city of becker annual financial report for the year …

CITY OF BECKER BECKER, MINNESOTA

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED

DECEMBER 31, 2011

THIS PAGE IS LEFT BLANK

INTENTIONALLY

CITY OF BECKER, MINNESOTA ANNUAL FINANCIAL REPORT

TABLE OF CONTENTS FOR THE YEAR ENDED DECEMBER 31, 2011

Page No. INTRODUCTORY SECTION Elected and Appointed Officials 7 FINANCIAL SECTION Independent Auditor’s Report 11 Management’s Discussion and Analysis 15 Basic Financial Statements Government-wide Financial Statements Statement of Net Assets 29 Statement of Activities 30 Fund Financial Statements Governmental Funds Balance Sheet 34 Reconciliation of the Balance Sheet to the Statement of Net Assets 37 Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) 38 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) to the Statement of Activities 40 General Fund Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 41 Community Center Statement of Revenues, Expenditures and Changes in Fund Deficits - Budget and Actual 43 Proprietary Funds Statements of Net Assets 44 Statements of Revenues, Expenses and Changes in Fund Net Assets 48 Statements of Cash Flows 50 Notes to the Financial Statements 55 Combining and Individual Fund Financial Statements and Schedules Nonmajor Governmental Funds Combining Balance Sheet 82 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 83 Nonmajor Special Revenue Funds Combining Balance Sheet 84 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances 85 Nonmajor Capital Projects Funds Combining Balance Sheet 86 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances (Deficits) 87 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 88 Debt Service Funds Combining Balance Sheet 92 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances 94 Summary Financial Report Revenues and Expenditures for General Operations 96

-1-


INTENTIONALLY

-2-

CITY OF BECKER, MINNESOTA ANNUAL FINANCIAL REPORT

TABLE OF CONTENTS - CONTINUED FOR THE YEAR ENDED DECEMBER 31, 2011

Page No. OTHER SCHEDULES AND REQUIRED REPORTS Report on Minnesota Legal Compliance 99 Report on Internal Control Over Financial Reporting and on compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 100 Schedule of Findings and Responses 102

-3-


INTENTIONALLY

-4-

INTRODUCTORY SECTION


FOR THE YEAR ENDED DECEMBER 31, 2011

-5-


INTENTIONALLY

-6-

CITY OF BECKER, MINNESOTA ELECTED AND APPOINTED OFFICIALS


Name Title Term Expires

Dave Graning Mayor 12/31/2012Phil Knutson Council Member 12/31/2014Lynette Brannan Council Member 12/31/2014Roger Bigalke Council Member 12/31/2012Tracy Bertram Council Member 12/31/2012

Name Title

Greg Pruszinske City AdministratorNancy Fiereck City Clerk

ELECTED

CITY OFFICIALS - APPOINTED

-7-


INTENTIONALLY

-8-

FINANCIAL SECTION



-9-


INTENTIONALLY

-10-

INDEPENDENT AUDITOR’S REPORT

Honorable Mayor and Council

City of Becker, Minnesota

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund,

and the aggregate remaining fund information of the City of Becker, Minnesota (the City), as of and for the year ended

December 31, 2011, which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial

statements are the responsibility of the City’s management. Our responsibility is to express opinions on these financial statements

based on our audit. The prior year comparative information has been derived from the City’s 2010 financial statements and, in the prior

audit report dated April 7, 2011, the prior auditor expressed unqualified opinions on the respective proprietary fund financial

statements.

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 provides a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the

governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of

December 31, 2011, and the respective changes in financial position and cash flows and the respective budgetary comparison for the

General fund, where applicable thereof, for the year then ended in conformity with accounting principles generally accepted in the

United States of America.

As described in the Note 7 to the basic financial statements, the City adopted the provisions of Governmental Accounting Standards

Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, for the year ended

December 31, 2011. Adoption of the provision of this statement results in significant changes to the classifications of the components

of fund balances.

In accordance with Government Auditing Standards, we have also issued our report dated April 24, 2012, on our consideration of the

City’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.

-11-


INTENTIONALLY

-12-

Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis on

starting on page 15 be presented to supplement the basic financial statements. Such information, although not a part of the basic

financial statements, is required by the Government 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.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s financial

statements as a whole. The introductory section and combining and individual fund financial statements and schedules listed in the

table of contents are presented for the purpose of additional analysis and are not a required part of the financial statements of the City.

The individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly

to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the

auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and

reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the

financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the

United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements

as a whole. The introductory section has not been subjected to the auditing procedures applied in the audit of the financial statements

and, accordingly, we do not express an opinion or provide any assurance on it.

April 24, 2012 ABDO, EICK & MEYERS, LLP

Minneapolis, Minnesota Certified Public Accountants

-13-


INTENTIONALLY

-14-

Management’s Discussion and Analysis

As management of the City of Becker, Minnesota (the City), we offer readers of the City’s financial statements this narrative overview

and analysis of the financial activities of the City for the fiscal year ended December 31, 2011.

Financial Highlights

The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $59,956,449. Of this amount,

$5,395,512 may be used to meet the City’s ongoing obligations to citizens and creditors.

The City’s total net assets decreased by $546,950.

At the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of

$18,196,094, an increase of $634,065 in comparison with the prior year. Approximately 65 percent of this total amount,

$11,875,736, is available for spending at the City’s discretion; $11,078,318 of the unrestricted amount has been assigned for

specific purposes.

At the end of the current fiscal year, total fund balance for the General fund was $1,187,734. Of this amount, $138,553 was

classified as nonspendable for prepaid items and due from other fund. Unrestricted fund balance for the General fund was

$1,049,181 or 41 percent of total General fund expenditures. Of this amount, $150,638 of the unrestricted balance was

assigned for specific purposes within the General fund.

The City’s total debt decreased by $3,549,096 or 12 percent during the current fiscal year.

-15-

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial

statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the

financial statements. This report also contains other supplemental information in addition to the basic financial statements themselves.

The financial statements also include notes that explain some of the information in the financial statements and provide more detailed

data. The statements are followed by a section of combining and individual fund financial statements and schedules that further

explain and support the information in the financial statements. Figure 1 shows how the required parts of this annual report are

arranged and relate to one another. In addition to these required elements, we have included a section with combining and individual

fund financial statements and schedules that provide details about nonmajor governmental funds, which are added together and

presented in single columns in the basic financial statements.

Figure 1

Required Components of the

City’s Annual Financial Report

Management's

Discussion and

Analysis

Basic Financial

Statements

Required

Supplementary

Information

Government-wide

Financial

Statements

Fund

Financial

Statements

Notes to the

Financial

Statements

Summary Detail

-16-

Figure 2 summarizes the major features of the City’s financial statements, including the portion of the City government they cover and

the types of information they contain. The remainder of this overview section of management’s discussion and analysis explains the

structure and contents of each of the statements.

Figure 2

Major features of the Government-wide and Fund Financial Statements

Fund Financial Statements

Government-wide

Statements

Governmental Funds Proprietary Funds

Scope Entire City government

(except fiduciary funds) and

the City’s component units

The activities of the City that

are not proprietary or

fiduciary, such as police, fire

and parks

Activities the City operates

similar to private businesses,

such as the water and sewer

system

Required financial statements Statement of Net Assets

Statement of Activities

Balance Sheet

Statement of Revenues,

Expenditures, and Changes

in Fund Balances

Statements of Net Assets

Statements of Revenues,

Expenses and Changes in

Fund Net Assets

Statements of Cash Flows

Accounting Basis and

measurement focus

Accrual accounting and

economic resources focus

Modified accrual accounting

and current financial resources

focus

Accrual accounting and

economic resources focus

Type of asset/liability

information

All assets and liabilities, both

financial and capital, and

short-term and long-term

Only assets expected to be

used up and liabilities that

come due during the year or

soon thereafter; no capital

assets included

All assets and liabilities, both

financial and capital, and

short-term and long-term

Type of in flow/out flow

information

All revenues and expenses

during year, regardless of

when cash is received or paid

Revenues for which cash is

received during or soon after

the end of the year;

expenditures when goods or

services have been received

and payment is due during the

year or soon thereafter

All revenues and expenses

during the year, regardless of

when cash is received or paid

Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad

overview of the City’s finances, in a manner similar to a private-sector business.

The statement of net assets presents information on all of the City’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 the

City is improving or deteriorating.

The statement of activities presents information showing how the City’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 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 distinguish functions of the City that are principally supported by taxes and

intergovernmental revenue (governmental activities) from other functions that are intended to recover all or a significant portion of

their costs through user fees and charges (business-type activities). The governmental activities of the City include general

government, public safety, public works, culture and recreation, economic development, LPI building lease and interest on long-term

debt. The business-type activities of the City include Water, Sewer, and Golf Course.

The government-wide financial statements include not only the City itself (known as the primary government), but also a legally

separate component unit for which the City is financially accountable. Financial information for the Economic Development Authority

(EDA) is reported as a separate special revenue fund. The EDA, although legally separate, functions for all practical purposes as a

department of the City, and therefore has been included as an integral part of the primary government.

The government-wide financial statements start on page 29 of this report.

-17-

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 City, like other state and local governments, uses fund accounting to ensure and

demonstrate compliance with finance-related legal requirements. All of the funds of the City 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 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 government-wide

financial statements. By doing so, readers may better understand the long-term impact by the government’s near-term financing

decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in

fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City maintains 16 individual governmental funds, five of which are Debt Service 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, Debt Service fund, Community Center fund, Revolving Capital fund, and the 2011 Industrial Park Street and Utility

Improvement fund, all of which are considered to be major funds. Data from the other governmental funds 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 or schedules elsewhere in this report.

The City adopts an annual appropriated budget for its General fund and special revenue funds. A budgetary comparison statement has

been provided for the General fund and Community Center fund, to demonstrate compliance with this budget.

The basic governmental fund financial statements start on page 34 of this report.

Proprietary fund. The City maintains one type of proprietary fund. Enterprise funds are used to report the same functions presented as

business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its Water, Sewer,

and Golf Course operations.

The Proprietary fund provides the same type of information as the government-wide financial statements, only in more detail. The

proprietary fund financial statements provide separate information for each of the enterprise funds which are considered to be major

funds of the City.

The basic proprietary fund financial statements start on page 44 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 government-wide and fund financial statements. The notes to the financial statements start on page 55 of this report.

Other information. The combining statements referred to earlier in connection with nonmajor governmental funds are presented

following the notes to financial statements. Combining and individual fund statements and schedules start on page 82 of this report.

-18-

Government-wide Financial Analysis

As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. In the case of the City,

assets exceeded liabilities by $59,956,449 at the close of the most recent fiscal year.

By far, the largest portion of the City’s net assets (75 percent) reflects its investment in capital assets (e.g., land, buildings, machinery

and equipment); less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to

provide services to citizens; consequently, these assets are not available for future spending. Although the City’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.

City of Becker’s Summary of Net Assets

Restated Increase Restated Increase

2011 2010 (Decrease) 2011 2010 (Decrease)

Assets

Current and other assets 21,102,450$ 19,210,496$ 1,891,954$ 4,648,164$ 6,231,156$ (1,582,992)$

Capital assets 22,669,741 26,117,574 (3,447,833) 39,294,302 40,221,327 (927,025)

Total assets 43,772,191 45,328,070 (1,555,879) 43,942,466 46,452,483 (2,510,017)

Liabilities

Long-term liabilities

outstanding 13,621,983 14,292,812 (670,829) 12,803,312 15,681,579 (2,878,267)

Other liabilities 1,055,720 996,452 59,268 277,193 306,311 (29,118)

Total liabilities 14,677,703 15,289,264 (611,561) 13,080,505 15,987,890 (2,907,385)

Net assets

Invested in capital assets,

net of related debt 18,290,203 13,772,226 4,517,977 26,547,563 24,587,376 1,960,187

Restricted 7,221,548 5,992,938 1,228,610 2,501,623 4,122,872 (1,621,249)

Unrestricted 3,582,737 10,273,642 (6,690,905) 1,812,775 1,754,345 58,430

Total net assets 29,094,488$ 30,038,806$ (944,318)$ 30,861,961$ 30,464,593$ 397,368$

Governmental Activities Business-type Activities

An additional portion of the City’s net assets (16 percent) represents resources that are subject to external restrictions on how they

may be used. The remaining balance of unrestricted net assets ($5,395,512) may be used to meet the City’s ongoing obligations to

citizens and creditors.

At the end of the current fiscal year, the City is able to report positive balances in all three categories of net assets, both for the City as

a whole, as well as for its separate governmental and business-type activities.

The City’s net assets decreased $546,950 during the current fiscal year. The decrease in net assets is due to the increase in

governmental expenditures during 2011.

-19-

Governmental activities. Governmental activities decreased the City’s net assets by $944,318.

City of Becker’s Changes in Net Assets

Restated Increase Restated Increase


Revenues

Program revenues

Charges for services 3,142,226$ 2,088,673$ 1,053,553$ 2,496,641$ 2,635,039$ (138,398)$

Operating grants and contributions 688,255 1,040,047 (351,792) - - -

Capital grants and contributions 1,482,489 28,688 1,453,801 8,252 8,169 83

General revenues

Property taxes 2,811,556 2,835,016 (23,460) 1,740,498 1,663,566 76,932

Franchise taxes 34,665 32,209 2,456 - - -

Unrestricted investment earnings 110,354 168,614 (58,260) 19,405 37,166 (17,761)

Gain on sale of capital assets 4,209 - 4,209 48,257 - 48,257

Total revenues 8,273,754 6,193,247 2,080,507 4,313,053 4,343,940 (30,887)

Expenses

General government 853,127 353,734 499,393 - - -

Public safety 1,205,216 1,351,290 (146,074) - - -

Public works 1,446,021 1,642,631 (196,610) - - -

Culture and recreation 1,135,471 1,182,530 (47,059) - - -

Economic development 3,808,813 1,148,891 2,659,922 - - -

Interest on long-term debt 759,280 763,158 (3,878) - - -

Water - - - 545,358 560,602 (15,244)

Sewer - - - 2,217,175 2,396,382 (179,207)

Golf Course - - - 1,163,296 1,261,293 (97,997)

Total expenses 9,207,928 6,442,234 2,765,694 3,925,829 4,218,277 (292,448)

Increase (decrease) in net assets

before transfers (934,174) (248,987) (685,187) 387,224 125,663 261,561

Transfers (10,144) (154,214) 144,070 10,144 154,214 (144,070)

Change in net assets (944,318) (403,201) (541,117) 397,368 279,877 117,491

Net assets, January 1 30,038,806 31,930,964 (1,892,158) 30,464,593 30,184,716 279,877

Prior period adjustment - (1,488,957) 1,488,957 - - -

Net assets, December 31 29,094,488$ 30,038,806$ (944,318)$ 30,861,961$ 30,464,593$ 397,368$


-20-

The following graph depicts various governmental activities and shows the revenue and expenses directly related to those activities.

