HomeMy WebLinkAbout#11 - Increase to LE Fire Relief Benefit STAFF REPORT
DATE: October 17, 2017
CONSENT
Item #: 11
TO: City Council
FROM: Steve Rutkowski, Relief Association President
AGENDA ITEM: Disscussion on raising the Relief Association Annual Benefit
REVIEWED BY: Relief Association Board
BACKGROUND: The Lake Elmo Relief Association has not had a Pension increase for over 10yrs. Tautges has provided the projections for the Relief Association and Hilde has provided the 2017 Auxuarial Report for both the Relif Association and City of Lake Elmo.
ISSUE BEFORE COUNCIL: Review the recommendation of the Relief Association Board to increase the annual retirement benefit and determine if the proposed increase can be supported by the fund based on the provided documentation. PROPOSAL DETAILS/ANALYSIS: We are currently invested at 151.11% with a Pension rate of $3,400. The Relief Association would like to increase to $5,000 which the Pension Fund would be vested at 115%. Which is 10% higher than the State Standards of 105%. FISCAL IMPACT: Based on the projections of Tautges there will not be a Fiscal impact to the City of Lake Elmo unless the Funds are below 105%, (as reqired by Sate Statue) which has not happened in over 10 years.
OPTIONS: 1) Support the recommendations of the Releif Association Board for the benefit increase.
2) Do not support the recommendations of the Releif Association Board for the benefit increase.
RECOMMENDATION: If removed from the consent agenda: “Motion to approve an increase in the annual retirement benefit for Lake Elmo Fire Relief to $5,000.” ATTACHMENTS: • The SC-17 Form which is a report that the audit provides for that the Relief Association Funds can be maximized to which shows $8,000.
• The Active member form shows active members and in red what different dollar amounts and the effects of funding percentages.
• The calculation form shows todays funding percentage which is at 151.11%.
• 2016 Fire Relief Audit
4810 White Bear Parkway, St. Paul, MN, 55110 651.426.7000 www.redpathcpas.com
June 27, 2017 Steve Rutkowski Lake Elmo Firefighters Relief Association
3510 Laverne Ave Lake Elmo, MN 55042 Dear Steve:
Transmitted herewith are two (2) copies of the following reports for the Lake Elmo Firefighters Relief Association for the year ended December 31, 2016:
Annual Financial Report
Legal Compliance Audit Report
Internal Control Report
Communication With Those Charged With Governance
We have submitted the reports listed above to the Office of the State Auditor. We will complete the 2016 FIRE form and we will send you confirmation of receipt and a copy of the form once it is submitted to the OSA. The Association must electronically sign
the form no later than June 30, 2017. Thank you for the opportunity to be of service. If you have questions or need additional information, please advise.
Sincerely, REDPATH AND COMPANY, LTD.
Peggy Moeller, CPA
PM/aer
LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION ANNUAL FINANCIAL REPORT December 31, 2016
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION
TABLE OF CONTENTS
Page
Number
Board of Trustees 3
Independent Auditor's Report 7
Basic Financial Statements:
Government-Wide and Fund Financial Statements:
Statement of Net Position and Governmental Fund Balance Sheet - General Fund Statement 1 12
Statement of Activities and Governmental Fund Revenues, Expenditures and
Changes in Fund Balance - General Fund Statement 2 13
Fiduciary Fund Financial Statements:
Special Fund - Pension Trust Fund:
Statement of Plan Net Position Statement 3 14
Statement of Changes in Plan Net Position Statement 4 15
Notes to Financial Statements 17
Special Fund - Pension Trust Fund:
Schedule of Changes in the Net Pension Liability and Related Ratios Statement 5 32
Schedule of Investment Returns Statement 6 33
Report on Internal Control 37
Minnesota Legal Compliance Report 39
Schedule of Findings and Responses 41
INTRODUCTORY SECTION
FINANCIAL SECTION
OTHER REQUIRED REPORTS
REQUIRED SUPPLEMENTARY INFORMATION
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INTRODUCTORY SECTION
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION
BOARD OF TRUSTEES
December 31, 2016
Term Expires
President:
Steve Rutkowski March, 2017
Vice President:
Nick Witter March, 2017
Secretary:
Mike Cornell March, 2017
Treasurer:
Brian Hauser March, 2017
Trustee:
Larry Cornell March, 2017
Alex Hilpisch March, 2017
Ex-Officio Trustees:
Jill Lundgren
Cathy Bendall
Greg Malmquist
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FINANCIAL SECTION
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4810 White Bear Parkway, St. Paul, MN, 55110 651.426.7000 www.redpathcpas.com
INDEPENDENT AUDITOR'S REPORT To the Board of Trustees Lake Elmo Firefighters Relief Association Lake Elmo, Minnesota We have audited the accompanying financial statements of the governmental activities, each major fund, and the fiduciary fund information of the Lake Elmo Firefighters Relief Association as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the Lake Elmo Firefighters Relief Association’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. 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 from 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 entity’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 entity’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 presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
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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, each major fund and the fiduciary fund information of the Lake Elmo Firefighters Relief Association, as of December 31, 2016, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Report on Summarized Comparative Information
We have previously audited the Lake Elmo Firefighters Relief Association’s 2015 financial statements, and we expressed an unmodified audit opinion on the respective financial statements of the governmental activities, each major fund, and the fiduciary fund information in our report dated April 12, 2016. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2015 is consistent, in all material respects, with the audited financial statements from which it has been derived.
