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2015-12-31 STMA Ice Arena Annual Financial Report Annual Financial Report St. Michael -Albertville Ice Arena Albertville, Minnesota For the Year Ended December 31, 2015 THIS PAGE IS LEFT BLANK INTENTIONALLY ST. MICHAEL -ALBERTVILLE ICE ARENA ALBERTVILLE, MINNESOTA ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2015 THIS PAGE IS LEFT BLANK INTENTIONALLY ST. MICHAEL - ALBERTVILLE ICE ARENA ANNUAL FINANCIAL REPORT TABLE OF CONTENTS FOR THE YEAR ENDED DECEMBER 31, 2015 Page No. INTRODUCTORY SECTION Appointed Officials5 FINANCIAL SECTION Independent Auditor’s Report9 Management’s Discussion and Analysis13 Basic Financial Statements Government-wide Financial Statements Statement of Net Position20 Statement of Activities21 Fund Financial Statements GovernmentalFunds Balance Sheet24 Statement of Revenues, Expenditures and Changes in Fund Balances25 General Fund Statementof Revenues, Expenditures and Changes in Fund Balances - Budget and Actual26 Notes to the Financial Statements27 OTHER REQUIRED REPORT Independent Auditor’s Reporton Minnesota Legal Compliance37 -1- THIS PAGE IS LEFT BLANK INTENTIONALLY -2- INTRODUCTORY SECTION ST. MICHAEL - ALBERTVILLE ICE ARENA ALBERTVILLE, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2015 -3- THIS PAGE IS LEFT BLANK INTENTIONALLY -4- ST. MICHAEL - ALBERTVILLE ICE ARENA APPOINTEDOFFICIALS FOR THE YEAR ENDED DECEMBER 31, 2015 APPOINTED NameTitleAppointed by Chris SchummChairSt. Michael Jeff LindquistMemberISD 885 Gayle WeberMemberISD 885 Cody GulickMemberSt. Michael Walter HudsonMemberAlbertville John VetschMemberAlbertville -5- THIS PAGE IS LEFT BLANK INTENTIONALLY -6- FINANCIAL SECTION ST. MICHAEL - ALBERTVILLE ICE ARENA ALBERTVILLE, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2015 -7- THIS PAGE IS LEFT BLANK INTENTIONALLY -8- Independent Auditor's Report Chair and Members of the Ice Arena Board St. Michael Albertville Ice Arena Albertville, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and each major fund of the St. Michael Albertville Ice Arena, Albertville, Minnesota, as of and for the year ended December 31, 2015,and the related notes to the financial statements, which collectively comprise the Organization's basic financial statements as listed in the Table of Contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Organization's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Organization's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. -9- THIS PAGE IS LEFT BLANK INTENTIONALLY -10- Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities andeach major fund of the St. Michael Albertville Ice Arena, Albertville, Minnesota, as of December 31, 2015, and the respective changes in financial position thereof and the budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis,which follows this report letter, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic,or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statement, 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. Report on Summarized Comparative Information The financial statements include partial prior year comparative information. Such information does not include all the information required to constitute a presentation in accordance with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Organization's financial statement for the year ended December 31, 2014, from which such partial information was derived. We have previously audited the Organization's 2014 financial statements and our report, dated April 7, 2015, expressed unmodified opinions on the respective financial statements of the governmental activities and each major fund. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2014, is consistent, in all material respects, with the audited financial statements from which it has been derived. Minneapolis, Minnesota April 6, 2016 -11- THIS PAGE IS LEFT BLANK INTENTIONALLY -12- Management’s Discussion and Analysis As management of the St. Michael - Albertville IceArenaof Albertville, Minnesota, (the Organization), we offer readers of the Organization’s financial statements this narrative overview and analysis of the financial activities of the Organizationfor the fiscal year ended December 31, 2015. Financial Highlights The assets of the Organization exceeded its liabilities at the close of the most recent fiscal year by $1,750,685(net position). Of this amount, $286,846(unrestricted net position) may be used to meet the Organization’s ongoing obligations to citizens and creditors. The Organization’s total net positionincreased $42,900.This increase is attributable to operating revenues and expenses remaining consistent with prior year. As of the close of the current fiscal year, the Organization’s governmental funds reported combined ending fund balances of $286,846, an increase of $99,830in comparison with the prior year. Fund balance of $280,399is available for spending at is nonspendable the Organization’s discretionbut a portion has been assigned for