SCOTT COUNTY, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDING, DECEMBER 31, 2004

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1 , MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDING, DECEMBER 31, 2004 Mission: To deliver quality public services to all citizens in an effective, professional and efficient manner. 2610

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3 TABLE OF CONTENTS Reference Page A. Introductory Section B. Letter of Transmittal i B. Organization 1 B. Organization Chart 2 A. Financial Section B. Independent Auditor s Report 3 B. Management s Discussion and Analysis 5 B. Basic Financial Statements C. GovernmentWide Financial Statements D. Statement of Net Assets Exhibit 1 15 D. Statement of Activities Exhibit 2 17 C. Fund Financial Statements D. Governmental Funds E. Balance Sheet Exhibit 3 19 E. Reconciliation of Governmental Funds Balance Sheet to the GovernmentWide Statement of Net AssetsGovernmental Activities Exhibit 4 23 E. Statement of Revenues, Expenditures, and Changes in Fund Balances Exhibit 5 24 E. Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the GovernmentWide Statement of ActivitiesGovernmental Activities Exhibit 6 26 D. Proprietary Funds E. Statement of Net Assets Internal Service Fund Exhibit 7 27 E. Statement of Revenues, Expenses, and Changes in Fund Net Assets Internal Service Fund Exhibit 8 28 E. Statement of Cash Flows Internal Service Fund Exhibit 9 29 D. Fiduciary Funds E. Statement of Fiduciary Net Assets Exhibit E. Statement of Changes in Fiduciary Net Assets Exhibit C. Notes to the Financial Statements 32

4 TABLE OF CONTENTS Reference Page A. Financial Section (Continued) B. Required Supplementary Information C. Budget Comparison Schedules D. General Fund D. Road and Bridge Special Revenue Fund D. Human Services Special Revenue Fund C. Notes to the Required Supplementary Information B. Supplementary Information C. Nonmajor Governmental Funds D. Combining Balance Sheet D. Combining Statement of Revenues, Expenditures, and Changes in Fund Balance D. Budgetary Comparison Schedules E. Debt Service Fund E. Capital Improvement Capital Projects Fund E. Library Special Revenue Fund E. Law Library Special Revenue Fund C. Fiduciary Funds D. Statement of Changes in Assets and Liabilities Agency Fund B. Other Schedules C. Schedule of Intergovernmental Revenue C. Schedule of Expenditures of Federal Awards Schedule 1 74 Schedule 2 76 Schedule Statement A1 79 Statement A2 80 Schedule 4 81 Schedule 5 82 Schedule 6 83 Schedule 7 84 Statement B1 85 Schedule 8 86 Schedule 9 88

5 TABLE OF CONTENTS (Continued) Reference Page A. Statistical Section B. General Expenditures by Function All Governmental Fund Types Last Ten Fiscal Years B. General Revenues by Source All Governmental Fund Types Last Ten Fiscal Years B. Property Tax Levies and Collections Last Ten Fiscal Years B. Assessed and Estimated Actual Value of Taxable Property Last Ten Fiscal Years B. Tax Capacity Rates Payable All Direct and Overlapping Governments Last Ten Fiscal Years B. Ratio of Net Bonded Debt to Assessed Value and Net Bonded Debt Per Capita Last Ten Fiscal Years B. Computation of Legal Debt Margin B. Current Underlying and Overlapping (Indirect) Debt of Scott County B. Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Governmental Expenditures Last Ten Fiscal Years B. Demographic Statistics Last Ten Fiscal Years B. Ten Largest Taxpayers in the County 2005 Tax Capacity Value B. Miscellaneous Statistical Data Table I 91 Table II 93 Table III 95 Table IV 97 Table V 99 Table VI 103 Table VII 105 Table VIII 106 Table IX 107 Table X 108 Table XI 109 Table XII 110

