CITY OF BARRETT. Financial Statements. For the Year Ended December 31, 2010

Transcription

1 Financial Statements For the Year Ended December 31, 2010

2 Table of Contents Page SECTION I - INTRODUCTION SECTION City Council 1 SECTION II - FINANCIAL SECTION INDEPENDENT AUDITOR S REPORT 2 REQUIRED SUPPLEMENTARY INFORMATION Management s Discussion and Analysis 3-14 BASIC FINANCIAL STATEMENTS Statement of Net Assets 15 Statement of Activities 16 Balance Sheet - Governmental Funds 17 Reconciliation of the Balance Sheet to the Statement of Net Assets - Governmental Funds 18 Statement of Revenue, Expenditures, and Changes in Fund Balances - Governmental Funds 19 Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances to Statement of Activities - Governmental Funds 20 Statement of Net Assets - Proprietary Funds 21 Statement of Revenue, Expenses and Changes in Net Assets - Proprietary Funds 22 Statement of Cash Flows - Proprietary Funds NOTES TO CITY FINANCIAL STATEMENTS REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures, and Changes in Fund Balance - 37 Budget and Actual - General Fund Notes to Schedule of Revenues, Expenditures and Changes in Fund Balance - 38 Budget and Actual OTHER REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS SUMMARY SCHEDULE OF AUDIT FINDINGS AND RESPONSES INDEPENDENT AUDITOR S REPORT ON MINNESOTA LEGAL COMPLIANCE 44

3 City Council Year Ended December 31, 2010 Term on Council Expires Les Alvstad 12/31/2010 Mayor Troy Johnson 12/31/2012 Council Member Earl Janshen 12/31/2012 Council Member Deborah Nelson-Pick 12/31/2010 Council Member Kathy Boys 12/31/2010 Council Member Marita Rhude Clerk/Treasurer 1

4 FINANCIAL SECTION

5 DINHAM, FOLKERT & ASSOCIATES CHTD. Certified Public Accountants 1309 Highway 29 North, P.O. Box Alexandria MN (320) Fax (320) dfasso@rea-alp.com INDEPENDENT AUDITOR S REPORT To the Mayor and Members of the City Council City of Barrett Barrett, Minnesota We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Barrett as of and for the year ended December 31, 2010, which collectively comprise the City s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City s management. Our responsibility is to express opinions on these basic financial statements based on our audit. The prior year partial comparative information has been derived from the City s 2009 financial statements and, in our report dated June 24, 2010, we expressed unqualified opinions on the respective financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall basic financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Barrett as of December 31, 2010, and the respective changes in financial position, and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated June 9, 2011, on our consideration of City of Barrett s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 4 through 14 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. Dinham, Folkert & Associates Chtd. June 9,

6 MANAGEMENT S DISCUSSION AND ANALYSIS

7 Management s Discussion and Analysis Year Ended December 31, 2010 This section of the City of Barrett s annual financial report presents the City s management discussion and analysis of the City s financial performance during the fiscal year that ended on December 31, Please read it in conjunction with the City s financial statements, which immediately follows this section. The Management s Discussion and analysis (MD&A) is a new element of Required Supplementary Information specified in the Governmental Accounting Standards Board s (GASB) Statement No Basic Financial Statements - and Management s Discussion and Analysis - for State and Local Governments issued in June Statement No. 34 contains significant requirements that enhance financial reporting. These requirements are also designated to make annual reports easier for the public to understand and more useful to stockholder. Specifically, Statement No. 34 establishes new reporting requirements that include new financial statements, expanded disclosure and supplemental information, including the MD&A (this section). FINANCIAL HIGHLIGHTS Key financial highlights for the 2010 fiscal year include the following: Total net assets increased 6.7% over the prior year. Business-type activities have total net assets of $2,307,116, of which there is $2,000,985 invested in capital assets, net of related debt. Of the total net assets of Business-type activities there is a $146,603 in unrestricted-undesignated fund balance. General Fund balance increased $84,146 to $458,398 which was a 22.5% increase. The City received intergovermental revenue during 2010 of $104,313 along with $156,609 in capital grant funds that were used. OVERVIEW OF THE FINANCIAL STATEMENTS The financial section of the annual report consists of four parts - Independent Auditor s Report, required supplementary information which includes the Management s Discussion and Analysis (this section), the basic financial statements, and supplemental information. The basic financial statements include two kinds of statements that present different views of the City: The first statements are government-wide financial statements that provide both short-term and long-term information about the City s overall financial status. The remaining statements are fund financial statements that focus on individual parts of the City, reporting the City s operations in more detail than the Government-wide financial statements. The governmental funds statement tell how basic service were financed in the short term as well as what remains for future spending. 3

8 Management s Discussion and Analysis Year Ended December 31, 2010 The financial statements also include notes that explain some of the information in the statements and provide more detailed data. Figure A-I shows how the various parts of this annual report are arranged and related to one another. 4

