2019 MANAGEMENT LETTER - Laserfiche WebLink

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( iiftcnLarsoriklen LLP CLAconnec: com Management City of Gem Lake Gem Lake, Minnesota In planning and performing our audit of the financial statements of the City of Gem Lake (the City) as of and for the year ended December 31, 2019, in accordance with auditing standards generally accepted in the United States of America, we considered the City's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial 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. However, during our audit we became aware of matters that are opportunities to strengthen your internal control and improve the efficiency of your operations. Our comments and suggestions regarding those matters are summarized below. A separate communication dated August 28, 2020, contains our written communication of any significant deficiencies and material weaknesses in the City's internal control. This letter does not affect our communication dated August 28, 2020. Employment Policy During our audit procedures, we noted that there was no policy that dictates whether City employees can accrue vacation from year-to-year. CLA recommends that there be a formal policy implemented which details out the benefits of each employee position at the City, including the year-end accrual of any vacation or other compensated absences. Contract for Financial Services During our audit procedures, we noted that the City entered into a new contract with White Bear Township to provide accounting services, dated in the fall of 2019. The contract was signed by the City, but contained no signature from White Bear Township officials. We recommend that the City ensure all contracts with external parties be signed by both the City and the external party. Capitalization Policy During our audit procedures we noted that the City does not have an official capitalization policy. The City could miss capitalizing items in capital outlay without a standard amount or capitalize trivial items on an inconsistent basis. This can lead to inconsistencies in the matching of the expense to the life of the asset. We recommend that the City create a capitalization policy with a threshold somewhere in the range of $$2,500 to $10,000 for capital outlay expenditures. We will review the status of these comments during our next audit engagement. We have already discussed many of these comments and suggestions with various City personnel, and we will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. A ^ ember of RN .) Nexia International