STATE OF MINNESOTA Office of the State Auditor

Transcription

1 STATE OF MINNESOTA Office of the State Auditor Patricia Anderson State Auditor WRIGHT COUNTY FOR THE YEAR ENDED DECEMBER 31, 2004

2 Description of the Office of the State Auditor The Office of the State Auditor serves as a watchdog for Minnesota taxpayers by helping to ensure financial integrity, accountability, and cost-effectiveness in local governments throughout the state. Through financial, compliance, and special audits, the State Auditor oversees and ensures that local government funds are used for the purposes intended by law and that local governments hold themselves to the highest standards of financial accountability. The State Auditor performs approximately 250 financial and compliance audits per year and has oversight responsibilities for over 4,300 local units of government throughout the state. The office currently maintains five divisions: Audit Practice - conducts financial and legal compliance audits for local governments; Government Information - collects and analyzes financial information for cities, towns, counties, and special districts; Legal/Special Investigations - provides legal analysis and counsel to the Office and responds to outside inquiries about Minnesota local government law; as well as investigates allegations of misfeasance, malfeasance, and nonfeasance in local government; Pension - monitors investment, financial, and actuarial reporting for over 700 public pension funds; and Tax Increment Financing, Investment and Finance - promotes compliance and accountability in local governments use of tax increment financing through financial and compliance audits. The State Auditor serves on the State Executive Council, State Board of Investment, Land Exchange Board, Public Employee s Retirement Association Board, Minnesota Housing Finance Agency, and the Rural Finance Authority Board. Office of the State Auditor 525 Park Street, Suite 500 Saint Paul, Minnesota (651) state.auditor@state.mn.us This document can be made available in alternative formats upon request. Call [voice] or [relay service] for assistance; or visit the State Auditor s web site:

3 For the Year Ended December 31, 2004 Audit Practice Division Office of the State Auditor State of Minnesota

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5 TABLE OF CONTENTS Reference Page Introductory Section Organization Financial Section Independent Auditor s Report Management s Discussion and Analysis Basic Financial Statements Government-Wide Financial Statements Statement of Net Assets Statement of Activities Fund Financial Statements Governmental Funds Balance Sheet Reconciliation of Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets--Governmental Activities Statement of Revenues, Expenditures, and Changes in Fund Balance Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Government-Wide Statement of Activities--Governmental Activities Budgetary Comparison Schedules General Fund Road and Bridge Special Revenue Fund Human Services Special Revenue Fund Fiduciary Funds Statement of Fiduciary Net Assets Notes to the Financial Statements Exhibit 1 Exhibit Exhibit 3 13 Exhibit 4 17 Exhibit 5 18 Exhibit 6 22 Exhibit 7 Exhibit 8 Exhibit Exhibit

6 TABLE OF CONTENTS Reference Page Financial Section (Continued) Supplementary Information Nonmajor Governmental Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Combining Balance Sheet - Special Revenue Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Special Revenue Funds Budgetary Comparison Schedules Lake Improvement Districts Special Revenue Fund Compost Special Revenue Fund Fiduciary Funds Combining Statement of Changes in Assets and Liabilities - All Agency Funds Other Schedule Schedule of Intergovernmental Revenue Management and Compliance Section Schedule of Findings and Questioned Costs Other Required 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 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 Schedule of Expenditures of Federal Awards Statement 1 Statement 2 Statement Statement 4 55 Schedule 1 Schedule Statement 5 59 Schedule 3 62 Schedule Schedule 5 71

7 Introductory Section

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9 ORGANIZATION 2004 Term Office Name From To Commissioners 1st District Karla Heeter January 2003 January nd District Pat Sawatzke January 1991 January rd District John D. Russek January 1993 January th District Elmer Eichelberg January 1999 January th District Richard Dick Mattson January 1993 January 2007 Officers Elected Attorney Auditor/Treasurer Tom Kelly Robert J. Hiivala 1 January 1999 January 1999 January 2007 January 2007 Sheriff Gary Miller June 2000 January 2007 Appointed Coordinator Richard W. Norman Indefinite Assessor Greg Kramber February 2002 December 2004 Court Administrator LaVonn Nordeen Indefinite Coroner Dr. Janis Amatuzio January 2003 January 2006 Highway Engineer Wayne Fingalson May 1983 April 2006 Human Services Director Don Mleziva Indefinite Recorder/Registrar of Titles Larry Unger Indefinite 1 Robert Hiivala was appointed by the County Board to complete the term of Douglas Gruber. Page 1

