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PANNELL <br />KERR <br />FOR57ER <br />Certified Public Accountants <br />410 Park National Bank Bldg. <br />5353 Wayzata Boulevard <br />Minneapolis. MN 55416 <br />Telephone (612) 545-0421 <br />May 28, 1986 <br />To the City Council <br />City of Orono <br />Orono, Minnesota <br />The following comments relating to your December 31, 1985 audit are provided to <br />assist you with the financial planning for your City and continued improvement <br />of your accounting records and internal controls. <br />Federal and State Legal Compliance Audit <br />The audits now required for Minnesota Cities are actually comprised of <br />several different audits, generally including: <br />*Financial audit of the City's financial statements <br />*Financial and compliance audit of federal programs and grants <br />(in accordance with the Single Audit Act of 1984) <br />*State legal compliance audit <br />The State Legal Compliance Audit is a new requirement for the year ending <br />December 31, 1985. This audit is a result of legislation passed in 1983 <br />requiring auditors to test and give an opinion, on the City's compliance <br />with Minnesota laws. The compliance audit covers five main categories: <br />contracting and bidding, deposits and investments, conflicts of interest, <br />public indebtedness, and claims and disbursements. Although our audit <br />procedures in previous years did cover most of these compliance items, we <br />were not required to perform specific tests, nor express an opinion on <br />our tests. The new audit requirements involve significant testing and <br />documentation. <br />We reported one area of noncompliance with Minnesota law relating to <br />collateral for City deposits. To correct this situation, we recommend <br />that the Council designate someone to approve collateral assignments and <br />changes. <br />The opinion on federal program and grant compliance, together with the <br />schedules of federal grant information and activity, and the letter on <br />internal controls relating to accounting and administrative controls over <br />federal programs are included in the special audit report provided under <br />a separate cover from the City's annual financial statements. <br />