2 meeting at a workshop at 5:15 2024 2024 did I say 2022 that's when I started yeah off to a good start council member schwe here council member Wong here council member nordby is absent mayor mongi is absent acting mayor Cole here in 2022 uh adopt the agenda is there a motion so moved do I have a second second all those in favor say I I I apposed carries topics Mr par thank you mayor uh topics tonight we have the review of the 2023 financial report with the city's audit firm Maloy or mm KR we have Jackie here this evening but it will turn it over to U Mr Dan Winnick our finance director to kick it off well good evening uh acting mayor Cole council member schweer and council member Wong um first of all I want to start off by just saying thank you and the thank you is for for your belief and and entrusting me with the finances of the city of North St Paul I also have a thank you for our city manager frandle for his day-to-day leadership I want to thank each and every one of our department heads because they are very consera conservative um they look um at their budget on a regular basis to make sure that they're no they're not overspending um uh bottom line is they're very frugal I think you're going to see that in the results tonight um for the 2023 um budget and then I want to thank all of the staff and especially the staff of the finance department because the preparation of this um financial statement would not be a uh would not be possible without all of their support and their assistance in in G Gathering all of this data um I think you're going to be very pleased with the results um for the 2023 budget um and I think um before this meeting started uh uh the acting mayor Cole uh made a comment about how things have changed um in the past uh three years from the audit perspective and I think you're going to see that um there's only one item that uh we've been written up on too um and you're going to see that we're in a much better financial position um so I think those are all very very positives before you tonight you're going to see the annual comprehensive annual report um you're going to see a write up on the corrective action plans and summary schedule of proit audit findings all of the prior audit findings were not um repetitive this year they were all corrected in the prior year um I mean in last year in 2023 you're also going to see see a report called the special purpose audit reports and then you're going to have the management report uh we'll be going through the management report it really does an overall summary um which it'll end up talking about the general fund and it'll talk about um your Enterprise funds and kind of your position of of how things have improved and where you're at with that I'm going to be turning that this over to um our audit uh firm our audit firm is mmkr um it's led by the principal Jackie eagle um her and her team um have been here um and they work diligently uh they come and visit us in January they come and visit us in February and they come and visit us and wrap it up in in March their audit um so we get to know them uh very well they give us a lot of great suggestions I look at it as a team approach whatever comments they have we try to incorporate to make um our organization a better organization so with that I'm going to turn it over to Jackie and after she's done um questions and answers from uh city council thank you thanks all right well thank you for thank you thank you for having me tonight uh as Dan said my name is Jackie heagle and I am a principal with mmkr the audit firm that did perform the independent audit for the year ended 2023 um as Dan mentioned you do have the three documents in front of you the annual comprehensive financial report which is a city document um as auditor we issue an opinion on that financial statement noting that it is fairly stated then there's a special purpose report that summarizes the internal control uh reports and the Minnesota legal compliance reports um that you're required we're required to app on and you're required to submit that to the state auditor's office and then lastly is that management report which is our mmkr document that summarizes the overall results of the audit and that's the document that I'm going to speak from tonight so as I'm referencing page numbers uh we can walk through that document if you want to follow along so on page one of that management report just talking through the audit summary a little bit um our responsibility as Auditors like I said is to issue an opinion on that financial statement uh to note that it is fairly uh stated at your end um one comment I just want to make that you're aware of if you ever spend more than 750,000 in federal funding there's a separate audit on those federal funds for the 20 23 year the city of North St Paul did not meet that threshold so there was not a separate single audit uh but just a reminder that um you do have your arpa funds about 1.3 million that are required to be spent out in 24 um so as we move forward into next year's audit there'll be some different opinions relating with that as you move forward uh to summarize the audit results we issued a unmodified opinion on that basic financial statement uh that is a clean opinion that's the opinion you are looking for um as you're reading through that report you're going to notice that there was a new audit standard that was required to be implemented in the 20123 audit year um all local governments are required to implement gasby statement Number 96 um which is a subscription based Information Technology Arrangement standard so the city was required to go through all the different subscriptions they have if you think of your financial software as various license that you have and any long-term uh material subscriptions you are now required to show in your financial statement as a asset because as a city you have a right to use that software and a liability because you're paying a fee to use that so that is a new audit standard a change uh that was implemented in 23 and as we continue to move forward uh for our review over the internal controls over the financials we had no deficiencies to report in that area and no non-compliance uh to report with government auditing standards when you're looking