Loading...
HomeMy WebLinkAboutReport on Compliance Tautges Redpath, Ltd. Certified Public Accountants and Consultants 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 financial statements of the City of Oak Park Heights, Minnesota, as of and for the year ended December 31, 2005 and have issued our report thereon dated March 2, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the provisions of the Minnesota Legal Compliance Audit Guide for Local Government promulgated by the State Auditor pursuant to Minnesota Statutes Section 6.65. Accordingly, the audit included such tests of the accounting records and such other auditing procedures we considered necessary in the circumstances. The Minnesota Legal Compliance Audit Guide for Local Government covers seven main categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our study included all of the listed categories except tax increment financing because the City of Oak Park Heights, Minnesota has no tax increment districts. 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. This report is intended solely for the information and use of the City of Oak Park Heights, Minnesota's City Council and management and is not intended to be, and should not be, used by anyone other than these specified parties. 1A11 T�� , e/7 HLB TAUTGES REDPATH, LTD. White Bear Lake, Minnesota March 2, 2006 4810 White Bear Parkway White Bear Lake, Minnesota 55110 651 426 7000 651 426 5004 Fax www.hlbtr.com 1303 South Frontage Road Suite 13 Hastings, Minnesota 55033 651 4804990 651 426 5004 Fax HLB Tautges Redpath, Ltd. is a member of ® International, a world -wide organization of accounting firms and business advisors Report on Compliance with Minnesota Legal Compliance Audit Guide for Local Government Page 2 FINDING 2005 -1: Deficiencies in collateral for deposits Criteria: Minnesota Statute 118A provides certain specific collateral requirements for deposits as follows: M.S. 118A.03 When and What Collateral Required. Subdivision 1. For deposits beyond insurance. 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. Subd. 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. 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 so long as it is not in default. The government entity may sell the collateral to recover the amount due. Any surplus from the sale of the collateral shall be payable 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 Report on Compliance with Minnesota Legal Compliance Audit Guide for Local Government Page 3 to the governmental entity and receiving confirmation. The authority to return any i 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. HIST: 1996 c 399 art 1 s 4 Condition: At December 31, 2005 the City of Oak Park Heights, Minnesota held interest bearing cash and investments at First State Bank and Trust totaling $4,399,248. 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 $4,729,173 ($4,299,248 x 110 %). Collateral in the amount of $4,685,598 was provided, resulting in a collateral deficiency of $43,575. Cause: The City purchased three additional certificates of deposit on December 1, 2005 from First State Bank and Trust. After these purchases, the amount of collateral provided was not sufficient. Effect: The effect of noncompliance is not determinable. Management Response: On January 10, 2006 the City received notification from First State Bank and Trust that additional collateral was being pledged to meet the above mentioned requirements.