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7 GOVERNMENT CENTER Finance Department 200 Fourth Avenue West Shakopee, MN (952) Fax (952) DATE: July 13, 2005 TO: Subject: The Citizens of Scott County The Board of County Commissioners 2004 COMPREHENSIVE ANNUAL FINANCIAL REPORT The Comprehensive Annual Financial Report (CAFR) of Scott County is submitted for the fiscal year ended December 31, The County s Finance Department prepared this report in conformity with generally accepted accounting principles (GAAP). Responsibility for both the accuracy and completeness of the presented data and the fairness of the presentation, including all disclosures, rests with the County. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and sets forth the financial position and results of operations and cash flows of the County, as measured by the financial activity of its various funds, and all disclosures necessary to enable maximum understanding of the County s financial affairs. Independent Audit Minnesota State Law requires an audit to be made of the books of account, financial records and transactions of the County by the Office of the State Auditor. This requirement has been complied with and the Auditor s Report has been included in this report. The State Auditor will issue a management and compliance letter covering the review, made as a part of their audit of the County s system of internal control and compliance with applicable legal provisions. The management and compliance letter will not modify or affect, in any way, this report on the financial statements. Single Audit As a recipient of federal, state and local financial assistance, the County is responsible for ensuring that adequate internal controls are in place to ensure compliance with applicable laws and regulations related to those programs. These internal controls are subject to periodic evaluation by management and the internal staff of the County. Office of Management and Budget (OMB) Circular A133 sets forth the audit requirements for state and local governments receiving federal assistance. It provides for a single independent audit of the financial operations, including the compliance with certain provisions of federal laws and regulations. The requirements have been established to ensure that audits are made on an organizational wide basis rather than a grantbygrant basis. The grants for which these requirements applied are identified in the Schedule of Expenditures of Federal Awards.

8 As a part of the government s single audit, test are made to determine the adequacy of the internal controls, including that portion related to federal financial assistance programs, as well as to determine that the County has complied with applicable laws and regulations. Internal Controls In developing and evaluating the County s accounting system, consideration is given to the adequacy of the County s internal controls. Internal controls are designed to provide reasonable, but not absolute, assurance regarding: the safeguarding of assets against loss from unauthorized use or disposition; and the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived and the evaluation of costs and benefits requires estimates and judgments by management. All internal control evaluations occur within the above framework. We believe the County s internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. The County s internal control are supported by policies and procedures and are continually reviewed, evaluated, and modified to meet current needs. Generally accepted accounting principles (GAAP) require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. Profile of the Government Scott County was organized in 1855 as a County in the State of Minnesota. It has an area of 357 square miles including 11 full and fractional townships and 13 incorporated municipalities. The 2004 population was 101,374. It is one of seven counties comprising the Twin Cities metropolitan area. The County seat, Shakopee, is located on the Minnesota River 25 miles southwest of the state capital, St. Paul. Scott County operates under an elected fivemember County Board, each member representing a district of the County. The County Board is responsible, among other things, for passing ordinances, adopting the budget, and the hiring of the County s Administrator. The County Administrator is responsible for carrying out the policies and ordinances of the County Board, for overseeing daytoday operations of the government, and for appointing the heads of various divisions and departments. The County Board is elected on a nonpartisan basis. County Board members serve fouryear staggered terms. The County provides a full range of services including public safety and law enforcement; courts and probation services; tax assessment and collection; vital statistics and public records; health and human services; highways, parks, public works and planning; environment management; and recreation and cultural services. Various potential component units were evaluated to determine whether they should be reported in the County s financial report. A component unit was considered to be part of the County s reporting entity when it was concluded that the County was financially accountable for the entity or the nature and significance of the relationship between County and the entity was such that exclusion would cause the County s basic financial statements to be misleading or incomplete. Scott County has one blended component unit; the Scott County Regional Rail Authority (Authority). The Authority was created

9 pursuant to Minnesota Statutes. The Scott County Board of Commissioners appoints the Authority s five member board. The Scott County Housing and Redevelopment Authority is a discretely presented component unit. The Authority was established in 1980 pursuant to special Minnesota legislation. Its five member board is also appointed by the Scott County Board of Commissioners. Budgetary Controls The annual budget serves as the foundation for the Scott County Government financial planning and control. The County budgets at a more detailed level than is required by law in Minnesota or for federal programs. The budgets are developed by divisions and departments on a line item basis to cover their clients needs, keeping in mind general guidelines set by the County Board of Commissioners. The divisions and departments submit their budget requests to the County Administrator, who must balance the competing needs against available resources. The County Board makes final adjustments to the budgets, which are then adopted and available for use on January 1 st of the year. Budgetary control has traditionally been maintained at the department category level. Division and department managers are held responsible for their budget performance. Compliance with budgets is essential for the County to maintain its sound financial condition. The timely preparation of this report could not have been accomplished without the professional and dedicated hard work of the entire staff of the Finance Department. Also, cooperation was essential from many other departments; especially the County Treasurer and County Auditor. We wish to express our appreciation to all members of the staff who assisted and contributed to the report s preparation. We also wish to thank the member of the County Board for their interest and support this past year in planning and conducting the financial operations of the County in a responsible and progressive manner. Respectfully submitted, /s/kevin Ellsworth Kevin Ellsworth Chief Financial Officer