Other Matters
Required Supplementary Information
Management has omitted the management’s discussion and analysis that accounting principles
generally accepted in the United States of America require to be presented to supplement the
basic financial statements. Such missing 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. Our opinion on the basic financial statements is not
affected by this missing information.
Accounting principles generally accepted in the United States of America require that the
Schedule of Changes in the Net Pension Liability and Related Ratios and Schedule of Investment
Returns on pages 32 and 33, 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.
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Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Lake Elmo Firefighters Relief Association’s basic financial statements. The introductory section is presented for purposes of additional analysis and is not a required part of the basic financial statements. The introductory section has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it.
REDPATH AND COMPANY, LTD. St. Paul, Minnesota June 26, 2017
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BASIC FINANCIAL STATEMENTS
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION
STATEMENT OF NET POSITION AND Statement 1
GOVERNMENTAL FUND BALANCE SHEET
GENERAL FUND
December 31, 2016
Balance Adjustments Statement
Sheet (Note 1E) of Net Position
Assets:
Cash and investments $50,087 $ - $50,087
Total assets $50,087 $0 $50,087
Liabilities $ - $ - $ -
Fund balance/net position:
Fund balance:
Unassigned 50,087 (50,087) -
Total liabilities and fund balance $50,087
Net position:
Unrestricted 50,087 50,087
Total net position $50,087 $50,087
The accompanying notes are an integral part of these financial statements.
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION
STATEMENT OF ACTIVITIES AND Statement 2
GOVERNMENTAL FUND REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE
GENERAL FUND
For The Year Ended December 31, 2016
Statement of
Revenues,
Expenditures
and Changes in Adjustments Statement
Fund Balance (Note 1E) of Activities
Expenditures/expenses:
Fundraising $2,566 $ - $2,566
Member appreciation dinner 4,706 - 4,706
Miscellaneous 528 - 528
Donations 3,000 - 3,000
Total expenditures/expenses 10,800 0 10,800
Program revenues:
Fundraising 1,858 - 1,858
Donations 832 - 832
Total program revenues 2,690 0 2,690
Net program revenue/(expense)(8,110)0 (8,110)
General revenues:
Investment earnings 3 - 3
Miscellaneous 120 - 120
Total general revenues 123 0 123
Revenues over (under) expenditures (7,987) 7,987 -
Change in net position - (7,987) (7,987)
Fund balance/net position:
Beginning of year 58,074 - 58,074
End of year $50,087 $0 $50,087
The accompanying notes are an integral part of these financial statements.
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION
STATEMENT OF PLAN NET POSITION Statement 3
SPECIAL FUND - PENSION TRUST FUND
December 31, 2016
With Comparative Amounts for December 31, 2015
2016 2015
Assets:
Cash and investments $1,078,579 $989,120
Supplemental receivable - 3,000
Total assets 1,078,579 992,120
Liabilities:
Accounts payable 3,133 28,492
Total liabilities 3,133 28,492
Net position restricted for pensions $1,075,446 $963,628
The accompanying notes are an integral part of these financial statements.
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION
STATEMENT OF CHANGES IN PLAN NET POSITION Statement 4
SPECIAL FUND - PENSION TRUST FUND
For The Year Ended December 31, 2016
With Comparative Amounts for The Year Ended December 31, 2015
2016 2015
Additions:
Contributions:
State of Minnesota $59,136 $58,166
State of Minnesota - supplemental benefit - 3,000
Total contributions 59,136 61,166
Investment income:
Net appreciation (depreciation) in fair value of investments 54,625 (64,663)
Dividends and interest 27,804 30,677
Management fees (12,328) (14,254)
Total investment income 70,101 (48,240)
Total additions 129,237 12,926
Deductions:
Pension benefits:
Regular - 188,582
Supplemental - 3,000
Audit, accounting and actuary 13,483 9,375
Salaries and wages 3,900 3,900
Office supplies/miscellaneous 36 39
Total deductions 17,419 204,896
Net change in net position 111,818 (191,970)
Net position restricted for pensions - January 1 963,628 1,155,598
Net position restricted for pensions - December 31 $1,075,446 $963,628
The accompanying notes are an integral part of these financial statements.
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION NOTES TO FINANCIAL STATEMENTS December 31, 2016
Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the Lake Elmo Firefighters Relief Association (the Association) conform to accounting principles generally accepted in the United States of America applicable to governmental units. The following is a summary of the significant accounting policies. A. FORM OF GOVERNMENT
The Association was incorporated in 1964. It operates under the provisions of Minnesota Laws 1951 Chapter 550, Minnesota Statutes Section 317, as amended. It is governed by a board of nine members. Six of the board members are elected by the members of the Association and three are appointed by the
City as members of the Board. The mayor, clerk and fire chief of the City of Lake Elmo are ex-officio members of the Board of Trustees.
B. FINANCIAL REPORTING ENTITY In accordance with the GASB pronouncements and generally accepted accounting principles, the
financial statements of the reporting entity include those of the Association (the primary government) and its component units. The Association does not have any component units.
C. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The government-wide financial statements (i.e., the statement of net position and the statement of
activities report information on all of the nonfiduciary activities of the primary government and its component units. Governmental activities, which are supported by dues and contributions, are reported separately from fiduciary-type activities.
The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include 1) dues from members and 2) contributions that are restricted to
meeting the operational or capital requirements of the Association. Investment income is not included among program revenues and is reported instead as general revenues.
Separate financial statements are provided for the governmental fund. D. MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT
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. Dues are recognized as revenues in the year for which they are assessed. Contributions and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION NOTES TO FINANCIAL STATEMENTS December 31, 2016
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
Association considers all 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.
