Projects and Equipment Revolving988,1131,025,94337,830See later comments.
$21,450 transfer out to fund Brekke Park
improvements.
Park Development754,007745,712(8,295)
Moelter Park627,122627,700578
Received $320,000 transfer from General Fund.
Street Reconstruction1,780,2022,133,008352,806
Receives annual transfer from Water and Sewer in
amount equal to depreciation.
Renewal and Replacement4,122,5204,378,791256,271
City Hall Improvements189,868115,659(74,209)Accounted for construction of city hall.
Expended $432,651 for Water Tower #2 rehab.
Water Tower Rehabilitation340,37952,996(287,383)
Received $78,000 transfer from General Fund.
Storm Sewer Renewal and Replacement239,953322,52282,569
Received $2,686 of connection charges.
Sanitary Sewer Connection397,737407,4019,664
Received $13,960 of connection charges.
Water Connection414,095435,48021,385
Received $2,178 of connection charges.
Storm Sewer Connection918,618936,85518,237
Received $13,333 transfer from Water Utility.
Well Rehabilitation78,72693,43314,707
Sewer Rehabilitation42,84743,594747
Totals$11,188,968$11,617,952$428,984
24
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,
2011:
BalanceRevenuesBalance
Purpose12/31/10and TransfersExpenditures12/31/11
Sealcoat/crack seal$140,610$80,000$123,922$96,688
Outdoor storage65,000 - - 65,000
Municipal building160,989 - - 160,989
Recreation:
Park and trail improvements12,647140,690147,2906,047
Trail maintenance44,30010,000 - 54,300
Park building maintenance17,000 - - 17,000
Brekke Park memorial fund394 - - 394
Computers25,15830,50042,13713,521
Document imaging2,894 - - 2,894
Vehicles:
Police85,51237,00065,85956,653
Public works119,04537,900 - 156,945
Building official238 - - 238
Furniture and equipment:
General5,0005,000 - 10,000
Building inspections78 - - 78
Police 3,1981,0001,0553,143
Trees102,048 - 12,50089,548
Public works equipment7,13573,000 - 80,135
Police radio equipment27,580 - - 27,580
Police computer equipment126 - - 126
Police in-squad video systems17,500(17,500) - -
Comprehensive plan141 - - 141
Coalition of utility cities16,000 - - 16,000
Civil defense10,000 - - 10,000
Unallocated125,52033,003 - 158,523
Totals$988,113$430,593$392,763$1,025,943
25
City of Oak Park Heights,
Minnesota
Audit Management Letter
Capital Project Funds
Connection Charge Funds
Based on City estimates, the Connection Charge Funds are scheduled to receive the
following future connection charges as development occurs:
(1)
Estimated Future Connection Charges
SanitaryWaterStorm
SewerWorksWaterTotal
Total$50,602$262,969$41,012$354,583
(1)
Estimated amounts are as of 2009. Revised estimates will be established in 2012.
A summary of fund balance and estimated future connection charges is as follows:
SanitaryWaterStorm
SewerWorksWaterTotal
Fund balance - December 31, 2011$407,401$435,480$936,855$1,779,736
Future connection charges (est.)50,602262,96941,012354,583
Uncommitted$458,003$698,449$977,867$2,134,319
26
City of Oak Park Heights,
Minnesota
Audit Management Letter
Enterprise Funds
EF
NTERPRISEUNDS
Enterprise funds account for water, sanitary sewer and storm sewer operations. Presented
below is history of change in net assets by activity.
Change in Net Assets by Year
SanitaryStorm
YearWaterSewerSanitationSewerTotal
2011$341,188($104,632)$ - ($55,911)$180,645
2010(10,739)(114,640) - (36,833)(162,212)
2009787,487(125,222) - 26,767689,032
2008(206,804)(85,523)(45,814)20,450(317,691)
2007368,75968,20621,11043,872501,947
200628,62337,50338,45810,742115,326
2005226,051326,22120,80439,279612,355
200413,89512,66518,15126,49671,207
2003117,82187,9355,45736,789248,002
200241,573 81,542 3,955 5,794 132,864
200141,643 (5,994) (3,604) 5,875 37,920
200065,051 (80,152) (255) (4,765) (20,121)
199949,552 (111,811) (32,625) 12,279 (82,605)
1998(31,669) (38,145) (25,637) - (95,451)
199711,294 50,550 - - 61,844
199626,964 (6,551) - - 20,413
199554,581 (2,359) - - 52,222
1994(302,719) (198,539) - - (501,258)
199373,349 40,156 - - 113,505
pre-1993595,125 595,126 - - 1,190,251
Subtotal2,291,025426,3360130,8342,848,195
Contributed capital - 1/1/932,725,9782,526,293 - - 5,252,271
Net assets - 12/31/11$5,017,003$2,952,629$0$130,834$8,100,466
2011 amounts include a prior period adjustment of ($9,729), ($13,766) and ($69,132) in
the Water, Sanitary Sewer and Storm Sewer Funds, respectively, due to overbillings in
previous years.
