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84 Honorable Mayor and Members of the City Council City of St. Anthony, Minnesota Financial Summary, continued Proprietary Funds The Liquor Fund had net income of $302,104 for the year. Operating income increased by approximately $16,000 or 6.0% compared to the prior year. It appears that inventory inconsistencies, which had previously plagued operations, have been resolved. There were no significant adjustments to inventory during the year noted. Transfers of $300,500 were made from the Liquor Fund during the year; $100,000 to the General Fund and $200,500 to, the Capital Equipment Fund. The Utility Fund had net income from operations of $270,200 for the year. Losses from operations of the Utility Fund were offset by investment income from water filtration funds. Utility rates were reviewed to determine the adequacy of revenues being generated to insure operating expenses are being covered. It was noted that utility rates were increased effective January 1, 2003. At December 31, 2002, the assets of the Employee Benefit Fund totaled $300,253 and the liability for accrued compensated absences was $600,055 (Deficit $299,802) . Funding of this liability in prior years has been limited to $200,000 due to the unlikelihood that the entire amount of the liability would be expended in any one year. It should be noted that the liability for compensatory (comp) time amounted to nearly $100,000 at year-end, an increase of 27.2%. One recommendation would be the City review its policy with regard to comp time, perhaps changing the policy to insure employees use it during the current year or have the City pay employees for the amount due prior to year end. Other Matters Investments - At year-end, the market value of City investments exceeded the cost or amortized cost of investments. In prior years, a change in accounting for investments required the City to report its investments at the lower of market value or cost. To comply with this reporting standard, the City in the year of the change recorded an adjustment of $411, 140. The market value of current City investments exceeds the cost of such investments. During these years, the City did not incur any losses pertaining to the disposition of any investments owned by the City. Collateral - During the audit process, the City perfected its collateral coverage to include the Housing and Redevelopment Authority (HRA) . Previously, collateral documentation listed only the City; this has now been changed to reference the HRA in the collateral agreement. Driveway Reimbursements - During the last two street improvement projects, additional costs were incurred related to driveway improvements for residents. These costs were not assessed at the part of the street improvement project. These additional costs are currently being billed to residents near the end of the construction project. Management should review its policy with regards to this additional work, perhaps having residents prepay for the extra work to avoid disputes and subsequent collection of these amounts.