Metropolitan Mosquito Control District

Office of the Legislative Auditor State of Minnesota
Financial Audit Metropolitan Mosquito Control District For the Year Ended December 31, 1999

JUNE 15, 2000 00-26

Financial Audit Division The Office of the Legislative Auditor (OLA) is a professional, nonpartisan office in the legislative branch of Minnesota State government. Its principal responsibility is to audit and evaluate the agencies and programs of state government (the State Auditor audits local governments). OLA's Financial Audit Division annually audits the state's financial statements and, on a rotating schedule, audits agencies in the executive and judicial branches of state government, three metropolitan agencies, and several "semi-state" organizations. The division also investigates allegations that state resources have been used inappropriately. The division has a staff of approximately fifty auditors, most of whom are CPAs. The division conducts audits in accordance with standards established by the American Institute of Certified Public Accountants and the Comptroller General of the United States.

Consistent with OLA's mission, the Financial Audit Division works to:
· Promote Accountability, · Strengthen Legislative Oversight, and
· Support Good Financial Management.
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OFFICE OF THE LEGISLATIVE AUDITOR State of Minnesota ° James Nobles, Legislative Auditor Report Summary
Financial Audit
Metropolitan Mosquito Control District For the Year Ended December 31, 1999

Key Audit Conclusions:
· The financial statements of the Metropolitan Mosquito Control District (District) for the year ended December 31, 1999, were fairly presented, in all material respects, in accordance with generally accepted accounting principles.
· We did not identify any instances of noncompliance with legal provisions that could have significantly affected the District's financial statements.

· We did not report any written findings or recommendations to the District for improving internal controls over financial reporting. Background: The District was created under the authority of Minn. Stat. Sections 473.701 to 473.716 to control mosquitoes and black gnats and to monitor Lyme ticks in the metropolitan area. The District is governed by the Metropolitan Mosquito Control Commission. The Commission is comprised of representatives from the following counties: Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. The District's executive director is Joseph Sanzone. The district had revenues of approximately $8.5 million during the audit period. Expenditures exceeded revenues by about $311,000. Unreserved fund balance at year-end totaled $5.2 million.

This audit report contains the Metropolitan Mosquito Control District's financial statements and our related Independent Auditor's Report and Report on Compliance and Internal Control over Financial Reporting.

Room 140, 658 Cedar Street, St. Paul, Minnesota 55155-1603 ° Tel: 651/ 296-4708 ° Fax: 651/ 296-4712 E-mail: auditor@ state. mn. us ° TDD Relay: 651/ 297-5353 ° Website: www. auditor. leg. state. mn. us

Metropolitan Mosquito Control District Table of Contents

Independent Auditor's Report
Financial Statements:
Combined Balance Sheet
Statements of Revenue, Expenses, and Changes in Fund Balance
Notes to the Financial Statements
Auditor's Report on Compliance and on Internal Control
Status of Prior Audit Issues

Audit Participation
The following members of the Office of the Legislative Auditor prepared this report: Claudia Gudvangen, CPA Deputy Legislative Auditor Jim Riebe, CPA, Audit Manager Susan Kachelmeyer, CPA, CISA Auditor-in-Charge Theresa Hahn Auditor

OFFICE OF THE LEGISLATIVE AUDITOR State of Minnesota ° James Nobles, Legislative Auditor Independent Auditor's Report Commissioner Randy Johnson, Chair Metropolitan Mosquito Control District

Members of the Metropolitan Mosquito Control District
Mr. Joseph Sanzone, Executive Director Metropolitan Mosquito Control District

We have audited the accompanying balance sheet of the Metropolitan Mosquito Control District (District) as of December 31, 1999, and the related statements of revenues, expenditures, and changes in fund balances for the two years then ended as presented on pages 3 to 16. These financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Metropolitan Mosquito Control District as of December 31, 1999, and the results of its operations and changes in its fund balance for the two years then ended in conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued our report dated May 24, 2000, on our consideration of the Metropolitan Mosquito Control District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.