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11 ORGANIZATION DECEMBER 31, 2004 Elected Commissioners Chair Vice Chair Board Member Board Member Board Member Attorney County Sheriff Appointed Accounting Manager Administrator Agricultural Inspector Assessor Auditor Building Official Information Technology Coroner Court Administrator Court Services Director Directors Community Development Community Services Employee Relations Finance Library Public Works Services Emergency Management Environmental Health Manager Examiner of Titles Extension Services Leader Facilities Manager Highway Engineer License Bureau Manager Planning Manager Recorder Surveyor Treasurer Veterans Service Officer John Ulrich Barbara Marschall Joseph Wagner Bob Vogel Jerry Hennen Pat Ciliberto David Menden Roberta Blank David J. Unmacht John Witt Leroy Arnoldi Cynthia Geis Vacant Marilyn McCarter Dr. Lindsay C. Thomas Gregory Ess Therese McCoy Michael Sobota Timothy Walsh Jack Kemme Kevin Ellsworth Vanessa Birdsey Lezlie Vermillion Gary Shelton Sheriff David Menden Allen Frechette Bryce Huemoeller Jayne Hager Dee Don Fehr Vacant Pamela Busse Vacant Pat Boeckman James Hentges Anthony Derhaag Roger Willmore District 5 District 4 District 1 District 2 District 3 Term Expires January 2007 January 2009 January 2007 January 2009 January 2007 January 2007 January 2007 Indefinite Indefinite Indefinite December 2008 Indefinite Indefinite Indefinite December 2005 Indefinite Indefinite Indefinite Indefinite Indefinite Indefinite Indefinite Indefinite Indefinite January 2007 Indefinite Indefinite Indefinite Indefinite Indefinite Indefinite Indefinite Indefinite Indefinite Indefinite Page 1

12 Board of Commissioners County Attorney County Administrator County Sheriff Community Development Community Services Employee Relations Finance Public Works Services Building Inspections Child Support Compensation/ Benefits Accounting Highway Customer Service Environmental Health Employment & Training Labor Relations Budget Surveyor Facilities Natural Resources Planning Soil & Water Extension Fraud Human Services Recruitment & Selection Risk Management Safety & Wellness Taxation Auditor Assessor Treasurer Geographic Information Systems Transit Information Technology Land Records Income Maintenance Training & Development Mental Health Center New Options Day Public Health Social Services Veterans Services Volunteering st Judicial District Court Administration st Judicial District Court Services Library System

13 STATE OF MINNESOTA OFFICE OF THE STATE AUDITOR SUITE PARK STREET PATRICIA ANDERSON SAINT PAUL, MN STATE AUDITOR (651) (Voice) (651) (Fax) ( ) (Relay Service) INDEPENDENT AUDITOR S REPORT Board of County Commissioners Scott County We have audited the accompanying financial statements of the governmental activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of Scott 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 Scott County s management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Scott County Housing and Redevelopment Authority, which represent the amounts shown as a discretely presented component unit. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Scott County Housing and Redevelopment Authority component unit, is based solely on the report of the other auditors. 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 and the report of the other auditors provide a reasonable basis for our opinions. In our opinion, based on our audit and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of Scott County as of December 31, 2004, 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. Page 3 An Equal Opportunity Employer

14 The required supplementary information as listed in the table of contents and the Management s Discussion and Analysis are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of 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 made for the purpose of forming opinions on the financial statements that collectively comprise Scott County s basic financial statements. The supplementary information listed in the table of contents is presented for purposes of additional analysis and is 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 stated 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 July 13, 2005, on our consideration of Scott 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: July 13, 2005 Page 4

15 MANAGEMENT S DISCUSSION AND ANALYSIS

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17 MANAGEMENT S DISCUSSION AND ANALYSIS DECEMBER 31, 2004 (Unaudited) The financial management of Scott County offers the readers of Scott County s financial statements this narrative overview and analysis of the financial activities of Scott County for the fiscal year ended December 31, We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal and the notes to the financial statements. Financial Highlights The assets of Scott County exceeded its liabilities at the close of the most recent fiscal year by 182,342,696 (net assets). Of this amount, 56,956,669 (unrestricted net assets) may be used to meet the government s ongoing obligations to citizens and creditors. The County s total assets increased by 5,507,706. This increase is a combination of additional capital assets, retirement of longterm debt, and budget savings from operations. As of the close of the current fiscal year, Scott County governmental funds reported combined ending fund balances of 59,423,716. Approximately 57 percent of this amount, 33,692,699, is available for spending at the government s discretion (unreserved fund balance). At the end of the current fiscal year, unreserved fund balance for the General Fund was 16,512,386, or 53 percent of the total General Fund expenditures. Scott County s total longterm debt decreased by 1,880,000, or three percent, during the current fiscal year. The key factor in this decrease was the scheduled payment of our principal amounts due for our outstanding debt. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to Scott County s basic financial statements. Scott County s basic financial statements comprise three components: (1) governmentwide financial statements, (2) fund financial statements, and (3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Page 5

