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2023 STMA Ice Arena Annual Financial ReportAnnual Financial Report St. Michael – Albertville Ice Arena Albertville, Minnesota For the year ended December 31, 2023 THIS PAGE IS LEFT BLANK INTENTIONALLY St. Michael - Albertville Ice Arena Annual Financial Report Table of Contents For the Year Ended December 31, 2023 Page No. Introductory Section Appointed Officials 7 Financial Section Independent Auditor’s Report 10 Management’s Discussion and Analysis 13 Basic Financial Statements Government-wide Financial Statements Statement of Net Position 22 Statement of Activities 23 Fund Financial Statements Governmental Funds Balance Sheet 26 Statement of Revenues, Expenditures and Changes in Fund Balances 27 General Fund Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 28 Notes to the Financial Statements 29 Other Required Report Independent Auditor’s Report on Minnesota Legal Compliance 39 3 THIS PAGE IS LEFT BLANK INTENTIONALLY 4 INTRODUCTORY SECTION ST. MICHAEL - ALBERTVILLE ICE ARENA ALBERTVILLE, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2023 5 THIS PAGE IS LEFT BLANK INTENTIONALLY 6 St. Michael - Albertville Ice Arena Appointed Officials For the Year Ended December 31, 2023 Name Title Appointed by Aaron Cocking Chair Albertville Tim Lewis Member ISD 885 Kari Dwinnell Member ISD 885 Travis Weber Member ISD 885 Bob Zagorski Member Albertville Ryan Gleason Member St. Michael Keith Wettschreck Member St. Michael APPOINTED 7 THIS PAGE IS LEFT BLANK INTENTIONALLY 8 FINANCIAL SECTION ST. MICHAEL - ALBERTVILLE ICE ARENA ALBERTVILLE, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2023 9 INDEPENDENT AUDITOR’S REPORT Board of Directors St. Michael - Albertville Ice Arena Albertville, Minnesota Report on the Financial Statements Opinions We have audited the accompanying financial statements of the governmental activities and each major fund of the St. Michael - Albertville Ice Arena (the Organization), as of and for the year ended December 31, 2023, and the related notes to the financial statements, which collectively comprise the Organization’s basic financial statements as listed in the table of contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Organization as of December 31, 2023, and the respective changes in financial position and, where applicable, cash flows 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. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Organization and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that t he audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Organization’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. 10 In performing an audit in accordance with GAAS, we: •Exercise professional judgment and maintain professional skepticism throughout the audit. •Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. •Obtain an understanding of internal control relevant to the audit 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, no such opinion is expressed. •Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. •Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Organization’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis 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 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 statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide an y assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Management is responsible for the other information included in the annual report. The other information comprises the introductory section but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Abdo Minneapolis, Minnesota April 11, 2024 11 THIS PAGE IS LEFT BLANK INTENTIONALLY 12 Management’s Discussion and Analysis As management of the St. Michael - Albertville Ice Arena of Albertville, Minnesota, (the Organization), we offer readers of the Organization’s financial statements this narrative overview and analysis of the financial activities of the Organization for the fiscal year ended December 31, 2023. Financial Highlights • The assets of the Organization exceeded its liabilities at the close of the most recent fiscal year as shown in the summary of net position on the following pages. The unrestricted amount of net position may be used to meet the Organization’s ongoing obligations to citizens and creditors. • The Organization’s total net position increased as shown in the summary of changes in net assets table on the following pages. This increase is attributable to revenues increasing from prior year in excess of expenditures. • At the close of the current fiscal year, the Organization’s governmental funds combined ending balance increased in comparison with the prior year. Unassigned fund balance is available for spending at the Organization’s discretion, but a portion has been assigned for specific purposes. The remaining is nonspendable for inventory and prepaids. • The unassigned fund balance in the General fund, as shown in the financial analysis of the Organization’s funds section, increased from prior year. 