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HomeMy WebLinkAbout2008 AMLCITY ~F COLUMBIA HEIGHTS, MINNESOTA AUDIT MANAGEMENT LETTER December 31, 2fl~8 Tautges Redpath, Ltd. Certified Public Accountants and Consultants To the Honorable Mayor and Members of the City Council City of Columbia Heights, Minnesota we have completed the ZooB audit of the financial statements of the City of Columbia Heights, Minnesota and have issued our report thereon. Dur Independent Auditor's Report is included in the City's Comprehensive Annual Financial Report ~CAFR}. tither reports included in the CAFR are: • Independent Auditors' Report on Compliance with Minnesota Legal Compliance Audit Guide for Local Government • Independent Auditor's Report on Internal Control and Compliance This Management Letter provides the City an independent review and analysis of City finances. we also issue a separate Management Letter for the Economic Development Authority. Page 3 contains an Executive Summary of our recommendations with page references to the areas discussed. ~~~ ~~g ~ v1~. HLB TAUTGES REDPATH, LTD. white Bear Lake, Minnesota June 17, 2009 4810 White Bear Parkway White Bear Lake, Minnesota 55110 ~ 651 426 7000 651 426 5004 Fax I www.hlbtr.cam HL6 Tautges Redpath, Ltd. is a member of International, a world-wide organization of accounting firms and business advisors. I Equal Opportunity Employer Report Summary REPORT SUMMARY Severat reports are issued in conjunction with the audit. Avery brief summary is as fotlows: Required Reports Comprehensive Annual Financial Report ~CAFR~ • Financial statements • Footnotes • Su lemental information • Unqualified ~"clean") opuvon on the Basic Financial Statements Report on Internal Control over Results of testing • Three def ciencies in internal Financial Reportr'ng and on • Internal controls over financial control Compliance and ether h7atters reporting • Compliance with laws, regulations, contracts and grants State legal Compliance Report • Results of testing certain • No reported findings provisions of Minnesota Statutes Audit Management Letter Executive Summary EXECUTIVE SUMMARY A summary of our recommendations contained in this report is as follows: The City continues to experience a good property tax collection rate - 97.25% Page 5 for 2005. The General Fund balance decreased $223,189 during 2008. The fund balance at December 31, 2008 was not sufficient to fulfill the reserve requirement for Pages 13 working capital. The shortfall was $663,205. and 16 The Library Fund balance at December 31, 2008 was not sufficient to fulfill the reserve requirement for working capital. The shortfall was $126,049. Page 1 S we have issued a separate management report addressed to the EDAIHRA. Page 19 The City's Comprehensive Annual Financial Report received the Certificate of Achievement for Excellence in Financial Reporting. Page 42 we have a summary of the status of prior year internal control findings. Pages 45 Audit Management Letter Government Wide Financial Statements ACCOUNT BALANCE ANALYSIS OF THE GOVERNMENT-WIDE FINANCIAL STATEMENTS The basic financial statements of the City of Columbia Heights are presented in Statements 1 through Statement 9 of the 2008 Comprehensive Annual Financial Report. The following comments relate to these Financial Statements, Summa _ of Financial,Activity A summary of financial activity for 2a~8 is as follows: Revenue Expenditures Interfuntl Increase in Fund Balance! Cash Fund CAFR and Other and Other Transfers Fund Balance Net Assets Balance Fund No. na. Sources Uses Net Net Assets 12131!08 12131108 ~ General 101 38 $8,395,250 $8,591,144 $27,295 $223,189 $3,755,957 $4,083,221 z S ecial Revenue: 3 Communi Develo ment Fund 201 105 288,146 539,610 252,596 1,132 46,784 63,463 4 Cable Television 225 103 173,352 31,D9D 62,388 79,874 219,117 178,100 5 Libra 24D 104 693,880 720,853 4,592 22,381 29,887 54,495 s Police Communi Pro rams 2l0 103 1,926 3,939 9,OD0 6,987 49,930 49,967 1 S ecial Pro'ects 226 105 162,496 - 206,700 44,204 157,844 188,013 8 C.N.A.S.E 250 104 2,302 - 62,457 60,155 - - 9 After-School Pro rams 261 104 59,670 45,225 62,457 76,902 104,380 75,483 ~a Police Forfeiture 265 1D3 5,281 1,072 - 4,209 4,291 4,291 ~~ Local Law Enforcement Block Grant 276 _ 12 Police Grants -Other 272 103 57,700 57,700 - - - - 73 Recreation Contributed Pro'ects 881 104 26,448 6,694 - 19,754 82,778 82,198 ~a Contributed Pro'ects 883 105 260,730 33,198 23,000 204,532 266,265 264,115 ~~ Anoka Coun CDBG 202 105 485,463 101,96D 365,583 17,920 6,048 6,048 ~s Flex Benefit 881 105 558 - 40,236 39,678 - - ~~ Housin and Redevelo ment Authori 18 ParkviewVilla North 203 124 606,185 507,553 - 98,632 748,138 881,435 ~s ParkviewVilla Sou#h 213 124 311,282 201,015 - 110,267 411,095 439,598 2a Rental Housin 235 124 - - 40,688 40,688 - - 21 EDA: zz Economic Develo