specific purposes. The remaining $6,447 for inventory. At the end of thecurrent fiscal year, unassignedfund balance for the General fund was $159,385, or 55percent of total General fund 2015expenditures. -13- Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Organization’s basic financial statements. The Organization’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 moredetailed data. The statements are followed by a section of supplementary informationwhich 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. Figure 1 Required Components of the Organization’s Annual Financial Report Management's Basic Required Discussion and Financial Supplementary Analysis StatementsInformation Government-FundNotes to the wide Financial Financial Financial StatementsStatementsStatements SummaryDetail -14- Figure 2 summarizes the major features of the Organization’s financial statements, including the portion of the Organization 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 Government-wide StatementsGovernmental Funds ScopeEntire Organization government (except The activities of the Organization that are not fiduciary funds) and the Organization’s proprietary or fiduciary, such as police, fire and parks component units Required financial Statement of Net PositionBalance Sheet statements Statement of ActivitiesStatement of Revenues, Expenditures, and Changes in Fund Balances Accounting Basis and Accrual accounting and economic resources Modified accrual accounting and current financial measurement focusfocusresources focus Type of asset/liability All assets and liabilities, both financial and Only assets expected to be used up and liabilities that informationcapital, and short-term and long-term come due during the year or soon thereafter; no capital assets included Type of deferred All deferred outflows/inflows of resources, Only deferred outflows of resources expected to be outflows/inflows of regardless of when cash is received or paidused up and deferred inflows of resources that come resources informationdue during the year or soon thereafter; no capital assets included Type of in flow/out flow All revenues and expenses during year, Revenues for which cash is received during or soon informationregardless of when cash is received or paidafter the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter Government-wide financial statements. The Government-wide financial statementsare designed to provide readers with a broad overview of the Organization’s finances, in a manner similar to a private-sector business. The statement of net positionpresents information on all of the Organization’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net positionmay serve as a useful indicator of whether the financial position of the Organizationis improving or deteriorating. The statement of activitiespresents information showing how the Organization’s net positionchanged during the mostrecent fiscal year. All changes in net positionare 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 thatwill only result in cash flows in future fiscal periods. The government-wide financial statements start on page 20 of this report. Fund financial statements. Afundis a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Organization, 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 Organizationare governmental funds. Governmental funds.Governmental fundsare 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 fundswith similar information presented for governmental activitiesin 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 fundsand governmental activities. -15- The Organizationmaintains twoindividual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General fundandCapital Improvementfund. The Organizationadopts an annual appropriated budget for its General fund. A budgetary comparison statement has been provided for the Generalfundto demonstrate compliance with this budget. The basic governmental fund financial statements start on page 24 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 page27of this report. Government-wide Financial Analysis As noted earlier, net positionmay serve over time as a useful indicator of a government’s financial position. In the case of the Organization, assetsexceeded liabilities by $1,750,685at the close of the most recent fiscal year. By far, the largest portion of the Organization’s net position (84percent) reflects its investment in capital assets (e.g., land, buildings, machinery and equipment).The Organizationuses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. St. Michael - Albertville Ice Arena’sSummary of Net Position Governmental Activities Increase 20152014(Decrease) Current and other assets$298,731$202,313$96,418 Capital assets1,463,8391,524,193(60,354) Total assets1,762,5701,726,50636,064 Long-term liabilities outstanding-3,424(3,424) Other liabilities11,88515,297(3,412) Total liabilities11,88518,721(6,836) Net position Net investment in capital assets1,463,8391,524,193(60,354) Unrestricted286,846183,592103,254 