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 more detailed data. The statements are followed by a section of supplementary information which 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 Discussion and Analysis Basic Financial Statements Required Supplementary Information Government- wide Financial Statements Fund Financial Statements Notes to the Financial Statements Summary Detail 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 Statements Governmental Funds Scope Entire Organization government (except fiduciary funds) and the Organization’s component units The activities of the Organization that are not proprietary or fiduciary, such as police, fire and parks Required financial statements •Statement of Net Position •Statement of Activities •Balance Sheet •Statement of Revenues, Expenditures, and Changes in Fund Balances Accounting basis and measurement focus Accrual accounting and economic resources focus Modified accrual accounting and current financial 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 Type of deferred outflows/inflows of resources information All deferred outflows/inflows of resources, regardless of when cash is received or paid Only deferred outflows of resources expected to be used up and deferred inflows of resources that come due during the year or soon thereafter; no capital assets included 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 Government-wide Financial Statements. The Government-wide financial statements are 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 position presents 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 position may serve as a useful indicator of whether the financial position of the Organization is improving or deteriorating. The statement of activities presents information showing how the Organization’s net position changed during the most recent fiscal year. All changes in net position 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. The government-wide financial statements start on page 22 of this report. 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 Organization, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finan ce-related legal requirements. All of the funds of the Organization are governmental 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. 15 `` 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 Organization maintains two individual 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 fund and Capital Improvement fund. The Organization adopts an annual appropriated budget for its General fund. A budgetary comparison statement has been provided for the General fund to demonstrate compliance with this budget. The basic governmental fund financial statements start on page 26 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 29 of this report. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the Organization, assets exceeded liabilities at the close of the most recent fiscal year. By far, the largest portion of the Organization’s net position reflects its investment in capital assets (e.g., land, buildings, machinery and equipment). The Organization uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. St. Michael - Albertville Ice Arena’s Summary of Net Position Increase 2023 2022 (Decrease) Current and Other Assets 682,859$ 500,348$ 182,511$ Capital Assets 1,109,783 1,161,261 (51,478) Total Assets 1,792,642 1,661,609 131,033 Other Liabilities 39,959 50,784 (10,825) Net Position Investment in capital assets 1,109,783 1,161,261 (51,478) Unrestricted 642,900 449,564 193,336 Total Net Position 1,752,683$ 1,610,825$ 141,858$ Net Position as a Percent of Total Net investment in capital assets 63.3 %72.1 % Unrestricted 36.7 27.9 100.0 %100.0 % Governmental Activities 16 `` The remaining balance of unrestricted net position may be used to meet the Organization’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the Organization is able to report positive balances in all categories of net position. Governmental Activities. Governmental activities increased the Organization’s net position as shown in summary below. St. Michael - Albertville Ice Arena’s Changes in Net Position Increase 2023 2022 (Decrease) Revenues Program Revenues Charges for services 859,773$ 783,352$ 76,421$ Capital grants and contributions 95,071 45,073 49,998 General Revenues Unrestricted investment earnings (loss)25,966 (11,198) 37,164 Total Revenues 980,810 817,227 163,583 Expenses Culture and recreation 838,952 801,194 37,758 Change in Net Position 141,858 16,033 125,825 Net Position, January 1 1,610,825 1,594,792 16,033 Net Position, December 31 1,752,683$ 1,610,825$ 141,858$ Governmental Activities Financial Analysis of the Government’s Funds As noted earlier, the Organization uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds: The focus of the Organization’s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the Organization’s financing requirements. In particular, unassigned 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 Organization’s governmental funds had increased in comparison with the prior year. Capital Prior Year Increase/ General Improvement Total Total (Decrease) Fund Balances Nonspendable 11,536$ -$ 11,536$ 2,553$ 8,983$ Assigned - 277,682 277,682 185,444 92,238 Unassigned 353,682 - 353,682 261,567 92,115 365,218$ 277,682$ 642,900$ 449,564$ 193,336$ The General fund is the chief operating fund of the Organization. At the end of the current year, the fund balance of the General fund is shown in the fund financial statements. The fund balance of the Organization’s General fund increased during the current fiscal year as anticipated with the budget. 17 `` The Capital Improvement fund balance increased as shown above. 