Expenses and Program Revenues - Governmental Activities

$-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

General

government

Public safety Public works Culture and

recreation

Economic

development

Interest on long-

term debt

Expenses Revenues

Revenues by Source - Governmental Activities

Charges for

services

38.0%

Operating

grants and

contributions

8.3%

Capital grants

and

contributions

17.9%

Property taxes

34.0%

Franchise taxes

0.4%

Unrestricted

Investment

earnings

1.3%

Gain on sale of

capital assets

0.1%

-21-

Business-type activities: There was an increase of $397,368 in net assets reported in connection with the City’s business-type

activities.

Expenses and Program Revenues - Business-type Activities

$-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

Water Sewer Golf Course

Expenses Revenues

Revenue by Source - Business-type Activities

Charges for

services

98.9%

Capital grants

and

contributions

0.3%

Unrestricted

Investment

earnings

0.8%

-22-

Financial Analysis of the Government’s Funds

As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows and

balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unrestricted

fund balance 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, the City’s governmental funds reported combined ending fund balances of $18,196,094, an

increase of $634,065 in comparison with the prior year. Approximately 65 percent of this total amount, $11,875,736, constitutes

unrestricted fund balance, which is available for spending at the City’s discretion. The majority of the assigned balance is assigned for

capital projects and equipment. The remainder of fund balance ($6,320,358) is nonspendable or restricted to indicate that it is not in

spendable form or restricted by a third party for specified purposes. $480,071 is nonspendable prepaid items, due from other funds,

and land held for resale. $5,840,287 is restricted for debt service and capital projects.

The General fund is the chief operating fund of the City. At the end of the current year, the fund balance of the General fund was

$1,187,734. As a measure of the General fund’s liquidity, it may be useful to compare both unrestricted fund balance and total fund

balance to total fund expenditures. Unrestricted fund balance represents 35 and total fund balance represents 40 percent of current year

expenditures and transfers out.

The fund balance of the City’s General fund increased $160,362 during the current fiscal year.

The Community Center fund has a deficit fund balance of $98,497. The fund balance decreased by $28,961 during the year.

The Debt Service fund has a total fund balance of $5,055,224, all of which is restricted for the payment of debt service. The fund

balance increased $1,240,980 in 2011.

The Revolving Capital fund has a total fund balance of $8,911,133. $333,300 of which is nonspendable in form of land held for resale.

The remaining balance is assigned for capital outlay. The fund balance increased $89,329 during the year.

The Park Street and Utility Improvement fund has a total fund balance of $744,299; $735,642 of which is restricted for future project

costs and the remaining balance is assigned for the purpose of the fund. The fund balance decreased $1,050,353 during the year.

Proprietary fund. The City’s proprietary fund provides the same type of information found in the government-wide financial

statements, but in more detail.

Unrestricted net assets of the enterprise funds at the end of the year amounted to $1,812,775. The total increase in net assets for the

funds was $397,368.

General Fund Budgetary Highlights

The City’s General fund budget was not amended during the year. The budget called for revenues to exceed expenses by $1,100

before other financing sources and uses and no change to fund balance after their consideration.

-23-

Capital Asset and Debt Administration

Capital assets. The City’s investment in capital assets for its governmental and business type activities as of December 31, 2011,

amounts to $61,964,043 (net of accumulated depreciation). This investment in capital assets includes land, structures, improvements,

machinery and equipment, park facilities, roads, highways and bridges.

City of Becker’s Capital Assets

(net of depreciation)

Increase Increase


Land 2,541,768$ 2,498,943$ 42,825$ 3,728,765$ 3,728,765$ -$

Construction in progress 1,301,826 4,531 1,297,295 1,000 58,102 (57,102)

Buildings 6,380,441 10,278,151 (3,897,710) 652,829 696,758 (43,929)

Infrastructure 9,789,663 10,534,846 (745,183) 34,077,706 34,991,968 (914,262)

Improvements other than buildings 567,258 587,121 (19,863) 275,527 303,964 (28,437)

Machinery and equipment 2,088,785 2,213,982 (125,197) 558,475 441,770 116,705

Total 22,669,741$ 26,117,574$ (3,447,833)$ 39,294,302$ 40,221,327$ (927,025)$


Major capital asset events during the current fiscal year included the following:

In 2009, the City purchased 40 acres of land to expand the industrial park. 2011 saw continued work on the streets and

utilities to serve the park and make the land marketable to private development.

Street improvements in 2011 included improvements/sidewalk on Dale and Gopher streets and improvements at the

intersection of Highway 10 and Liberty Lane for quiet zone implementation.

Significant equipment purchases in 2011 included a Police squad car and Public Works F550 truck and related equipment.

Park Improvements in 2011 included trail design work for the Elk River Trail and the Becker Athletic Complex Trail, and

improvements to the park at the Becker Athletic Complex.

The Golf Course traded in its fleet of old golf carts for 74 new golf carts.

The restaurant at the Golf Clubhouse saw numerous improvements including a new deck off of the east side of the clubhouse.

Additional information on the City’s capital assets can be found in Note 3D starts on page 67 of this report.

-24-

Long-term debt. At the end of the current fiscal year, the City had total bonded debt outstanding of $25,920,000. While all the City’s bonds have revenue streams, they are all backed by the full faith and credit of the City.

City of Becker’s Outstanding Debt

Increase Increase2011 2010 (Decrease) 2011 2010 (Decrease)

G.O. improvement bonds 3,255,000$ 2,040,000$ 1,215,000$ 11,360,000$ 14,320,000$ (2,960,000)$ General obligation revenue bonds - - - 1,090,000 1,165,000 (75,000)

G.O. tax increment bonds 8,355,000 10,000,000 (1,645,000) - - - G.O Special assessment bonds 1,860,000 2,100,000 (240,000) - - - Capital lease payable - - - 296,739 148,951 147,788 Compensated absences 151,983 152,812 (829) 56,573 47,628 8,945

Total 13,621,983$ 14,292,812$ (670,829)$ 12,803,312$ 15,681,579$ (2,878,267)$


The City’s total debt decreased by $3,549,096 (12 percent) during the current fiscal year. Minnesota statutes limit the amount of net general obligation debt a City may issue to 3 percent of the market value of taxable property within the City. Net debt is debt payable solely from ad valorem taxes. The current debt limitation for the City is $26,387,430. The City is well below the legal debt margin. Additional information on the City’s long-term debt can be found in Note 3F start on page 70 of this report. Economic Factors and Next Year’s Budgets and Rates

The City continues to monitor the Utility Transition Valuation Aid program at the state. This aid represents a significant portion of the City’s General fund revenue budget so reductions to this program would have a significant negative impact to the City’s General fund.

The City continues to support legislative action at the state level to eliminate the pollution control exemption for Minnesota utilities, and supports allowing utilities to recover their costs related to pollution control equipment by spreading those costs to electricity users through other means.

The slow housing market continues to limit residential development within the City, with just seven new single family home building permits pulled in each of the last two years.

2012 General fund Budgeted expenditures are $2,570,875, a slight increase from 2011 budgeted expenditures of $2,568,120. Budgeted expenditures for the Fire Department, Economic Development, and the Community Center together decreased $81,200, and levies related to debt service obligations decreased $41,675 in 2012. All of these factors resulted in an overall City property tax levy of $4,709,755, $41,008 less than 2011. This decreased levy, coupled with a 3.200 percent reduction in overall net taxing capacity city-wide, resulted in a tax rate of 30.485 percent in 2012, up slightly from 29.729 percent in 2011.

The City froze all utility rates for 2012 at 2011 levels. The last increase to the City utility rates was in 2010.

Requests for Information This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the City’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Treasurer, City of Becker, 12060 Sherburne Avenue, Becker, Minnesota 55308.

-25-


INTENTIONALLY

-26-

GOVERNMENT-WIDE FINANCIAL STATEMENTS

CITY OF BECKER

BECKER, MINNESOTA

FOR THE YEAR ENDED

DECEMBER 31, 2011

-27-


INTENTIONALLY

-28-

CITY OF BECKER, MINNESOTA

STATEMENT OF NET ASSETS

DECEMBER 31, 2011

Governmental Business-type

Activities Activities Total

ASSETS

Cash and temporary investments 18,494,880$ 1,687,988$ 20,182,868$

Restricted cash and temporary investments - 2,501,623 2,501,623

Receivables

Accrued interest 31,401 - 31,401

Delinquent taxes 57,632 33,502 91,134

Accounts, net 8,838 248,709 257,547

Loans 281,200 - 281,200

Special assessments 1,814,825 119,914 1,934,739

Due from other governments 16,931 7,645 24,576

Inventories - 29,567 29,567

Land held for resale 333,300 - 333,300

Prepaid items 28,722 19,216 47,938

Deferred charges 34,721 - 34,721

Capital assets

Land and construction in progress 3,843,594 3,729,765 7,573,359

Depreciable (net of accumulated depreciation) 18,826,147 35,564,537 54,390,684

TOTAL ASSETS 43,772,191 43,942,466 87,714,657

LIABILITIES

Accounts payable 156,107 70,486 226,593

Accrued salaries and benefits payable 51,334 19,902 71,236

Accrued interest payable 321,542 170,053 491,595

Deposits payable 526,737 541 527,278

Unearned revenue - 16,211 16,211

Noncurrent liabilities

Due within one year

Compensated absences payable 116,866 39,031 155,897

Capital leases payable - 39,364 39,364

Bonds payable 3,820,000 1,375,000 5,195,000

Due in more than one year

Compensated absences payable 35,117 17,542 52,659

Capital leases payable - 257,375 257,375

Bonds payable 9,650,000 11,075,000 20,725,000

TOTAL LIABILITIES 14,677,703 13,080,505 27,758,208

NET ASSETS

Invested in capital assets, net of related debt 18,290,203 26,547,563 44,837,766

Restricted for

Debt service 6,430,043 2,501,623 8,931,666

Capital projects 735,462 - 735,462

Fire department operations 41,978 - 41,978

Economic development 14,065 - 14,065

Unrestricted 3,582,737 1,812,775 5,395,512

TOTAL NET ASSETS 29,094,488$ 30,861,961$ 59,956,449$

The notes to the financial statements are an integral part of this statement.

-29-


STATEMENT OF ACTIVITIES


Operating Grants Capital Grants

Charges for and and

Expenses Services Contributions Contributions

Governmental activities

General government 853,127$ 217,167$ 441,557$ -$

Public safety 1,205,216 17,246 212,665 200

Public works 1,446,021 93,772 - 1,482,289

Culture and recreation 1,135,471 484,041 34,033 -

Economic development 3,808,813 - - -

Interest on long-term debt 759,280 2,330,000 - -

Total governmental activities 9,207,928 3,142,226 688,255 1,482,489

Business-type activities

Water 545,358 474,719 - 3,768

Sewer 2,217,175 1,191,733 - 4,484

Golf Course 1,163,296 830,189 - -

Total business-type activities 3,925,829 2,496,641 - 8,252

Total 13,133,757$ 5,638,867$ 688,255$ 1,490,741$

General revenues

Taxes

Property taxes, levied for general purposes

Property taxes, levied for debt service

Franchise taxes

Unrestricted investment earnings

Gain on sale of capital assets

Transfers

Total general revenues and transfers

Change in net assets

Net assets, January 1 (restated - note 3)

Net assets, December 31


Functions/Programs

Program Revenues

-30-

Governmental Business-type

Activities Activities Total

(194,403)$ -$ (194,403)$

(975,105) - (975,105)

130,040 - 130,040

(617,397) - (617,397)

(3,808,813) - (3,808,813)

1,570,720 - 1,570,720

(3,894,958) - (3,894,958)

- (66,871) (66,871)

- (1,020,958) (1,020,958)

- (333,107) (333,107)

- (1,420,936) (1,420,936)

(3,894,958) (1,420,936) (5,315,894)

2,741,122 - 2,741,122

70,434 1,740,498 1,810,932

34,665 - 34,665

110,354 19,405 129,759

4,209 48,257 52,466

(10,144) 10,144 -

2,950,640 1,818,304 4,768,944

(944,318) 397,368 (546,950)

30,038,806 30,464,593 60,503,399

29,094,488$ 30,861,961$ 59,956,449$

Net (Expenses) Revenues and Changes in Net Assets

-31-


INTENTIONALLY

-32-

FUND FINANCIAL STATEMENTS



-33-


BALANCE SHEET

GOVERNMENTAL FUNDS

DECEMBER 31, 2011

Community Debt

General Center Service

ASSETS

Cash and temporary investments 1,551,804$ 39,236$ 5,063,138$

Receivables

Accrued interest 30,369 - 141

Delinquent taxes 48,473 - 2,717

Accounts, net 8,838 - -

Notes - - 265,000

Special assessments 386,181 - 1,428,644

Due from other governments 13,426 - 1,164

Due from other funds 118,049 - -

Land held for resale - - -

Prepaid items 20,504 2,628 -

TOTAL ASSETS 2,177,644$ 41,864$ 6,760,804$

LIABILITIES AND FUND BALANCES (DEFICITS)

LIABILITIES

Accounts payable 54,825$ 9,067$ 9,219$

Deposits payable 327,687 - -

Due to other funds 136,729 118,049 -

Accrued salaries and benefits payable 36,015 13,245 -

Deferred revenue 434,654 - 1,696,361

TOTAL LIABILITIES 989,910 140,361 1,705,580

FUND BALANCES (DEFICITS)

Nonspendable 138,553 2,628 -

Restricted - - 5,055,224

Assigned 150,638 - -

Unassigned 898,543 (101,125) -

TOTAL FUND BALANCES (DEFICITS) 1,187,734 (98,497) 5,055,224

TOTAL LIABILITIES AND FUND BALANCES 2,177,644$ 41,864$ 6,760,804$


-34-

2011 Industrial

Park Street Other Total

Revolving and Utility Governmental Governmental

Capital Improvement Funds Funds

8,577,833$ 783,668$ 2,479,201$ 18,494,880$

- - 891 31,401

- - 6,442 57,632

- - - 8,838

- - 16,200 281,200

- - - 1,814,825

- - 2,341 16,931

- - 136,729 254,778

333,300 - - 333,300

- - 5,590 28,722

8,911,133$ 783,668$ 2,647,394$ 21,322,507$

-$ 39,369$ 43,627$ 156,107$

- - 199,050 526,737

- - - 254,778

- - 2,074 51,334

- - 6,442 2,137,457

- 39,369 251,193 3,126,413

333,300 - 5,590 480,071

- 735,462 49,601 5,840,287

8,577,833 8,837 2,341,010 11,078,318

- - - 797,418

8,911,133 744,299 2,396,201 18,196,094

8,911,133$ 783,668$ 2,647,394$ 21,322,507$

-35-


INTENTIONALLY

-36-


RECONCILIATION OF THE BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

GOVERNMENTAL FUNDS

DECEMBER 31, 2011

Total fund balances - governmental funds 18,196,094$

Amounts reported for governmental activities in the statement

of net assets are different because

Capital assets used in governmental activities are not financial

resources and therefore are not reported as assets in governmental funds.

