The URL can be used to link to this page

Home My WebLink About2012 Management Report CITY OF OAK PARK HEIGHTS, MINNESOTA AUDIT MANAGEMENT LETTER December 31, 2012 - This page intentionally left blank - 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) Financial statements Unqualified (“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 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 permits, Park donations State police aid fines (1) Governmental activities: General government$1,455,359$24,558$ - $ - ($1,430,801)$ - ($1,430,801) Public safety1,431,594325,43379,600 - (1,026,561) - (1,026,561) Public works1,128,24945,38833,3123,396(1,046,153) - (1,046,153) Parks and recreation248,243 - - 20,735(227,508) - (227,508) Interest on long-term debt377,713 - - - (377,713) - (377,713) Total governmental activities4,641,158395,379112,91224,131(4,108,736)0(4,108,736) Business-type activities: Water470,266714,660 - - - 244,394244,394 Sanitary sewer668,588800,281 - - - 131,693131,693 Storm sewer43,90483,762 - - - 39,85839,858 Total business-type activities1,182,7581,598,703000415,945415,945 Total $5,823,916$1,994,082$112,912$24,131(4,108,736)415,945(3,692,791) General revenues: General property taxes4,262,983 - 4,262,983 Tax increment26,583 - 26,583 Grants and contributions not restricted to specific programs2,040 - 2,040 Unrestricted investment earnings204,42214,046218,468 Gain on sale of capital assets7,950 - 7,950 Other29,172 - 29,172 Transfers504,239(504,239) - Total general revenues and transfers5,037,389(490,193)4,547,196 Change in net position928,653(74,248)854,405 Net position - January 126,492,9148,100,46634,593,380 Net position - December 31$27,421,567$8,026,218$35,447,785 (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: Increase (Decrease) inFund Balance/ Revenue ExpendituresFund Balance/Net and Otherand OtherTransfersNetAssets FundSourcesUses(Net)Assets12/31/12 General 1$4,763,035$3,097,738($1,257,225)$408,072$3,669,633 Special Revenue Funds: 2Forfeiture and Seizure1,7843,016 - (1,232)6,923 3Economic Development429 - - 42931,627 4TIF District #126,61122,007 - 4,6044,604 Debt Service Funds: 5Bonds of 20081,690403,030400,000(1,340)98,168 6Bonds of 2009460132,650136,0003,81016,873 7G.O. CIP Refunding Bonds of 2012A5,298,644103,854 - 5,194,7905,194,790 Capital Project Funds: 8Capital Revolving49,759139,075 - (89,316)209,542 9Budgeted Projects and Equipment Revolving39,636309,611428,178158,2031,184,146 10Street Reconstruction30,518 - 329,000359,5182,492,526 11City Hall Improvements1,7223,308(9,094)(10,680)104,979 12Park Development10,245 - - 10,245755,957 13Moelter Park8,61242,506 - (33,894)593,806 14Renewal and Replacement60,4492,675248,305306,0794,684,870 15Storm Sewer Renewal/Replacement4,719 - 78,00082,719405,241 16Sanitary Sewer Connection 5,597 - - 5,597412,998 17Water Connection5,982 - - 5,982441,462 18Storm Sewer Connection12,870 - - 12,870949,725 19Water Tower Rehabilitation33,04812540,47973,402126,398 20Well Rehabilitation1,320 - 13,33314,653108,086 21Sewer Rehabilitation599 - 1,9382,53746,131 Enterprise Funds: 22Water721,459470,266(225,538)25,6555,042,658 23Sanitary Sewer805,808668,588(177,384)(40,164)2,912,465 24Storm Sewer85,482139,229(5,992)(59,739)71,095 Total 25$11,970,478$5,537,678$0$6,432,800$29,564,703 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: 20082009201020112012 Tax levy certified$3,367,480$3,657,865$3,754,704$3,964,704$4,228,062 Less market value homestead credit deduction(81,250)(83,010)(92,249)(93,934) - Net levy3,286,2303,574,8553,662,4553,870,7704,228,062 Receipts: Current property taxes3,211,3923,417,6013,584,0273,819,2204,176,125 Delinquent property taxes36,77030,36474,11892,2695,820 Total receipts3,248,1623,447,9653,658,1453,911,4894,181,945 Adjustments(48,826)(59,731)(9,992)(9,361)(28,494) Increase (decrease) in delinquent taxes receivable(10,758)67,159(5,682)(50,080)17,623 