Management Report and Recommendations 12/31/1983

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City of Lino Lakes Management Report, Page.38 of the City of Lino Lakes taken as a whole. However, our study and evaluation disclosed that a substantial portion of the accounting process is performed by a single employee. Ideal conditions call for segregation of duties to establish a system of internal testing of procedures performed. Additionally, our evaluation disclosed that the City does not maintain a system of control over fixed assets. These conditions are common to cities of this size. Any modification of internal controls in these areas must be viewed from a cost /benefit perspective. These conditions were considered in determining the nature, timing, and extent of the audit tests to be applied in our examination of the December 31, 1983 financial statements, and this report does not affect our report on the financial statements dated February 20, 1984. This report is intended solely for the use of the City of Lino Lakes and should not be used for any other purpose. Financial Management Requirements The City now employs a hand posted accounting system. The general ledger use is generally limited to cash and investment accounts. The effect of this is to maintain minimal general ledger control. In effect the City is operating the accounting system on a cash basis with accrual /modified accrual entries made on year -end audit workpapers. The third party Annual Financial Reports of the City are, however, issued on the generally accepted accrual /modified accrual basis. This difference between the internal and external basis of accounting causes undue complexity in the year -end closing process and limits the effectiveness of the overall system of accounting and reporting. Certain financial information is readily available only at the date of issuance of the Annual Financial Report. In the past, the need for timely financial data regarding the financial position of the various funds of Cities was not always urgent. The