Cost of capital assets 37,283,761

Less: accumulated depreciation (14,614,020)

Long-term liabilities, including bonds payable, are not due and payable in the

current period and therefore are not reported as liabilities in the funds.

Long-term liabilities at year-end consist of

Compensated absences payable (151,983)

Bond principal payable (13,470,000)

Less bond discount net of accumulated amortization 34,721

Some receivables are not available soon enough to pay for the current period's expenditures,

and therefore are deferred in the funds.

Delinquent property taxes 57,632

Special assessments 1,814,825

Loans 265,000

Governmental funds do not report a liability for accrued interest until

due and payable. (321,542)

Total net assets - governmental activities 29,094,488$


-37-


STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS)

GOVERNMENTAL FUNDS


Community Debt

General Center Service

REVENUES

Taxes 1,921,680$ 440,800$ 209,354$

Licenses and permits 50,353 - -

Intergovernmental 585,140 - -

Charges for services 113,779 452,765 -

Fines and forfeitures 15,013 - -

Special assessments 73,044 - 26,912

Interest on investments 6,229 (54) 22,454

Miscellaneous 56,807 15,495 2,353,760

TOTAL REVENUES 2,822,045 909,006 2,612,480

EXPENDITURES

Current

General government 680,997 - -

Public safety 722,525 - -

Public works 571,090 - -

Culture and recreation 111,386 827,433 -

Economic development - - -

Capital outlay

General government 3,272 - -

Public safety 47,823 - -

Public works 371,005 - -

Culture and recreation 52,864 3,909 -

Debt service

Principal - - 2,005,000

Interest and other - - 743,553

Bond issuance costs - - 34,721

TOTAL EXPENDITURES 2,560,962 831,342 2,783,274

EXCESS (DEFICIENCY) OF REVENUES

OVER (UNDER) EXPENDITURES 261,083 77,664 (170,794)

OTHER FINANCING SOURCES (USES)

Sale of capital assets - - -

Bonds issued - - 1,335,000

Transfers in 324,467 17,318 76,774

Transfers out (425,188) (66,021) -

TOTAL OTHER FINANCING SOURCES (USES) (100,721) (48,703) 1,411,774

NET CHANGE IN FUND BALANCES 160,362 28,961 1,240,980

FUND BALANCES (DEFICITS), JANUARY 1 1,027,372 (127,458) 3,814,244

FUND BALANCES (DEFICITS), DECEMBER 31 1,187,734$ (98,497)$ 5,055,224$


-38-

2011 Industrial

Park Street Other Total

Revolving and Utility Governmental Governmental

Capital Improvement Funds Funds

-$ -$ 449,093$ 3,020,927$

- - - 50,353

- - 97,780 682,920

28,000 - 20,839 615,383

- - - 15,013

- - - 99,956

53,725 8,837 19,163 110,354

50,410 - 18,540 2,495,012

132,135 8,837 605,415 7,089,918

93,488 - - 774,485

- - 291,391 1,013,916

- - - 571,090

- - - 938,819

- - 109,443 109,443

55,828 - - 59,100

- - - 47,823

- 1,059,190 - 1,430,195

- - - 56,773

- - - 2,005,000

- - - 743,553

- - - 34,721

149,316 1,059,190 400,834 7,784,918

(17,181) (1,050,353) 204,581 (695,000)

4,209 - - 4,209

- - - 1,335,000

611,821 - 8,160 1,038,540

(509,520) - (47,955) (1,048,684)

106,510 - (39,795) 1,329,065

89,329 (1,050,353) 164,786 634,065

8,821,804 1,794,652 2,231,415 17,562,029

8,911,133$ 744,299$ 2,396,201$ 18,196,094$

-39-


RECONCILIATION OF THE STATEMENT OF

REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (DEFICITS)

TO THE STATEMENT OF ACTIVITIES

GOVERNMENTAL FUNDS


Total net change in fund balances (deficits) - governmental funds 634,065$

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 the estimated useful lives as depreciation

expense.

Capital outlay 1,575,584

Depreciation expense (1,409,942)

The issuance of long-term debt provides current financial resources to governmental funds, while

the repayment of principal of long-term debt consumes the current financial resources of governmental

funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report

the effect of issuance costs, premiums, discounts and similar items when debt is first issued,

whereas these amounts are deferred and amortized in the statement of activities.

Principal repayments 2,005,000

Debt issued or incurred (1,335,000)

Disposal of capital assets (3,613,475)

Interest on long-term debt in the statement of activities differs from the amount reported in the

governmental funds because interest is recognized as an expenditure in the funds when it is due,

and thus requires the use of current financial resources. In the statement of activities, however,

interest expense is recognized as the interest accrues, regardless of when it is due. (15,727)

Governmental funds report debt issuance premiums and discounts as other financing

sources or uses at the time of issuance. Premiums and discounts are reported as an

unamortized asset or liability in the government-wide financial statements 34,721

Certain revenues are recognized as soon as they are earned. Under the modified accrual

basis of accounting certain revenues cannot be recognized until they are available

to liquidate liabilities of the current period.

Property taxes (35,786)

Special assessments 1,354,333

Notes payable (138,920)

Some expenses reported in the statement of activities do not require the use of current

financial resources and, therefore, are not reported as expenditures in governmental funds.

Compensated absences 829

Change in net assets - governmental activities (944,318)$


-40-


STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -

BUDGET AND ACTUAL

GENERAL FUND


Actual Variance with

Original Final Amounts Final Budget

REVENUES

Taxes 1,828,520$ 1,828,520$ 1,921,680$ 93,160$

Licenses and permits 48,300 48,300 50,353 2,053

Intergovernmental 519,600 519,600 585,140 65,540

Charges for services 126,300 126,300 113,779 (12,521)

Fines and forfeitures 13,500 13,500 15,013 1,513

Special assessments - - 73,044 73,044

Interest on investments 6,000 6,000 6,229 229

Miscellaneous 25,900 25,900 56,807 30,907

TOTAL REVENUES 2,568,120 2,568,120 2,822,045 253,925

EXPENDITURES

Current

General government 786,320 786,320 680,997 105,323

Public safety 714,600 714,600 722,525 (7,925)

Public works 626,100 626,100 571,090 55,010

Culture and recreation 104,500 104,500 111,386 (6,886)

Capital outlay 337,700 337,700 474,964 (137,264)

TOTAL EXPENDITURES 2,569,220 2,569,220 2,560,962 8,258

EXCESS OF REVENUES

OVER EXPENDITURES (1,100) (1,100) 261,083 262,183


Transfers in 57,500 57,500 324,467 266,967

Transfers out (56,400) (56,400) (425,188) (368,788)

TOTAL OTHER FINANCING

SOURCES (USES) 1,100 1,100 (100,721) (101,821)

NET CHANGE IN FUND BALANCES - - 160,362 160,362

FUND BALANCES, JANUARY 1 1,027,372 1,027,372 1,027,372 -

FUND BALANCES, DECEMBER 31 1,027,372$ 1,027,372$ 1,187,734$ 160,362$


Budgeted Amounts

-41-


INTENTIONALLY

-42-


COMMUNITY CENTER

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND DEFICITS -

BUDGET AND ACTUAL


Actual Variance with

Original Final Amounts Final Budget

REVENUES

Taxes 440,800$ 440,800$ 440,800$ -$

Charges for service 459,600 459,600 452,765 (6,835)

Interest on investments - - (54) (54)

Miscellaneous

Contributions and donations 28,500 28,500 15,495 (13,005)

TOTAL REVENUES 928,900 928,900 909,006 (19,894)

EXPENDITURES

Culture and Recreation

Current 833,500 833,500 827,433 6,067

Capital outlay 51,000 51,000 3,909 47,091

TOTAL EXPENDITURES 884,500 884,500 831,342 53,158


OVER (UNDER) EXPENDITURES 44,400 44,400 77,664 33,264


Transfers in - - 17,318 17,318

Transfers out (44,400) (44,400) (66,021) (21,621)


SOURCES (USES) (44,400) (44,400) (48,703) (4,303)

NET CHANGE IN FUND BALANCES - - 28,961 28,961

FUND DEFICITS, JANUARY 1 (127,458) (127,458) (127,458) -

FUND DEFICITS, DECEMBER 31 (127,458)$ (127,458)$ (98,497)$ 28,961$


Budgeted Amounts

2011

-43-


STATEMENTS OF NET ASSETS - CONTINUED ON THE FOLLOWING PAGES

PROPRIETARY FUNDS

DECEMBER 31, 2011 AND 2010

Restated

2011 2010 2011 2010

ASSETS

CURRENT ASSETS

Cash and temporary investments 1,396,240$ 1,191,586$ 290,021$ 310,892$

Restricted cash and temporary investments 325,026 342,455 2,176,597 3,780,417

Receivables

Property taxes - - 33,502 54,812

Accounts, net 60,066 81,842 186,182 238,450

Special assessments

Delinquent 33,144 41,260 - -

Deferred 72,923 83,963 13,847 16,792

Due from other governments - 1,714 7,645 7,247

Inventories - - - -

Prepaid items 1,805 1,719 4,022 3,745

TOTAL CURRENT ASSETS 1,889,204 1,744,539 2,711,816 4,412,355

NONCURRENT ASSETS

Capital assets

Land - - 43,500 43,500

Construction in progress - 58,102 - -

Buildings and systems 9,401,640 9,329,646 33,527,698 33,469,975

Improvements other than buildings - - - -

Machinery and equipment 198,822 190,004 394,253 383,931

Less accumulated depreciation (2,605,117) (2,352,189) (6,732,990) (5,902,083)

Total capital assets

(net of accumulated depreciation) 6,995,345 7,225,563 27,232,461 27,995,323

TOTAL ASSETS 8,884,549 8,970,102 29,944,277 32,407,678


Business-type Activities - Enterprise funds

600 610

Water Sewer

-44-

2011 2010 2011 2010

1,727$ 1,000$ 1,687,988$ 1,503,478$

- - 2,501,623 4,122,872

- - 33,502 54,812

2,461 5,963 248,709 326,255

- - 33,144 41,260

- - 86,770 100,755

- - 7,645 8,961

29,567 53,675 29,567 53,675

13,389 13,624 19,216 19,088

47,144 74,262 4,648,164 6,231,156

3,685,265 3,685,265 3,728,765 3,728,765

1,000 - 1,000 58,102

2,017,774 1,988,981 44,947,112 44,788,602

1,070,889 1,054,917 1,070,889 1,054,917

1,647,670 1,594,040 2,240,745 2,167,975

(3,356,102) (3,322,762) (12,694,209) (11,577,034)

5,066,496 5,000,441 39,294,302 40,221,327

5,113,640 5,074,703 43,942,466 46,452,483

620


TotalsGolf Course

-45-


STATEMENTS OF NET ASSETS - CONTINUED

PROPRIETARY FUNDS

DECEMBER 31, 2011 AND 2010

Restated

2011 2010 2011 2010

LIABILITIES

CURRENT LIABILITIES

Accounts payable 10,506$ 4,733$ 51,516$ 40,584$

Accrued salaries and benefits payable 3,548 4,003 10,156 10,460

Accrued interest payable 19,442 20,551 150,611 189,598

Deposits payable 541 - - -

Compensated absences payable - current 6,959 8,023 18,173 21,907

Deferred revenue - - - -

Capital lease - current - - - -

Bonds payable - current 80,000 - 1,295,000 2,960,000

TOTAL CURRENT LIABILITIES 120,996 37,310 1,525,456 3,222,549

NONCURRENT LIABILITIES

Compensated absences payable 3,127 - 8,168 -

Capital lease payable - - - -

Bonds payable 1,010,000 1,165,000 10,065,000 11,360,000

TOTAL NONCURRENT LIABILITIES 1,013,127 1,165,000 10,073,168 11,360,000

TOTAL LIABILITIES 1,134,123 1,202,310 11,598,624 14,582,549

NET ASSETS

Invested in capital assets, net of related debt 5,905,345 6,060,563 15,872,461 13,675,323

Restricted for debt service 325,026 342,455 2,176,597 3,780,417

Unrestricted 1,520,055 1,364,774 296,595 369,389

TOTAL NET ASSETS 7,750,426$ 7,767,792$ 18,345,653$ 17,825,129$



600 610

Water Sewer

-46-

2011 2010 2011 2010

8,268$ 14,320$ 70,290$ 59,637$

6,394 6,985 20,098 21,448

- 1,059 170,053 211,208

- - 541 -

13,899 - 39,031 29,930

16,211 14,018 16,211 14,018

39,364 28,580 39,364 28,580

- - 1,375,000 2,960,000

84,136 64,962 1,730,588 3,324,821

6,247 17,698 17,542 17,698

257,375 120,371 257,375 120,371

- - 11,075,000 12,525,000

263,622 138,069 11,349,917 12,663,069

347,758 203,031 13,080,505 15,987,890

4,769,757 4,851,490 26,547,563 24,587,376

- - 2,501,623 4,122,872

(3,875) 20,182 1,812,775 1,754,345

4,765,882$ 4,871,672$ 30,861,961$ 30,464,593$


620

TotalsGolf Course

-47-


STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS

PROPRIETARY FUNDS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

2011 2010 2011 2010

OPERATING REVENUES

Charges for services 474,719$ 515,880$ 1,191,733$ 1,267,296$

OPERATING EXPENSES

Wages and salaries 99,018 99,875 258,301 269,941

Employee benefits 36,964 36,872 109,695 116,945

Materials and supplies 36,778 40,687 206,896 224,822

Repairs and maintenance 15,346 4,858 77,970 84,678

Professional services 3,357 17,760 42,435 40,496

Utilities 42,741 39,441 295,796 285,030

Depreciation 252,928 242,205 823,085 818,946

Miscellaneous 10,599 9,285 29,031 26,053

Cost of merchandise sales - - - -

TOTAL OPERATING EXPENSES 497,731 490,983 1,843,209 1,866,911

OPERATING INCOME (LOSS) (23,012) 24,897 (651,476) (599,615)