Delinquent taxes - January 182,09571,337138,496132,81482,734 Delinquent taxes - December 31$71,337$138,496$132,814$82,734$100,357 Current collection as a percent of current levy97.7%95.6%97.9%98.7%98.8% Total collections as a percent of current levy98.8%96.5%99.9%101.1%98.9% 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 2009 through 2013 is as follows: 20092010201120122013 Taxable market value$718,753,400$682,742,100$669,938,700$643,608,300$663,496,300 Tax capacity values: Real estate$11,011,415$10,486,193$10,335,277$10,095,639$10,257,139 Personal property87,62386,68192,02390,84095,168 Subtotal11,099,03810,572,87410,427,30010,186,47910,352,307 Tax increment - - - - (108,254) Fiscal disparity contribution(2,177,678)(2,492,111)(2,117,456)(2,336,411)(2,346,765) Fiscal disparity distribution556,955546,593508,498405,806392,002 Total$9,478,315$8,627,356$8,818,342$8,255,874$8,289,290 Tax capacity rates38.732 43.845 45.027 51.710 54.898 Tax levy$3,657,865$3,754,704$3,964,704$4,228,062$4,538,193 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 20042012 Percent ofPercent of AmountCity TotalAmountCity Total Real estate: Agricultural$36,3900.6% $8250.0% Seasonal2,4180.0% 3,0720.0% Residential homestead1,954,02730.4% 1,840,80318.2% Residential nonhomestead649,21710.1% 1,084,63910.6% Commercial/industrial2,300,83335.7% 3,562,10035.0% Public utility1,417,84122.0% 3,599,10435.3% Railroad2,6280.0% 5,0960.1% Total real estate6,363,35498.8% 10,095,63999.2% Personal property82,5731.2% 90,8400.8% Total tax capacity$6,445,927100.0% $10,186,479100.0% As shown above, the City’s major tax payer (Xcel Energy) is 35.3% of total tax capacity. 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: (1) Property TaxesState AidsAll OtherTotal Revenue YearAmountPercentAmountPercentAmountPercentAmountPercent 2003$1,859,20371%$60,4102%$706,21027%$2,625,823100% 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% 20124,245,360 90%69,677 1%423,580 9%4,738,617 100% Since 2010, the General Fund has levied property taxes which have been transferred out to Debt Service Funds. (1) Those levies were $536,000, $134,000, and $122,000 for the years ended December 31, 2012, 2011 and 2010, respectively. 8 City of Oak Park Heights, Minnesota Audit Management Letter General Fund A graph of property taxes, state aids, and other revenue for the General Fund is as follows: State Aids State aids of the General Fund have consisted of the following for the past seven years: State Aid2006200720082009201020112012 Market value homestead credit$ - $81,066$40,625$ - $ - $ - $ - LGA27,79827,98414,028 - - - - Police aid62,53266,52560,40469,39258,93063,27861,242 Utility valuation transition aid - - - 178,390102,947 - - Other state revenue2,0405,6585,6442,04018,29712,5828,435 Totals$92,370$181,233$120,701$249,822$180,174$75,860$69,677 Change$88,863($60,532)$129,121($69,648)($104,314)($6,183) % Change96% (33%)107% (28%)(58%)(8%) 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: Description2006200720082009201020112012 Licenses and permits$306,266$155,820$203,041$100,074$197,181$131,081$163,986 Charges for services: (2) Enterprise64,46563,20062,04064,40066,42069,4253,830 Construction/engineering fee2,35412,5682,602 - - - - Other11,94656,78915,6789,89077,38618,12713,698 Fines and forfeits81,23066,18963,60270,10258,36557,86255,023 Earnings on investments79,61093,95790,00455,43950,67541,37836,791 (1) Other87,18691,647155,571139,238223,942150,895140,940 Total$633,057$540,170$592,538$439,143$673,969$468,768$414,268 (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. (2) 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 $64,047. 