EAGAN-INVER GROVE HEIGHTS WATERSHED MANAGEMENT ORGANIZATION

Transcription

1 EAGAN-INVER GROVE HEIGHTS WATERSHED MANAGEMENT ORGANIZATION EAGAN, MINNESOTA FINANCIAL STATEMENTS STUART J. BONNIWELL CERTIFIED PUBLIC ACCOUNTANT

2 EAGAN-INVER GROVE HEIGHTS WATERSHED MANAGEMENT ORGANIZATION EAGAN, MINNESOTA FINANCIAL STATEMENTS

3 TABLE OF CONTENTS Page Organization - Members of the Board of Managers and Advisors - Independent Auditor's Report 1-2 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position - Governmental Activities 4 Statement of Activities - Governmental Activities 5 Notes to Financial Statements 6-13 Other Information General Fund - Statement of Revenues, Expenditures and Changes in Fund Balance 15

4 MEMBERS OF THE BOARD OF MANAGERS AND ADVISORS BOARD OF MANAGERS Position City Julie Vigness-Pint Chair Eagan Sharon Lencowski Vice Chair Inver Grove Heights George Fell Secretary-Treasurer Inver Grove Heights Monica Foss Manager Eagan Joe Reymann Manager Eagan ADVISORS Brian Watson - Dakota County Soil & Water Conservation District Eric Macbeth - City of Eagan Scott Thureen - City of Inver Grove Heights Administrator City Representative City Representative

5 STUART J. BONNIWELL Certified Public Accountant 7101 York Avenue South Office: (952) Suite 346 Fax: (952) Minneapolis, Minnesota INDEPENDENT AUDITOR'S REPORT Board of Managers Eagan-Inver Grove Heights Watershed Management Organization Eagan, Minnesota I have audited the accompanying financial statements of the governmental activities and the major fund (General Fund) of the Eagan-Inver Grove Heights Watershed Management Organization as of December 31, 2014 and for the period January 7, 2014 to December 31, 2014, and the related notes to the financial statements, which collectively comprise the Eagan-Inver Grove Heights Watershed Management 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 My responsibility is to express opinions on these financial statements based on my audit. I conducted the audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that I 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, I express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant estimates made by management, as well as evaluating the overall financial presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinions. -1-

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7 BASIC FINANCIAL STATEMENTS

8 STATEMENT OF NET POSITION GOVERNMENTAL ACTIVITIES ASSETS Cash $ 29,291 LIABILITIES AND NET POSITION Liabilities Accounts Payable $ 3,131 Net Position Unrestricted 26,160 Total $ 29,291 See Accompanying Notes to Financial Statements. -4-

9 STATEMENT OF ACTIVITIES GOVERNMENTAL ACTIVITIES FOR THE PERIOD JANUARY 7, 2014 TO Governmental Activities Expenses $ 13,742 Revenues Charges for Services - Operating Grants and Contributions 27,149 Capital Grants and Contributions 12,749 Total Program Revenues 39,898 Net Revenues 26,156 General Revenues - Interest 4 Change in Net Position 26,160 Net Position Beginning of Period - Net Position End of Period $ 26,160 See Accompanying Notes to Financial Statements. -5-

