Management Report and Recommendations 12/31/1986

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City of Lino Lakes, Minnesota Management Report, Page 37 3. Cancellable by the City of Circle Pines commencing on January 1, 1992. The City of Lino Lakes has the right to cancel the franchise agreement through the purchase of this system beginning on January 1, 1992. 4. Right to inspect the financial /accounting records to verify revenue calcula- tions. 5. Revenue begins to be earned starting on January 1, 1987. Revenue will be received four and one -half months after the year end (i.e., first receipt is scheduled for May, 1988). 6. The City has the right to purchase the system at stated terms beginning on January 1, 1992. We commend the City for the successful efforts to receive a supplemental financing source for the City. Financial uncertainties facing metropolitan cities require diver- sity of revenue sources to assure adequate funding of operations without severe property tax increases. We recommend that the City establish review procedures to project revenue earnings and to compare to actual results. Internal Accounting Controls As part of our examination, we made a study and evaluation of the system of internal accounting control of the City of Lino Lakes to the extent we considered necessary to evaluate the system, as required by generally accepted auditing standards. The purpose of our study and evaluation was to determine the nature, timing and extent of the auditing procedures necessary for the expression of an opinion on the City's financial statements. Our study was more limited than would be necessary to express an opinion on the system of internal accounting control taken as a whole or on any of the categories of controls identified. The City of Lino Lakes is responsible for establishing and maintaining a system of internal accounting control. The objective of internal accounting control is to provide reasonable, but not absolute, assurance as to the safe- guarding of assets against loss from unauthorized use or disposition, and the reliability of financial records for preparing financial statements and main- taining accountability for assets. The concept of reasonable assurance recogni- zes that the cost of a system of internal accounting control should not exceed the benefits derived and also recognizes that the evaluation of these factors necessarily requires estimates and judgments by management.