18 GovernmentWide Financial Statements. The governmentwide financial statements are designed to provide readers with a broad overview of Scott County s finances in a manner similar to a privatesector business. The statement of net assets presents information on all of Scott 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 Scott 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 only in future fiscal periods, such as uncollected taxes and earned but unsaved vacation leave. Activities principally supported by taxes and intergovernmental revenues are governmental activities. The governmental activities of Scott County include general government, public safety, highways and streets, transit, human services, health, culture and recreation, conservation of natural resources, and economic development. The governmentwide financial statements include not only Scott County itself (known as the primary government), but also a legally separate Scott County Housing and Redevelopment Authority (HRA) for which Scott County is financially accountable. Financial information for the component unit is reported separately from the financial information presented for the primary government itself. The governmentwide financial statements can be found on Exhibits 1 and 2 of this report. Fund 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. Scott County, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with financerelated requirements. All of the funds of Scott County can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the governmentwide financial statements. However, unlike the governmentwide financial statements, governmental fund financial statements focus on nearterm 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 nearterm financing requirements. Because the focus of governmental funds is narrower than that of the governmentwide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the governmentwide financial statements. (Unaudited) Page 6

19 By doing so, readers may better understand the longterm impact of the government s nearterm 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. Scott County maintains 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 balances for the General Fund, Road and Bridge Fund, Human Services Fund, Capital Improvement Fund, and Debt Service Fund, all of which are considered major funds. Data from the Library Fund, Law Library Fund, Regional Rail Authority Fund, Ditch Fund, and Watershed Management Organization Fund 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 elsewhere in this report. Scott County adopts an annual appropriated budget for its five major governmental funds and its nonmajor governmental funds, except the Regional Rail Authority Fund and the Ditch Fund. A budgetary comparison statement has been provided for these funds to demonstrate compliance with their budgets. The governmental fund financial statements can be found on Exhibits 3 through 6 of this report. General Fund. The General Fund is used to account for all financial resources not required to be accounted for in another fund. Special Revenue Funds. Special revenue governmental funds account for the proceeds of specific revenue restricted to expenditures for specific purposes. The special revenue funds include: Road and Bridge Human Services Library Law Library Regional Rail Authority Ditch Watershed Management Organization Capital Improvement Fund. The Capital Improvement Fund tracks major construction projects. Debt Service Fund. The Debt Service Fund accounts for the payment of principal, interest, and fiscal charges on longterm obligations of Scott County. Proprietary Funds. Scott County uses only one type of proprietary fund. Internal service funds are an accounting device used to accumulate and allocate costs internally among Scott County s various functions. Scott County uses internal service funds to account for its selfinsurance. (Unaudited) Page 7

20 Because this service predominantly benefits governmental rather than businesstype functions, they have been included within governmental activities in the governmentwide financial statements. The proprietary fund financial statements can be found on Exhibits 7 through 9 of this report. Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the governmentwide financial statements because resources of those funds are not available to support Scott County s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The fiduciary fund financial statements can be found on Exhibits 10 and 11 of this report. Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the governmentwide and fund financial statements. The notes to the financial statements can be found on pages 32 through 70 of this report. Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information. The combining statements referred to earlier in connection with nonmajor governmental funds are presented in the supplementary information section. Combining and individual fund statements and schedules can be found on pages 76 through 87 of this report. GovernmentWide Financial Analysis As noted earlier, over time net assets may serve as a useful indicator of a government s financial position. In the case of Scott County, assets exceeded liabilities by 182,342,696 at the close of the most recent fiscal year. Capital assets net of related debt (land, buildings, machinery and equipment, infrastructure, and construction in progress, less any related debt used to acquire assets that is still outstanding) are 104,018,658 and represent 57 percent of total net assets. Scott County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although Scott County s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Approximately 12 percent of Scott County s net assets represent resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets, 56,956,669, or approximately 31 percent, may be used to meet the government s ongoing obligations to citizens and creditors. (Unaudited) Page 8