NONOPERATING REVENUES (EXPENSES)

Taxes - - 1,740,498 1,663,566

Interest on investments 9,505 16,497 9,900 20,652

Miscellaneous - - - -

Special assessments 3,768 4,002 4,484 4,167

Gain on sale of capital asset - - - -

Loss on disposal of fixed assets - (19,337) - (14,587)

Interest expense (47,627) (50,282) (373,966) (514,884)

TOTAL NONOPERATING

REVENUES (EXPENSES) (34,354) (49,120) 1,380,916 1,158,914

INCOME (LOSS) BEFORE TRANSFERS (57,366) (24,223) 729,440 559,299

TRANSFERS IN 40,000 40,000 20,686 101,875

TRANSFERS OUT - (2,089) (229,602) (208,475)

TOTAL TRANSFERS 40,000 37,911 (208,916) (106,600)

CHANGE IN FUND NET ASSETS (17,366) 13,688 520,524 452,699

FUND NET ASSETS, JANUARY 1 7,767,792 7,754,104 17,825,129 17,372,430

FUND NET ASSETS, DECEMBER 31 7,750,426$ 7,767,792$ 18,345,653$ 17,825,129$


610


Water Sewer

600

-48-

2011 2010 2011 2010

829,939$ 851,863$ 2,496,391$ 2,635,039$

350,851 426,347 708,170 796,163

115,698 137,283 262,357 291,100

97,613 100,742 341,287 366,251

74,168 72,259 167,484 161,795

12,924 8,180 58,716 66,436

61,002 74,220 399,539 398,691

225,364 226,749 1,301,377 1,287,900

120,667 119,396 160,297 154,734

100,863 89,066 100,863 89,066

1,159,150 1,254,242 3,500,090 3,612,136

(329,211) (402,379) (1,003,699) (977,097)

- - 1,740,498 1,663,566

- 17 19,405 37,166

250 - 250 -

- - 8,252 8,169

48,257 - 48,257 -

- - - (33,924)

(4,146) (7,051) (425,739) (572,217)

44,361 (7,034) 1,390,923 1,102,760

(284,850) (409,413) 387,224 125,663

179,060 222,903 239,746 364,778

- - (229,602) (210,564)

179,060 222,903 10,144 154,214

(105,790) (186,510) 397,368 279,877

4,871,672 5,058,182 30,464,593 30,184,716

4,765,882$ 4,871,672$ 30,861,961$ 30,464,593$

620


TotalsGolf Course

-49-


STATEMENTS OF CASH FLOWS - CONTINUED ON THE FOLLOWING PAGES

PROPRIETARY FUNDS


2011 2010 2011 2010

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers and users 521,133$ 536,835$ 1,247,094$ 1,241,880$

Payments to suppliers (103,589) (109,228) (641,473) (642,174)

Payments to employees (133,378) (135,949) (363,866) (383,669)

NET CASH PROVIDED (USED) BY

OPERATING ACTIVITIES 284,166 291,658 241,755 216,037

CASH FLOWS FROM

NONCAPITAL FINANCING ACTIVITIES

Transfers from other funds 40,000 40,000 20,686 101,875

Transfers to other funds - (2,089) (229,602) (208,475)


NONCAPITAL FINANCING ACTIVITIES 40,000 37,911 (208,916) (106,600)

CASH FLOWS FROM CAPITAL

FINANCING ACTIVITIES

Property taxes - - 1,761,807 1,661,363

Special assessments - - 3,938 3,484

Acquisition of property and equipment (22,710) (14,380) (60,222) (20,499)

Bond proceeds - - - 1,355,000

Capital lease proceeds - - - -

Interest paid on bonds (48,736) (51,340) (412,953) (526,183)

Principal paid on bonds (75,000) (75,000) (2,960,000) (1,260,000)


CAPITAL FINANCING ACTIVITIES (146,446) (140,720) (1,667,430) 1,213,165

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received on investments 9,505 16,497 9,900 20,652

NET INCREASE (DECREASE) IN

CASH AND CASH EQUIVALENTS 187,225 205,346 (1,624,691) 1,343,254

CASH AND CASH EQUIVALENTS, JANUARY 1 1,534,041 1,328,695 4,091,309 2,748,055

CASH AND CASH EQUIVALENTS, DECEMBER 31 1,721,266$ 1,534,041$ 2,466,618$ 4,091,309$

RECONCILIATION TO THE STATEMENTS OF NET ASSETS

Cash and temporary investments 1,396,240$ 1,191,586$ 290,021$ 310,892$

Restricted cash and temporary investments 325,026 342,455 2,176,597 3,780,417

Total 1,721,266$ 1,534,041$ 2,466,618$ 4,091,309$


Sewer


600, 310 610

Water

-50-

2011 2010 2011 2010

835,884$ 856,358$ 2,604,111$ 2,635,073$

(448,946) (454,754) (1,194,008) (1,206,156)

(464,692) (581,083) (961,936) (1,100,701)

(77,754) (179,479) 448,167 328,216

179,060 222,903 239,746 364,778

- - (229,602) (210,564)

179,060 222,903 10,144 154,214

- - 1,761,807 1,661,363

- - 3,938 3,484

(373,798) (73,277) (456,730) (108,156)

- - - 1,355,000

296,739 - 296,739 -

(5,205) (7,234) (466,894) (584,757)

(18,315) (25,694) (3,053,315) (1,360,694)

(100,579) (106,205) (1,914,455) 966,240

- 17 19,405 37,166

727 (62,764) (1,436,739) 1,485,836

1,000 63,764 5,626,350 4,140,514

1,727$ 1,000$ 4,189,611$ 5,626,350$

1,727$ 1,000$ 1,687,988$ 1,503,478$

- - 2,501,623 4,122,872

1,727$ 1,000$ 4,189,611$ 5,626,350$


Totals

620

Golf Course

-51-


STATEMENTS OF CASH FLOWS - CONTINUED

PROPRIETARY FUNDS


2011 2010 2011 2010

RECONCILIATION OF OPERATING INCOME (LOSS) TO

NET CASH PROVIDED BY

OPERATING ACTIVITIES

Operating income (loss) (23,012)$ 24,897$ (651,476)$ (599,615)$

Adjustments to reconcile operating income (loss) to

net cash provided by operating activities

Other income related to operations 3,768 4,002 546 607

Depreciation 252,928 242,205 823,085 818,946

(Increase) decrease in assets

Accounts receivable 21,776 (2,053) 52,268 (24,176)

Special assessment receivable 19,156 19,095 2,945 (6,667)

Due from other governments 1,714 (89) (398) 4,820

Inventory - - - -

Prepaid items (86) (337) (277) (339)

Increase (decrease) in liabilities

Accounts payable 5,773 3,140 10,932 19,244

Salaries payable (455) (121) (304) (3,922)

Compensated absences 2,063 919 4,434 7,139

Customer deposits payable 541 - - -

Deferred revenue - - - -

NET CASH PROVIDED BY

OPERATING ACTIVITIES 284,166$ 291,658$ 241,755$ 216,037$

SCHEDULE OF NONCASH

CAPITAL FINANCING ACTIVITIES

Disposal of capital assets -$ -$ -$ -$

Loss on disposal of fixed assets -$ -$ 7,823$ -$

Forgiveness of capital lease -$ -$ -$ -$



600, 310

Water Sewer

610

-52-

2011 2010 2011 2010

(329,211)$ (402,379)$ (1,003,699)$ (977,097)$

250 - 4,564 4,609

225,364 226,749 1,301,377 1,287,900

3,502 5,834 77,546 (20,395)

- - 22,101 12,428

- - 1,316 4,731

24,108 745 24,108 745

235 (424) (128) (1,100)

(6,052) 8,788 10,653 31,172

(591) (7,255) (1,350) (11,298)

2,448 (10,198) 8,945 (2,140)

- - 541 -

2,193 (1,339) 2,193 (1,339)

(77,754)$ (179,479)$ 448,167$ 328,216$

274,403$ -$ 274,403$ -$

-$ -$ 7,823$ -$

130,636$ -$ 130,636$ -$

TotalsGolf Course


620

-53-


INTENTIONALLY

-54-


NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2011

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting entity

The City of Becker, Minnesota, operates under “Optional Plan A” as defined in the State of Minnesota statutes. The

City is governed by an elected mayor and four council members. The Council exercises legislative authority and

determines all matters of policy. The Council appoints personnel responsible for the proper administration of all

affairs relating to the City. The accompanying financial statements present the government entities for which the

government is considered to be financially accountable.

The City has considered all potential units for which it is financially accountable, and other organizations for which

the nature and significance of their relationship with the City are such that exclusion would cause the City’s financial

statements to be misleading or incomplete. The Governmental Accounting Standards Board (GASB) has set forth

criteria to be considered in determining financial accountability. These criteria include appointing a voting majority

of an organization’s governing body, and (1) the ability of the primary government to impose its will on that

organization or (2) the potential for the organization to provide specific benefits to, or impose specific financial

burdens on the primary government.

As a result of applying the component unit definition criteria above, certain organizations have been defined and are

presented in this report as follows:

Blended Component Units- Reported as if they were part of the City.

Joint Ventures and Jointly Governed Organizations- The relationship of the City with the entity is

disclosed.

For each of the categories above, the specific entities are identified as follows:

Blended component unit. The Becker Economic Development Authority (EDA) is a legal entity separate from the

City. Although legally separate, the Becker EDA is reported as if it were part of the primary government because it

provides services exclusively for the City. Separate financial statements are not prepared for the Becker EDA.

Joint ventures and jointly governed organizations. The City has a joint powers agreement with the Township of

Becker for fire protection services. The Becker Fire Department Joint Powers Board is a legal entity separate from

the City. Although legally separate, the Becker Fire Department Joint Powers Board is reported as if it were part of

the primary government because the City provides the majority of the funding necessary for operations.

-55-

CITY OF BECKER, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2011 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

B. Government-wide and fund financial statements

The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the City and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. 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. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

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, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. 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 government considers 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, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the year in which the resources are measurable and become available.

-56-



Non-exchange transactions, in which the City receives value without directly giving equal value in return, include property taxes, grants, entitlement and donations. On an accrual basis, revenue from property taxes is recognized in the year for which the tax is levied. Revenue from grants, entitlements and donations is recognized in the year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the year when use is first permitted, matching requirements, in which the City must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the City on a reimbursement basis. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized.

Deferred revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are also recorded as deferred revenue. On the modified accrual basis, receivables that will not be collected within the available period have also been reported as deferred revenue in the fund financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. The City reports major governmental funds that are calculated based on these criteria:

1) Total assets, liabilities, revenues or expenditures/expenses of that individual governmental or enterprise

fund are at least 10 percent of the corresponding total (that is, total governmental or total enterprise funds), and

2) Total assets, liabilities, revenues or expenditures/expenses of that individual governmental fund or

enterprise fund are at least five percent of the corresponding total for all governmental and enterprise funds combined.

The City reports the following major governmental funds:

The General fund is the government’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 Debt Service fund accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds. The Community Center fund accounts for property taxes and charges that are committed for Community Center operations. The Revolving Capital fund accounts for resources accumulated and payments made to purchase capital during the year. The Industrial Park Street and Utility Improvement fund is set up to account for financial resources for the improvement of streets and utilities.

The City reports the following major proprietary funds:

The Water fund accounts for the activities of the City’s water distribution system. The Sewer fund accounts for the activities of the City’s sewer collection operations. The Golf Course fund accounts for the activities of the City’s golf course.

-57-



Private-sector standards of accounting and financial reporting issued prior to December 1, 1989 generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board (GASB). Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. As a general rule, the effect of interfund activity has been eliminated from government-wide financial statements. Exceptions to this general rule are charges between the City’s electric and sewer functions and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. 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, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the City enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. 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 City’s policy to use restricted resources first, then unrestricted resources as they are needed.

D. Assets, liabilities and net assets or equity

Deposits and investments The City’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. Cash balances from all funds are pooled and invested, to the extent available, in certificates of deposit and other authorized investments. Earnings from such investments are allocated on the basis of applicable participation by each of the funds.

-58-



The City may invest idle funds as authorized by Minnesota statutes, as follows:

1. Direct obligations or obligations guaranteed by the United States or its agencies.

2. Shares of investment companies registered under the Federal Investment Company Act of 1940 and received the highest credit rating, rated in one of the two highest rating categories by a statistical rating agency, and have a final maturity of thirteen months or less.

3. General obligations of a state or local government with taxing powers rated “A” or better; revenue obligations rated “AA” or better.

4. General obligations of the Minnesota Housing Finance Agency rated “A” or better.

5. Bankers’ acceptances of United States banks eligible for purchase by the Federal Reserve System.

6. Commercial paper issued by United States banks corporations or their Canadian subsidiaries, of highest quality category by at least two nationally recognized rating agencies, and maturing in 270 days or less.

7. Repurchase or reverse repurchase agreements and securities lending agreements with financial institutions qualified as a “depository” by the government entity, 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 broker-dealers.

8. Guaranteed investment contracts (GIC's) issued or guaranteed by a United States commercial bank, a domestic branch of a foreign bank, a United States insurance company, or its Canadian subsidiary, whose similar debt obligations were rated in one of the top two rating categories by a nationally recognized rating agency.

Investments for the City are reported at fair value. The broker money market investment pool operates in accordance with appropriate State laws and regulations. The reported value of the pool is the same as the fair value of the pool share. The Minnesota Municipal Money Market (4M) fund operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares. Financial statements of the 4M fund can be obtained by contacting RBC Global Asset Management at 100 South Fifth Street Suite 2300, Minneapolis, MN 55402-1240. Property taxes The Council annually adopts a tax levy and certifies it to the County in December for collection the following year. The County is responsible for collecting all property taxes for the City. These taxes attach an enforceable lien on taxable property within the City on January 1 and are payable by the property owners in two installments. The taxes are collected by the County Treasurer and tax settlements are made to the City during January, June and November each year. Taxes payable on homestead property, as defined by Minnesota statutes, are partially reduced by a market value credit aid. The credit is paid to the City by the State of Minnesota (the State) in lieu of taxes levied against the homestead property. The State remits this credit in two equal installments in October and December each year. Delinquent taxes receivable include the past six years’ uncollected taxes. Delinquent taxes have been offset by a deferred revenue liability for delinquent taxes not received within 60 days after year end in the fund financial statements.

