HomeMy WebLinkAboutVLAWMO Annual Financial Report 2013AVIAWMO
Vadnais rat.-p Area
f// Water Management Organization
April 25, 2014
800 County Road E E, Vadnais Heights, MN 55127
www.vlawmo.org; Office@vlawmo.org
To: The financial Officers of the member communities
Gem Lake
Lino Lakes
North Oaks
Vadnais Heights
White Bear Lake
White Bear Township
Re: Financial Statements and Management Letter for the Vadnais Lake Area Water Management
Organization
The Vadnais Lake Area Water Management Organization (VLAWMO) in order to provide clear reporting
to our member communities and to comply with Minnesota Statute Ch. 103B.231, has conducted an
independent audit of its financial records for 2013. The enclosed Financial Statement and Management
Letter is provided for your information.
Please contact the VLAWMO office with questions or comments:
VLAWMO
800 COUNTY ROAD E EAST
VADNAIS HEIGHTS, MN 55127
651-204-6073; office@vlawmo.org
Sincerely,
Stephanie McNamara
Administrator
VADNAIS LAKE AREA WATER
MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
DECEMBER 31, 2013
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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
TABLE OF CONTENTS
FOR THE YEAR ENDED DECEMBER 31, 2013
INTRODUCTORY SECTION
Board of Directors and Appointed Officials
Page No.
7
FINANCIAL SECTION
Independent Auditor's Report 11
Management's Discussion and Analysis 15
Basic Financial Statements
Government -wide Financial Statements
Statement of Net Position 24
Statement of Activities 25
Fund Financial Statements
Governmental Funds
Balance Sheet 28
Reconciliation of the Balance Sheet to the Statement of Net Position 29
Statements of Revenues, Expenditures and Changes in Fund Balances 30
Reconciliation of the Statement of Revenues, Expenditures and Changes in
Fund Balances to the Statement of Activities 31
General Fund
Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 32
Notes to the Financial Statements 33
OTHER REQUIRED REPORT
Independent Auditor's Report on Minnesota Legal Compliance 45
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INTRODUCTORY SECTION
VADNAIS LAKE AREA WATER
MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
FOR THE YEAR ENDED
DECEMBER 31, 2013
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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
BOARD OF DIRECTORS AND APPOINTED OFFICIALS
FOR THE YEAR ENDED DECEMBER 31, 2013
Name
BOARD OF DIRECTORS
Title Member City
Marc Johansen Chairperson Vadnais Heights
Dan Jones Vice Chair White Bear Lake
Bruce Ackerman Secretary/Treasurer North Oaks
Bill Mample Director White Bear Township
Rob Rafferty Director Lino Lakes
Robert Uzpen Director Gem Lake
Name
TECHNICAL COMMISSION
Title Member City
Paul Peterson Chairperson White Bear Township
Mark Graham Vice Chair Vadnais Heights
Jim Grisim Finance Officer White Bear Lake
Jim Lindner Commissioner Gem Lake
Chris Mann Commissioner North Oaks
Marty Asleson Commissioner Lino Lakes
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FINANCIAL SECTION
VADNAIS LAKE AREA WATER
MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
FOR THE YEAR ENDED
DECEMBER 31, 2013
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ABDO
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INDEPENDENT AUDITOR'S REPORT
Board of Directors
Vadnais Lake Area Water Management Organization
Vadnais Heights, Minnesota
Report on Financial Statements
We have audited the accompanying financial statements of the governmental activities and the major fund of the Vadnais Lake Area
Water Management Organization (the Organization), Vadnais Heights, Minnesota, as of and for the year ended December 31, 2013,
and the related notes to the financial statements, which collectively comprise the Organization's basic financial statements as listed in
the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting
principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of
internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. The prior year comparative
information has been derived from the Organization's 2012 financial statements and, in our report dated April 15, 2013 we
express unmodified opinions on the respective fund financial statements. We conducted our audit in accordance with auditing
standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. in making those risk assessments, the auditor considers internal control relevant to the
Organization's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Organization's internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating the overall financial statement
presentation.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
5201 Eden Avenue, Suite 250
Edina, MN 55436
952.835.9090 I Fax 952.835.3261
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Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the
governmental activities and the major fund of the Organization as of December 31, 2013, and the respective changes in financial
position and the respective budgetary comparison for the General fund for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis
starting on page 15 be presented to supplement the basic financial statements. Such information, although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial
reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied
certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the
United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing
the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we
obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information
because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
0115 ta. 4
"AlifiA0)11,
ABDO, EICK & MEYERS, LLP
Minneapolis, Minnesota
March 18, 2014
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People
+Process®
Going
Numbers
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Management's Discussion and Analysis
As management of the Vadnais Lake Area Water Management Organization, (the Organization), Vadnais Heights, Minnesota, we
offer readers of the Organization's financial statements this narrative overview and analysis of the financial activities of the
Organization for the fiscal year ended December 31, 2013. We encourage readers to consider the information presented here in
conjunction with the financial statements, which follow this section.
Financial Highlights
• The assets of the Organization exceeded its liabilities at the close of the most recent fiscal year by $639,398 (net position).
Of this amount, $512,658 (unrestricted net position) may be used to meet the Organization's ongoing obligations.
• The Organization's total net position increased by $30,880. The increase is due to the Organization receiving more grants
monies during the year than anticipated.
• As of the close of the current fiscal year, the Organization's govenunental fund reported combined ending fund balances of
$526,607, an increase of $52,074 in comparison with the prior year. This increase in fund balance is due the Organization
receiving more grants than anticipated during the year.
• The ending General fund balance was $526,607. Of this balance, $186,000 is committed purposes disclosed in the financial
statements.
• The Organization's unrestricted cash and temporary investments increased to $588,720 from $543,273 during 2013.
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Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the Organization's basic financial statements. The
Organization's basic financial statements are comprised of three components: 1) government -wide financial statements, 2) fund
financial statements, and 3) notes to the financial statements. This report also contains other required supplemental information in
addition to the basic financial statements themselves.
The financial statements also include notes that explain some of the information in the financial statements and provide more detailed
data. The statements are followed by a section of combining and individual fund financial statements and schedules that further
explains and supports the information in the financial statements. Figure 1 shows how the required parts of this annual report are
arranged and relate to one another.
Figure 1
Required Components of the
Organization's Annual Financial Report
Management's
Discussion and
Analysis
Basic
Financial
Statements
Required
Supplementary
Information
Government -
wide Financial
Statements
Summary
Fund
Financial
Statements
Notes to the
Financial
Statements
Detail
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Figure 2 summarizes the major features of the Organization's financial statements, including the portion of the Organization
government they cover and the types of information they contain. The remainder of this overview section of management's discussion
and analysis explains the structure and contents of each of the statements.
Figure 2
Major features of the Government -wide and Fund Financial Statements
Fund Financial Statements
Government -wide Statements
Governmental Funds
Scope
Entire Organization
The activities of the Organization
Required financial statements
• Statement of Net Position
• Statement of Activities
• Balance Sheet
• Statement of Revenues, Expenditures, and
Changes in Fund Balances
Accounting Basis and
measurement focus
Accrual accounting and economic
resources focus
Modified accrual accounting and current
financial resources focus
Type of asset/liability
information
All assets and liabilities, both
financial and capital, and short-
term and long-term
Only assets expected to be used up and
liabilities that come due during the year or
soon thereafter; no capital assets included
Type of deferred
outflows/inflows of resources
information
All deferred outflows/inflows of
resources, regardless of when
cash is received or paid.
Only deferred outflows of resources expected
to be used up and deferred inflows of
resources that come due during the year or
soon thereafter; no capital assets included
Type of inflow/out flow
information
All revenues and expenses during
year, regardless of when cash is
received or paid
Revenues for which cash is received during
or soon after the end of the year; expenditures
when goods or services have been received
and payment is due during the year or soon
thereafter
Government -wide financial statements. The government -wide financial statements are designed to provide readers with a broad
overview of the Organization's finances, in a manner similar to a private -sector business.
The statement of net position presents information on all of the Organization's assets and liabilities, with the difference between the
two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial
position of the Organization is improving or deteriorating.
