HomeMy WebLinkAbout5B - 1996 Audit Report
AGENDA #:
PREPARED BY:
SUBJECT:
DATE:
INTRODUCTION:
BACKGROUND:
DISCUSSION:
5&
RALPH TESCHNER, FINANCE DIRECTOR
CONSIDER APPROV AL OF 1996 AUDIT REPORT AND
MANAGEMENT LETTER
JUNE 2, 1997
Councilmembers received through direct mail a copy of the 1996
Financial Report and Management Letter as prepared by the
certified public accountant firm of Abdo, Abdo and Eick. The report
was sent to you directly to afford sufficient time to review the
document before the June 2 meeting. The audit was conducted in
accordance with generally accepted auditing standards and
represents an independent opinion of the financial results and status
ofthe City of Prior Lake during the year of 1996.
Approximately two years ago on July 17, 1995 the City Council
approved Resolution 95-61 which authorized the engagement of the
Abdo, Abdo and Eick Company to provide auditing services for
1995, 1996 and 1997 plus an option for 1998-2000. The cost for
their professional services to prepare the 1996 CAFR
(comprehensive annual financial report) was approved in an amount
of$9,880.00.
The City Council approved Resolution 94-27 on June 6, 1994 which
authorized a working capital designation or General Fund reserve of
30% of the current year's Operating Budget, based upon the
availability of sufficient funds. Any remaining portion is to be
allocated by the Council as unreserved fund balance. Each year the
Council is to review these excess amounts for the purpose of
allocating the excess reserves to other City funds on an as needed
basis.
Final budget figures show a surplus of $406,461.00. The surplus
occurred because of actual revenues of $5,719,304 compared to
budgeted revenues of $5,447,005 or 105.0% of projection.
Operating expenditures were $5,312,843 compared to budgeted
expenditures of 5,447,005 or 97.5% of budget.
This allowed the Council at it's May 20th meeting to appropriate a
total of $450,000 from the General Fund to create the Revolving
Equipment Fund. The General Fund balance was reduced from the
recommended 30% working capital threshold to 26%. It should be
restored over the next two years under normal budget experience.
H~UD!J.\AUD,RPTDOC
16200 Eagle Creek Ave. S.E., Prior Lake. Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
.''1N EQLAL OPPORTLNITY E"lPLOYER
Contained within the financial report is a legal compliance audit
which was performed to ensure compliance with Minnesota Statutes
in the areas of; contracting and bidding, deposits and investments,
conflicts of interest, public indebtedness and claims and
disbursements.
According to the auditor's tests, the City has complied with the
applicable legal provisions as they apply to the five main categories
stated above. Also noted within their report on internal control is the
fact that no matters involving internal control structure and
operation were observed to contain material weaknesses as defined
by GAS (Government Auditing Standards).
The Management Letter is intended to bring to the City Council's
attention deficiencies or conditions recommended for improvement
within the design or administration of the City's financial
operations. A graphic summary of the City's results of operations
within the General Fund depicting revenues and expenditures is
included. Also, under a section entitled "Building Financial Strength
Outside of the General Fund", the auditors discuss the importance of
stabilizing tax efforts and the ups and downs of capital acquisition
costs by establishing revolving funds such as the Revolving
Equipment Fund recently approved by the City Council.
AL TERNA TIVES
The following alternatives are available to the City Council:
1. Accept 1996 Audit Report and Management Letter as submitted.
2. Delay action according to specific Council reason.
RECOMMENDATION: Staff would recommend approval of the management letter and the
financial report for the fiscal year ended December 31, 1996 as
submitted. A City Financial Reporting Form, which is basically a
condensed excerpt of the official document, is required to be
submitted to the Office of the State Auditor by June 30, 1997 along
with this report.
Please feel free to contact Staff prior to the meeting if you have any
questions. Gerry Eick of the firm Abdo, Abdo and Eick will make a
brief presentation regarding the report and management letter.
ACTION REQUIRED:
Motion and second to accept the 1996 Audit Report and
Manage;nent Letter.