9 Management s Discussion and Analysis Year Ended December 31, 2010 Figure A-2 summarizes the major features of the City s financial statement, including the portion of the City s activities they cover and the types of information they contain. The remainder of the overview section of the MD&A highlights the structure and contents of each of the statements Figure A-2 Major Features of the Government-wide and Fund Financial Statements Fund Financial Statements Government-wide Statements Governmental Funds Scope Entire City The activities of the City that are not proprietary or fiduciary, such as general government, special revenue, debt service Required financial statements Statements of net assets Statement of activities Balance sheet Statement of revenues, expenditures, and changes in fund balances Accounting Basis and measurements focus Type of asset/liability information Type of inflow/outflow information Accrual accounting and economic resources focus All assets and liabilities, both financial and capital, short-term and long-term All revenues and expenses during year, regardless of when cash is received or paid Modified accrual accounting and current financial focus Generally assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets or long-term liabilities included Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and the related liability is due and payable Government-wide Financial Statements - The Statement of Net Assets and The Statement of Activities The Government-wide financial statements report information about the City as a whole using accounting methods similar to those used by private-sector companies. The statement of net assets includes all of the City s assets and liabilities. All of the current year s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two Government-wide financial statements report the City s net assets and how they have changed. Net assets (the difference between assets and liabilities) is one way to measure the City s financial health or position. Over time, increases or decreases in the City s net assets are an indicator of whether its financial position is improving or deteriorating, respectively. To assess the overall health of the City you need to consider additional non-financial factors such as changes in the City s property tax base and the condition of roads & buildings and other facilities. 5

10 Management s Discussion and Analysis Year Ended December 31, 2010 Government-wide Financial Statements - The statement of Net Assets and the Statement of Activities (cont.) In the Government-wide financial statements, the City s activities are shown in two categories. Governmental activities - All of the City s basic services are included here, such as regular city services, debt service, and special revenue information. Property taxes, special assessments, and state aids and grants finance most of these activities. Business type activities - The City charges a fee to customers to cover all or most of cost of services it provides. The City s water and sewer operations are reported here. Fund Financial Statements The fund financial statements provide more detailed information about he City s funds - focusing on its most significant or major funds - not the City as a whole. Funds are accounting devices the City uses to keep track of specific sources of funding and spending on particular programs: Some funds are required by State law and by bond covenants. The City establishes other funds to control and manage money for particular purposes (e.g., repaying its long-term debts) or to show that it is properly using certain revenues (e.g., grants). The City has two kinds of funds: Governmental funds - Most of the City s basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out (2) the balances left at year-end that are available for spending. Consequently, the governmental funds statements provide a detail shortterm view that helps to determine whether there are more or fewer financial resources that can be spent in a new future to finance the City s programs. Because this information dies not encompass the additional long-term focus of the Government-wide financial statements, we provide additional information following the governmental funds statements that explains the relationship (or differences) between them. Proprietary funds - When the City charges customers for services it provides, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the statement of net assets and the statement of activities. In fact, the City s enterprise fund presents the same information as the business-type activities in the government-wide financial statements but provides more detail and additional information, such as cash flows. 6

11 Management s Discussion and Analysis Year Ended December 31, 2010 FINANCIAL ANALYSIS OF THE CITY AS A WHOLE Net Assets The City combined nets assets were $3,503,069 on December 31, This was an increase of 6.7% from the prior year (see Table A-1). Table A-1 City of Barrett Combined Governmental Activities Business-Type Activities Total Primary Government Current and Other Assets $ 818,607 $ 748,089 $ 443,549 $ 234,623 $ 1,262,156 $ 982,712 Capital Assets 618, ,306 3,720,871 3,706,126 4,339,200 4,302,432 Total Assets 1,436,936 1,344,395 4,164,420 3,940,749 5,601,356 5,285,144 Long-term Liabilities 185, ,095 1,722,000 83,000 1,907, ,095 Other Liabilities 55,222 54, ,304 1,664, ,526 1,718,916 Total Liabilities 240, ,970 1,857,304 1,747,041 2,098,287 2,003,011 Net Assets Invested in capital assets, net of related debt 395, ,053 2,000,985 2,054,303 2,396,945 2,419,356 Restricted for Debt Service 330, , ,528 57, , ,212 Unrestricted - Undesignated 469, , ,603 81, , ,565 Total Net Assets $ 1,195,953 $1,088,425 $ 2,307,116 $2,193,708 $ 3,503,069 $ 3,282,133 7