Total net position$1,750,685$1,707,785$42,900 The remaining balance of unrestricted net position$286,846may be used to meet the Organization’s ongoing obligations to citizens and creditors.At the end of the current fiscal year, the Organizationis able to report positive balances in all categories of net position. Governmental activities . Governmental activities increased the Organization’s net position$42,900. Significant changes from the prior year are noted below: Capitalgrants and contributionsdecreased $140,119which mostly related to contributions from member organizations for the dehumidification system improvement on the arenain the prior year. -16- St. Michael - Albertville Ice Arena’s Changes in Net Position Governmental Activities Increase 20152014(Decrease) Revenues Program revenues Charges for services$314,154$312,802$1,352 Capital grants and contributions89,225229,344(140,119) General revenues Unrestricted investment earnings1,4583,226(1,768) Total revenues404,837545,372(140,535) Expenses Culture and recreation361,937366,037(4,100) Change in net position 42,900179,335(136,435) Net position, January 11,707,7851,528,450179,335 Net position, December 31$1,750,685$1,707,785$42,900 Financial Analysis of the Government’s Funds As noted earlier, the Organizationuses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds: The focus of the Organization’s governmental fundsis to provide information on near-term inflows, outflows and balances of spendableresources. Such information is useful in assessing the Organization’s financing requirements. In particular, unassigned fund balancemay 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 Organization’s governmental funds had combined ending fund balances of $286,846, an increase of $99,830in comparison with the prior year. Approximately 42percent of this total amount, $121,014, constitutes assigned fund balance, which is available for spending at the Organization’s discretionbut assigned for specific purposes.The remainder of fund balance isunassigned ($159,385) and nonspendable ($6,447). The General fundis the chief operating fund of the Organization. At the end of the current year, the fund balance of the General fund was $165,832.The fund balance of the Organization’s General fund increased $24,533during the current fiscal year. The CapitalImprovementfundbalance increased $75,297, for an ending fund balance of $121,014.Each member of the Organization contributes money for future capital needs. General Fund Budgetary Highlights The Organization’s General fund budget was not amended during the year. The budgetcalledfor adecrease infund balanceof $9. The actual activity of the General fund resulted in an increase of $24,533. Revenues were under budget by $13,663.The largest revenue variances consisted of ice rental charges being under budget by $17,502. Expenditures were underbudget by $38,205.This was mostly due toutility expenditures being under budget by $28,803. -17- Capital Asset Capital assets : The Organization’s investment in capital assets for its governmental activities as of December31,2015, amounts to $1,463,839(net of accumulated depreciation). This investment in capital assets includes land,buildings, improvements, machinery and equipment.The increase from the prior year relatestothe installation of the new dehumidification system in the arena. Additional information on the Organization’s capital assets can be found in Note 3B on page 33 of thisreport. St. Michael - Albertville Ice Arena’s Capital Assets (net of depreciation) Governmental Activities Increase 20152014(Decrease) Land$102,000$102,000$- Buildings1,331,1251,389,425(58,300) Improvements other than buildings14,85815,378(520) Machinery and equipment15,85617,390(1,534) Total$1,463,839$1,524,193$(60,354) Long-term liabilities St. Michael - Albertville Ice Arena’s Long-term Liabilities BeginningEndingDue Within BalanceIncreasesDecreasesBalanceOne Year Governmental activities Compensated absences payable$3,424$-$(3,424)$-$- Additional information on the Organization’s long-term liabilitiescan be found in Note 3C starting on page 33 of this report. Economic Factors and Next Year’s Budgets and Rates The Organizationis a joint powers organization comprised of the City of Albertville, City of St. Michael and Independent School District 885. The Organization strives to maintain reasonable and competitive rates, sufficient to fund operations. The Organization has several primaryparties that rent the ice time at the facility. These groups include, but are not limited to, the STMA High School and the local youth hockey association, STMA Youth Hockey Association, Inc. Other key economic factors are as follows: Ice rental rates were not increased in September 2015. There continues to be an annual shortage of the prime ice available for rentals during the typical hockey season. Requests for Information This financial report is designed to provide a general overview of the Organization’s finances for all those with an interest in the