The statement of activities presents information showing how the Organization's net position changed during the most recent fiscal
year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing
of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in
future fiscal periods (e.g., grants and earned but unused vacation and sick leave).
The governmental activities of the Organization include general and administrative, programs, and projects.
The government -wide financial statements start on page 24 of this report.
Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been
segregated for specific activities or objectives. The Organization, like other state and local government, uses fund accounting to
ensure and demonstrate compliance with finance -related legal requirements. The Organization currently only uses governmental
funds.
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Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities
in the government -wide financial statements. However, unlike the government -wide financial statements, governmental fund
financial statements focus on near -term inflows and outflows of spendable resources, as well as on balances of spendable resources
available at the end of the fiscal year. Such information may be useful in evaluating a government's near -term financing
requirements.
Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the
information presented for governmental funds with similar information presented for governmental activities in the government -wide
financial statements. By doing so, readers may better understand the long-term impact by the government's near -term financing
decisions. Both the governmental fund balance sheets and the governmental fund statements of revenues, expenditures and changes in
fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
The Organization adopts an annual appropriated budget for its General fund. A budgetary comparison statement has been provided
for the General fund to demonstrate compliance with this budget.
The basic governmental fund financial statements start on page 28 of this report.
Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data
provided in the government -wide and fund financial statements. The notes to the financial statements start on page 33 of this report.
Government -wide Financial Analysis
As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the
Organization, assets exceeded liabilities by $639,398 at the close of the most recent fiscal year.
The largest portions of the Organization's net position are unrestricted and available to meet the ongoing needs of the Organization.
The Organization has a total of 20 percent classified as investment in capital assets (e.g., land, buildings, machinery and equipment).
The Organization uses these capital assets to provide services to its member cities; consequently, these assets are not available for
future spending.
Vadnais Lake Area Water Management Organization's Summary of Net Position
December 31, Increase
2013 2012 (Decrease)
Assets
Current $ 1,094,496 $ 1,024,680 $ 69,816
Capital, net of accumulated depreciation 126,740 138,110 (11,370)
Total assets
1,221,236 1,162,790 58,446
Liabilities
Current 559,674 534,629 25,045
Noncurrent 22,164 19,643 2,521
Total liabilities
581,838 554,272 27,566
Net position
Net investment in capital assets 126,740 138,110 (11,370)
Unrestricted 512,658 470,408 42,250
Total net position $ 639,398 $ 608,518 $ 30,880
At the end of the current fiscal year, the Organization is able to report positive balances in both categories of net position.
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Vadnais Lake Area Water Management Organization's Changes in Net Position
December 31, Increase
2013 2012 (Decrease)
Revenues
Program
Charges for services $ 436,119 $ 428,098 $ 8,021
Operating grants and contributions 142,089 7,643 134,446
Capital grants and contribution 80,526 (80,526)
General
Unrestricted investment earnings 99 90 9
Miscellaneous 60 907 (847)
Total revenues 578,367 517,264 61,103
Expenses
General government 314,485 284,992 29,493
Programs 55,598 48,669 6,929
Projects 177,404 116,852 60,552
Total expenses 547,487 450,513 96,974
Change in net position 30,880 66,751 (35,871)
Net position, January 1 608,518 541,767 66,751
Net position, December 31 $ 639,398 $ 608,518 $ 30,880
The increase in operating grants and contributions are directly related to the projects that the Organization is currently working on.
Many of these capital grants are reimbursements from member cities for expenses incurred on significant improvement projects or
from grants received for projects.
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The following graph depicts various governmental activities and shows the revenue and expenses directly related to those activities.
$400,000
$3 50,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$-
Expenses and Program Revenues - Governmental Activities
General government
General revenues
0.03%
Programs Projects
■ Expenses ■ Program Revenues
Revenues by Source - Governmental Activities
Operating grants
and contributions
24.57%
Charges for services
75.40%
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Financial Analysis of the Government's Funds
As noted earlier, the Organization uses fund accounting to ensure and demonstrate compliance with finance -related legal
requirements.
Governmental funds. The focus of the Organization's governmental funds is to provide information on near -term inflows, outflows
and balances of spendable resources. Such information is useful in assessing the Organization's financing requirements. In particular,
unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal
year.
As of the end of the current fiscal year, the Organization's governmental fund reported an ending fund balance of $526,607 an
increase of $52,074 in comparison with the prior year. Approximately 65 percent of the total amount, $340,607, constitutes
unassigned fund balance, which is available for spending at the Organization's discretion. The remainder fund balance of $186,000 is
committed for purposes described in the notes to the financial statements.
The General fund is the chief operating fund of the Organization. At the end of the current year, the fund balance of the General fund
was $526,607. As a measure of the General fund's liquidity, it may be useful to compare total fund balance to total fund expenditures.
Total fund balance represents 99 percent of 2013 fund expenditures and 70 percent of 2014 budgeted fund expenditures.
The fund balance of the Organization's General fund increased $52,074 during the current fiscal year. The key factor in this change
was the increase in intergovernmental revenue due to the receipts of grants as well as less than anticipated project costs.
General Fund Budgetary Highlights
The Organization's General fund budget was amended during the year. The amended budget called for expenditures exceeding budget
by $273,800. Actual revenues were over budget by $143,796, mainly due to grant revenues exceeding budget by $135,154.
Expenditures had a positive budget variance of $182,078, mostly due to project costs being less than anticipated.
Capital Asset and Debt Administration
Capital assets. The Organization's investment in capital assets for its governmental activities as of December 31, 2013, amounts to
$126,740 (net of accumulated depreciation). This investment in capital assets includes infrastructure related to the Lambert Creek
Restoration project and monitoring equipment at Whitaker Pond.
Additional information on the Organization's capital assets can be found in Note 3C on page 40 of this report.
Economic Factors and Next Year's Budgets
The Organization considered and prepared the 2013 budget based on the following factors:
• Revenue is primarily from the storm sewer utility assessment, with minor income from grants, service fees and interest.
• Expenditures fall into three main categories: Programs, projects, and general and administration.
• Programs include: monitoring and data analysis, sustainable lake plans, cost -share, education and outreach, maintenance and
48 percent of payroll for 4.0 employees.
• Projects include capital projects, three Community Blue Partnership project installations, stabilization of 210' of Lambert
Creek, Tamarack Floating Island, Gem Lake, Gilfillan Lake, Goose Lake, Wilkinson Lake and TMDL work planning,
implementation of sustainable lake plans and 28 percent of payroll for 4.0 employees.
• Operations and administration include office rent and supplies, bookkeeping and general and program audit, information
systems, insurance, 24 percent payroll for 4.0 employees and legal expenses.
All of these factors were considered in preparing the Organization's budget for the 2014 fiscal year.
Requests for Information
This financial report is designed to provide a general overview of the Organization's finances for all those with an interest in the
Organization's finances. Questions concerning any of the information provided in this report or requests for additional financial
information should be addressed to Stephanie McNamara, Administrator, Vadnais Lake Area Water Management Organization,
800 County Road E East, Vadnais Heights, MN 55127.
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GOVERNMENT -WIDE FINANCIAL STATEMENTS
VADNAIS LAKE AREA WATER
MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
FOR THE YEAR ENDED
DECEMBER 31, 2013
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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
STATEMENT OF NET POSITION
DECEMBER 31, 2013
Govenunental
Activities
ASSETS
Cash and temporary investments $ 588,720
Restricted cash 16,893
Receivables
Accounts 5,100
Special assessments 477,365
Due from other governments 6,418
Capital assets
Depreciable assets, net of accumulated depreciation 126,740
TOTAL ASSETS 1,221,236
LIABILITIES
Accounts payable 34,328
Escrow deposits payable 16,893
Due to other governments 18,541
Unearned revenue 489,912
Noncurrent liabilities
Due within one year 16,623
Due in more than one year 5,541
TOTAL LIABILITIES 581,838
NET POSITION
Net investment in capital assets
Unrestricted
126,740
512,658
TOTAL NET POSITION $ 639,398
The notes to the financial statements are an integral part of this statement.