12 Management s Discussion and Analysis Year Ended December 31, 2010 The increase in net assets occurs as a result of the City s revenues being more than its expenses for the year ended December 31, A summary of the revenues and expenses is presented in Table A-2 below. Table A-2 City of Barrett Change in Net Assets Governmental Activities Business-Type Activities Total Primary Government Revenues: Program revenues Charges for Services $ 85,887 $ 85,797 $ 173,442 $ 177,439 $ 259,329 $ 263,236 Operating Grants and Contributions 24,006 46, ,006 46,909 Capital Grants and Contributions 44,691 69, , ,609 69,214 General revenues Property taxes 201, , , ,907 Special assessments 15,609 18, ,609 18,054 Intergovernmental 78,857 92,110 25, , , ,535 Interest earnings 2,100 2,527 1,445 1,089 3,545 3,616 Miscellaneous 25,218 24,031 3,867 6,790 29,085 30,821 Total Revenues 477, , , , , ,292 Expenses: Public Safety 84, , , ,736 General government 141, , , ,791 Streets 56,795 45, ,795 45,658 Culture and recreation 23,340 27, ,340 27,451 Sanitation 44,749 47, ,749 47,447 Interest 11,086 15, ,086 15,732 Water , , , ,152 Sewer ,008 56,622 58,008 56,622 Total Expenses 361, , , , , ,589 Increase in net assets before transfers 116, , , , , ,703 Transfers (8,500) (8,500) 8,500 8, Increase (Decrease) in Net Assets 107, , , , , ,703 End of Year Net Assets $1,195,953 $1,088,425 $2,307,116 $2,193,708 $3,503,069 $3,282,133 8

13 Management s Discussion and Analysis Year Ended December 31, 2010 Changes in net assets The City s total revenues were $794,012 for the year ended December 31, Property taxes and intergovernmental revenues accounted for 38.5% of total revenue for the year (see Figure A-3). Operating and capital grants and contributions were 22.7% with the remaining 32.7% and 6.1% resulted from charges for services and other revenues respectively. The total cost of all programs and services was $573,076. The City s expenses related to general government was 24.7% of expenses, public safety related expenses were 14.7%. Business type activity expenses for water and sewer were 26.7% and 10.1% respectively. 9

14 Management s Discussion and Analysis Year Ended December 31, 2010 The net cost of governmental and business type activities are their total costs, less program revenues applicable to each category. Table A-3 presents these net costs for Table A-3 City of Barrett Net Cost of Governmental Activities Total Cost of Services Percentage Change Net Cost of Services Percentage Change Public Safety $ 84,484 $ 104,736 (19.3)% $ 48,286 $ 2, % General Government 141, ,791 (6.2)% 96, ,788 (33.6)% Streets 56,795 45, % 56,795 45, % Culture and Recreation 23,340 27,451 (15.0)% (666) (17,120) (96.1)% Sanitation 44,749 47,447 (5.7)% (5,004) (2,925) 71.1% Interest 11,086 15,732 (29.5)% 11,086 15,732 (29.5)% Total $ 361,856 $ 391,815 (7.6)% $ 207,272 $ 189, % Net Cost of Business Type Activities Water $ 153,212 $ 108, % $ (71,805) $ (9,487) 681.6% Sewer 58,008 56, % (2,335) (3,178) (26.5)% Total $ 211,220 $ 164, % $ (74,140) $ (12,665) 499.6% FINANCIAL ANALYSIS OF THE CITY S FUNDS The financial performance of the City as a whole is reflected in its governmental and proprietary funds as well. As the City completed the year, its governmental funds reported a combined fund balance $543,033. This was up from $433,013 at the end of the prior year, a increase of $110,020. During 2010 the City s proprietary funds reported combined net income before contributions and transfers of $104,908 which, in conjunction with a one time transfer from the general fund in the amount of $8,500 resulted in an overall proprietary fund balance increase from $2,193,708 to $2,307,

15 Management s Discussion and Analysis Year Ended December 31, 2010 GENERAL FUND The General Fund includes the primary operations of the City in providing administrative services to the City for its recreational, public protection, street maintenance, and sanitation services to the residents of The City of Barrett. The following schedule presents a summary of General Fund Revenues for Year Ended December 31, 2010 Year Ended December 31, 2009 Amount of Increase (Decrease) Percentage of Increase (Decrease) Local sources Property taxes $ 204,147 $ 194,425 $ 9, % Licenses, Fees, and Fines 2,633 2,665 (32) (1.2)% State sources 78,857 92,110 (13,253) (14.4)% Charges for Services 83,254 83, % Grant Proceeds 44,691 71,552 (26,861) (37.5)% Interest earnings (217) (23.3)% Public Donations 24,006 44,571 (20,565) (46.1)% Rental Income 11,264 9,812 1, % Other 13,294 14,048 (754) 5.4% Total General Fund Revenue $ 462,859 $ 513,244 $ (50,385) (9.8)% The following schedule presents a summary of General Fund Expenditures for Year Ended December 31, 2010 Year Ended December 31, 2009 Amount of Increase (Decrease) Percentage of Increase (Decrease) Current Expenditures City Office Expenses $ 7,948 $ 8,767 $ (819) (9.3)% Clerk/Treasurer & Board Payroll Expense 65,994 59,369 6, % Insurance 22,004 20,643 1, % Public Protection 43,321 42, % Fire Department Expenses 23,138 47,767 (24,629) (51.6)% Professional Services 4,739 22,772 (18,033) (79.2)% Garbage Expenses 44,749 47,447 (2,698) (5.7)% Street/Lighting Expenses 52,103 45,658 6, % Recreation & Culture Expenses 19,969 24,080 (4,111) (17.1)% Miscellaneous 28,411 24,475 3, % Total Current Expenditures 312, ,669 (31,293) (9.1)% Capital Outlay Expenditures 59, ,079 (79,156) (56.9)% Debt Service Expenditures 122,914 17, , % Total General Fund Expenditures $ 495,213 $ 500,316 $ (5,103) (1.0)% 11

