Comprehensive Annual Financial Report

Transcription

1 Comprehensive Annual Financial Report For Year Ended December 31, 2017 Anoka Champlin Fire Department, Minnesota

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3 COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE FOR THE YEAR ENDED DECEMBER 31, 2017

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5 TABLE OF CONTENTS Page Numbers Letter of Transmittal 1 Organization 5 List of Elected and Appointed Officals 6 Independent Auditor's Report 9 Management's Discussion and Analysis 12 Basic Financial Statements: INTRODUCTORY SECTION FINANCIAL SECTION Government-Wide Financial Statements: Statement of Net Position Statement 1 20 Statement of Activities Statement 2 21 Fund Financial Statements: Balance Sheet - Governmental Funds Statement 3 22 Statement of Revenues, Expenditures, and Changes in Fund Balances - Statement 4 23 Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement 5 24 Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund Statement 6 25 Notes to Financial Statements 27 Required Supplementary Information: Schedule of Contributions - Public Employees General Retirement Fund Pension Plan Statement 7 48 Schedule of Proportionate Share of Net Pension Liability - Public Employees General Retirement Fund Pension Plan Statement 8 49 Schedule of Contributions - Public Employees Police and Fire Fund Pension Plan Statement 9 50 Schedule of Proportionate Share of Net Pension Liability - Public Employees Police and Fire Fund Pension Plan Statement Notes to RSI 52 STATISTICAL SECTION Net Position Schedule 1 56 Changes in Net Position Schedule 2 57 Fund Balances of Governmental Funds Schedule 3 58 Changes in Fund Balances of Governmental Funds Schedule 4 59

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7 INTRODUCTORY SECTION

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9 July 11, 2018 To the Citizens of the City of Champlin and the City of Anoka Honorable Members of the Anoka-Champlin Joint Powers Fire Board State law requires that all general-purpose local governments publish within six months of the close of each fiscal year a complete set of audited financial statements. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the Anoka-Champlin Fire Department for the fiscal year ended December 31, Management assumes full responsibility for the completeness and reliability of this information contained in this report, based upon a comprehensive framework of internal control that the Fire Department has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. The Anoka-Champlin Fire Department s financial statements have been audited by Redpath and Company, a firm of licensed certified public accountants. The auditor has issued an unmodified ( clean ) opinion on the Anoka-Champlin Fire Department s financial statements for the year ended December 31, The independent auditor s report is located at the front of the financial section of this report. Management s discussion and analysis (MD&A) immediately follows the independent auditor s report and provides a narrative introduction, overview and analysis of the basic financial statements. The MD&A complements this letter of transmittal and should be read in conjunction with it. PROFILE OF THE FIRE DEPARTMENT The City of Champlin is located in northern Hennepin County on the west bank of the Mississippi River approximately seventeen miles northwest of Minneapolis and the City of Anoka is located just north of the City of Champlin in southern Anoka County. The average elevation is 875 feet above sea level and the Mississippi River is approximately one-eighth of a mile wide. The Fire Department serves a population of 41,338 according to the estimates from the Metropolitan Council. 1

