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Honorable Mayor and Members of the City Council City of St. Anthony, Minnesota Financial Statement Presentation The method of presentation of certain activities and programs of the City has been changed for this year. Activities of the following programs have .been presented as individual special revenue funds in the accompanying financial statements, recycling and beautication, DARE and related police programs, and operations of the commu- nity center complex. Management has determined the activities of these programs are significant enough to warrant presentation of these activities as separate funds. Previously, these activities were presented as General Fund activities. As a result, the fund balance of the General Fund previously reported at December 31 , 1996 decreased by $115,678 to reflect the balance of funding available for these programs. The presentation of the financial statements for the year ended December 31 , 1996 have been reclas- sified to reflect this change. According to generally accepted accounting principles operating budgets are required for all special revenue funds. Future budgets adopted by the City should include separate operating budgets for each of the special revenue funds. The current budget reflects only a budget for operations of the community center. The accom- panying financial statements include budgeted amounts based on the level of funding received during the year to make the financial statements more readable. Tax Revenues and Budgeting For the year ended December 31 , 1997, current tax collections received were 98.92% of the total tax levy. When delinquent tax collections are included, the tax col- lection rate actually decreased to 98.67% of the tax levy as a result of abatements. Since tax collections received were not 100% of the tax levy, a negative variance of approximately $18,600 occurred in the General Fund. Generally, it is impractical- to reflect in the budget property tax revenues equal to the entire amount of the tax levy. The City should estimate an allowance for uncollectible taxes based on prior tax collection experience. Applying this per- centage of uncollectible taxes to the total tax levy, ,provides for a more realistic estimate of the tax revenues to be received by the City. Future budgets prepared by City management should, reflect this budgeting .procedure. Liquor Budget As part of the audit process, actual expenses are compared to budgeted amounts to determine the reasonableness of expenses reported. It appears the liquor budget has been prepared based on prior expense levels without regard to changes in opera- tions and increases in certain types of expenses. This budget should be prepared on the same basis as other funds of the City, with accuracy and sufficient detail supporting the amounts reflected in the budget. It is critical to the liquor operation that an accurate, complete and reasonable budget be prepared to reflect all operating costs, including debt service requirements on bonds and other debt issued. A carefully prepared budget should be viewed as a valuable management tool to assist management in the decision making process.