ment Authori Atlmin 204 120 272,248 36,7D5 304,196 539,739 176,108 93,609 Z3 Business Revolvin Loan Fund 299 120 2,590 - 467,447 464,857 - - za EDA Housin Maintenance s=and 408 144 - 96,153 327,655 231,502 231,502 231,5D2 25 Debt Service: 2s Sheffiield TIF Redevelo ment 377 136 79,616 16,354 - 63,262 217,420 40,396 27 Tax Increment Bonds 376 136 940,414 15,843 783,200 141,371 506,083 507,862 2e Multi-Use Redevelo ment Plan 385 136 36,016 4,754 - 31,262 12,784 61,796 zs Tax Increment Refuntlin Bonds of 2D04A 350 135 3,790 645,181 783,200 141,809 170,945 170,125 3a G.O. Im rovement 1999A 387 135 12,420 93,602 25,509 56,013 344,626 342,036 31 G.D. Im rovementlRevenue 2003A 388 135 - 127,749 82,709 45,040 24,142 24,142 32 G.O. Im rovementlRevenue 20D6A 34D 135 13,590 331,025 506,159 188,724 763,252 760,322 33 G.O. Street Rehabilitation Bonds 2007 341 135 115,598 36,373 - 79,225 T9,225 78,051 3~ G.O. Housin Im rovement Area Bonds 2008A 343 38 2,716,576 2,532,488 - 244,D88 244,088 366,604 3~ TIF District #2 386 136 200 402 5,093 5,295 - - 3B TIF Scattered Site 3701379 137 57,165 3,441 5,093 58,817 215,255 213,195 37 TIF Transition Black 389 137 64,126 57,301 - 6,819 33,309 61,260 ~ TIF Central Avenue 3l1 137 231,364 587 - 230,7T7 475,939 473,309 s9 EDA TIF Revenue 2007 373 137 7,650 158,325 244,169 93,494 304,785 303,135 as TIF Huset Paris Area Fund 372 137 268,732 2D,D63 244,169 4,500 33,826 4,720 a~ G.D. Public Safe Center Bonds 2008E 343 136 5,090 - 314,194 319,284 319,284 318,184 Audit Management Letter Governmen~wWrde Financial Statements 42 Capital Pro'ect: 43 MSA State Aid Street 212 39 1,274,549 370,642 169,265 734,542 771,130 461,136 a~ Commun' Center Ca dal Buildin Fund 418 38 149,100 1,995,400 - 1,846,300 2,372,383 2,977,021 ~ Ca ital Im rovements General Government Buildin s 411 39 26,849 544,049 653,559 136,359 889,252 1,932,424 as Ca ital E ui ment Re lacement General Government 431 39 235,927 382,734 50,000 96,807 4,966,230 3,994,793 ar Ca ital Im rovements PIR Fund 401 39 845,950 334,708 474,989 36,253 1,175,944 985,711 4a Public Safe Center Ca ital Buildin 417 38 10,136,919 3,491,804 657,230 7,302,345 7,302,345 7,600,026 49 Ca ital Im rovement 401 145 37,387 15,100 517,000 554,713 80,425 90,469 ~o Downtown Parkin Maintenance 405 144 10,130 14,801 - 4,671 158,821 156,631 5~ Ca ital Sheffield Redevelo ment 410 144 20,300 - 266,821 246,521 723,432 300,671 s2 Ca ital Im rovement Parks 412 145 65,908 720,314 134,442 519,964 245,961 324,512 53 Ca ital Im rovement PWS 414 145 1,110 - - 1,110 29,855 29,615 54 Ca ital Im rovement Develo ment 420 144 155,012 322,058 392,898 559,882 1,323,377 910,3$1 ~ Infrastructure Re lacement 430 145 33,640 867,051 81,143 152,268 26,459 19,209 ss Ca ital E ui ment Fire 439 145 6,910 - - 6,910 185,740 184,250 5i Ca ital E ui ment Cable TV 440 145 3,160 - - 3,160 85,051 84,311 s8 Ca ital Buildin Libra 450 145 - - - - 200,000 200,000 59 Enterprise: 6o Water 44 2,451,466 2,113,431 114,610 229,425 3,227,944 291,574 s~ Sewer 44 1,59Q068 1,534,242 114,609 58,783 5,043,822 1,117,816 s2 Refuse 44 1,405,526 1,146,181 131,114 128,231 654,486 364,161 s3 Storm Sewer 45 330,329 224,756 - 105,573 962,274 149,954 sa Li uor 45 7,519,398 7,430,669 $4,782 3,947 2,921,835 604,034 s5 Internal Service: 66 Central Gara a 701 969 616,517 568,556 78,559 30,598 1,538,112 386,283 s7 Information S stems T20 169 27,740 235,420 235,000 27,320 751,482 742,471 sa Insurance 884 169 476,858 458,042 - 18,896 703,865 636,653 ss Compensated Absences 890 169 28,450 40,569 - (12,119) 87,733 830,871 ~o Total $43,812,117 $37,827,930 $0 $6,267,976 $45,960,673 $36,396,970 Pro ert_y.Ta~,ece~ Ie Delinquent taxes receivable related to the general property tax levy increased from $257,897 at December 31, 2007 to $287,344 at December 31, 2008. Tax collections were 97.25% of the 20081evy. A history of tax collections is presented in Table 8 of the Comprehensive Annual Financial Report. Audit Management Letter Government-Wive Financial Statements Tax Levies, Tax Rates and Tax Cauacity A comparison of values for taxes payable 2006 through 2009 is as follows: 2006 Market value 2007 2008 2009 $1,271,030,500 $1,387,050,100 $x,454,932,200 $1,416,581,900 Tax capacity values: Real estate $13,247,486 $14,721,372 $15,714,527 $15,556,739 Personal property 101,071 106,$85 101,382 99,334 Subtotal 13,348,557 14,828,257 15,815,909 15,656,073 Fiscal disparity contribution (453,305) (443,665} (485,657} (551,683} Fiscal disparity distribution 2,324,917 2,473,140 2,877,432 3,175,712 Total $15,220,169 $16,857,732 $18,207,684 $18,2$0,102 Tax capacity rates 44.736 41.511 42.703 47.430 Tax levy $6,345,537 $6,508,613 $7,D45,370 $7,702,363 Audit Management Letter Government-Wide Financial Statements S eclat Assessments Receivable Special assessments receivable consisted of the following amounts at December 