16 Management s Discussion and Analysis Year Ended December 31, 2010 GENERAL FUND (cont.) In 2010, General Fund expenditures exceeded revenues by $17,424. Therefore, total fund balance decreased to $356,828 before transfers out of $8,500 and transfers in of $110,070 that brought the fund balance to $458,398. Unreserved - Undesignated Fund Balance $ 458,398 $ 374,252 % Increase (Decrease) 22.5% 1.2% BUDGETARY HIGHLIGHTS General Fund The City did not revise its initial adopted budget during the year. The City had revenue over budget of $36,067 and expenditures exceeded budget by $108,110. Debt Service Funds The City did not adopt a budget for the Sewer Debt Service Fund or the G.O. Capital Improvement Bond of 2010A Debt Service Fund because it was not legally obligated and, therefore, presentation of budgetary information is not required. DEBT SERVICE FUNDS The Sewer Debt Service Fund revenue exceeded expenditures by $25,874 in The remaining fund balance of $84,635 at December 31, 2010 is available for meeting future debt service obligations. G.O. Capital Improvement Bonds of 2010A Debt Service Fund revenues equaled its expenditures. Proceeds from the $125,000 bond were used to pay off the note and to make capital improvements for the office building. PROPRIETARY FUNDS Water and Sewer operations comprise the City s proprietary funds. Water and sewer net income before contributions and transfers for 2010 were $100,459 and $4,449 respectively. The water fund s net assets increased from $1,089,084 to $1,220,743 and the sewer fund s net assets decreased from $1,104,624 to $1,086,373 after net transfers in the water and sewer funds of $31,200 and $(22,700) respectively. CAPITAL ASSET AND DEBT ADMINISTRATION By the end of 2010, the City had invested over $5,010,000 in capital assets, (see Table A-4). More detailed information about capital assets can be found in Note 4 to the financial statements. Accumulated depreciation on these assets is $670,898. The City has elected to add only assets acquired after 2002 in implementing GASB 34 with the exception of the sewer and water enterprise fund capital assets which were added from inception. 12

17 Management s Discussion and Analysis Year Ended December 31, 2010 Table A Total Percentage Change Buildings $ 367,758 $ 307, % City Equipment 19,742 19, % Fire Equipment 180, , % Infrastructure 142, , % Parks and Recreation 67,421 67, % Sewer and Water 4,232,413 3,151, % Construction in Progress ,410 (100.0)% Less Accumulated Depreciation (670,898) (559,159) 20.0% Total $ 4,339,200 $ 4,302, % Debt Administration At December 31, 2010, the City had debt obligations of $1,947,369. The bonds are General Obligation Revenue Bonds issued in 2001 and 2007, General Obligation Bonds issued in 1999, and General Obligation Capital Improvement Plan Bonds issued in The City also has a capital lease which has been included as long term debt. Construction - Next Five Years None planned Long-term Liabilities At year-end, the City had $1,947,369 in total debt outstanding, which is an increase of $64,292 from last year. Permanent financing on the million GO bond along with the capital lease on the City s office building, were obtained in early More detailed information about the City s long-term liabilities is presented in Note 6 to the financial statements. FACTORS BEARING ON THE CITY S FUTURE The City of Barrett s population has seen a significant increase after a number of years with slight decreases each previous year. For a number of years the population was decreasing because of the boom of homes on the lakes and other homes in the city selling to people who use them for seasonal recreation and not as their principal residence. There were also a number of empty homes in town either for sale or in foreclosure, and this still exists. Also, a great number of homes were occupied by older single residents which have since sold to younger families with children. With the school in Barrett and current gas prices the City is attracting more families with children to move into town. 13

18 Management s Discussion and Analysis Year Ended December 31, 2010 CONTACTING THE CITY S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City s finances and to demonstrate the City s accountability for the money it receives. If you have questions about this report or need additional financial information, contact Marita Rhude, Clerk/Treasurer, PO Box 155, Barrett, MN or phone