-59-



Accounts receivable Accounts receivable include amounts billed for services provided before year end. Unbilled utility enterprise fund receivables are also included for services provided in 2011. The City annually certifies delinquent water and sewer accounts to the County for collection in the following year. Therefore, there has been no allowance for doubtful accounts established. Special assessments Special assessments represent the financing for public improvements paid for by benefiting property owners. These assessments are recorded as receivables upon certification to the County. Special assessments are recognized as revenue when they are annually certified to the County or received in cash or within 60 days after year end. All governmental special assessments receivable are offset by a deferred revenue liability in the fund financial statements. Interfund receivables and payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” Advances between funds as reported in the fund financial statements are offset by a fund balance reserve account in applicable governmental funds to indicate they are not available for appropriation and are not expendable available financial resources. Inventories and prepaid items All inventories are stated at the lower of cost or market on the first-in, first-out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. 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. Assets held for resale These assets represent land owned by the city with the intent to sell to developers. This land is recorded at the lessor of historical cost or net realizable value.

-60-



DECEMBER 31, 2011

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Capital assets

Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks,

and similar items) are reported in the applicable governmental or business-type activities columns in the government-

wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than

$500 (amount not rounded) and an estimated useful life in excess of three years. Intangible assets are defined by the

City as assets with an initial, individual cost of more than $5,000 and an indefinite useful life. Such assets are

recorded at historical cost or estimated historical cost if purchased or constructed. The City reports infrastructure

assets on a network and subsystem basis. Accordingly, the amounts spent for the construction or acquisition on

infrastructure assets are capitalized and reported in the government-wide financial statements regardless of their

amount.

In the case of the initial capitalization of general infrastructure assets (i.e., those reported by governmental activities)

the City chose to include all such items regardless of their acquisition date or amount. The City was able to estimate

the historical cost for the initial reporting of these assets through backtrending (i.e., estimating the current

replacement cost of the infrastructure to be capitalized and using an appropriate price-level index to deflate the cost

to the acquisition year). As the City constructs or acquires additional capital assets each period, including

infrastructure assets, they are capitalized and reported at historical cost.

Interest incurred during the construction phase of capital assets of business-type activities is included as part of the

capitalized value of the assets constructed. The reported value excludes normal maintenance and repairs which are

essentially amounts spent in relation to capital assets that do not increase the capacity or efficiency of the item or

extend its useful life beyond the original estimate. In the case of donations the City values these capital assets at the

estimated fair value of the item at the date of its donation.

Property, plant and equipment of the City, as well as the component units, are depreciated using the straight-line

method over the following estimated useful lives:

Useful Lives

Assets in Years

Buildings 20 - 50

Building improvements 10 - 20

Light vehicles 4 - 13

Machinery and equipment 3 - 20

Fire trucks 15 - 18

Utility distribution system 30 - 50

Land improvements 10 - 20

Infrastructure 20 - 50

Compensated absences

It is the City’s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. There is

also a provision for payout of unpaid accumulated sick leave when an employee separates from service with the City.

All vacation pay is accrued when incurred in the governmental and proprietary funds. It is expected the vacation pay

will be liquidated with expendable available financial resources. A liability for accumulated sick leave is reported in

governmental funds only if they have matured, for example, as a result of employee resignations and retirements. The

General fund is typically used to liquidate governmental compensated absences payable.

-61-



Long-term obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method for governmental activities. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognized bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

Fund equity In the fund financial statements, fund balance is divided into five classifications based primarily on the extent to which the City is bound to observe constraints imposed upon the use of resources reported in the governmental funds. These classifications are defined as follows: Nonspendable - Amounts that cannot be spent because they are not in spendable form, such as prepaid items. Restricted - Amounts related to externally imposed constraints established by creditors, grantors or contributors; or constraints imposed by state statutory provisions.

Committed - Amounts constrained for specific purposes that are internally imposed by formal action (resolution) of the City Council (the Council), which is the City’s highest level of decision-making authority. Committed amounts cannot be used for any other purpose unless the Council modifies or rescinds the commitment by resolution. Assigned - Amounts constrained for specific purposes that are internally imposed. In governmental funds other than the General fund, assigned fund balance represents all remaining amounts that are not classified as nonspendable and are neither restricted nor committed. In the General fund, assigned amounts represent intended uses established by the Council itself or by an official to which the governing body delegates the authority. The Council has adopted a fund balance policy which delegates the authority to assign amounts for specific purposes to the City Administrator or Treasurer.

Unassigned - The residual classification for the General fund and also negative residual amounts in other funds.

The City considers restricted amounts to be spent first when both restricted and unrestricted fund balance is available. Additionally, the City would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made.

The City has formally adopted a fund balance policy for the General fund. The City’s policy is to maintain a minimum unrestricted fund balance of 40 percent of the next year’s budgeted operating expenditures for cash-flow timing needs.

-62-



Net assets In the government-wide financial statements, net assets represent the difference between assets and liabilities. Net assets are displayed in three components:

a. Invested in capital assets, net of related debt - Consists of capital assets, net of accumulated depreciation reduced by any outstanding debt attributable to acquire capital assets.

b. Restricted net assets - Consist of net assets restricted when there are limitations imposed on their use through external restrictions imposed by creditors, grantors, laws or regulations of other governments.

c. Unrestricted net assets - All other net assets that do not meet the definition of “restricted” or “invested in capital assets, net of related debt”.

Comparative data/reclassifications Comparative data for the prior year have been presented only for the enterprise funds financial statements in order to provide an understanding of the changes in the financial position and operations of these funds. Also, certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year’s presentation. During 2011, the City decided to change the classification of six funds. The Debt Service funds with related wastewater treatment facility bonds are now reported within the Sewer fund. The activity of the funds was incorporated into all years presented for the Sewer fund. These funds were previously presented as governmental funds in the fund financial statements and as business-type in the government-wide financial statements.

Note 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary information

The City Council adopts an annual budget. The City follows these procedures in establishing the budgetary data reflected in the financial statements.

1. Budget requests are submitted by all department heads to the City Administrator. The City Administrator and Treasurer compile the budget requests into an overall preliminary City budget.

2. The City Administrator and Treasurer present the proposed budget to the City Council. The budget

resolution adopted by the City Council sets forth the budgets at the fund level for the General, Special Revenue and Debt Service funds.

3. Formal budgetary integration is employed as a management control device during the year for the General,

special revenue and Debt Service funds. Budgetary control for Capital Projects funds is accomplished through the use of project controls.

4. The budgets for the General, special revenue and Debt Service funds are adopted on a basis consistent with

U.S. generally accepted accounting principles generally accepted in the United States of America. Annual appropriations lapse at year-end.

5. Expenditures may not legally exceed budgeted appropriations at the department level. No funds budget can

be increased without City Council approval. The City Council may authorize transfers of budgeted amounts between departments within any fund. Management may amend budgets within a department level, so long as the total department budget is not changed.

-63-


DECEMBER 31, 2011 Note 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY - CONTINUED B. Deficit fund equity

The following fund had a fund balance deficit at December 31, 2011 that will be eliminated with future revenues:

AmountMajor

Community Center 98,497$

Fund

Note 3: DETAILED NOTES ON ALL FUNDS A. Deposits and investments

Custodial credit risk for deposits and investments is the risk that in the event of a bank failure, the City’s deposits and investments may not be returned or the City will not be able to recover collateral securities in the possession of an outside party. In accordance with Minnesota statutes and as authorized by the Council, the City maintains deposits at those depository banks, all of which are members of the Federal Reserve System. Minnesota statutes require that all City deposits be protected by insurance, surety bond or collateral. The market value of collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds. Authorized collateral in lieu of a corporate surety bond includes:

United States government Treasury bills, Treasury notes, Treasury bonds; Issues of United States government agencies and instrumentalities as quoted by a recognized industry

quotation service available to the government entity; General obligation securities of any state or local government with taxing powers which is rated “A” or

better by a national bond rating service, or revenue obligation securities of any state or local government with taxing powers which is rated “AA” or better by a national bond rating service;

General obligation securities of a local government with taxing powers may be pledged as collateral

against funds deposited by that same local government entity; Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by

written evidence that the bank’s public debt is rated “AA” or better by Moody’s Investors Service, Inc., or Standard & Poor’s Corporation; and

Time deposits that are fully insured by any federal agency.

Minnesota statutes require that all collateral shall be placed in safekeeping in a restricted account at a Federal Reserve Bank, or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. The selection should be approved by the City. At year end, the City’s carrying amount of deposits was $1,804,186 and the bank balance was $1,869,538. Of the bank balance, $684,568 was covered by federal depository insurance the remaining bank balance was covered by collateral held by the City’s agent in the City’s name.

-64-


DECEMBER 31, 2011

Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Investments As of December 31, 2011, the City had the following investments that are insured or registered, or securities held by the City or its agent in the City’s name.

Credit SegmentedQuality/ Time Carrying

Ratings (1) Distribution (2) AmountNon-pooled investments

Brokered CD's N/A less than 6 months 747,780$ Brokered CD's N/A 6 months to 1 year 798,969 Brokered CD's N/A 1 to 3 years 2,361,855 Brokered CD's N/A more than 3 years 245,042 U.S. Government Securities AA more than 3 years 500,340 U.S. Government Securities AAA more than 3 years 5,118,758

Total non-pooled investments 9,772,744

Pooled investmentsMoney Market Mutual funds N/A less than 6 months 3,908,742 4M fund P1 less than 6 months 7,196,469

Total pooled investments 11,105,211

Total investments 20,877,955$

Types of Investments

1. Ratings were provided by Moody’s. 2. Interest rate risk disclosed using the segmented time distribution method. N/A Indicated not applicable or available

Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its

obligations. Ratings are provided by various credit rating agencies and where applicable, indicate associated credit risk. Minnesota statutes limit the City’s investments.

Custodial Credit Risk. The custodial credit risk for investments is the risk that, in the event of the failure of

the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. In accordance with its investment policy, the City limits its exposure by purchasing insured or registered investments.

Concentration of Credit Risk. The concentration of credit risk is the risk of loss attributed to the magnitude

of a government’s investment in a single issuer. In accordance with its investment policy, the City manages its exposure by diversifying investments according to type and maturity.

Interest Rate Risk. The interest rate risk is the risk that changes in interest rates will adversely affect the

fair value of an investment. In accordance with its investment policy, the City manages its exposure to declines in fair values by limiting long term investments of the portfolio. The maturity of the long term investments cannot exceed ten years.

-65-


DECEMBER 31, 2011

Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED

Cash on hand Cash in the possession of the City, consisting of petty cash totals $2,350. Cash summary A reconciliation of cash as shown on the Statement of Net Assets for the City follows: Carrying amount of deposits 1,804,186$ Investments 20,877,955 Cash on hand 2,350

Total 22,684,491$

As presented on the Statement of Net AssetsCash and temporary investments 20,182,868$ Restricted cash and temporary investments 2,501,623

Total 22,684,491$

B. Receivables/deferred revenue Loans receivable

The City built a new fire station which Becker Township will be reimbursing for their share of the project. The note is due and payable semiannually with interest accruing. The bond related to the project was refunded in 2011 and the receivable was recorded in the G.O. Fire Station Refunding Bonds, Series 2011A fund. The principal balance of $265,000 at December 31, 2011 has been offset by deferred revenue because it is not available to finance current operations. The City issued a note receivable to satisfy a mortgage and special utility assessment. The note is due and payable annually. The note was recorded as a receivable in the Economic Development special revenue fund. The principal balance of $16,200 at December 31, 2011 has been offset by nonspendable fund balance because it is not available to finance current operations.

Deferred revenue

Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue reported in the governmental funds were as follows:

UnavailableGeneral

Delinquent taxes 48,473$ Special assessments 386,181

Debt ServiceDelinquent taxes 2,717 Special assessments 1,428,644 Loans 265,000

Nonmajor GovernmentalDelinquent taxes 6,442

Total 2,137,457$

Fund

-66-



DECEMBER 31, 2011


D. Capital assets

Capital asset activity for the year ended December 31, 2011 was as follows:

Beginning Ending

Balance Reclassification Increases Decreases Balance


Capital assets, not

being depreciated

Land 2,498,943$ -$ 42,825$ -$ 2,541,768$

Construction in progress 4,531 - 1,300,046 (2,751) 1,301,826

Total capital assets,

not being depreciated 2,503,474 - 1,342,871 (2,751) 3,843,594

Capital assets, being depreciated

Buildings 29,954,148 - - (20,614,736) 9,339,412

Infrastructure 17,980,885 - 28,826 - 18,009,711

Improvements other than buildings 1,164,817 - 20,652 - 1,185,469

Machinery and equipment 4,780,658 (7,822) 185,986 (53,247) 4,905,575

Total capital assets

being depreciated 53,880,508 (7,822) 235,464 (20,667,983) 33,440,167

Less accumulated depreciation for

Buildings (19,675,997) - (290,135) 17,007,161 (2,958,971)

Infrastructure (7,446,039) - (774,009) - (8,220,048)

Improvements other than buildings (577,696) - (40,515) - (618,211)

Machinery and equipment (2,566,676) 7,822 (305,283) 47,347 (2,816,790)

Total accumulated

depreciation (30,266,408) 7,822 (1,409,942) 17,054,508 (14,614,020)


being depreciated, net 23,614,100 - (1,174,478) (3,613,475) 18,826,147


capital assets, net 26,117,574$ -$ 168,393$ (3,616,226)$ 22,669,741$

The City disposed from its books a building that has transferred ownership to a private industry in relation to the

G.O. Tax increment bonds shown in Note 3 F. As described in the paragraph in Note 3 F, if the private industry

does not meet the obligation requirements related to the bond, the City has multiple remedies to recover the

requirements, including, to the extent permitted by law, taking possession of the building.