Intergovernmental revenues and interest associated with the current fiscal period are all considered to be 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
Association. The Association reports the following major governmental fund:
General Fund - accounts for all financial resources except those required to be accounted for in the Special Fund.
Additionally, the Association reports the following fund type: Fiduciary Fund – the Pension Trust Fund accounts for financial resources to be used exclusively for
the payment and administration of the Association’s pension relief.
E. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
In the fund financial statements, the governmental funds are reported using the modified accrual basis of accounting. Under this method, governmental funds report only current assets and current liabilities. In
the government-wide financial statements, all funds are reported using the accrual basis of accounting. The governmental funds of the Association do not have any long-term assets or liabilities. Therefore, no reconciling terms are noted.
F. INVESTMENTS
Investments are stated at fair value. G. USE OF ESTIMATES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates that affect amounts reported in financial statements during the reporting period. Actual results could differ from such
estimates.
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION NOTES TO FINANCIAL STATEMENTS December 31, 2016
H. FUND BALANCE CLASSIFICATIONS In the fund financial statements, governmental funds report fund balance in classifications that disclose constraints for which amounts in those funds can be spent. These classifications are as follows:
Nonspendable - consists of amounts that are not in spendable form, such as prepaid items.
Restricted - consists of amounts related to externally imposed constraints established by creditors,
grantors or contributors; or constraints imposed by state statutory provisions.
Committed - consists of internally imposed constraints. These constraints are established by
Resolution of the Board.
Assigned - consists of internally imposed constraints. These constraints reflect the specific purpose for which it is the Association’s intended use. These constraints are established by the Association’s
Board.
Unassigned - is the residual classification for the general fund.
I. COMPARATIVE TOTALS
The basic financial statements include certain prior-year summarized comparative information in total but not at the level of detail required for a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Association’s financial
statements for the year ended December 31, 2015, from which the summarized information was derived.
Note 2 CASH AND INVESTMENTS A. DEPOSITS
Minnesota Statutes require that all deposits of the Association be protected by insurance, surety bond, or collateral. The market value of the collateral pledged must equal 110% of the deposits not covered by insurance or bonds. Minnesota Statutes require that securities pledged as collateral be held in
safekeeping by the treasurer or in a financial institution other than that furnishing the collateral. Custodial Credit Risk – Deposits. Custodial credit risk is the risk that in the event of a bank failure, the Association’s deposits may not be returned to it. State statutes require that insurance, surety bonds or collateral protect all Association deposits. The market value of collateral pledged must equal 110% of deposit not covered by insurance or bonds.
At December 31, 2016, the carrying value and bank balance of the Association’s deposits was $135,946, all of which was covered by FDIC.
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION NOTES TO FINANCIAL STATEMENTS December 31, 2016
B. INVESTMENTS 1. Minnesota Statutes 424A.095 and 356A.06, subdivision 6 and 7 authorize the Association to invest in the following: A) Securities generally. The covered pension plan has the authority to purchase, sell, lend, or exchange the securities specified in paragraphs (B) to (J), including puts and call options and future contracts traded on a contract market regulated by a governmental agency or by a financial institution regulated by a governmental agency. These securities may be owned as units in commingled trusts that own the securities described in paragraphs (C) to (I), including real estate investment trusts and insurance company commingled accounts, including separate
accounts. B) Government obligations. The covered pension plan may invest funds in governmental bonds, notes, bills, mortgages, and other evidences of indebtedness if the issue is backed by the full
faith and credit of the issuer or the issue is rated among the top four quality rating categories by a nationally recognized rating agency. The obligations in which funds may be invested under this paragraph include guaranteed or insured issues of (1) the United States, its agencies, its
instrumentalities, or organizations created and regulated by an act of Congress; (2) Canada and its provinces, provided the principal and interest is payable in United States dollars; (3) the states and their municipalities, political subdivisions, agencies, or instrumentalities; (4) the International Bank for Reconstruction and Development, the Inter-American Development
Bank, the Asian Development Bank, the African Development Bank, or any other United States government sponsored organization of which the United States is a member, provided the principal and interest is payable in United States dollars.
C) Corporate obligations. The covered pension plan may invest funds in bonds, notes, debentures, transportation equipment obligations, or any other longer term evidences of indebtedness issued or guaranteed by a corporation organized under the laws of the United
States or any state thereof, or the Dominion of Canada or any province thereof if they conform to the following provisions:
1) The principal and interest of obligations of corporations incorporated or organized under the laws of the Dominion of Canada or any province thereof must be payable in United States dollars; and 2) Obligations must be rated among the top four quality categories by a nationally recognized
rating agency. D) Other obligations. 1) The covered pension plan may invest funds in bankers acceptances, certificates of deposit,
deposit notes, commercial paper, mortgage participation certificates and pools, asset backed securities, repurchase agreements and reverse repurchase agreements, guaranteed investment contracts, savings accounts, and guaranty fund certificates, surplus notes, or
debentures of domestic mutual insurance companies if they conform to the following provisions: i) Bankers acceptances and deposit notes of United States banks are limited to those
issued by banks rated in the highest four quality categories by a nationally recognized rating agency; ii) Certificates of deposit are limited to those issued by (A) United States banks and savings institutions that are rated in the highest four quality categories by a nationally
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION NOTES TO FINANCIAL STATEMENTS December 31, 2016
recognized rating agency or whose certificates of deposit are fully insured by federal
agencies; or (B) credit unions in amounts up to the limit of insurance coverage provided by the National Credit Union Administration; iii) Commercial paper is limited to those issued by United States corporations or their
Canadian subsidiaries and rated in the highest two quality categories by a nationally recognized rating agency; iv) Mortgage participation or pass through certificates evidencing interests in pools of first mortgages or trust deeds on improved real estate located in the United States
where the loan to value ratio for each loan as calculated in accordance with section 61A.28, subdivision 3, does not exceed 80 percent for fully amortizable residential properties and in all other respects meets the requirements of section 61A.28,
subdivision 3; v) Collateral for repurchase agreements and reverse repurchase agreements is limited to letters of credit and securities authorized in this section;
vi) Guaranteed investment contracts are limited to those issued by insurance companies or banks rated in the top four quality categories by a nationally recognized rating agency or to alternative guaranteed investment contracts where the underlying assets comply with the requirements of this subdivision;
vii) Savings accounts are limited to those fully insured by federal agencies; and viii) Asset-backed securities must be rated in the top four quality categories by a nationally recognized rating agency.
