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Item 5A. 2025 Audited Financial Statement Review and Auditor Presentation

Superintendent's Recommendation:

MOTION TO ADOPT THE 2025 ANNUAL COMPREHENSIVE FINANCIAL REPORT AND THE AUDITOR'S SPECIAL PURPOSE REPORTS AND AUTHORIZE THE FINANCE DEPARTMENT TO FILE THE REPORTS WITH ALL INTERESTED PARTIES.


Prepared By: Shaan Hamilton, Chief Financial Officer, and Kim Carlson, Assistant Director of Finance Director/Controller, and the entire Finance Department staff

Background:

On an annual basis, an independent auditing firm examines the Park District’s financial activities. The purpose of the audit is to ensure that the Park District is following applicable laws and standards with respect to the way it receives, expends, and accounts for its revenues and expenditures.

CLA (CliftonLarsonAllen) completed the audit of the Park District’s financial transactions for fiscal year 2025 (January 1, 2025 – December 31, 2025). 2025 was CLA’s fourth audit of the Park District. Troy Gabler, principal at CLA, will be presenting the 2025 audit to the Board of Commissioners.

The reports prepared for the audit include:

  • The 2025 Annual Comprehensive Financial Report (ACFR). The ACFR is a detailed analysis of each of the Park District’s funds. While the preparation of the ACFR and all supporting information involves the entire Finance staff, the Park District’s Assistant Director of Finance/Controller, Kim Carlson, and Chief Financial Officer, Shaan Hamilton, are responsible for the completion and accuracy of much of the information.
  • The 2025 Schedule of Expenditures of Federal Awards and Other Required Reports. The two reports from the auditor are required reports communicating the efforts made by the auditors in testing the Park District’s federal grants, internal controls, and compliance with state laws and communicating various issues to the Board. There were no findings related to compliance associated with the financial statements or major federal programs. There was one Minnesota Legal Compliance finding: the Park District did not receive and retain an IC-134 Withholding Affidavit (which verifies that a construction contractor, along with any subcontractors, has fully complied with state income tax withholding requirements for wages paid on government construction projects) before making final payment for one of the contracts tested by the auditor. In the future, the Park District will increase its review of final payments for all construction contracts to comply with this state requirement.


Annual Comprehensive Financial Report

The ACFR is a complex and difficult document to read. Its format is dictated by accounting standards and is designed to provide a large amount of information to users with varying levels of financial knowledge. The report can be broken into five sections:

  1. The Introductory Section – This includes a general discussion of the Park District, its history, policies, achievements, and organization (pages 1 to 9).
  2. The auditor’s opinion – This can be found on pages 10 through 13.
  3. Management’s Discussion and Analysis – This can be found on pages 14 through 27 and includes a detailed discussion of the Park District’s financial activity and condition for 2025 as well as an introduction to the format of the ACFR.
  4. The financial statements and accompanying footnotes – This can be found on pages 28 through 105.
  5. The statistical section – This can be found on pages 106 through 125 and includes a variety of annual comparisons and non-financial information.

The following is a summary of the financial results for 2025 that are presented in the ACFR:

  • Net Position (the amount the Park District is “worth”) increased from $248.6 million to $254.5 million. This is not a balance that can be spent since a large portion of the balance is invested in land, buildings, and equipment or is restricted for specific purposes. Of this, $910,556 is unrestricted. (ACFR-Page 28).
  • The General Fund’s fund balance is $19.4 million. This amount decreased by $1.13 million in 2025. The amended budget had anticipated a portion of this amount decreasing by $203,801 due to purchases initiated in 2024 that were completed in 2025. Revenues were $339,282, or 0.6 percent, under budget, while expenditures were $634,801, or 1.2 percent, over budget (ACFR-pages 30 and 94).
  • The Financial Management Plan includes the following commitments and assignments of the General Fund - fund balance:
    • Committed for Compensated Absences (Amount of Accrued Vacation and Sick Leave) = $4,320,184
    • Assigned for Next Year's Budget (Operations and Maintenance Funding received in 2023 to be used to fund the 2026-2027 budgets) = $1,490,554
    • Assigned for Contingencies (Funds for unforeseen contingencies) = $1,000,000
    • Assigned for Working Capital [Amount needed to fund 2026 operations until tax revenues are received (22% of 2026 budget) (Shown as unassigned due to accounting principle requirements)] = $12,190,863
    • The Park District has met all four required balances and has an unassigned balance of $252,017. This balance can be used at the Board’s discretion for purposes outlined in the Financial Management Plan or held to finance future budget variances.
  • Scott County partnership revenues for 2025 were $279,457 (7.0%) greater than budgeted due primarily to golf related revenues at Cleary Lake Regional Park. Expenditures were $17,122 (0.4%) under budget. The 2025 fund balance decreased from $1,460,534 to $1,052,041 (ACFR-pages 30 and 95), primarily due to land acquisition purchases in 2025.
  • Baker National Golf Course shows net income of $782,402 (ACFR-page 35) due to strong demand and favorable weather conditions. On a budgetary basis (the budget excludes depreciation and shows the cost of equipment when purchased and funds set aside for future development as expenses), Baker National revenue exceeded the annual budget by more than $723,000. Green fees, which account for 52.5% of the total budgeted revenue, were more than $477,000 above budget. Expenditures were $283,600 less than budgeted primarily due to a budgeted investment in a capital improvement that did not occur in 2025.
  • Eagle Lake Golf Course shows net income of $33,905 (ACFR-page 35). On a budgetary basis, golf revenues at Eagle Lake exceeded the budget by more than $197,000 with green fees, driving range fees, and interest earnings accounting for most of this amount. The total revenue of $1,370,581 was 16.8% greater than budgeted. Expenditures were $56,500 more than budgeted, primarily due to wages and benefits being greater than budgeted as a result of higher than anticipated seasonal staffing costs.
  • The Hyland Hills Ski Area reported net income of $223,815 (ACFR-page 35). On a budgetary basis, the ski area’s revenues were $1,065,762 greater than the amended budget. All revenue streams exceeded budget for the year. Excluding depreciation, expenditures were $398,680 greater than the amended budget. This negative variance was due to higher than budgeted seasonal staffing costs, food and beverage supplies, and contracted services.
  • Two of the nine funds with minimum fund balance requirements in the Financial Management Plan have not met their requirements. First, the Debt Service Fund, whose minimum fund balance requirement is the principal and interest payable in the subsequent year, had a fund balance of $6,843,032 at the end of 2025 (ACFR-page 32), which is $1,306,013 less than required. Second, the Risk Management Fund, whose minimum fund balance requirement is set at $500,000, had a fund balance of -$541,666 at the end of 2025 (ACFR-page 103), which is $1,041,666 below its minimum.
  • Hyland Greens, which became an enterprise fund in 2024, shows an unrestricted fund balance of negative $319,866 (ACFR-page 34) with an operating loss of $32,793. This enterprise fund will need time to realize potential demand.
  • The Park District’s outstanding general obligation bonded debt as of December 31, 2025 (pages 59-61) increased by $3.015 million to $63.065 million due to the issuance of additional debt in 2025. The Park District’s limit for debt outstanding without voter approval as of January 1, 2025 is $184.2 million (based on 2025 valuation data). The Park District’s net debt (bonded debt less funds on hand to pay debt) totaled $56.7 million as of December 31, 2025.


Upon approval by the Board, the Chief Financial Officer and Assistant Director of Finance/Controller will submit the ACFR to a variety of interested parties. The State Auditor and bond markets will receive ACFRs as required by state law and bond resolutions. In addition, the ACFR will be forwarded to the Governmental Finance Officers’ Association for review under its Certificate of Excellence in Financial Reporting program. The Park District has received this prestigious award for the past 36 years. Finance staff believes the 2025 ACFR meets the requirements of this program. Finally, the ACFR will be sent to various businesses and others who have requested copies.


Other Auditor Reports

CLA completed several additional required reports for the Park District. These included:

  • The Schedule of Expenditures of Federal Awards - This report, which is also referred to as the Single Audit, audited the Park District's compliance with federal grants. CLA found that Three Rivers Park District complied, in all material respects, with the compliance requirements for each of its major federal programs for the year ended December 31, 2025.
  • Other Required Reports – Testing of the Park District’s controls over its assets and financial reporting and compliance with state of Minnesota laws found that there were no findings related to compliance associated with the financial statements or major federal programs. As noted earlier, the Park District had one Minnesota Legal Compliance finding: the Park District did not receive and retain an IC-134 Withholding Affidavit (which verifies that a construction contractor, along with any subcontractors, has fully complied with state income tax withholding requirements for wages paid on government construction projects) before making final payment for one of the contracts tested by the auditor. In the future, the Park District will increase its review of final payments for all construction contracts to comply with this state requirement.
  • The Report to the Board of Commissioners is a required report containing various issues to be reported by the auditor to the Board. The contents of the report are mandated by governmental accounting and auditing principles.


Auditor Presentation

Troy Gabler from CLA will present the audit at the meeting and answer any questions from Commissioners.

Relationship to the System Plan:

The Request for Action supports the following goal(s) of the System Plan:

Goal 3: Lead by Example

by ensuring the Park District handles its financial resources as required by other agencies and generally accepted accounting principles.

Attachments:

Signed Financial Statements 2025.pdf

Signed Single Audit Report 2025.pdf

Signed Governance Letter 2025.pdf

CliftonLarsonAllen FY25 Audit Presentation - Three Rivers Park District.pdf

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