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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2013
Program Revenues
Net (Expense)
Revenue and
Changes in
Net Position
Charges Operating Capital
for Grants and Grants and Governmental
Functions/Programs Expenses Services Contributions Contributions Activities
Governmental activities
General and administrative $ 314,485 $ 327,089 $ 7,353 $ $ 19,957
Programs 55,598 87,224 - 31,626
Projects 177,404 21,806 134,736 (20,862)
Total $ 547,487 $ 436,119 $ 142,089 $ 30,721
General revenues
Unrestricted investment earnings
Miscellaneous
Total general revenues
Change in net position
Net position, January 1
Net position, December 31
The notes to the financial statements are an integral part of this statement.
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99
60
159
30,880
608,518
$ 639 398
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FUND FINANCIAL STATEMENTS
VADNAIS LAKE AREA WATER
MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
FOR THE YEAR ENDED
DECEMBER 31, 2013
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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
BALANCE SHEET
GOVERNMENTAL FUNDS
DECEMBER 31, 2013 AND 2012
2013 2012
ASSETS
Cash and temporary investments $ 588,720 $ 543,273
Restricted cash 16,893 16,891
Receivables
Accounts 5,100 3,315
Special assessments 477,365 461,201
Due from other governments 6,418
TOTAL ASSETS $ 1,094,496 $ 1,024,680
LIABILITIES
Accounts payable $ 34,328 $ 13,090
Escrow deposits payable 16,893 16,891
Due to other governments 18,541 17,066
Unearned revenue 489,912 487,582
TOTAL LIABILITIES
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue - special assessments
559,674 534,629
8,215 15,518
FUND BALANCES
Committed 186,000 173,800
Unassigned 340,607 300,733
TOTAL FUND BALANCES
526,607 474,533
TOTAL DEFERRED INFLOWS OF RESOURCES,
LIABILITIES AND FUND BALANCES $ 1,094,496 $ 1,024,680
The notes to the financial statements are an integral part of this statement.
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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
RECONCILIATION OF THE BALANCE SHEET
TO THE STATEMENT OF NET POSITION
GOVERNMENTAL FUNDS
DECEMBER 31, 2013
Total fund balances - governmental
Amounts reported for the governmental activities in the statement
of net position are different because
Capital assets used in governmental activities are not financial
resources and therefore are not reported as assets in governmental funds.
Cost of capital assets
Less: accumulated depreciation
Noncurrent liabilities, are not due and payable in the current period
and therefore are not reported as liabilities in the funds.
Compensated absences payable
Some receivables are not available soon enough to pay for the current period's
expenditures, and therefore are unavailable in the funds.
Special assessments
$ 526,607
190,380
(63,640)
(22,164)
8,215
Total net position - governmental activities $ 639,398
The notes to the financial statements are an integral part of this statement.
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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
2013 2012
REVENUES
Charges for services $ 443,422 $ 436,501
Intergovernmental
Grants 140,154 86,426
Interest on investments 99 90
Miscellaneous 1,995 2,650
TOTAL REVENUES 585,670 525,667
EXPENDITURES
Current
General and administrative 300,594 266,689
Programs 55,598 48,669
Projects 177,404 116,852
TOTAL EXPENDITURES
EXCESS OF REVENUES
OVER EXPENDITURES
FUND BALANCES, JANUARY 1
FUND BALANCES, DECEMBER 31
533,596 432,210
52,074 93,457
474,533 381,076
$ 526,607 $ 474,533
The notes to the financial statements are an integral part of this statement.
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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
RECONCILIATION OF THE STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
TO THE STATEMENT OF ACTIVITIES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2013
Total net change in fund balances - governmental funds $ 52,074
Amounts reported for governmental activities
in the statement of activities are different because
Capital outlays are reported in governmental funds as expenditures. However
in the statement of activities, the cost of those assets is allocated over the
estimated useful lives as depreciation expense.
Depreciation expense
Certain revenues are recognized as soon as they are earned. Under the modified
accrual basis of accounting certain revenues cannot be recognized until they
are available to liquidate liabilities of the current period.
Special assessments
Some expenses reported in the statement of activities do not require the use of
current financial resources and, therefore, are not reported as expenditures
in governmental funds.
Compensated absences
(11,370)
(7,303)
(2,521)
Change in net position - governmental activities $ 30,880
The notes to the financial statements are an integral part of this statement.
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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES -
BUDGET AND ACTUAL
GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2013
(With comparative actual amounts for the year ended December 31, 2012)
2013 2012
Budgeted Amounts Actual Variance with Actual
Original Final Amounts Final Budget Amounts
REVENUES
Charges for services $ 436,074 $ 436,074 $ 443,422 $ 7,348 $ 436,501
Intergovernmental
Grants 5,000 5,000 140,154 135,154 86,426
Interest on investments 300 300 99 (201) 90
Miscellaneous 500 500 1,995 1,495 2,650
TOTAL REVENUES
441,874 441,874 585,670 143,796 525,667_
EXPENDITURES
General and administrative
Wages 202,000 202,000 175,676 26,324 179,443
Payroll taxes and employee benefits 47,000 47,000 46,739 261 40,148
Legal 3,000 3,000 707 2,293 -
Professional services 21,300 29,300 37,599 (8,299) 11,800
Information systems 14,600 14,600 9,304 5,296 6,056
Insurance 4,150 4,150 4,517 (367) 4,023
Office 18,900 18,900 16,489 2,411 17,127
Staff training 2,700 3,000 2,871 129 1,177
Telephone - 1,980 (1,980) 1,920
Miscellaneous 7,500 7,500 4,712 2,788 4,995
Programs
Monitoring 38,500 40,500 34,080 6,420 27,732
Maintenance 42,224 48,724 21,518 27,206 20,937
Projects 140,000 297,000 177,404 119,596 116,852
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
FUND BALANCES, JANUARY 1
541,874 715,674 533,596 182,078 432,210
(100,000) (273,800) 52,074 325,874 93,457
474,533 474,533 474,533 381,076
FUND BALANCES, DECEMBER 31 $ 374,533 $ 200,733 $ 526,607 $ 325,874 $ 474,533
The notes to the financial statements are an integral part of this statement.
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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting entity
The Vadnais Lake Area Water Management Organization (the Organization) was established to meet the requirements of
the Metropolitan Surface Water Management Act, re -codified as Minnesota statutes, chapters 103-b and 103-d.
The general purpose of the Organization is to establish a jointly and cooperatively developed water management plan
and program to (1) protect, preserve, and use natural surface and groundwater storage and retention systems;
(2) minimize capital expenditures necessary to correct flooding and water quality problems; (3) identify and plan for
means to effectively protect and improve surface and groundwater quality; (4) establish more uniform local policies and
official controls for surface water, wetland and groundwater management; (5) prevent erosion of soil into surface water
systems; (6) promote groundwater recharge; (7) protect and enhance fish and wildlife habitat and water recreational
facilities, and secure other benefits associated with the proper management of surface ground water, and be in
accordance with the Act.
The Organization is governed by a Board of Directors which consists of six members, one from each of the following
governmental units: City of North Oaks, City of White Bear Lake, City of Lino Lakes, White Bear Township, City of
Vadnais Heights and the City of Gem Lake. The Board of Directors exercises legislative authority and determines all
matters of policy. The Board of Directors appoints personnel responsible for the proper administration of all affairs
relating to the Organi7ation's activities.
The Organization has considered all potential units for which it is financially accountable, and other organizations for
which the nature and significance of their relationship with the Organization are such that exclusion would cause the
Organization's financial statements to be misleading or incomplete. The Governmental Accounting Standards Board
(GASB) has set forth criteria to be considered in determining financial accountability. These criteria include appointing a
voting majority of an organization's governing body, and (1) the ability of the primary government to impose its will on
that organization or (2) the potential for the organization to provide specific benefits to, or impose specific financial
burdens on the primary government. The Organization has no component units that meet the GASB criteria.
B. Government -wide and fund financial statements
The government -wide financial statements (i.e., the statements of net position and the statements of activities) report
information on all of the non -fiduciary activities of the Organization.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset
by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment.