Organization’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, Cityof Albertville, 5959 Main Avenue, Albertville, Minnesota 55301. -18- GOVERNMENT-WIDE FINANCIAL STATEMENTS ST. MICHAEL - ALBERTVILLE ICE ARENA ALBERTVILLE,MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2015 -19- ST. MICHAEL - ALBERTVILLE ICE ARENA STATEMENT OF NET POSITION DECEMBER 31, 2015 Governmental Activities ASSETS Cash and temporary investments$ 245,140 Accounts receivable47,144 Inventory6,447 Capital assets Land102,000 Depreciable assets, net of accumulated depreciation1,361,839 TOTAL ASSETS1,762,570 LIABILITIES Accounts payable9,963 Due to other governments1,922 TOTAL LIABILITIES11,885 NET POSITION Net investment in capital assets1,463,839 Unrestricted 286,846 TOTAL NET POSITION$ 1,750,685 The notes to the financial statements are an integral part of this statement. -20- ST. MICHAEL - ALBERTVILLE ICE ARENA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2015 Net (expenses) Revenues and Changes in Program Revenues Net Position OperatingCapital Grants Charges forGrants andandGovernmental Functions/Programs ExpensesServicesContributionsContributionsActivities Governmental activities Culture and recreation$ 361,937$ 314,154$ -$ 89,225$ 41,442 General revenues Unrestricted investment earnings1,458 Change in net position42,900 Net position, January 11,707,785 Net position, December 31$ 1,750,685 The notes to the financial statements are an integral part of this statement. -21- THIS PAGE IS LEFT BLANK INTENTIONALLY -22- FUNDFINANCIAL STATEMENTS - ST. MICHAEL ALBERTVILLE ICE ARENA ALBERTVILLE, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2015 -23- ST. MICHAEL - ALBERTVILLE ICE ARENA BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2015 Total Capital Governmental GeneralImprovementFunds ASSETS Cash and temporary investments$ 124,126$ 121,014$ 245,140 Accounts receivable47,144-47,144 Inventory6,447-6,447 TOTAL ASSETS$ 177,717$ 121,014$ 298,731 LIABILITIES Accounts payable$ 9,963$ -$ 9,963 Due to other governments1,922-1,922 TOTAL LIABILITIES11,885-11,885 FUND BALANCES Nonspendable for inventory6,447-6,447 Assigned for future capital acquisitions-121,014121,014 Unassigned159,385-159,385 TOTAL FUND BALANCES165,832121,014286,846 TOTAL LIABILITIES AND FUND BALANCES$ 177,717$ 121,014$ 298,731 Total fund balance reported above$ 286,846 Amounts reported for the governmental activities in the statement of net position are different because Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. Cost of capital assets2,335,318 Less: accumulated depreciation(871,479) Total net position - governmental activities$ 1,750,685 The notes to the financial statements are an integral part of this statement. -24- ST. MICHAEL - ALBERTVILLE ICE ARENA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2015 Total Capital Governmental GeneralImprovementFunds REVENUES Charges for services$ 299,755$ -$ 299,755 Interest on investments8835751,458 Miscellaneous14,39989,225103,624 TOTAL REVENUES315,03789,800404,837 EXPENDITURES Current Culture and recreation286,175-286,175 Capital outlay Culture and recreation4,32914,50318,832 TOTAL EXPENDITURES290,50414,503305,007 NET CHANGE IN FUND BALANCES24,53375,29799,830 FUND BALANCES, JANUARY 1141,29945,717187,016 FUND BALANCES, DECEMBER 31$ 165,832$ 121,014$ 286,846 Total change is fund balances$ 99,830 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. Depreciation expense(60,354) 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 the governmental funds. Compensated absences3,424 Change in net position - governmental activities$ 42,900 The notes to the financial statements are an integral part of this statement. -25- ST. MICHAEL - ALBERTVILLE ICE ARENA GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET TO ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2015 (With comparative actual amounts for the year ended December 31, 2014) 2015 2014 Budgeted Amounts ActualVariance withActual OriginalFinalAmountsFinal BudgetAmounts REVENUES Charges for services Ice rental$ 278,200$ 278,200$ 260,698$ (17,502)260,669 Concessions32,00032,00036,2594,25931,442 Vending machines1,0001,000538(462)962 Skate sharpening2,0002,0002,2602602,376 Total313,200313,200299,755(13,445)295,449 Interest on investments1,0001,000883(117)2,657 Miscellaneous Other14,50014,50014,399(101)17,353 TOTAL REVENUES328,700328,700315,037(13,663)315,459 EXPENDITURES Current Culture and recreation Supplies16,55016,55016,13941121,041 Contracted services161,213161,213161,347(134)167,038 Utilities120,600120,60091,79728,803103,211 Other services and charges15,34615,34616,892(1,546)15,090 Total current expenditures313,709313,709286,17527,534306,380 Capital outlay Culture and recreation15,00015,0004,32910,67139,942 TOTAL EXPENDITURES328,709328,709290,50438,205346,322 NET CHANGE IN FUND BALANCES(9)(9)24,53324,542(30,863) FUND BALANCES, JANUARY 1141,299141,299141,299-172,162 FUND BALANCES, DECEMBER 31$ 141,290$ 141,290$ 165,832$ 24,542$ 141,299 The notes to the financial statements are an