/s/ James R. Nobles /s/ Claudia J. Gudvangen
James R. Nobles Claudia J. Gudvangen, CPA Legislative Auditor Deputy Legislative Auditor

May 24, 2000

EXHIBIT A METROPOLITAN MOSQUITO CONTROL DISTRICT COMBINED BALANCE SHEET

ALL FUND TYPES AND ACCOUNT GROUPS December 31, 1999

Account Groups Totals Governmental General General (MEMORANDUM ONLY) Fund Type Fixed Long-Term December 31, Assets General Assets Debt 1999 1998
Cash+ Cash Equivalents $ 5,272,916 $ 5,272,916 $ 5,133,018
PrePaid Expenses 12,424 12,424 0
Income Receivable:
(net of allowance for uncollectible taxes of $391,901) 397,936 397,936 332,198
Inventory at cost 320,036 320,036 1,182,880
Equipment
Net of depreciation $ 1,556,040 1,556,040 1,566,092
Land 1,118,867 1,118,867 1,118,867
Building
Net of bldg. depreciation 5,132,846 5,132,846 5,365,228
Amount to be provided for
Employee Benefits $ 557,087 557,087 513,858
Total Assets $ 6,003,312 $ 7,807,753 $ 557,087 $ 14,368,152 $ 15,212,141

Liabilities Fund Equity Liabilities:
Accounts Payable $ 60,418 $ 60,418 $ 453,958
Accrued Salary
and Wages 88,015 88,015 73,997
Employee Benefits
Payable 29,835 $ 557,087 586,922 533,845
Deferred Revenue 274,212 274,212 237,849
Total Liabilities $ 452,480 $ 557,087 $ 1,009,567 $ 1,299,649

Fund Equity:
Investment in general
fixed assets $ 7,807,753 $ 7,807,753 $ 8,050,187

Fund Balance:
Reserved for inventory $ 320,036 $ 320,036 $ 1,182,880

Unreserved Fund Balance $ 5,230,796 $ 5,230,796 $ 4,679,425
(See designation in foonotes $1,898,000) Total Fund Equity $ 5,550,832 $ 7,807,753 $ 13,358,585 $ 13,912,492

Total Liabilities and Fund Equity $ 6,003,312 $ 7,807,753 $ 557,087 $ 14,368,152 $ 15,212,141

The accompanying notes are an integral part of the financial statements.

EXHIBIT B METROPOLITAN MOSQUITO CONTROL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GENERAL FUND Years Ended December 31, 1999 and 1998

1999 1998 Revenue:
Taxes -Anoka
County $ 611,687 $ 503,400
Carver County 112,666 94,295
Dakota County 918,830 793,495
Hennepin County 3,502,560 3,096,939
Ramsey County 1,173,371 1,045,930
Scott County 191,415 157,475
Washington County 520,173 426,825
Homestead Agricultural
Credit other aids 1,094,824 1,094,824 (see footnote #1, K)

Tax Delinquent Income 52,116 46,069
Investment Income 192,748 285,777
Miscellaneous 98,684 87,423
Total Revenues $ 8,469,074 $ 7,632,452

Expenditures:
Board of Commissoners -Salaries
$ 0 $ 0
Travel 3,227 3,900
Administrative 718,246 665,646
Control 7,744,523 7,248,318
Capital Expenditures 314,551 289,985
Total Expenditures $ 8,780,547 $ 8,207,849

Excess (deficiency) of revenues over expenditures $ (311,473) $ (575,397)

Fund Balance at beginning of year $ 5,862,305 $ 6,437,702

Fund Balance at end of year $ 5,550,832 $ 5,862,305
The accompanying notes are an integral part of the financial statements.

EXHIBIT C METROPOLITAN MOSQUITO CONTROL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL

GENERAL FUND Year Ended December 31, 1999Variance Favorable Budget Actual (Unfavorable)Revenue: Taxes -Anoka County $ 624,565 $ 611,687 $ (12,878)
Carver County 114,506 112,666 (1,840)
Dakota County 928,953 918,830 (10,123)
Hennepin County 3,539,568 3,502,560 (37,008)
Ramsey County 1,178,281 1,173,371 (4,910)
Scott County 193,229 191,415 (1,814)
Washington County 526,466 520,173 (6,293)
Homestead Agricultural
Credit other aids 1,094,824 1,094,824 0
(see footnote #1, K)

Tax Delinquent Income 50,000 52,116 2,116
Investment Income 250,000 192,748 (57,252)
Miscellaneous 100,000 98,684 (1,316)
Total Revenues $ 8,600,392 $ 8,469,074 $ (131,318)

Expenditures:
Board of Commissoners -Salaries
$ 0 $ 0 $ 0
Travel 6,900 3,227 3,673
Administrative 717,786 718,246 (460)
Control 8,130,018 7,744,523 385,495
Capital Expenditures 370,420 314,551 55,869
Total Expenditures $ 9,225,124 $ 8,780,547 $ 444,577

Excess (deficiency) of revenues over expenditures $ (624,732) $ (311,473) $ 313,259

Fund Balance at beginning of year $ 5,862,305 $ 5,862,305 $ 0

Fund Balance at end of year $ 5,237,573 $ 5,550,832 $ 313,259 The accompanying notes are an integral part of the financial statements.