2) Sections 16A.58, 16C.03, subdivision 4, and 16C.05 do not apply to certificates of deposit and collateralization agreements executed by the covered pension plan under clause (1), item (ii).
3) In addition to investments authorized by clause (1), item (iv), the covered pension plan may purchase from the Minnesota Housing Finance Agency all or any part of a pool of residential mortgages, not in default, that has previously been financed by the issuance of bonds or notes of the Agency. The covered pension plan may also enter into a
commitment with the agency, at the time of any issue of bonds or notes, to purchase at a specified future date, not exceeding 12 years from the date of the issue, the amount of mortgage loans then outstanding and not in default that have been made or purchased from
the proceeds of the bonds or notes. The covered pension plan may charge reasonable fees for any such commitment and may agree to purchase the mortgage loans at a price sufficient to produce a yield to the covered pension plan comparable, in its judgment, to
the yield available on similar mortgage loans at the date of the bonds or notes. The covered pension plan may also enter into agreements with the Agency for the investment of any portion of the funds of the Agency. The agreement must cover the period of the investment, withdrawal privileges, and any guaranteed rate of return.
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION NOTES TO FINANCIAL STATEMENTS December 31, 2016
E) Corporate stocks. The covered pension plan may invest funds in stocks or convertible issues of any corporation organized under the laws of the United States or the states thereof, any
corporation organized under the laws of the Dominion of Canada or its provinces, or any corporation listed on an exchange regulated by an agency of the United States or of the Canadian national government, if they conform to the following provisions:
1) The aggregate value of investments under this paragraph, plus paragraphs (F) and (J), plus equity investments under paragraphs (G), (H), and (I), as adjusted for realized gains and
losses, must not exceed 85 percent of the market or book value, whichever is less, of a fund; and 2) Investments must not exceed five percent of the total outstanding shares of any one corporation.
F) Developed market foreign stocks investments. In addition to investments authorized under paragraph (E), the covered pension fund may invest in foreign stock sold on an exchange in any developed market country that is included in the Europe, Australia and Far East Index.
G) Commingled or mutual investments. The covered pension plan may invest in index funds or
mutual funds, including index mutual funds, through bank-sponsored collective funds and shares of open-end investment companies registered under the Federal Investment Company Act of 1940, to the extent that these funds comply with paragraphs (B) to (I). H) Real estate investment trust; related investments. The covered pension plan may invest in real estate investment trusts secured by mortgages or deeds of trust and sold on an exchange, and insurance company commingled accounts, including separate accounts, of a debt or equity
name. I) Exchange traded funds. The covered pension plan may invest funds in exchange traded
funds, subject to the maximums, the requirements, and the limitations set forth in paragraph (B) to (H), as applicable.
J) Other investments. 1) In addition to the investments authorized in paragraphs (A) to (I), and subject to the provisions in clause (2), the covered pension plan may invest funds in:
i) Venture capital investment businesses through participation in limited partnerships and corporations; ii) Real estate ownership interests or loans secured by mortgages or deeds of trust through investment in limited partnerships, bank sponsored collective funds;
iii) Regional and mutual funds through bank sponsored collective funds and open-end investment companies registered under the Federal Investment Company Act of 1940, to the extent that a fund or a portion if a fund does not qualify under paragraph (G);
iv) Resource investments through limited partnerships, private placements, and corporations; and v) International debt securities and emerging market equity securities.
2) The investments authorized in clause (1) must conform to the following provisions: i) The aggregate value of all investments made according to clause (1) including allocated amounts of index and mutual funds, may not exceed 20 percent of the
market value of the fund for which the covered pension plan is investing;
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION NOTES TO FINANCIAL STATEMENTS December 31, 2016
ii) There must be at least four unrelated owners of the investment other than the covered
pension plan for investments made under clause (1), item (i), (ii), (iii), or (iv); iii) Covered pension plan participation in an investment vehicle is limited to 20 percent thereof for investments made under clause (1), item (i), (ii), (iii), or (iv); and
iv) Covered pension plan participation in a limited partnership does not include a general partnership interest or other interest involving general liability. The covered pension plan may not engage in any activity as a limited partner which creates general liability.
2. Up to 75 percent of the market value of the assets of the special fund, not including any money market mutual funds, may be invested in open-end investment companies registered under the
Federal Investment Company Act of 1940, if the portfolio investments of the investment companies comply with the type of securities authorized for investment under 1 (A) through 1 (J).
3. Securities held by the Association before June 2, 1989, that do not meet the requirements of this section may be retained after that date if they were proper investments for the Association on that date.