10 The Anoka-Champlin Fire department originated as the Anoka Fire Department. Established in July of 1878 the first piece of firefighting equipment was a Silsby Steamer engine. The steamer and horse drawn pumps were augmented by the hand operated fire pumps of the time. In 1984, the cities of Anoka and Champlin entered into a Joint Powers Agreement that began the partnership between the cities. The City of Champlin with the City of Anoka, Minnesota participate in a joint venture to provide fire protection services to the residents of the respective cities. The Anoka-Champlin Fire Department was created pursuant to an agreement dated March 20, The terms of the agreement provide for a 48% and 52% undivided equity interest for the City of Champlin and the City of Anoka, respectively. The City of Champlin is responsible for the administration and daily financial management of the fire department. Each City is responsible for their proportionate share of the cost of the fire department s operations. It is governed by an appointed Board consisting of one Councilmember from each City, one staff member from each City and one at-large member who is not a resident nor employed by either City. This report includes all funds of the Fire Department. The Fire Department provides a full range of services to its citizens. These services include, but are not limited to fire suppression, high level rescue, low level rescue, confined space rescue, swift water rescue, ice water rescue, hazardous materials response, code enforcement and public fire education. The annual budget serves as the foundation for the Anoka-Champlin Fire Department s financial planning and control. The department is required to submit requests for appropriation to the finance director in early May each year. All information is compiled and submitted to the Fire Chief, who uses these requests as the starting point for developing a proposed budget. The proposed budget is presented to the Anoka-Champlin Joint Powers Fire Board for review and adoption. The Anoka-Champlin Joint Powers Fire Board adopts a budget prior to August 1. The appropriated budget is prepared by fund and department. The Fire Chief may make transfers of appropriations within a department. Transfers of appropriations between departments, however, require the approval of the Anoka-Champlin Joint Powers Fire Board. Budget-to-actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund, this comparison is presented on page 28 as part of the basic financial statements for the governmental funds. FACTORS AFFECTING FINANCIAL CONDITION The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City of Champlin and the City of Anoka operate. Local Economy Both cities have been affected by the national economic environment. Local indicators continue to do better than the national average, however, the cities are continuing to experience mortgage foreclosures and slowed growth. As a result the Anoka-Champlin Joint Powers Fire Board has been asked by the two cities to minimize increases in spending. Staff in the Fire Department do an excellent job maintaining and extending the life of equipment to their maximum potential. 2

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13 Organizational Chart 2017 ANOKA CHAMPLIN JOINT POWERS FIRE BOARD CHIEF ADMINISTRATIVE ASSISTANT DUTY CAPTAIN LOGISTICS SUPPLY SUPPORT SERVICES ASSISTANT CHIEF F.T. FIRE MARSHALL ASSISTANT CHIEF PAID ON CALL DUTY CAPTAIN INSPECTIONS TRAINING CAPTAIN STATION ONE CAPTAIN STATION TWO LIEUTENANT LIEUTENANT LIEUTENANT LIEUTENANT COMPANY 11 COMPANY 12 COMPANY 21 COMPANY 22 FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. FF. 5

14 LIST OF APPOINTED OFFICIALS Year Ended December 31, 2017 Name Official Title Anoka-Champlin Joint Powers Fire Board: Nate Truesdell Mark Freeburg Bret Heitkamp Greg Lee Dennis Bjorklund Board Member Champlin Councilmember Chair Anoka Councilmember Board Member Champlin City Administrator Board Member Anoka City Manager Board Member At Large Administration: Charles Thompson June Johnston (retired 12/31/2017) Shelly Peterson (effective 05/07/2018) Scott Lepak Fire Chief Finance Director Finance Director Attorney 6

15 FINANCIAL SECTION 7

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17 INDEPENDENT AUDITOR'S REPORT To the Board Members Anoka-Champlin Fire Department Champlin, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and each major fund of the Anoka-Champlin Fire Department, as of and for the year ended December 31, 2017, and the related notes to the financial statements, which collectively comprise Anoka- Champlin Fire Department s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements White Bear Parkway, St. Paul, MN,

18 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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 the Anoka-Champlin Fire Department as of December 31, 2017, in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, and the schedules of pension liabilities and contributions, as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Anoka-Champlin Fire Department s basic financial statements. The introductory section and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. 10

19 The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. REDPATH AND COMPANY, LTD. St. Paul, Minnesota July 11,

20 Management s Discussion and Analysis As management of the Anoka-Champlin Fire Department, we offer readers of the Fire Department s financial statements this narrative overview and analysis of the financial activities of the Anoka-Champlin Fire Department 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, which can be found on pages 1-3 of this report. Financial Highlights The assets of the Anoka-Champlin Fire Department exceeded its liabilities at the close of the most recent fiscal year by $2,429,787 (net position). Of this amount, $487,373 (unrestricted net position) may be used to meet the Fire Department s ongoing obligations to citizens and creditors. As of the close of the current fiscal year, the Anoka-Champlin Fire Department s governmental funds reported combining ending fund balances of $1,045,260, an increase of $250,632 in comparison with the prior year. Approximately 18.61% of this total amount, $194,551, is available for spending at the Fire Department s discretion (assigned and unassigned fund balances). At the end of the current fiscal year, unassigned fund balance for the general fund was $183,427 or percent of total general fund expenditures. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Anoka- Champlin Fire Department s basic financial statements. The Anoka-Champlin Fire Department 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. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the Anoka-Champlin Fire Department s finances in a manner similar to a private-sector business. The statement of net position presents information on all of the Anoka-Champlin Fire Department s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Anoka-Champlin Fire Department is improving or deteriorating. The statement of activities presents information showing how the Fire Department s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of 12

