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HomeMy WebLinkAboutLegal Compliance Report December 31, 1996 4 JO TAUTGES, REDPATH & CO., LTD. CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE To the Honorable Mayor and Members of the City Council City of Oak Park Heights, Minnesota We have audited the general purpose financial statements of the City of Oak Park Heights, Minnesota, as of and for the year ended December 31, 1996, and have issued our report thereon dated February 20, 1997. We conducted our audit in accordance with generally accepted auditing standards; GovernmentAuditing Standards, issued by the Comptroller General of the United States; and the provisions of the Minnesota Legal Compliance Audit Guide for Local Government promulgated by the Legal Compliance Task Force p ursuan t to Minnesota Statutes Section 6.65. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. General Purmose Financial Statements. Compliance with laws, regulations, contracts, and grants applicable to the City of Oak Park Heights, Minnesota, is the responsibility of the City's management. As part of obtaining reasonable assurance about whether the general purpose financial statements are free of material misstatement, we performed tests of the City's compliance with certain provisions of laws, regulations, contracts, and grants. However, our objective was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported here under Government Auditing Standards. With respect to items not tested, nothing came to our attention that caused us to believe that the City of Oak Park Heights, Minnesota had not complied, in all material respects, with those provisions. Leval Compliance. The Minnesota Legal Compliance Audit Guide for Local Government covers five main categories of compliance to be tested. contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, and claims and disbursements. Our study included all of the above listed categories. The results of our tests indicate that for the items tested, the City of Oak Park Heights, Minnesota complied with the material terms and conditions of applicable legal provisions, except as described in this report. Further, for items not tested, based on our audit and the procedures referred to above, nothing came to our attention to indicate that the City of Oak Park Heights, Minnesota had not complied with such legal provisions. This report is intended solely for the use of the City of Oak Park Heights, Minnesota and should not be used for any other purpose. This restriction is not intended to limit the distribution of this report which is a matter of public record. Respectfully submitted, A1 1 4 P '404A -'-f 4 'z /1 TAUTGES, REDPATH & CO., LTD. Certified Public Accountants February 20, 1997 4810 White Bear Parkway • White Bear Lake, Minnesota 55110 • 612/426 -7000 • FAX /426 -5004 • Member of HLB International City of Oak Park Heights, Minnesota Legal Compliance Report, Page 2 FINDING: Deficiencies in collateral for deposits. CONDITION: At December 31, 1996, the City held eight certificates of deposit at Lake Elmo Bank totaling $3,330,000. Deposits up to $100,000 are insured by the FDIC. Deposits require collateral of at least ten percent more than the amount on deposit in excess of that covered by FDIC insurance. The collateral required was $3,553,000 ($3,230,000 x 110%). Collateral in the amount of $3,452,170 was provided, resulting in a collateral deficiency of $100,830. CRITERIA: Minnesota Statute 118 provides certain specific collateral requirements for deposits as follows: 118.01 DEPOSITORY BONDS AND COLLATERAL. Subd. l Any bank, trust company or thrift institution authorized to do business in this state may, in lieu of the corporate or personal surety bond required to be furnished to secure deposited funds, deposit with the custodian of the funds as collateral security: 1) certificates of deposit that are fully insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation; 2) notes secured by first mortgages of future maturity, upon which interest is not past due, on improved real estate free from delinquent taxes, within the county wherein the depository is located, or within counties immediately adjoining the county in the State of Minnesota; 3) obligations which are legally authorized investments for debt service funds under section 475.66, subdivision 3; and 4) qualified state or local government obligations acceptable to the treasurer or chief financial officer. Qualified obligations must be general obligations rated "A" or better by Moody's Investors Service, Inc. or Standard & Poor's Corporation. Subd. 2. Except for notes secured by first mortgages of future maturity, the total in amount of the collateral computed at its market value shall be at least ten percent more than the amount on deposit at the close of the business day, in excess of any insured portion, which would be permitted if a corporate or personal surety bond were furnished. The total amount of collateral consisting of notes secured by first mortgages of future maturity computed at its market value shall be at least 40 percent more than the amount on deposit at the close of the business day, in excess of any insured portion, which would be permitted if a corporate or personal surety bond were furnished. The depository may furnish both a bond and collateral aggregating the required amount. City of Oak Park Heights, lV mesota Legal Compliance Report, Page 3 Subd. 3. Any collateral so deposited shall be accompanied by an assignment thereof to the municipality from the depository. The assignment shall recite that the depository shall pay over to the treasurer or chief financial officer on demand, free of exchange or any other charges, except for early withdrawal penalties on time deposits, all money deposited therein at any time during the period the collateral shall be so deposited and shall pay the interest thereon when due at the agreed rate; and that, in case of any default upon the part of the depository, the governing body of the municipality or the treasurer or chief financial officer may sell the collateral, or as much thereof as may be necessary to realize the full amount due the municipality and to pay over any surplus to the depository or its assigns. Subd. 4. A depository may make withdrawals of excess collateral or substitute other collateral, as defined in subdivision 1, on receipt by the municipality of written notice from the depository. Authority is vested in the treasurer to return the collateral to the depository. All interest on the collateral shall be paid to the depository so long as it is not in default. Subd. S. The closing of a depository shall be deemed a default on the part of the depository and no demand on the part of the municipality shall be necessary to establish the default. If a depository closes, any deposit placed therein shall immediately become due and payable. Subd. 6. All collateral shall be deposited with the treasurer or chief financial officer of the municipality or placed in safekeeping for the municipality in a financial institution approved by the governing body of the municipality or the treasurer or chief financial officer. The collateral shall not be redeposited in the bank, trust company or thrift institution furnishing it. RECOAEVIENDATION: We recommend that the City monitor amounts on deposit with each depository to insure that amounts on deposit do not exceed FDIC insurance limits or that sufficient collateral is pledged in cases where deposits exceed FDIC insurance limits.