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. . . Certified Public AccOIwtan.ls & Con.sultants April I, 2004 GrmlJvi",w SLJu.,n' 5201 EU"'II ..hlOlIIJ" SlJilp. :flO F.llina, MN 554:\6 Honorable Mayor and City Council City of Arden Hills, Minnesola We have audited the general purpose financial statements of the City of Arden Hills, Minnesota for the year ended December 31,2003 and have issued our report thereon dated April 1,2004. Professional standards require that we provide you with the following information related to our audit. Our Responsibility Under Auditing Standards Generally Accepted in the United States of America 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 ofmateriaJ misstatement and are fairly presented in accordance with accollnting principles generally accepted in the United States of America. Because an audit is designed to provide reasonable, but not absolute, assurance and because we did not pcrfonn a detailed examination of all transactions, there is a risk that material errors, fraud or illegal acts may exist and not be detected by us. In planning and perrorming our audit of the general purpose financial statements of the City, for the year ended December 3 1,2003, we considered its inlernal control in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on the internal control. However, we noted certain matters involving the 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 "vith the assertions of management in the general purpose financial statements. We noted the following reportable condition: Segregation of Duties Our study and evaluation disclosed that because of the limited size of your office staff, the City has limited segregation of duties. Good internal control contemplates an adequate segregation of duties so that no one individual handles a transaction from inception to completion. While we recognize thaI the City is not large enough to pennlt an adequate segregation of duties in all respects, it is important, however, tbat you be aware of this condition. 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 fraud in amounts that would be material in relation to the general putpose financial ,statements being audited may occur and not be detected within a timely period by employees in the nonnal 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 material weaknesses as defined above. However, the reportable condition described above is not believed to be a material \veakness. 9S2.2:t'i.9090 . Fax %2_8:~.)..:{2bl www.aemCIHls.com