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City of Lino Lakes, Minnesota <br />Management Report <br />Capital Project Funds <br />In addition to identifying the contract noncompliance and following through to achieve <br />compliance, it is the City's responsibility to report liabilities in the City's financial statements. <br />Audit procedures include a requirement that the auditor obtain from responsible City <br />officials representations that, to the best of their knowledge, the financial statements are <br />presented fairly. The representations are included in a letter each year upon conclusion of the <br />annual financial audit. Our firm received written representation from responsible City officials at <br />the conclusion of each annual audit. Included in those representations were the following: <br />"There are no material liabilities or gain or loss contingencies that are required to be <br />accrued or disclosed..." <br />and <br />"There are no material transactions that have not been properly recorded in the <br />accounting records or related data underlying the financial statements" <br />and <br />"The City has complied with all aspects of contractual agreements that would have a <br />material effect on the financial statements in the event of noncompliance." <br />Internal correspondence indicates that City officials who signed the letters of representation <br />at some point over the past ten years had knowledge of noncompliance with the Agreement and <br />that a liability existed. The effects of the misrepresentations include an understatement of <br />liabilities or lack of disclosure thereof. Additionally, the misrepresentation precluded the <br />inclusion of a management comment regarding the contractual obligation to comply with the <br />terms of the Agreement. <br />Page 41 <br />