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11 Financial Section

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13 STATE OF MINNESOTA OFFICE OF THE STATE AUDITOR SUITE PARK STREET (651) (Voice) (651) (Fax) PATRICIA ANDERSON SAINT PAUL, MN ( ) STATE AUDITOR (Relay Service) INDEPENDENT AUDITOR S REPORT Board of County Commissioners Wright County We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Wright County, Minnesota, as of and for the year ended December 31, 2004, which collectively comprise the County s basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the County s management. 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 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 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, each major fund, and the aggregate remaining fund information of Wright County as of December 31, 2004, and the respective changes in financial position and the respective budgetary comparison for the General Fund, the Road and Bridge Special Revenue Fund, and the Human Services Special Revenue Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Management s Discussion and Analysis is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of Page 2 An Equal Opportunity Employer

14 inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Wright County s basic financial statements. The supplementary information and other schedule listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly presented in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued our report dated October 25, 2005, on our consideration of Wright County s internal control over financial reporting and on 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. /s/pat Anderson PATRICIA ANDERSON STATE AUDITOR /s/greg Hierlinger GREG HIERLINGER, CPA DEPUTY STATE AUDITOR End of Fieldwork: October 25, 2005 Page 3

15 MANAGEMENT S DISCUSSION AND ANALYSIS

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17 MANAGEMENT S DISCUSSION AND ANALYSIS December 31, 2004 (Unaudited) As management of Wright County, we offer readers of the Wright County financial statements this narrative overview and analysis of the financial activities of Wright County for the fiscal year ended December 31, We encourage readers to consider the information presented here in conjunction with the County s basic financial statements following this section. All amounts, unless otherwise indicated, are expressed in whole dollars. FINANCIAL HIGHLIGHTS The assets of Wright County exceeded its liabilities by $127,475,421 at the close of Of this amount, $22,582,861 (unrestricted net assets) may be used to meet Wright County s ongoing obligations to citizens and creditors. Wright County s total net assets increased by $8,741,295 in This is attributable primarily to the capitalization of additional capital assets and improved cash flows from operations. At the close of 2004, Wright County s governmental funds reported combined ending fund balances of $28,894,219, an increase of $4,726,642 in comparison with the prior year. Of the total fund balance, $9,612,080 is available for spending at the County s discretion and is noted as unreserved, undesignated fund balance. At the close of 2004, unreserved, undesignated fund balance for the General Fund was $4,089,040, or 13 percent of total General Fund expenditures. Wright County s total debt increased by $920,000, or four percent, during The key factor in the increase was the issuance of the 2004 Series A and B Capital Notes and the 2004 Series C General Obligation Solid Waste Revenue Refunding Bonds. OVERVIEW OF THE FINANCIAL STATEMENTS This Management s Discussion and Analysis (MD&A) is intended to serve as an introduction to Wright County s basic financial statements. The County s basic financial statements comprise three components: (1) government-wide financial statements, (2) fund level financial statements, and (3) notes to the financial statements. The MD&A is required to accompany the basic financial statements and, therefore, is included as required supplementary information. This report also contains other supplementary information in addition to the basic financial statements themselves. Page 4

18 Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of Wright County s finances in a manner similar to a private-sector business. The statement of net assets presents information on all of Wright County s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of Wright County is improving or deteriorating. The statement of activities presents information showing how the government s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in only future fiscal periods (such as uncollected taxes and earned but unused vacation leave). The County s government-wide financial statements report functions of the County that are principally supported by taxes and intergovernmental revenues. The governmental activities of Wright County include general government, public safety, highways and streets, sanitation, human services, health, culture and recreation, conservation of natural resources, and economic development. The government-wide financial statements can be found as Exhibits 1 and 2 of this report. Fund Level Financial Statements A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. Wright County, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of Wright County can be divided into two categories: governmental funds and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, County fund level financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s short-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. (Unaudited) Page 5

19 Wright County reports ten individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balance for the General Fund, Road and Bridge Special Revenue Fund, Human Services Special Revenue Fund, and the Debt Service Fund, all of which are considered to be major funds. Data from the other six governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements after the notes to the financial statements. Fiduciary funds. Fiduciary funds are used to account for assets held by the County as an agent for individuals, private organizations, other governments, or other funds. Wright County s fiduciary funds consist of seven agency funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. In addition, the agency funds are not reflected in the government-wide financial statements because those resources are not available to support the County s programs. Notes to the financial statements. The notes to the financial statements provide additional information that is essential to a full understanding of the data provided. Other information. In addition to the basic financial statements and notes, supplementary information is provided on Wright County s intergovernmental revenues. Wright County adopts an annual appropriated budget for its General Fund and major special revenue funds. Budgetary comparison statements have been provided for the County s major funds to demonstrate compliance with these budgets. GOVERNMENT-WIDE FINANCIAL ANALYSIS Over time, net assets serve as a useful indicator of the County s financial position. Wright County s assets exceeded liabilities by $127,475,421 at the close of The largest portion of Wright County s net assets (79 percent) reflects its investment in capital assets (land, buildings, equipment, and infrastructure), less any related debt used to acquire those assets that is still outstanding. However, it should be noted that these assets are not available for future spending. Governmental Net Assets Current and other assets Capital assets 2004 $ 36,866, ,476, (Restated) $ 33,362, ,552,324 Total Assets $ 162,343,127 $ 152,914,902 Long-term liabilities outstanding Other liabilities $ 28,766,395 6,101,311 $ 27,734,798 6,445,978 Total Liabilities $ 34,867,706 $ 34,180,776 (Unaudited) Page 6

