Governmental Services Partner City of Jordan 2017 Audit Kyle Meyers Governmental Services Partner kyle.meyers@aemcpas.com 507-304-6801

2017 Audit Results Audit Opinion – unmodified or “clean” Findings 1) Segregation of duties findings (need for compensating controls because of small number of staff) Review of cash disbursements Cancelled checks, bank statements, voided checks Review of cash receipts Monthly receipt information Review of utility billing Customer adjustments Review of payroll Payroll registers, earnings records, payroll reports, etc. 2) Material audit adjustment – related to capital projects accounting 3) Dated outstanding checks Review of outstanding checks to ensure checks held for more than three years are reported and paid or delivered to the state Commissioner of Commerce.

2017 Financial Results The City’s total net position increased by $1,403,221 compared to an increase of $484,702 in the previous year. Increase in capital grants and contributions and property taxes contributed to this change. As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $7,309,902, an increase of $705,895 in comparison with the prior year. This increase is attributable to bond proceeds and MSA funding received for project costs during the year. Approximately 3.5 percent of ending fund balances, $258,193, is available for spending at the City’s discretion. The remainder of fund balance, $7,051,709, is not available for new spending because it is either 1) nonspendable ($731,531), 2 ) restricted ($7,051,709), 3) committed ($542,599), or 4) assigned ($1,231,589). The City’s total debt increased by $488,000, or 1.9 percent during the current fiscal year. The key factor in this increase was the retirement of $6,347,000 in long-term debt during the year along with $6,835,000 in new debt issues during the year.

New Standards Implemented None.

General Fund Unassigned Fund Balance as a Percent of Next Year’s Budget Many other organizations, including the Office of the State Auditor (the OSA) and League of Minnesota Cities (LMC) recommend that a fund balance reserve be anywhere from 35 to 50 percent of planned expenditures.

General Fund Operations Some of the larger budget variances are as follows: Municipal street aid was under budget by $153,172. Property taxes exceeded budgeted amounts by $40,677. Capital outlay for general government were under budget by $322,148 due to the timing of projects. Transfers out were over budget by $582,082 due to financing various capital project costs.

General Fund Revenues By Source

General Fund Expenditures by Program

Special Revenue Funds

Debt Service Funds

The annual debt service requirements for the next 10 years for the debt detailed above are as follows :    

Capital Projects Funds

Water Utility Fund Cash Flows

Water Utility Fund Cash Balances Cash and investment balances in the fund increased in 2017. Cash balances have been decreasing over the past several years and it appears that, in the past years, operations were not providing enough cash flow to pay operating and debt costs, but this changed during the current year due to rate changes made this year. It is important to continuously monitor rates to ensure they are sufficient to maintain reserves, pay debt and keep up with increasing system costs. The minimum target cash balance is based off of 25 percent of operating costs plus next year’s debt payments. The above graphs do not reflect escrow activity. Escrow balances and bonds payable for the past four years are shown below.

Sewer Utility Fund Cash Flows

Sewer Utility Fund Cash Balances Cash and investment balances in the fund increased in 2017. This year, it appears that operations have been able to provide cash to cover costs due to increased rates. It is important to continuously monitor rates to ensure they are sufficient to maintain reserves, pay debt and keep up with increasing system costs. The minimum target cash balance is based off of 25 percent of operating costs plus next year’s debt payments. The above graphs do not reflect escrow activity. Escrow balances and bonds payable for the past four years are shown below.

Storm Sewer Utility Fund Cash Flows

Storm Sewer Utility Fund Cash Balances Although there is a healthy cash balance, it appears that operations are not providing enough cash flow to pay operating and debt costs. It is important to continuously monitor rates to ensure they are sufficient to maintain reserves, pay debt and keep up with increasing system costs. The minimum target cash balance is based off of 25 percent of operating costs plus next year’s debt payments. The above graphs do not reflect escrow activity. Escrow balances and bonds payable for the past four years are shown below.

Peer Group Ratios

Future Accounting Standards GASB Statement No. 75 - Accounting and Financial Reporting for Postemployment Benefit Plans Other than Pensions (12/31/18) GASB Statement No. 83 - Certain Asset Retirement Obligations (12/31/19) GASB Statement No. 84 - Fiduciary Activities (12/31/19) GASB Statement No. 85 - Omnibus 2017 (12/31/18) GASB Statement No. 86 - Certain Debt Extinguishment Issues (12/31/18) GASB Statement No. 87 - Leases (12/31/20)

Thanks! We appreciate the opportunity to serve the City of Jordan. Thanks to the City staff for their assistance during the audit process.