EXHIBIT D METROPOLITAN MOSQUITO CONTROL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL

GENERAL FUND Year Ended December 31, 1998
Variance Favorable Budget Actual (Unfavorable)Revenue:
Taxes -Anoka
County $ 525,789 $ 503,400 $ (22,389)
Carver County 95,256 94,295 (961)
Dakota County 801,274 793,495 (7,779)
Hennepin County 3,129,469 3,096,939 (32,530)
Ramsey County 1,056,382 1,045,930 (10,452)
Scott County 159,088 157,475 (1,613)
Washington County 437,918 426,825 (11,093)
Homestead Agricultural
Credit other aids 1,094,824 1,094,824 0
(see footnote #1, K)

Tax Delinquent Income 50,000 46,069 (3,931)
Investment Income 250,000 285,777 35,777
Miscellaneous 50,000 87,423 37,423
Total Revenues $ 7,650,000 $ 7,632,452 $ (17,548)

Expenditures:
Board of Commissoners -Salaries
$ 0 $ 0 $ 0
Travel 6,900 3,900 3,000
Administrative 654,300 665,646 (11,346)
Control 7,632,110 7,248,318 383,792
Capital Expenditures 292,000 289,985 2,015
Total Expenditures $ 8,585,310 $ 8,207,849 $ 377,461

Excess (deficiency) of revenues over expenditures $ (935,310) $ (575,397) $ 359,913

Fund Balance at beginning of year $ 6,437,702 $ 6,437,702 $ 0

Fund Balance at end of year $ 5,502,392 $ 5,862,305 $ 359,913
The accompanying notes are an integral part of the financial statements.

Metropolitan Mosquito Control District Notes to Financial Statements December 31, 1999
1. Organization Significant Accounting Policies Reporting Entity
The Metropolitan Mosquito Control District (MMCD) was established under Minnesota Laws 1959, Chapter 488 (Coded Minn. Stat. Sections 473.701 to 473.716). The District operates under the Metropolitan Mosquito Control Commission representing the seven county metropolitan area. It was created to control mosquitoes and black gnats and to perform surveillance on Lyme ticks in the metropolitan area, which consists of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott and Washington Counties. A director is responsible for the supervision of the District and reports to the Commission. As provided by Minn. Stat. Section 473.129, Subd. 6, a member of the Metropolitan Council is appointed to serve as a representative to the Metropolitan Mosquito Control Commission. This member receives a copy of all Commission meeting minutes. For financial reporting purposes, the Commission is not considered part of the Metropolitan Council.

Significant Accounting Policies
This summary of significant accounting policies of the Metropolitan Mosquito Control District is presented to assist in understanding the District's financial statements. The financial statements and

notes are representations of the District's management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board and have been consistently applied in the preparation of the financial statements. In accordance with Governmental Accounting Standard No. 20, the District does not apply any pronouncements of the Financial Accounting Standards Board issued after November 30, 1989.

A. Basis of Presentation
The accounts of the District are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The fund and account groups maintained are presented as follows:
Governmental Fund

General Fund -The General Fund is the general operating fund of the District and is used to account for all financial activities.

Account Groups
General Fixed Assets Account Group -The General Fixed Assets group of accounts is used to account for all fixed assets of the District.

General Long-Term Debt Account Group -The General Long-Term Debt group of accounts contains the long-term obligations of the District represented by employee benefit obligations.

B. Basis of Accounting
Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. Revenues and expenditures are recognized on the modified accrual basis as follows:

Revenue Recognition -Revenues are recognized when they become measurable and available.
Expenditure Recognition -Expenditures are generally recognized when the related liability is incurred. An exception to this general rule is the long-term portion of employee benefits for unused sick and vacation leave. Also, consumable inventory items are recognized as expenditures in the period used, rather than in the period purchased.