31, 2005 and 2007: December 31, Jncrease Descri Lion 2007 2008 Decrease) Delinquent $28,117 $45,793 $20,676 Deferred 2,962,663 3,631,302 668,639 Unremitted 11,379 139,816 128,437 Totals $3,002,159 $3,819,911 $817,752 Delinquent special assessments receivable consist of amounts which have been spread for collection in 2008 and prior years but have not been collected at December 31, 2008. The City collected approximately 97% of the current assessments due in 2005. Deferred assessments receivable consist of the remaining balance of council adopted assessment rolls. These assessments are collectible at various terms and interest rates. Balance at January 1, 200$ $2,962,663 Less 2008 principal levy X438,295) Plus new assessment rolls 3,184,008 Less prepayments X2,072,034) Adjustments ~5,04D} Balance at December 31, 2008 $3,631,302 Audit Management Letter Government-Wide Financial Statements Interfund Recetvabtes A schedule of activity of long term interfund loans is as follows: Balance New Pa eats Balance Fund with Pa able 12/31/07 Loans Principal Interest 12/31/08 Sheffield TIF - 652 $332,726 $ - $74,300 $15,952 $258,426 EDA - 390 600,000 - 600,000 - - EDA - 420 8aa,aaa - 40a,0Qa - 4a0,00a Capital Improvements General Government Buildings - 411 - 930,227 - - 930,227 Huset Park TIF - 372 76,188 - 30,879 1,905 45,309 TIF Multi-use Redevelopment Plan - 385 70,358 - 21,861 - 48,497 Totals $1,879,272 $930,227 $1,127,040 $17,857 $1,482,459 The Sheffield TIF loan is authorized by Resolution 2003-5. The EDA loans are authorized by Resolution 2004-4 and 2x04-b0. The Capital Improvements General Government Buildings loan is authorized by Resolution 2009-01. The Huset Park TIF loan was authorized in a contract for private redevelopment dated August 1, 2007. The TIF Multi- UseRedevelopment Plan loans were authorized by Resolution 2402-05. Audit Management Letter General Fund GENERAL FUND The General Fund of the City is maintained to account for the current operating and capital outlay expenditures common to all cities. These basic services include abut are not limited to} public safety, public works, culture and recreation, and general government. State aids and property taxes account for approximately 87% of the total revenue of the General Fund. A history of General Fund revenue is as follows: General Fund -Sources of Revenue State Aid Propert y Taxes _ All Qther Total Year Amount Percent Amount Percent Amount Percent Amount Percent 1996 $3,153,299 49% $2,403,017 37% $924,756 14% $b,481,072 100% 1997 3,333,b15 49% 2,505,456 37% 1,006,133 15% 6,$45,204 100% 1998 3,382,187 47% 2,662,288 37% 1,123,767 16% 7,1 b8,242 100% 1999 3,448,758 48% 2,65$,598 37% 1,026,541 14% 7,133,$97 100% 2000 3,509,577 47% 2,737,854 37% I,1b7,65b lb% 7,415,087 140% 2001 3,577,318 47% 2,954,511 38°/v 1,148,$42 15% 7,680,b71 100% 2002 3,362,902 41% 3,534,854 44% 1,225,8$9 15% 8,123,b45 100% 2003 2,811,870 3$% 3,646,155 49% 967,382 l3% 7,425,407 100% 2004 2,413,850 30% 4,336,802 53% 1,398,7$b 17% 8,149,438 104% 2005 1,$0$,144 23% 4,960,66$ b2% 1,175,b28 15% 7,944,440 100% 200b 1,737,869 22% 5,202,$Zb 66% 944,379 I2% 7,885,074 100% 2007 1,9$$,013 23% 5,4$3,751 64% 1,056,223 12% 8,527,987 100% 200$ 1,663,650 20% 5,$08,662 69% 922,93$ 11 % $,395,250 100% Audit Management Letter Audit Management Letter General Fund State aids for the General Fund have consisted of the following amounts for the last two years: Descri tion Local government aid MVHC Police aid Fire aid All other Totals Increase 2008 2007 Decrease} $771,218 $1,0$8,532 x$317,314} 451,574 473,173 X21,599} 228,702 229,167 (465} 76,333 89,645 X13,312} 135,823 107,496 28,327 $1,663,650 $1,988,013 x$324,363} A graph of General Fund revenue by source is as follows: $~,aoa,ooa General Fund Revenue By $6,OOa,Oaa Source $S,OOa,00a $4,0oo,ooa ~~ State Aid -~-~ Propertyy Taxes -f-All Other $3,ooa,aoo $a,aoa,aoo ~~,aao,oao $a 2aoa 200 ~ ~aoa aoo3 aoa4 aoas Zoat; aoo~ aao~ Genera! Fund A chart of 2008 revenue by source is as follows: Audit Management Letter General Fund A chart of 2008 expenditures by function is as follows: Audit Management Letter General Fund The fund balance of the General Fund at December 31, 2005 was $3,755,957. During 2005, the fund balance of the General Fund decreased by $223,189 as follows: Budget Revenues and transfers in: Favorable Unfavorable} Actual Variance Property taxes $5,$35,000 $5,808,662 ($26,338) Licenses and permits 133,600 135,739 2,139 Intergovernmental 1,999,$$7 1,663,650 X336,237) Charges for services 529,051 563,612 34,561 Fines and forfeitures 128,000 121,468 X6,532} Investment income 75,000 97,564 22,864 Qther 16,700 4,255 (12,445} Transfers in 356,411 396,647 40,236 Total 9,073,649 8,791,897 X281,752} Expenditures and transfers out: General government 1,75D,637 1,671,337 79,300 Public safety 4,330,824 4,241,722 89,102 Public