at that Minnesota legal compliance opinion you'll note that we did have one finding to report in that area um that relates with the state statutes um over Group insurance so in the current year the did uh the city did enter into a new insurance contract relating with Dental Group Insurance um and you are required to follow statutes of publishing in the newspaper and going out for an official RFP when you're changing uh Group Insurance uh so so just a reminder of that as you move forward moving on to page two I'll just comment a little bit about um every year as part of an audit we are required to follow up on any findings you had in the prior year um so as part of our 23 audit we reviewed any findings from the 22 audit um and did note that they were all cleared up uh so in the prior year there was a finding and internal control comment related with the limited segregation of Duties you were down on position um that position was hired in 23 um so that did clear up that comment obviously as we move forward um I know that position uh has left again so I think the city is working to maybe shift uh duties around and tasks around to try to keep the uh duties segregated as best as possible so it's important to continue to review that uh within your finance department and then the other comment from last year was making sure that vendor bills are being paid within that 35-day payment period and the testing that you know we sample so many invoices each year and review those all the ones that we reviewed were all properly paid timely so those findings were all cleared up in the current year other observations and recommendations just want to comment on um some of these comments you've seen in previous audits if you've been on the council so I'll just a highle touch base on them um there are a few funds that the city does have where there's deficit uh net position or fund balances um there's three special Revenue funds that have a deficit fund Equity at yearend uh there's a capital project fund for MSA funding that has a deficit and one Enterprise fund at yearend with the deficit net position and there's several reasons that can cause these deficits you know the timing of the funding where sometimes the expenditures take place before the funding's coming in um but just wanted to point those out as a reminder um to continue to monitor those funds to make sure um that the funding is coming in to recover those deficits uh the second common is the fiber optic fund um this is something that you know every year we briefly discuss about um but that is one of the funds that has a significant deficit on restricted net position um of about 2 million so as a city just making sure uh you're reviewing the plans on what that fund is doing as you continue to move forward and then the last comment just want to comment on um relates with deposit and escro reconciliations um so we're recommending that the city RWS your policies and procedures in that area um making sure that you have proper reconciliations over those deposits and those ESC accounts as you're getting funds and holding them and having to re remit them back um making sure that somebody is tracking that and reconciling that to the city's Financial software that I'm going to move forward then a few pages over to page six of the management report um I'll just comments on a couple uh tax graphs that we have in here on page six we show a graph of the taxable market value of the city um just given some Trend history for the past 10 years um and the market value for the 2023 year went up about 177% and if you flip to the top of the next page there's a similar graph just of the tax capacity and you're seeing for the 23 year uh the city's tax capacity increased about 12.3% um and you are one of the earlier City audits being presented but this graph is very similar to what we're seeing everywhere else with the market valuations going up moving on to page eight then on this page we summarize the governmental fund balances from 2022 to 2023 if you're looking at the top part of that table it's shown by the classification of fund balance so the dollars that are nonspendable restricted committed assigned down to the unassigned bucket the bottom portion of that table shows it by what we call the major funds with all the other funds combined into that non- major row so overall when you're looking at all the city's governmental funds from 22 to 23 you saw a slight decrease of about 150,000 um breaking it out a little bit you're seeing in the top part your restricted fund balance going down which correlates to the bottom portion of that table the street Improvement fund um and that decrease in that fund balance is just spending down Bond proceeds that were issued in a previous year and then you're seeing that offset if you're looking at the top portion of that table in the unassigned fund balance um and that unassigned increase just due to the improved financial position of the general fund as well as some of the non- major funds in the current year moving on to page nine and 10 um on here we have some Statewide data uh page nine shows all the government Al funds revenue on a per capita basis and given some Statewide data to compare it to the 2022 Statewide data is still not available so we are comparing it to 2021 overall though the city's revenue on a per capita basis was at $1,091 that was an increase of about $105 per capita compared to the prior year uh the largest increase you're seeing is that increase in that other line that other Revenue which is the very last line that's up about $60 per capita a lot of that is just in the investment earnings the timing of the market with the fair market value adjustment at yearn 23 compared to yearn 22 um you also saw an increase in your property tax levy um and then the tax increments going up with the increased valuations looking on page 10 then that summarizes similar information just the governmental fund expenditures per capita so overall the total expenditures were 1,214 which is an increase of about $85 from the prior year um if you're looking at the top portion of that table that shows the current expenditures by the various functions overall that's up about $33 per capita most of that's in that all other line um and that's just due