Comprehensive Annual Financial Report 12/31/2005

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Cash temporarily idle during the year was invested in certificates of deposit, commercial paper, and obligations of the U.S. Treasury. The City's investment policy's primary objective is safety of principal. Therefore, all deposits were either insured by Federal depository insurance or were collateralized as required by State Statute. Due to the weakened economy, a low interest rate environment has persisted over the few years and has had a significant impact on the city's investment earnings. The average yield on investments for 2005 was 2.98 %. Investment income includes positive or negative changes in the fair value of investments. Changes in fair value during the current year, however, do not necessarily represent trends that will continue; nor is it always possible to realize such amounts, especially in the case of temporary changes in the fair value of investments the city intends to hold to maturity. Risk management. The City's general property, liability and worker's compensation coverage is provided through the League of Minnesota Cities Trust (LMCIT). At the beginning of the insurance year, the city deposits with LMCIT a premium determined by calculating estimated payroll and applying experience modification ratios. An audit is performed at the end of the insurance year, which may produce a refund or an adjustment due. LMCIT's reserves and rates are reviewed annually by an actuary to assure that the program remains financially strong. Pension benefits. The City of Lino Lakes participates in a statewide defined benefit pension plan administered by the Public Employees Retirement Association of Minnesota (PERA). All full -time and part-time employees are covered by PERA. PERA administers the Public Employees Retirement Fund (PERF) which is a cost - sharing, multiple- employer retirement plan. A plan description and funding policy are included in the Notes to the Financial Statements beginning on page 48. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awards the Certificate of Achievement for excellence in_financial reporting to cities that meet certain criteria. The City of Lino Lakes received this award for its comprehensive annual financial report for the year ended December 31, 2004. This marks the ninth consecutive year that the city has received this prestigious award. A governmental unit must publish an easily readable and efficiently organized comprehensive annual financial report, the contents of which conform to program requirements. This report must satisfy both U.S. generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. The City is submitting the 2005 report to GFOA for consideration of the Certificate of Achievement for Excellence in Financial Reporting. We believe our current report continues to conform to the high standards of the Certificate program. The timely preparation of this report could not have been accomplished without the dedicated services of the Finance Depai tment, auditors and other city staff. I also want to express my appreciation to the Mayor and City Council for their support for maintaining the highest standard of professionalism in the management of the financial operation of the City. Respectfully submitted, Alan J. Rolek Director of Finance 6