21 the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements present functions of the Anoka- Champlin Fire Department that are principally supported by tax revenues (governmental activities). The governmental activities of the Anoka-Champlin Fire Department include only a public safety function. The government-wide financial statements can be found on pages of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Anoka-Champlin Fire Department, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. All of the funds of the Anoka-Champlin Fire Department fall into one category: governmental 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, governmental fund 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 governmentwide financial statements. By doing so, readers may better understand the long-term impact of the Fire Department s near-term financing decisions. Both the governmental fund balance sheet and governmental statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Anoka-Champlin Fire Department maintains three 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, grant fund, and capital equipment funds, all of which are considered to be major funds. The Anoka-Champlin Fire Department adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with the budget. The basic governmental fund financial statements can be found on pages of this report. 13

22 Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of the Fire Department s financial position. In the case of the Anoka-Champlin Fire Department, assets exceeded liabilities by $2,429,787, at the close of the most recent fiscal year. A large portion of the Anoka-Champlin Fire Department s net position (79.94 percent) reflects its investment in capital assets (e.g., machinery, and equipment) less any related debt used to acquire those assets that is still outstanding ($0). The Anoka-Champlin Fire Department uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Anoka-Champlin Fire Department s Net Position Current and other assets $1,687,964 $862,562 Capital assets 1,942,414 2,041,056 Total assets 3,630,378 2,903,618 Deferred outflows of resources 777,095 1,072,113 Long-term liabilities outstanding 531,341 1,313,626 Other liabilities 642,704 67,934 Total liabilities 1,174,045 1,381,560 Deferred inflows of resources 803, ,803 Net position: Invested in capital assets, net of related debt 1,942,414 2,041,056 Unrestricted 487, ,312 Total net position $2,429,787 $2,391,368 The balance of unrestricted net position ($487,373) may be used to meet the Fire Department s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the Anoka-Champlin Fire Department is able to report a positive balance in net position. The same situation held true for the prior fiscal year. 14

23 Governmental activities. Governmental activities increased the Fire Department s net position by $38,419. Key elements of this increase are as follows: 1) Increase in charges for services ($62,804) and 2) Decrease in pension expense of $102, Revenues: Program revenues: Charges for services $1,234,440 $1,171,576 Operating grants and contributions 235, ,156 Gain (loss) on sale of capital asset 2,726 Unrestricted investment earnings 3,972 14,117 Total revenues 1,476,269 1,424,849 Expenses: Public safety 1,437,850 1,572,679 Total expenses 1,437,850 1,572,679 Increase (decrease) in net position 38,419 (147,830) Net position January 1, as previously stated 2,391,368 2,539,198 Prior period adjustment - - Net position January 1, as restated 2,391,368 2,539,198 Net position December 31 $2,429,787 $2,391,368 15

24 Financial Analysis of the Fire Department s Funds As noted earlier, the Anoka-Champlin Fire Department uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the Anoka-Champlin Fire Department s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Anoka- Champlin Fire Department s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a Fire Department s net resources available for spending at the end of the fiscal year. As of the close of the current fiscal year, the Anoka-Champlin Fire Department s governmental funds reported combined ending fund balances of $1,045,260, an increase of $250,632 in comparison with the prior year. Approximately 18.61% of this total amount ($194,551) constitutes assigned and unassigned fund balance, which is available for spending at the Fire Department s discretion. The remainder of fund balance is not available for new spending because it is considered nonspendable because of its form (i.e. prepayments) or there is a legal or contractual commitment requiring it to be maintained intact ($850,709). $842,509 of the nonspendable portion of fund balance is related to the prepayment of a new fire truck that the Anoka- Champlin Fire Department paid for in 2017 but that will not be delivered until The general fund is the chief operating fund of the Anoka-Champlin Fire Department. At the end of the current fiscal year, unassigned fund balance of the general fund was $183,427, while the total fund balance reached $187,676. As a measure of the general fund s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents percent of total general fund expenditures, while total fund balance represents percent of that same amount. 16