20 (Restated) Net Assets Invested in capital assets, net of related debt $ 100,941,213 $ 93,837,324 Restricted 3,951,347 3,859,501 Unrestricted 22,582,861 21,037,301 Total Net Assets $ 127,475,421 $ 118,734,126 The unrestricted net asset amount of $22,582,861 as of December 31, 2004, may be used to meet the County s ongoing obligations to citizens and creditors. Wright County s activities increased net assets by $8,741,295, or seven percent over the 2003 net assets. Revenues increased by $2,655,345; the key element of the increase was additional property tax revenue. Expenses increased by $5,357,728, with the largest increase in general government. Changes in Net Assets (Restated) Revenues Program revenues Charges for services $ 10,626,531 $ 9,814,634 Operating grants and contributions 22,325,656 23,739,792 Capital grants and contributions 2,098,165 3,156,215 General revenues Property taxes 26,141,048 22,294,987 Other 6,618,381 6,146,808 Total Revenues $ 67,809,781 $ 65,152,436 Expenses General government $ 14,143,405 $ 11,650,161 Public safety 14,277,686 12,926,315 Highways and streets 8,252,177 7,636,552 Sanitation 686, ,023 Human services 15,500,177 14,263,074 Health 2,472,101 2,399,207 Culture and recreation 2,047,174 2,330,478 Conservation of natural resources 503, ,951 Economic development 38,289 42,400 Interest 1,147,304 1,206,597 Total Expenses $ 59,068,486 $ 53,710,758 Increase in Net Assets $ 8,741,295 $ 11,441,678 Net Assets - January 1, restated 118,734, ,292,448 Net Assets - December 31 $ 127,475,421 $ 118,734,126 (Unaudited) Page 7

21 The increase in general government s expenses is due to a number of factors, including increased labor costs and an increased demand for the County s services. The increase in highways and streets expenses is due to greater depreciation expenses, specifically on infrastructure capital assets. FINANCIAL ANALYSIS OF THE GOVERNMENT S FUNDS As noted earlier, the County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the County s governmental funds is to provide information on short-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the County s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the County s governmental funds reported combined ending fund balances of $28,894,219, an increase of $4,726,642 in comparison with the prior year. The majority of this amount ($27,708,770) consists of unreserved fund balance, which is available for spending at the County s discretion. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed. The General Fund is the chief operating fund of Wright County. At the end of the current fiscal year, unreserved fund balance of the General Fund was $14,818,913, while total fund balance was $14,936,858. As a measure of the General Fund s liquidity, it may be useful to compare unreserved fund balance to total fund expenditures. Unreserved fund balance represents 48 percent of total General Fund expenditures. In 2004, fund balance in the General Fund increased by $1,168,064. This increase was due primarily to the increase of tax revenue and transfers to the fund. The Road and Bridge Special Revenue Fund s fund balance increased by $606,172 in The main reason for this increase resulted from reduced expenditures for road construction and maintenance projects. The Human Services Fund s fund balance increased $1,154,997 from the prior year due to additional property tax revenues and grants received in General Fund Budgetary Highlights There were no changes between the original budget and the final amended budget. The actual revenues exceeded budgeted revenues by $207,501. The largest variance was in intergovernmental revenue where the County received more state aid than was budgeted. Actual expenditures were under the amounts budgeted by $784,685, with the most favorable savings coming from the general government category in the amount of $984,871. (Unaudited) Page 8

22 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The County s investment in capital assets for its governmental activities as of December 31, 2004, was $125,476,213 (net of accumulated depreciation). This investment in capital assets includes land, buildings, equipment, and infrastructure. The total increase in the County s investment in capital assets for the current fiscal year was five percent. The increases were attributed primarily in the areas of buildings, infrastructure, and construction in progress. Governmental Capital Assets (Net of Depreciation) Land Construction in progress Building Furniture, equipment, and machinery Infrastructure 2004 $ 6,200,652 4,330,672 32,065,893 3,767,839 79,111, (Restated) $ 5,829,104 8,969,809 30,344,485 3,492,460 70,916,466 Total $ 125,476,213 $ 119,552,324 Additional information on the County s capital assets can be found in the notes to the financial statements. Long-Term Debt At the end of the current fiscal year, the County had total debt outstanding of $26,535,000, which is backed by the full faith and credit of the government. Outstanding Debt General Obligation Bonds $ 23,260,000 $ 25,615,000 General Obligation Capital Notes 3,275,000 - Total $ 26,535,000 $ 25,615,000 The County s debt related to general obligation bonds decreased by $2,355,000 (nine percent) during the fiscal year, due primarily to the refunding of the 1994 Series A General Obligation Revenue Refunding Bonds. During 2004, the County issued two capital notes for the purchase of capital equipment. Wright County s bond rating is A1 from Moody s. (Unaudited) Page 9