C. Budgets and Budgetary Accounting
The Commission adopts an annual budget for the General Fund for the fiscal year commencing the following January. The budget is prepared on the modified accrual basis of accounting which is consistent with generally accepted accounting principles (GAAP). It includes the amounts that can be expended based on detailed budget estimates for individual expenditure accounts and the related anticipated revenues, as shown in the basic financial statements and supplementary information. The property tax levy limitation for 1996 is the 1995 property tax levy limitation adjusted by a multiplier based on market valuation changes between 1994 and 1995 reduced by 50 % of the actual 1995 levy. In addition HACA payments were permanently reduced by 50% of the amount certified to have been received in 1995. The property tax levy limitation for 1999 is the 1998 property tax levy limitation adjusted by a multiplier based on market valuation changes between 1997 and 1998. District budgeted expenditures have exceeded the levy as Commission and legislative intent has been to minimize growth and reduce the fund balance.

All budget amounts lapse at the end of the year to the extent they have not been expended or encumbered.

D. Deposits and Investments
Deposits are held in a financial institution, US Bank N. A. Midway branch, and are carried at cost plus accrued interest. The carrying amount of deposits is $250,000, displayed on the balance sheet as part of "Cash and Cash Equivalents". Cash equivalents are short-term, highly liquid investments that are both (1) readily convertible to known amounts of cash and (2) so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Minn. Stat. Section 118A. 03 requires that deposits in financial institutions by municipalities, including special districts, be secured by depository insurance or a combination of depository insurance and collateral security. The statute further requires the total collateral computed at its fair market value shall be at least 10 percent more than the amount on deposit in excess of any insured portion. The MMCD's deposits at year-end were appropriately secured by federal depository insurance and by collateral held by US Bank N. A. Midway branch in MMCD's name. The District participates in the Minnesota Association of Governments Investing for Counties (MAGIC) Trust Fund, an investment pool. These pooled investments are not categorized because securities are not specifically held by the District in book entry form. The fund invests in instruments permitted by law, including direct obligations of the United States of America and its agencies, obligations of the State of Minnesota rated "A" or better, bankers' acceptances of United States banks, commercial paper issued by United States corporations, deposits in national or state banks insured by FDIC or FSLIC, certain repurchase agreements or reverse repurchase agreements and other instruments permitted by applicable laws. The assets of the District within the fund are held in the District's name as equally valued shares. The carrying amount is $5,022,716.

The following table summarizes the District's cash and cash equivalents. Instrument Carrying Amount MAGIC Trust Fund $ 5,022,716 Deposits 250,000 Imprest Petty Cash 200 __________ $ 5,272,916

E. Inventory
Inventory is stated at cost using the first-in, first-out method. It consists of expendable supplies held for consumption in the next operating year. A portion of the fund balance, $320,036, has been reserved for control materials inventory.

F. Fixed Assets and Real Property
Fixed assets and real property are stated net of depreciation. The costs of fixed assets and real property, which are purchased from current revenue, are accounted for as expenditures in the year received. Depreciation is provided in the District's accounts because it results in better information for resource allocation to activities of the District's operation. In addition, comparison of accumulated depreciation and the cost of assets is helpful in budgeting outlays for replacement of capital assets.

G. Risk Management
The District 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 District carries insurance. The District 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 District 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 amount for each insurance event. Settled claims have not exceeded the District's coverage in any of the past three fiscal years.

H. Amount to be Provided for Employee Benefits
Resources for the payment of employee benefits included in the General Long-Term Debt group of accounts will be provided by the General Fund. The amount of $560,000 has been designated in the fund balance for employee benefits.

I. Comparative Data
Comparative total data for the prior year has been presented in the accompanying financial statements in order to provide an understanding of changes in the District's financial position and operation.

J. Total Columns on Statements
Total columns on the statements are captioned "Memorandum Only" to indicate they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or changes in financial position in conformity with generally accepted accounting principles. Such data also is not comparable to a consolidation.

The property tax levy of the District is set by the Metropolitan Mosquito Control Commission. Distribution of the levy between the counties in the District is set by the Commissioner of Revenue, acting as the State Board of Equalization, and based on the budget established by MMCD. The levies are certified to Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington Counties. The levies are limited to the statutory levy limitation in each of the Counties. Property taxes are payable in equal installments by real property owners to the counties on May 15 and October 15. In general, the counties remit the collection to MMCD after each payment date. Taxes payable on homestead property are partially reduced by a homestead credit. This credit is paid to MMCD by the state in lieu of taxes levied against homestead property. The state remits this credit in two equal installments in July and December each year. For 1999 the Homestead and Agricultural Credit Aid was $1,094,824.

