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City Council and Residents City of Ramsey Ramsey, Minnesota INDEPENDENT AUDITOR'S REPORT ON INTERNAL ACCOUNTING CONTROLS BASED SOLELY ON A STUDY AND EVALUATION MADE AS A PART OF AN AUDIT OF THE GENERAL PURPOSE FINANCIAL STATEMENTS PANNELL KERR FORSTER Certified Public Accountants 400 Park National Bank Bldg. 5353 Wayzata Boulevard Minneapolis, MN 55416 Telephone (612) 545 -0421 Telefax 612 - 545 -0569 We have audited the General Purpose Financial Statements of the City of Ramsey, Minnesota, for the year ended December 31, 1988, and have issued our report thereon, dated May 23, 1989. As a part of our audit, we made a study and eval- uation of the City's system of internal accounting control to the extent we con- sidered necessary to evaluate the system as required by generally accepted auditing standards and the standards for financial and compliance audits con- tained in the U.S. General Accounting Office's, Government Auditing Standards. For the purpose of this report, we have classified the significant internal accounting controls in the following categories: cash receipts /revenue, cash disbursements /expenditures, payroll, and external financial reporting. Our study included all of the control categories listed above. The purpose of our study and evaluation was to determine the nature, timing, and extent of per- forming the auditing procedures necessary for expressing an opinion on the enti- ty's financial statements. Our study and evaluation was more limited than would be necessary to express an opinion on the system of internal accounting control taken as a whole or on any of the categories of controls identified above. The management of the City of Ramsey is responsible for establishing and main- taining a system of internal accounting control. In fulfilling this respon- sibility, estimates and judgements by management are required to assess the expected benefits and related costs of control procedures. The objectives of a system are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any system of internal accounting control, errors or irregulari- ties may nevertheless occur and not be detected. Also, projection of any evalu- ation of the system to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the degree of compliance with the procedures may deteriorate. (Continued)