23 Minnesota statutes limit the amount of debt that a county may levy to two percent of its total market value. At the end of 2004, Wright County is well below the two percent debt limit imposed by state statutes. Additional information on the County s long-term debt can be found in the notes to the financial statements of this report. ECONOMIC FACTORS AND NEXT YEAR S BUDGETS Wright County s unemployment rate was 4.9 percent at the end of This was above the statewide rate of 4.2 percent. Mortgage interest rates have been low, causing many people to refinance their mortgages. At the end of 2004, the Wright County Board set its 2005 revenue and expenditure budgets. REQUESTS FOR INFORMATION This annual financial report is designed to provide a general overview of the County s finances for all those with an interest in the County s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Wright County Auditor/Treasurer, Wright County Government Center, 10 Second Street N.W., Room 230, Buffalo, Minnesota (Unaudited) Page 10

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25 BASIC FINANCIAL STATEMENTS

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27 GOVERNMENT-WIDE FINANCIAL STATEMENTS

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29 EXHIBIT 1 STATEMENT OF NET ASSETS GOVERNMENTAL ACTIVITIES DECEMBER 31, 2004 Assets Cash and pooled investments Petty cash and change funds Departmental cash Taxes receivable Prior - net Special assessments receivable Prior - net Noncurrent - net Accounts receivable - net Accrued interest receivable Loans receivable Due from other governments Prepaid items Inventories Deferred charges Capital assets Non-depreciable Depreciable - net of accumulated depreciation $ 30,430,523 1,760 2, , ,549 1,122, , ,581 87,035 2,323,743 3, ,029 72,576 10,531, ,944,889 Total Assets $ 162,343,127 Liabilities Accounts payable Salaries payable Contracts payable Due to other governments Accrued interest payable Unearned revenue Long-term liabilities Due within one year Due in more than one year $ 1,427,187 1,466,361 2,109, , , ,814 4,176,144 24,590,251 Total Liabilities $ 34,867,706 Net Assets Invested in capital assets - net of related debt Restricted for Capital projects Debt service Equipment replacement Postclosure Unrestricted $ 100,941,213 1,019,159 2,596,678 87, ,475 22,582,861 Total Net Assets $ 127,475,421 The notes to the financial statements are an integral part of this statement. Page 11

30 EXHIBIT 2 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2004 Program Revenues Net (Expenses) Fees, Charges, Operating Capital Revenues and Fines, and Grants and Grants and Changes in Expenses Other Contributions Contributions Net Assets Functions/Programs Governmental activities General government $ 14,143,405 $ 5,058,715 $ 306,137 $ - $ (8,778,553) Public safety 14,277,686 3,681,460 1,394,022 - (9,202,204) Highways and streets 8,252,177 84,073 8,639, ,138 1,145,835 Sanitation 686,220 66, (619,600) Human services 15,500,177 1,535,730 10,480,845 - (3,483,602) Health 2,472,101-1,148,462 - (1,323,639) Culture and recreation 2,047, , ,170 - (1,749,055) Conservation of natural resources 503,953 2, ,219 1,424,027 1,178,277 Economic development 38, (38,289) Interest 1,147, (1,147,304) Total governmental activities $ 59,068,486 $ 10,626,531 $ 22,325,656 $ 2,098,165 $ (24,018,134) General Revenues Property taxes $ 26,141,048 Gravel taxes 155,571 Mortgage registry and deed tax 275,096 Payments in lieu of tax 114,000 Grants and contributions not restricted to specific programs 5,069,670 Investment income 913,077 Miscellaneous 65,310 Gain on sale of capital assets 25,657 Total general revenues $ 32,759,429 Change in net assets $ 8,741,295 Net Assets - January 1, restated (Note 1.E.) 118,734,126 Net Assets - December 31 $ 127,475,421 The notes to the financial statements are an integral part of this statement. Page 12

31 FUND FINANCIAL STATEMENTS

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33 GOVERNMENTAL FUNDS

34 BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2004 General Road and Bridge Assets Cash and pooled investments $ 16,169,319 $ 1,033,126 Petty cash and change funds 1,700 - Departmental cash 2,443 - Taxes receivable Prior 561,543 96,060 Special assessments receivable Prior Noncurrent 14,069 - Accounts receivable 99,554 93,137 Accrued interest receivable 305,581 - Loans receivable 87,035 - Due from other funds 17,661 36,761 Due from other governments 295,218 1,376,939 Inventories - 819,029 Advances to other funds 17,400 - Prepaid items - - Total Assets $ 17,572,331 $ 3,455,052 The notes to the financial statements are an integral part of this statement. Page 13

