Agenda - Council Work Session - 06/10/2014

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The following is a summary of our audit work, key conclusions, and other information that we consider important or that is required to be communicated to the City Council, administration, or those charged with governance of the City. AUDIT SUMMARY OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA AND GOVERNMENT AUDITING STANDARDS 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 as of and for the year ended December 31, 2013, and the related notes to the fmancial statements. Professional standards require that we provide you with information about our responsibilities under auditing standards generally accepted in the United States of America and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information to you verbally and in our audit engagement letter. Professional standards also require that we communicate the following information related to our audit. PLANNED SCOPE AND TIMING OF THE AUDIT We performed the audit according to the planned scope and timing previously discussed and coordinated in order to obtain sufficient audit evidence and complete an effective audit. AUDIT OPINION AND FINDINGS Based on our audit of the City's financial statements for the year ended December 31, 2013: • We have issued an unmodified opinion on the City's basic financial statements. • We reported no deficiencies involving the City's internal control over financial reporting that we consider to be material weaknesses. • The results of our testing disclosed no instances of noncompliance required to be reported under Government Auditing Standards. • We reported no findings based on our testing of the City's compliance with Minnesota laws and regulations. FOLLOW -UP ON PRIOR YEAR FINDINGS AND RECOMMENDATIONS As a part of our audit of the City's financial statements for the year ended December 31, 2013, we performed procedures to follow -up on the findings and recommendations that resulted from our prior year audit. During our audit for the year ended December 31, 2012, the City had a reportable instance of noncompliance with Minnesota laws and regulations for two investments Minnesota Statutes require investments in mutual funds to have a rating in the two highest rating categories by at least one nationally recognized statistical ratings organization, and investments in general obligations of state or local government with taxing powers to have a rating of "A" or better. The position of the State Auditor's Office is that, if permissible when purchased, the public investor should make a decision whether to divest or hold the downgraded security. The public investor should also communicate the downgrade to the governing board or council. During our audit for the year ended December 31, 2013, the City continued to hold investments which, when originally purchased, met state statute as noted above. The Finance Director will continue to monitor the cost - benefit of selling the securities and maintain its fiduciary responsibility to the City. Because the downgraded investment was allowable at the time of purchase, we are including it only in this communication and have not reported it as a legal compliance exception.