Amounts reported as program revenues include 1) charges to customers or applicants who purchase, use, or directly
benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that
are restricted to meeting the operational or capital requirements of a particular function or segment. Other items not
properly included among program revenues are reported instead as general revenues.
Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as
separate columns in the fund financial statements.
-33-
VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
C. Measurement focus, basis of accounting and basis of presentation
The government -wide financial statements are reported using the economic resources measurement focus and the
accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred,
regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all
eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus and the
modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available.
Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to
pay liabilities of the current period. For this purpose, the Organization considers revenues to be available if they are
collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is
incurred, as under accrual accounting. However, expenditures related to compensated absences and claims and
judgments, are recorded only when payment is due.
Charges for service, assessments to members, grants and interest associated with the current fiscal period are all
considered susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue
items are considered to be measurable and available only when cash is received by the Organization.
Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is
recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the
year in which the resources are measurable and become available.
Non -exchange transactions, in which the Organization receives value without directly giving equal value in return,
include grants, entitlement and donations. Eligibility requirements include timing requirements, which specify the year
when the resources are required to be used or the year when use is first permitted, matching requirements, in which the
Organization must provide local resources to be used for a specified purpose, and expenditure requirements, in which the
resources are provided to the Organization on a reimbursement basis. On a modified accrual basis, revenue from non -
exchange transactions must also be available before it can be recognized.
Unearned revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and
entitlements received before eligibility requirements are met are also recorded as unearned revenue.
The Organization reports the following major governmental fund:
The General fund is the Organization's primary operating fund. It accounts for all financial resources of the
Organization.
When both restricted and unrestricted resources are available for use, it is the Organization's policy to use restricted
resources first, then unrestricted resources as they are needed.
As a general rule the effect of interfund activity has been eliminated from government -wide financial statements.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
-34-
VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
D. Assets, liabilities, deferred inflows of resources, and net position/fund balance
Deposits and investments
The Organization's cash and temporary investments are considered to be cash on hand, demand deposits and short-term
investments with original maturities of three months or less from the date of acquisition. Investments are reported at fair
value.
The Organization may also invest idle funds as authorized by Minnesota statutes, as follows:
1. Direct obligations or obligations guaranteed by the United States or its agencies.
2. Shares of investment companies registered under the Federal Investment Company Act of 1940 and received
the highest credit rating, rated in one of the two highest rating categories by a statistical rating agency, and have
a final maturity of thirteen months or less.
3. General obligations of a state or local government with taxing powers rated "A" or better; revenue obligations
rated "AA" or better.
4. General obligations of the Minnesota Housing Finance Agency rated "A" or better.
5. Bankers' acceptances of United States banks eligible for purchase by the Federal Reserve System.
6. Commercial paper issued by United States banks corporations or their Canadian subsidiaries, of highest quality
category by at least two nationally recognized rating agencies, and maturing in 270 days or less.
7. Repurchase or reverse repurchase agreements and securities lending agreements with financial institutions
qualified as a "depository" by the government entity, with banks that are members of the Federal Reserve
System with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. government securities to
the Federal Reserve Bank of New York, or certain Minnesota securities broker -dealers.
8. Guaranteed Investment Contracts (GIC's) issued or guaranteed by a United States commercial bank, a domestic
branch of a foreign bank, a United States insurance company, or its Canadian subsidiary, whose similar debt
obligations were rated in one of the top two rating categories by a nationally recognized rating agency.
The Minnesota Municipal Money Market (4M) fund operates in accordance with appropriate state laws and regulations.
The 4M fimd is an external investment pool not registered with the Securities and Exchange Commission (SEC);
however, it follows the same regulatory rules of the SEC under rule 2a7. The reported value of the pool is the same as
the fair value of the pool shares. Financial statements of the 4M fund can be obtained by contacting RBC Global Asset
Management at 100 South Fifth Street, Suite 2300, Minneapolis, MN 55402-1240.
Restricted assets
Certain assets of the Organization are set aside for repayment of individual property owners once they meet specific
criteria.
Accounts receivable
Accounts receivable include amounts billed for services provided before year end.
-35-
VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED
Special assessments
Special assessments represent storm sewer utility charges. These assessments are recorded as receivables upon
certification to the County. Special assessments are recognized as revenue in the year they are collected or received in
cash or within 60 days after year end. Governmental fund special assessments receivables are offset by deferred inflows
of resources liabilities or unearned revenue in the fund financial statements.
Capital assets
Capital assets, which include property, plant and equipment, are reported in the applicable governmental activities
columns in the government -wide financial statements. Capital assets are defined by the Organization as assets with an
initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of one year. Such
assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are
recorded at estimated fair market value at the date of donation.
The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are
not capitalized.
Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the
construction phase of capital assets is included as part of the capitalized value of the assets constructed.
Property, plant, and equipment of the Organization are depreciated using the straight-line method over the following
estimated useful lives:
Assets
Infrastructure
Equipment
Deferred inflows of resources
Useful Lives
in Years
20-30
5-7
In addition to liabilities, the statement of financial position and fund financial statements will sometimes report a
separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of
resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an
inflow of resources (revenue) until that time. The government has only one type of item, which arises only under a
modified accrual basis of accounting, that qualifies as needing to be reported in this category. Accordingly, the item,
unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report
unavailable revenues from one source: special assessments. The unavailable amounts are deferred and recognized as an
inflow of resources in the period that the amounts become available.
Compensated absences
It is the Organization's policy to permit employees to accumulate earned but unused vacation and sick benefits, which
will be paid to the employee upon separation without the considerations of number of years of service. A liability for
these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee
resignations and retirements.
-36-
VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Fund balance
In the fund financial statements, fund balance is divided into five classifications based primarily on the extent to which
the Organization is bound to observe constraints imposed upon the use of resources reported in the governmental funds.
These classifications are defined as follows:
Nonspendable - Amounts that cannot be spent because they are not in spendable form, such as prepaid items.
Restricted - Amounts related to externally imposed constraints established by creditors, grantors or contributors; or
constraints imposed by state statutory provisions.
Committed - Amounts constrained for specific purposes that are internally imposed by formal action (resolution) of
the Board of Directors, which is the Organization's highest level of decision -making authority. Committed amounts
cannot be used for any other purpose unless the Board of Directors modifies or rescinds the commitment by
resolution.
Assigned - Amounts constrained for specific purposes that are internally imposed. In governmental funds other than
the General fund, assigned fund balance represents all remaining amounts that are not classified as nonspendable
and are neither restricted nor committed. In the General fund, assigned amounts represent intended uses established
by the Board of Directors itself or by an official to which the governing body delegates the authority. The Board of
Directors has adopted a fund balance policy which delegates the authority to assign amounts for specific purposes to
the Administrator.
Unassigned - The residual classification for the General fund and also negative residual amounts in other funds.
The Organizations considers restricted amounts to be spent first when both restricted and unrestricted fund balance is
available. Additionally, the Organization would first use committed, then assigned, and lastly unassigned amounts of
unrestricted fund balance when expenditures are made.
The Organization has formally adopted a fund balance policy for the General fund. The Organization's policy is to
maintain a minimum unassigned fund balance of 35 - 50 percent of budgeted operating expenditures for cash -flow
timing needs.
Net position
Net position represents the difference between assets and liabilities. Net position is displayed in three components:
a. Net investment in capital assets - Consists of capital assets, net of accumulated depreciation reduced by any
outstanding debt attributable to acquire capital assets.
b. Restricted net position - Consist of net position balances restricted when there are limitations imposed on their
use through external restrictions imposed by creditors, grantors, laws or regulations of other governments.
c. Unrestricted net position - All other net position balances that do not meet the definition of "restricted" or "net
investment in capital assets".
Comparative data/reclassijications
Comparative total data for the prior year has been presented for the fund financial statements in order to provide an
understanding of the change in financial position. Certain amounts presented in prior year data have been reclassified in
order to be consistent with the current year's presentation.