21 Scott County s Net Assets Governmental Activities Current and other assets 74,948,425 92,234,617 Capital assets 172,749, ,956,088 Total Assets 247,698, ,190,705 Longterm liabilities outstanding 52,716,614 55,448,277 Other liabilities 12,639,101 11,276,550 Total Liabilities 65,355,715 66,724,827 Net Assets Invested in capital assets, net of related debt 104,018,658 62,489,402 Restricted 21,367,369 32,013,389 Unrestricted 56,956,669 80,963,087 Total Net Assets 182,342, ,465,878 At the end of the current fiscal year, Scott County is able to report positive balances in all three categories of net assets. The same held true for the prior fiscal year. Scott County s net assets increased by 8,999,919 during the current fiscal year. This increase is the combination of many surpluses and deficits, but the primary changes include: a large increase in construction in progress of 5,724,705 for new highways and an increase in capital assets of 564,431. Scott County s Changes in Net Assets Governmental Activities Revenues Program revenues Fees, charges, fines, and other 11,175,907 10,043,263 Operating grants and contributions 17,276,198 17,154,767 Capital grants and contributions 4,392,942 3,594,141 General revenues Property taxes 32,889,484 28,999,336 Payment in lieu of taxes 128, ,670 Grants and contributions not restricted to specific programs 7,442,530 11,739,770 Investment income 2,415,793 1,353,146 Miscellaneous 1,210,142 1,285,272 Total Revenues 76,931,771 74,290,365 (Unaudited) Page 9

22 Governmental Activities Expenses General government 19,779,689 19,611,493 Public safety 11,464,182 10,415,689 Highways and streets 11,378,703 10,781,795 Transit 1,491,526 1,378,642 Human services 15,043,945 14,571,013 Health 1,501,988 1,686,332 Culture and recreation 3,133,886 2,780,126 Conservation of natural resources 874, ,659 Economic development 823,514 1,041,405 Interest 2,440,233 2,102,123 Total Expenses 67,931,852 65,033,277 Increase (decrease) in net assets 8,999,919 9,257,088 Prior period adjustment (2,123,101) (592,957) Net Assets January 1 175,465, ,801,747 Net Assets December ,342, ,465,878 For the most part, increases in expenses closely paralleled inflation and growth in the demand for services. Expenses and Program Revenues Governmental Activities 25 's (in millions) General government Public safety Highways and streets Transit Human services Ex pens es Pr ogr am Revenues Health Culture and recreation Conservation of natural resources Economic development Interest (Unaudited) Page 10

23 Revenues by Source Governmental Activities Grants and contributions not restricted to specific programs 10% Investment income 3% Fees, charges, fines, and other 15% Operating grants and contributions 23% Property taxes 43% Capital grants and contributions 6% Financial Analysis of the Government s Funds As noted earlier, Scott County uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. Governmental Funds. The focus of Scott County governmental funds is to provide information on nearterm inflows, outflows, and balances of spendable resources. Such information is useful in assessing Scott County s financing requirements. In particular, unreserved fund balances 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, Scott County s governmental funds reported combined ending fund balances of 59,423,716, a decrease of 19,928,691 in comparison with the prior year restated. Most of the total amount, 33,692,699, constitutes unreserved fund balance, which is available for spending at the government s discretion. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has been committed for specific purposes. Most of the reserved fund balance is set aside for encumbrances. The General Fund is the chief operating fund of Scott County. At the end of the current fiscal year, unreserved fund balance of the General Fund was 16,512,386, while total fund balance reached 22,185,183. As a measure of the General Fund s liquidity, it may be useful to compare both unreserved fund balance and the total fund balance to total fund expenditures. Unreserved fund balance represents 53 percent of total General Fund expenditures, while total fund balance represents 71 percent of that same amount. (Unaudited) Page 11

24 The fund balance of Scott County s General Fund increased by 1,478,062 during the current fiscal year. The key factor in this increase was revenue received to help with the acquisition of County park land. The revenue received for this acquisition amounted to 1,303,333. The Road and Bridge Fund had a total fund balance of 15,250,899 at the end of the current fiscal year. The fund balance of the Road and Bridge Fund decreased by 1,323,915 during the current fiscal year due to expenses associated with road construction projects. The Human Services Fund had a total fund balance of 2,431,000 at the end of the current fiscal year. The fund balance of the Human Services Fund increased by 131,773 during the current fiscal year. This change is primarily due to increased clients in our New Options program. The Library Fund had a total fund balance of 3,173 at the end of the current fiscal year. The fund balance of the Library Fund decreased 17,383 during the fiscal year, primarily due to an increase in expenditures for books and reference materials. The Ditch Fund had a total fund balance of 173,458 at the end of the current fiscal year. The fund balance of the Ditch Fund increased by 1,652 during the fiscal year. This increase is due to the net difference in operational expenses of the ditches and the investment income from the fund balance. The Regional Rail Authority Fund had a fund balance of 431,495 at the end of the current fiscal year. The fund balance decreased by 6,093 primarily due to our contribution to the Hennepin County Regional Rail Authority. The Capital Improvement Fund had a total fund balance of 12,400,423 at the end of the current fiscal year, which is reserved for capital construction. The Capital Improvement Fund decreased by 19,971,498 during the fiscal year, primarily due to increased expenditures related to the construction of the new Law Enforcement Center. The Debt Service Fund had a total fund balance of 6,102,434 at the end of the current fiscal year which is reserved for payment of debt service. The Debt Service Fund decreased by 169,655 during the current fiscal year primarily due to Scott County occupying greater space at the Workforce Development Center and thus receiving less rental income for debt service. General Fund Budgetary Highlights The changes between the original budget and the final amended budget for the current fiscal year were not significant. (Unaudited) Page 12

