2017.05.09 WS Agenda C - Laserfiche WebLink

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To: Mayor Johnson Council Members Bauman, Burg, Jacobsen, Strub Dean Lotter, City Manager From: Brenda Davitt, Director of Finance Date: May 9, 2017 Re: Comprehensive Annual Financial Report, Legal Compliance Report, and Communications Letter BACKGROUND This report contains a discussion of the reports listed below and provides a summary of financial activity for the budgeted funds. These reports present the City’s financial activity for the year 2016, the financial position (assets, liabilities, deferred inflows or resources and fund equity) at December 31, 2016, and any audit findings. 1. Report on Compliance with Government Auditing Standards and Legal Compliance 2. Communications Letter 3. Comprehensive Annual Financial Report and opinion COMPLIANCE WITH GOVERNMENT AUDITING STANDARDS AND LEGAL COMPLIANCE The compliance with government auditing standards and legal compliance audit requires an examination of eight main areas, including: 1. Internal Control over Financial Reporting 2. Contracting and bidding 6. Claims and disbursements 3. Deposits and investments 7. Miscellaneous provisions 4. Conflicts of interest 8. Tax increment financing 5. Public indebtedness When auditors review these items, they are reviewing the actions, documents, and agreements for all departments involved in these activities. The attached opinion states that for 2016 the auditors found nothing which caused them to believe the City of New Brighton failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions. However, the below issue was found under the Internal Control audit: 1) Lack of Segregation of Accounting Duties – During the year ended December 31, 2016, the City had a lack of segregation of accounting duties due to a limited number of office employees. Adequate segregation of accounting duties is in place when the following four areas of a transaction have been separated: authorization, custody, recording, and reconciliation. The lack of segregation of accounting duties could adversely affect the City’s ability to initiate, record, process, and report financial data consistent with the assertions of management in the financial statements. Management and the City Council must remain aware of this situation and management should continually monitor the accounting system, including changes that occur. Please refer to pages four and five of the Report on Compliance with Government Auditing Standards and Legal Compliance to review the City response to this finding.