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. . . Certified Puhlir Aa:ounumts & umsrdlwUs April 14,2006 Grnndview SYlJan~ 5201 Eden Avenue Suite 370 EJina, MN 55436 Honorable Mayor and Council City of Arden Hills, Minnesot;:.! We have audited the financial statements the govemmentaJ activities, the business-type activities, each major fund and the aggregate remaining fund infol11l3tion of the City of Arden }-hlls, Minnesota (the City), for the year ended December 31, 2005 and have issued our report thereon dated April 14,2006. Professional standards require that we provide you with the following infonnation related to our audit. Our Responsibility Vnder Auditing Standards Generally Accepted in the IJllited States of America As stated in our engagement letter, our responsibility, as described by professlonaf 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 \'lith accounting 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 perform 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 perforn1ing our audit of the financial statements oftbe City, for the year ended December 31,2005, we considered its internal control in order to deteID1ine our auditing procedures for the purpose of expressing our opinion on the 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 Publ1c Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofintemal coTllrol 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. We noted the following reportable condition: Seg.-egation of Duties Our study and evaluation disclosed that because oftne limited size of your office staft~ the City had limited segregation of duties for a portion of 2005. Good internal control contemplates an adequate segregation of duties so that no one individual handles a transaction from inception to completion. With the prosecution of a former City employee for misappropriation of assets and reorganization of job responsibilities. we believe that this issue has been remedied as of year end. A material weakness is a reportable condition in which the desii,,'l1 or operation of one or more of the internal control components does not reduce to a relatively low level the nsk that errors or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected \",ithin a timely period by employees in the normal course ofperfonning their assigned functions. Our consideration ofjntcmal control would not necessarily disclose all maners in imcmal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be mateJial weaknesses as defined above. However, the reportable condition described above is not believed to he a material weakness. 952.8.1:>.9090 . Ln_ 952.83:).:\261 WWW.;WIIlCp,J",.l:Olll