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 budget called for an increase in fund balance. The actual activity of the General fund resulted in an increase. Final Budgeted Actual Variance with Amounts Amounts Final Budget Revenues 822,850$ 873,572$ 50,722$ Expenditures 784,451 772,474 11,977 Net Change in Fund Balances 38,399 101,098 62,699 Fund Balances, January 1 264,120 264,120 - Fund Balances, December 31 302,519$ 365,218$ 62,699$ Revenues were over budget. The largest revenue variance was the ice rental revenue which was over budget. Expenditures were under budget. This was mostly due to utilities being under budget. Capital Assets: The Organization’s investment in capital assets for its governmental activities as of December 31, 2023, is shown in the table below. This investment in capital assets includes land, buildings, improvements, machinery and equipment. The decrease from the prior year relates to depreciation expense. Additional information on the Organization’s capital assets can be found in Note 3 B on page 35 of this report. St. Michael - Albertville Ice Arena’s Capital Assets (Net of Depreciation) Increase 2023 2022 (Decrease) Land 102,000$ 102,000$ -$ Buildings 872,377 928,832 (56,455) Machinery and Equipment 135,406 130,429 4,977 Total 1,109,783$ 1,161,261$ (51,478)$ Governmental Activities 18 `` Economic Factors and Next Year’s Budgets and Rates The Organization is 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 primary parties 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: • There continues to be an annual shortage of the prime ice available for rentals during the typical hockey season. • Demand for off-season ice has greatly increased. • The arena leases 2,850 SF as retail space to Hat Trick Hockey. The retail use complements the arena’s operations and generates revenue. • The arena has an agreement with the local youth hockey association committing the association to a minimum number of ice rental hours in exchange for use of dryland space in the arena. 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, City of Albertville, 5959 Main Avenue, Albertville, Minnesota 55301. 19 THIS PAGE IS LEFT BLANK INTENTIONALLY 20 GOVERNMENT-WIDE FINANCIAL STATEMENTS ST. MICHAEL - ALBERTVILLE ICE ARENA ALBERTVILLE, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2023 21 St. Michael - Albertville Ice Arena Statement of Net Position December 31, 2023 Governmental Activities Assets Cash and temporary investments 568,738$ Accounts receivable 102,585 Inventory 3,181 Prepaid items 8,355 Capital assets Land 102,000 Depreciable assets, net of accumulated depreciation 1,007,783 Total Assets 1,792,642 Liabilities Accounts payable 28,953 Accrued salaries payable 11,006 Total Liabilities 39,959 Net Position Investment in capital assets 1,109,783 Unrestricted 642,900 Total Net Position 1,752,683$ The notes to the financial statements are an integral part of this statement. 22 St. Michael - Albertville Ice Arena Statement of Activities For the Year Ended December 31, 2023 Net (Expenses) Revenues and Changes in Net Position Operating Capital Grants Charges for Grants and and Governmental Expenses Services Contributions Contributions Activities Governmental Activities Culture and recreation 838,952$ 859,773$ -$ 95,071$ 115,892$ General Revenues Unrestricted investment earnings 25,966 Change in Net Position 141,858 Net Position, January 1 1,610,825 Net Position, December 31 1,752,683$ Program Revenues Functions/Programs The notes to the financial statements are an integral part of this statement. 23 THIS PAGE IS LEFT BLANK INTENTIONALLY 24 FUND FINANCIAL STATEMENTS ST. MICHAEL - ALBERTVILLE ICE ARENA ALBERTVILLE, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2023 25 St. Michael - Albertville Ice Arena Balance Sheet Governmental Funds December 31, 2023 Total Capital Governmental General Improvement Funds Assets Cash and temporary investments 291,056$ 277,682$ 568,738$ Accounts receivable 102,585 - 102,585 Inventory 3,181 - 3,181 Prepaid items 8,355 - 8,355 Total Assets 405,177$ 277,682$ 682,859$ Liabilities Accounts payable 28,953$ -$ 28,953$ Accrued salaries payable 11,006 - 11,006 Total Liabilities 39,959 - 39,959 Fund Balances Nonspendable for inventory and prepaids 11,536 - 11,536 Assigned for future capital acquisitions - 277,682 277,682 Unassigned 353,682 - 353,682 Total Fund Balances 365,218 277,682 642,900 Total Liabilities and Fund Balances 405,177$ 277,682$ 682,859$ Total fund balance reported above 642,900$ 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 assets 2,539,686 Less: accumulated depreciation (1,429,903) Total Net Position - Governmental Activities 1,752,683$ The notes to the financial statements are an integral part of this statement. 26 St. Michael - Albertville Ice Arena Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended December 31, 2023 Total Capital Governmental General Improvement Funds Revenues Charges for services 827,098$ -$ 827,098$ Interest on investments 13,799 12,167 25,966 Miscellaneous 32,675 95,071 127,746 Total Revenues 873,572 107,238 980,810 Expenditures Current Culture and recreation 761,894 - 761,894 Capital outlay Culture and recreation 10,580 15,000 25,580 Total Expenditures 772,474 15,000 787,474 Net Change in Fund Balances 101,098 92,238 193,336 Fund Balances, January 1 264,120 185,444 449,564 Fund Balances, December 31 365,218$ 277,682$ 642,900$ Total Change is Fund Balances 193,336$ 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 outlays 25,580 Depreciation expense (77,058) Change in Net Position - Governmental Activities 141,858$ The notes to the financial statements are an integral part of this statement. 