L. Budget
The 1999 annual budget for Operations was $9,225,124. The Commission has designated $500,000 of the fund balance for emergency disease vector control, as well as $50,000 for education. 2. General Fixed Assets A. Furniture and Equipment / Motor Vehicles
A summary of changes in general fixed assets as of December 31, 1999 follows: Furniture

Motor Vehicles Equipment Total

Balance Jan 1, 1999 $2,312,126 $1,404,384 $3,716,510

Additions 239,323 73,717 313,040
Deletions (Disposition) ( 162,108) (78,502) ( 240,610)
Balance Dec 31, 1999 $2,389,341 $1,399,599 $3,788,940
Accumulated Depreciation ( 1,148,111) (1,084,789) (2,232,900) Balance
Net of Depreciation
Dec 31, 1999 $1,241,230 $ 314,810 $1,556,040

The threshold for capitalization is $400. The District is recording depreciation on fixed assets, as better information can be provided for decision making. The method of depreciation used is straight line. The estimated useful life of the assets is as follows: Vehicles................................... 12 yrs Salvage value 15% of purchase Equipment................................ 10 yrs. Salvage value 5% of purchase Computer Application Equipment.......................... 5 yrs. Salvage value 0% of purchase Buildings .................................. 30 yrs. Salvage value 0% of purchase There has been $200,000 designated in the fund balance for equipment replacement. B. Building and Land
The following is a schedule of values of headquarters operating buildings owned by the District. Depreciation and value net of depreciation is included. The Anoka operating headquarters is on land owned by Anoka County being leased at $1 per year for 99 years. Should the District break the lease, Anoka County is to purchase the building at its depreciated value as calculated using 20 years straight-line depreciation. This facility was built in 1984-85 and expanded in 1992. The Jordan headquarters was constructed in 1991. The Administrative Research headquarters was constructed in 1992-93. The Rosemount headquarters was completed in 1994. The two Hennepin County facilities were purchased in 1993 and remodeling was completed in 1994. An appraisal was made of the land at the Jordan headquarters to determine its value for reporting purposes. The result is an increase in land value at that site.

Building Accumulated Net Building Building Land Cost Depreciation Value

Anoka HQ $ -0-$ 723,596 $ (255,468) $ 468,128
Jordan HQ 47,000 781,022 (216,801) 564,221
Admin./ Research HQ 530,202 2,701,499 (680,777) 2,020,722
Rosemount HQ 187,381 856,987 (161,760) 695,227
Maple Grove HQ 225,744 829,690 (160,775) 668,915
Plymouth HQ 128,540 888,943 (173,310) 715,633
$1,118,867 $6,781,737 $( 1,648,891) $5,132,846

The buildings are shown on the GFAAG statement. The District has completed all planned construction projects. The buildings provide suitable working conditions and space for internal meetings and other agency use. Some space is currently rented to other agencies. A portion of the fund balance, $588,000 has been designated for facilities repair and upkeep.

3. Changes in Long Term Debt The following is a summary of employee benefit transactions of the Metropolitan Mosquito Control District for the year ended December 31, 1999.

Total Employee benefits payable at Jan. 1, 1999 $533,845 Portion currently payable in 1999 (19,987)
Long term employee benefits payable at Jan. 1, 1999 513,858
Net change in compensated absences 43,229 Long term employee benefits payable at
December 31, 1999 $557,087

4. Compensated Absences
Compensated absences consist of employee vacation, sick leave and compensatory time benefits. These benefits are determined based on a formula with a maximum number of hours accumulated and are payable upon death, termination or retirement. Calculations include employer's share of Social Security and Medicare taxes. In previous years only vested accrued benefits were shown. The current portion of this liability is reflected in the General Fund, and the long term portion is reflected in the General Long-Term Debt group of accounts under the heading Employee Benefits Payable.

5. Deferred Revenue
The deferred revenue balance at December 31, 1999 was $666,113 consisting of taxes and other receivables which are not expected to be collected within 60 days as required by NCGA

Interpretation 3. In addition, $391,901 is estimated uncollectible in the future based on historical experience.

6. Leases
Operating leases consist of rental of the Ramsey/ Washington Division headquarters. The following is a yearly schedule of future minimum rental payments under operating leases (including base rent, property taxes and operating costs):

2000 $176,805
Total minimum lease payments $176,805
The District has exercised its option to extend this lease agreement through 2000. An accounts payable credit of $5,851.08 has been charged for rental fees not billed to the District. The District Expects to have minimum lease payments in 2001 and beyond in an amount at least equal to 2000 but a lease has not yet been signed. Total rental expense including short-term, seasonal equipment and vehicles is as follows: 1998 $164,712 1999 $173,405 7. Retirement Plan
The following pension disclosures are made to comply with GASB Statement 27, "Accounting for Pensions by State and Local Government Employers."