10 NOTES TO FINANCIAL STATEMENTS Note 1. Significant Accounting Policies A. General Statement The Eagan-Inver Grove Heights Watershed Management Organization (the WMO) was established on January 7, 2014 in response to the Metropolitan Surface Water Management Act of This law requires surface water planning and management for all watershed areas in the seven county Twin Cities metropolitan area. The Eagan-Inver Grove Heights WMO is a joint powers organization consisting of the cities of Eagan and Inver Grove Heights established to cooperatively regulate and manage the natural water storage and retention in the Eagan-Inver Grove Heights Watershed. The WMO is governed by a five-member board of managers; the managers are comprised of citizens appointed by representatives of the member cities. The purpose of the WMO is to: (1) protect, preserve and use natural surface and ground water storage and retention systems; (2) minimize public capital expenditures necessary to correct flooding and water quality problems; (3) identify and plan for means to effectively protect and improve surface and ground water quality; (4) establish more uniform local policies and official controls regarding surface and ground water management; (5) prevent erosion of soil into surface water systems; (6) promote ground water recharge; (7) protect and enhance fish and wildlife habitat and water recreational facilities; and (8) secure other benefits associated with the proper management of surface and ground water. The accounting and reporting policies of the WMO relating to the accompanying financial statements conform to accounting principles generally accepted in the United States of America as applied to governmental units by the Governmental Accounting Standards Board (GASB). GASB is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The WMO applies all relevant GASB pronouncements. Following is a summary of the more significant accounting policies. B. Reporting Entity In accordance with generally accepted accounting principles and GASB pronouncements, the financial statements of the WMO (the primary government) are required to include activities of its component units or other organizations over which the WMO exercises significant influence or financial accountability. Significant influence or financial accountability is based primarily on operational, nature and significance of their financial relationships with the WMO such that exclusion of such activities would cause the WMO s financial statements to be misleading or incomplete. GASB has set forth criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of the organization s governing body; and (1) the ability of the WMO 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 WMO. The WMO has considered all potential organizations and determined that the WMO has no such component units or organizations that meet the GASB criteria for inclusion. C. Government-Wide and Fund Financial Statements The government-wide financial statements, consisting of the Statement of Net Position and the Statement of Activities (changes in net position) report information on all of the non-fiduciary activities as a whole. Governmental activities, which normally are supported by member assessments and other revenues, are reported separately from business-type activities, which rely to a significant extent on service charges and fees for support. All activities of the WMO are reported as governmental activities; the WMO has no business-type activities. -6-

11 NOTES TO FINANCIAL STATEMENTS Note 1. Significant Accounting Policies, continued C. Government-Wide and Fund Financial Statements, continued The Statement of Activities demonstrates the degree to which the direct expenses of a given program or function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific program or function. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given program or function, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program or function. Other revenue items not properly included among program revenues are reported instead as general revenues. The General Fund is the only governmental fund maintained by the WMO and separate fund financial statements are not provided in this report, as these statements would be the same as the government-wide financial statements. D. Measurement Focus, Basis of Accounting and Basis of Presentation The government-wide financial statements are reported using the economic resources (cost of service) measurement focus and the accrual basis of accounting. The economic measurement focus means all assets and liabilities (whether current or non-current) are included on the statement of net position and the operating statements present increases (revenues) and decreases (expenses) in net total assets. Revenues are recorded when earned and expenses are recorded when the liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue when 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 WMO considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Revenue sources not susceptible to accrual are recorded only when received because they are not measurable until collected. Reimbursements from grants are considered available if they are collected within one year of the end of the current fiscal period. Intergovernmental revenues, charges for services and investment income associated with the current fiscal period are 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 when received by the WMO. Expenditures are generally recorded when the related liability is incurred, as under accrual accounting. Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange occurs. On the modified accrual basis, revenue is recorded in the year in which the resources are measurable and become available. Non-exchange transactions, in which the WMO receives value without directly giving equal value in return, include grants, entitlements, and contributions. Revenues from these sources are recognized in the year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when resources are required to be used or the year when use is first permitted; matching requirements, in which the WMO must provide local resources to be used for a specified purpose; and, expenditure requirements, in which the resources are provided to the WMO on a reimbursement basis. On the modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. -7-

