HomeMy WebLinkAbout10A - 2004 Financial Report16200 Eagle Creek Avenue S.E.
Prior Lake, MN 55372-1714
STAFF AGENDA REPORT
MEETING DATE:
AGENDA #:
PREPARED BY:
AGENDA ITEM:
MAY 16, 2005
10A
RALPH TESCHNER, FINANCE DIRECTOR
CONSIDER APPROVAL OF 2004 ANNUAL
REPORT AND MANAGEMENT LETTER
FINANCIAL
DISCUSSION:
Introduction
Included with this agenda report is a copy of the 2004 Financial
Report along with the management letter as prepared by the certified
public accountant firm of Abdo, Eick and Meyers. The audit was
conducted in accordance with generally accepted auditing standards
and represents an independent opinion of the financial results and
status of the City of Prior Lake during the year of 2004.
Current Circumstances
The audit report represents the second year of a new financial
reporting model that reflects GASB Statement No. 34 as required by
the Governmental Accounting Standards Board (GASB). This new
format represents a consolidation of the city's financial reporting
activity into two groups; governmental activities and business-type
activities that includes a statement of net assets. The most
significant difference from previous years is that a statement of net
assets is added that identifies capital fixed assets, i.e. land, buildings
and improvements. As stated in the financial report the city's overall
net asset financial position is $94,509,616.
Contained within the financial report is a legal compliance audit
which was performed to ensure compliance with Minnesota Statutes
in the five areas of; contracting and bidding, deposits and
investments, conflicts of interest, public indebtedness and claims
and disbursements. Also attached is a Management Letter prepared
by the auditors that provides highlights of the report as well as any
applicable recommendations.
According to the auditor's tests, the City has complied with the
applicable legal provisions tis they apply to the five main categories
stated above. Also noted within their report on internal control is the
fact that no matters involving internal control structure and
operation were observed to contain material weaknesses as defined
by GAS (Government Auditing Standards).
H:~UDITLa, gendaaudit.doc
www. cityofpriorlake, corn
Phone 952.447.4230 / Fax 952.447.4245
ALTERNATIVES:
The audit has been prepared in accordance with generally accepted
accounting principals. The primary results of the General Fund as
indicated within the 2004 audit are:
1 .) Actual revenues of $9,126,943 (including transfers in), compared
to budgeted revenues of $8,751,570 (adjusted for market value aid
loss) or 104% of projection.
2.) Operating expenditures were $8,595,021 compared to budgeted
expenditures of $8,751,570 or 98.2% of budget.
3.) Gross revenues exceeded expenditures in the amount of
$531,922.00.
The 2004 year-end General Fund balance (which is maintained for
cash flow and emergency purposes) increased to $4,370,829 that
represents a reserve of 45% of the 2005 General Fund Budget or
above the council recognized minimum 30% threshold, and
consistent with the auditor's recommendation of 40-50%. Also, it
falls within the acceptable level of 35-50% as defined by the State
Auditor's Office.
The reserve growth occurred primarily because of four contributing
factors.
· The first was careful expenditure of budgeted funds. The City
Manager, Finance Director and City department and division
supervisors expect that purchases are made only if needed, and
adhere to this practice.
· The second was a large increase in State fire aid of $62,867 that
is unlikely to occur again in the future.
· Third was a 5% increase in Charges for Services, primarily in
the area of facility rental income and zoning fees.
· The fourth occurrence was attributed to development agreement
revenue that is difficult to accurately anticipate.
The significant increase in our General Fund balance was a very
timely occurrence in light of anticipated expenses including: City
Hall/Police Station, transportation and development related
expenditures and potential state aid cuts.
The Management Letter is intended to bring to the City Council's
attention deficiencies or conditions recommended for improvement
within the design or administration of the City's financial
operations. A graphic summary of the City's results of operations
within the General Fund depicting revenues and expenditures is
included. Also, the auditors discuss the importance of maintaining
an adequate fund balance for cash flow purposes and to establish
overall long term financial strength.
The following alternatives are available to the City Council:
H:L~UDIT\Agendaaudit.doc
RECOMMENDATION:
RECOMMENDED
MOTION:
REVIEWED BY:
Attachments:
1. Accept the 2004 Annual Financial Report and Management
Letter as submitted.
2. Delay action according to a specific Council reason.
Staff recommends acceptance of the management letter and the
financial report for the fiscal year ended December 31, 2004 as
submitted. A City Financial Reporting Form, which is basically a
condensed excerpt of the official document, is required to be
submitted to the Office of the State Auditor by June 30, 2005 along
with this report.
Please feel free to contact Staff prior to the meeting if you have any
questions. Steve McDonald of the firm Abdo, Eick and Meyers will
make a brief presentation regarding the report and management
letter and respond to any questions the Council may have.
Motion to accept the 2004
Management Letter.
1. 2004 Ar~n~ ufl~YFin~tncial Report
2. Managet~nt Letter
Annual Financial Report and
H:~AUDITXAgendaaudit.doc