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HomeMy WebLinkAboutReport on Internal Control, Compliance & Other Matters Tautges Redpath, Ltd. Certified Public Accountants and Consultants REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITING STANDARDS To the Honorable Mayor and Members of the City Council City of Oak Park Heights, Minnesota We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Oak Park Heights, Minnesota as of and for the year ended December 31, 2005, which collectively comprise the City of Oak Park Heights, Minnesota's basic financial statements 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 standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City of Oak Park Heights, Minnesota's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect the City of Oak Park Heights, Minnesota's ability to record, process, summarize and report financial data consist with the assertions of management in the financial statements. Reportable conditions are described in the accompanying schedule of findings as item 2005 -1. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily 4810 White Bear Parkway White Bear Lake, Minnesota 55110 651 4267000 651 426 5004 Fax I www.hlbtr.com 1303 South Frontage Road Suite 13 Hastings, Minnesota 55033 651 480 4990 651 426 5004 Fax HLB Tautges Redpath, Ltd. is a member of 0 International, a world -wide organization of accounting firms and business advisors. Report on Internal Control and on Compliance and Other Matters Page 2 disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Oak Park Heights, Minnesota's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. We also noted certain additional matters that we reported to management of the City of Oak Park Heights, Minnesota in a separate letter dated March 23, 2006. 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. A/I -IA , 0 HLB TAUTGES REDPATH, LTD. White Bear Lake, Minnesota March 2, 2006 Report on Internal Control and on Compliance and Other Matters Page 3 2005 -1 Lack of Segregation of Duties Within Utility Billing Criteria: Generally, a system of internal control contemplates separation of duties such that no individual has responsibility to execute a transaction, have physical access to the related assets, and have responsibility or authority to record the transaction. Condition: Utility bills are produced, payments are collected, and receipts are posted to the utility system by a single employee. Cause: The condition is due to the limited number of staff and is common to cities of this size. Effect: The lack of ideal segregation of duties subjects the City to a higher risk that errors or fraud could occur and not be detected in a timely manner. Management Response: The City has established certain other safeguards to compensate for this situation, including the Finance Director's approval of all utility adjustments and storing the City's cash box in the Finance Director's office.