Other Auditor Reports 12/31/2011

Home Search

Honorable Mayor and Members of the City Council City of Lino Lakes Material Audit Adjustment - Internal Control over the Financial Reporting Process Condition: Management noted that there was a material misstatement in the December 31, 2010 financial statements related to capital assets where land donated to the City in prior years was not capitalized. The amount of misstatement was material to the City's financial statements, and as a result, this misstatement was corrected by adjusting beginning net assets of the governmental activities. While the City's internal controls did detect the misstatement, it was not detected in a timely manner. Criteria: The City should have controls in place to prevent and detect a material misstatement in the financial statements in a timely manner. Management is responsible for the accuracy and completeness of all financial records and related information. Their responsibilities include adjusting the financial statements to correct material misstatements. Effect: Correction of a material misstatement in the financial statements. Cause: The City's established controls to ensure that all accounts are adjusted to their appropriate year-end balances in accordance with generally accepted accounting principles (GAAP) did not detect the misstatement in a timely manner. Recommendation: We recommend the City continue to evaluate its internal control processes to determine if additional internal control procedures should be implemented to ensure that accounts are adjusted to their appropriate year-end balances in accordance with GAAP. Management Response: Management did discover the understatement of capital assets during a review conducted for 2011. We agree that the discovery of the error or misstatement was untimely; it should have been discovered when the transaction occurred in the early 2000's. Management will continue to review is process to ensure that non-cash transactions are properly recorded. 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. The City's responses to the findings identified in our audit are described above. We did not audit the City's responses and, accordingly, we express no opinion on them. We noted certain matters that we reported to management of the City in a separate letter dated May 17, 2012. (2)