works 1,465,125 1,269,348 195,777 Parks and recreation 1,456,908 1,406,568 50,340 Contingencies 73,61 D 2,169 71,441 Transfers out 323,000 423,942 (100,942) Total 9,400,104 9,015,086 385,018 Net change in fund balance x$326,455} x$223,189} $103,266 The City's LGA unallotment for 2008 was $338,865. Audit Management Letter Genera! Fund The City's General Fund balance has been as follows for the past several years: Year Ended Increase December 31, Fund Balance Decrease} 1993 $3,181,939 $256,D73 1994 3,444,40$ 262,469 1995 3,591,224 146,816 1996 3,839,350 248,126 1997 4,06D,594 221,244 1998 4,744,231 683,637 1999 5,015,965 271,734 2000 4,801,418 X214,547} 2001 3,897,376 X904,042} 2002 3,515,606 X381,770} 2003 3,423,232 X92,374} 2004 4,140,110 716,878 2005 3,350,128 X789,982} 2006 3,595,848 245,720 2007 3,979,146 383,298 2D08 3,755,957 (223,189} Audit Management Letter General Fund Audit Management Letter Genera! Fund Property taxes and state aids account for approximately 89% of the revenue of the General Fund. Property taxes and state aids are not received until July and December of each year ~i.e., the second half of the year}. As a result, the City is required to have sufficient reserves at the beginning of the year to fund operations of the first half of the year. As such, the City adopted resolution 95-40 establishing a General Fund cash flow reserve. This reserve is an amount equal to forty-five percent of the ensuing year's budgeted expenditures. A summary of General Fund designations is as follows: Fund Balance Com onent Reserved for prepayments Designated for working capital Undesignated Tatal fund balance -December 31 ~nn~ $12,159 3,743,798 ~nm $35,710 3,943,436 $3,755,957 $3,979,146 The amount of General Fund balance at December 3 1, 208 was not sufficient to fulf 11 the City's reserve goal. The reserve requirement is calculated as follows: 2009 budgeted expenditures Reserve requirement percentage Reserve requirement Balance available Amount of fund balance under reserve requirement $9,793,340 ~r d5%. 4,4U~I,UU:i 3,743,798 $663,205 Audit Management Letter Specla! Revenue Funds SPECIAL REVENUE FUNDS The financial statements of the Special Revenue Funds are presented in Statements t 4 through 37 of the 2008 Comprehensive Annual Financial Report. Special Revenue Funds are a classification of funds to account for revenues (and expenditures related thereto) segregated by City policy or Federal or State statutes for specific purposes. The City maintained the following Special Revenue Funds during 200$ and 2007: Fund Flex Benef is Anoka County CDBG Cable Television Police Community Programs Police Grants Library Community Development After School Programs Recreation Contributed Projects Contributed Projects Special Projects Police Forfeiture C.H.A.S.E. Housing & Redevelopment Authority: Parkview Villa North Parkview Villa South Rental Housing Economic Development Authority: Business Revolving Loan Fund E.D.A. Administration Fund Balance (Deficit) December 31, Increase 2008 2007 (Decrease) $ - $39,678 ($39,678) 6,048 (11,572} 17,920 219,177 139,303 79,574 49,930 42,943 6,987 29,887 52,268 (22,381} 46,784 45,652 1,132 104,380 27,478 76,902 82,778 63,024 19,754 266,265 61,733 204,532 157,844 202,048 (44,204} 4,291 82 4,209 - 60,155 (60,155} 748,138 649,506 98,632 411,095 300,828 110,267 - 40,688 (40,688) - 464,857 (464,557} 176,108 (363,631) 539,739 Totals $2,302,725 $1,514,740 $487,985 Audit Management Letter Special Revenue Funds L~brary Fund X240) ~..,_ ,-- The primary revenue source of this fund is property taxes which are not received until the second-half of the year (July and December). Resolution 95-40 established a reserve for cash flow in an amount equal to forty-dive percent of the ensuing year's budgeted expenditures. A summary of fund balance is as follows: December 3t, 2008 2007 Designated for working capital $26,682 $45,924 Reserved for prepayments 3,205 3,344 Total $29,887 $52,268 The fund balance at December 31, 2008 was not sufficient to fulf 11 the established reserve. A comparison of the required reserve and the fund balance available is as follows: $783,847 2009 budgeted expenditures x 45% Reserve requirement percentage 352,731 Reserve requirement 200,000 Balance available in Capital Equipment Replacement Fund 26,682 Balance available in Library Fund $126,049 Amount of fund balance under reserve requirement Effective December 31, 2002, the City transferred $200,000 out of this fund to establish the Capital Equipment Replacement -Library Fund. Audit Management Letter Special Revenue Funds Community D,eveiopment This fund was established in # 99b to account for the fiinancial activity related to building inspections and community development administration. A summary of the financial activity of this fund is as follows: 2006 2007 200$ Revenues and transfers