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III.2. 2015 Comprehensive Annual Financial Report; Harkess (Memo)CITY OF HOPKINS MEMORANDUM Date: August 16, 2016 To: Mayor & City Council From: Christine Harkess, Finance Director Subject: 2015 Comprehensive Annual Financial Report (CAFR) Our auditors, Dennis Hoogeveen, Principal and John Lorenzini, Manager of the audit firm CliftonLarsonAllen, LLC will be in attendance to present the 2015 Comprehensive Annual Financial Report (CAFR) and the results of their audit. Attached is their presentation. The audit due to its size is being provided under separate cover and can be accessed on the City website on the following page: http://www.hopkinsmn.com/departments/finance/index.php . A copy is also available to the public in the City Hall lobby. Supporting Information  Power Point Presentation FINANCE DEPARTMENT 8/10/2016 1 WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. | ©2016 CliftonLarsonAllen LLP City of Hopkins Audit Results and Communications Dennis Hoogeveen, Principal John Lorenzini, Manager ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P Audit Results 2 8/10/2016 2 ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P WEALTH ADVISORY  |  OUTSOURCING |  AUDIT, TAX, AND CONSULTING Audit Results •T h e City has an unmodified (clean) opinion for the  December 31, 2015 financial statement audit. •O n e material weakness in internal control over  financial reporting – Audit Adjustments •O n e significant deficiency (single audit) •O n e Minnesota Legal Compliance Finding 3 ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P WEALTH ADVISORY  |  OUTSOURCING |  AUDIT, TAX, AND CONSULTING Audit Results •S i n g l e Audit required in 2015 (federal expenditures >  $750,000) •H i g h w a y Planning and Construction Program –C F D A  #20.205 (Mainstreet project) •O n e significant deficiency – Documentation of suspension or debarment verification 4 8/10/2016 3 ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P WEALTH ADVISORY  |  OUTSOURCING |  AUDIT, TAX, AND CONSULTING Audit Results •R e p o r t on Minnesota Legal Compliance (Minnesota  Legal Compliance Audit Guide for Cities promulgated  by the State Auditor). •O n e finding noted: – Missing verifications as required by “Responsible  Contractor” criteria, per Minnesota Statute §16C.285,  subdivision 3 (became effective January 1, 2015). 5 ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P Required Communications Highlights 6 8/10/2016 4 ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P WEALTH ADVISORY  |  OUTSOURCING |  AUDIT, TAX, AND CONSULTING Required Communications •N e w Accounting Policies –G A S B Statements No. 68 and 71 (Pensions) • Accounting Estimates •N o uncorrected misstatements • Corrected misstatements detected as a result of audit  procedures •N o difficulties or disagreements with management –E x t e n s i o n s received from Minnesota Office of the State  Auditor (OSA) and Government Finance Officers Association  (GFOA)7 ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P Financial Results 8 8/10/2016 5 ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P WEALTH ADVISORY  |  OUTSOURCING |  AUDIT, TAX, AND CONSULTING Financial Results • Implementation of GASB Statements No. 68 and 71  required recognition of the City’s proportionate share  of PERA’s GERF and PEPFF and Fire Relief Association  unfunded pension liability •R e c o g n i z e d in Govt‐Wide and Enterprise Fund  financials (which are full‐accrual). DOES NOT affect  governmental fund financials • Required an adjustment to beginning net position of  ($5.9M) 9 ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P WEALTH ADVISORY  |  OUTSOURCING |  AUDIT, TAX, AND CONSULTING Financial Results •P e n s i o n Recognition effect on Statement of Net  Position 10 Governmental Business‐Type Total Assets Net Pension Asset 688,087              ‐                      688,087        Deferred Pension Outflows 1,355,974         113,826             1,469,800    Liabilities Net Pension Liability (6,518,754)       (844,388)           (7,363,142)  Deferred Pension Inflows (843,495)           (82,636)             (926,131)      Net Effect on Net Position (5,318,188)       (813,198)           (6,131,386)  8/10/2016 6 ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P WEALTH ADVISORY  |  OUTSOURCING |  AUDIT, TAX, AND CONSULTING Financial Results • Governmental Funds fund balances totaled $26.9 million, an  increase of $1.8 million from 2014 – Primarily due to sale of 2015D bonds (proceeds unspent at year‐end) – 2015 Bonds issued included: TIF Refunding Debt ‐$11.695 million;  Street Reconstruction ‐$4.1 m; Tax Abatement ‐$2.94 million • Unassigned fund balance of the General Fund totaled $5.4  million or 48% of expenditures. • General Fund Revenues were $252,229 or 2% higher than  budget • General Fund Expenditures were within 0.16% of budget 11 ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P WEALTH ADVISORY  |  OUTSOURCING |  AUDIT, TAX, AND CONSULTING City PresentationFinancial Results ‐Revenues by Fund Type Enterprise 23% Internal Service  2% General 42% Special Revenue  19% Debt Service 9% Capital Project  5% 8/10/2016 7 ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P WEALTH ADVISORY  |  OUTSOURCING |  AUDIT, TAX, AND CONSULTING City PresentationFinancial Results ‐Expenditures Fund Type Enterprise 18% Internal Service  3% General 33% Special Revenue  8% Debt Service 9% Capital Project  29% ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P WEALTH ADVISORY  |  OUTSOURCING |  AUDIT, TAX, AND CONSULTING St a t e m e n t  of  Ne t  As s e t s (in thousands)2015 2014 Assets Cash and investments 30,222$ 31,517$ Taxes & special assessments receivable 3,880 4,561 Other receivables 2,170 1,102 Other assets 81,848 73,017 Deferred outflows 1,779 313 Total Assets 119,899$ 110,510$ Liabilities Accounts payable 2,372$ 2,082$ Accrued compensation 159 134 Other liabilities 648 3,032 Long term liabilities 53,303 36,227 Deferred inlows 926 - Total Liabilities 57,408$ 41,475$ Total Net Position 62,491$ 69,035$ Financial Results 8/10/2016 8 ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P WEALTH ADVISORY  |  OUTSOURCING |  AUDIT, TAX, AND CONSULTING St a t e m e n t  of  Ac t i v i t i e s Governmental Fund Types , (in thousands)2015 2014 Revenues Property taxes and assessments 13,960$ 13,908$ Charges for service 1,367 1,069 Operating grants & contributions 4,970 2,944 Capital grants & contributions 501 2,728 Grants & contributions not restricted 21 21 Other revenues 306 714 Total Revenues 21,125$ 21,384$ Expenditures General government 6,657$ 2,276$ Public safety 6,666 6,526 Health & welfare 185 171 Highways & streets 4,542 5,709 Urban redevelopment & housing 1,249 2,248 Culture & recreation 2,069 1,942 Interest on long-term debt 688 172 Transfers out 864 - Total Expenditures 22,920$ 19,044$ Change in Net Position (1,795)$ 2,340$ Financial Results ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P WEALTH ADVISORY  |  OUTSOURCING |  AUDIT, TAX, AND CONSULTING St a t e m e n t  of  Ac t i v i t i e s Proprietary Fund Types , (in thousands)2015 2014 Revenues Charges for service 5,705$ 5,521$ Operating grants & contributions 622 795 Capital grants & contributions - - Other revenues 87 25 Transfers In 864 - Total Revenues 7,278$ 6,341$ Expenses Water 1,699$ 1,541$ Sewer 2,061 2,042 Storm Sewer 394 509 Refuse 849 834 Pavilion/Ice Arena 463 460 Housing & Redevelopment Authority 610 626 Transfers - 493 Total Expenses 6,076$ 6,505$ Change in Net Position 1,202$ (164)$ Financial Results 8/10/2016 9 ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P WEALTH ADVISORY  |  OUTSOURCING |  AUDIT, TAX, AND CONSULTING • Governmental Accounting Standards Board Statement  No. 72 – Applicable for December 31, 2016 –F a i r value measurement and disclosures • Governmental Accounting Standards Board Statement  No. 77 – Applicable for December 31, 2016 –T a x Abatements • Governmental Accounting Standards Board Statement  Nos. 74 and 75 –# 7 4 Applicable December 31, 2017 –# 7 5 Applicable December 31, 2018 –O t h e r Postemployment Benefits17 Emerging Issues twitter.com/CLAconnectfacebook.com/ cliftonlarsonallen linkedin.com/company/ cliftonlarsonallen ©2 0 1 6  Cl i f t o n L a r s o n A l l e n   LL P CLAconnect.com Thank You! Dennis Hoogeveen, Principal (612) 397‐3063 Dennis.Hoogeveen@CLAconnect.com John Lorenzini, Manager (612) 397‐3268 John.Lorenzini@CLAconnect.com 18