to increased Economic Development payments in the current year compared to the previous year and then your capital outlay construction that middle lines up about $45 per capita and that's just the timing of various Street projects that take place from year to year then moving forward on to page 11 of the management report uh now this will start focusing in on just specifically the general fund the primary operating fund of the city so page 11 shows a graph of the general fund financial position for the past 5 years it shows that fund balance the cash balance as well as the expenditures overall the cash and investment balance at yearend was about 5.6 million increase of about 850,000 from the prior year and then overall the total fund balance in the general fund saw an increase of about 76,000 and that was compared to uh a balance a budget that was balanced that was approved by city council and overall that general fund fund balance ended the year at about 5 million the city does have a fund balance policies uh noting that you'll strive to maintain a minimum unassigned general fund balance of 50% and the city was in compliance with that this year at year end the general fund fund balance was at unassigned fund balance was at 50% of the subsequent Year's expenditures so you were in line with your fund balance policy at yearn 23 moving on to page 12 this summarizes specifically the general fund revenues that top graph there shows it uh current you're actual compared to budget and then the bottom graph shows 5 years of history of the revenues overall the revenues uh for the general fund were about 8.6 million and that was about 320,000 over budget uh the main budget variances you're seeing was in that intergovernmental revenues other revenues with investment earnings and license and permits and most of that's just due to uh conservative budgeting not knowing you know what your investment earnings or license and permits will be from year to year and overall the general fund revenues saw an increase of about 640,000 from the prior year uh the largest changes you're seeing was in taxes that's directly related to The increased Levy that was approved by city council and also the all other once again with the increase in the investment earnings just due to the improved interest rates and improved market and then that was Offset you saw your license and permits uh go down so last year there was more license and permits I believe there was a hail storm um and more permits that were being issued in 22 compared to 23 moving on to page 13 then this shows similar graphs here just of the general fund expenditures by the various functions overall the total general fund expenditures were about 8.7 million for the general fund in 2023 um that was about 390,000 under budget U most of the budget variances that you're seeing are just uh due to vacant positions in the current year of in the general government public safety and Public Works uh functions um and then when you're looking at the increase from prior year you're seeing an increase of about 500,000 um most of that Public Safety you saw an increase just due to the Personnel cost in both the police protection and the fire departments in the current year and also the increase in the general government expenditures due to increased Personnel costs in the finance department with the additional higher in the 2023 year then moving on to page 14 starting on this page starts our discussion of the Enterprise fund operations um so on this page this shows a snapshot of that change in the financial position of all the Enterprise funds from 2022 to 2023 overall in these Enterprise funds you saw an increase of just under 3.7 million um if you look at the top portion of that graph that show or the table it shows up by classification you're seeing that net investment in capital assets go up about 1.4 million that's just due to the continued investment in the utility infrastructure and the capital assets uh streets and everything within the city and then the unrestricted you're seeing go up about 2.2 million that's directly related with the Positive operating results of those funds and as you look at the bottom portion of the table you're going to see each of those Enterprise funds the electric water surface water all split out separately uh showing those positive operating results as we move forward here we'll talk through each of those Enterprise funds so starting with the electric fund on page 15 um have a graph and a table just summarizing operations for the past 5 years of the electric fund um overall you saw your gross profit in this fund at about 4.4 million this year that's up about 37 ,000 from the prior year a lot of that is due to the rate increase in the electric fund um and then you have your other operating expenses which are comparable to Prior year you're seeing your increased other income which is that investment earnings again the improved Market there but overall the electric fund end of the year uh before any transfers with income of about 2 million and I'm going to skip over to page 17 which continues through the discussion of each uh Enterprise fund page 17 here shows the water fund for the past 5 years had good operating results you're seeing for the 2023 year the operating income was just over a million dollars in that water fund um overall the operating revenues increased from the prior year U most of that was consumption related uh causing that increase and then overall your expenses were very comparable to last year within about $1,300 um but like I said end of the year with operating income of about a million do um and then before any transfers about 1.1 million yet some non-operating Revenue the investment earnings once again so good operations there and moving with the surface water fund on page 18 uh positive operations here as well you saw for the 2023 year the fund ended with operating income of about 320,000 overall your operating revenues increase slightly about 11,000 from the prior year just due to the increased number of customers from 22 to 23 um and then overall your operating expenses saw an increase of about 880,000 just primarily in some Professional Service cost in the current year uh but overall positive operations ending the year with positive