Other Auditor Reports 12/31/2010

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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 to more efficiently run the City's operations or enhance its internal controls. We herein submit the following suggestions to the City 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 2010 Annual Financial Report. As of December 31, 2010, three capital project funds have deficit fund balances equaling a combined deficit of $1,362,396. 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 $57,167 for 2010. One of the other two 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 $18,424 for 2010. The last one is a new fund (Traffic Signal) this year and expenditures are in excess of revenues of $5,838. Information Technology Disaster Recovery Plan — We noted that the City has not established a formal, written business continuity or disaster recovery plan to be used in the event of a disaster. We therefore recommend the City develop a written plan to support the recovery of the technical infrastructure that can be used for testing and training purposes. In addition, the plan should be constructed in a format that could be followed by individuals not familiar with City operations in the event "key" information technology personnel are affected by the disaster event and are not available to execute recovery activities. Review of Reconciliations/Payroll Registers During the audit it was also noted that although there is procedures in place to review reconciliations and payroll registers, there is no documentation of this review. We recommend the individual reviewing the reconciliations and payroll registers to date and initial to show proper documentation of review. (2)