35 EXHIBIT 3 Other Total Human Debt Governmental Governmental Services Service Funds Funds $ 6,067,219 $ 2,545,789 $ 4,615,070 $ 30,430, , , ,506 84,410 2, , ,034 2, ,549-1,086,944 21,169 1,122, , , , , , , ,323, , ,400 3, ,849 $ 7,343,449 $ 3,854,177 $ 4,641,151 $ 36,866,160 Page 14

36 BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2004 General Road and Bridge Liabilities and Fund Balances Liabilities Accounts payable $ 882,482 $ 72,917 Salaries payable 1,074,237 88,053 Contracts payable - 2,083,289 Due to other funds 36,299 - Due to other governments 119,982 4,953 Deferred revenue - unavailable 522,473 45,767 Deferred revenue - unearned - 602,814 Advance from other funds - - Total Liabilities $ 2,635,473 $ 2,897,793 Fund Balances Reserved for Inventories $ - $ 819,029 Advances to other funds 17,400 - Missing heirs 2,618 - Gravel tax 97,927 - Landfill closure/postclosure - - Unreserved Designated for cash flows 9,251,138 - Designated for debt service - - Designated for compensated absences 1,478,735 - Undesignated 4,089,040 (261,770) Unreserved, reported in nonmajor Special revenue funds - - Capital projects fund - - Total Fund Balances $ 14,936,858 $ 557,259 Total Liabilities and Fund Balances $ 17,572,331 $ 3,455,052 The notes to the financial statements are an integral part of this statement. Page 15

37 EXHIBIT 3 (Continued) Other Total Human Debt Governmental Governmental Services Service Funds Funds $ 463,940 $ - $ 7,848 $ 1,427, , ,466, ,200 2,109,489 13,954-4,169 54, ,280-51, , ,704 1,257,499 24,203 1,981, , ,400 17,400 $ 1,049,949 $ 1,257,499 $ 131,227 $ 7,971,941 $ - $ - $ - $ 819, , , , , ,475 4,378, ,629,405-2,596,678-2,596, , ,870,607 1,523, ,350, ,242,290 1,242, ,019,159 3,019,159 $ 6,293,500 $ 2,596,678 $ 4,509,924 $ 28,894,219 $ 7,343,449 $ 3,854,177 $ 4,641,151 $ 36,866,160 Page 16

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39 EXHIBIT 4 RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE GOVERNMENT-WIDE STATEMENT OF NET ASSETS--GOVERNMENTAL ACTIVITIES DECEMBER 31, 2004 Fund balances - total governmental funds (Exhibit 3) $ 28,894,219 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets, net of accumulated depreciation, used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds. 125,476,213 Other long-term assets are not available to pay for current period expenditures and, therefore, are deferred in the governmental funds. 1,981,646 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the governmental funds. General obligation bonds and any related unamortized discounts or premiums Deferred debt issuance costs Compensated absences Accrued interest payable $ (26,664,449) 72,576 (2,101,946) (182,838) (28,876,657) Net assets of governmental activities (Exhibit 1) $ 127,475,421 The notes to the financial statements are an integral part of this statement. Page 17

40 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2004 General Road and Bridge Revenues Taxes $ 15,848,695 $ 2,643,572 Special assessments Licenses and permits 324,466 - Intergovernmental 5,174,400 10,500,583 Charges for services 6,690, ,237 Fines and forfeits 694,597 - Gifts and contributions 1,000 - Interest on investments 906,169 - Miscellaneous 1,569, ,583 Total Revenues $ 31,209,905 $ 13,961,975 Expenditures Current General government $ 13,602,036 $ - Public safety 14,209,563 - Highways and streets - 13,695,723 Sanitation 36,792 - Human services - - Health - - Culture and recreation 1,017,047 - Conservation of natural resources 469,168 - Economic development 38,289 - Intergovernmental Public safety 145,848 - Highways and streets - 338,994 Culture and recreation 1,282,924 - Conservation of natural resources - - Capital outlay - - Debt service Principal retirement - - Interest - - Bond issuance costs - - Total Expenditures $ 30,801,667 $ 14,034,717 Excess of Revenues Over (Under) Expenditures $ 408,238 $ (72,742) The notes to the financial statements are an integral part of this statement. Page 18

41 EXHIBIT 5 Other Total Human Debt Governmental Governmental Services Service Funds Funds $ 5,198,814 $ 2,757,142 $ 47,380 $ 26,495,603-1,544,408 62,605 1,607, ,466 12,901, ,808 28,814,871 1,073,674-66,620 8,431, ,597 15, ,575-5,397 1, , , ,248,618 $ 19,650,736 $ 4,306,947 $ 417,527 $ 69,547,090 $ - $ - $ - $ 13,602, ,209, ,695, , ,111 16,071, ,071,651 2,482, ,482, ,017, , , , , , ,282, ,283 14, ,660,864 2,660,864-11,850, ,000 11,950,000-1,130,468 6,518 1,136,986-44,974 35,970 80,944 $ 18,553,739 $ 13,025,442 $ 3,300,208 $ 79,715,773 $ 1,096,997 $ (8,718,495) $ (2,882,681) $ (10,168,683) Page 19