-37-
VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, NIINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
Budgetary information
Annual budgets are prepared on a basis consistent with accounting principles generally accepted in the United States of
America for the General fund. All annual appropriations lapse at year end. The Organization does not use encumbrance
accounting.
During the budget year, supplemental appropriations and deletions are or may be authorized by the Board of Directors. The
budget was amended by the Board of Directors in 2013. The amended budget called for expenditures exceeding revenues by
$273,800.
Note 3: DETAILED NOTES ON ACCOUNTS
A. Deposits and investments
Deposits
Custodial credit risk for deposits and investments is the risk that in the event of a bank failure, the Organization's
deposits may not be returned or the Organization will not be able to recover collateral securities in the possession of an
outside party. In accordance with Minnesota statutes and as authorized by the Board of Directors, the Organization
maintains deposits at those depository banks which are members of the Federal Reserve System.
Minnesota statutes require that all Organization deposits be protected by insurance, surety bond or collateral. The market
value of collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds.
Authorized collateral in lieu of a corporate surety bond includes:
• United States government Treasury bills, Treasury notes, Treasury bonds;
• Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation
service available to the government entity;
• General obligation securities of any state or local government with taxing powers which is rated "A" or better
by a national bond rating service, or revenue obligation securities of any state or local government with taxing
powers which is rated "AA" or better by a national bond rating service;
• General obligation securities of a local government with taxing powers may be pledged as collateral against
funds deposited by that same local government entity;
• Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by
written evidence that the bank's public debt is rated "AA" or better by Moody's Investors Service, Inc., or
Standard & Poor's Corporation; and
• Time deposits that are fully insured by any federal agency.
Minnesota statutes require that all collateral shall be placed in safekeeping in a restricted account at a Federal Reserve
Bank, or in an account at a trust department of a commercial bank or other financial institution that is not owned or
controlled by the financial institution furnishing the collateral. The selection should be approved by the Organization
-38-
VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3: DETAILED NOTES ON ACCOUNTS - CONTINUED
At year end, the Organization's carrying amount of deposits was $125,082 and the bank balance was $125,418. The
entire bank balance was covered by federal depository insurance.
Investments
At year end, the Organization had the following investments that are insured or registered, or securities held by the
Organization's agent in the Organization's name:
Types of Investments
Fair Value
Credit Segmented and
Quality/ Time Carrying
Ratings (1) Distribution (2) Amount
Pooled investments
Minnesota Municipal Money Market fund NA Tess than 6 months $ 480,507
(1) Ratings are provided by Moody's where applicable to indicate associated credit risk.
(2) Interest rate risk is disclosed using the segmented time distribution method.
The investments of the Organization are subject to the following risks:
• Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its
obligations. Ratings are provided by various credit rating agencies and where applicable, indicate associated
credit risk. Minnesota statutes limit the Organization's investments to the list on page 35 of the notes.
• Custodial Credit Risk. The custodial credit risk for investments is the risk that, in the event of the failure of the
counterparty to a transaction, a government will not be able to recover the value of investment or collateral
securities that are in the possession of an outside party.
• Concentration of Credit Risk. Concentration of credit risk is the risk of loss attributed to the magnitude of a
government's investment in a single issuer.
• Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of
an investment.
The Organization does not have an investment policy that addresses the risks described above.
A reconciliation of cash and temporary investments as shown in the financial statements of the Organization follows:
Carrying amount of deposits $ 125,082
Investments 480,507
Cash on hand 24
Total $ 605,613
Cash and investments
Unrestricted $ 588,720
Restricted 16,893
Total $ 605.613
-39-
VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3: DETAILED NOTES ON ACCOUNTS - CONTINUED
B. Restricted assets
The Organization set aside the following cash balances for repayment of individual property owners:
Mitigation Restricted Cash
C. Capital assets
Capital asset activity for the year ended December 31, 2013 was as follows:
$ 16,893
Beginning Ending
Balance Increases Decreases Balance
Governmental activities
Capital assets, being depreciated
Infrastructure $ 181,219 $
Equipment 9,161
Total capital assets
being depreciated
$ 181,219
9,161
190,380 190,380
Less accumulated depreciation for
Infrastructure (47,690) (9,538) (57,228)
Equipment (4,580) (1,832) (6,412)
Total accumulated depreciation (52,270) (11,370) (63,640)
Total governmental activities $ 138.110 $ (11,370) $ $ 126,740
The full depreciation expense amount was charged to general and administrative.
D. Operating lease
The Organization entered into a lease agreement with the City of Vadnais Heights for office space. The lease agreement
has an effective period of January 1, 2012 and will terminate on December 31, 2014.
The lease agreement calls for monthly payments for office space, as well as amounts for the Organizations portion of
normal operating expenses, such as: janitorial, secretarial, office supplies, postage, utilities, IT support and any other
costs that arise.
The Organization paid $13,800 and $13,500 for rent in 2013 and 2012, respectively. The Organization's rent for fiscal
year 2014 is expected be $14,100 as outlined in the lease agreement.
E. Unearned revenue
Governmental funds report unearned revenue in connection with receivables for revenues that have been received, but
not yet earned. At the end of the current fiscal year, the various components of unearned revenue reported were as
follows:
Special assessments receivable
Grants receivable
Unearned
$ 454,100
35,812
Total $ 489,912
-40-
VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 3: DETAILED NOTES ON ACCOUNTS - CONTINUED
F. Changes in long-term liabilities
Long-term liability activity for the year ended December 31, 2013, was as follows:
Beginning Ending Current
Balance Increases Decreases Balance Portion
Governmental activities
Compensated
absences payable
G. Fund balance classifications
$ 19,643 $ 19,940 $ (17,419) $ 22,164 $ 16,623
At December 31, 2013, portions of the Organization's fund balance are not available for appropriation due to Board of
Directors action (committed). The following is a summary of the commitments:
Commitments
Technical assistance $ 9,000
Planning 2,000
Information systems 5,000
Financial incentives 8,800
Engineering 6,800
Education and outreach 6,000
Lab analysis 6,000
Lambert Creek restoration 8,300
Legal assistance 2,000
Maintenance 6,500
Equipment 4,800
Water Qual projects and implementation 98,000
Research 20,000
Other 2,800
Total committed $ 186,000
Note 4: DEFINED BENEFIT PENSION PLANS - STATEWIDE
A. Plan description
A11 full -tune and certain part-time employees of the Vadnais Heights Area Water Management Organization are covered
by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA
administers the General Employees Retirement Fund (GERF) which is a cost -sharing, multiple -employer retirement
plan. This plan is established and administered in accordance with Minnesota statutes, chapters 353 and 356.
GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by
Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan.
PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of
eligible members. Benefits are established by Minnesota statute, and vest after three years of credited service. The
defined retirement benefits are based on a member's highest average salary for any five successive years of allowable
service, age and years of credit at termination of service.
-41-
VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013
Note 4: DEFINED BENEFIT PENSION PLANS - STATEWIDE - CONTINUED
Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring member
receives the higher of step -rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under
Method 1, the annuity accrual rate for a Basic Plan member is 2.2 percent of average salary for each of the first 10 years
of service and 2.7 percent for each remaining year. The annuity accrual rate for a Coordinated Plan member is
1.2 percent of average salary for each of the first 10 years and 1.7 percent for each remaining year. Under Method 2, the
annuity accrual rate is 2.7 percent of average salary for Basic Plan members and 1.7 percent for Coordinated Plan
members for each year of service. GERF members hired prior to July 1, 1989 whose annuity is calculated using
Method 1, a full annuity is available when age plus years of service equal 90. Normal retirement age is the age for
unreduced Social Security benefits capped at 66 for Coordinated members hired on or after July 1, 1989. A reduced
retirement annuity is also available to eligible members seeking early retirement.
There are different types of annuities available to members upon retirement. A single -life annuity is a lifetime annuity
that ceases upon death of the retiree --no survivor annuity is payable. There are also various types of joint and survivor
annuity options available which will be payable over joint lives. Members may also leave their contributions in the fund
upon termination of public service, in order to qualify for a deferred annuity at retirement age. Refunds of contributions
are available at any time to members who leave public service, but before retirement benefits begin.
