2006-12-31 Management Letter - Laserfiche WebLink

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May 3, 2007 Grandview Square 5201 Eden Avenue Suite 370 Edina, MN 55436 Honorable Mayor and Council City of Centerville, Minnesota We have audited the [mancial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City ofCenterville, Minnesota (the City) for the year ended December 31,2006 and have issued our report thereon dated May 3, 2007. 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 A material weakness is a significant deficiency, or combination of significant deficiencies, that result in more than a remote likelihood that a material misstatement of the [mancial statements will not be prevented or detected by the entity's internal control. The [mding reported is not considered a material weakness. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the City's 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 noncompliance. 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 about whether the financial statements are free of material misstatement. 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 error, fraud, or other illegal acts may exist and not be detected by us. In planning and performing our audit ofthe financial statements of the City, for the year ended December 31, 2006, we considered the City's internal control over [mancial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the [mancial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report [mancial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a misstatement of the City's financial statements that is more than inconsequential will not be prevented or detected by the City's internal control. However, we identified the following deficiency in internal control that we consider to be a significant deficiency. 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. A good internal control structure contemplates and adequate segregation of duties so that no one individual handles transactions from inception to completion. While we recognize that the City is not large enough to permit an adequate segregation of duties in all respects, it is important that you be aware of this reportable condition. The main area where the City has not been able to segregate functions is between general ledger control and reconciliation of accounts. This is a common area that is difficult to separate. 952.835.9090 . Fax 952.835.3261 www.aemcpas.com ,j