27 General Fund Actual Variance with Original Final Amounts Final Budget Revenues Charges for services Ice rental 720,350$ 720,350$ 738,449$ 18,099$ Concessions 75,000 75,000 86,017 11,017 Vending machines 2,000 2,000 2,632 632 Total Charges for Services 797,350 797,350 827,098 29,748 Interest on investments 500 500 13,799 13,299 Miscellaneous Other 25,000 25,000 32,675 7,675 Total Revenues 822,850 822,850 873,572 50,722 Expenditures Current Culture and recreation Supplies 39,200 39,200 38,787 413 Contracted services 428,587 428,587 451,609 (23,022) Utilities 288,930 288,930 244,703 44,227 Other services and charges 27,734 27,734 26,795 939 Total current expenditures 784,451 784,451 761,894 22,557 Capital outlay Culture and recreation - - 10,580 (10,580) Total Expenditures 784,451 784,451 772,474 11,977 Net Change in Fund Balances 38,399 38,399 101,098 62,699 Fund Balances, January 1 264,120 264,120 264,120 - Fund Balances, December 31 302,519$ 302,519$ 365,218$ 62,699$ Budgeted Amounts St. Michael - Albertville Ice Arena Statement of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual For the Year Ended December 31, 2023 The notes to the financial statements are an integral part of this statement. 28 St. Michael - Albertville Ice Arena Notes to the Financial Statements December 31, 2023 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 seven regular members, two from each member city and three from the Independent School District No. 885. 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 not have any component units. B.Government-wide and Fund Financial 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 a re offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Amounts reported as 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. 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 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 . 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 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 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. 29 St. Michael - Albertville Ice Arena Notes to the Financial Statements December 31, 2023 Note 1: Summary of Significant Accounting Policies (Continued) 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 to the Organization on a reimbursement basis. On a modified accrual basis, revenue from non- exchange transactions must also be available before it can be recognized. Unearned revenue arises when assets are recognized before revenue recognition criteria hav e been satisfied. Grants and entitlements received before eligibility requirements are met are also recorded as unearned revenue. 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 Organization reports 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. The Capital Improvement fund 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. D.Assets, Liabilities, and Net Position/Fund Balance Deposits and Investments 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 with in the City’s financial statements. Earnings from such investments are allocated on the basis of applicable participation by each of the funds. The Organization may also 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.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. 30 St. Michael - Albertville Ice Arena Notes to the Financial Statements December 31, 2023 Note 1: Summary of Significant Accounting Policies (Continued) 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 $10,000,000, a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York, or certain Minnesota securities broker-dealers. 9. Guaranteed Investment Contracts (GIC’s) issued or guaranteed by a United States commercial bank, a domestic branch of a foreign bank, a United States insurance company, or its Canadian subsidiary, whose similar debt obligations were rated in one of the top two rating categories by a nationally recognized rating agency. The Organization does not have an investment policy that addresses interest rate and credit risk. Accounts Receivable Accounts receivable include amounts billed for services provided before year end and are expected to be collected. Therefore, there has been no allowance for doubtful accounts established. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. Prepaid items are reported using the consumption method and recorded as expenditures/expenses at the time of consumption. Inventory The inventory in the General fund is stated at FIFO (first-in, first-out) cost and consists of expendable supplies held for consumption. The cost is recognized as an expenditure at the time the individual inventory items are used (consumption method). Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets are reported in the applicable governmental-type activities columns in the government-wide financial statements. Capital assets are defined by the Organization as assets with an estimated useful life of more than one year and an initial individual cost of more than the following: Category Cost Land/Land Improvements 10,000$ Other Improvements 25,000 Infrastructure 100,000 Buildings 25,000 Building Improvements 25,000 Vehicles 5,000 Other Equipment 5,000 Intangible Assets 10,000 31 St. Michael - Albertville Ice Arena Notes to the Financial Statements December 31, 2023 Note 1: Summary of Significant Accounting Policies (Continued) The Organization reports 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 Organization chose to include items dating back to June 30, 1980. The Organization was 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 Organization constructs 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 acquisition 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 Assets in Years Land Improvements 5 to 30 Infrastructure 15 to 50 Buildings 15 to 40 Vehicles 3 to 15 Other Equipment 3 to 20 Fund Balance In the fund financial statements, fund balance is divided into five classifications based primarily on the extent to which th e Organization is bound to observe constraints imposed upon the use of resources repor ted in the governmental funds. These classifications are defined as follows: Nonspendable - Amounts that cannot be spent because they are not in spend able form, such as inventory. 