25 The fund balance of the Anoka-Champlin Fire Department s general fund increased by $14,978 during the current fiscal year. During the year, revenues were higher than budgetary estimates ($15,081). The majority of this variance is related to actual other revenue exceeding budget by $15,694. This is due to $14, 974 in unbudgeted reimbursement revenue received in Expenditures were lower than budgetary estimates ($48,854) primarily due to position vacancies during the year. Capital Asset Administration The Anoka-Champlin Fire Department s investment in capital assets for its governmental activities as of December 31, 2017, amounts to $1,942,414 (net of accumulated depreciation). This investment in capital assets includes machinery and equipment to support fire operations. The total decrease in the Anoka-Champlin Fire Department s investment in capital assets for the current fiscal year was 4.83 percent. Major capital asset events during the current fiscal year included the following: Purchase of a 2017 Ford Interceptor for $36,592 Disposal of a 93 Fire Rescue Truck which cost $136,371 at the time of purchase and had accumulated depreciation of $109,097 at the time of disposal. Anoka-Champlin Fire Department s Capital Assets (net of depreciation) Machinery and equipment 1,942,414 2,041,056 Additional information on the Anoka-Champlin Fire Department s capital assets can be found in Note 6 on page 36 of this report. Economic Factors and Next Year s Budgets and Rates During the current fiscal year, unassigned fund balance in the general fund increased to $183,427. This increase was the result of operating expenditures less than anticipated. Requests for information This financial report is designed to provide a general overview of the Anoka-Champlin Fire Department s finances for all those with an interest in the Fire Department s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Finance Director, Anoka-Champlin Fire Department, Champlin Drive, Champlin, MN

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27 BASIC FINANCIAL STATEMENTS 19

28 STATEMENT OF NET POSITION Statement 1 December 31, 2017 Governmental Activities Assets: Cash and investments $809,486 Receivables: Accounts and interest 1,800 Due from other governmental units 29,920 Prepayments 846,758 Capital assets, net of accumulated depreciation: Machinery and equipment 1,942,414 Total assets 3,630,378 Deferred outflows of resources: Resources related to proportionate share of PERA pension 777,095 Liabilities: Accounts and contracts payable 8,653 Accrued salaries and withholdings payable 25,592 Due to other governmental units 33,459 Unearned revenue 575,000 Noncurrent liabilities: Due within one year - Due in more than one year 531,341 Total liabilities 1,174,045 Deferred inflows of resources: Resources related to proportionate share of PERA pension 803,641 Net position: Net investment in capital assets 1,942,414 Unrestricted 487,373 Total net position $2,429,787 The accompanying notes are an integral part of these financial statements. 20

29 STATEMENT OF ACTIVITIES Statement 2 For The Year Ended December 31, 2017 Program Revenues Operating Total Charges For Grants and Governmental Expenses Services Contributions Activities Functions/Programs Governmental activities: Public safety $1,437,850 $1,234,440 $235,131 $31,721 Total governmental activities $1,437,850 $1,234,440 $235,131 31,721 General revenues: Gain (loss) on sale of capital asset 2,726 Unrestricted investment earnings 3,972 Total general revenues 6,698 Change in net position 38,419 Net position - January 1 2,391,368 Net position - December 31 $2,429,787 The accompanying notes are an integral part of these financial statements. 21

30 BALANCE SHEET Statement 3 GOVERNMENTAL FUNDS December 31, 2017 Assets Capital Total Grant Equipment Governmental General Fund Fund Funds Cash and investments $794,411 $3,951 $11,124 $809,486 Accounts receivable 1, ,800 Due from other governmental units 29, ,920 Prepayments 4, , ,758 Total assets $830, $3, $853, $1,687, Liabilities, Deferred Inflows of Resources, and Fund Balances Liabilities: Accounts payable $8,653 $ - $ - $8,653 Accrued salaries and withholdings payable 25, ,592 Due to other governmental units 33, ,459 Total liabilities 67, ,704 Deferred Inflows of Resources: Unearned revenue 575, ,000 Fund balances: Nonspendable: Prepayments 4, , ,758 Committed: Special revenue funds - 3,951-3,951 Assigned: Capital projects funds ,124 11,124 Unassigned: General fund 183, ,427 Total fund balances 187,676 3, ,633 1,045,260 Total liabilities, deferred inflows of resources, and fund balances $830,380 $3,951 $853,633 $1,687,964 Fund balance reported above - Governmental Funds (Modified Accrual) $1,045,260 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources, and therefore, are not reported as assets in the governmental funds. 1,942,414 Long-term liabilities are not due and payable in the current period, and therefore, are not reported in the funds. Compensated absences (47,498) Net pension liability (483,843) Deferred outflows of resources related to the Department's proportionate share of GERF and PEPPF pensions. 777,095 Deferred inflows of resources related to the Department's proportionate share of GERF and PEPPF pensions. (803,641) Net position of governmental activities $2,429,787 The accompanying notes are an integral part of these financial statements. 22