25 Capital Assets and Debt Administration Capital Assets. Scott County s investment in capital assets for its government as of December 31, 2004, is 172,749,986 (net of accumulated depreciation). This investment in capital assets includes land, buildings, machinery and equipment, infrastructure, and construction in progress. The total increase in the Scott County investment in capital assets for the current year was approximately 17 percent. Major capital asset events during the current fiscal year included the following: Continued construction of the new Law Enforcement Center located in Shakopee. The cost as of the end of the year had reached 21,903,712. Continued infrastructure construction on highways. Construction in progress as of the end of the year reached 17,178,376. Scott County s Capital Assets (Net of Depreciation) Governmental Activities Land 36,082,891 32,984,280 Buildings 23,116,325 23,883,481 Machinery and equipment 3,749,920 3,955,555 Infrastructure 70,718,761 72,280,150 Construction in progress 39,082,089 14,438,474 Total 172,749, ,541,940 Additional information on Scott County s capital assets can be found in the notes of this report. LongTerm Debt. At the end of the current fiscal year, Scott County had total bonded debt outstanding of 54,215,000. This is a decrease of 1,880,000 from the start of the year. Current and future County tax levies are used to finance 54,215,000 of the bond indebtedness. The decrease in the total bonded debt is related to the payment of 2004 principal. Scott County s Outstanding Debt General Obligation and Facility Lease Bonds Governmental Activities General obligation bonds 38,785,000 39,805,000 Facility lease bonds 15,430,000 16,290,000 Total 54,215,000 56,095,000 (Unaudited) Page 13

26 State statutes limit the amount of general obligation debt a county can incur to no more than two percent of the market value of taxable property in the county. The current debt limitation for Scott County is 187,808,654, which is significantly in excess of Scott County s outstanding general obligation debt. The Scott County Board authorized the sale of 17,650,000 General Obligation Grant Anticipation Notes in July The notes will mature in September Additional information on Scott County s longterm debt can be found in the notes on pages 50 through 51 of this report. Economic Factors and Next Year s Budgets and Rates The unemployment rate for Scott County is currently 3.8 percent, which is a decrease from a rate of 4.5 percent a year ago. This compares favorably to the state s average unemployment rate of 4.7 percent and the national average of 5.6 percent. The State of Minnesota has a projected large budget deficit due to inflation not being factored into their current budget numbers. It is likely that Scott County will see cuts in state revenues, particularly in general program aid revenue and Social Services funding. All of these factors were considered in preparing Scott County s budget for the 2005 fiscal year. Requests for Information This financial report is designed to provide a general overview of Scott County s finances for all those with an interest in the government s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Department, 200 Fourth Avenue West, Government Center, Shakopee, Minnesota Or visit our website at (Unaudited) Page 14

27 GOVERNMENTWIDE FINANCIAL STATEMENTS

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30 EXHIBIT 1 STATEMENT OF NET ASSETS DECEMBER 31, 2004 Primary Government Governmental Activities Component Unit Housing and Redevelopment Authority Assets Cash and pooled investments Petty cash and change funds Cash with fiscal agent Taxes receivable Prior net Accounts receivable net Accrued interest receivable Due from other governments Inventories Restricted assets Cash and pooled investments Deferred charges Advances to component unit Capital assets Nondepreciable Depreciable net of accumulated depreciation 64,416,445 7,910 2,274, , , ,664 3,595, , ,633 2,460,235 75,164,980 97,585,006 4,602,120 21,487 20, ,192 2,576, ,178 9,024,152 36,414,493 Total Assets 247,698,411 53,766,827 Liabilities Accounts payable Salaries payable Contracts payable Retainage payable Due to other governments Accrued interest payable Unearned revenue Advance from primary government Noncurrent liabilities Due within one year General obligation bonds payable Facility lease bonds payable Notes payable Claims payable Compensated absences Due in more than one year General obligation bonds payable Facility lease bonds payable Notes payable Compensated absences 2,220, ,069 2,178,107 1,096, , ,277 64,197 1,685, , ,232 1,947,084 37,008,062 14,525,000 1,183,552 64,506 12,690 90, , ,547 2,460, , ,309 32,512 25,501,856 4,043,130 18,697 Total Liabilities 65,355,715 33,750,445 The notes to the financial statements are an integral part of this statement. Page 15

