2007 Management Letter - Year End 12-31-2007

Home Browse Search

I I I I I I I I I I I I I I I I I I I Other Matters The following are areas that came to our attention during the audit that we feel should be reviewed: Financial Position and Results of Operations City of Centerville May 29, 2008 Page 7 Our principal observations and recommendations are summarized on the following pages. These recommendations resulted from our observations made in connection with our audit of the City's financial statements for the year ended December 31,2007. General Fund The General fund is used to account for resources traditionally associated with government, which are not required legally or by sound principal management to be accounted for in another fund. The General fund balance decreased $128,171 from 2006. The fund balance of$I,435,164 is 64 percent of the 2008 budgeted expenditures. The total General fund budget is $2,237,000 for 2008. We recommend the fund balance be maintained at a level sufficient to fund operations until the major revenue sources are received in June. We feel a reserve of approximately 40 to 50 percent of planned expenditures and transfers out is adequate to meet working capital and small emergency needs. At the current level, the fund balance is above the range of what is generally recommended as a minimum. The Minnesota Office of the State Auditor has classified cities' unreserved fund balance levels relative to expenditures as follows: Percent of Planned E:lQ)enditures Extremely low Low Acceptable Moderately high High Very high Extremely high Under 20% 21 - 34 35 - 50 51 - 64 65 - 100 100 - 150 Above 150 Months Expenditures on hand Under 2.5 2.5 - 4 4-6 6-7 8 -12 12 - 18 Above 18 The State Auditor does group all General, special revenue funds of the government when making this calculation where our calculation is based only on the General fund. The Office of the State Auditor (the OSA) has issued a Statement of Position relating to fund balance stating "a local government should identify fund balance separately between reserved and unreserved fund balance. The local government may assign and report some or all of the fund balance as designated and undesignated." The OSA also recommends local governments adopt a formal policy on the level of unreserved fund balance that should be maintained in the general and special revenue funds. This helps address citizen concerns as to the use of fund balance and tax levels. 952.835.9090 . Fax 952.835.3261 www.aemcpas.com