integral part of this statement. -26- ST. MICHAEL - ALBERTVILLE ICE ARENA NOTES TOTHE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 1:SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A.Reporting entity St. Michael - Albertville Ice Arena (the Organization) was created under a joint powers agreement between the City of St. Michael, the City of Albertville, and the Independent School District No. 885. The agreement was for the construction and maintenance of a qualified ice arena. The Board consists of sixregular members, two from each member of the Organization. Each member is also part of the City Council or Board of Education. The Organization 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 Organization are such that exclusion would cause the Organization’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. The Organization does nothave any component units. B.Government-wide and fundfinancial statements The goal of government-wide financial statements is to present a broad overview of the Organization’s finances. The basic statements that form the government-wide financial statements are the statement of net position and the statement of activities. The two statements report information on all of the non-fiduciary activities of the Organization. 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. Amounts reported asprogram revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Other items not properly included among program revenues are reported instead as general revenues. Major individual governmental funds are reported as separate columns in the fund financialstatements. -27- ST. MICHAEL - ALBERTVILLE ICE ARENA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 1:SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED C.Measurement focus, basis of accounting and financial statement presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statementsare 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 availablewhen they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Organization 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. 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. Non-exchange transactions, in which the Organization receives value without directly giving equal value in return, include grants, entitlement and donations. 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 Organization must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided tothe Organization on a reimbursement basis. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Unearnedrevenue 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 unearnedrevenue. 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 Organizationreports the following major governmental funds: The General fund is the Organization’s primary operating fund. It accounts for all financial resources of the Organization, except those required to be accounted for in another fund. TheCapital Improvementfund accounts for future capital acquisitions and other capital improvements. As a general rule, the effect of interfund activity has been eliminated from government-wide financial statements. When both restricted and unrestricted resources are available for use, it is the Organization’spolicy to use restricted resources first, then unrestricted resources as they are needed. -28- ST. MICHAEL - ALBERTVILLE ICE ARENA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 1:SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED D.Assets, liabilities, and net position/fund balance Deposits and investment The Organization’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 of the City of Albertville are pooled and invested, to the extent available, in certificates of deposit and other authorized investments. The Organization’s balances are maintained in a separate fund withinthe City’s financial statements. Earnings from such investments are allocated on the basis of applicable participation by each of the funds. The Organizationmay also invest idle funds as authorizedby 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.Obligation of a school district with an original maturity not exceeding 13 months and (i) rated in the highest category by a national bond rating service or (ii) enrolled in the credit enhancement program pursuant to statute section 126C.55. 6.Bankers’acceptances of United States banks eligible for purchase by the Federal Reserve System. 7.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. 8.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. 9.