As of December 31, 2016, the Association had the following investments and maturities:
Investment Type Maturity Fair Value
Equity securities N/A $373,471
Exchange traded funds N/A 231,178
Mutual funds N/A 326,521
Money market funds N/A 61,550
Total investments $992,720
A reconciliation of total assets held by the Association at December 31, 2016 is as follows:
Investments $992,720
Deposits 135,946
$1,128,666
The Association categorizes its fair value measurements within the fair value hierarchy established by
generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. The hierarchy has three levels. Level 1 investments are valued using inputs that are based on quoted prices in active markets for identical assets; Level 2 investments are valued
using inputs that are based on quoted prices for similar assets or inputs that are observable, either directly or indirectly; Level 3 investments are valued using inputs that are unobservable. Mutual funds, money market funds and exchange traded funds are not required to be categorized.
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION NOTES TO FINANCIAL STATEMENTS December 31, 2016
The Association has the following recurring fair value measurements as of December 31, 2016:
Fair Value Measurement Using
Investment Type 12/31/2016 Level 1 Level 2 Level 3
Investments at fair value:
Equity securities $373,471 $ - $373,471 $ -
Total/Subtotal 373,471 $ - $373,471 $ -
Investments not categorized:
Exchange traded funds 231,178
Mutual funds 326,521
Money market funds 61,550
Total $992,720
Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will be unable to fulfill its obligation to the holder on the investment. State law limits investments in commercial paper to the top two quality ratings issued by a nationally recognized rating organization. State law also limits investments in asset-backed securities (such as FNMA, FHLMC, FHLB) bonds, notes, bills, mortgages,
debentures and any other longer term evidences of indebtedness to the top four quality ratings issued by a national recognized rating organization. The Association’s investment policy does not further limit its investment choices.
Concentration of Credit Risk. Concentration of credit risk is the risk of loss that may be attributed to the magnitude of the Association’s investment in a single issuer. State law limits the Association’s investments in open-end mutual funds to 75 percent of the Association’s total investment portfolio. Also, state law limits
investments in equity investments to 85 percent of the Association’s total investment portfolio and 5 percent of the outstanding shares of any one corporation. The Association’s investment policy limits investments by type as follows:
Equity securities 60%
Fixed income 40%
The Association held no investments (other than U.S. government, U.S. government guaranteed obligations, mutual funds, external investment pools and other pooled investments) in any one organization that exceed five percent of the net position available for benefits. The Association’s policy in regard to the allocation of investment assets is established and may be amended by the Board by a majority vote of its members. Interest Rate Risk. Interest rate risk is the risk that changes in interest rates of debt investments could
adversely affect the fair value of an investment. The Association’s investment policy does not limit investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.
Custodial Credit Risk. For investments in securities, custodial credit risk is the risk that in the event of a failure of the counterparty, the Association will not be able to recover the value of its investment securities that is in the possession of an outside party. As of December 31, 2016, $619,249 of the Association’s
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION NOTES TO FINANCIAL STATEMENTS December 31, 2016
investments were in mutual funds, money markets, or exchange traded funds. Investments in mutual funds,
money markets, or exchange traded funds are not evidenced by securities that exist in physical or book entry form, and therefore are not subject to custodial credit risk disclosures. The Association’s investments in stocks are held by the broker dealer and are insured through SIPC.
Rate of Return. For the year ended December 31, 2016, the annual money-weighted rate of return on pension investments, net of pension plan investment expense, was 5.80%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts
actually invested. Note 3 PENSION PLAN
A. PLAN DESCRIPTION The Association is the administrator of a single employer Public Employee Retirement System (PERS) established to provide benefits for members of the Lake Elmo Fire Department. The plan was established and is administered in accordance with Minnesota Statutes, Chapters 69 and 424A.
Retired members entitled to benefits,
but have not received them 5
Current members:
Fully vested (20 years or more)2
Partially vested (10 years to 19 years)6
Nonvested (less than 10 years)11
Total 24
Plan provisions are established and may be amended by the Association’s Board of Trustees within the guidelines of the State of Minnesota statutes. B. NET PENSION LIABILITY The components of the net pension liability at December 31, 2016 were as follows:
Total pension liability $618,531
Plan fiduciary net position (1,075,446)
Net pension liability (asset)($456,915)
Plan fiduciary net position as a
percentage of the total pension liability 173.87% The Association is comprised of volunteers; therefore, there are no payroll expenditures (i.e., there are
no covered payroll amounts or percentage calculations).
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION NOTES TO FINANCIAL STATEMENTS December 31, 2016
C. BENEFIT PROVISIONS Twenty Year Service Pension
Each member who is at least 50 years of age; has retired from the Lake Elmo Fire Department, has served at least twenty (20) years of active service with such department before retirement; and, has been a member of the Association in good standing at least 10 years prior to such retirement; shall be entitled to a pro-rated lump sum service pension in the amount of $3,400 for each completed full year of service
and pro-rated monthly for fractional years of service but not exceeding the maximum amount per year of service allowed by law for the minimum average amount of available financing per firefighter as prescribed by law. Members with 10 years of service receive partial vesting at 60% of the 20 year rate
and 4% added for every one year of service beyond ten years up to 20 years. Death Benefits Upon the death of an active or deferred member, the beneficiaries of deceased members shall be paid a death benefit out of the Special Fund depending on the number of years of service:
Up to 10 years $5,000 10 years to 30 years That amount the deceased had earned as retirement
benefit had she/he retired on the date of death and been fifty (50) years of age. State Supplemental Benefits Minnesota Statute 424A.10 provides for the payment of a supplemental benefit equal to ten percent of a regular lump sum distribution up to a maximum of $1,000. The supplemental benefit is in lieu of a State
income tax exclusion for lump sum distributions and will no longer be available if State tax law is modified to exclude lump sum distributions from State income tax. The Association qualifies for these benefits.
