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Budget Appropriations <br />Each year the City adopts an annual budget for the general fund. Each department receives an <br />appropriation based upon detailed budget estimates for individual expenditure accounts. Department <br />heads have the ability to transfer appropriations within a department. This can be helpful and improves <br />— flexibility in meeting department needs as they change during the year. However, such a policy can <br />lead to unnecessary or unauthorized expenditures. For example, equipment purchases. <br />We suggest the City review this policy and consider adding controls on the amounts that can be <br />transferred within a department without bringing it to the City Council for approval. These controls could <br />include dollar limits, restrictions on the types of purchases or getting the approval of someone in <br />— administration. <br />WENS <br />lam <br />Developer Escrow Accounts <br />The City maintains an Agency Fund to account for the activity related to developer escrows. It is our <br />understanding that developers deposit an escrow prior to a project beginning and that certain costs may <br />be applied against this escrow. We noted that there are several escrow accounts that carry a "negative" <br />balance (which represents an additional receivable balance from the developer) or have remained idle <br />from the prior year. Efforts were made during 2006 by the City to reconcile negative and idle accounts <br />with the related developers. We recommend that the City continue this process. <br />Conclusion <br />— We welcome the opportunity to discuss the points mentioned in this letter or any other accounting and <br />procedural issues in order to coordinate our efforts with you, the mutual objective being the <br />development of more effective accounting procedures for the City. We understand that some of the <br />— aforementioned points are in the process of implementation or may already have been implemented; <br />however, these points are noted so that effective follow -up can be accomplished. <br />We sincerely appreciate all the courtesies and cooperation extended to us by you and the staff of the <br />— <br />City, and thank you for the opportunity to be of service to you. We look forward to working with you in <br />the future. <br />Imo <br />■ <br />This report is intended solely for the use of the Finance Committee, City Council, and management of <br />the City of Lino Lakes and is not intended to be, and should not be used by anyone other than these <br />specified parties. <br />Austin, Minnesota <br />May 30, 2007 <br />Aer--400 1414' <br />LarsonAllen, LLP <br />