2003-03-26 CC Packet - Laserfiche WebLink

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City of Centerville February 6, 2003 Page Two As part of obtaining reasonable assurance about whether the general purpose 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 instances of non- compliance with Minnesota statutes. Significant Accounting PoUcies Management has the responsibility for selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we"will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the City are descnbed in Note 1 to the general purpose financial statements. No new accoUnting policies were adopted and the application of existing policies was not changed during 2002. We noted no transactions entered into by the City during the year that were both significant and unusual, and of which, under professional standards, we are required to inform you, or transactions for which there is a lack of authoritative guidance or consensus. Accounting Estimates Accounting estimates are an integral part of the general purpose financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the general purpose financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most significant estimate affecting the financial statements was depreciation on enterprise fund fjxed assets. Management's estimate of depreciation is based on estimated useful lives of the assets. We evaluated the key factors and assumptions used to develop this estimate in determining that it is reasonable in relation to the financial statements taken as a whole. Audit Adjustments For purposes of this letter, professional standards define an audit adjustment as a proposed correction of the financial statements that, in our judgment, may not have been detected except through our auditing procedures. An audit adjustment mayor may not indicate matters that could have a significant effect on the City's financial reporting process (that is, cause future financial statements to be materially misstated.).. Our prior years' management letter reported concern with the number of audit adjus1ments made and the lack ofreconci1iation procedures to ensure that data entry is property reviewed. During our 2002 audit, we made 34 adjusting entries. They all were year end and accounting entries. This is a significant improvement in the type of entries made. The Finance Director has impleinented reconciliation procedures for all major areas and this eliminated the correcting entries we made in the past From discussions with the Finance Director, we anticipate the number of adjusting entries to decrease since the reconciliation processes are in place and more time will be available for year end adjustments. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting or auditing matter that could be significant to the general purpo~ financial statements or the auditor's report We are pleased to report that no such disagreements arose during the course of our audit