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Home My WebLink About2009 Special Purpose Report - MMKR CITY OF BROOKLYN CENTER HENNEPIN COUNTY, MINNESOTA Special Purpose Audit Reports Year Ended December 31, 2009 CITY OF BROOKLYN CENTER HENNEPIN COUNTY, MINNESOTA Year Ended December 31, 2009 Table of Contents Page Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 1 -2 Independent Auditor's Report on Compliance With Minnesota State Laws and Regulations 3 Schedule of Findings and Responses 4 -5 PRINCIPAL'S ennerh W. Malloy, CPA Thonia N -4. Montague, CPA Thoinas A. l arnow ski., TA Paul A. Radosc°v ch, CPA C E R T I F I E D PUBLIC William J. Lauer, CPA A C C 0 U N T A N T S J=ces H. Elchtcn, CPA Altoij Nielsen, CIA Victoria L. Hohnka, CPA INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS City Council and Residents City of Brooklyn Center, Minnesota 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 Brooklyn Center (the City) as of and for the year ended December 31, 2009, which collectively comprise the City's basic financial statements, and have issued our report thereon dated May 27, 2010. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting as a basis for designing our auditing procedures 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 over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses and, therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as described in the accompanying Schedule of Findings and Responses, we identified one deficiency in internal control over financial reporting that we consider to be a material weakness and one deficiency that we considered to be a significant deficiency. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiency described in the accompanying Schedule of Findings and Responses as item 2009 -1 to be a material weakness. (continued) -I- Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata ]Soul va. rd # SuiEc 410 * Minneapolis, MIS 55416 9 Tcicphonc. 952 -0424 + Tdcfa ; 52- 545 -0569 • ww.tn mkr.c —om A significant deficiency is a deficiency or a combination of deficiencies in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiency described in the accompanying Schedule of Findings and Responses as item 2009 -2 to be a significant deficiency. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. The City's responses to the findings identified in our audit are described in the accompanying Schedule of Findings and Responses. We did not audit the City's response and, accordingly, we express no opinion on them. This report is intended solely for the information and use of the City Council, management of the City, and others within the City and is not intended to be, and should not be, used by anyone other than these specified parties. Pei V-S . kdp C4 4q 1104 �a v Q. o�"s0 W 5 May 27, 2010 -2- PRINCIPALS Kennech W. Mallo CPA Thonias M. Manra CPA M, R I'liomas A. Karnowski, CPA Paul A. Radosevich., CPA CERTIFIED PUBLIC William J . Lauer, CPA A C C 0 U N T A N T S J amcs H, Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH MINNESOTA STATE LAWS AND REGULATIONS Cit Council and Residents Cit of Brookl Center, Minnesota We have audited the financial statements of the g overnmental activities, the business-t activities, each major fund, and the a remainin fund information of the Cit of Brookl Center (the Cit as of and for the y ear ended December 31, 2009, which collectivel comprise the Cit basic financial statements, and have issued our report thereon dated Ma 27, 2010. We conducted our audit in accordance with auditin standards g enerall y accepted in the United States of America the standards applicable to financial audits contained in Government Auditin Standards, issued b the Comptroller General of the United States and the provisions of the Minnesota Le Compliance Audit Guide for Local Governments, promul b the Office of the State Auditor pursuant to Minnesota Statute § 6.65. Accordin the audit included such tests of the accountin records and such other auditin procedures as we considered necessar in the circumstances. The Minnesota Le Compliance Audit Guide for Local Governments covers seven main cate of compliance to be tested: contractin and biddin deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financin Our stud included all of the listed cate The results of our tests indicate that, for the items tested, the Cit complied with the material terms and conditions of applicable le provisions. This report is intended solel for the information and use of the Cit Council, mana of the Cit and the state of Minnesota and is not intended to be, and should not be, used b an other than these specified parties. q a 4 e 1*7 o r7 y�Ax L) k^ir44sus ectJ'43 dAlt C.-01 Ma 27, 20 10 -3- Mallo Monta Karnowski, Radosevich & Co., P.A. 5353 Wa Boulevard e Suirc 410 • klinncapolis, MN 55416 9 Tcicphonc, 952-545-0424 * Telcfax: 952-545-0569 • ww%v-mmkr.com CITY OF BROOKLYN CENTER Schedule of Findings and Responses Year Ended December 31, 2009 This schedule summarizes findings and responses relating to compliance with Minnesota Statutes, internal controls, and compliance findings. The auditor, Malloy, Montague, Karnowski, Radosevich & Co., P.A. (MMKR), is responsible for providing the information under the headings "Criteria," "Condition," "Cause," "Effect," and "Recommendation." The City of Brooklyn Center (the City) is responsible for providing the information under the heading "Management's Response." A. FINDINGS — INTERNAL CONTROL OVER FINANCIAL REPORTING MATERIAL WEAKNESS 2009 -1 PREPARATION OF ADJUSTING JOURNAL ENTRY Criteria — Preparation of the trial balance should be completely handled by the City, including adjusting all account balances to be fairly stated for completion of the annual financial audit. Condition — During our audit we noted a material adjusting journal entry that was made by the City to make the general ledger fairly stated. Auditing standards recently issued consider the identification by the auditor of a material misstatement that was not initially identified by the audit entity to be a material weakness in the related internal control. Cause — This was an oversight by city personnel. Effect — Because some account balances were not completely adjusted at the start of the financial audit, an adjusting journal entry noted by the auditor was required to fairly state all account balances in the general ledger. Recommendation — We recommend that the City continue to review practices and make sure all account balances are fairly stated at the start of the annual financial audit. Management's Response — There is no disagreement with the audit finding. The City will review account balance adjustment procedures to fairly state the financial statements prior to the start of the annual audit to ensure proper financial statement presentation. SIGNIFICANT DEFICIENCY 2009 -2 LACK OF MANAGEMENT APPROVAL Criteria — Management is responsible for establishing and maintaining effective internal controls. These controls include the establishment of a review and approval process by an appropriate level of management. Condition — We noted one area within the accounting and reporting internal accounting control systems that lacked management approval: • There is no approval of payroll by management, nor are payroll registers reviewed throughout the year. The allocation of payroll costs should also be monitored and approved by department heads on a periodic basis. -4- CITY OF BROOKLYN CENTER Schedule of Findings and Responses (continued) Year Ended December 31, 2009 A. FINDINGS — INTERNAL CONTROL OVER FINANCIAL REPORTING (CONTINUED) SIGNIFICANT DEFICIENCY (CONTINUED) 2009 -2 LACK OF MANAGEMENT APPROVAL (CONTINUED) Cause — Management is not requiring approval of certain transactions within the internal accounting control systems of the City. Effect — This lack of approval process subjects the City to a higher risk that errors or fraud could occur and not be detected in a timely manner. Recommendation — We recommend that the City establish procedures to incorporate management approval in the following areas: • We recommend that management periodically review the payroll registers. • We recommend a periodic review of the allocation of payroll costs to the general ledger to ensure that they are being coded to the appropriate accounts, funds, and programs. Management's Response — The City will add procedures to monitor the allocation of payroll costs throughout the year. These procedures will include periodic comparisons of actual to budget amounts for payroll, periodic reviews of the allocation of payroll costs to the appropriate function, and reconciliation of the payroll registers and general ledger accounts to the quarterly federal tax returns. In addition, periodic verification of payroll/benefit files will be added to the existing control procedures for verification of additions, changes, and termination of employees. -5-