The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan
participants. Vested, terminated employees, who are entitled to benefits but are not receiving them yet, are bound by the
provisions in effect at the time they last terminated their public service.
PERA issues a publicly available financial report that includes financial statements and required supplementary
information for GERF. That report may be obtained on the Internet at mnpera.org, by writing to PERA, 60 Empire Drive
#200, St. Paul, Minnesota, 55103-2088 or by calling (651) 296-7460 or (800) 652-9026.
B. Funding policy
Minnesota statutes, chapter 353 sets the rates for employer and employee contributions. These statutes are established
and amended by the State legislature. The Organization makes annual contributions to the pension plans equal to the
amount required by Minnesota statutes. GERF Basic Plan members and Coordinated Plan members are required to
contribute 9.10 percent and 6.25 percent, respectively, of their annual covered salary in 2013. In 2013, the Vadnais
Heights Lake Area Water Management Organization was required to contribute the following percentages of annual
covered payroll: 11.78 percent for Basic Plan GERF members and 7.25 percent for Coordinated Plan GERF members.
The Organization's contributions to the General Employees Retirement Fund for the years ended December 31, 2013,
2012 and 2011 were $13,544, $13,178, and $10,886, respectively. The Organization's contributions were equal to the
contractually required contributions for each year as set by Minnesota statute.
Note 5: OTHER INFORMATION
Risk management
The Organization is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and
omissions; injuries to employees; and natural disasters for which the Organization carries insurance. The Organization pays
annual premiums for its workers compensation and property and casualty insurance. Settled claims have not exceeded the
Organization's coverage in any of the past three fiscal years.
Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated.
Liabilities, if any, include an amount for claims that have been incurred but not reported (IBNRs). The Organization's
management is not aware of any incurred but not reported claims.
-42-
OTHER REPORT
VADNAIS LAKE AREA WATER
MANAGEMENT ORGANIZATION
VADNAIS HEIGHTS, MINNESOTA
FOR THE YEAR ENDED
DECEMBER 31, 2013
-43-
THIS PAGE IS LEFT BLANK
INTENTIONALLY
-44-
ABDO
iV,; EICK &
®r •, _ MEYERS.
Certified Public Accountants & Consultants
INDEPENDENT AUDITOR'S REPORT ON MINNESOTA LEGAL COMPLIANCE
Board of Directors
Vadnais Lake Area Water Management Organization
Vadnais Heights, Minnesota
We have audited, in accordance with auditing standards generally accepted in the United States of America, the financial statements of
the governmental activities and the major fund of the Vadnais Lake Area Water Management Organization (the Organization),
Vadnais Heights, Minnesota, as of and for the year ended December 31, 2013, and the related notes to the financial statements as and
have issued our report thereon dated March 18, 2014.
The Minnesota Legal Compliance Audit Guide for Political Subdivisions, promulgated by the State Auditor pursuant to Minnesota
statute § 6.65, contains six categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of
interest, public indebtedness, claims and disbursements, and miscellaneous provisions. Our audit considered all of the listed
categories.
In connection with our audit, nothing came to our attention that caused us to believe that the Organization failed to comply with the
provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions. However, our audit was not directed primarily
toward procedures, other matters may have come to our attention regarding the Organization's noncompliance with the above
referenced provisions. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding
the City's noncompliance with the above referenced provisions.
This report is intended solely for the information and use those charged with governance and management of the Organization's and
the State Auditor and is not intended to be and should not be used by anyone other than these specified parties.
OItU141YtQMW',LL�
ABDO, EICK & MEYERS, LLP
Minneapolis, Minnesota
March 18, 2014
5201 Eden Avenue, Suite 250
Edina, MN 55436
952.835.9090 I Fax 952.835.3281
-45-
ABDO
IPJEICK&
_ MEYERSLLP
CertifiedPublic Accountants & Consultants March 18, 2014
Board of Directors
Vadnais Lake Area Water Management Organisation
Vadnais Heights, Minnesota
We have audited the financial statements of the governmental activities the each major fund of the Vadnais Lake Area Water
Management Organization (the Organization), Vadnais Heights, Minnesota, for the year ended December 31, 2013. Professional
standards require that we provide you with information about our responsibilities under generally accepted auditing standards. We
have communicated such information in our letter to you dated October 22, 2013. Professional standards require that we provide you
with the following information related to our audit.
Our Responsibility Under Auditing Standards Generally Accepted in the United States of America
As stated in our engagement letter, our responsibility, as described by professional standards, is to express opinions about whether the
financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with
accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or
management of your responsibilities.
Our responsibility is to plan and perform the audit to obtain reasonable, but not absolute, assurance that the financial statements are
free of material misstatement. As part of our audit, we considered the internal control of the Organization. Such considerations were
solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are
responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your
responsibilities in overseeing the financial reporting process. However, we are not required to design procedures specifically to
identify such matters.
Significant Audit Findings
In planning and performing our audit, we considered the City's internal control over financial reporting as a basis for designing our
auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an
opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we do not express an opinion on the
effectiveness of the City's internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the
normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material
weakness is a deficiency, or combination of deficiencies, in intemal control such that there is a reasonable possibility that material
misstatement of the City's financial statements will not be prevented, or detected and corrected on a timely basis.
Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies,
significant deficiencies or material weaknesses.
We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined
above. However, we identified a deficiency in internal control over financial reporting, described below as finding 2013-001, which
we consider to be a significant deficiency in internal control over financial reporting. A significant deficiency is a deficiency, or
combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by
those charged with governance.
5201 Eden Avenue, Suite 250
Edina, MN 55436
952.835.9090 I Fax 952.835.3261
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2013-001 Limited segregation of duties - cash disbursements and cash receipts
Condition: During our audit we reviewed procedures over cash disbursements and cash receipts and found the
Organization to have limited segregation of duties related to these procedures.
Criteria:
Cause:
There are four general categories of duties: authorization, custody, record keeping and
reconciliation. In an ideal system, different employees perform each of these four major functions. In
other words, no one person has control of two or more of these responsibilities.
As a result of the limited number of staff, the Organization is not able to completely segregate all
accounting functions. For both transaction cycles, one person is performing two or more of the major
functions described above.
Effect: The existence of this limited segregation of duties increases the risk of fraud and errors.
Recommendation: While we recognize the current staff is not large enough to eliminate this deficiency, we recommend
the following compensating controls be implemented by the Organization. For cash disbursements,
we suggest that the Administrator be removed as an authorized signatory. For cash receipts, we
suggest that someone other than the Administrator either prepare the deposit slip or take it to the
bank.
Management response:
Efforts have been made to increase the internal control available by segregating duties. A part-time Bookkeeper
reconciles bank statements, prepares checks and monthly financial reports. The Program Coordinator or Water Resource
Technician opens and initials bank statements. The Administrator reviews payments and reports, makes deposits and can
be one of two required signatures on checks. Monthly expenditures within budget are authorized by the Technical
Commission at their monthly meeting. The Board officers are check signers and the Board of Directors must approve
any changes to budgeted expenses.
For now, the Organization accepts the degree of risk associated with any further segregation of duties.
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2013-002 Preparation of financial statements
Condition:
We were requested to draft the audited financial statements and related footnote disclosures as part
of our regular audit services. Ultimately, it is management's responsibility to provide for the
preparation of your statements and footnotes, and the responsibility of the auditor to determine the
fairness of presentation of those statements. However, based on recent auditing standards, it is our
responsibility to inform you that this deficiency could result in a material misstatement to the
financial statements that could have been prevented or detected by your management. Essentially,
the auditors cannot be part of your internal control process.
Criteria: Internal controls should be in place to provide reasonable assurance over financial reporting.
Cause: From a practical standpoint, we both prepare the statements and determine the fairness of the
presentation at the same time in connection with our audit. This is not unusual for us to do with
organizations of your size.
Effect: The effectiveness of the internal control system relies on enforcement by management. The effect of
deficiencies in internal controls can result in undetected errors in financial reporting.
