Agenda - Council Work Session - 06/13/2017

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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, 2016, we performed procedures to follow-up on the findings and recommendations that resulted from our prior year audit. We reported the following finding in the prior year that the City corrected in the current year: • In the prior year audit, we reported a compliance finding with Minnesota laws and regulations that the responsible contractor documentation was not obtained as required by state statute. We are pleased to report this is not a finding in the current year. SIGNIFICANT ACCOUNTING POLICIES Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 of the notes to basic financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year ended December 31, 2016. We noted no transactions entered into by the City 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 AND MANAGEMENT JUDGMENTS 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 estimates affecting the financial statements were: • Value of Land Held for Resale — Management's estimates of these assets are based on net realizable value (lower of cost or fair value). • Depreciation — Management's estimates of depreciation expense are based on the estimated useful lives of the assets. • Net Other Post -Employment Benefit (OPEB) and Pension Liabilities — The City has recorded liabilities and activity for other post -employment benefits (OPEB) and pension benefits. These obligations are calculated using actuarial methodologies described in the Governmental Accounting Standards Board (GASB) Statement Nos. 45 and 68. These actuarial calculations include significant assumptions, including projected changes, healthcare insurance costs, investment returns, retirement ages, proportionate share, and employee turnover. • Compensated Absences — Management's estimate is based on current rates of pay and unused compensated absence balances. We evaluated the key factors and assumptions used by management to develop these estimates in determining that they are reasonable in relation to the basic financial statements taken as a whole. The financial statement disclosures are neutral, consistent, and clear. -2-