10 City of Oak Park Heights, Minnesota Audit Management Letter General Fund Budget Versus Actual Comparison The General Fund balance increased by $408,000. Licenses and permit revenue exceeding budget resulted in higher than anticipated revenue. Expenditures in most City departments were also less than budgeted. Positive budget variances in City administration ($30,000), insurance ($19,000), engineering ($15,000), police department ($61,000), snow removal ($34,000) and parks and recreation ($30,000) accounted for the largest budget to actual variances. A summary is as follows: BudgetActualVariance Revenue$4,654,000$4,739,000$85,000 Expenditures3,407,0003,098,000309,000 Revenue over expenditures1,247,0001,641,000394,000 Other financing sources (uses): Sale of property - 24,00024,000 Transfers out(1,257,000)(1,257,000) - Net change in fund balance($10,000)$408,000$418,000 11 City of Oak Park Heights, Minnesota Audit Management Letter General Fund General Fund Reserves The fund balance of the General Fund increased in 2012. The schedule below reflects the General Fund balance for the past fifteen years: Year EndedFundIncrease December 31,Balance(Decrease) 1998$1,186,663($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 20123,669,633408,072 12 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 Special with unexpected events Unanticipated Projects Expenditures 13 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 Benefit20112012 Vacation leave carryover (50%)$41,410$40,063 Severance137,101125,082 Total$178,511$165,145 Rounded amount$165,000 14 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 $2,060,000, computed as follows: Cash Flow Reserve 2013 tax levy $4,538,193 Less transfers out which occur after taxes are received(417,410) $4,120,783 Reserve amount @ 50%$2,060,000 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: As shown above, the cash balance decreased $1,456,000 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, Description20112012 Ensuing year's budget$4,654,684$4,893,418 Reserve amount @ 15%$698,000$734,000 General Fund Balance Summary In summary, the fund balance of the General Fund at December 31, 2012, was as follows: General Fund Balance Constraint December 31, 20112012 Nonspendable: Prepaid items$2,057$4,609 Assigned for: Employee benefits179,000165,000 Unassigned: Cash flow reserve1,911,0002,060,000 General contingency reserve698,000734,000 Remaining balance471,504706,024 Subtotal - unassigned3,080,5043,500,024 Total fund balance$3,261,561$3,669,633 17 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 three Special Revenue Funds during 2012. 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 Years2012Total Revenue: Intergovernmental - bulletproof vests$9,825$ - $9,825 Earnings on investments16,1469816,244 Reimbursements8,601 - 8,601 Confiscated property166,2561,686167,942 Sale of municipal property5,046 - 5,046 Total revenue$205,874$1,784207,658 Expenditures: Public safety: Materials and supplies$70,615$2,67273,287 Contractual services25,98834426,332 Capital outlay101,116 - 101,116 Total expenditures$197,719$3,016200,735 Fund balance - December 31, 2012$6,923 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." 18 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 Years2012Total Revenue: Earnings on investments$34,980$429$35,409 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$448,700$429449,129 Expenditures: Community development: Materials and supplies$457$ - 457 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$417,502$0417,502 Fund balance - December 31, 2012$31,627 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. 19 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: Revenue: Tax increment$26,583 Investment income28 Total revenue$26,611 Expenditures: General government: TIF note payment$21,267 Other740 Total expenditures$22,007 Fund balance - December 31, 2012$4,604 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. 20 City of Oak Park Heights, Minnesota Audit Management Letter Debt Service Funds DSF EBTERVICEUNDS 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 2012. 