Recommendation: It is your responsibility to make the ultimate decision to accept this degree of risk associated with
this condition because of cost and other considerations. We have instructed management to review a
draft of the auditor prepared financials in detail for accuracy; we have answered any questions that
management might have, and have encouraged research of any accounting guidance in connection
with the adequacy and appropriateness of classification of disclosures in your statements. We are
satisfied that the appropriate steps have been taken to provide you with the completed financial
statements. While the Organization is reviewing the financial statements we recommend a disclosure
checklist is utilized to ensure all required disclosures are presented and the Organization should
agree its financial software to the numbers reported in the financial statements.
Management response:
For now, the Organisation's management accepts the degree of risk associated with this condition and thoroughly
reviews a draft of the financial statements.
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Compliance
As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests
of compliance with certain provisions of Minnesota statutes. However, the objective of our tests was not to provide an opinion on
compliance with such provisions. While our audit provides a reasonable basis for our opinion, it does not provide a legal
determination on the Organization's compliance with those requirements. We noted no instances of noncompliance with Minnesota
statutes.
Summary of Prior Year Findings
2012-003 Material audit adjustments
Condition: During our audit an adjustment was needed to record and reverse accounts payable.
Criteria: The financial statements are the responsibility of the Organization's management.
Current year status: No material audit adjustments were needed to adjust accounts payable. As a result, the finding was
eliminated in the current year.
Planned Scope and Timing of the Audit
We performed the audit according to the planned scope and timing.
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by
the Organization 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 2013. We noted no transactions entered into by the Organization 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 include depreciation
on capital assets and allocation of payroll.
• Management's estimate of depreciation is based on estimated useful lives of the assets. Depreciation is calculated using the
straight-line method.
• Allocations of gross wages and payroll benefits are approved by the Board of Directors within the Board of Director's budget
and are derived from each employee's estimated time to be spent servicing the respective functions of the Organization.
These allocations are also used in allocating accrued compensated absences payable.
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. Certain financial
statement disclosures are particularly sensitive because of their significance to financial statement users.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing our audit.
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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. Management has corrected all such misstatements. In
addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either
individually or in the aggregate, to the opinion unit's financial statements taken as a whole.
We also assisted in preparing a number of year end accounting entries. These were necessary to adjust the Organization's records at
year end to correct ending balances. The Organization should establish more detailed processes and procedures to reduce the total
number of entries in each category. The Organization will receive better and timelier information if the preparation of year end entries
is completed internally.
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
March 18, 2014.
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 Organization'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 Organization's auditors. However, these discussions occurred in the normal course of our
professional relationship and our responses were not a condition to our retention.
Other Matters
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.
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Financial Position and Results of Operations
Our principal observations and recommendations are summarized on the following pages. These recommendations resulted from our
observations made in connection with our audit of the Organization's financial statements for the year ended December 31, 2013.
General Fund
The fund balance at December 31, 2013 was $526,607, an increase of $52,074 in comparison with the prior year. The total
unassigned fund balance ($340,607) represents 99 percent of the 2013 total expenditures, while total fund balance represents
70 percent of the 2014 budgeted expenditures. The remaining fund balance ($186,000) is committed for future use.
A table summarizing the General fund balance in relation to budget follows:
Year
Percent
General General of Fund
Fund Balance Budget Fund Balance to
December 31 Year Budget Budget
2009 $ 254,419 2010 $ 432,693 59 %
2010 336,309 2011 441,526 76
2011 381,076 2012 512,293 74
2012 474,533 2013 715,674 66
2013 526,607 2014 747,151 70
$900,000
$800,000
$700,000
$600,000 -
$500,000
$400,000
$300,000
$200,000
$100,000
$-
Fund Balance as a Percent of Next Year's Budget
$432,693 $441,526
74%
76%
$512,293
$715,674
70%
$747,151
59%
2009 2010 2011 2012 2013 2014
--General Fund Balance --Budget
The purposes and benefits of a General fund balance are as follows:
• Expenditures are incurred somewhat evenly throughout the year. However revenues are not received evenly. An adequate
fund balance will provide the cash flow required to finance the General fund expenditures.
• Expenditures not anticipated at the time the annual budget was adopted may need immediate Board of People
Directors action. These would include capital outlay replacement, lawsuits and other items. An adequate +Process.
fund balance will provide the financing needed for such expenditures. GOlno.
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The 2013 General fund operations are summarized as follows:
Final
Budgeted Actual Variance with
Amounts Amounts Final Budget
Revenues $ 441,874 $ 585,670 $ 143,796
Expenditures 715,674 533,596 182,078
Net change in fund balances (273,800) 52,074 325,874
Fund balances, January 1 474,533 474,533
Fund balances, December 31 $ 200,733 $ 526,607 $ 325,874
The positive variance in revenues was due to grants that the Organization received during the year. Expenditures were under
budget mostly due to project costs being less than anticipated.
Future Accounting Standard Changes
The following Governmental Accounting Standards Board (GASB) Statements have been issued and may have an impact on future
Organization's financial statements:'
GASB Statement No. 67 - The Financial Reporting for Pension Plans- an Amendment to GASB Statement No. 25
Summary
The objective of this Statement is to improve financial reporting by state and local governmental pension plans. This Statement
results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions
with regard to providing decision -useful information, supporting assessments of accountability and interperiod equity, and
creating additional transparency.
This Statement replaces the requirements of Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note
Disclosures for Defined Contribution Plans, and No. 50, Pension Disclosures, as they relate to pension plans that are
administered through trusts or equivalent arrangements (hereafter jointly referred to as trusts) that meet certain criteria.
The requirements of Statements No. 25 and No. 50 remain applicable to pension plans that are not administered through trusts
covered by the scope of this Statement and to defined contribution plans that provide postemployment benefits other than
pensions.
This Statement is effective for financial statements for fiscal years beginning after June 15, 2013. Earlier application is
encouraged.
How the Changes in This Statement Will Improve Financial Reporting
The requirements of this Statement will improve financial reporting primarily through enhanced note disclosures and schedules of
required supplementary information that will be presented by the pension plans that are within its scope. The new information
will enhance the decision -usefulness of the financial reports of these pension plans, their value for assessing accountability, and
their transparency by providing information about measures of net pension liabilities and explanations of how and why those
liabilities changed from year to year. The net pension liability information, including ratios, will offer an up-to-date indication of
the extent to which the total pension liability is covered by the fiduciary net position of the pension plan. The comparability of the
reported information for similar types of pension plans will be improved by the changes related to the attribution method used to
determine the total pension liability. The contribution schedule will provide measures to evaluate decisions related to the
assessment of contribution rates in comparison to actuarially determined rates, when such rates are determined. In that
circumstance, it also will provide information about whether employers and nonemployer contributing entities, if applicable, are
keeping pace with actuarially determined contribution measures. In addition, new information about rates of
return on pension plan investments will inform financial report users about the effects of market conditions on people
the pension plan's assets over time and provide information for users to assess the relative success of the 7')_,�
pension plan's investment strategy and the relative contribution that investment earnings provide to the pension +Process.
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Future Accounting Standard Changes - Continued
GASB Statement No. 68 - The Accounting and Financial Reporting of Pensions- an Amendment of GASB Statement No. 27
The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for
pensions. It also improves information provided by state and local governmental employers about financial support for pensions
that is provided by other entities. This Statement results from a comprehensive review of the effectiveness of existing standards of
accounting and financial reporting for pensions with regard to providing decision -useful information, supporting assessments of
accountability and interperiod equity, and creating additional transparency.
This Statement replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental
Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate to pensions that are provided
through pension plans administered as trusts or equivalent arrangements (hereafter jointly referred to as trusts) that meet certain
criteria. The requirements of Statements 27 and 50 remain applicable for pensions that are not covered by the scope of this
Statement.
This Statement is effective for fiscal years beginning after June 15, 2014. Earlier application is encouraged.
How the Changes in This Statement Will Improve Financial Reporting
The requirements of this Statement will improve the decision -usefulness of information in employer and governmental
nonemployer contributing entity fmancial reports and will enhance its value for assessing accountability and interperiod equity by
requiring recognition of the entire net pension liability and a more comprehensive measure of pension expense. Decision -
usefulness and accountability also will be enhanced through new note disclosures and required supplementary information.