-67-



DECEMBER 31, 2011


Beginning Ending

Balance Reclassification Increases Decreases Balance


Capital assets, not

being depreciated

Land 3,728,765$ -$ -$ -$ 3,728,765$

Construction in progress 58,102 - 1,000 (58,102) 1,000


not being depreciated 3,786,867 - 1,000 (58,102) 3,729,765

Capital assets, being depreciated

Buildings 1,988,981 - 28,793 - 2,017,774

Water System 9,329,646 - 71,994 - 9,401,640

Sewer System 33,469,975 - 57,723 - 33,527,698

Improvements other than buildings 1,054,917 - 15,972 - 1,070,889

Machinery and equipment 2,167,975 7,823 339,350 (274,403) 2,240,745


being depreciated 48,011,494 7,823 513,832 (274,403) 48,258,746

Less accumulated depreciation for

Buildings (1,292,223) - (72,722) - (1,364,945)

Water System (2,209,103) - (236,240) - (2,445,343)

Sewer System (5,598,550) - (807,739) - (6,406,289)

Improvements other than buildings (750,953) - (44,409) - (795,362)

Machinery and equipment (1,726,205) (7,823) (140,267) 192,025 (1,682,270)

Total accumulated

depreciation (11,577,034) (7,823) (1,301,377) 192,025 (12,694,209)


being depreciated, net 36,434,460 - (787,545) (82,378) 35,564,537


capital assets, net 40,221,327$ -$ (786,545)$ (140,480)$ 39,294,302$

Depreciation expense was charged to the functions/programs of the City as follows:


General government 65,870$

Public safety 189,575

Public works 845,845

Culture and recreation 222,757

Economic development 85,895

Total depreciation expense - governmental activities 1,409,942$


Water 252,928$

Sewer 823,085

Golf Course 225,364

Total depreciation expense - business-type activities 1,301,377$

-68-



DECEMBER 31, 2011


E. Interfund receivables, payables and transfers

Interfund balances

The compositions of interfund balances as of year-end December 31, 2011 are as follows:

Amount

General Community Center 118,049$

Fire Department General 136,729

Total 254,778$

Payable FundReceivable Fund

The Community Center fund received an interfund loan from the General fund to cover a deficit cash balance.

The interfund loan from the Fire Department to the General fund is to account for transactions flowing through the

General fund that relate directly to the Fire Department.

Interfund transfers

Community Debt Revolving

General Center Service Capital

Transfers out

General -$ -$ 76,774$ 332,228$

Community Center - - - 60,491

Revolving Capital 306,467 17,318 - -

Nonmajor governmental - - - 7,500

Sewer enterprise 18,000 - - 211,602

Total transfers in 324,467$ 17,318$ 76,774$ 611,821$

Nonmajor Water Sewer Golf Course

Governmental Enterprise Enterprise Enterprise Total

Transfers out

General -$ -$ 16,186$ -$ 425,188$

Community Center 1,030 - 4,500 - 66,021

Revolving Capital 6,675 - - 179,060 509,520

Nonmajor governmental 455 40,000 - - 47,955

Sewer enterprise - - - - 229,602

Total transfers in 8,160$ 40,000$ 20,686$ 179,060$ 1,278,286$

Fund

Fund

Transfers in

Transfers in

The City annually budgets for transfers between funds. These annual budgeted transfers are made for certain funds

portion of debt service payments, to cover administrative fees and to fund certain capital improvement projects.

Unbudgeted transfers were approved by council resolution to close Debt Service funds and transfers for capital

related purchases.

-69-



DECEMBER 31, 2011


F. Long-term debt

General obligation bonds

The City issues general obligation bonds to provide funds for the acquisition and construction of major capital

facilities. General obligation bonds have been issued for both governmental and business-type activities. These

bonds are reported in the proprietary funds if they are expected to be repaid from proprietary fund revenues. In

addition, general obligation bonds have been issued to refund special assessments related bonds.

General obligation bonds

General obligation bonds are direct obligations and pledge the full faith and credit of the City. General obligation

bonds currently outstanding are as follows:

Balance

Authorized Issue Maturity at

and Issued Date Date Year End

G.O. Fire Station

Bonds, Series 2003A 2,800,000$ 3.70 - 4.625 % 02/18/03 02/01/12 1,920,000$

G.O. Fire Station

Bonds, Series 2011A 1,335,000 0.50 - 2.15 11/15/11 02/01/19 1,335,000

Total Governmental G.O. Improvement Bonds 3,255,000

2005A Wastewater Treatment

Facility Bonds 8,975,000 3.75 - 3.89 09/01/05 02/01/22 6,785,000


Facility Bonds 1,460,000 2.90 - 3.75 02/01/08 02/01/22 1,200,000


Facility Refunding Bonds 2,965,000 1.85 - 2.60 03/15/09 02/01/15 2,020,000

2010B Wastewater Treatment

Facility Refunding Bonds 1,355,000 0.70 - 2.00 12/01/10 02/01/17 1,355,000

Total Enterprise G.O. Improvement Bonds 11,360,000

Total G.O. Improvement Bonds 14,615,000$

Rate

Interest

Description

Annual debt service requirements to maturity for general obligation bonds are as follows:

Year Ending

December 31, Principal Interest Total Principal Interest Total

2012 1,920,000$ 53,903$ 1,973,903$ 1,295,000$ 345,376$ 1,640,376$

2013 180,000 17,767 197,767 1,340,000 311,590 1,651,590

2014 185,000 16,624 201,624 1,375,000 274,939 1,649,939

2015 185,000 14,913 199,913 1,425,000 235,151 1,660,151

2016 190,000 12,612 202,612 925,000 199,586 1,124,586

2017-2021 595,000 18,185 613,185 4,125,000 551,049 4,676,049

2022 - - - 875,000 16,872 891,872

Total 3,255,000$ 134,004$ 3,389,004$ 11,360,000$ 1,934,563$ 891,872$


-70-


DECEMBER 31, 2011 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED

Revenue bonds The following bonds were issued to finance capital improvements in the enterprise funds. They will be retired from net revenues of the enterprise funds.

BalanceAuthorized Issue Maturity atand Issued Date Date Year End

2002A Water Revenue Bonds 1,625,000$ 3.55 - 4.80 % 10/15/03 02/01/23 1,090,000$

InterestRateDescription

Annual debt service requirements to maturity for revenue bonds are as follows:

Year EndingDecember 31, Principal Interest Total

2012 80,000$ 45,239$ 125,239$ 2013 85,000 42,268 127,268 2014 85,000 39,080 124,080 2015 90,000 35,644 125,644 2016 95,000 31,884 126,884

2017-2021 460,000 97,652 557,652 2022-2023 195,000 9,480 204,480

Total 1,090,000$ 301,247$ 1,391,247$

Governmental Activities

-71-


DECEMBER 31, 2011


G.O. tax increment bonds The following bonds were issued to finance capital improvements in governmental funds. They will be retired from revenues received from the related developer.


Tax Increment RefundingBonds, Series 1994D 25,000,000$ 6.25 % 07/01/94 08/01/15 8,355,000$

InterestDescription Rate

Annual debt service requirements to maturity for tax increment bonds are as follows:


2012 1,900,000$ 522,187$ 2,422,187$ 2013 2,020,000 403,438 2,423,438 2014 2,150,000 277,188 2,427,188 2015 2,285,000 142,812 2,427,812

Total 8,355,000$ 1,345,625$ 9,700,625$


The Debt Service requirements for these bonds are paid through lease payments received from Liberty Paper Inc. (the Lessee). In the event of default of payments by the Lessee, the City, to the extent permitted by law, has multiple remedies to recover the cost associated with the remaining bond payments. G.O. special assessment bonds The following bonds were issued to finance capital improvements in governmental funds. They will be retired from the collection of taxes and special assessments.


2010A AssessmentImprovement Bonds 1,860,000$ 1.00 - 4.80 % 12/01/10 02/01/26 1,860,000$

InterestDescription Rate

Annual debt service requirements to maturity for special assessment bonds are as follows:


2012 -$ 60,923$ 60,923$ 2013 120,000 60,322 180,322 2014 120,000 58,898 178,898 2015 120,000 57,022 177,022 2016 125,000 54,566 179,566

2017-2021 650,000 217,025 867,025 2022-2026 725,000 84,120 809,120

Total 1,860,000$ 592,876$ 2,452,876$


-72-


DECEMBER 31, 2011


Capital lease obligation

The City is obligated under a capital lease for golf equipment. The assets and liabilities under the capital lease are recorded at the lower of the present value of the minimum lease payments or the fair value of the assets. The assets acquired through the capital lease are as follows:

Governmental

ActivitiesAsset

Golf Carts 296,739$ Less: Accumulated depreciation (9,891)

Total 286,848$

Minimum future lease payments under the capital lease in the aggregate is as follows:

Year Ending Governmental December 31 Activities

2012 51,393$ 2013 51,393 2014 51,393 2015 51,393 2016 51,393 2017 84,660

Total minimum lease payments 341,625 Less: amount representing interest (44,886)

Present value of minimum lease payments 296,739$

-73-



Changes in long-term liabilities Long-term liability activity for the year ended December 31, 2011, was as follows:

Beginning Prior Period Ending Due WithinBalance Adjustment Increases Decreases Balance One Year

Governmental activitiesBonds payableG.O. improvement bonds 16,360,000$ (14,320,000)$ 1,335,000$ (120,000)$ 3,255,000$ 1,920,000$ G.O. tax increment bonds 10,000,000 - - (1,645,000) 8,355,000 1,900,000 G.O. special assessment bonds 2,100,000 - - (240,000) 1,860,000 -

Total bonds payable 28,460,000 (14,320,000) 1,335,000 (2,005,000) 13,470,000 3,820,000

Compensated absences 152,812 - 116,037 (116,866) 151,983 116,866

Governmental activity long-term liabilities 28,612,812$ (14,320,000)$ 1,451,037$ (2,121,866)$ 13,621,983$ 3,936,866$

Business-type activitiesBonds payableG.O. revenue bonds 1,165,000$ -$ -$ (75,000)$ 1,090,000$ 80,000$ G.O. improvement bonds - 14,320,000 - (2,960,000) 11,360,000 1,295,000

Total bonds payable 1,165,000 14,320,000 - (3,035,000) 12,450,000 1,375,000

Capital lease 148,951 - 296,739 (148,951) 296,739 39,364 Compensated absences 47,628 - 47,976 (39,031) 56,573 39,031

Business-type activitylong-term liabilities 1,361,579$ 14,320,000$ 344,715$ (3,222,982)$ 12,803,312$ 1,453,395$

Current refunding On November 15, 2011 the City issued $1,335,000 of G.O. Fire Station Refunding Bonds, Series 2011A, bearing an average coupon rate of 1.63 percent, to provide resources along with a transfer from prior issued Debt Service funds for the current refunding of $1,795,000 of the outstanding principal of the G.O. Fire Station Bonds, Series 2003A on February 1, 2012. As a result of the refunding issue, the City will save $707,534 in debt service payments and achieve an economic gain (the present value of the difference between the old and the new debt service) of $608,443.

-74-



G. Components of fund balance At December 31, 2011, portions of the City’s fund balance are not available for appropriation due to not being in spendable form (Nonspendable), legal restrictions (Restricted), policy and/or intent (Assigned). The following is a summary of the components of fund balance:

2011 IndustrialPark Street Other

Community Revolving and Utility GovernmentalGeneral Debt Service Center Capital Improvement Funds Total

NonspendableDue from other funds $ 118,049 $ - $ - $ - $ - $ - $ 118,049 Land held for resale - - - 333,300 - - 333,300 Prepaid items 20,504 - 2,628 - - 5,590 28,722

Total nonspendable $ 138,553 $ - $ 2,628 $ 333,300 $ - $ 5,590 $ 480,071

Restricted forDebt service $ - $ 5,055,224 $ - $ - $ - $ - $ 5,055,224 Capital improvements - - - - 735,462 - 735,462 Fire department operations - - - - - 35,536 35,536 Economic development - - - - - 14,065 14,065

Total restricted $ - $ 5,055,224 $ - $ - $ 735,462 $ 49,601 $ 5,840,287

Assigned toFire department operations $ - $ - $ - $ - $ - $ 1,238,045 $ 1,238,045 Economic development - - - - - 175,625 175,625 Benefits payable 150,638 - - - - 6,801 157,439 Capital improvements - - - 8,577,833 8,837 920,539 9,507,209

Total assigned $ 150,638 $ - $ - $ 8,577,833 $ 8,837 $ 2,341,010 $ 11,078,318

-75-



H. Conduit debt obligations

Conduit debt obligations are certain limited obligation revenue bonds or similar debt instruments issued for the express purpose of providing capital financing for a specific third party. The City has issued various revenue bonds to provide funding to private sector entities for projects deemed to be in the public interest. Although these bonds bear the name of the City, the City has no obligation for such debt. Accordingly, the bonds are not reported as liabilities in the financial statements of the City. As of December 31, 2011, the City’s conduit debt is detailed as follows: Pollution Control Revenue Bonds (Northern States Power Company -

Sherburne County Generating Station Unit 3 Project), Series 1992A 27,900,000$

Pollution Control Revenue Bonds (Northern States Power Company - Sherburne County Generating Station Unit 3 Project), Series 1993A 50,000,000

Pollution Control Revenue Bonds (Northern States Power Company - Sherburne County Generating Station Unit 3 Project), Series 1993B 50,000,000

Pollution Control Revenue Refunding Bonds (Northern States Power Company - Sherburne County Generating Station Units 1 and 2Project), Series 2000A 69,000,000

Variable Rate Demand Industrial Development Revenue Bonds(Plymouth Foam Project), Series 2004 1,560,000

Senior Housing Revenue Bonds (Shepherd of Grace Project), Series 2006 8,360,000

206,820,000$

-76-


DECEMBER 31, 2011 Note 4: DEFINED BENEFIT PENSION PLANS - STATEWIDE

A. Plan description

All full-time and certain part-time employees of the City are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF), which are cost sharing, multiple-employer retirement plans. These plans are established and administered in accordance with Minnesota statutes, chapters 353 and 356.

GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, fire fighters and peace officers who qualify for membership by Minnesota statute are covered by the PEPFF.

PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by Minnesota statute and vest after three years of credited service. The defined retirement benefits are based on a member’s highest average salary for any five successive years of allowable service, age and years of credit at termination of service.

Two methods are used to compute benefits for PERA’s Coordinated and Basic Plan members. The retiring member receives the higher of the step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan is 2.2 percent of average salary for each of the first 10 years of service and 2.7 percent for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2 percent of average salary for each of the first 10 years and 1.7 percent for each remaining year. Under Method 2, the annuity accrual rate is 2.7 percent of average salary for Basic Plan members and 1.7 percent for Coordinated Plan for each year of service. For PEPFF members, the annuity accrual rate is 3.0 percent for each year of service. For all PEPFF members and GERF members hired prior to July 1, 1989 whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. Normal retirement age is 55 for PEPFF members and 65 for Basic and Coordinated members hired prior to July 1, 1989. Normal retirement age is the age for unreduced Social Security benefits capped at 66 for Coordinated members hired on or after July 1, 1989. A reduced retirement annuity is also available to eligible members seeking early retirement. There are different types of annuities available to members upon retirement. A single-life annuity is a lifetime annuity that ceases upon the death of the retiree--no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will be payable over joint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin.

