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IV-2 INDEPENDENT AUDITORS' REPORT Honorable Mayor and the City Council City of Elk River, Minnesota Report on the Flnanclal Statements We have audited the accompanying financial statements of the governmental activities, the business- type activities, the discretely presented component unit, each major fund, and U,e aggregate remaining fund information of the City of Elk River, as of and for tt,e year ended December 31, 2019, and the related notes to the financial statements, which collectively comprise the entity's basic financial statements as listed In the table of contents. /llanagemenl's Reaponslblltty forlhe Flnanchll- Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, Implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responaiblltty Our responsibility Is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Eiecb'ic and Water proprietary funds, which represent 64% of the assets and deferred outflows, 60% of the net position, and 76% of the revenues of the proprietary funds and business-type activities. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts lnciuded for the proprietary funds and business-type activities, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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 Uie audit to obtain reasonable assurance about whether the financial statements are free from material mlsstatement An audit Involves performing procedures to obtain audit evidence about the amounts and dlsciosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements In order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Auditors' Raaponslblltty (Continued) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, In all material respects, the respective financial position of the governmental activities, the busine&&-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Elk River as of December 31, 2019, and the respective changes in financial position and, where applicable, cash flows thereof and the respective the budgetary comparison for the General fund for U,e year then ended in accordance with accounting principles generally accepted in the United States of America. Emphashl of Matter During flscal year ended December 31, 2019, the City of Elk River adopted GASB Statement No. 84, Fiduciary Activities. As a result of U,e implementation of this standard, actMty which was previously reported as the Developer Fee Escrow agency fund is now being reported as a capital projects fund and activity which was previously reported as the FSA Plans agency fund is now being reported as part of the General Fund, though there was no impact on beginning fund balance or net position. Our auditors' opinion was not modified with respect to these matters. Other Matters Required Supplementary lnfonnatton Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, schedules of proportionate share of net pension liability, schedules of City's pension contributions, schedule of changes In the net pension liability and related ratios -fire relief, schedule of city contributions -fire relief, and the schedule of changes in the total OPEB llablllty and related ratios, as listed In the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, Is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements In an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Elk River's basic financial statements. The introductory section, combining and individual fund statements and schedules, and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. Other Maffe,s (Continued) Other lnfonnatlon (Conttnued) The combining and individual fund statements and schedules are the responsibility of management and were derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the undertying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and indiVidual statements and schedules are fairly stated, In all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Olhar R-rtlng Required by Go..,,,ment Auditing Standants In accordance with Government Auditing Standards, we have also Issued our report dated May 26, 2020, on our consideration of the City of Elk River's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the result of that testing, and not to provide an opinion on the effectiveness of City of Elk River's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards In considering City of Elk River's internal control over financial reporting and compliance. ~LL:? Cllflonl.arsonAllen LLP Minneapolis, Minnesota May 26, 2020 150