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8.a Signed Final 2019 Governance Communication SCHLENNER WENNER & CO. Certified Public Accountants & Business Consultants CITY OF SCANDIA, MINNESOTA REPORT TO MEMBERS OF GOVERNANCE APRIL 29, 2020 CITY OF SCANDIA, MINNESOTA TABLE OF CONTENTS Introductory Letter ...................................................................................................................................................... 1 Required Communications.......................................................................................................................................... 2 An Independently Owned Member, RSM US Alliance RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. St. Cloud 320.251.0286 Little Falls 320.632.6311 Albany 320.845.2940 Maple Lake 320.963.5414 Monticello 763.295.5070 www.swcocpas.com April 29, 2020 Members of Governance City of Scandia, Minnesota We are pleased to present this report related to our audit of the financial statements of the City of Scandia (the City) as of and for the year ended December 31, 2019. This report summarizes certain matters required by professional standards to be communicated to you in your oversight responsibility for the City’s financial reporting process. This report is intended solely for the information and use of the City’s members of governance and management, and is not intended to be, and should not be, used by anyone other than these specified parties. It will be our pleasure to respond to any questions you have regarding this report. We appreciate the opportunity to continue to be of service to the City of Scandia. SCHLENNER WENNER & CO. St. Cloud, Minnesota CITY OF SCANDIA, MINNESOTA REQUIRED COMMUNICATIONS 2 Generally accepted auditing standards (AU-C 260, The Auditor’s Communication With Those Charged With Governance) require the auditor to promote effective two-way communication between the auditor and those charged with governance. Consistent with this requirement, the following summarizes our responsibilities regarding the financial statement audit as well as observations arising from our audit that are significant and relevant to your responsibility to oversee the financial reporting process. Our Responsibilities With Regard to the Financial Statement Audit Our responsibilities under auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States have been described to you in our arrangement letter dated November 25, 2019. Our audit of the financial statements does not relieve management or those charged with governance of their responsibilities, which are also described in that letter. Overview of the Planned Scope and Timing of the Financial Statement Audit We have issued a separate communication dated February 12, 2020 regarding the planned scope and timing of our audit and have discussed with you our identification of, and planned audit response to, significant risks of material misstatement. Accounting Policies and Practices Preferability of Accounting Policies and Practices Under generally accepted accounting principles, in certain circumstances, management may select among alternative accounting practices. In our view, in such circumstances, management has selected the preferable accounting practice. Adoption of, or Change in, Accounting Policies Management has the ultimate responsibility for the appropriateness of the accounting policies used by the City. Effective January 1, 2019, the City has adopted Governmental Accounting Standards Board (GASB) Statement No. 84, Fiduciary Activities. The implementation of this standard clarifies the scope and improves the accounting guidance for identifying activities that are fiduciary in nature and recognition as a fiduciary fund in the basic financial statements of the City. The adoption of this standard did not result in a material impact on the City’s financial statements or result in additional footnote disclosures or required supplementary information. Significant or Unusual Transactions We did not identify any significant or unusual transactions or significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Alternative Treatments Discussed with Management We did not discuss with management any alternative treatments within generally accepted accounting principles for accounting policies and practices related to material items during the current audit period. Management’s Judgments and Accounting Estimates Accounting estimates are an integral part of the preparation of financial statements and are based upon management's current judgment. The process used by management encompasses their knowledge and experience about past and current events and certain assumptions about future events. You may wish to monitor throughout the year the process used to compute and record these accounting estimates. The only estimates we have deemed significant to the financial statements are the estimates included in the calculation of overall net pension liability/asset and deferred inflows/outflows of resources for the pension plans in which the City’s employees participate. CITY OF SCANDIA, MINNESOTA REQUIRED COMMUNICATIONS 3 Audit Adjustments Audit adjustments have been proposed by us and recorded by the City and relate to the adjustment, reclassification or recording of receivables, interest earnings, capital assets, payables, net pension liability, accrued expenses, and special assessments. Uncorrected Misstatements We did not identify any uncorrected misstatements in the City’s financial statements. Departure From the Auditor's Standard Report Our Independent Auditors' Report includes several additional or non-standard paragraphs that you should be aware of as follows:  Other Matters related to Required Supplementary Information and Supplementary Information  Other Reporting Required by Government Auditing Standards  Report on Other Legal and Regulatory Requirements Disagreements with Management We encountered no disagreements with management over the application of significant accounting principles, the basis for management’s judgments on any significant matters, the scope of the audit, or significant disclosures to be included in the financial statements. Consultations with Other Accountants We are not aware of any consultations management had with other accountants about accounting or auditing matters. Significant Issues Discussed with Management No significant issues arising from the audit were discussed or were the subject of correspondence with management. Significant Difficulties Encountered in Performing the Audit We did not encounter any difficulties in dealing with management during the audit. Letter Communicating Deficiencies in Internal Control over Financial Reporting We have separately communicated the significant deficiency and material weaknesses identified during our audit of the financial statements as required by Government Auditing Standards, and this communication is included within the compliance section of the City’s financial report for the year ended December 31, 2019. Significant Written Communications Between Management and Our Firm We have requested certain representations from management that are included in the management representation letter dated April 29, 2020.