19 BASIC FINANCIAL STATEMENTS

20 Statement of Net Assets Year Ended December 31, 2010 (with partial comparative information as of December 31, 2009) Primary Government Primary Governmental Business Type Government Activities Activities Total 2009 ASSETS Cash and cash equivalents $ 493,304 $ 362,732 $ 856,036 $ 666,345 Receivables: Current property taxes 13, ,963 5,747 Delinquent property taxes 15, ,850 15,481 Special assessments 243, , ,631 Other receivables 47,018 75, ,721 12,508 Total Current & Other Assets 813, ,435 1,252, ,712 Unamortized bond issuance costs 4,887 5,114 10, Capital Assets: Buildings 367, , ,834 City Equipment 19, ,742 19,742 Fire Equipment 180, , ,252 Infrastructure 142, , ,512 Parks & Recreation 67, ,421 67,421 Sewer & Water -0-4,232,413 4,232,413 3,151,420 Sewer & Water-Construction in Progress ,410 Less accumulated depreciation (159,356) (511,542) (670,898) (559,159) Total Net Capital Assets 618,329 3,720,871 4,339,200 4,302,432 TOTAL ASSETS $ 1,436,936 $ 4,164,420 $ 5,601,356 $ 5,285,144 LIABILITIES Payroll liabilities payable 4, ,028 3,600 Sales tax payable Accounts payable 6,237 77,078 83,315 41,387 Accrued interest payable 7,362 55,226 62,588 73,989 Current portion long-term liabilities 36,608 3,000 39,608 1,598,982 Total Current Liabilities 55, , ,526 1,718,916 Long-term Liabilities: Notes payable 222,369 1,725,000 1,947,369 1,883,077 Less current portion (36,608) (3,000) (39,608) (1,598,982) Total Long-term Liabilities 185,761 1,722,000 1,907, ,095 TOTAL LIABILITIES 240,983 1,857,304 2,098,287 2,003,011 Net Assets: Invested in capital assets, net of debt 395,960 2,000,985 2,396,945 2,419,356 Restricted-Debt Service 330, , , ,212 Unrestricted 469, , , ,565 Total Net Assets 1,195,953 2,307,116 3,503,069 3,282,133 TOTAL LIABILITIES AND NET ASSETS $ 1,436,936 $ 4,164,420 $ 5,601,356 $ 5,285,144 See accompanying notes to financial statements 15

21 GOVERNMENTAL Expenses Statement of Activities Year Ended December 31, 2010 (with partial comparative information for the year ended December 31, 2009) Fines, Fees, and Charges for Services Program Revenues Operating Grants and Contributions Capital Grants and Contributions Government Activities Net (Expense) Revenue Changes in Net Assets Business Type Activities Public Safety $ 84,484 $ 33, $ 2,697 $ (48,286) -0- $ (48,286) $ (2,762) General Government 141,402 2, ,994 (96,775) -0- (96,775) (145,788) Streets 56, (56,795) -0- (56,795) (45,658) Culture and Recreation 23, , ,120 Sanitation 44,749 49, , ,004 2,925 Interest 11, (11,086) -0- (11,086) (15,732) Total Governmental Activities $ 361,856 $ 85,887 $ 24,006 $ 44,691 $ (207,272) -0- $ (207,272) $ (189,895) BUSINESS TYPE Water 153, , , ,805 71,805 9,487 Sewer 58,008 60, ,335 2,335 3,178 Total Business Type $ 211,220 $ 173, $ 111, $ 74,140 $ 74,140 $ 12,665 General revenues: 2010 Total 2009 Total Property Taxes $ 201, $ 201,516 $ 202,907 Special Assessment 15, ,609 18,054 Intergovernmental revenue 78,857 25, , ,535 Investment Interest earnings 2,100 1,445 3,545 3,616 Miscellaneous revenues 25,218 3,867 29,085 30,821 Transfers (8,500) 8, Total General Revenue and Transfers 314,800 39, , ,933 Changes in Net Assets 107, , , ,703 Net assets - beginning of year 1,088,425 2,193,708 3,282,133 2,844,430 Net assets - end of year $ 1,195,953 $ 2,307,116 $ 3,503,069 $ 3,282,133 See accompanying notes to financial statements 16

22 ASSETS Balance Sheet Governmental Funds Year Ended December 31, 2010 (with partial comparative information for the year ended December 31, 2009) General G. O. Capital Improvement Bonds of 2010A Debt Service Sewer Debt Service Total Governmental 2010 Total Governmental 2009 Cash and cash equivalents $ 412, $ 80,710 $ 493,304 $ 431,722 Receivables: Current property taxes 10, ,925 13,963 5,747 Delinquent property taxes receivable 9, ,739 15,850 18,481 Special assessments , , ,631 Other receivables 47, ,018 12,508 Total receivables 66, , , ,367 Due from other funds Total Assets $ 478, $ 334,959 $ 813,720 $ 748,089 LIABILITIES AND EQUITY FUND BALANCES Liabilities Payroll liabilities payable 4, ,028 3,600 Sales tax payable Account payable 6, ,237 12,406 Deferred revenue 9, , , ,112 Equity Fund Balances Total Liabilities 20, , , ,076 Reserved Unreserved Major Fund: Undesignated 458, , , ,013 Total Equity Fund Balances 458, , , ,013 Total Liabilities and Equity Fund Balances $ 478, $ 334,959 $ 813,720 $ 749,089 See accompanying notes to financial statements 17