31 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES Statement 4 GOVERNMENTAL FUNDS For The Year Ended December 31, 2017 Capital Total Grant Equipment Governmental General Fund Fund Funds Revenues: Licenses and permits $80 $ - $ - $80 Intergovernmental - 232, ,147 Charges for services 1,218, ,218,366 Investment income 3, ,972 Other revenues 15, ,994 Total revenues 1,238, , ,470,559 Expenditures: Current: Public safety 941, ,451 52,226 1,222,303 Capital outlay ,624 27,624 Total expenditures 941, ,451 79,850 1,249,927 Revenues over (under) expenditures 296,486 3,696 (79,550) 220,632 Other financing sources (uses): Transfers in , ,508 Transfers out (281,508) - - (281,508) Proceeds from sale of capital assets ,000 30,000 Total other financing sources (uses) (281,508) 0 311,508 30,000 Net change in fund balances 14,978 3, , ,632 Fund balances - January 1 172, , ,628 Fund balances - December 31 $187,676 $3,951 $853,633 $1,045,260 The accompanying notes are an integral part of these financial statements. 23

32 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, Statement 5 AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For The Year Ended December 31, 2017 Total Net Change in Fund Balance - Governmental Funds (Modified Accrual Amount) $250,632 Amounts reported for governmental activities in the statement of activities are different because: Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. Capital outlays 27,624 Capitalized current expenditures 8,968 Depreciation expense (107,960) Asset disposals (27,274) Compensated absences are recognized as paid in the governmental funds but recognized as the expense is incurred in the statement of activities. (26,673) Governmental funds report pension contributions as expenditures, however, pension expense is reported in the statement of activities. This is the amount by which pension expense exceeded pension contributions: Pension expense (86,898) 2017 Change in Net Position - Governmental Activities $38,419 The accompanying notes are an integral part of these financial statements. 24

33 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - Statement 6 BUDGET AND ACTUAL GENERAL FUND For The Year Ended December 31, 2017 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues: Licenses and permits $3,000 $3,000 $80 ($2,920) Charges for services 1,219,031 1,219,031 1,218,366 (665) Investment income 1,000 1,000 3,972 2,972 Other revenues ,694 15,694 Total revenues 1,223,031 1,223,031 1,238,112 15,081 Expenditures: Public safety: Fire: Personal services 742, , ,795 (39,262) Supplies 64,500 64,500 42,699 (21,801) Other services and charges 183, , ,132 12,209 Total expenditures 990, , ,626 (48,854) Revenues over (under) expenditures 232, , ,486 63,935 Other financing sources (uses): Transfers out (232,551) (232,551) (281,508) (48,957) Total other financing sources (uses) (232,551) (232,551) (281,508) (48,957) Net change in fund balances ,978 14,978 Fund balances - January 1 172,698 Fund balances - December 31 $187,676 The accompanying notes are an integral part of these financial statements. 25

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35 NOTES TO FINANCIAL STATEMENTS December 31, 2017 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the Anoka-Champlin Fire Department (the Association) conform to accounting principles generally accepted in the United States of America (GAAP) applicable to governmental units. The following is a summary of the significant accounting policies. A. REPORTING ENTITY The Anoka-Champlin Fire Department and the City of Anoka, Minnesota participate in a joint venture to provide fire protection services to the residents of the respective cities. The Anoka-Champlin Fire Department was created pursuant to an agreement dated March 20, The terms of the agreement provide for a 49% and 51% undivided equity interest for the City of Champlin and the City of Anoka, respectively. The Anoka-Champlin Fire Department (the Fire Department) is responsible for the administration and daily operations of the fire department. Each City is responsible for their proportionate share of the cost of the fire department s operations. It is governed by an appointed Board consisting of one Councilmember from each City, one staff member from each City and one at-large member who is not a resident nor employed by either City. The Fire Department has no component units. B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the fire department. For the most part the effect of interfund activity has been removed from these statements. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds. There are no proprietary funds or fiduciary funds. Major individual governmental funds are reported as separate columns in the fund financial statements. 27

