Loading...
HomeMy WebLinkAboutIndependent Auditor's Report on Compliance December 31, 1998 1 Tautges Redpath, Ltd. Certified Public Accountants and Consultants Independent Auditor's Report on Compliance with Minnesota Legal Compliance Audit Guide for Local Government 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, 1998 and have issued our report thereon dated March 3, 1999. We conducted our audit in accordance with generally accepted auditing standards and the provisions of the Minnesota Legal Compliance Audit Guide for Local Government promulgated by the Legal Compliance Task Force pursuant to Minnesota Statutes Section 6.65. Accordingly, the audit included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. 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 the 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 for the information of the City of Oak Park Heights, Minnesota. However, this report is a matter of public record and distribution is not limited. March 3, 1999 HLB TAUTGES REDPATH, LTD. Certified Public Accountants 4810 White Bear Parkway, White Bear Lake, Minnesota 55110, USA Telephone: 651 426 7000 Fax: 651 426 5004 HLB Tautges Redpath, Ltd is a member of ® International. A world -wide organization of accounting firms and business advisers. City of Oak Park Heights, Minnesota Independent Auditor's Report on Compliance, Page 2 FINDING: Deficiencies in collateral for deposits. CONDITION. At December 31, 1998, the City had deposits in the amount of $1,704,720 at Central Bank. Deposits of $100,000 were 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 requirement was $1,765,192 ($1,704,720 - $100,000 = $1,604,720 x 110 %). Collateral in the amount of $1,514,103 was provided resulting in a collateral deficiency of $251,089. CRITERIA: Minnesota Statute I I 8 provides certain specific collateral requirements for deposits as follows: 118A.03 WHEN AND WHAT COLLATERAL REQUIRED. Subdivision 1. To the extent that funds deposited are in excess of available federal deposit insurance, the government entity shall require the financial institution to furnish collateral security or a corporate surety bond executed by a company authorized to do business in the state. Subdivision 2. In lieu of surety bond. The following are the allowable forms of collateral in lieu of a corporate surety bond: (1) United States government treasury bills, treasury notes, treasury bonds; (2) issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; (3) general obligation securities of any state or local government with taxing powers which is rated "A" or better by a national bond rating service, or revenue obligation securities of any state or local government with taxing powers which is rated "AA" or better by a national bond rating service; (4) irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by written evidence that the bank's public debt is rated "AA" or better by Moody's Investors Service, Inc., or Standard & Poor's Corporation; and (5) time deposits that are fully insured by the Federal Deposit Insurance Corporation. City of Oak Park Heights, Minnesota Independent Auditor's Report on Compliance, Page 3 Subd. 3. Amount. The total amount of the collateral computed at its market value shall be at least ten percent more than the amount on deposit plus accrued interest at the close of the business day. The financial institution may furnish both a surety bond and collateral aggregating the required amount. Subd. 4. Assignment. Any collateral pledged shall be accompanied by a written assignment to the government entity from the financial institution. The written assignment shall recite that, upon default, the financial institution shall release to the government entity on demand, free of exchange or any other charges, the collateral pledged. Interest earned on assigned collateral will be remitted to the financial institution, its assigns, or both. Subd. 5. Withdrawal of excess collateral. A financial institution may withdraw excess collateral or substitute other collateral after giving written notice to the governmental entity and receiving confirmation. The authority to return any delivered and assigned collateral rests with the government entity. Subd. 6. Default. For purposes of this section, default on the part of the financial institution includes, but is not limited to, failure to make interest payments when due, failure to promptly deliver upon demand all money on deposit, less any early withdrawal penalty that may be required in connection with the withdrawal of a time deposit, or closure of the depository. If a financial institution closes, all deposits shall be immediately due and payable. It shall not be a default under this subdivision to require prior notice of withdrawal if such notice is required as a condition of withdrawal by applicable federal law or regulation. Subd. 7. Safekeeping. All collateral shall be placed in safekeeping in a restricted account at a Federal Reserve Bank, or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. The selection shall be approved by the government entity. RECOMMENDATION. We recommend that the City monitor amounts on deposit with each depository to insure that amounts on deposit do not exceed collateral pledged.