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HomeMy WebLinkAboutItem 14 - City of Lake Elmo Governance Letter / SMITH*SCHAFER & A S S O C I A T E S, LTD. Members of American Institute of CPA's. Certified Public Accountants and Consultants Private Companies Practice Section,Minnesota Society of CPA's June 28, 2013 Honorable Mayor and Members of the City Council City of Lake Elmo, Minnesota We have audited the financial statements of the governmental activities and each major fund of the City of Lake Elmo, Minnesota for the year ended December 31, 2012. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated April 15, 2013. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City of Lake Elmo, Minnesota are described in Note 1 to the financial statements. As described in Note 5 to the financial statements, the City changed accounting policies related to financial reporting of deferred outflows of resources, deferred inflows of resources and net position by adopting Statement of Governmental Accounting (GASB Statement) No. 63 for the year ended December 31, 2012. The application of existing policies was not changed during the year. We noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate affecting the City of Lake Elmo, Minnesota's financial statements was: Management's estimate of the useful life of purchased or contributed property and equipment is based on the estimate productive life of these assets. We evaluated the estimated useful lives assigned to property and equipment and determined that these lives were reasonable in relation to the financial statements taken as a whole. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Maplewood Office • 2035 E County Road D • Suite A • Maplewood MN 55109 • PH (651) 770-8414 • FAX (651) 770-5175 Rochester Office • 220 South Broadway • Suite 102 • Rochester, MN 55904 • (PH(507)288-3277 • FAX(507)288-4571 Red Wing Office • 519 Bush Street • Red Wing, MN 55066 • PH(651)388-2858 • FAX(651)388-6414 Edina Office • 6800 France Avenue South • Suite 178 • Edina, MN 55435 • PH(952)920-1455 • FAX(952)920-6603 Honorable Mayor and Members of the City Council City of Lake Elmo, Minnesota Page Two Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. The attached schedule summarizes uncorrected misstatements of the financial statements. Management has determined that their effects are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated June 28, 2013. Management Consultation with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a"second opinion" on certain situations. If a consultation involves application of an accounting principle to the governmental unit's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. This information is intended solely for the use of the City Council and management of the City of Lake Elmo, Minnesota and is not intended to be used by anyone other than these specified parties. Very truly yours, S / � . Smith, Schafer&Associates, LTD Client: City of Lake Elmo,Minnesota Year End: December 31,2012 Schedule of Passed Adjustments Amount is Overstated Understated Current Other Current Other Income Before Ending Beginning Workpaper Assets Assets Liabilities Liabilities Taxes Equity Equity Reference Description of Passed Adjustment To correct A/P for beginning of the year 4100.01 balances not reversed when A!P recorded 9,338 (9,338) A!P invoices related to 2012 found in 4100.02 review of subsequent disbursements (6,919) 6.919 Total Passed Adjustments - - 2,419 - (2,419) - Tax Impact of Adjustments Total Passed Adjustments Net of Tax Impact - - 2,419 - ____L2,419Z - - Conclusion Passed adjustments are immaterial individually and in the aggregate. Pass further review.