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HomeMy WebLinkAboutItem 09.bCITY OF LAKEVILLE DAKOTA COUNTY, MINNESOTA Special Purpose Audit Reports Year Ended December 31, 2010 CITY OF LAKEVILLE DAKOTA COUNTY, MINNESOTA Year Ended December 31, 2010 Table of Contents Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Independent Auditor's Report on Compliance With Minnesota State Laws and Regulations Page 1 -2 3 Schedule of Findings 4-5 MMKR CF,RTIFIf ?D P['PLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF' FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS City Council and Management City of Lakeville, Minnesota PRINCIPAI.S Titoei:. M.:ib t.tguc, r `PA Thr:it;x A. harnyw:.ki, CPA Paul .1. R tcfns etch, C':\ (TPA JA:itc+ I'I. r. C11ft -n, i:P,1 Aron I.ii4aa,n.t pA \' . ;oria L. Hr:EitEka, CPA A We have audited the financial statements of the governmental_ activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Lakeville (the City) as of and for the year ended December 31, 2010, which collectively comprise the City's basic financial statements, and have issued our report thereon dated June 14, 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses and, therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as described in the accompanying Schedule of Findings, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented, or detected and corrected, on a timely basis. We consider the deficiencies described in the accompanying Schedule of Findings as items 2010 -1 and 2010 -2 to be material weaknesses. (continued) - Mal!oy, tiontague, K: rrtor,sl:i, R.tdoscvich & Co., P.A. tg li,.tittatd •'slit. ,;it • mil nca. :'\ `i 1 • T.I.hhan...: • IcIAIx: ) •I "( • ,,,•w•..tntntr.ccm Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to the City Council, management of the City, and the state of Minnesota in a separate letter dated June 14, 2011. The City's responses to the findings identified in our audit are described in the accompanying Schedule of Findings and Responses. We did not audit the City's responses and, accordingly, we express no opinion on them. This report is intended solely for the information and use of the City Council, management of the City, and the state of Minnesota and is not intended to be, and should not be, used by anyone other than these specified parties. 74(rier, gr,44.01,44; 4- d / June 14, 2011 MMKR CERTIFIF.D PUBLIC R' COUNTA >:T5 City Council and Management City of Lakeville, Minnesota June 14, 2011 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH MINNESOTA STATE LAWS AND REGULATIONS PRINCIPALS 7 homes M..:.innt -: ;se, CPA "l ho :;t.) . I-:.trn*xtski. Paul A. It .Inscvich. (..PA "Willia'a.1. Laic.. CPA Jgenc H. T ..hrrn. A.art. J. °:i KIA. n . 4 i toria I Holtnka, C PA We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Lakeville (the City) as of and for the year ended December 31, 2010, which collectively comprise the City's basic financial statements, and have issued our report thereon dated June 14, 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions, promulgated by the Office of the State Auditor pursuant to Minnesota Statute § 6.65. Accordingly, the audit included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The Minnesota Legal Compliance Audit Guide for Political Subdivisions covers seven main categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our study included all of the listed categories. The results of our tests indicate that, for the items tested, the City complied with the material terms and conditions of applicable legal provisions. This report is intended solely for the information and use of those charged with governance, the City Council, management of the City, and the state of Minnesota and is not intended to be, and should not be, used by anyone other than these specified parties. 1 C A , , f�M.0 CGi � r � r►, °v4.. co., t - r^t -3- llalloy, Niontaguc, Karnow;.ki, Radoscvich cz Co., P.A. Bodo: .:d • Suia, RI • °.iinnc.p.ti_, r 554i6 • Ta., hon.: 952- c;5 -0:2, • - i'.1_f•x 9`2.- Sig -� ".G9 CITY OF LAKEVILLE Schedule of Findings Year Ended December 31, 2010 A. FINDINGS — MATERIAL WEAKNESSES IN INTERNAL CONTROL OVER FINANCIAL REPORTING 2010 -1 SEGREGATION OF DUTIES Criteria — Internal control over financial reporting. Condition — The City of Lakeville (the City) has limited segregation of duties in controls over payroll. The individual responsible for processing payroll is also maintains the individual payroll records, which gives them access to add new employees to the system or alter employee pay and benefit rates. Cause — The lack of segregation of duties is due to having the same employee performing both payroll and human resource functions. Effect — The City's risk that a material misstatement of the financial statements would not be prevented or detected by its internal controls is increased. Context — This is a current year finding. Recommendation -- We recommend that the City restrict the access of payroll personnel to the human resource functions of the payroll system, or add a mitigating control such as having a member of senior management review all changes to the payroll system on a regular basis. Management Response — There is no disagreement with the audit finding. The City has added a periodic review payroll of payroll change reports to address this deficiency. 2010 -2 MATERIAL PRIOR PERIOD ADJUSTMENT Criteria — Internal control over financial reporting. Condition — In 2010, the City recorded a prior period adjustment to correct the recording of Liquor Fund accounts payable and cost of sales reported for the year ended December 31, 2009, which reduced the beginning net assets reported for its business -type activities and enterprise funds by $186,003. Cause — This adjustment is due to an unintentional oversight by city staff in the previous year. Effect — The financial statements issued for the previous year contained misstatements that were material to the financial statements. Context — This is a current year fmding. Recommendation — We recommend that the City review its controls over the identification and recording of accounts payable and cost of sales for its liquor operations to ensure they are recorded correctly in the future. Management Response — There is no disagreement with the audit finding. The City will assure the proper recording of the Liquor Fund accounts payable and cost of sales in the future. -4- CITY OF LAKEVILLE Schedule of Findings (continued) Year Ended December 31, 2010 B. FINDINGS — MINNESOTA LEGAL COMPLIANCE AUDIT None.