21 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. A $400,000 property tax was levied in the General Fund for 2012 and was 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 - 26,334436,334521,6775,207,615 20145,207,615420,000 - 25,935445,935526,7765,126,774 20155,126,774430,000 - 25,548455,548535,1765,047,146 20165,047,146440,000 - 23,144463,1445,402,758107,532 2017107,532410,000 - 748410,748409,758108,522 2018108,522420,000 - 770420,770418,658110,634 2019110,634430,000 - 795430,795432,258109,171 2020109,171440,000 - 810440,810445,458104,523 2021104,523460,000 - 809460,809458,258107,074 2022107,074475,000 - 838475,838470,658112,254 2023112,254490,000 - 890490,890492,658110,486 2024110,486505,000 - 909505,909509,058107,337 2025107,337520,000 - 929520,929539,95888,308 202688,308535,000 - 864535,864560,05864,114 202764,114550,000 - 764550,764569,29445,584 202845,584575,000 - 709575,709597,57623,717 Total$9,039,999$5,433,586$129,912$14,603,497$14,579,780 Assumptions Property tax collection rate.....................................100% Investment interest rate...........................................0.50% Negative interest charged to funds?.....................no 22 City of Oak Park Heights, Minnesota Audit Management Letter Debt Service Funds Capital Improvement Bonds of 2009 The bond was issued as additional financing for construction of City Hall. The repayment of the bond is being funded by property tax levies. Taxes are levied in the General Fund and then transferred into the Debt Service Fund. A schedule of actual and projected tax levies (per the bond resolution) and debt payments are as follows: City of Oak Park Heights, Minnesota Projection of Cashflow Capital Improvement Bonds of 2009 Cash and CurrentTotalCash and Current Assets BalancePropertyBondInvestmentProjectedDebtAssets Balance YearJanuary 1TaxesProceedsInterestReceiptsPaymentsDecember 31 2009$ - $ - $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 - 460136,460132,65016,873 201316,873138,000 - 336138,336135,76019,449 201419,449139,000 - 368139,368138,56020,257 201520,257140,000 - 383140,383140,85819,782 201619,782142,000 - 390142,390142,67819,494 201719,494143,000 - 397143,397144,11418,777 201818,777144,000 - 397144,397150,08413,090 201913,090145,000 - 351145,351155,3263,115 Total$1,383,000$21,582$6,111$1,410,693$1,407,118 Assumptions Property tax collection rate................................100% Investment interest rate....................................1.00% 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, 2011 and 2012: Increase inFund InterfundFundBalance FundRevenuesExpendituresTransfersBalance12/31/2012Comments Capital Revolving49,759139,075 - (89,316)209,542Expenditures relate to Hwy 36 Bridge Project Budgeted Projects and Equipment Revolving39,636309,611428,178158,2031,184,146See later comments. Received transfer from General Fund. Street Reconstruction30,518 - 329,000359,5182,492,526 City Hall Improvements1,7223,308(9,094)(10,680)104,979Accounted for construction of city hall. Park Development10,245 - - 10,245755,957 Moelter Park8,61242,506 - (33,894)593,806 Renewal and Replacement60,4492,675248,305306,0794,684,870Receives annual transfer from Water and Sewer Storm Sewer Renewal/Replacement4,719 - 78,00082,719405,241Received transfer from General Fund. Sanitary Sewer Connection 5,597 - - 5,597412,998 Water Connection5,982 - - 5,982441,462 Storm Sewer Connection12,870 - - 12,870949,725 Water Tower Rehabilitation33,04812540,47973,402126,398Received transfer from Water fund. Well Rehabilitation1,320 - 13,33314,653108,086Received transfer from Water fund. Received transfer from Sewer fund. Sewer Rehabilitation599 - 1,9382,53746,131 Totals$265,076$497,300$1,130,139$897,915$12,515,867 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, 2012: FundRevenuesFund BalanceandBalance Purpose12/31/11TransfersExpenditures12/31/12 1Sealcoat/crack