23 Reconciliation of the Balance Sheet to the Statement of Net Assets Governmental Funds Year Ended December 31, 2010 (with partial comparative information for the year ended December 31, 2009) Total Fund Balance - Governmental Funds $ 543,033 $ 433,013 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. Cost of capital assets 777, ,761 Less: accumulated depreciation (159,356) (121,455) Notes payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. (222,369) (231,254) Delinquent property taxes receivable will be collected this year, but are not available soon enough to pay for the current period s expenditures, and therefore are deferred in the funds. 15,850 18,481 Special assessments receivable are collected in future years and therefore are deferred in the funds. 243, ,631 Governmental funds do not report a liability for accrued interest until due and payable. (7,362) (7,752) Governmental funds report debt issuance premiums, discounts and costs as another financing source or use at the time of issuance. Premiums, discounts and costs are reported as an amortized asset or liability in the Government-wide financial statements. Bond issuance costs 5, Less: Accumulated amortization bond issuance costs (493) -0- Total Net Assets - Governmental Funds $ 1,195,953 $ 1,088,425 See accompanying notes to financial statements 18

24 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Year Ended December 31, 2010 (with partial comparative information for the year end December 31, 2009) G.O. Capital Improvement Total Total Bonds of 2010A Sewer Governmental Governmental Revenues General Debt Service Debt Service Local property tax levies $ 204,147 $ -0- $ -0- $ 204,147 $ 194,425 Special assessments ,655 51,655 53,342 Licenses, fees and fines 2, ,633 2,665 Revenues from state sources 78, ,857 92,110 Charges for services 83, ,254 83,131 Grant proceeds 44, ,691 71,552 Investment income ,387 2,100 2,527 Public donations 24, ,006 44,571 Rental income 11, ,264 9,812 Other 13, ,954 14,220 Total Revenues 462, , , ,355 Expenditures Current Public Safety 66, ,459 90,458 Governmental 129, , ,026 Sanitation 44, ,749 47,447 Culture and Recreation 19, ,969 24,080 Streets 52, ,103 45,658 Total Current 312, , ,669 Capital Outlay 50,373 9, , ,079 Debt Service: Principal 112, , ,886 75,543 Interest 5, ,473 11,476 18,115 Bond Issuance costs -0-5, , Total Debt Service 117,534 5,380 27, ,742 93,658 Total Expenditures 480,283 14,930 27, , ,406 Excess (deficiency) of revenue over expenditures (17,424) (14,930) 25,874 (6,480) (8,051) Other financing sources (uses) Transfers out (8,500) (110,070) -0- (118,570) (8,500) Transfers in 110, , Debt proceeds , , Total other financing sources (uses) 101,570 14, ,500 (8,500) Net changes in fund balances 84, , ,020 (16,551) Fund Balances - Beginning of Year 374, , , ,564 Fund Balances - End of year $ 458,398 $ -0- $ 84,635 $ 543,033 $ 433,013 See accompanying notes to financial statements 19

25 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to Statement of Activities Governmental Funds Year Ended December 31, 2010 (with partial comparative information for the year ended December 31, 2009) Total Net Change in Fund Balance - Governmental Funds $ 110,020 $ (16,551) Amounts reported for governmental activities in the statement of activities are different because: Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over the estimated useful lives as depreciation expense. Capital outlays 59, ,079 Depreciation expense (37,901) (32,415) Debt proceeds provide current financial resources to governmental funds but issuing debt increases long-term liabilities in the statement of net assets. Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. Debt Proceeds (125,000) -0- Debt repayment 133,886 75,543 Revenues in the statement of activities that do not provide current financial resources are not reported as revenue in the funds. Delinquent property tax revenue (2,631) 8,482 Special assessment revenue (36,046) (35,288) Debt issuance costs and bond premiums are reported as another financing uses at the time of issuance. Discounts and premiums are amortized over the term of the debt instrument in the statement of activities. Amortization of bond issuance costs (493) -0- Bond issuance costs 5, Interest on long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the statement of activities, however interest expense is recognized as the interest accrues, regardless of when it is due ,384 Total Change in Net Assets - Governmental Funds $ 107,528 $ 141,234 See accompanying notes to financial statements 20