12 NOTES TO FINANCIAL STATEMENTS Note 1. Significant Accounting Policies, continued D. Measurement Focus, Basis of Accounting and Basis of Presentation, continued Deferred revenue in the fund financial statements and unearned revenue in the government-wide financial statements may arise when assets are recognized before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are satisfied are also recorded as deferred revenue. Under the modified accrual basis, receivables that will not be collected within the available period are also reported as deferred revenue. Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria are met. Revenues from reimbursement based grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met. The accounts of the WMO are organized on the basis of funds, each of which is considered a separate accounting entity with a self-balancing set of accounts. The WMO uses funds to report on its financial position and the results of its operations. The WMO segregates transactions related to certain government functions or activities in separate funds to aid financial management and to demonstrate legal compliance. Government resources are allocated to and accounted for in individual funds based upon the purposes for which resources are to be spent and the means by which spending activities are controlled. Governmental funds are those funds through which most governmental functions typically are financed. Governmental fund financial statements are reported using the current financial resources measurement focus and are accounted for using the modified accrual basis of accounting. The measurement focus of governmental funds is on the sources, uses and balance of current financial resources. The WMO s only governmental fund is the General Fund. The General Fund is the WMO s primary operating fund and accounts for all financial resources and expenditures. The General Fund was determined to be a major fund for financial reporting purposes. When both restricted and unrestricted resources are available for an allowable use, it is the WMO s policy to use restricted resources first, then unrestricted resources as they are needed. E. Budgets and Budgetary Control A plan of financial operation for the WMO is established in the budget adopted by the Board of Managers. The budget outlines proposed expenditures and the means of financing them. On or before July 1 of each year, the Board needs to adopt a budget for the ensuing year which includes a statement of the assessment to be provided by each member City. The budget is subsequently submitted to each member City for its review and approval. However, since the WMO commenced operations in 2014 no formal budget was adopted. The budget of the General Fund is adopted on a basis consistent with generally accepted accounting principles. Future budgets of the General Fund will utilize the same basis of accounting for both budgetary purposes and actual results. Budgeted expenditure appropriations lapse at year-end. In addition, outstanding encumbrances expire at year-end. -8-

13 NOTES TO FINANCIAL STATEMENTS Note 1. Significant Accounting Policies, continued F. Deposits and Investments Deposits and investment balances include demand deposits and temporary investments with a maturity date of less than three months from acquisition date. Investment income is recognized as earned. As of December 31, 2014, the WMO had no investments. With respect to the investment of funds, the WMO follows applicable Minnesota Statutes. G. Receivables Receivables are recorded for services provided by the WMO during the year. Receivables, if any, are reported at gross with no allowance for uncollectible accounts provided against the receivables. H. Inventories Inventories of expendable supplies held by governmental fund types are recorded as expenditures when purchased (purchase method). The WMO does not maintain significant amounts of inventories of materials and supplies. I. Prepaid Items Payments made for services, except for insurance, that reflect costs applicable to periods beyond the current period are recorded as prepaid items. A nonspendable reserve for prepaid items is recorded to signify that a portion of the fund balance is not available for subsequent expenditures. J. Capital Assets Capital assets, which include property, buildings and improvements, equipment, and other infrastructure assets, are reported as governmental activities in the government-wide financial statements. Capital assets are defined by the WMO as assets with an original individual cost of $5,000 or more with an estimated useful life in excess of one year. Such assets are recorded at historical cost when acquired or constructed, or estimated historical cost if actual cost not available. Donated capital assets are valued at their estimated fair value on the date received. As of December 31, 2014, the WMO does not own any capital assets as defined above. If infrastructure assets are constructed by the WMO, these assets will subsequently be transferred to other governmental units. These assets are recorded as an expense in the accompanying financial statements rather than being capitalized. K. Net Position and Fund Balances Net position (equity) represents the difference between assets and liabilities in the government-wide financial statements. Net position are classified and displayed in three components: a) Invested in capital assets, net of related debt This component consists of capital assets net of accumulated depreciation and reduced by the amount of outstanding balances of bonds or other debt that are attributable to the acquisition, construction or improvement of those assets. -9-