The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service.

PERA issues a publicly available financial report that includes financial statements and required supplementary information for GERF and PEPFF. That report may be obtained on the web at www.mnpera.org, by writing to PERA, 60 Empire Street, #200, St. Paul, Minnesota 55102 or by calling (651) 296-7460 or 1-800-652-9026.

-77-



DECEMBER 31, 2011

Note 4: DEFINED BENEFIT PENSION PLANS - STATEWIDE - CONTINUED

B. Funding policy

Minnesota statutes, chapter 353 sets the rates for employer and employee contributions. These statutes are

established and amended by the State legislature. The City makes annual contributions to the pension plans equal to

the amount required by Minnesota statutes. GERF Basic Plan members and Coordinated Plan members are required

to contribute 9.1 percent and 6.25 percent, respectively, of their annual covered salary in 2011. PEPFF members are

required to contribute 9.6 percent of their annual covered salary in 2011. In 2011, the City was required to contribute

the following percentages of annual covered payroll: 11.78 percent for Basic Plan GERF members,

7.25 percent for Coordinated Plan GERF members, and 14.4 percent for PEPFF members. The City’s contributions

to the General Employees Retirement Fund for the year ended December 31, 2011, 2010 and 2009 were $113,296,

$123,327, and $127,277 respectively. The City’s contributions to the PEPFF for the years ending

December 31, 2011, 2010, and 2009 were $45,583, $48,065, and $46,309, respectively. The City’s contributions

were equal to the contractually required contributions for each year as set by Minnesota statute.

Note 5: OTHER INFORMATION

A. Risk management

The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and

omissions; injuries to employees; and natural disasters for which the City carries insurance. The City obtains

insurance through participation in the League of Minnesota Cities Insurance Trust (LMCIT), which is a risk sharing

pool with approximately 800 other governmental units. The City pays an annual premium to LMCIT for its workers

compensation and property and casualty insurance. The LMCIT is self-sustaining through member premiums and

will reinsure for claims above a prescribed dollar amount for each insurance event. Settled claims have not exceeded

the City’s coverage in any of the past three fiscal years.

Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably

estimated. Liabilities, if any, include an amount for claims that have been incurred but not reported (IBNRs). The

City’s management is not aware of any incurred but not reported claims.

B. Legal debt margin

The City’s statutory debt limit is computed as 3 percent of the taxable market value of property within the City.

Long-term debt issued and financed partially or entirely by special assessments or the net revenues of enterprise fund

operations is excluded from the debt limit computation. The 2011 taxable market value of property was

$879,581,000 and the debt limit was $26,387,430. The City is well below the legal debt margin.

-78-


DECEMBER 31, 2011 Note 6: BECKER FIREMAN’S RELIEF ASSOCIATION A. Plan description

The City contributes to the Becker Fire-Rescue Department Relief Association (the “Association”), a single employer defined benefit pension plan. The plan provides retirement, disability and death benefits to volunteer fire fighters of the City. Pension benefits are determined by multiplying the accrued liability, as set forth in Minnesota statutes 69.772, Subd. 2, by the ratio of the lump sum service pension amount provided in the bylaws of the Association to a service pension of $2,900 per year of service. The Association’s Board of Trustees has the authority to establish and amend benefit provisions. The City Council must ratify any amendments to the benefit provisions. Benefit provisions are also subject to enabling Minnesota statutes; therefore, any amendments to benefit provisions are reviewed by the Office of the State Auditor. The Association issues a publicly available financial report that includes financial statements and required supplementary information for the plan. That report may be obtained by writing to the Becker Fire-Rescue Department Relief Association, Attention Russell Cox, 14090 East Central Avenue, Becker Minnesota, 55308

B. Funding policy The financial requirements of the Special fund are determined in accordance with section 69.772 of the Minnesota statutes, which requires the payment of pension benefits in a lump sum or optionally in annual installments. The benefits are payable after age 50, 20 years of service, and 10 years of Association membership or upon death. The City’s annual pension cost for the current year and related information for the plan is as follows: Annual pension cost 51,225$

Contributions madeState Aid 51,225

Actuarial valuation date 12/31/11Actuarial cost method Entry age normalAmortization method Level dollar closed

Remaining amortization periodNormal cost 20 yearsPrior service cost 10 years

Asset valuation method Market

Actuarial assumptionsInvestment rate of return 5%Projected salary increases N/AInflation rate N/ACost of living adjustments None

-79-



DECEMBER 31, 2011

Note 6: VOLUNTEER FIREFIGHTER’S RELIEF ASSOCIATION - CONTINUED

Annual

Year Pension Net Pension

Ending Cost (APC) Obligation

12/31/11 51,225$ 100.0 % -$

12/31/10 65,033 100.0 -

12/31/09 42,122 100.0 -

Contributed

of APC

Percentage

Three Year Trend Information

Excess of Pension

Actuarial Actuarial Actuarial (Unfunded) Benefit

Valuation Value of Accrued Accrued Per Year

Date Assets Liability Liability of Service

12/31/11 * * * * % 2,900$

12/31/10 902,024$ 867,202$ 34,822$ 104.0 2,900

12/31/09 828,565 857,922 (29,357) 96.6 2,900

Funded

Rate

Required Supplementary Information

* 2011 information not available.

Note 7: ACCOUNTING CHANGE

GASB Statement 54 “Fund Balance Reporting and Governmental Fund Type Definitions” enhances the usefulness of fund

balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying

the existing governmental fund type definitions. The City implemented this standard for fiscal year end December 31, 2011.

Changes to governmental fund type fund balance reporting is reflected in the financial statements and schedules and related

disclosures are included in Note 1 and Note 3.

Note 8: SUBSEQUENT EVENT

On April 1, 2012 the City issued $6,075,000 G.O. Refunding Bonds, Series 2012A. The bonds were issued to finance the

current refunding of the 2002A Water Revenue Bonds and the 2005A Wastewater Treatment Facility Crossover Refunding

Bonds.

-80-

COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS

CITY OF BECKER

BECKER, MINNESOTA


-81-


NONMAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEET

DECEMBER 31, 2011

Total

Nonmajor

Special Capital Governmental

Revenue Projects Funds

ASSETS

Cash and temporary investments 1,359,612$ 1,119,589$ 2,479,201$

Receivable

Accrued interest 891 - 891


Notes 16,200 - 16,200

Due from other governments 2,341 - 2,341

Due from other funds 136,729 - 136,729

Prepaid items 5,590 - 5,590

TOTAL ASSETS 1,527,805$ 1,119,589$ 2,647,394$

LIABILITIES AND FUND BALANCES

LIABILITIES

Accounts payable 43,627$ -$ 43,627$

Deposits payable - 199,050 199,050

Accrued salaries and benefits payable 2,074 - 2,074

Deferred revenue 6,442 - 6,442

TOTAL LIABILITIES 52,143 199,050 251,193

FUND BALANCES

Nonspendable 5,590 - 5,590

Restricted 49,601 - 49,601

Assigned 1,420,471 920,539 2,341,010

TOTAL FUND BALANCES 1,475,662 920,539 2,396,201

TOTAL LIABILITIES AND

FUND BALANCES 1,527,805$ 1,119,589$ 2,647,394$

-82-


NONMAJOR GOVERNMENTAL FUNDS

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES


Total

Nonmajor

Special Capital Governmental

Revenue Projects Funds

REVENUES

Taxes 449,093$ -$ 449,093$

Intergovernmental 97,780 - 97,780

Charges for services - 20,839 20,839

Interest on investments 11,972 7,191 19,163

Miscellaneous 18,540 - 18,540

TOTAL REVENUES 577,385 28,030 605,415

EXPENDITURES

Current

Public safety 291,391 - 291,391

Economic development 109,443 - 109,443

TOTAL EXPENDITURES 400,834 - 400,834

EXCESS OF REVENUES

OVER EXPENDITURES 176,551 28,030 204,581


Transfers in 7,705 455 8,160

Transfers out (7,500) (40,455) (47,955)

TOTAL OTHER FINANCING SOURCES (USES) 205 (40,000) (39,795)

NET CHANGE IN FUND BALANCES 176,756 (11,970) 164,786

FUND BALANCES, JANUARY 1 1,298,906 932,509 2,231,415

FUND BALANCES, DECEMBER 31 1,475,662$ 920,539$ 2,396,201$

-83-


NONMAJOR SPECIAL REVENUE FUNDS


DECEMBER 31, 2011

200 210

Fire Economic

Department Development Total

ASSETS

Cash and temporary investments 1,166,375$ 193,237$ 1,359,612$

Receivable

Accrued interest 891 - 891


Notes - 16,200 16,200

Due from other governments 1,635 706 2,341

Due from other funds 136,729 - 136,729

Prepaid items 4,543 1,047 5,590

TOTAL ASSETS 1,316,615$ 211,190$ 1,527,805$


LIABILITIES

Accounts payable 31,847$ 11,780$ 43,627$

Accrued salaries and benefits payable 202 1,872 2,074

Deferred revenue 6,442 - 6,442

TOTAL LIABILITIES 38,491 13,652 52,143

FUND BALANCES

Nonspendable 4,543 1,047 5,590

Restricted 35,536 14,065 49,601

Assigned 1,238,045 182,426 1,420,471

TOTAL FUND BALANCES 1,278,124 197,538 1,475,662


FUND BALANCES 1,316,615$ 211,190$ 1,527,805$

-84-


NONMAJOR SPECIAL REVENUE FUNDS

COMBINING SCHEDULE OF REVENUE, EXPENDITURES



200 210

Fire Economic

Department Development Total

REVENUES

Taxes 318,086$ 131,007$ 449,093$

Intergovernmental 97,780 - 97,780

Interest on investments 11,025 947 11,972

Miscellaneous

Contributions and donations 8,501 - 8,501

Other 10,039 - 10,039

TOTAL REVENUES 445,431 131,954 577,385

EXPENDITURES

Current

Public safety 291,391 - 291,391

Economic development - 109,443 109,443

TOTAL EXPENDITURES 291,391 109,443 400,834

EXCESS OF REVENUES

OVER EXPENDITURES 154,040 22,511 176,551


Transfers in - 7,705 7,705

Transfers out - (7,500) (7,500)

TOTAL OTHER FINANCING SOURCES (USES) - 205 205

NET CHANGE IN FUND BALANCES 154,040 22,716 176,756

FUND BALANCES, JANUARY 1 1,124,084 174,822 1,298,906

FUND BALANCES, DECEMBER 31 1,278,124$ 197,538$ 1,475,662$

-85-


NONMAJOR CAPITAL PROJECTS FUNDS


DECEMBER 31, 2011

401 431 450

Fossum Fields

Trunk Road Pedestrian County Road 67

Facilities Path Improvements Total

ASSETS

Cash and temporary investments 879,231$ 240,358$ -$ 1,119,589$


LIABILITIES

Deposits payable -$ 199,050$ -$ 199,050$

FUND BALANCES

Assigned 879,231 41,308 - 920,539


FUND BALANCES 879,231$ 240,358$ -$ 1,119,589$

-86-


NONMAJOR CAPITAL PROJECTS FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES (DEFICITS)


401 431 450

Fossum Fields

Trunk Road Pedestrian County Road 67

Facilities Path Improvements Total

REVENUES

Charges for services 20,839$ -$ -$ 20,839$

Interest on investments 5,687 1,504 - 7,191

TOTAL REVENUES 26,526 1,504 - 28,030


Transfers in - - 455 455

Transfer out (40,455) - - (40,455)

TOTAL OTHER FINANCING SOURCES (USES) (40,455) - 455 (40,000)

NET CHANGE IN FUND BALANCES (13,929) 1,504 455 (11,970)

FUND BALANCES (DEFICITS), JANUARY 1 893,160 39,804 (455) 932,509

FUND BALANCES, DECEMBER 31 879,231$ 41,308$ -$ 920,539$

-87-


GENERAL FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL - CONTINUED ON THE FOLLOWING PAGES


(With comparative actual amounts for the year ended December 31, 2010)

2010

Actual Variance with Actual

Original Final Amounts Final Budget Amounts

REVENUES

Taxes

Property taxes 1,794,520$ 1,794,520$ 1,887,015$ 92,495$ 2,185,679$

Franchise fees 34,000 34,000 34,665 665 32,209

Total 1,828,520 1,828,520 1,921,680 93,160 2,217,888

Licenses and permits 48,300 48,300 50,353 2,053 51,199

Intergovernmental

State

Fired state aid 43,000 43,000 51,225 8,225 45,437

Police state aid 27,000 27,000 33,815 6,815 33,092

Other grants and aids 449,600 449,600 500,100 50,500 758,837

Total 519,600 519,600 585,140 65,540 837,366

Charges for services

General government 111,000 111,000 85,690 (25,310) 112,360

Public safety 300 300 6,048 5,748 962

Public works 15,000 15,000 22,041 7,041 16,864

Culture and recreation - - - - (760)