in: Investment income $6,920 $3,0$0 $420 Licenses and permits 469,730 307,046 2$7,726 Charges for services 2,Ogg _ - Transfer from EDA Administration Fund 247,331 317,22$ 274,$63 Total 726,070 627,354 563,009 Expenditures and transfers out: Expenditures 4$$,507 517,$41 539,610 Transfer to Capital Improvement Development 191,604 201,$67 - Transferout to General Fund administrative charge} 22,9$9 21,700 22,267 Total 703,100 741,408 561,$77 Net change in fund balance 22,970 X114,054} 1,132 Fund balance -January 1 136,736 159,706 45,652 Fund balance -December 31 $159,706 $45,652 $46,784 HRA and EDA Comments and analysis of the HRA and EDA Funds are presented in a separate report addressed to the EDA. Audit Management Letter Debi Service Funs DEBT SERVICE FUNDS Debt Service Funds are a type of governmental fund to account for the accumulation of resources for the payment of interest and principal on debt (other than Proprietary Fund debt). A summary of bonded debt at December 3 ~, 2~~$ is as follov~s: Bond Issue Fund Debt Balance at Payable at 1213110fi 121311(lfi Source of Rea ent Tax Increment Revenue Bonds of 2007 G.O. Tax Increment Refunding Bonds of 2004A ~35D} G.O. Improvement Bonds of 1999A (387) G.O. Improvement Bonds of 20D3A X388) G.O. Improvement Bands of 2006A (340) G.O. Street Rehabilitation Series 2007A X373} Taxable G.O. Housing Improvement Area Series 2008A (343} G.O. Public Safety Center Bands of 2008B Tax increment Tax increment Transfers from Capital Improvement PIR Transfers from Capital Improvement PIR Property taxes Special assessments receivable was $969,400 at 12131108} Praperiy taxes $304,785 $2,890,000 170,945 150,000 344,626 150,000 24,142 909,910 763,252 2,534,550 79,225 1,000,000 244,088 975,000 319,284 10,004,000 Total $2,250,347 $18,609,464 Audit Management Letter Capita! Project Funds CAPITAL PROJECT FUNDS The fund balances of the Capital Project Funds were as fo~~ows at December 3 t, 2008 and 2007: Fund Fund Balance December 31, 2008 2007 Increase Decrease} Municipal State Aid 2121402 $771,130 $36,488 $734,642 Community Center Capital Building Fund 418 2,372,383 4,218,683 X1,846,300} Capital Improvement Development 420 1,323,377 1,883,259 (559,882} Capital Improvement 4011390 80,425 635,135 X554,713} Downtown Parking Maintenance 4051290 158,821 163,492 X4,671} Capital Sheff eld Redevelopment 410 723,432 969,953 X246,521) Capital Improvement General Government Buildings 411 889,252 752,893 136,359 Capital Improvement Parks 412 245,961 765,925 X519,964) Capital Impravement PWS 414 29,855 2$,745 1,110 Capital Improvement Projects PIR 415 1,175,944 1,139,691 36,253 Infrastructure Replacement 430 26,459 778,727 (752,268) Capital Equipment Replacement 431 4,966,230 5,063,037 X96,507} Capital Equipment Fire 439 185,740 178,830 6,910 Capital Equipment Cable TV 440 85,051 51,891 3,160 Capital Building Library 450 200,000 200,000 - Public Safety Center Capital Building Fund 7,302,345 - 7,302,345 Totals $20,536,405 $16,596,752 $3,639,653 AudEt Management Letter Capr"tal Project Funds Munici ai State Aid 2121402 This fund was established to account for MSA maintenance and construction allotments. For the past three years, the fund balance of this fund consisted of the following: December 31, Account 2006 2007 2008 Maintenance $ 147,501 $132,766 $143,627 Construction (342,033} (96,278} 627,503 Total x$194,532} $36,488 $771,130 Audit Management Letter Capital Project Funds A summary of 2008 activity is as follows: Revenue: MSA Charges for services Total Revenue 212 402 ~ ~ ~~~ Maintenance Construction Tata] $133,569 2,97a y~r can $1,138,010 $1,271,579 n non 1,138,010 1,274,549 Expenditures: Personal services 74,b97 _ 74,697 Supplies 28,723 - 28,723 Other services and charges 22,621 244,601 267,222 Transfers out: Fund 340 - 114,800 114,800 Fund 415 - 23,322 23,322 Fund 430 - 31,143 31,143 Total expenditures 126,041 413,866 539,907 Net change in fund balance 10,498 724,144 734,642 Fund balance - January 1 132,766 (96,278} 36,488 Fund balance -December 31 $143,264 $627,866 $771,130 At December 31, 2008, a substantial portion of the Construction Fund X402} fund balance is designated to be transferred to Fund 434 -Infrastructure Replacement. AudEt Management Letter Capital Project Funds Ca ltal Im rovement General Government Buil.diin s 411 A summary of f nancial activity is as follows: Revenue: Investment income Transfers from: Garage Fund Public Safety Center Capital Bldg Total revenue Expenditures: Project costs: MSC building repairs Murzyn Hall renovation Other Transfers out: Community Center Capital Bldg. Garage Fund Total expenditures Net change in fund balance Fund balance -January 1 Fund balance -December 31 ?006 2007 Zoos $32,470 $49,170 $26,849 89,998 122,468 88,837 72,500 - 600,000 651,909 73,404 - - - 544,049 24,073 - - 1,800,000 - - - - 18,941 2,475,982 