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- Honorable Mayor and Members of the City Council <br />City of Lino Lakes <br />Page 5 <br />Tax Increment Financing (TIF) District Administration Charges— <br />As part of the audit we noted that an administrative charge was charged against the TIF districts. With <br />the recent law changes that clarified the definition of administrative charges, among other items, any <br />administrative charges to a TIF district must be for documented expenses incurred in the management <br />of the district. We recommend that as administrative charges (as well as any interfund transaction) are <br />charged against the district, the City carefully document and retain the documentation that <br />substantiates the charges. We also recommend that the City work closely with its TIF advisors, Ehlers <br />and Associates, in determining whether any charges are eligible administrative charges as defined by <br />statute and that they have been provided for in the TIF plan. <br />Budgeting for Multi -Year Projects <br />Currently, the City adopts a budget for the operating funds of the City, including the general fund, <br />program recreation, capital equipment and the utility funds. Current practice for project budgeting is to <br />adopt a project budget as part of the Capital Improvements Program and the related bond issue. This <br />budget is not currently entered into the finance system, however by entering these budgets into the <br />finance system, budgetary controls could easily be added to the project expenditures. <br />The current chart of accounts in use includes an account segment that is used for the project (each <br />project is given a unique number) which accumulates the costs for each individual project. At the end <br />of a project, staff goes back over the expenditures to determine if there were costs charged to the <br />project that should have gone against another project. By adding the budgets into the system at the <br />- beginning of the project, it would assist in monitoring the expenditures on an ongoing basis and help to <br />identify the revenue sources for the project. <br />- For multi -year projects, the total budget would be entered in the first year. In the second year, the <br />budgeted amounts would be reduced for the amounts recorded in the first year. The benefits to be <br />derived include that all revenue sources are identified up front and that staff members from differing <br />departments can work together to identify the expected project costs. This should help to reduce coding <br />errors in the processing of payments. <br />An example of this methodology follows: <br />Received/ Remaining <br />Original Expended budget for <br />Budget in 1999 future year(s) <br />Revenues <br />Bond Issue $ 1,000 $ 1,000 $ <br />Transfer from fund 25 25 <br />1,025 1,000 25 <br />Expenditures <br />Construction 900 750 150 <br />Engineering 80 50 30 <br />Prof services, legal 25 15 10 <br />Bond issue costs 20 20 <br />1,025 835 190 <br />