31 EXHIBIT 1 (Continued) STATEMENT OF NET ASSETS DECEMBER 31, 2004 Primary Government Governmental Activities Component Unit Housing and Redevelopment Authority Net Assets Invested in capital assets net of related debt Restricted for Debt service Capital purchases Equipment replacement Postclosure Other purposes Unrestricted 104,018,658 6,160,294 14,516, , ,691 56,956,669 13,662,106 1,403,439 1,669,155 3,281,682 Total Net Assets 182,342,696 20,016,382 The notes to the financial statements are an integral part of this statement. Page 16

32 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2004 Expenses Fees, Charges, Fines, and Other Functions/Programs Primary Government Governmental activities General government Public safety Highways and streets Transit Human services Health Culture and recreation Conservation of natural resources Economic development Interest 19,779,689 11,464,182 11,378,703 1,491,526 15,043,945 1,501,988 3,133, , ,514 2,440,233 5,613,867 1,349, , ,526 1,857, , ,233 28,754 Total primary government 67,931,852 11,175,907 Component unit Housing and Redevelopment Authority 6,307,729 4,579,115 The notes to the financial statements are an integral part of this statement. Page 17

33 EXHIBIT 2 Net (Expense) Revenue and Changes in Net Assets Program Revenues Component Unit Operating Capital Primary Government Housing and Grants and Grants and Governmental Redevelopment Contributions Contributions Activities Authority 1,676,272 (12,489,550) 455,298 42,531 (9,617,261) 3,762,198 3,697,078 (3,306,815) 570,613 (119,387) 8,071,127 (5,115,617) 1,113,151 (240,215) 858, ,333 (857,557) (845,432) 768,776 (54,738) (2,440,233) 17,276,198 4,392,942 (35,086,805) 597, ,146 (966,982) General Revenues Property taxes 32,889,484 1,307,147 Gravel taxes 174,546 Mortgage registry and deed tax 384,541 Payments in lieu of tax 128,775 Grants and contibutions not restricted to specific programs 7,442,530 48,621 Unrestricted investment earnings 2,415,793 71,828 Miscellaneous 651,055 29,101 Total general revenues 44,086,724 1,456,697 Change in net assets 8,999, ,715 Net Assets Beginning, as adjusted 173,342,777 19,526,667 Net Assets Ending 182,342,696 20,016,382 Page 18

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35 FUND FINANCIAL STATEMENTS

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37 GOVERNMENTAL FUNDS

38 BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2004 General Road and Bridge Assets Cash and pooled investments 20,541,845 15,883,823 Petty cash and change funds 7, Cash with fiscal agent Taxes receivable Prior 295, ,502 Accounts receivable 135,967 55,071 Accrued interest receivable 336,022 Due from other governments 511,859 1,072,531 Inventories 456,032 Advances to component unit 2,460,235 Total Assets 24,289,176 17,590,009 The notes to the financial statements are an integral part of this statement. Page 19

39 EXHIBIT 3 Human Services Capital Improvement Debt Service Other Governmental Funds Total Governmental Funds 1,091, , ,791 2,008,425 3,328,010 15,379,583 31,622 59,750 2,268 15,473,223 3,806,663 2,274,923 57,860 20,848 6,160,294 1,133,876 33,107 14,284 2, ,184,019 57,837,326 7,910 2,274, , , ,335 3,595, ,032 2,460,235 68,024,731 Page 20

40 BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2004 General Road and Bridge Liabilities and Fund Balances Liabilities Accounts payable 1,059, ,711 Salaries payable 359,877 76,060 Contracts payable 398,230 Retainage payable 191,841 Due to other governments 164, ,275 Deferred revenue unavailable 519, ,993 Deferred revenue unearned Total Liabilities 2,103,993 2,339,110 Fund Balances Reserved for Encumbrances 9,456,988 Petty cash 7, Advances to component unit 2,460,235 Sheriff's contingency 36,701 Sheriff's forfeited property 32,310 Debt service Solid waste 2,942,695 Recorder's equipment 193,056 Gravel pit closure 497,691 Unreserved Designated for debt service Designated for future expenditures 630,058 Designated for capital improvements 567,064 4,887,112 Designated for compensated absences 1,861, ,058 Designated for cash flows 13,454,192 Undesignated Unreserved, reported in nonmajor special revenue funds Total Fund Balances 22,185,183 15,250,899 Total Liabilities and Fund Balances 24,289,176 17,590,009 The notes to the financial statements are an integral part of this statement. Page 21