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. The Organization does not have an investment policy that addresses interest rate and credit risk. Accounts receivable Accounts receivable include amounts billed for services provided before year endand are expected to be collected. Therefore, there has been no allowance for doubtful accounts established. Inventory The inventory in the General fund is stated at FIFO (first-in, first-out) cost and consists of expendable supplies held for consumption. The cost is recognized as an expenditure at the time the individual inventory items are used (consumption method). -29- ST. MICHAEL - ALBERTVILLE ICE ARENA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 1:SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Capital assets Capital assets, which include property, plant, equipment and infrastructure assetsare reportedin the applicable governmental-type activities columns in the government-wide financial statements. Capital assets are defined by the Organizationas assets with an estimated useful life of more than oneyear and an initialindividual cost of more than the following: CategoryCost Land/land improvements$10,000 Other improvements25,000 Infrastructure100,000 Buildings25,000 Building improvements25,000 Vehicles5,000 Other equipment5,000 Intangible assets10,000 The Organizationreports infrastructure assets on a network and subsystem basis. Accordingly, the amounts spent for the construction or acquisition of infrastructure assets are capitalized and reported in the government-wide financial statements regardless of their amount. In the case of initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the Organizationchose to include items dating back to June 30, 1980. The Organizationwas able to estimate the historical cost for the initial reporting of these assets through back trending(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 or estimated acquisition year). As the Organizationconstructs or acquires capital assets each period, including infrastructure assets, they are capitalized and reported at historical cost. 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 Organization values these capital assets at the estimated fair value of the item at the date of its donation. Property, plant and equipment will be depreciated using the straight-line method over the following estimated useful lives: Useful Lives Assetsin Years Land improvements5 to 30 Infrastructure15 to 50 Buildings15 to 40 Vehicles3 to 15 Other Equipment3 to 20 -30- ST. MICHAEL - ALBERTVILLE ICEARENA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 1:SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Fund balance In the fund financial statements, fund balance isdivided into five classifications based primarily on the extent to which the Organizationis 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 inventory. Restricted - Amounts related to externally imposed constraints establishedby 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 Ice Arena Board, which is the Organization’s highest level of decision-making authority. Committed amounts cannot be used for any other purpose unless the Ice Arena Boardmodifies 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 Ice Arena Boarditself or by an official to which the governing body delegates the authority. The Ice Arena Boardhas adopted a fund balance policy which delegates the authority to assign amounts for specific purposes to the Finance Directorand/orOrganizationAdministrator. Unassigned - The residual classification for the General fund and also negative residual amounts in other funds. The Organizationconsiders restricted amounts to be spent first when both restricted and unrestricted fund balance is available. Additionally, the Organizationwould first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made. Net position Net position represents the difference between assets and deferred outflows and liabilities and deferred inflows. Net position is displayed in three components: a.Net investment in capital assets - Consists of capital assets, net of accumulated depreciation reduced by any outstanding debt attributable to acquire capital assets. b.Restricted net position - Consists of net position 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 position - All other net positions that do not meet the definition of “restricted” or “net investment in capital assets”. Comparative data/reclassifications Comparative total data for the prior year has been presented only for the General Fund in order to provide an understanding of the changes in financial position and operations of this fund. Also, certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year’s presentation. -31- ST. MICHAEL - ALBERTVILLE ICE ARENA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 2:STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Budgetary information An annual budgetisadopted on a basis consistent with accounting principles generally accepted in the United States of America for the General fund.All annual appropriations lapse at fiscal year-end. The Organizationdoes not use encumbrance accounting. The Board adoptsan annual budget for the Organization. During the budget year, supplemental appropriations and deletions may be authorized by the Organization. The amounts shown in the financial statements as ‘Budget’ represent the original and final budgeted amounts. The Organization prepares its budget on a basis consistent with accounting principles