Management Report and Recommendations 12/31/1988

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City of Lino Lakes, Minnesota Management Report, Page 46 Section 89 The Tax Reform Act of 1986 created qualifications and discrimination provisions for employee benefit plans under Section 89. The legislation requires: 1) employee notification of essential features of plans; 2) a "written plan" for which a definition has not yet been provided; and, 3) testing for discrimination between "highly compensated" employees and other employees. Regulations have been delayed and there is widespread dissatisfaction with the complexity of the law. Amendments to the law may be forthcoming. We recommend that the City monitor compliance with Section 89 provisions. Forfeiture of Property - Public Safety The 1988 legislature passed laws which allow local police departments to seize property which is used during a crime associated with controlled substances. There are a variety of rules and regulations included in Minnesota Statutes Section 609.53 related to circumstances under which property may be forfeited and procedures regarding disposition of forfeited property. There are several areas which may impact the financial accounting records of the City, as follows: 1. Certain property may be retained by the law enforcement agency for official use by the agency or prosecuting agency. Under certain circumstances, the City may be required to add these assets to any fixed assets records which the City retains including insurance of such property. 2. 70% of the money or proceeds from the sale of the forfeited property may be retained by the City for use in its operating fund or similar fund for use in law enforcement. Certain other amounts must be forwarded to the County Attorney or other prosecuting agency and 10% must be forwarded to the State Treasury for crime victim and witness account. We recommend that the City's Finance Department coordinate with the Police Department to determine procedures to properly account for any property forfeited pursuant to the preceding statute. Budgeting The City currently budgets certain revenues on a combined basis. Also, the City may be budgeting in the General Fund certain capital outlay which is scheduled to be funded by equipment certificates (i.e., Capital Project Fund). We recommend that in conjunction with the computer acquisition that budgeting practices be reviewed and automated on the new system.