2020 Comprehensive Annual Financial Report

CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020

NOTE 3 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (CONTINUED) A. Budgetary Information (Continued) 5. An annual budget is adopted for the General Fund and EDA. Annual appropriated budgets are not adopted for Debt Service Funds because effective budgetary control is alternatively achieved through bond indenture provisions. Budgetary control for Capital Projects Funds is accomplished through the use of project controls and budgets are not adopted. 6. Budgeted amounts are as originally adopted and as amended in December by the City Council. Budgeted expenditure appropriations lapse at year-end. B. Deficit Net Position and Fund Balance The TIF District No. 17 Amazon capital project fund had a negative fund balance of $1,028,939 on December 31, 2020 as a result of street improvements costs. Tax increment revenue over the next seven years is anticipated to eliminate this deficit. The TIF District No. 19 Riverfront capital project fund had a negative fund balance of $1,212,842 on December 31, 2020 as a result of property acquisition costs. Future tax increment revenue is anticipated to eliminate this deficit. The Employee Benefits internal service fund had a negative net position of $1,381,017 on December 31, 2020. This deficit has been in place for many years and is not expected to be resolved. Management’s position is that the cash balance should be sufficient enough to cover the current compensated absences and not necessarily the noncurrent portion of compensated absences. The TIF District No. 20 Enclave capital project fund had a negative fund balance of $2,423,778 on December 31, 2020 as a result of lot improvements at the old city hall site. Tax increment revenue is anticipated to eliminate this deficit. A. Deposits In accordance with applicable Minnesota Statutes, the City and the Component Unit maintains deposits at depository banks authorized by the City Council and the Commissioners. Custodial Credit Risk: This is the risk that an issuer or other counterparty to an investment will not fulfill its obligation to the holder of the investment. Minnesota Statutes 118A.04 and 188A.05 limit investments that are in the top two ratings issued by nationally recognized statistical rating organizations. The City’s investment policy references Minnesota Statutes and further limits the types of investments that the City is allowed to invest in. The Commission has a deposit policy that requires the Commission’s deposits to be collateralized as required by Minnesota Statues 118.03 for an amount exceeding FDIC, SAIF, BIF, FCUA, or other federal deposit coverage. As of December 31, 2020, the City and Commission’s bank balances were not exposed to custodial credit risk because they were insured through Federal Deposit Insurance Corporation (FDIC) and properly collateralized with securities held by the pledging financial institutions’ trust departments or agents in the City’s name. NOTE 4 – DEPOSITS AND INVESTMENTS

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