Management Report and Recommendations 12/31/1990

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City of Lino Lakes, Minnesota Management Report, Page 51 The Investment Fund is designed to pool all available cash balances of the City to maximize the investment efficiency of the City. Interest is allocated to funds annually based on the average cash balance of the participating funds. The Deferred Compensation Fund was established in 1987 in response to the issuance of the Governmental Accounting Standards Board (GASB) Statement No. 2. GASB Statement No. 2 requires deferred compensation plans adopted under the provisions of Internal Revenue Code Section 457 to be included in the City's annual financial report. INTERNAL ACCOUNTING CONTROLS Current auditing standards require an auditor to communicate any material weaknesses in internal accounting controls directly to City Council and/or City Administrators. Our examination for 1989 disclosed no material deficiencies in the City's system of internal controls not identified in this report or past reports to the City Council. We have audited the financial statements of the City of Lino Lakes, Minnesota as of and for the year ended December 31, 1990, and have issued our report thereon dated May 28, 1991. 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 financial statements are free of material misstatement. In planning and performing our audit of the financial statements of the City of Lino Lakes, Minnesota, for the year ended December 31, 1990, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control structure. 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 judgements 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 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, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in