seal$96,688$100,000$137,813$58,875 2Outdoor storage65,000(65,000) - - 3Municipal building160,98974,0948,471226,612 4Recreation: 5 Park and trail improvements6,04770,00012,16663,881 6 Trail maintenance54,30010,000 - 64,300 7 Park building maintenance17,000 - - 17,000 8 Brekke Park memorial fund394 - - 394 9Computers13,52128,5005,97436,047 10Document imaging2,894 - - 2,894 11Vehicles: 12 Police56,65339,75035,52060,883 13 Public works156,94519,83480,53096,249 14 Building official238 - - 238 15Furniture and equipment: 16 General10,0005,000 - 15,000 17 Building inspections78 - - 78 18 Police 3,1432004902,853 19Trees89,54813,475 - 103,023 20Emerald ash borer - 40,000 - 40,000 21Public works equipment80,13573,000 - 153,135 22Police radio equipment27,5805,000 - 32,580 23Police computer equipment12613,0918,0915,126 24Police in-squad video systems - - - - 25Comprehensive plan141 - - 141 26Coalition of utility cities16,000 - - 16,000 27Civil defense10,0009,8723,87216,000 28Software - 17,00016,684316 29Unallocated158,52313,998 - 172,521 30Totals$1,025,943$467,814$309,611$1,184,146 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 2013. A summary of fund balance and estimated future connection charges is as follows: SanitaryWaterStorm SewerWorksWaterTotal Fund balance - December 31, 2012$412,998$441,462$949,725$1,804,185 Future connection charges (est.)50,602262,96941,012354,583 Uncommitted$463,600$704,431$990,737$2,158,768 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. Water Utility Fund A chart of income from operations for the past seven years is as follows: 27 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: 28 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 Charge01/01/0601/01/0701/01/0801/01/0907/01/0901/01/1001/01/1101/01/12 Water: Base fee$7.50$23.10$24.35$26.24$28.31$28.31$29.91$30.70 Charge per 1,000 gallons for: Usage between 15,000 and 50,000 gallons$1.34$1.47$1.62$1.78$1.96$1.96$2.48$2.55 Usage between 50,000 and 99,000 gallons$1.76$2.02$2.22$2.44$2.68$2.68$2.97$3.05 Usage between 99,000 and 200,000 gallons$2.11$2.43$2.67$2.94$3.23$3.23$3.81$3.92 Usage in excess of 200,000 gallons$2.11$2.43$2.67$2.94$3.23$3.91$4.61$4.74 Sewer: Base fee$16.65$49.95$49.95$51.70$54.28$56.99$60.41$62.10 Charge per 1,000 gallons for: Usage between 15,000 and 50,000 gallons$3.40$3.40$3.40$3.52$3.70$4.07$4.31$4.43 Usage in excess of 50,000 gallons$3.40$3.40$3.40$3.52$3.70$4.50$4.77$4.90 29 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: 30 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 (the City) for the year ended December 31, 2012. 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 15, 2013. 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 2012. 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 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 31 City of Oak Park Heights, Minnesota Audit Management Letter Communication With Those Charged With Governance 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. Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosure affecting the financial statements pertained to the City’s commitment to relocate portions of its utility infrastructure along Highway 36 (Note 9A). 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. We identified three known misstatements which were not corrected (market value adjustment of $10,000, prepaid insurance of $15,000 and bond issuance costs of $104,000). The misstatement of bond issuance costs only affects governmental activities on Statements 1 and 2 and was recorded as an expense in 2012 to conform with new guidance effective for 2013. None of the 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. 32 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 15, 2013. 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. 33 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. 34 - This page intentionally left blank -