9.a) CliftonLarsonAllan Presentation of 2012 Audit and Financial Statements . q . �.�
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city council
City of Scandia CITY QF SCP,^�n!A
Scandia, Minnesota ��i� " " ���
We have audited the financial statements of the governmental activities, the business-type activities, each
major fund, and the aggregate remaining fund information of the City of Scandia (the City) for the year ended
December 31, 2012, and have issued our report thereon dated May 6, 2013. We have previously communicated
to you information about our responsibilities under auditing standards generally accepted in the United States
of America and GovernmentAuditing Standards, as well as certain information related to the planned scope and
timing of our audit. Professional standards also require that we communicate to you the following information
related to our audit.
Significant audit findings
Qualitative aspects of accounting practices
Accountinq policies
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by the City are described in Note 1 to the financial statements.
For the year ended December 31, 2012, the financial statements include the impact of adoption of
Governmental Accounting Standards Board statement numbers 62 and 63.
GASBS 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989
FA58 and AICPA Pronouncements, supersedes GASBS 20. GASBS 20 gave governments the choice to elect to
follow only GASB's authoritative literature, or to follow FA56 and AICPA pronouncements that did not conflict
with GASB pronouncements. Upon adoption of GASBS 62, all governmental accounting guidance is codified into
the GASB literature.
GASBS 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net
Position, provides guidance on deferred outflows and inflows of resources. It also renames the residual amounts
from "net assets" to "net position". These financial statements include the statement of net position, which
reports all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position.
Adoption of future GA56 standards will include reporting of some items previously reported as assets and
liabilities as deferred outflows and inflows of resources.
We noted no transactions entered into by the City during the year for which there is a lack of authoritative
guidance or consensus. All significant transactions have been recognized in the financial statements in the
proper period.
� M vtleperqenl rtertEer d Ne.�da IMemelim�
INTERNAl10NAl
. City Council
City of Scandia
Page 2
Qualitative aspects of occounting practices(continuedJ
Accountinq estimates
Accounting estimates are an integral part of the 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 financial
statements and because of the possibility that future events affecting them may differ significantly from those
expected. The most sensitive estimate affecting the financial statements was management's estimate of the
useful lives of capital assets, which is based on guidance recommended by authoritative literature and past
experiences. We evaluated the key factors and assumptions used to develop the useful lives of capital assets in
determining that these estimates are reasonable in relation to the financial statements taken as a whole.
Financial statement disclosures
Certain financial statement disclosures are particularly sensitive because of their significance to financial
statement users. There were no particularly sensitive financial statement disclosures.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties encountered in performing the audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Uncorrected misstatements
Professional standards require us to accumulate all misstatements identified during the audit, other than those
that are clearly trivial, and communicate them to the appropriate level of management. Management did not
identify and we did not notify them of any uncorrected financial statement misstatements.
Professional standards require us to accumulate all misstatements identified during the audit, other than those
that are clearly trivial, and communicate them to the appropriate level of management. Management has
corrected all such misstatements.
Corrected misstatements
During the course of the audit, we proposed audit adjustments to convert the City's records from the cash to
accrual basis of accounting as a result of audit procedures in the areas of cash, receivables, prepaid items,
inventory, accounts payable, accrued liabilities, deferred revenue, revenues and expenditures. Additionally, we
proposed audit adjustments to book depreciation expense for the current year. These adjustments were
recorded by management.
Disagreements with management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing
matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the
auditors' report. No such disagreements arose during our audit.
Management representations
We have requested certain representations from management that are included in the management
representation letter dated May 6, 2013.
City Council
City of Scandia
Page 3
Management consultations with other independent accountants
in some cases, management may decide to consult with other accountants about auditing and accounting
matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an
accounting principle to the City's financial statements or a determination of the type of auditors' opinion that
may be expressed on those statements, our professional standards require the consulting accountant to check
with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such
consultations with other accountants.
Signi�cont issues discussed with management prior to engagement
We generally discuss a variety of matters, including the application of accounting principles and auditing
standards, with management each year prior to engagement as the City's auditors. However, these discussions
occurred in the normal course of our professional relationship and our responses were not a condition to our
engagement.
Other information in documents containing audited financial statements
With respect to the required supplementary information (RSI) accompanying the financial statements, we made
certain inquiries of management about the methods of preparing the RSI, including whether the RSI has been
measured and presented in accordance with prescribed guidelines, whether the methods of ineasurement and
preparation have been changed from the prior period and the reasons for any such changes, and whether there
were any significant assumptions or interpretations underlying the measurement or presentation of the RSI. We
compared the RSI for consistency with management's responses to the foregoing inquiries, the basic financial
statements, and other knowledge obtained during the audit of the basic financial statements. Because these
limited procedures do not provide sufficient evidence, we did not express an opinion or provide any assurance
on the RSI.
With respect to the combining fund financial statements (collectively, the supplementary information)
accompanying the financial statements, on which we were engaged to report in relation to the financial
statements as a whole, we made certain inquiries of management and evaluated the form, content, and
methods of preparing the information to determine that the information complies with accounting principles
generally accepted in the United States of America, the method of preparing it has not changed from the prior
period or the reasons for such changes, and the information is appropriate and complete in relation to our audit
of the financial statements. We compared and reconciled the supplementary information to the underlying
accounting records used to prepare the financial statements or to the financial statements themselves. We have
issued our report thereon dated May 6, 2013.
Our auditors' opinion, the audited financial statements, and the notes to financial statements should only be
used in their entirety. Inclusion of the audited financial statements in a document you prepare, such as an
annual report, should be done only with our prior approval and review of the document.
* * * * * *
City Council
City of Scandia
Page 4
This communication is intended solely for the information and use of the Mayor and Members of the City
Council and management of the City and is not intended to be and should not be used by anyone other than
these specified parties.
LL�
CliftonLarsonAllen LLP
Minneapolis, Minnesota
May 6, 2013
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