Financial Analysis & Management Considerations Report 12/31/1997

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City of Lino Lakes, Minnesota Management Report Capital Project Funds ✓ Classify contracts as follows: • Routine, short-term contracts • Long -term contracts, particularly those with delayed rights or obligations _ ✓ Include staff turnover procedures to improve communication of long -term contract responsibilities. ✓ Establish a central repository for all long -term contracts. Include a cover sheet which WeNN summarizes key provisions and staff position responsibilities for compliance. Maintain summaries in a database (Access, Word or Excel) to allow for on -line look -up by date, key word or staff responsibility. ✓ Expand year -end confirmation procedures to verify the contractual obligations and rights with border communities and if applicable, other local units of government. b The above controls may have prevented the nondisclosure of noncompliance with the Agreement. It is important to understand, however, that if there is collusion to hide information the effectiveness of any internal control procedure will be compromised. There are additional procedures discussed later in this report relative to fraud prevention. We recommend that the City also consider adopting the recommendations in that section. b Beyond internal control and contract compliance systems, there is also an issue of business ethics. There is a place for firm negotiations between cities and there will most likely always be border disputes over a variety of issues. Once an agreement is reached, however, both parties have an obligation to comply with the terms defined in the agreement. An apparent oversight by a neighboring city regarding their contractual rights should not be viewed as an open invitation to take advantage of the circumstances. This is especially the case when taking such advantage requires repeated instances of violations of the terms of the agreement. Adopting a code of conduct policy may help define the City of Lino Lakes' position regarding business ethics which impacts the City's reputation in the business community. We understand that the City is currently in the process of developing such a policy. We concur with this action. MSA Construction The MSA Construction Fund was established in 1990 to account for the collection of assessments on MSA projects in accordance with the City's Public Improvement Financing Policy. This fund had a deficit of $24,618 at December 31, 1997. Page 44