Other Auditor Reports 12/31/2009

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Honorable Mayor and Members of the City Council City of Lino Lakes Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, 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 or other matters that are required to be reported under Government Auditing Standards. During the course of our audit, certain items came to our attention that we feel could be addressed by the City of Lino Lakes to more efficiently run the City's operations or enhance its internal controls. We herein submit the following suggestions to the City of Lino Lakes for their consideration. Auditor Comments: Capital Project Deficits The financial statements for the capital project funds are presented in Statements 3, 5, 13, and 14 of the 2009 Annual Financial Report. As of December 31, 2009, two capital project funds have deficit fund balances equaling a combined deficit of $1,395,134. While this is an on-going comment, we would like to recognize the significant improvements made related to fund balance deficits over the past five years. The following describes the status of each of these funds: - One of the deficits is very typical for any city operating a TIF fund (TIF 1-11). This fund showed positive operating results with revenues in excess of expenditures of $140,917 for 2009. - The second has specifically been addressed by the Council and a plan is being implemented to reduce the deficit over the near future (Dedicated Parks). This fund showed negative operating results with expenditures in excess of revenues of $15,264 for 2009. Area and Unit Charge Fund On January 11, 1988, the City Council approved Resolution 1-88, which established the Area and Unit Charge Fund for the City. The purpose of this fund is to collect various area and unit charges to be used to meet debt payments. Before October 1 of each year, the City estimates the required transfer needed to meet debt payments for the subsequent year. In December, these estimated amounts are transferred to the various debt funds. We recommend that the City continue to closely monitor actual versus projected area and unit assessment collections to assure that debt payment requirements will be met. Designations of balances required for debt service is necessary to define discretionary construction balances available to the City. The financing plan for the following bond issues have pledged area and unit charges for the repayment of debt service: Improvement and Utility Bonds of 2004A Water Revenue Bonds of 1999B The Improvement and Utility Bonds of 2004A have future debt service requirements (principal and interest) totaling $1,281,336. (2)