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• NABDO ABDO C•EICK& ,dMEYERS LLP April 14,2001 Certified Public Accountants&Consultants 7241 Ohms Lane Suite 200 Minneapolis,MN 55439 Members of the City Council City of Arden Hills,Minnesota We have audited the general purpose financial statements of the City of Arden Hills for the year ended December 31,2000 and have issued our report thereon dated April 14,2001. Professional standards require that we provide you with the following information related to our audit. Our Responsibility Under Generally Accepted Auditing Standards in the United States and Government Auditing Standards As stated in our engagement letter,our responsibility,as described by professional standards,is to plan and perform our audit to obtain reasonable,but not absolute,assurance that the financial statements are free of material misstatement and are fairly presented in accordance with generally accepted accounting principles in the United States. Our audit is designed to provide reasonable assurance of detecting misstatements that,in our professional judgment,would have a material effect on the financial statements taken as a whole. Consequently,our audit will not necessarily detect misstatement less than this • materiality level that might exist due to error,fraudulent financial reporting or misappropriation of assets. In planning and performing our audit of the general purpose financial statements of the City of Arden Hills for the year ended December 31,2000,we considered its internal control in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on internal control. However,we noted certain matters involving internal control and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of internal control that,in our judgment,could adversely affect the City's ability to record,process,summarize and report financial data consistent with the assertions of management in the financial statements. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of internal control would not necessarily disclose all matters in internal control that might be reportable conditions and,accordingly,would not necessarily disclose all reportable conditions that are also considered to be a material weakness,as defined above. However,we noted the following reportable condition that we believe is not a material weakness. Segregation of Duties Our study and evaluation disclosed that because of the limited size of your office staff,your organization has limited segregation of duties. A good internal control structure contemplates an adequate segregation of duties so that no one individual handles a transaction from inception to completion. While we recognize that your organization is not large enough to permit an adequate segregation of duties in all respects,it is important,however,that you be aware of this condition. • As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement,we performed tests of compliance with certain provisions of laws,regulations,contracts and grants. However,the objective of our tests was not to provide an opinion on compliance with such provisions. We noted no noncompliance with provisions of laws,regulations,contract and grants. 612.835.9090 9 Fax 612.835.3261