D. FUNDING REQUIREMENTS
Minnesota Statutes 424A.092 specifies minimum contributions required on an annual basis. The minimum contribution from the City of Lake Elmo is determined as follows:
Normal Cost
+/- Amortization Payment on Unfunded Liability/Surplus
+ Administrative expenses
- Anticipated State Aid
- Projected Investment Earnings
= Total Contribution Required (City of Lake Elmo)
Plan members are volunteers with no contribution requirements.
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION NOTES TO FINANCIAL STATEMENTS December 31, 2016
E. ACTUARIAL METHOD AND SIGNIFICANT ASSUMPTIONS The total pension liability was determined by an actuarial valuation as of December 31, 2016 using the following actuarial assumptions, applied to all periods in the measurement:
Valuation date 01/01/17
Measurement date (assets and funded status)12/31/16
Actuarial cost method Entry age normal
Amortization method Level dollar amount
Closed 5 year period
Asset valuation method Market value
Actuarial assumptions:
Investment rate of return 5.50%
20-year municipal bond yield 3.50%
Projected salary increases 2.50%
Includes inflation at N/A
Cost-of-living adjustments 4.00%
Age of service retirement 50
Post retirement benefit increase N/A
Mortality Due to a small sample size,
assumed no pre-retirement
mortality. Post-retirement mortality
does not apply as the benefit
structure and form of payment do
not reflect lifetime benefits.
The expected investment return and discount rate decreased from 6.00% to 5.50% in 2016.
The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimates of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These asset
class estimates are combined to produce the portfolio long-term expected rate of return by weighting the expected future real rates of return by the current asset allocation percentage (or target allocation, if available) and by adding expected inflation. All results are then rounded to the nearest quarter percentage point.
The best-estimate of expected future real rates of return were developed by aggregating data from several published capital market assumption surveys and deriving a single best-estimate based on the
average survey values. These capital market assumptions reflect both historical market experience as well as diverse views regarding anticipated future returns. The expected inflation assumption was developed based on an analysis of historical experience blended with forward-looking expectations
available in market data.
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION NOTES TO FINANCIAL STATEMENTS December 31, 2016
Best estimates of geometric real and nominal rates of return for each major asset class included in the
pension plan’s asset allocation as of the measurement date are summarized in the following table:
Portfolio Expected
Asset Class Weight Class Return
Cash 17.00%2.25%
Fixed income 28.00%3.30%
Equities 54.00%7.50%
Other 1.00%6.00%
Total (weighted ave, rounded to 1/4%) 100.00% 5.50%
F. DISCOUNT RATES
The discount rate used to measure the total pension liability was 5.50%, a decrease from the 6.00% used in 2015. The liability discount rate was developed using the alternative method described in paragraph
43 of GASB 67, which states that “if the evaluations required by paragraph 41 can be made with sufficient reliability without a separate projection of cash flows into and out of the pension plan, alternative methods may be applied in making the evaluations.” The determination of the discount rate
assumed that the plan’s current overfunded status, combined with Minnesota statutory funding requirements, provide sufficient reliability that projected plan assets will be adequate to pay future retiree benefits. Therefore, the plan’s long-term expected return on plan investments was applied to all periods
of projected benefit payments to determine the total pension liability G. CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE
Minnesota Statute Chapter 424A.092 specifies minimum support rates required on an annual basis. The minimum support rates from the municipality and from State Aid are determined as the amount required
to meet the normal cost plus amortizing any existing prior service costs over a ten-year period. The Association is comprised of volunteers; therefore, there are no payroll expenditures (i.e., there are no covered payroll percentage calculations).
Contributions totaling $59,136 were made by the State of Minnesota in accordance with State Statute requirements for the year ended December 31, 2016.
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION NOTES TO FINANCIAL STATEMENTS December 31, 2016
H. SENSITIVITY OF THE NET PENSION LIABILITY TO CHANGES IN THE DISCOUNT RATE The following presents the net pension liability (asset) of the plan, calculated using the discount rate of 5.5 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (4.5 percent) or 1-percentage-point higher (6.5 percent) than the current
rate:
Current
1% Decrease Discount Rate 1% Increase
(4.5%)(5.5%)(6.5%)
Net pension liability (asset) ($432,549) ($456,915) ($479,967)
Note 4 RISK MANAGEMENT
The Association is exposed to various risks of loss related to theft of assets for which the Association carries an employee dishonesty bond.
There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three fiscal years. Note 5 REQUIRED SUPPLEMENTARY INFORMATION Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements – and Management’s
Discussion and Analysis – for State and Local Governments, requires a budgetary comparison schedule to be
presented as RSI for the General Fund. Since fire relief organizations do not have legally adopted budgets, the comparison schedule is not being presented.
Note 6 INCOME TAXES The Association is exempt from income taxes under section 501(c)4 of the Internal Revenue Code. Such
organizations are subject to tax on unrelated business taxable income. The Association has not had any material unrelated business income.
The Association previously was classified as an affiliate of a governmental unit in accordance with Revenue Procedures 95-48 and therefore exempt from filing IRS Form 990. During March of 2012, the Association was informed by the Internal Revenue Service, that the governmental unit determination was in error. The Association remains tax exempt, but must start filing IRS Form 990 for the 2011 tax year going forward.
