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CITY OF RAMSEY <br />Schedule of Findings and Responses <br />Year Ended December 31, 2016 <br />FINDINGS — INTERNAL CONTROL OVER FINANCIAL REPORTING <br />2016-001 PRIOR PERIOD ADJUSTMENT <br />Criteria — Management is responsible for establishing and maintaining effective internal <br />controls over the financial reporting process. These controls include the responsibility for the <br />preparation of the City of Ramsey, Minnesota's (the City) annual financial statements in <br />accordance with accounting principles generally accepted in the United States of America. <br />Condition — During our audit, we noted a material prior period adjustment, as detailed in the <br />notes to basic financial statements, that was necessary to correct the recording of capital asset <br />contributions by developers in the prior year. Auditing standards consider the necessity of <br />recording a material prior period adjustment to be indicative of a material weakness in the <br />related internal controls. <br />Context — Capital assets reported for the City's governmental activities and business -type <br />activities for the year ended December 31, 2015 were understated by $1,045,874 and <br />$1,643,793, respectively. Consequently, net position reported for the combined governmental <br />activities and business -type activities as of December 31, 2015 was understated by <br />$2,689,667. This is a current year finding. <br />Cause — This was an oversight by city staff. <br />Effect — The City's basic financial statements, as of and for the year ended December 31, <br />2015, contained a material misstatement. <br />Recommendation — We recommend that the City review its accounting procedures and <br />internal controls for recording capital assets and capital asset contributions to assure <br />transactions such as these are properly reported in the future. <br />Management Response — There is no disagreement with the audit finding. The error was <br />discovered by city staff during their preparation for the current year audit. The nature and <br />details of the misstatement have been reviewed with the individuals responsible, and <br />appropriate guidance has been given to assure such transactions are reported correctly in the <br />future. The finance director will monitor the implementation of these corrective actions. <br />-4- <br />