Total 126,300 126,300 113,779 (12,521) 129,426

Special assessments - - 73,044 73,044 57,748

Fines and forfeitures 13,500 13,500 15,013 1,513 11,235

Interest on investments 6,000 6,000 6,229 229 13,485

Miscellaneous

Contributions and donations 2,000 2,000 9,000 7,000 4,600

Other 23,900 23,900 47,807 23,907 39,955

Total 25,900 25,900 56,807 30,907 44,555

TOTAL REVENUES 2,568,120 2,568,120 2,822,045 253,925 3,362,902

2011

Budgeted Amounts

-88-

2010



EXPENDITURES

Current

General government

Mayor and Council

Personal services 33,000$ 33,000$ 28,441$ 4,559$ 24,582$

Supplies 400 400 822 (422) 30

Other services and charges 1,400 1,400 365 1,035 718

Total 34,800 34,800 29,628 5,172 25,330

Administration

Personal services 145,100 145,100 143,782 1,318 143,496


Total 148,900 148,900 144,409 4,491 143,724

City hall


Supplies 21,000 21,000 20,620 380 20,179

Other services and charges 71,300 71,300 56,708 14,592 71,852

Total 211,500 211,500 180,781 30,719 192,461

Finance



Total 125,020 125,020 99,140 25,880 122,253

City attorney


Planning


Supplies 300 300 138 162 -

Other services and changes 6,400 6,400 5,691 709 4,609

Total 88,400 88,400 83,418 4,982 71,895

Other general government

Other services and changes 157,700 157,700 133,396 24,304 124,838

Total general government 786,320 786,320 680,997 105,323 697,104

Budgeted Amounts

2011


GENERAL FUND


BUDGET AND ACTUAL - CONTINUED



-89-

2010



Budgeted Amounts

2011


GENERAL FUND





EXPENDITURES - CONTINUED

Current - Continued

Public safety

Police

Personal services 563,900$ 563,900$ 566,688$ (2,788)$ 575,584$

Supplies 34,500 34,500 39,295 (4,795) 28,369


Total 645,000 645,000 645,723 (723) 640,077

Fire

Other services and charges 48,000 48,000 56,225 (8,225) 50,437

Other public safety

Personal services 6,200 6,200 5,623 577 -

Supplies 200 200 (192) 392 -

Other services and charges 15,200 15,200 15,146 54 20,658

Total 21,600 21,600 20,577 1,023 20,658

Total public safety 714,600 714,600 722,525 (7,925) 711,172

Public works

Street and Highways


Supplies 74,000 74,000 43,100 30,900 37,889

Other services and charges 174,000 174,000 201,186 (27,186) 143,463

Total public works 626,100 626,100 571,090 55,010 506,768

Culture and recreation


Supplies 11,000 11,000 21,245 (10,245) 25,754


Total culture and recreation 104,500 104,500 111,386 (6,886) 124,842

Total current expenditures 2,231,520 2,231,520 2,085,998 145,522 2,039,886

-90-

2010



Budgeted Amounts

2011


GENERAL FUND





EXPENDITURES - CONTINUED

Capital outlay

General government 20,000$ 20,000$ 3,272$ 16,728$ 98,977$

Public safety 27,700 27,700 47,823 (20,123) 40,874

Public works 240,000 240,000 371,005 (131,005) 308,814

Culture and recreation 50,000 50,000 52,864 (2,864) 22,905

Total capital outlay 337,700 337,700 474,964 (137,264) 471,570

TOTAL EXPENDITURES 2,569,220 2,569,220 2,560,962 8,258 2,511,456


OVER (UNDER) EXPENDITURES (1,100) (1,100) 261,083 262,183 851,446


Transfers in 57,500 57,500 324,467 266,967 102,212

Transfers out (56,400) (56,400) (425,188) (368,788) (1,209,547)


SOURCES (USES) 1,100 1,100 (100,721) (101,821) (1,107,335)

NET CHANGE IN FUND BALANCES - - 160,362 160,362 (255,889)

FUND BALANCES, JANUARY 1 1,027,372 1,027,372 1,027,372 - 1,283,261

FUND BALANCES, DECEMBER 31 1,027,372$ 1,027,372$ 1,187,734$ 160,362$ 1,027,372$

-91-


DEBT SERVICE FUNDS


DECEMBER 31, 2011

315 316 320

G.O.

G.O. Fire G.O. Fire Station Improvement

Station Bonds, Refunding Bonds, Bonds,

Series 2003A Series 2011A Series 2010A

ASSETS

Cash and temporary investments 1,535,840$ 13,345$ 5,579$

Receivables

Accrued interest - - -

Delinquent taxes - 2,558 159

Notes - 265,000 -

Special assessments

Deferred - - 1,428,644

Due from other governments 1,109 - 55

TOTAL ASSETS 1,536,949$ 280,903$ 1,434,437$


LIABILITIES

Accounts payable -$ 8,794$ 425$

Deferred revenue - 267,558 1,428,803

TOTAL LIABILITIES - 276,352 1,429,228

FUND BALANCES

Restricted for debt service 1,536,949 4,551 5,209

TOTAL LIABILITIES AND FUND BALANCES 1,536,949$ 280,903$ 1,434,437$

-92-

360 390

G.O. Tax G.O.

Increment Improvement

Financing Bonds, Bonds,

Series 1994D Series 1998A Total

3,508,374$ -$ 5,063,138$

141 - 141

- - 2,717

- - 265,000

- - 1,428,644

- - 1,164

3,508,515$ -$ 6,760,804$

-$ -$ 9,219$

- - 1,696,361

- - 1,705,580

3,508,515 - 5,055,224

3,508,515$ -$ 6,760,804$

-93-


DEBT SERVICE FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES



315 316 320

G.O.

G.O. Fire G.O. Fire Station Improvement

Station Bonds, Refunding Bonds, Bonds,

Series 2003A Series 2011A Series 2010A

REVENUES

Taxes 177,045$ -$ 17,224$

Special assessments - - -

Interest on investments 18,372 22 54

Miscellaneous 23,760 - -

TOTAL REVENUES 219,177 22 17,278

EXPENDITURES

Debt service

Principal 120,000 - -

Interest and fiscal charges 84,827 750 22,963

Bond issuance costs - 34,721 -

TOTAL EXPENDITURES 204,827 35,471 22,963


OVER (UNDER) EXPENDITURES 14,350 (35,449) (5,685)

OTHER FINANCING SOURCES

Transfers in - - -

Bonds issued 1,295,000 40,000 -


SOURCES 1,295,000 40,000 -

NET CHANGE IN FUND BALANCES 1,309,350 4,551 (5,685)

FUND BALANCES, JANUARY 1 227,599 - 10,894

FUND BALANCES, DECEMBER 31 1,536,949$ 4,551$ 5,209$

-94-

360 390

G.O. Tax G.O.

Increment Improvement

Financing Bonds, Bonds,

Series 1994D Series 1998A Total

-$ 15,085$ 209,354$

- 26,912 26,912

3,694 312 22,454

2,330,000 - 2,353,760

2,333,694 42,309 2,612,480

1,645,000 240,000 2,005,000

625,000 10,013 743,553

- - 34,721

2,270,000 250,013 2,783,274

63,694 (207,704) (170,794)

- 76,774 76,774

- - 1,335,000

- 76,774 1,411,774

63,694 (130,930) 1,240,980

3,444,821 130,930 3,814,244

3,508,515$ -$ 5,055,224$

-95-


SUMMARY FINANCIAL REPORT

REVENUES AND EXPENDITURES FOR GENERAL OPERATIONS

GOVERNMENTAL FUNDS


2011 2010

REVENUES

Taxes 3,020,927$ 4,529,447$ (33.30) %

Licenses and permits 50,353 51,199 (1.65)

Intergovernmental 682,920 998,159 (31.58)

Charges for services 615,383 1,945,210 (68.36)

Fines and forfeits 15,013 43,444 (65.44)

Special assessments 99,956 97,990 2.01

Interest on investments 110,354 185,234 (40.42)

Miscellaneous 2,495,012 121,870 1,947.27

TOTAL REVENUES 7,089,918$ 7,972,553$ (11.07) %

Per Capita 1,562$ 1,859$ (15.95) %

EXPENDITURES

Current

General government 774,485$ 730,184$ 6.07 %

Public safety 1,013,916 1,103,359 (8.11)

Public works 571,090 543,682 5.04

Culture and recreation 938,819 939,758 (0.10)

Economic development 109,443 118,155 (7.37)

Capital outlay

General government 59,100 98,977 (40.29)

Public safety 47,823 40,874 17.00

Public works 1,430,195 239,767 496.49

Culture and recreation 56,773 47,785 18.80

Debt service

Principal 2,005,000 1,435,000 39.72

Interest and other 743,553 1,305,390 (43.04)

Bond issuance costs 34,721 - 100.00

TOTAL EXPENDITURES 7,784,918$ 6,602,931$ 17.90 %

Per Capita 1,716$ 1,540$ 11.43 %

Total Long-term Indebtedness 13,470,000$ 14,140,000$ (4.74) %

Per Capita 2,968 3,297 (9.97)

General Fund Balance - December 31 1,187,734$ 1,027,372$ 15.61 %

Per Capita 262 240 9.26

The purpose of this report is to provide a summary of financial information concerning the City of Becker to interested citizens.

The complete financial statements may be examined at City Hall, 12060 Sherburne Avenue, Becker, MN 55308. Questions about

this report should be directed to Corey Boyer, Treasurer at (763) 261-4302.

Percent

Increase

(Decrease)

Totals

-96-

OTHER SCHEDULES AND REQUIRED REPORTS

CITY OF BECKER

BECKER, MINNESOTA


-97-


INTENTIONALLY

-98-

REPORT ON MINNESOTA LEGAL COMPLIANCE



We have audited financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate

remaining fund information of the City of Becker, Minnesota (the City), as of and for the year ended December 31, 2011, which

collectively comprise the City’s basic financial statements, and have issued our report thereon dated April 24, 2012.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the provisions

of the Minnesota Legal Compliance Audit Guide for Local Government, promulgated by the Minnesota Office of the State Auditor

pursuant to Minnesota statute, section 6.65. Accordingly, the audit included such tests of the accounting records and such other

auditing procedures, as we considered necessary in the circumstances.

The Minnesota Legal Compliance Audit Guide for Local Government covers seven main categories of compliance to be tested:

contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, tax increment

financing, and miscellaneous provisions. Our study included all of the listed categories.

The results of our tests indicate that for the items tested, the City complied with the material terms and conditions of applicable legal

provisions.

This report is intended solely for the information and use of the Council, management, others within the City and the Minnesota Office

of the State Auditor and is not intended to be and should not be used by anyone other than these specified parties.



-99-

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

AND ON COMPLIANCE AND OTHER MATTERS BASED

ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED

IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS



We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the

aggregate remaining fund information of the City of Becker, Minnesota (the City), as of and for the year ended December 31, 2011,

which collectively comprise the City’s basic financial statements, and have issued our report thereon dated April 24, 2012. 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.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the City’s internal control over financial reporting as a basis of designing our

auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an

opinion on the effectiveness of the City’s internal control over financial reporting. Accordingly, we do not express an opinion on the

effectiveness of the City’s internal control over financial reporting.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the

normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material

weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that material

misstatement of the City’s financial statements will not be prevented, or detected and corrected on a timely basis.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section

and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant

deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider

to be material weaknesses, as defined above. However, we identified a certain deficiencies in internal control over financial reporting,

described in the accompanying Schedule of Findings and Responses as findings 2011-1 and 2011-2, which we consider to be

significant deficiencies in internal control over financial reporting. A significant deficiency is a deficiency, or combination of

deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged

with governance.

-100-

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the City’s financial statements are free of material misstatement, we

performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with

which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on

compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of

our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing

Standards.

We also noted certain matters involving the internal control over financial reporting that we reported to management of the City in a

separate letter dated April 24, 2012.

The City’s responses to the finding identified in our audit are described in the accompanying Schedule of Findings and Responses. We

did not audit the City’s response and, accordingly, we express no opinion on it.

This report is intended solely for the information and use of the Council, management, others within the City and the Minnesota Office

of the State Auditor and is not intended to be and should not be used by anyone other than these specified parties.



-101-

CITY OF BECKER, MINNESOTA SCHEDULE OF FINDINGS AND RESPONSES FOR THE YEAR ENDED DECEMBER 31, 2011

Finding Description 2011-1 Preparation of financial statements

Condition: As in prior years, we were requested to draft the audited financial statements and related footnote

disclosures as part of our regular audit services. Recent auditing standards require auditors to communicate this situation to the Council as an internal control deficiency. Ultimately, it is management’s responsibility to provide for the preparation of your statements and footnotes, and the responsibility of the auditor to determine the fairness of presentation of those statements. It is our responsibility to inform you that this deficiency could result in a material misstatement to the financial statements that could have been prevented or detected by your management. Essentially, the auditors cannot be part of your internal control process.

Criteria: Internal controls should be in place to provide reasonable assurance over financial reporting. Cause: From a practical standpoint we do both for you at the same time in connection with our audit. This is

not unusual for us to do with an organization of your size. Effect: The effectiveness of the internal control system relies on enforcement by management. The effect of

deficiencies in internal controls can result in undetected errors in financial reporting. Recommendation: It is your responsibility to make the ultimate decision to accept this degree of risk associated with

this condition because of cost or other considerations. As in prior years, we have instructed management to review a draft of the auditor prepared financials in detail for their accuracy; we have answered any questions they might have, and have encouraged research of any accounting guidance in connection with the adequacy and appropriateness of classification of disclosure in your statements. We are satisfied that the appropriate steps have been taken to provide you with the completed financial statements. While the City is reviewing the financial statements we recommend that a disclosure checklist be utilized to ensure all required disclosures are presented and the City should agree its financial software to the numbers reported in the financial statements.

Management response: For now, the City’s management accepts the degree of risk associated with this condition and thoroughly reviews a draft of the financial statements.

-102-

CITY OF BECKER, MINNESOTA SCHEDULE OF FINDINGS AND RESPONSES - CONTINUED

FOR THE YEAR ENDED DECEMBER 31, 2011 Finding Description 2011-2 Limited segregation of duties

Condition: During our audit we reviewed procedures over cash receipts, cash disbursements, payroll, utility billing, financial reporting, and capital assets and found the City to have limited segregation of duties over those transaction cycles.

Criteria: There are four general categories of duties: authorization, custody, record keeping and

reconciliation. In an ideal system, different employees perform each of these four major functions. In other words, no one person has control of two or more of these responsibilities.

Cause: As a result of the limited number of staff, in the disbursement cycle, the Finance Director has

access to checks, ability to posts to the general ledger, and prepares bank reconciliations. In the receipts cycle, the Finance Director maintains accounts receivable invoices, posts to the general ledger, prepares deposits and brings to the bank, and reconciles the bank statement. In the payroll cycle, the Accounting Clerk has control over the checks, sets up employee records, posts to the general ledger. In the utility billing cycle, the Council approves rates but the Utility Billing Clerk, does all other duties. In the financial reporting and capital asset transaction cycles, the Finance Director performs all of the duties.

Effect: The existence of this limited segregation of duties increases the risk of fraud. Recommendation: While we recognize the number of staff is not large enough to eliminate this deficiency, we

recommend that the City evaluate the current procedures and segregate duties where possible and implement any compensating controls. We are aware some compensating controls are in place; however, it is important that the Council is aware of this condition and monitor all financial information.

Management response: Management recognizes that it is not economically feasible to correct this finding, however is aware of the deficiency and is relying on oversight by management and the Council to monitor this deficiency.

-103-

city of becker annual financial report for the year …

Documents