FASB ASC 740-10 provides that a tax expense or benefit from an uncertain income tax position (including tax-exempt status) may be recognized only when it is more likely than not that the position will be sustained upon
examination by taxing authorities. Management believes the Association has no uncertain income tax positions that would result in an accrual, expense or benefit under a more likely than not standard.
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION NOTES TO FINANCIAL STATEMENTS December 31, 2016
Note 7 DUE FROM STATE OF MINNESOTA Minnesota Statutes, Section 424A.10 provides for the payment of supplemental benefits to retired members of the Association. These benefits are paid by the Association, which is reimbursed by the State of Minnesota by March 15th of the next calendar year. State supplemental benefit revenue is recognized in the period the funds are expended by the Association.
Note 8 CONTINGENCIES The Association is not aware of any existing or pending lawsuits, claims or other actions in which the Association
is a defendant.
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REQUIRED SUPPLEMENTARY INFORMATION
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION
REQUIRED SUPPLEMENTARY INFORMATION Statement 5
SPECIAL FUND - PENSION TRUST FUND
SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS
2016 2015
Total pension liability:
Service cost $27,579 $28,520
Interest 36,976 37,130
Assumption changes 11,690 -
Gain or loss (46,403) -
Benefit payments - (191,582)
Net change in total pension liability 29,842 (125,932)
Total pension liability - beginning 588,689 714,621
Total pension liability - ending (a)$618,531 $588,689
Plan fiduciary net position:
Contributions - State of Minnesota $59,136 $61,166
Net investment income 70,101 (48,240)
Benefit payments - (191,582)
Administrative expense (17,419) (13,314)
Net change in plan fiduciary net position 111,818 (191,970)
Plan fiduciary net position - beginning 963,628 1,155,598
Plan fiduciary net position - ending (b)$1,075,446 $963,628
Net pension liability (asset) - ending (a)-(b)($456,915) ($374,939)
Plan fiduciary net position as a percentage of the total pension liability 173.87% 163.69%
Covered payroll *N/A N/A
Net pension liability as a percentage of covered employee payroll *N/A N/A
Pension benefit per year of service $3,400 $3,400
Discount rate 5.50% 6.00%
Notes:
Information is not available for years prior to 2015.
* The Association is comprised of volunteers, therefore, there are no payroll expenditures
(i.e., there are no covered payroll amounts or percentage calculations).
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LAKE ELMO FIREFIGHTERS RELIEF ASSOCIATION
REQUIRED SUPPLEMENTARY INFORMATION Statement 6
SPECIAL FUND - PENSION TRUST FUND
SCHEDULE OF INVESTMENT RETURNS
Annual money-weighted rate of return, net of investment expense
2014 1.38%
2015 (5.90%)
2016 5.80%
Note:
The weighted rate of return is not available for years prior to 2014.
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OTHER REQUIRED REPORTS
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4810 White Bear Parkway, St. Paul, MN, 55110 651.426.7000 www.redpathcpas.com
REPORT ON INTERNAL CONTROL To the Board of Trustees and Management Lake Elmo Firefighters Relief Association Lake Elmo, Minnesota In planning and performing our audit of the financial statements of the governmental activities, each major fund, and the fiduciary fund information of the Lake Elmo Firefighters Relief Association as of and for the year ended December 31, 2016, in accordance with auditing standards generally accepted in the United States of America, we considered the Lake Elmo Firefighters Relief Association’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Lake Elmo Firefighters Relief Association’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Lake Elmo Firefighters
Relief Association’s internal control.
Our consideration of internal control was for the limited purpose described in the preceding
paragraph and was not designed to identify all deficiencies in internal control that might be
material weaknesses or significant deficiencies and, therefore, material weaknesses or significant
deficiencies may exist that were not identified. However, as discussed below, we identified
certain deficiencies in internal control that we consider to be significant deficiencies.
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 internal control, such that there is a reasonable
possibility that a material misstatement of the entity’s financial statements will not be prevented,
or detected and corrected on a timely basis. We did not identify any deficiencies in internal
control that we consider to be material weaknesses.
A significant deficiency is a deficiency, or a 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. We consider the deficiency of the Lake Elmo Firefighters Relief Association’s
internal control as described in the accompanying Schedule of Findings and Responses as item
2016-001 to be a significant deficiency.
37
Lake Elmo Firefighters Relief Association Report on Internal Control
Lake Elmo Firefighters Relief Association’s written response to the significant deficiency identified in our audit is described in the accompanying Schedule of Findings and Responses. We did not audit the Lake Elmo Firefighters Relief Association’s response and accordingly, we express no opinion on it. This communication is intended solely for the information and use of management, the Lake Elmo Firefighters Relief Association’s Board of Trustees, and others within the organization, and is not intended to be, and should not be, used by anyone other than these specified parties.
REDPATH AND COMPANY, LTD.
St. Paul, Minnesota
June 26, 2017
38
4810 White Bear Parkway, St. Paul, MN, 55110 651.426.7000 www.redpathcpas.com
MINNESOTA LEGAL COMPLIANCE REPORT To the Board of Trustees Lake Elmo Firefighters Relief Association Lake Elmo, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America, the financial statements of the governmental activities, each major fund, and the fiduciary fund information of Lake Elmo Firefighters Relief Association as of and for the year ended December 31, 2016, and the related notes to the financial statements which collectively comprise the Lake Elmo Firefighters Relief Association’s basic financial statements, and have issued our report thereon dated June 26, 2017. The Minnesota Legal Compliance Audit Guide for Relief Associations, promulgated by the
State Auditor pursuant to Minn. Stat. § 6.65, contains two categories of compliance to be
tested in audits of relief associations: deposits and investments, and relief associations.