36 NOTES TO FINANCIAL STATEMENTS December 31, 2017 C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION The government-wide 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. 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. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Anoka-Champlin Fire Department considers all revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Interest associated with the current fiscal period is considered to be susceptible to accrual and so has been recognized as revenue of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the Fire Department. The Anoka-Champlin Fire Department reports the following major governmental funds: The general fund is the Fire Department 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 grant fund accounts for grants received by the department used for designated purposes. The capital equipment fund accounts for all capital purchases of the department. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the Anoka-Champlin Fire Department s policy to use restricted resources first; then unrestricted resources, as they are needed. 28

37 NOTES TO FINANCIAL STATEMENTS December 31, 2017 D. USE OF ESTIMATES The preparation of financial statements in accordance with GAAP requires management to make estimates that affect amounts reported in the financial statements during the reporting period. Actual results could differ from such estimates. E. DEPOSITS AND INVESTMENTS The Fire Department s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Investments are stated at fair market value. The Fire Department may invest idle funds as authorized investments by Minnesota Statutes as follows: a) Direct obligations or obligations guaranteed by the United States or its agencies excluding highrisk mortgage-backed securities. b) General obligations of the State of Minnesota or any of its municipalities that meet specified ratings. c) Commercial paper issued by United States corporation or their Canadian subsidiaries, rated in the highest quality category by two rating agencies, and maturing in 270 days or less. d) Repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York, or certain Minnesota securities brokerdealers. e) Guaranteed investment contracts (gic s) issued or guaranteed by United States commercial banks or domestic branches or foreign banks or United States insurance companies if the credit quality of the issuer or guarantor meets certain rating requirements. Cash balances from all funds of the Fire Department are combined and invested to the extent available in allowable investments. Investments are stated at fair value, based on quoted market prices. F. PREPAID ITEMS Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements and are recorded as expenditures when consumed rather than when purchased. 29

38 NOTES TO FINANCIAL STATEMENTS December 31, 2017 G. CAPITAL ASSETS Capital assets, which include property, plant and equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items) are reported in the applicable governmental activities columns in the government-wide financial statements. Capital assets are defined by the Fire Department as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Property, plant, and equipment is depreciated using the straight line method over the following estimated useful lives: Assets Years Engines 30 Machinery and equipment 5-10 H. DEFERRED OUTFLOWS/INFLOWS OF RESOURCES In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The Fire Department has outflows related to the net pension liability. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents the acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Fire Department has inflows related to the net pension liability. I. COMPENSATED ABSENCES It is the Fire Department s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Employees are entitled to one-third of the balance of their accumulated sick leave at the time of separation of employment, providing the employee has three or more years of service with the Fire Department. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements. 30

39 NOTES TO FINANCIAL STATEMENTS December 31, 2017 J. LONG-TERM OBLIGATIONS The Anoka-Champlin Fire Department has no long-term obligations. K. PENSIONS For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from PERA s fiduciary net position have been determined on the same basis as they are reported by PERA except that PERA s fiscal year end is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. L. NET POSITION/FUND BALANCE 1. Net position flow assumption Sometimes the Fire Department will fund outlays for a particular purpose from both restricted and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government-wide fund statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the Fire Department s policy to consider restricted net position to have been depleted before unrestricted net position is applied. 2. Fund balance flow assumptions Sometimes the Fire Department will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the Fire Department s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. 3. Fund balance policies In the fund financial statements, governmental funds report fund balance in classifications that disclose constraints for which amounts in those funds can be spent. These classifications are as follows: Nonspendable consists of the amounts that are not in spendable form, such as prepaid items. 31

