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<br />I; <br />Ii.~ <br /> <br />City of Arden Hills . <br />April 1,2004 <br />Page Three <br /> <br />Consultations with Other Independent Accountants <br /> <br />In some cases, management may decide to consult with other accountants about auditing andliCcounting matters. similar to <br />obtaining a "second opinion" on certain situations. If a consultation involves applicationofan accounting principle to the City's <br />general purpose financial statements or a determination of the type ofauditoc's opiQion.that may be expressed on those <br />statements. our professional standards require the consulting accountant to check 'Yiihus tq determine that the consultant has all <br />the relevant facts. To our knowledge, there were no such consultations with other,accountants. <br /> <br />Issues Discussed Prior to Retention of Independent Auditors <br /> <br />We gencraIly discuss a variety of matters, including the applicatiofi"_ofaccounting principles and auditil1g:standards, with <br />management each year prior to retention as the City's auditors. However, these discussions occurred in lhenormal course of our <br />professional relationship and our responses were not a condition to'~)Urretention. <br /> <br />Difficulties Encountered in Performing the Audit <br /> <br />We encountered no significant difficulties in dealitigwilhmanagement in perforDling our audit. <br /> <br />Other Matters <br /> <br />The following are areas that came to our attention during':the audit thatw~:feershould be reviewed: <br /> <br />Financial Position and R~slllts:ofOpel"ations <br /> <br />. <br /> <br />General Fund <br /> <br />The general fund is used t(JaR~oynl for resollfc.e~ traditionally associated with government, which are not required legally or <br />by sound pri~cipal_lI1anagemeIift~,be acc.o~nt~4:-fofi.ll~~ot~erfund. The general fund balance increased $272,608 from <br />2002. The ft!Itq'b~]~~cepf$I,02~,7~{)is 35 percent ofth. 2004 budgeted expenditures. We recommend the fund balance be <br />maintain~~t'alevelSt1fflci~nt to fund-operations until the major revenue sources are received in June. We feel a reserve of <br />appro:Xiwately 40 to 50 petceitt:of planned:,expenditures and transfers out is adequate to meet working capital and small <br />e~g~ncy needs. <br /> <br />The Mipjii?'sota Office of the State. Auditor has classified cities' unreserved fund balance levels relative to expenditures as <br />follows: <br /> <br />Extremely <br />Low <br />Acceptable <br />Moderately high <br />High <br />Very high <br />Extremely high <br /> <br />Under 20% <br />21 - 34 <br />35 - 50 <br />51- 64 <br />65 -100 <br />101 - 150 <br />Above 150 <br /> <br />The State Auditor does group all general and special revenue funds of the city when making this calculation where our <br />calculation is based only on the general fund. Although there is no legislation regulating fund balance, it is a good policy to <br />designate intended use of fund balance. This helps address citizen concerns as to the use of fund balance and (ax levels. <br /> <br />. <br /> <br />9;)2.g;~5.9090 . fll)l 9.,)2.83S..1.261 <br /> <br />www.aemcpal>.com <br />