73,404 562,990 ~2,353,514~ 64,603 136,359 3,041,804 688,290 752,893 $688,290 $752,593 $889,252 During X001, the City adopted Resolution 2001-$4 which authorized the transfer of $1,400,000 from the General Fund to this fund. Pursuant to the resolution, these funds are "dedicated to future improvements to general government buildings." Also, the resolution requires afour-fifths vote to expend any unbudgeted, undesignated fund balance. Audit Management Letter Capl~al Project Funds Ca ital Im rovement PVVS 414 This fund Was established in 2001 by Resolution 2001-54 to account for monies dedicated for future Improvement or replacement of the building. A summary of financial activity is as follows: Revenues: Investment income Expenditures: Transfer to CAB's of 1990 Net change in fund balance Fund balance -January 1 Fund balance -December 31 2ao6 2007 Zoos $940 $1,710 $X,110 940 1,710 1,110 26,095 27,035 28,745 $27,035 $28,745 $29,855 The resolution establishing this fund requires afour-fifths vote to expend any unbudgeted, undesignated fund balance. The transfer was approved through Resolution 2004-52. Audit Management Letter Ca itai Im rovements PIR 415 A summary of the activity of this fund is as follows: Financial sources: Special assessments Intergovernmental Charges for services Investment income Issuance of bands Bond premium Transfers from General Fund Transfers from Municipal State Aid Fund Transfers from Infrastructure Replacement Fund Transfers from Debt Service Fund Total financial sources Financial uses: Transfer to Capital Improvements Development Transfer to Debt Service Fund Issuance costs Other Project expenditures Total financial uses Net change in fund balance Fund balance ~def cit} -January 1 2006 2007 Zoos $1,011,553 $1,137,576 $738,423 731,701 - - 229,986 146,906 72,303 - 67,270 35,224 2,759,550 - - 26,303 - - 3,700 12,599 1,267 ~ 5,000 - 23,322 107,354 ~o,~ not 1$5,130 - /,~.v~,c,~V 1,J-rJ,TV 1 U I V,JJ7 16,569 - - 133,244 743,812 499,578 25,114 - - 3,135,$20 1,073,562 334,708 3,31 D,747 1,817,674 834,286 1,958,511 X268,193) 36,253 X550,627} 1,407,884 1,139,691 d~~ nn~ nne m, ~~n ten, m, ,~~ n~. Fund balance -December 31 Audit Management Letter Capita! Project Funa~s ~api~a! Project Funds The projects accounted for in this fund are financed by the following sources: • Capital Equipment Replacement Fund • water Capital Construction Fund • Sewer Capital Construction Fund • General Fund • Special assessments The financing provided by other City funds is basically a cash transfer from those funds. The financing provided by special assessments is not an immediate repayment. Special assessments are extended out over a period of up to f fteen years. The Capital Improvement Projects Fund is therefore required to finance the special assessment receivables until they are collected. The amount of special assessments receivable at December 31, 2008 was $3,519,911. Audit Management Letter Capital Projecf Funds Communi Center Ca ital Buildin Fund 418 A summary of financial activity is as follows: Revenue and other sources: Transfers in: Capital Improvements General Gov't Bldgs. Capital Improvements Parks Liquor Capital Improvement Four Cities Bonds Capital Equipment Cable TV Insurance Internal Service Flex Bene#it Investment income Total revenue and other sources Expenditures Net change in fund balance Fund balance -January 1 Fund balance -December 31 2006 2007 zoos $1,800,000 $ - $ - 500,000 - - 500,D00 - - 90,000 - - 250,000 - - 735,000 - - 25,000 - - 140,210 252,840 149,100 4,040,210 252,840 149,100 26.~ 47,865 1,995,400 4,013,708 204,975 (1,$46,300) - 4,013,708 4,21$,683 $4,013,708 $4,21$,683 $2,372,383 The City has a joint powers agreement with Independent School District No. I3. The agreement commits the City to contribute up to $3,5~a,000 towards the construction of the Community Center. Audit Management Letter Public Safe Center Ca ital Buildin Fund 417 A summary of the activity of this fund is as follows: Revenue and other sources: Bonds issued Transfers in: EDA Housing Maintenance X408} Anoka County CDBG X202} Capital Improvement X390} Capital Improvement Development (420} Investment income Other Total revenue and other sources Expenditures and other uses: Project costs Bond issuance costs Transfers out: 2008B Bonds Debt Service Capital Improvement General Gov't Bldgs. Total expenditures and other uses Net change in fund balance Fund balance -January 1 Fund balance -December 31 Land Construction Other Total $ - $10,D00,000 $ - $10,000,000 - - 600,000 600,000 365,583 - - 365,583 581,963 - - 581,963 23,878 - - 23,878 - 135,919 - 135,919 - 1,000 - 1,000 971424 10,136,919 600,000 11,708,343 971,424 2,401,359 - 3,372,783 - 119,021 - 119,021 - 314,194 - 314,194 - - 600,000 600,000 971,424 2,834,574 600,000 4,405,998 0 7,302,345 0 7,302,345 $0 $7,302,345 $0 $7,302,345 