operating income page 19 then moving on to the Wastewater fund once again you saw some good positive operations in this fund and in the year with operating income of just over 600,000 your operating revenues at the year end were about 2.5 million saw an increase of about 102,000 from the prior year um most of that was just due to a rate increase in the current year and then your expenses increased slightly but very comparable again to Prior year uh in the nonoperating revenue here I'll just comment um that the investment earning was a big part of the increase but the city also does receive a grant from met Council in this fund uh relating with some infiltration uh projects so grant money received uh flows through that non-operating Revenue line uh page 20 then is the fiber optic fund of the city um at year end here you ended the year with the deficit net position um but saw an improvement from prior year slightly of about 54,000 uh but like I said it's still in a deficit a net position unrestricted of the 2 million um so as I've already discussed just it's critical for the city to continue to monitor the operations of this fund and the plan continuing As you move forward um and then the solid waste fund is the last Enterprise fund of the city on page 21 um showing here your operating revenues ended the year at about a million uh increase of about 23,00 from the prior year most of that's directly related with the number of customers so saw an increase in the customers and then the operating expenses increased about 105,000 from prior year a mainly and some professional service costs so overall for in this fund for 23 you saw an operating loss of about 18,000 um but then you did receive your non-operating revenues once again that investment earnings so that ended with income before transfers of about 40,000 and then I'm starting on page 22 this last table I have here this summarizes what we call the government-wide financial statements um so as a city you operate uh in all the funds of the financial statements and in your uh act for report you have in front of you uh there's the second reporting layer model which are the front statements what we call the government-wide financial statements and it's where you take all the different governmental funds of the city all the different Enterprise funds of the city roll it up into one snapshot um called the statement of net position on these government-wide financial statements um overall when you roll everything up and I should say on this statement here you're also seeing all the capital assets of the activity record of the city recorded as well as any long-term liabilities that the city has so any bonds any pensions um post-employment benefit obligations they're all reflected in this government-wide financial statement so overall that total net position you saw an increase of about 6.2 million from the prior year um if you look the top portion shows governmental activities versus the business type activities um with your Eda at the bottom there the overall governmental activities though you're seeing an increase of about 2.5 million um you're seeing increases in that net investment in capital assets once again that's just the continued investment into the infrastructure within the city the various Capital assets you're seeing your restricted net position go up about $800,000 most of that is just due to the re the new restriction for the public safety dollars uh that local governments received in the current year that is all restricted to be spent on Public Safety um so you're seeing the increase in that bucket and the unrestricted directly related you know with the improved financial performance in that general fund and then the business type activities is that increase of 3.6 million in net position um which is consistent uh with the discussion we just had on each of the various Enterprise funds that we walked through um so with that I mean that kind of summarizes a high level results of the audit so overall very positive operating results in all the funds um your general fund like I said ended about 700,000 better than budget um you saw your Enterprise funds with all positive operations in the current year and then just the one audit finding for 2023 um relating with group health insurance um as a reminder As you move forward and continue to do uh changes in group insurance so with that I can open it up if there are any questions thank you for your presentation it's good news overall and um I don't have any questions this time thank you Jackie I apologize that's okay everything looks fantastic yeah nice have Dan and your team and it's not just one person absolutely it's a team effort do do want to make a clarification on what we were written up for um as far as the group health insurance so we were in compliance um with our solicitation for health insurance what ended up coming out was at the 11th Hour um the um firm that we decided to go toward to with the health insurance um offered us if we were to go and add group Dental even though we're in violation um they offered us a reduction um they offered us better Dental rates than we currently were at plus they offered us an additional 2% reduction in our health insurance and so we made the decision to to do that even though it is in violation we should have included both the health and the dental insurance in our solicitation um so we are in air but to kind of give a little bit more of a clarification um to that but um like I said we ended up in a very good position um we corrected um uh writeups that we had in the prior year um again we're moving in the right on the right path uh a lot of it has to do with the planning that we that we do and and uh guess what we we get another opportunity of planning as we're working on the the budget as we as we move forward here but again I sincerely mean this I thank you all for all of your support and your help um because just like the team that's behind me in the finance department and all the department heads and all their staff none of this comes together and we don't move the needle into better financial position without your support um so thank you very very much I guess we're up to motion to adjer so moved your honor second um all those in favor say I I opposed wer2