GASB Statement No. 69 - Government Combinations and Disposals of Government Operations
Summary
This Statement establishes accounting and financial reporting standards related to government combinations and disposals of
government operations. As used in this Statement, the term government combinations include a variety of transactions referred to
as mergers, acquisitions, and transfers of operations.
The distinction between a govenrunent merger and a government acquisition is based upon whether an exchange of significant
consideration is present within the combination transaction. Government mergers include combinations of legally separate entities
without the exchange of significant consideration. This Statement requires the use of carrying values to measure the assets and
liabilities in a government merger. Conversely, government acquisitions are transactions in which a government acquires another
entity, or its operations, in exchange for significant consideration. This Statement requires measurements of assets acquired and
liabilities assumed generally to be based upon their acquisition values. This Statement also provides guidance for transfers of
operations that do not constitute entire legally separate entities and in which no significant consideration is exchanged. This
Statement defines the term operations for purposes of determining the applicability of this Statement and requires the use of
carrying values to measure the assets and liabilities in a transfer of operations.
A disposal of a government's operations results in the removal of specific activities of a government. This Statement provides
accounting and financial reporting guidance for disposals of government operations that have been transferred or sold.
This Statement requires disclosures to be made about government combinations and disposals of government operations to enable
financial statement users to evaluate the nature and financial effects of those transactions.
The requirements of this Statement are effective for government combinations and disposals of government operations occurring
in financial reporting periods beginning after December 15, 2013, and should be applied on a prospective basis. Earlier
application is encouraged.
How the Changes in This Statement Will Improve Financial Reporting
Until now, governments have accounted for mergers, acquisitions, and transfers of operations by analogizing to accounting and
financial reporting guidance intended for the business environment, generally APB Opinion No. 16, Business Combinations. This
Statement provides specific accounting and financial reporting guidance for combinations in the governmental
environment. This Statement also improves the decision usefulness of financial reporting by requiring that
disclosures be made by governments about combination arrangements in which they engage and for disposals of People
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Future Accounting Standard Changes - Continued
GASB Statement No. 70 - Accounting and Financial Reporting for Nonexchnage Financial Guarantees
Summary
Some governments extend financial guarantees for the obligations of another government, a not -for -profit organization, a private
entity, or individual without directly receiving equal or approximately equal value in exchange (a nonexchange transaction). As a
part of this nonexchange financial guarantee, a government commits to indemnify the holder of the obligation if the entity or
individual that issued the obligation does not fulfill its payment requirements. Also, some governments issue obligations that are
guaranteed by other entities in a nonexchange transaction. The objective of this Statement is to improve accounting and financial
reporting by state and local governments that extend and receive nonexchange financial guarantees.
This Statement requires a government that extends a nonexchange financial guarantee to recognize a liability when qualitative
factors and historical data, if any, indicate that it is more likely than not that the government will be required to make a payment
on the guarantee. The amount of the liability to be recognized should be the discounted present value of the best estimate of the
future outflows expected to be incurred as a result of the guarantee. When there is no best estimate but a range of the estimated
future outflows can be established, the amount of the liability to be recognized should be the discounted present value of the
minimum amount within the range.
This Statement requires a government that has issued an obligation guaranteed in a nonexchange transaction to report the
obligation until legally released as an obligor. This Statement also requires a government that is required to repay a guarantor for
making a payment on a guaranteed obligation or legally assuming the guaranteed obligation to continue to recognize a liability
until legally released as an obligor. When a government is released as an obligor, the government should recognize revenue as a
result of being relieved of the obligation. This Statement also provides additional guidance for intra-entity nonexchange financial
guarantees involving blended component units.
This Statement specifies the information required to be disclosed by governments that extend nonexchange financial guarantees.
In addition, this Statement requires new information to be disclosed by governments that receive nonexchange financial
guarantees.
The provisions of this Statement are effective for reporting periods beginning after June 15, 2013. Earlier application is
encouraged. Except for disclosures related to cumulative amounts paid or received in relation to a nonexchange financial
guarantee, the provisions of this Statement are required to be applied retroactively. Disclosures related to cumulative amounts
paid or received in relation to a nonexchange financial guarantee may be applied prospectively.
How the Changes in This Statement Will Improve Financial Reporting
The requirements of this Statement will enhance comparability of financial statements among governments by requiring
consistent reporting by those governments that extend nonexchange financial guarantees and by those governments that receive
nonexchange financial guarantees. This Statement also will enhance the information disclosed about a government's obligations
and risk exposure from extending nonexchange financial guarantees. This Statement also will augment the ability of financial
statement users to assess the probability that governments will repay obligation holders by requiring disclosures about obligations
that are issued with this type of financial guarantee.
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Future Accounting Standard Changes - Continued
GASB Statement No. 71- Pension Transition for Contributions Made Subsequent to the Measure Date - an Amendment of
GASB Statement No. 68
Summary
The objective of this Statement is to address an issue regarding application of the transition provisions of Statement No. 68,
Accounting and Financial Reporting for Pensions. The issue relates to amounts associated with contributions, if any, made by a
state or local government employer or nonemployer contributing entity to a defined benefit pension plan after the measurement
date of the government's beginning net pension liability.
Statement No. 68 requires a state or local government employer (or nonemployer contributing entity in a special funding
situation) to recognize a net pension liability measured as of a date (the measurement date) no earlier than the end of its prior
fiscal year. If a state or local government employer or nonemployer contributing entity makes a contribution to a defined benefit
pension plan between the measurement date of the reported net pension liability and the end of the government's reporting period,
Statement No. 68 requires that the government recognize its contribution as a deferred outflow of resources. In addition,
Statement No. 68 requires recognition of deferred outflows of resources and deferred inflows of resources for changes in the net
pension liability of a state or local government employer or nonemployer contributing entity that arise from other types of events.
At transition to Statement No. 68, if it is not practical for an employer or nonemployer contributing entity to determine the
amounts of all deferred outflows of resources and deferred inflows of resources related to pensions, paragraph 137 of Statement
No. 68 required that beginning balances for deferred outflows of resources and deferred inflows of resources not be reported.
Consequently, if it is not practical to determine the amounts of all deferred outflows of resources and deferred inflows of
resources related to pensions, contributions made after the measurement date of the beginning net pension liability could not have
been reported as deferred outflows of resources at transition. This could have resulted in a significant understatement of an
employer or nonemployer contributing entity's beginning net position and expense in the initial period of implementation.
This Statement amends paragraph 137 of Statement No. 68 to require that, at transition, a government recognize a beginning
deferred outflow of resources for its pension contributions, if any, made subsequent to the measurement date of the beginning net
pension liability. Statement No. 68, as amended, continues to require that beginning balances for other deferred outflows of
resources and deferred inflows of resources related to pensions be reported at transition only if it is practical to determine all such
amounts.
The provisions of this Statement are required to be applied simultaneously with the provisions of Statement No. 68.
How the Changes in This Statement Will Improve Financial Reporting
The requirements of this Statement will eliminate the source of a potential significant understatement of restated beginning net
position and expense in the first year of implementation of Statement No. 68 in the accrual -basis financial statements of
employers and nonemployer contributing entities. This benefit will be achieved without the imposition of significant additional
costs.
' Note. From GASB Pronouncements Summaries. Copyright 2014 by the Financial Accounting Foundation, 401 Merritt 7,
Norwalk, CT 06856, USA, and is reproduced with permission.
This communication is intended solely for the information and use of Board of Directors, management and the Minnesota Office of
the State Auditor, and is not intended to be and should not be used by anyone other than these specified parties.
Our audit would not necessarily disclose all weaknesses in the system because it was based on selected tests of the accounting records
and related data. The comments and recommendations in the report are purely constructive in nature, and should be read in this
context.
If you have any questions or wish to discuss any of the items contained in this letter, please feel free to contact us at your convenience.
We wish to thank you for the opportunity to be of service and for the courtesy and cooperation extended to us by your staff.
abilktitiLimarolto
ABDO, EICK & MEYERS, LLP
Minneapolis, Minnesota
March 18, 2014
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