The City established this fund pursuant to Resolution 2008-67. Start-up funding was provided by the $600,000 transfer from EDA Housing Maintenance Fund. The Resolution also required these funds be ultimately transferred to the Capital Improvement General Government Buildings Fund (411) upon receipts of bond proceeds. Audit Management Letter Capital Prolecl Funds Enterprise Funds ENTERPRISE FUNDS Water Fund Operating Account 601 A graph of the water operations is presented below: $2,500,000 $2,400,000 $2,300,000 $2,200,000 $2,100,000 $2,000,000 $1,900,000 $1,800,000 $1,700,000 $1,600,000 $1,500,000 $1,400,000 $1,300,000 $1,200,000 $1,100,000 $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 2004 2005 2006 2007 2008 $2,500,000 $2,400,000 $2,300,000 Water Utility Fund $2,200,000 Revenue and Expenses $2,100,000 $2,000,000 $1,900,000 $1,800,000 $1,700,000 $1,600,000 $1,500,000 $1,400,000 oTransfers0ut $1,300,000 ~WaterPurchases $1,200,000 ~OtherOperatingExpenses $1,100,000 ~OperatingRevenue $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 The City increased rates effective January 1, 2008. Audit Management Letter Enterprise Funds Sewer Fund Operating Account 602 A graph of sewer operations is presented below. $Z,ooo,ooo $1,900,000 $1,800,000 $1,700,000 $1,600,000 $1,500,000 $1,400,000 $1,300,000 $1,200,000 $1,100,000 $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 2004 2005 2006 2007 2008 X2,000,000 X1,900,000 $1,800,000 Sewer Utility Fund Revenue and Expenses $1,700,000 $1,600,000 $1,500,000 $1,400,000 $1,300,000 $1,200,000 $1,100,000 ~TransfersOut $1,000,000 ®MCES ~ Other OperatingExpenses $900,000 f OperatingRevenue $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 The decrease in operating revenue for 2004 is related to a revised rate structure adopted in December 2003 (Resolution 2003-50). The revised rate structure established a fixed fee and eliminated a minimum billing amount. Audit Management Letter Enterprise Funds Refuse Fund 603 A graph of refuse operations is presented below: $1,500,000 $1,500,000 $1,400,000 $1,400,000 $1,300,000 $1,300,000 Refuse Utility $1,200,000 $1,200,000 $1,100,000 $1,100,000 $1,000,000 $1,000,000 $900,000 $900,000 ©OperatingExpenses I $800,000 $800,000 Transfers Out $700,000 $700,000 ~OperatingRevenue $600,000 $600,000 $500,000 $500,000 $400,000 $400,000 $300,000 $300,000 $200,000 $200,000 $100,000 $100,000 $0 $0 2004 2005 2006 2007 2008 Audit Management Letter Enterprise Funds Storm Sewer Fund 604 A graph of operations is presented below: $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 2004 2005 2006 2007 2008 $500,000 $450,000 Storm Sewer $400,000 $350,000 0 Transfers Out $300,000 ©OperatingExpenses $250,000 T OperatingRevenue $200,000 $150,000 $100,000 $50,000 $0 This fund is responsible for a portion of the debt service on the 1999B, 2003A and 2006A bond issues. The outstanding liability on the bonds was $626,688 at December 31, 2008. Additionally, the Storm Sewer Debt Service account (634) had a deficit of $470,009 at December 31, 2008. Audit Management Letter Fn~erprise Funds Munict al Li uor Fund 609 An analysis of 2005 activity is as follows: To Valu _ . Top Valu II Hei hts Li uor 2008 Total 2007 Total Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent Operating revenues $3,187,033 100.00% $3,161,284 100.00% $1,142,625 100.00% $7,490,942 100.00% $6,722,390 100.00% Cost of goods sold 2,5~ 78.65% 2,422,665 76.64% 854,305 74.77% 5,783,545 7~0 5,1~ 7~3% Gross margin 680,458 21.35% 738,619 23.36% 288,320 25.23% 1,707,397 22.79% 1,577,50$ 23.47% Other operating expenses 671,994 21.09% 545,274 17.25% 182,670 15.99% 1,399,438 18.69% 1,308,944 19.47% Net income from operations $8,464 0.27% $193,345 6.12% $105,b50 9.25% $307,459 ~ 4.10% ~ $268,564 ~ 4.00% The following comments relate to the above table: • Sales increased by approximately $769,000. • Gross margin percent decreased from 23.47% to 22.79% however, overall gross margin increased by $129,8$9. • Net income from operations increased approximately $40,000 from 2007 to 2008. Audit Management Letter Enterprise Funds Income from operations as a percent of total sales for the past eighteen years are scheduled below: __ _ Net Income From Operations % of Top Top Heights Total Year Valu Valu II Li uor Total Sales 1989 ---------------Site Information---------------- $228,857 6.2% 1990 -----Not Available----------------- 261,509 6.2% 1991 $297,378 $ - $97,341 394,719 8.2% 1992 246,739 - 100,907 347,646 7.2% 1993 148,150 X62,60$} 103,476 189,018 3.6% 1994 X46,350 5,902 101,483 253,735 4.6% 1995 141,235 37,749 115,595 294,579 5.2% 1996 124,471 80,855 150,649 356,005 S.9% 1997 68,002 92,250 151,023 311,275 5.1% 199$ 151,974 123,436 1$1,752 457,162 7.2% 1999 146,576 130,763 226,116 503,455 7.5% 2000 152,630 105,749 128,389 386,768 6.0% 2001 183,202 108,788 167,587 