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WORKSESSION MATERIALS To: Mayor Larson Council Members Bauman, Burg, Doffing and Phillips Dean Lotter, City Manager From: Dan Maiers, Director of Finance i4� Subject: May 27, 2008 Worksession — 2007 Comprehensive Annual Financial Report and Management Reports Date: May 21, 2008 We have prepared the Comprehensive Annual Financial Report (CAFR) for the year ending December 31, 2007. Our auditors have completed their audit of our accounting records and financial statements. They have issued a clean, unqualified opinion that our financial statements are presented fairly in all material respects. The auditors also have issued a Management Letter and Reports on Compliance with Government Auditing Standards and Legal Compliance. These reports are included with your May 27th City Council Meeting Agenda packet. It is my intention that Steve Wischmann, audit partner with Kern DeWenter Viere, review the 2007 CAFR and their management reports with you at the worksession prior to the regular Council meeting. Steve will give a presentation and be available to answer any questions that you may have. Our CAFR provides a wealth of financial information on the City of New Brighton. The Management Letter, as prepared by Kern DeWenter Viere, is intended to be a primary information tool or executive summary for the City Council. If your time is limited, then I suggest that you spend it reviewing this report, instead of the CAFR. I will give a short presentation during the regular business meeting. Then I will recommend that the Council accept the Comprehensive Annual Financial Report for the year ending December 31, 2007 and the auditors' Management Letter and their Reports on Compliance with Government Auditing Standards and Legal Compliance. There were two findings in the auditors' Management Letter and Reports on Compliance with Government Auditing Standards and Legal Compliance. They are as follows along with our responses: 1. Lack of Segregation of Accounting Duties Auditors' Comment: During the year ended December 31, 2007, the City had a lack of segregation of accounting duties due to a limited number of office employees. Management and the City Council are aware of this condition and have taken certain steps to compensate for the lack of segregation. However, due to the small staff needed to handle all of the accounting duties, the costs of obtaining desirable segregation of accounting duties can often exceed benefits which could be derived. However, management, along with the City Council