40 NOTES TO FINANCIAL STATEMENTS December 31, 2017 Restricted consists of amounts related to externally imposed constraints established by creditors, grantors or contributors; or constraints imposed by state statutory provisions. Committed consists of internally imposed constraints. These constraints are established by Resolution of the Anoka-Champlin Fire Board. Assigned consists of internally imposed constraints. These constraints reflect the specific purpose for which it is the Fire Department s intended use. These constraints are established by resolution of the Anoka-Champlin Fire Board and/or management. The Fire Chief and Finance Director are authorized to establish assignments of fund balance. Unassigned is the residual classification for the general fund and also reflects negative residual amounts in other funds. At December 31, 2017, a summary of the governmental fund balance classifications are as follows: Capital Total Grant Equipment Governmental General Fund Fund Funds Nonspendable: Prepayments $4,249 $ - $842,509 $846,758 Committed for: Public safety training - 3,951-3,951 Assigned ,124 11,124 Unassigned 183, ,427 Total $187,676 $3,951 $853,633 $1,045, Minimum Fund Balance Policy The Fire Department has a fund balance policy for the General Fund. The policy establishes a year-end targeted unassigned fund balance amount for cash-flow timing needs (working capital) in the range of 15% to 25% of subsequent years budgeted expenditures. This is sufficant to support operations untill contributions are recieved from both Cites during the first quarter of the year at December 31, The unassigned fund balance was 17.5% of 298, budgeted expenditures. 32

41 NOTES TO FINANCIAL STATEMENTS December 31, 2017 The specific revenue source of each special revenue fund and the specific purposes for which they are assigned are as follows: Fund Specific Revenue Sources Restricted to: Grant Fund Public Safety Grants Training/grant specified Note 3 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. BUDGETARY INFORMATION The Fire Chief submits to the Anoka-Champlin Fire Board a proposed operating budget for the fiscal year commencing on January 1 of the following year. At least one special Fire Board meeting is conducted to obtain public comments. The Anoka-Champlin Fire Board annually adopts budgets prior to September 1 for the general and capital funds. The budgets are prepared by fund, function and activity. The budgets are adopted on a basis consistent with generally accepted accounting principles and all appropriations lapse at the end of the budget year to the extent that they have not been expended. Total expenditures appropriated in the budget resolution may not legally exceed estimated revenues available from various sources. If the governing boards of the City of Anoka and the City of Champlin disagree on budget approval, then they shall convene a meeting of the two City Councils to consider the matter. Until the new budget is approved by both cities, continuing department expenditures shall be in accord with the last approved budget. Formal budgetary integration is employed as a management control device during the year. Budget revisions between activities may be made by the Fire Chief. Budget revisions at the department and fund levels are authorized by the Anoka-Champlin Fire Board. The legal level of budgetary control is therefore at the department level. The Fire Department does not use encumbrance accounting. 33

42 NOTES TO FINANCIAL STATEMENTS December 31, 2017 Note 4 DEPOSITS AND INVESTMENTS As of December 31, 2017, the Fire Department had the following investments: Investment Type Maturity (Years) Fair Value Less Than One 1-2 Certificates of deposit $494,097 $247,191 $246,906 Money market mutual funds 4,850 4,850 - Total fair value $498,947 $252,041 $246,906 Following is a reconciliation of the Fire Department s cash and investment balances at December 31, 2017: Deposits $310,539 Investments 498,947 Total $809,486 Fair Value Hierarchy. Investments are stated at fair value within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. The hierarchy has three levels. Level 1 investments are valued using inputs that are based on quoted prices in active markets for identical assets. Level 2 investments are valued using inputs that are based on quoted prices for similar assets or inputs that are observable, either directly or indirectly. Level 3 investments are valued using inputs that are unobservable. The Department has the following recurring fair value measurements as of December 31, 2017: Negotiable certificates of deposit are valued using Level 2 inputs, significant other observable inputs. Money market mutual funds are investments not categorized. Interest rate risk. In accordance with its investment policy, the Fire Department manages its exposure to declines in fair values by: Structuring the investment portfolio so that no more than 50 percent of the portfolio is placed in longterm investments that have maturities exceeding five years, and no more than 25 percent of the portfolio is placed in long-term investments that have maturities exceeding seven years. At least 5 percent of the Fire Department s portfolio is kept in investments that are available on a daily basis without loss of principal. 34