42 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2004 General Road and Bridge Other Financing Sources (Uses) Transfers in $ 781,292 $ 534,800 Transfers out (21,466) - Proceeds from sale of capital assets - - Notes issued - - Premium on bonds/notes issued - - Refunding bonds issued - - Total Other Financing Sources (Uses) $ 759,826 $ 534,800 Net Change in Fund Balance $ 1,168,064 $ 462,058 Fund Balance - January 1 13,768,794 (48,913) Increase (decrease) in reserved for inventories - 144,114 Fund Balance - December 31 $ 14,936,858 $ 557,259 The notes to the financial statements are an integral part of this statement. Page 20

43 EXHIBIT 5 (Continued) Other Total Human Debt Governmental Governmental Services Service Funds Funds $ 58,000 $ 309,745 $ 21,466 $ 1,705, (1,683,837) (1,705,303) - - 1,806,000 1,806, ,485,000 4,485, ,422 40, ,211-8,285,000-8,285,000 $ 58,000 $ 8,729,167 $ 4,669,418 $ 14,751,211 $ 1,154,997 $ 10,672 $ 1,786,737 $ 4,582,528 5,138,503 2,586,006 2,723,187 24,167, ,114 $ 6,293,500 $ 2,596,678 $ 4,509,924 $ 28,894,219 Page 21

44 EXHIBIT 6 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES--GOVERNMENTAL ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2004 Net change in fund balances - total governmental funds (Exhibit 5) $ 4,582,528 Amounts reported for governmental activities in the statement of activities are different because: In the funds, under the modified accrual basis, receivables not available for expenditure are deferred. In the statement of activities, those revenues are recognized when earned. The adjustment to revenue between the fund statements and the statement of activities is the increase (decrease) in revenue deferred as unavailable. Deferred revenue - December 31 Deferred revenue - January 1 $ 1,981,646 (2,918,102) (936,456) Governmental funds report capital outlay as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Also, in the statement of activities, only the gain or loss on the disposal of capital assets is reported; whereas, in the funds, the proceeds from the sale increase financial resources. Therefore, the change in net assets differs from the change in fund balance by the net book value of the disposed assets. Expenditures for general capital assets and infrastructure Net book value of assets disposed of Current year depreciation $ 9,843,480 (174,120) (3,745,471) 5,923,889 The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the long-term debt consumes current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued; whereas, these amounts are deferred and amortized in the statement of activity. The net proceeds for debt issuance are: Bonds issued Premium on bonds sold Bond issuance costs Principal repayment: General obligation bonds Contract for deed $ (12,770,000) (175,211) 80,944 (12,864,267) 11,850, ,000 Amortization of premiums and discounts and issuance costs (20,867) Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in funds. Change in inventories Change in accrued interest payable Change in compensated absences $ 144,114 10,549 (48,195) 106,468 Change in net assets of governmental activities (Exhibit 2) $ 8,741,295 The notes to the financial statements are an integral part of this statement. Page 22

45 EXHIBIT 7 BUDGETARY COMPARISON SCHEDULE GENERAL FUND FOR THE YEAR ENDED DECEMBER 31, 2004 Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Taxes $ 17,020,562 $ 17,020,562 $ 15,848,695 $ (1,171,867) Special assessments Licenses and permits 341, , ,466 (17,284) Intergovernmental 2,425,477 2,425,477 5,174,400 2,748,923 Charges for services 6,101,848 6,101,848 6,690, ,607 Fines and forfeits 433, , , ,897 Gifts and contributions - - 1,000 1,000 Investment earnings 850, , ,169 56,169 Miscellaneous 3,829,067 3,829,067 1,569,839 (2,259,228) Total Revenues $ 31,002,404 $ 31,002,404 $ 31,209,905 $ 207,501 Expenditures Current General government Commissioners $ 275,458 $ 275,458 $ 252,165 $ 23,293 Courts 1,754,710 1,754,710 1,281, ,855 Court services 2,273,003 2,273,003 2,006, ,207 Law library 132, , ,834 22,742 County administration 638, , ,693 67,662 County auditor 1,598,387 1,598,387 1,423, ,609 County assessor 854, , ,455 54,470 Elections 97,750 97,750 72,112 25,638 Data processing 772, , ,405 34,393 Attorney 1,761,087 1,761,087 1,700,123 60,964 Recorder 586, , ,217 7,501 Surveyor 415, , ,970 (5,062) Planning and zoning 999, , ,712 62,758 Buildings and plant 1,335,265 1,335,265 1,430,846 (95,581) Veterans service officer 111, , ,117 11,394 Other general government 942, ,986 1,177,958 (234,972) Total general government $ 14,550,907 $ 14,550,907 $ 13,602,036 $ 948,871 Public safety Sheriff $ 9,842,713 $ 9,842,713 $ 10,317,712 $ (474,999) Coroner 141, , ,856 - E-911 system ,093 (55,093) County jail 4,071,832 4,071,832 3,372, ,759 Community corrections ,342 (104,342) Civil defense 112, , ,643 (41,477) Other public safety 5,000 5,000 64,844 (59,844) Total public safety $ 14,173,567 $ 14,173,567 $ 14,209,563 $ (35,996) Sanitation Solid waste $ - $ - $ 36,792 $ (36,792) The notes to the financial statements are an integral part of this statement. Page 23

