Comprehensive Annual Financial Report 12/31/2001

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RISK MANAGEMENT The City's general property and liability coverage is provided through the League of Minnesota Cities Trust (LMCIT) and worker's compensation is provided through State Fund Mutual. At the beginning of the insurance year, the city deposits with State Fund a premium determined by calculating estimated payroll and applying experience modification ratios. An audit is performed at the end of the insurance year, which may produce a refund or an adjustment due. State Funds reserves and rates are reviewed annually by an actuary to assure that the program remains financially strong. INDEPENDENT AUDIT Minnesota State law requires that cities over 2,500 population submit annual financial statements attested by a certified public accountant or the State Auditor to the State Auditor. The firm Larson, Allen, Weishair and Co., LLP was retained by the City Council to perform the audit. U.S. generally accepted auditing standards and the standards set forth in the Comptroller General of the United States' Government Auditing Standards, were used by the auditors in conducting the engagement. In addition, the requirements of the Federal Single Audit Act of 1984 and the related U.S. Office of Management and Budget's Circular A -133 have been met by the City. The auditor's report on the general purpose financial statements and combining and individual fund statements and schedules is included in the financial section of the report. The auditor's reports on internal controls and compliance with applicable laws and regulations can be found in a separately issued legal compliance report. CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING The Government Finance Officers Association of the United States and Canada (GFOA) awards the Certificate of Achievement for excellence in financial reporting to cities that meet certain criteria. A governmental unit must publish an easily readable and efficiently organized comprehensive annual financial report, the contents of which conform to program requirements. The City of Lino Lakes received this award for the year ended December 31, 2000. The City is submitting the 2001 report to GFOA for consideration of the Certificate of Achievement for Excellence in Financial Reporting. We believe our current report continues to conform to the program requirements. ACKNOWLEDGMENTS The preparation of this report could not have been accomplished without the dedicated services of the Finance Department, auditors and other city staff. I also want to express my appreciation to the Mayor and City Council for their responsible policies involving the financial operation of the City. Respectfully submitted, an J. Rola/ D. - tor o finance 10