5.1. 2019 FINAL Audited Financial Statements

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CITY OF PEQUOT LAKES, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2019 4 Our discussion and analysis of the City of Pequot Lakes’ financial performance provides an overview of the City’s financial activities for the year ended December 31, 2019. Please read it in conjunction with the independent auditor’s report on page two and the City’s financial statements, which begin on page thirteen. FINANCIAL HIGHLIGHTS  The City’s net position increased $482,185 as a result of this year’s operations.  In the City’s business-type activities, revenues increased $48,501 (or 7.74 percent) and program expenses decreased $46,028 (or 11.13 percent). These changes are discussed in greater detail throughout the following pages.  Total cost of all of the City’s programs decreased $88,110 (or 3.07 percent).  The City of Pequot Lakes received local government aid in the amount of $21,025.  The City’s General Fund generated more revenue than budgeted by $15,653, excluding transfers in from other funds and anticipated bond proceeds. Expenditures were less than budgeted by $5,210,035, due to budgeted capital outlay for projects expected to occur during 2019 that did not happen. See additional details starting on page fifty-four. USING THIS ANNUAL REPORT This annual report consists of series of financial statements. The Statement of Net Position and the Statement of Activities (on pages thirteen and fourteen) provide information about the activities of the City as a whole and present a longer-term view of the City’s finances. Fund financial statements start on page fifteen. These statements tell how governmental activity services were financed in the short term as well as what remains for future spending. Fund financial statements also report the City’s operations in more detail than the government-wide statements by providing information about the City’s most significant funds. Reporting the City as a Whole Our analysis of the City as a whole begins on page six. One of the most important questions asked about the City’s finances is, “Is the City as a whole better off or worse off as a result of the year’s activities?” The Statement of Net Position and the Statement of Activities report information about the City as a whole and about its activities in a way that helps answer this question. These statements include all assets, deferred outflows/inflows of resources, and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the City’s net position and changes in net position. You can think of the City’s net position (assets plus deferred outflows, less liabilities plus deferred inflows) as one way to measure the City’s financial health, or financial position. Over time, increases or decreases in the City’s net position are one indicator of whether its financial health is improving or deteriorating. You will need to consider other nonfinancial factors, however, such as changes in the City’s property tax base, costs associated with current and future construction projects, and the condition of the City’s roads in order to assess the overall health of the City.