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Wow <br />City of Lino Lakes, Minnesota <br />Management Report, Page 48 <br />A substantial portion of certain accounting processes are performed by a single <br />employee. Ideal conditions call for segregation of duties to establish a system of <br />internal testing of procedures performed. Additionally, our audit disclosed that the <br />City does not maintain a system of control over General Fixed Assets. These <br />conditions are common to cities of this size. Any modification of internal control <br />structure in this area, however, must be viewed from a cost/benefit perspective. <br />A material weakness is a reportable condition in which the design or operation <br />of the specific intemal control structure elements does not reduce to a relatively low <br />level the risk that errors or irregularities in amounts that would be material in <br />relation to the general purpose financial statements being audited may occur and not <br />be detected within a timely period by employees in the normal course of performing <br />their assigned functions. <br />Our consideration of the internal control structure would not necessarily <br />disclose all matters in the internal control structure that might be reportable <br />conditions and, accordingly, would not necessarily disclose all reportable <br />conditions that are also considered to be material weaknesses as defined above. <br />However, we believe none of the reportable conditions described above are material <br />weaknesses. <br />This report is intended for the information of management and others within the <br />City of Lino Lakes, Minnesota. This restriction is not intended to limit the <br />distribution of this report, which is a matter of public record. <br />Developer Deposits <br />The City collects deposits from developers for costs which the City incurs during the permit <br />process. Remaining amounts are returned to the developer. The City has not been consistent in <br />coding costs against the developers deposit versus the construction funds once a project has been <br />started. We recommend the City develop procedures to establish at what point costs should be <br />charged to the construction fund rather than the developers deposit. The City's system of <br />calculating amounts to be returned to developers does not always produce adequate verifiable <br />documentation. The City has made improvements in the above areas during 1991 and we <br />recommend that the City continue to review the system and improve reconciliation procedures. <br />FINANCIAL ACCOUNTING SYSTEM <br />During 1988, the City purchased an in -house computer system. This system is intended to <br />provide the City with the following: <br />• Payroll System <br />• Utility Billing System <br />• General Ledger Accounting <br />• Word Processing <br />• Spreadsheet Analysis <br />