26 Statement of Net Assets Proprietary Funds December 31, 2010 (with partial comparative information for December 31, 2009) Business Type Activities - Enterprise Fund Water Sewer 2010 Totals 2009 Totals ASSETS: Current Assets: Cash and Cash Equivalents $ 302,086 $ 60,646 $ 362,732 $ 234,623 Accounts Receivable, net 75, , Total Current Assets 377,789 60, , ,623 Noncurrent Assets: Capital Assets: Treatment Plant and Mains 2,897, ,897,712 1,816,719 Lift Station, Lines and Sewer Ponds -0-1,334,701 1,334,701 1,334,701 Construction in Progress ,410 Less Accumulated Depreciation (203,237) (308,305) (511,542) (437,704) Capital Assets, Net 2,694,475 1,026,396 3,720,871 3,706,126 Other Assets: Unamortized debt issuance costs 5, , Total Noncurrent Assets 2,699,589 1,026,396 3,725,985 3,706,126 Total Assets 3,077,378 1,087,042 4,164,420 3,940,749 LIABILITIES: Current Liabilities: Accounts Payable 76, ,078 28,981 Accrued Interest 55, ,226 66,237 Current Maturities of GO Water Revenue Bonds of , ,000 3,000 Current Maturities of General Obligation Water Revenue Bond, Anticipation Master Note of ,565,823 Total Current Liabilities 134, ,304 1,664,041 Noncurrent Liabilities: General Obligation Water Revenue Bonds of , ,000 83,000 General Obligation Water Revenue Bond of ,642, ,642, Total Noncurrent Liabilities 1,722, ,722,000 83,000 Total Liabilities 1,856, ,857,304 1,747,041 NET ASSETS: Invested in Capital Assets, Net of Related Debt 974,589 1,026,396 2,000,985 2,054,303 Restrict - Debt Services - Expendable 159, ,528 57,786 Unrestricted 86,626 59, ,603 81,619 Total Net Assets 1,220,743 1,086,373 2,307,116 2,193,708 Total Liabilities and Net Assets $ 3,077,378 $ 1,087,042 $ 4,164,420 $ 3,940,749 See accompanying notes to financial statements 21

27 Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds For the Year Ended December 31, 2010 (with partial comparative information for the year ended December 31, 2009) Business Type Activities - Enterprise Funds Water Sewer 2010 Totals 2009 Totals Operating Revenues: Charges for Services $ 112,075 $ 60,343 $ 172,418 $ 176,403 Connection Fees 1, ,024 1,036 Miscellaneous 2,018 1,849 3,867 6,790 Total Operating Revenues 115,117 62, , ,229 Operating Expenses: Personal Services 14,052 14,052 28,104 27,238 Professional Fees 12, , Utilities 7,360 1,854 9,214 8,628 Repairs and Maintenance 7,897 5,418 13,315 16,244 Supplies 3,533 6,800 10,333 10,756 Other Expenses 1,577 3,190 4,767 4,666 Depreciation 47,144 26,694 73,838 63,028 Total Operating Expenses 93,825 58, , ,560 Operating Income (Loss) 21,292 4,184 25,476 53,669 Nonoperating Revenues (Expenses): Interest and Investment Revenues 1, ,445 1,089 Intergovernmental Revenue 25, , ,425 Grant Contributions 111, , Interest Expense (59,311) -0- (59,311) (34,214) Amortization Bond issuance costs (76) -0- (76) -0- Total Nonoperating Revenues (Expenses) 79, , ,300 Net Income (Loss) Before Contributions and Transfers 100,459 4, , ,969 Transfers In 31,200 8,500 39,700 37,500 Transfers Out -0- (31,200) (31,200) (29,000) Change in Net Assets 131,659 (18,251) 113, ,469 Total Net Assets - Beginning 1,089,084 1,104,624 2,193,708 1,897,239 Total Net Assets - Ending $ 1,220,743 $ 1,086,373 $ 2,307,116 $ 2,193,708 See accompanying notes to financial statements 22

28 Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2010 (with partial comparative information for the year ended December 31, 2009) Business Type Activities - Enterprise Funds Water Sewer 2010 Totals 2009 Totals CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Customers $ 115,117 $ 62,192 $ 177,309 $ 184,229 Payments to Suppliers (32,166) (16,760) (48,926) (40,339) Payments to Employees (14,052) (14,052) (28,104) (27,238) Net Cash Provided by Operating Activities 68,899 31, , ,652 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers From (To) Other Funds 31,200 8,500 39,700 37,500 Payments to other funds -0- (31,200) (31,200) (29,000) Net cash provided (used) from non capital financing activities 31,200 (22,700) 8,500 8,500 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from Capital Debt 1,642, ,642, ,397 Principal paid on Capital Debt (1,568,823) -0- (1,568,823) (4,100) Interest paid on Capital Debt (70,322) -0- (70,322) (4,282) Purchases of Capital Assets (41,449) -0- (41,449) (987,031) Bond issuance costs (5,190) (5,190) -0- Intergovernmental Revenue 8, , ,425 Grant Contributions 53, , Net Cash Provided by (Used in) Capital and Related Financing Activities 17, ,886 1,409 CASH FLOWS FROM INVESTING ACTIVITIES Interest and Dividends 1, ,444 1,089 Net Cash Provided by Investing Activities 1, ,444 1,089 Net Increase (Decrease) in Cash and Deposits 119,165 8, , ,650 Balances - Beginning of the Year 182,921 51, , ,973 Balances - End of the Year 302,086 60, , ,623 Cash and Cash Equivalents Current Assets 302,086 60, , ,623 Restricted Assets Total Cash and Cash Equivalents - End of Year $ 302,086 $ 60,646 $ 362,732 $ 234,623 See accompanying notes to Financial Statements. 23