In connection with our audit, nothing came to our attention that caused us to believe that
Lake Elmo Firefighters Relief Association failed to comply with the provisions of the
Minnesota Legal Compliance Audit Guide for Relief Associations, except as described in the
Schedule of Findings and Responses as item 2016-002. However, our audit was not directed
primarily toward obtaining knowledge of such noncompliance. Accordingly, had we
performed additional procedures, other matters may have come to our attention regarding the
Lake Elmo Firefighters Relief Association’s noncompliance with the above referenced
provisions.
This report is intended solely for the information and use those charged with governance and
management of Lake Elmo Firefighters Relief Association and the State Auditor and is not
intended to be and should not be used by anyone other than these specified parties.
REDPATH AND COMPANY, LTD. St. Paul, Minnesota June 26, 2017
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Lake Elmo Firefighters Relief Association Schedule of Findings and Responses
2016-001 Lack of Segregation of Duties
Criteria: Generally, a system of internal control contemplates segregation of duties such that no individual has responsibility to execute a transaction, has physical access to the related assets, and has responsibility or authority to record the transaction.
Condition: Substantially all accounting procedures are performed by one person.
Cause: This condition is common to organizations of this size due to a limited number of staff.
Effect: The lack of ideal segregation of duties subjects the Association to a higher risk that
errors or fraud could occur and not be detected in a timely manner.
Recommendation: Any modification of internal controls in this area must be viewed from a cost/benefit perspective.
Management Response: The Association has implemented a policy to have both the Treasurer and Secretary track the activity of the General and Special Fund separately.
41
Lake Elmo Firefighters Relief Association Schedule of Findings and Responses
2016-002 Lack of Certification of Financial Requirements and Minimum Municipal Obligation
Criteria: Minnesota Statute 424A.092 Subdivision 4 provides certain specific requirements for certifying financial requirements and minimum municipal obligation: M.S. 424A.092 Subd. 4 Certification of financial requirements and minimum municipal obligation; levy. The officers of the relief association shall certify the financial requirements of the special fund of the relief association and the minimum obligation of the municipality with respect to the special fund of the relief association as determined under subdivision 3 on or before August 1 of each year. The certification must be made to the entity that is responsible for satisfying the minimum obligation with respect to the special
fund of the relief association.
Condition: The Relief did not submit and sign the SC-16 form prior to August 1st, which is the means by which the Relief should certify to the City of Lake Elmo the financial requirements and minimum municipal obligation.
Context: The SC-16 form was originally submitted to the Office of the State Auditor prior to August 1st, however it was not signed by the required Relief officers and was not submitted to the City of Lake Elmo as certification of the financial requirements and municipal obligation.
Cause: Unknown.
Effect: The effect of noncompliance is not determinable.
Recommendation: We recommend the Association make efforts to submit and sign all required
reporting forms prior to statutorily required deadlines.
Management Response: The Association will work on ensuring all reporting forms are submitted and signed prior to their deadlines.
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4810 White Bear Parkway, St. Paul, MN, 55110 651.426.7000 www.redpathcpas.com
Communication with Those Charged with Governance
To the Board of Trustees Lake Elmo Firefighters Relief Association Lake Elmo, Minnesota
We have audited the financial statements of the governmental activities, each major fund,
and the fiduciary fund information of the Lake Elmo Firefighters Relief Association for the year ended December 31, 2016. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such
information in our letter to you dated January 9, 2017. Professional standards also require that
we communicate to you the following information related to our audit. Significant Audit Results
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The
significant accounting policies used by the Lake Elmo Firefighters Relief Association 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 2016. However, GASB Statement No. 72, Fair Value Measurements and Application was implemented during 2016 which
enhanced disclosures regarding investments. We noted no transactions entered into by the Lake
Elmo Firefighters Relief Association 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 estimate affecting the Lake Elmo Firefighters Relief Association’s financial statements
was the disclosed net pension liability (asset). Management’s estimate of the disclosed net pension liability (asset) is based on the January 1, 2017 GASB 67 Actuarial Valuation Report. We evaluated the key factors and assumptions used to develop the disclosed net pension liability (asset) in determining that it is reasonable in relation to the financial statements taken as a whole.
The financial statement disclosures are neutral, consistent, and clear.
Lake Elmo Firefighters Relief Association Communication with Those Charged with Governance
Page 2
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and
completing our audit.
Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the
appropriate level of management. There were no corrected nor uncorrected misstatements identified during the audit. We have proposed closing journal entries to you that have been reflected in the Lake Elmo Firefighters Relief Association’s financial statements. Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations We have requested certain representations from management that are included in the management representation letter dated June 26, 2017. Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the governmental unit’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to
determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Results 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 Lake Elmo Firefighters Relief Association’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.
Lake Elmo Firefighters Relief Association Communication with Those Charged with Governance
Page 3
Other Matters We applied certain limited procedures to the Schedule of Changes in Net Pension Liability
and Related Ratios, and the Schedule of Investment Returns, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding 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 did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were not engaged to report on the introductory section, which accompanies the financial statements but is not RSI. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an
opinion or provide any assurance on it. Other Reports Various reports on compliance and internal controls are contained in the other required reports section of the audited financial statement document.
Restriction on Use This information is intended solely for the information and use of members of the Board of Trustees and management of the Lake Elmo Firefighters Relief Association and is not intended to be, and should not be, used by anyone other than these specified parties.
REDPATH AND COMPANY, LTD. St. Paul, Minnesota
June 26, 2017