46 EXHIBIT 7 (Continued) BUDGETARY COMPARISON SCHEDULE GENERAL FUND FOR THE YEAR ENDED DECEMBER 31, 2004 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget Expenditures Current (Continued) Culture and recreation Historical society Parks Other $ 166, ,699 76,000 $ 166, ,699 76,000 $ 162, ,881 76,000 $ 4,230 11,818 - Total culture and recreation $ 1,033,095 $ 1,033,095 $ 1,017,047 $ 16,048 Conservation of natural resources County extension Soil and water conservation Water planning $ 233, ,500 51,315 $ 233, ,500 51,315 $ 178, ,500 66,923 $ 54,299 - (15,608) Total conservation of natural resources $ 507,859 $ 507,859 $ 469,168 $ 38,691 Economic development Community development $ 38,000 $ 38,000 $ 38,289 $ (289) Intergovernmental Public safety Culture and recreation $ - 1,282,924 $ - 1,282,924 $ 145,848 1,282,924 $ (145,848) - Total intergovernmental $ 1,282,924 $ 1,282,924 $ 1,428,772 $ (145,848) Total Expenditures $ 31,586,352 $ 31,586,352 $ 30,801,667 $ 784,685 Excess of Revenues Over (Under) Expenditures $ (583,948) $ (583,948) $ 408,238 $ 992,186 Other Financing Sources (Uses) Transfers in Transfers out $ 583,948 - $ 583,948 - $ 781,292 (21,466) $ 197,344 (21,466) Total Other Financing Sources) (Uses) $ 583,948 $ 583,948 $ 759,826 $ 175,878 Net Change in Fund Balance $ - $ - $ 1,168,064 $ 1,168,064 Fund Balance - January 1 13,768,794 13,768,794 13,768,794 - Fund Balance - December 31 $ 13,768,794 $ 13,768,794 $ 14,936,858 $ 1,168,064 The notes to the financial statements are an integral part of this statement. Page 24

47 EXHIBIT 8 BUDGETARY COMPARISON SCHEDULE ROAD AND BRIDGE SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2004 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget Revenues Taxes Intergovernmental Charges for services Miscellaneous $ 2,791,121 14,119, , ,254 $ 2,791,121 14,119, , ,254 $ 2,643,572 10,500, , ,583 $ (147,549) (3,618,987) 126, ,329 Total Revenues $ 17,488,945 $ 17,488,945 $ 13,961,975 $ (3,526,970) Expenditures Current Highways and streets Administration Maintenance Construction Equipment maintenance and shop $ 579,590 2,916,961 12,965,297 1,401,531 $ 579,590 2,916,961 12,965,297 1,401,531 $ 588,919 2,993,344 8,829,055 1,284,405 $ (9,329) (76,383) 4,136, ,126 Total highways and streets $ 17,863,379 $ 17,863,379 $ 13,695,723 $ 4,167,656 Intergovernmental Highways and streets 638, , , ,952 Total Expenditures $ 18,502,325 $ 18,502,325 $ 14,034,717 $ 4,467,608 Excess of Revenues Over (Under) Expenditures $ (1,013,380) $ (1,013,380) $ (72,742) $ 940,638 Other Financing Sources (Uses) Transfers in , ,800 Net Change in Fund Balance $ (1,013,380) $ (1,013,380) $ 462,058 $ 1,475,438 Fund Balance - January 1 Increase (decrease) in reserved for inventories (48,913) - (48,913) - (48,913) 144, ,114 Fund Balance - December 31 $ (1,062,293) $ (1,062,293) $ 557,259 $ 1,619,552 The notes to the financial statements are an integral part of this statement. Page 25

