01-22-2024 CC Agenda Packet - Laserfiche WebLink

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Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements.. The City changed accounting policies during the year ended June 30, 2022 related to the accounting and financial reporting for lease activities (GASB 87). . We noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements included below: •Management’s estimate of depreciation is based on estimated useful lives of the assets. Depreciation is calculated using the straight-line method. •Allocations of gross wages and payroll benefits are approved by City Council within the City’s budget and are derived from each employee’s estimated time to be spent servicing the respective functions of the City. These allocations are also used in allocating accrued compensated absences payable. •Management’s estimate of its OPEB liability is based on several factors including, but not limited to, anticipated retirement age for active employees, life expectancy, turnover, and healthcare cost trend rate. •Management’s estimate of its lease receivable is based on the present value of lease payments expected to be received during the lease term. •Management’s estimate of its pension liabilities and assets are based on several factors including, but not limited to, anticipated investment return rate, retirement age for active employees, life expectancy, salary increases and form of annuity payment upon retirement. o The allocation of the pension liability related to Minnesota Public Employee Retirement Association (PERA) is based on the City’s proportionate share of employer contributions to the PERA cost -sharing multiple employer Coordinated and Police and Fire pension plans. We evaluated the key factors and assumptions used to develop these accounting estimates in determining that it is reasonable in relation to the financial statements taken as a whole. The disclosures in the financial statements are neutral, consistent, and clear. Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements We assisted in preparing a number of year end accounting entries. These were necessary to adjust the City’s records at year end to correct ending balances. The City should establish more detailed processes and procedures to reduce the total number of entries in each category. Material misstatements detected as a result of audit procedures were corrected by management. 4 209