Federal Financial Assistance 12/31/1996

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TAUTGES, REDPATH & CO., LTD. CERTIFIED PUBLIC ACCOUPJTA %,75 Independent Auditor's Report on the Internal Control Structure in Accordance with Government Auditing Standards To the Honorable Mayor and Members of the City Council City of Lino Lakes, Minnesota — We have audited the general purpose financial statements of the City of Lino Lakes, Minnesota, as of and for the year ended December 31, 1996, and have issued our report thereon dated February 28, 1997. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. The management of the City of Lino Lakes, Minnesota, is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of general purpose financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projections of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. In planning and performing our audit of the general purpose financial statements of the City of Lino Lakes, Minnesota, for the year ended December 31, 1996, we obtained an understanding of the internal control structure. With respect to the internal control structure, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide an opinion on the internal control structure. Accordingly, we do not express such an opinion. 4810 White Bear Parkway • White Bear Lake, Minnesota 55110 • 612/426 -7000 • FAX /426 -5004 • Member of HLB International