14 NOTES TO FINANCIAL STATEMENTS Note 1. Significant Accounting Policies, continued K. Net Position and Fund Balances, continued b) Restricted net assets Net assets with constraints placed on the use either by 1) external groups such as creditors, grantors, or laws or regulations of other governments; or 2) law through constitutional provisions or enabling legislation are reflected in this component. c) Unrestricted net assets All other net assets that do not meet the definition of restricted or invested in capital assets, net of related debt. In the fund financial statements, governmental fund equity is classified as fund balance. Fund balance is divided into five classifications based primarily on the extent to which the WMO is bound to observe constraints imposed on the use of resources reported in the governmental funds. These classifications are as follows: Nonspendable Consists of amounts that cannot be spent because the assets are not in spendable form, such as prepaid items. Restricted Restricted amounts are related to externally imposed constraints established by creditors, grantors or contributors; or constraints imposed by state statutory provisions. Committed Committed amounts are constrained for specific purposes that are internally imposed by formal action of the Board of Managers. These committed amounts cannot be used for any other purpose unless the Board of Managers removes or changes the specified use by taking the same type of action it utilized to previously commit these amounts. Assigned Assigned amounts are intended to be used by the WMO for specific purposes but do not meet the criteria to be classified as restricted or committed. In the General Fund, assigned amounts represent intended uses established by the governing body itself or by an official delegated by the governing body. Unassigned This is the residual classification for the General Fund and also may reflect negative residual amounts in other funds. The WMO expends restricted amounts first when both restricted and unrestricted fund balance is available. Additionally, the WMO would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made. L. Use of Estimates The preparation of these financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures or expenses during the reporting period. Actual results could differ from those estimates. -10-

15 NOTES TO FINANCIAL STATEMENTS Note 1. Significant Accounting Policies, continued M. Reconciliation of Government-Wide and Fund Financial Statements 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 fund balance sheet would include a reconciliation between fund balances of governmental funds to net position of governmental activities. The governmental fund statement of revenues, expenditures and changes in fund balance would also include a reconciliation between net changes in fund balances total governmental funds and changes in net position of governmental activities as reported in the government-wide statement of activities. The WMO does not have any reconciling items between governmental funds and the government-wide financial statements. Note 2. Stewardship, Compliance and Accountability A. Budgetary Information A plan of financial operation for the WMO is established in the budget adopted by the Board of Managers. The budget outlines proposed expenditures and the means of financing them. The budget is prepared by the WMO Administrator based on anticipated requirements of the WMO. On or before July 1 of each year, the Board needs to adopt a budget for the ensuing year which includes a statement of the assessment to be provided by each member City. The budget is subsequently submitted to each member City for its review and approval. B. Fund Balance Deficits The fund balance of General Fund (the WMO s only fund) had a positive fund balance at December 31, In addition, the fund balance of the General Fund would be classified as unassigned. Note 3. Deposits and Investments A. Deposits Cash and deposits of $29,291 reported at December 31, 2014 represent the carrying amount of the WMO s deposits in its checking account; the bank balance of this account was $29,977. In accordance with applicable Minnesota Statutes, the WMO maintains deposits at depository banks authorized by the Board of Managers, all of which are members of the Federal Reserve System. The following is considered the most significant risk associated with deposits. Custodial Credit Risk In the case of deposits, this is the risk that in the event of a bank failure, the WMO s deposits may not be returned or lost. Minnesota Statutes require that WMO deposits be protected by federal deposit insurance, surety bond or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by federal deposit insurance or surety bonds. -11-