48 EXHIBIT 9 BUDGETARY COMPARISON SCHEDULE HUMAN SERVICES SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2004 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget Revenues Taxes Intergovernmental Charges for services Gifts and contributions Miscellaneous $ 5,675,700 11,643,600 1,108,300 21, ,600 $ 5,675,700 11,643,600 1,108,300 21, ,600 $ 5,198,814 12,901,080 1,073,674 15, ,593 $ (476,886) 1,257,480 (34,626) (5,925) 200,993 Total Revenues $ 18,709,700 $ 18,709,700 $ 19,650,736 $ 941,036 Expenditures Current Human services Income maintenance Social services $ 3,440,300 12,733,000 $ 3,440,300 12,733,000 $ 3,571,639 12,500,012 $ (131,339) 232,988 Total human services $ 16,173,300 $ 16,173,300 $ 16,071,651 $ 101,649 Health Nursing service 2,536,400 2,536,400 2,482,088 54,312 Total Expenditures $ 18,709,700 $ 18,709,700 $ 18,553,739 $ 155,961 Excess of Revenues Over (Under) Expenditures $ - $ - $ 1,096,997 $ 1,096,997 Other Financing Sources (Uses) Transfers in ,000 58,000 Net Change in Fund Balance $ - $ - $ 1,154,997 $ 1,154,997 Fund Balance - January 1 5,138,503 5,138,503 5,138,503 - Fund Balance - December 31 $ 5,138,503 $ 5,138,503 $ 6,293,500 $ 1,154,997 The notes to the financial statements are an integral part of this statement. Page 26

49 FIDUCIARY FUNDS

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51 EXHIBIT 10 STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS DECEMBER 31, 2004 Agency Assets Cash and pooled investments $ 4,800,739 Liabilities Accounts payable $ 38,435 Due to other governments 4,762,304 Total Liabilities $ 4,800,739 The notes to the financial statements are an integral part of this statement. Page 27

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53 NOTES TO THE FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, Summary of Significant Accounting Policies Wright County s financial statements are prepared in accordance with generally accepted accounting principles (GAAP) for the year ended December 31, The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (statements and interpretations). Governments are also required to follow the pronouncements of the Financial Accounting Standards Board issued through November 30, 1989, (when applicable) that do not conflict with or contradict GASB pronouncements. The more significant accounting policies established in GAAP and used by the County are discussed below. A. Financial Reporting Entity Wright County was established February 20, 1855, and is an organized county having the powers, duties, and privileges granted counties by Minn. Stat. ch The County is governed by a five-member Board of Commissioners elected from districts within the County. The Board is organized with a chair and vice chair elected at the annual meeting in January of each year. Joint Ventures The County participates in a joint venture which is described in Note 5.D. The County also participates in two jointly-governed organizations which are described in Note 5.E. B. Basic Financial Statements 1. Government-Wide Statements The government-wide financial statements (the statement of net assets and the statement of activities) display information about Wright County. These statements include the financial activities of the overall County government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Page 28

54 1. Summary of Significant Accounting Policies B. Basic Financial Statements 1. Government-Wide Statements (Continued) In the government-wide statement of net assets, the governmental activities are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The County s net assets are reported in three parts: (1) invested in capital assets, net of related debt; (2) restricted net assets; and (3) unrestricted net assets. The County first utilizes restricted resources to finance qualifying activities. The statement of activities demonstrates the degree to which the direct expenses of each function of the County s governmental activities are offset by program revenues. Direct expenses are those clearly identifiable with a specific function or activity. Program revenues include: (1) fees, fines, and charges paid by the recipients of goods, services, or privileges provided by a given function or activity; and (2) grants and contributions restricted to meeting the operational or capital requirements of a particular function or activity. Revenues not classified as program revenues, including all taxes, are presented as general revenues. 2. Fund Financial Statements The fund financial statements provide information about the County s funds, including its fiduciary funds. Separate statements for each fund category-- governmental and fiduciary--are presented. The emphasis of governmental fund financial statements is on major individual funds, with each displayed as separate columns in the fund financial statements. All remaining governmental funds are aggregated and reported as nonmajor funds. The County reports the following major governmental funds: The General Fund is the County s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Road and Bridge Special Revenue Fund is used to account for revenues and expenditures of the County Highway Department, which is responsible for the construction and maintenance of roads, bridges, and other projects affecting County roadways. Page 29

55 1. Summary of Significant Accounting Policies B. Basic Financial Statements 2. Fund Financial Statements (Continued) The Human Services Special Revenue Fund is used to account for economic assistance and community social services programs. The Debt Service Fund is used to account for payment of principal and interest on debt. Additionally, the County reports the following fund type: Agency funds are custodial in nature and do not present results of operations or have a measurement focus. These funds account for assets that the County holds for others in an agent capacity. C. Measurement Focus and Basis of Accounting The government-wide and fiduciary fund 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 recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as 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. Wright County considers all revenues to be available if they are collected within 60 days after the end of the current period. Property and other taxes, licenses, and interest are all considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, compensated absences, and claims and judgments, which are recognized as expenditures to the extent that they have matured. Proceeds of general long-term debt are reported as other financing sources. When both restricted and unrestricted resources are available for use, it is the County s policy to use restricted resources first, then unrestricted resources as they are needed. Page 30