A. Plan Description
All full-time and certain part-time employees of the Metropolitan Mosquito Control District are covered by defined benefit pension plans administered by the Public Employees Retirement

Association of Minnesota (PERA). PERA administers the Public Employees Retirement Fund (PERF) which is a cost-sharing multiple-employer retirement plan. These plans are established and administered in accordance with Minnesota Statutes Chapters 353 and 356. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. One member has elected Medicare Coverage. All new members must participate in the Coordinated Plan. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by State Statute, and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERF's Coordinated and Basic Pan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Pan member is 2.2 percent of average salary for each of the first 10 years of service and 2.7 percent for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2 percent of average salary for each of the first 10 years and 1.7 percent for each remaining year. Under Method 2, the annuity accrual rate is 2.7 percent of average salary for Basic Plan members and 1.7 percent for Coordinated Plan members for each year of service. For PERF members whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. A reduced retirement annuity is also available to eligible members seeking early retirement.

There are different types of annuities available to members upon retirement. A normal annuity is a lifetime annuity that ceases upon the death of the retiree– no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will reduce the monthly normal annuity amount, because the annuity is payable over joint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan members. Vested, terminated employees who are entitled to benefits but are not receiving them yet, are bound by the provisions in effect at the time they last terminated their public service.

PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF. That report may be obtained by writing to PERA, 514 St. Peter Street #200, St. Paul, Minnesota, 55102 or by calling (651) 296-7460 or 1-800-652-9026.

B. Funding Policy
Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The District makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Basic Plan members and Coordinated Plan members are required to contribute 8.75 percent and 4.75 percent, respectively, of their annual covered salary. The District is required to contribute the following percentages of annual covered payroll: 11.43 percent for Basic Plan PERF members, 5.18 percent for Coordinated Plan PERF members. The District's contributions to the Public Employees Retirement Fund for the years ending December 30, 1997, 1998, and 1999 were

$180,674, $241,516, and $247,138, respectively. The District's contributions were equal to the contractually required contributions for each year as set by state statute.

8. Patent
The District has received two patents from the U. S. Patent Office. In 1999, $43,812.42 in royalties were collected from the patents. After fees are recovered, twenty five percent will be paid to the former Director. Fees have been recovered on one of the patents. In 1999, a payment of $17,036.21 was made to the former Director. As he has terminated employment with the District, he will be entitled to 25 percent for the duration of the patents. The patents are for the process currently used for manufacturing control material briquets. The District has licensed rights to manufacture the briquets to a private company, and revenue will accrue to the District from sales to entities other than the District. The District to date has not been successful licensing additional development rights. The first patent was issued on June 2, 1987; the second on March 22, 1988.

OFFICE OF THE LEGISLATIVE AUDITOR State of Minnesota ° James Nobles, Legislative Auditor Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

Commissioner Randy Johnson, Chair Metropolitan Mosquito Control District Members of the Metropolitan Mosquito Control District Mr. Joseph Sanzone, Executive Director Metropolitan Mosquito Control District

We have audited the balance sheet of the Metropolitan Mosquito Control District as of December 31, 1999, and the related statements of revenues, expenditures, and changes in fund balance for the two years then ended and have issued our report thereon dated May 24, 2000. We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

Compliance
As part of obtaining reasonable assurance about whether the Metropolitan Mosquito Control District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards.

Internal Control Over Financial Reporting In planning and performing our audit, we considered the Metropolitan Mosquito Control District's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce, to a relatively low level, the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely

Commissioner Randy Johnson, Chair Members of the Metropolitan Mosquito Control District Mr. Joseph Sanzone, Executive Director Page 2

period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the Metropolitan Mosquito Control District's management and the Legislative Audit Commission and is not intended to be and should not be used by anyone other than these specified parties. /s/ James R. Nobles /s/ Claudia J. Gudvangen
James R. Nobles Claudia J. Gudvangen, CPA Legislative Auditor Deputy Legislative Auditor

May 24, 2000

Status of Prior Audit Issues As of May 24, 2000 Most Recent Audit
The Office of the Legislative Auditor performs an annual audit of the Metropolitan Mosquito Control District. Legislative Audit Report 99-32, dated May 17, 1999, covered the year ended December 31, 1998. The audit scope included those areas material to the district's financial statements for the year then ended. There were no findings in the report.

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