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 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 Board 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 Ice Arena Board itself or by an official to which the governing body delegates the authority. The Ice Arena Board has adopted a fund balance policy which delegates the authority to assign amounts for specific purposes to the Finance Director and/or Organization Administrator. Unassigned - The residual classification for the General fund and also negative residual amounts in other funds. 32 St. Michael - Albertville Ice Arena Notes to the Financial Statements December 31, 2023 Note 1: Summary of Significant Accounting Policies (Continued) The Organization considers restricted amounts to be spent first when both restricted and unrestricted fund balance is available. Additionally, the Organization would 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. Investment in Capital Assets - Consists of capital assets, net of accumulated depreciation. 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 “investment in capital assets”. When both restricted and unrestricted resources are available for use, it is the Organization’s policy to use restricted resources first, then unrestricted resources as they are needed. Note 2: Stewardship, Compliance and Accountability Budgetary Information An annual budget is adopted 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 Organization does not use encumbrance accounting. The Board adopts an 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. 33 St. Michael - Albertville Ice Arena Notes to the Financial Statements December 31, 2023 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 Organization 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 Organization Council, the Organization maintains 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 insuran ce, surety bond or collateral. The fair 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 rate d “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 government entity. At December 31, 2023, the Organization had $568,738 invested in an external investment pool maintained by the City of Albertville. The Organization funds are pooled with the City of Albertville and invested in accordance with Minnesota Statues which are the same for Minnesota Cities as for the Organization. Investment earnings (including interest and market value changes) are allocated to the Organization each month based on the Organization’s respective share of the total investment portfolio held by the pool. 34 St. Michael - Albertville Ice Arena Notes to the Financial Statements December 31, 2023 Note 3: Detailed Notes on All Funds B.Capital Assets Capital asset activity for the year ended December 31, 2023 was as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities Capital Assets not Being Depreciated Land 102,000$ -$ -$ 102,000$ Capital Assets Being Depreciated Buildings 2,017,446 - - 2,017,446 Improvements other than buildings 8,495 - - 8,495 Machinery and equipment 386,165 25,580 - 411,745 Total Capital Assets Being Depreciated 2,412,106 25,580 - 2,437,686 Less Accumulated Depreciation for Buildings (1,088,614) (56,455) - (1,145,069) Improvements other than buildings (8,495) - - (8,495) Machinery and equipment (255,736) (20,603) - (276,339) Total Accumulated Depreciation (1,352,845) (77,058) - (1,429,903) Total Capital Assets Being Depreciated, Net 1,059,261 (51,478) - 1,007,783 Governmental Activities Capital Assets, Net 1,161,261$ (51,478)$ -$ 1,109,783$ Depreciation expense charged to the culture and recreation function for the current year is $77,058 as shown above. Note 4: Other Information Risk Management The Organization 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 Organization carries 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 Organization 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 am ount 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. 35 THIS PAGE IS LEFT BLANK INTENTIONALLY 36 OTHER REQUIRED REPORT ST. MICHAEL - ALBERTVILLE ICE ARENA ALBERTVILLE, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2023 37 THIS PAGE IS LEFT BLANK INTENTIONALLY 38 INDEPENDENT AUDITOR’S REPORT ON MINNESOTA LEGAL COMPLIANCE Board of Directors 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 (the Organization), as of and for the year ended December 31, 2023, and the related notes to the financial statements which collectively comprise the Organization’s financial statements, and have issued our report thereon dated April 11, 2024. In connection with our audit, nothing came to our attention that caused us to believe that the St. Michael - Albertville Ice Arena failed to comply with the provisions of the contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements and miscellaneous provisions sections of the Minnesota Legal Compliance Audit Guide for Other Political Subdivisions, promulgated by the State Auditor pursuant to Minn. Stat. § 6.65, insofar as they relate to accounting matters. 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, insofar as they relate to accounting matters. This report is intended solely for the information and use those charged with governance and 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. Abdo Minneapolis, Minnesota April 11, 2024 39