27
City of Oak Park Heights,
Minnesota
Audit Management Letter
Enterprise Funds
Water Utility Fund
A chart of income from operations for the past seven years is as follows:
$800,000
Water Operating
Revenue & Expense
$700,000
$600,000
$500,000
Depreciation
Transfer Out
All Other Expenses
$400,000
Contractual Services
Personal Services
Operating Revenue
$300,000
$200,000
$100,000
$0
2005200620072008200920102011
The City increased water rates effective January 1, 2005, 2007, 2008, 2009, July 1, 2009
and January 1, 2011.
28
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:
$1,000,000
Sewer Operating
Revenue &
$900,000
Expense
$800,000
$700,000
Depreciation
$600,000
Transfer Out
Personal Services
$500,000
All Other Expenses
MCES
$400,000
Operating Revenue
$300,000
$200,000
$100,000
$0
2005200620072008200920102011
The City increased sewer rates effective January 1, 2005, January 1, 2009, July 1, 2009,
January 1, 2010 and January 1, 2011.
29
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 Charge01/01/0501/01/0601/01/0701/01/0801/01/0907/01/0901/01/1001/01/11
Water:
Base fee$7.50$7.50$23.10$24.35$26.24$28.31$28.31$29.91
Charge per 1,000 gallons for:
Usage between 15,000 and 50,000 gallons$1.34$1.34$1.47$1.62$1.78$1.96$1.96$2.48
Usage between 50,000 and 99,000 gallons$1.76$1.76$2.02$2.22$2.44$2.68$2.68$2.97
Usage between 99,000 and 200,000 gallons$2.11$2.11$2.43$2.67$2.94$3.23$3.23$3.81
Usage in excess of 200,000 gallons$2.11$2.11$2.43$2.67$2.94$3.23$3.91$4.61
Sewer:
Base fee$16.65$16.65$49.95$49.95$51.70$54.28$56.99$60.41
Charge per 1,000 gallons for:
Usage between 15,000 and 50,000 gallons$3.40$3.40$3.40$3.40$3.52$3.70$4.07$4.31
Usage in excess of 50,000 gallons$3.40$3.40$3.40$3.40$3.52$3.70$4.50$4.77
30
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:
$90,000
Storm Sewer Operating
Revenue & Expense
$80,000
$70,000
$60,000
Transfer Out
$50,000
All Other Expenses
Contractual Services
Personal Services
$40,000
Operating Revenue
$30,000
$20,000
$10,000
$0
2005200620072008200920102011
31
City of Oak Park Heights,
Minnesota
Audit Management Letter
Communication With Those Charged With Governance
CWTCWG
OMMUNICATIONITHHOSEHARGEDITHOVERNANCE
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 for the year ended December 31, 2011. 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 16, 2012. 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 of Oak Park Heights, Minnesota are
described in Note 1 to the financial statements. As described in Note 11 to the financial
statements, the City implemented GASB Statement No. 54, Fund Balance Reporting and
Governmental Fund Type Definitions in 2011. GASB No. 54 changed fund balance
classifications for governmental fund statements. The former classifications of reserved,
designated and undesignated have been replaced with nonspendable, restricted, committed,
assigned and unassigned. Definitions for each new classification can be found in Note 1.O.
to the financial statements. We noted no transactions entered into by the governmental unit
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.
32
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 market value of the City’s land held for resale and the factors relating to the
net OPEB obligation. 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 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 trivial, and communicate them to the
appropriate level of management. We identified two known misstatements which were not
corrected (market value adjustment of $39,000 and prepaid insurance of $15,000). We also
identified one known misstatement (accounts payable of $17,000) which was corrected.
None of the other misstatements detected as a result of audit procedures were material, either
individually or in the aggregate, to each opinion unit’s financial statements taken as a whole.
33
City of Oak Park Heights,
Minnesota
Audit Management Letter
Communication With Those Charged With Governance
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with
management as 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 2, 2012.
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.
34
City of Oak Park Heights,
Minnesota
Audit Management Letter
Communication With Those Charged With Governance
Other Information in Documents Containing Audited Financial Statements
With respect to the supplementary information accompanying the financial statements,
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. We compared and reconciled the
supplementary information to the underlying accounting records used to prepare the financial
statements or to the financial statements themselves.
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.
35