29 Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2010 (with partial comparative information for the year ended December 31, 2009) RECONCILIATION OF OPERATING INCOME TO NET CASH FLOWS FROM OPERATING ACTIVITIES Business Type Activities - Enterprise Funds Water Sewer 2010 Totals 2009 Totals Operating Income (loss) $ 21,292 $ 4,184 $ 25,476 $ 53,669 Adjustments to reconcile operating income to net cash flows from operating activities Depreciation and amortization 47,144 26,694 73,838 63,028 Changes in assets and liabilities Receivables Accounts Payable (45) NET CASH FLOWS FROM OPERATING ACTIVITIES $ 68,899 $ 31,380 $ 100,279 $ 116,652 See accompanying notes to Financial Statements. 24

30 NOTES TO CITY FINANCIAL STATEMENTS

31 Notes to City Financial Statements December 31, 2010 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNT POLICIES A. Basis of Presentation The financial statements of the City of Barrett have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The GASB has issued codification of governmental accounting and financial reporting standards dated December 31, This codification and subsequent GASB pronouncement are recognized as U.S. generally accepted accounting principles for state and local government. This financial report has been prepared in conformity with GASB Statement No. 34, Basic Financial Statements - and Management s Discussion and Analysis - for State and Local Governments; Statements No. 37, Basic Financial Statements - and Management s Discussion and Analysis - for State and Local Governments: Omnibus and Interpretation No. 6 Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements, all issued in June B. Reporting Entity The government is a city governed under a mayor-council form of government. The mayor and four council members are voting members. The clerk/treasurer is a non-voting member. The City s policy is to include in the financial statements all funds, departments, agencies, boards, commissions, and other component units for which the City is considered to be financially accountable. Component units are legally separate entities for which the City (primary government) is financially accountable, or for which the exclusion of the component unit would render the financial statements of the primary government misleading. The criteria used to determine if the primary government is financially accountable for the component unit include whether or not the primary government appoints the voting majority of the potential component unit s governing body, is able to impose its will and the potential component unit, is in a relationship of financial benefit or burden with the potential component unit, or is fiscally depended upon by the potential component unit. Based on these criteria, there are no organizations considered to be component units of the City. Blended component units, although legally separate entities, are, in substance, part of the government s operations and so data from these units are combined with data of the primary government. The City has no blended component units. C. Basic Financial Statement Presentation The City-wide financial statements (i.e. the Statement of Net Assets and the Statement of Activities) display information about the reporting government as a whole. These statements include all the financial activities of the City. The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include charges to customers or applicants who purchase, use, or directly benefit from goods, service, or privileges provided by a given function or segment and grants and contributions that are restricted to meeting the operation; or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. The City applies restricted resources first when an expense is incurred for purpose for which both restricted and unrestricted net assets are available. Depreciation expense can be specifically identified by function and is included in the direct expenses of each function. Interest on long-term debt is considered an indirect expense and is reported separately on the Statement of Activities. Generally, the effect of material inter fund activity has been removed from the Government-wide financial statements. 25

32 Notes to City Financial Statements December 31, 2010 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (cont.) C. Basic Financial Statement Presentation (cont.) Separate Fund financial statements are provided for governmental funds. Aggregated information for the remaining non-major governmental funds is report in a single column in the fund financial statements. For the City of Barrett, all funds are considered major governmental funds. It is the City s policy to apply all FASB pronouncements issued after November 30, 1989, except for those that conflict with or contradict GASB pronouncements. D. Measurement Focus and Basis of Accounting The accounting and financial reporting treatment applied is determined by its measurement focus and basis of accounting. The governmentwide 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. Property taxes are generally recognized as revenue in fiscal year for which they are levied. Grants are similar items are recognized 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. Under this basis of accounting transactions are recorded in the following manner: 1. Revenue Recognition - Revenue is recognized when it becomes measurable and available. Measurable means the amount of the transaction can be determined and available means collectible within the current period and soon enough thereafter to be used to pay liabilities of the current period. Property tax revenue and special assessments are generally considered as available if collected within 60 days after year-end. State revenue is recognized in the year to which it applies according to Minnesota statutes and U.S. generally accepted accounting principles. Minnesota Statutes include state aid funding formulas for specific fiscal years. Federal revenue is recorded in the year in which the related expenditure is made. Other revenue is considered available if collected within one year. 2. Recording of Expenditures - Expenditures are generally recorded when a liability is incurred. However, expenditures are recorded as prepaid for approved disbursements or liabilities incurred in advance of the year in which the item is to be used. Principal and interest on long-term debt issued are recognized on their due dates. GOVERNMENTAL FUND TYPES Description of Funds Fund Accounting - The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, and revenues and expenditures or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. For the purpose of these financial statements, all funds listed below are treated as being major funds. The various funds are in the financial statement sin this report as follows: General Fund - General Fund accounts for all financial resources and transactions except those required to be accounted for in other funds or account groups. 26