generally accepted in the United States of America. All budgeting appropriations lapse at year-end. Note 3:DETAILED NOTES ON ALL FUNDS A.Deposits and investments Deposits Custodial credit risk for deposits and investments is the risk that in the event of a bank failure, the Organization’s deposits and investments may not be returned or the Organizationwill not be able to recover collateral securities in the possession of an outside party. In accordance with Minnesota statutes and as authorized by the OrganizationCouncil, the Organizationmaintains deposits at those depository banks, all of which are members of the Federal Reserve System. Minnesota statutes require that all District 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, bonds, or irrevocable standby letters of credit from Federal Home Loan Banks. 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 ofa 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 government entity. At December 31 2015, the Organization had $245,140invested in an external investment pool maintained by the City of Albertville. The Organization funds are pooled with the City of Albertville and invested in accordance with Minnesota Statues which are the same for Minnesota Cities as for the Organization. Investment earnings (including interest and market value changes) are allocated to the Organization each month based on the Organization’s respective share of the total investment portfolio held by the pool. -32- ST. MICHAEL - ALBERTVILLE ICE ARENA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 3:DETAILED NOTES ON ALL FUNDS - CONTINUED B.Capital assets Capital asset activityfor the year ended December 31, 2015 was as follows: BeginningEnding BalanceIncreasesDecreasesBalance Governmental activities Capital assets not being depreciated Land$102,000$-$-$102,000 Capital assets being depreciated Buildings2,017,446--2,017,446 Improvements other than buildings20,495--20,495 Machinery and equipment195,377--195,377 Total capital assets being depreciated2,233,318--2,233,318 Less accumulated depreciation for Buildings(628,021)(58,300)-(686,321) Improvements other than buildings(5,117)(520)-(5,637) Machinery and equipment(177,987)(1,534)-(179,521) Total accumulated depreciation(811,125)(60,354)-(871,479) Total capital assets being depreciated, net1,422,193(60,354)-1,361,839 Governmental activities capital assets, net$1,524,193$(60,354)$-$1,463,839 Depreciation expense charged to the culture and recreation function was $60,354. C.Long-term liabilities Changes in long-term liabilities Long-term liability activity for the year ended December 31, 2015was as follows: BeginningEndingDue Within BalanceIncreasesDecreasesBalanceOne Year Governmental activities Compensated absences payable$3,424$-$(3,424)$-$- -33- ST. MICHAEL - ALBERTVILLEICE ARENA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2015 Note 4: OTHER INFORMATION Risk management The Organizationis 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 Organizationcarries insurance. The Organization 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 Organizationpays 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 Organization’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 Organization’s management is not aware of any incurred but not reported claims. -34- OTHER REQUIRED REPORT ST. MICHAEL - ALBERTVILLE ICE ARENA ALBERTVILLE, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2015 -35- THIS PAGE IS LEFT BLANK INTENTIONALLY -36- Report on Legal Compliance Independent Auditor's Report Chair and Members of the Ice Arena Board St. Michael Albertville Ice Arena Albertville, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America, the financial statements of the governmental activities and each major fund of the St. Michael Albertville Ice Arena, Albertville, Minnesota as of and for the year ended December 31, 2015, and the related notes to the financial statements, and have issued our report thereon dated April 6, 2016. The Minnesota Legal Compliance Audit Guide for Other Political Subdivisions/Towns, promulgated by the State Auditor pursuant to Minnesota Statutes§ 6.65,contains six categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements,andmiscellaneous provisions. Our audit considered all of the listed categories, except that we did not test for compliance with the provisions for public indebtedness because the Organization has no indebtedness. In connection with our audit, nothing came to our attention that caused us to believe that the Organization failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide for Other Political Subdivisions/Towns. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the Organization's noncompliance with the above referenced provisions. This report is intended solely for the information and use of those charged with governance, management of the Organization and the State Auditor and is not intended to be and should not be used by anyone other than these specified parties. Minneapolis, Minnesota April 6, 2016 -37-