16 NOTES TO FINANCIAL STATEMENTS Note 3. Deposits and Investments, continued Authorized collateral includes U.S. treasury bills, notes, and bonds; issues of U.S. government agencies; general obligation securities of any state or local government rated A or better; irrevocable standard letters of credit issued by the Federal Home Loan Bank; and time deposits fully insured by any federal agency. Securities pledged as collateral are to be held in safekeeping in an account at the Federal Reserve Bank or at a trust department of a commercial bank or other financial institution other than the financial institution furnishing the collateral. The WMO has no additional deposit policies addressing custodial credit risk. At December 31, 2014, WMO s bank deposits were covered by federal depository insurance. B. Investments The WMO may invest funds as authorized by Minnesota Statutes; however, the WMO maintained no investments during the year. Investments are subject to various risks, the following of which are considered the most significant. Custodial Credit Risk For investments in securities, this is the risk that in the event of failure of the counterparty to an investment transaction (typically a broker-dealer), the WMO would not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The WMO does not have a formal investment policy addressing this risk, but typically limits its exposure by purchasing insured or registered investments, or by the control of who holds the securities. Credit Risk This is the risk that an issuer or the counterparty to an investment will not fulfill its obligations. The WMO follows Minnesota Statutes with regards to credit risk of investments. The WMO s investment policies do not further address credit risk. Concentration of Credit Risk This is the risk associated with investing a significant portion of the WMO s investments (considered 5 % or more) in the securities of a single issuer, excluding U.S. guaranteed investments (such as U.S. treasuries), investment pools and mutual funds. The WMO s investment policies do not limit the concentration of investments. Interest Rate Risk This is the risk of potential variability in the fair value of fixed rate investments resulting from changes in interest rates (the longer the period for which the interest rate is fixed, the greater the risk). The WMO does not have an investment policy limiting the duration of investments. Note 4. Member Contributions In accordance with the provisions of the Joint Powers Agreement, individual members agree to contribute each year to the General Fund based on the budget adopted for the year. Each member s percentage share is based on an average of the following two percentages: (1) the percentage of the total assessed valuation of all real property within the watershed which lies within the member s boundaries; and (2) the percentage of the total area in the watershed which lies within the member s boundaries. Member contributions totaled $39,898, which included $12,749 of start up funds contributed by member cities. -12-

17 NOTES TO FINANCIAL STATEMENTS Note 5. Related Parties The WMO entered into a contract with the Dakota County Soil & Water Conservation District to provide certain administrative assistance and services, education and outreach assistance, and implementation of water quality projects. The amount paid for these services was $4,195 for the period ended December 31, This contract is effective through December 31, 2015 unless terminated by either party as provided for in the contract. The majority of the administrative functions of the WMO were performed by staff members of the City of Eagan. During 2014, the WMO reimbursed the City of Eagan $8,315 for services provided. Note 6. Commitments and Contingencies A. Risk Management The WMO is exposed to various risk of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The WMO participates in the League of Minnesota Cities Insurance Trust (the Trust), a public entity risk sharing pool for its general property and casualty, workers' compensation and other insurance coverage. The Trust operates as a common risk management and insurance program for cities throughout Minnesota. The Trust agreement provides that the Trust will be self-sustaining through member premiums and will reinsure through commercial companies for claims in excess of certain limits. Insurance for the WMO was provided by the City of Eagan, who participates in the League of Minnesota Cities Insurance Trust. B. Credit Risk Financial instruments that potentially subject the WMO to credit risk are cash and cash equivalents, investments and receivables. The WMO attempts to limit its exposure related to cash and investments by following state statutes regarding types of investments, insurance and collateral. Receivables, if any, are due primarily from other governmental agencies. C. Litigation The WMO is not aware of any existing or pending lawsuits, claims or other actions in which it is a defendant. Note 7. Subsequent Events Management of the WMO has evaluated subsequent events through February 10, 2015, the date which the financial statements were available to be issued. No events were noted subsequent to December 31, 2014 which would require adjustment to the financial statements being reported on. -13-

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19 GENERAL (OPERATING) FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE PERIOD JANUARY 7, 2014 TO Revenues Member Assessments $ 27,149 Member Contributions - Start Up Funds 12,749 Interest 4 Total Revenues 39,902 Expenditures Work Program Watershed Management Plan 1,022 Administrative Activities 870 1,892 Organizational Administration Staff Services 11,245 Other Services ,850 Total Expenditures 13,742 Revenues Over Expenditures 26,160 Fund Balance Beginning of Period - Fund Balance End of Period $ 26,