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9.a) CliftonLarsonAllan Presentation of 2012 Audit and Financial Statements . q . �.� � , CIrft�LarsonAllen LLP � www.diftonlarsonallen.com CliftonLarsonAllen ���������� �;�,�( 15 ZO i 3 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 d���allVuosie�uou!I�ZlOZO i � • • � N ■� � i � N ,O � a� � � L � � � O .v � � � . � � � � � � m � � = (� � � ,� � � � N � o o � O � � = o � N � °�' o �� � � �, � � � � p � Q o V Q ' c a� ' a c 0 � � ro ' J C O a.+ � ' ����� `' �;:. 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