4.1 ERMUSR 04-14-2020 - Laserfiche WebLink

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Elk River Municipal Utilities Elk River, Minnesota Notes to the Financial Statements December 31, 2019 Note 1:Summary of Significant Accounting Policies(Continued) Pensions For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from PERA’s fiduciary net position have been determined on the same basis as they are reported by PERA except that PERA’s fiscal year end is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. The total pension expense for all plans recognized by the Utilities for the year ended December 31, 2019was $422,390. The components of pension expense are noted in the plan summaries in Note 3. Long-term Obligations Long-term debt is reflected as a liability in the fund issuing the obligation. Bond premiums and discounts areamortized over the life of the bonds using the straight-line method. Bond issuance costs are reported as an expense in the period incurred. Performance Metrics and Incentive Compensation Through Utilities Performance Metric-based Incentive Compensation system (UPMIC) the Utilities employees will have an opportunity, as a group, to each earn a maximum of 2 percent of their total gross wage paid during the Measurement Period. The percentage of UMPIC is calculated using a Score Card. The Score Card has three categories: Safety, Reliability and Quality of Utility Services which are divided into various weighted factors. This incentive was created to help the Utilities to become more efficient and successful in meeting strategic goals and mission and deliver improved value to the Utilities customers. The liability at year end is recorded as part of accrued wages. Deferred Inflows of Resources In addition to liabilities, the statement of netposition and fund financial statements will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Utilitieshas only one type of item which qualifies for reporting in this category. The item, deferred pension resources, is reported only in the statement of net position and results from actuarial calculations. Net Position Net position represents the difference between assetsand deferred outflows of resourcesand liabilities and deferred inflowsof resources. Net position is displayed in three components: a.Net investment in capital assets - Consists of capital assets, net of accumulated depreciation reduced by any outstanding debt attributable to acquire capital assets. 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 netposition - All other net position that do not meet the definition of “restricted” or “net investment in capital assets”. When both restricted and unrestricted resources are available for use, it is the Utilities’ policy to use restricted resources first,then unrestricted resources as they are needed. 33 123