41 EXHIBIT 3 (Continued) Human Services Capital Improvement Debt Service Other Governmental Funds Total Governmental Funds 404, , , ,088 64, , ,851 1,779, ,450 31,622 3,072,800 57,860 57,860 76,483 20,652 33, ,242 2,220, ,069 2,178,107 1,096, ,315 1,715,507 64,197 8,601, ,688 1,670,252 2,431,000 3,328,010 7,828,508 4,571,915 12,400,423 15,473,223 2,274,923 3,827,511 6,102,434 6,160,294 1,053,777 1,053,777 1,184,019 17,285,496 7,910 2,460,235 36,701 32,310 2,274,923 2,942, , ,691 3,827, ,058 10,026,091 3,030,818 13,454,192 1,670,252 1,053,777 59,423,716 68,024,731 Page 22

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43 EXHIBIT 4 RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE GOVERNMENTWIDE STATEMENT OF NET ASSETSGOVERNMENTAL ACTIVITIES DECEMBER 31, 2004 Fund balances total governmental funds (Exhibit 3) 59,423,716 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. 172,749,986 Other longterm assets are not available to pay for current period expenditures and, therefore, are deferred in the governmental funds. 1,715,507 Internal service funds are used by management to charge the costs of management of fleet maintenance and selfinsurance to individual funds. The assets and liabilities included in governmental activities in the statement of net assets are: 6,151,829 Longterm 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 Facility lease bonds Compensated absences Accrued interest payable Deferred debt issuance charges (38,693,062) (15,430,000) (3,130,636) (761,277) 316,633 (57,698,342) Net assets of governmental activities (Exhibit 1) 182,342,696 The notes to the financial statements are an integral part of this statement. Page 23

44 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2004 General Road and Bridge Revenues Taxes 15,981,000 6,583,734 Licenses and permits 2,506,398 Intergovernmental 7,016,834 9,837,915 Charges for services 4,045,247 1,153,124 Fines and forfeits 435,886 Gifts and contributions 2,335 Interest on investments 1,935,470 Miscellaneous 747, ,014 Total Revenues 32,670,266 17,835,787 Expenditures Current General government 19,020,359 Public safety 10,448,905 Highways and streets 17,798,859 Transit 1,360,843 Human services Health Culture and recreation 1,277,443 Conservation of natural resources 422,300 Economic development Capital outlay Debt service Principal retirement Interest Total Expenditures 31,169,007 19,159,702 Excess of Revenues Over (Under) Expenditures 1,501,259 (1,323,915) Other Financing Sources (Uses) Transfers in Transfers out (23,197) Proceeds from sale of capital assets Total Other Financing Sources (Uses) (23,197) Net Change in Fund Balance 1,478,062 (1,323,915) Fund Balance January 1, as restated 20,707,121 16,574,814 Fund Balance December 31 22,185,183 15,250,899 The notes to the financial statements are an integral part of this statement. Page 24

45 EXHIBIT 5 Human Services 4,845,632 10,927,530 1,863,824 8, ,844 17,798,262 Capital Improvement 909, , ,891 40,216 1,513,759 Debt Service 3,335, , , ,176 4,476,331 Other Governmental Funds 1,769, , ,387 18,319 11, ,418,125 Total Governmental Funds 33,424,116 2,506,398 29,006,192 7,349, ,886 29,086 2,414,864 1,546,406 76,712,530 15,317,702 1,501, ,819 17,651, ,207 (15,434) (15,434) 131,773 2,299,227 2,431,000 21,529,140 21,529,140 (20,015,381) 38,631 5,252 43,883 (19,971,498) 32,371,921 12,400,423 1,880,000 2,765,986 4,645,986 (169,655) (169,655) 6,272,089 6,102, ,430 1,873, ,623 6,112 2,491,583 (73,458) (73,458) 1,127,235 1,053,777 19,181,789 10,448,905 17,798,859 1,360,843 15,317,702 1,501,534 3,150, , ,931 21,529,140 1,880,000 2,765,986 96,646,473 (19,933,943) 38,631 (38,631) 5,252 5,252 (19,928,691) 79,352,407 59,423,716 Page 25