459,577 6.7% 2002 159,242 161,358 175,799 496,399 7.2% 2003 30,672 165,891 135,709 332,272 4.8% 2004 16$,475 144,812 86,440 399,727 5.7% 2005 14,526 98,334 87,211 200,071 3.0% 2006 62,100 93,540 46,512 202,152 3.1 2007 115,219 104,449 48,896 26$,564 4.0% 2008 $,464 193,345 105,650 307,459 4.I% As shown above, liquor operations have been an important revenue source for the City. Audit Management Letter Enterprise Funds Com orison with Other Munici al Li uor Stores The Office of the State Auditor (OSA) annually publishes "An Analysis of Minnesota Municipal Liquor Store ~~erations. " The most recent report available is for 2007. The following analysis compares Columbia Heights' liquor operations with those reported in the OSA report. There are eighteen cities in the metropolitan area that operate off sale only operations. The City of Columbia Heights ranks sixth in sales among metro area. cities behind Lakeville, Edina, Richfield, Eden Prairie, and Apple Valley. It should be noted that the following comparisons are strictly a comparison of amounts reported. There are a number of factors that affect operating results that are not included in this comparison. These factors include the mix of product sold and philosophy regarding sales techniques such as high volumellower margin. Audit Management Letter Enfer~rise Funa~s Gross Mar 'n Anal sxs Gross margin measures the sales less the direct cost of products sold. A comparison to state averages for Minnesota municipal off sate operations is as follows: Cost Gross Mar in State Sales of Sales Amount Percent Average{i} 1996 $6,011,907 $4,774,905 $1,236,999 20.6% 23.1% 1997 6,135,166 4,$75,712 1,256,454 20.5% 22.7% 1998 6,367,689 5,009,923 1,357,766 21.3% 23.2% 1999 6,669,376 5,235,023 1,431,353 21.5% 23.6% 2000 6,425,021 5,051,575 1,373,446 21.4% 23.5% 2001 6,796,3$4 5,267,398 1,525,986 22.4% 24.0% 2002 6,857,307 5,254,598 1,602,709 23.3% 24.4% 2003 6,934,572 5,366,137 1,56$,435 22.6% 23.9% 2004 6,946,058 5,318,331 1,627,727 23.4% 24.1% 2005 6,713,932 5,210,861 1,503,071 22.4% 24.6% 2006 6,546,491 5,039,315 1,507,173 23.0% 24.4% 2007 6,722,390 5,144,582 1,577,508 23.5% 25.1% 2005 7,490,942 5,753,545 1,707,397 22.5% Not Available ~1~Source; Minnesota Office of the State Auditor -Metropolitan Area Off Sale Gperations Audit Management Letter Enterprise Funds Operating Expenses Operating expenses for the past several years have been as follows: Percent of Sales Year Amount Ci State Avg. 1994 $788,424 X4.3°/0 16.0% 1995 830,817 14.6% 16.8% 1996 $80,994 14.7% 16.3% 1997 945,179 15.4% 16.5% 1998 900,604 14.1 % 16.1 1999 927,898 13.9% 16.2% 2000 986,675 15.4% 16.5% 2001 1,069,409 15.7% 16.6% 2002 1,106,310 16.1% 16.2% 2003 1,236,163 17.8% 17.8% 2004 1,256,934 18.1% 17.9% 2005 1,303,000 19.4% 17.0% 2006 1,305,021 19.9% 17.9% 2007 1,308,944 19.5% 17.9% 2008 1,399,938 18.7% NIA Audit Management Letter Fn~erprise Fun~fs Operating expenses for 2008 and 2007 were as fo~~ows: Increase 2008 2007 (Decrease) Personnel costs $$93,197 $830,089 $63,X08 Rent 48,374 201,949 (153,575} Utilities 85,603 64,750 20,853 Credit card fees 95,176 71,940 23,236 Insurance 21,$42 19,893 1,949 Depreciation 125,649 22,404 103,245 All other 130,097 100,026 30,071 Total $1,399,938 $1,311,051 $85,887 Audit Management Letter Enterprise Funafs Net Income from ~ erations Net income for the past several dears is as follows: Percent of Sales City State Year Amount City Average 1994 $253,735 4.6% 7.2% 1995 294,579 5.2% b.8% 1996 356,005 5.9% 7.5% 1997 311,275 5.1 % 6.9% 1998 457,162 7.2% 7.5% 1999 503,455 7.5% 7.5% 2000 386,7b8 6.0% 7.2% 2001 459,577 6.7% 7.3% 2002 496,399 7.2% 8.1 % 2003 332,272 4.8% b.l 2004 370,793 5.3% b.b% 2D05 2D0,071 3.0% 7.8% 2006 202,152 3.1 % 7.0% 2007 2b8,564 4.0% 8.5% 2008 307,459 4.1 % Nod Available Audit Management Leiter !nlerna! Service Funds INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the financing on a cost reimbursement basis of goods or services provided by one department to another department within the City. During 20oS, the City maintained the following Internal Service Funds: Central Information Compensated Garage S stems Insurance Absences Total Assets: Cash $386,283 $742,477 $636,653 $830,871 $2,596,2$4 Other current assets 36,713 5,970 67,961 6,130 116,774 Capital assets 1,159,111 47,984 - - 1,207,095 Total assets $1,582,107 $796,431 $704,614 $837,001 $3,920,153 Liabilities and Net Assets Liabilities: Current liabilities $20,760 $36,601 $749 $ - $58,110 Compensated absences payable 23,175 8,348 - 749,268 780,791 Total liabilities 43,935 44,949 749 749,268 838,901 Net assets 1,538,172 751,482 703,$65 87,733 3,081,252 Total liabilities and net assets $1,582,107 $796,431 $704,614 $837,001 $3,920,153 Audit Management Letter Certificate of Achievement CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING The City submits the Comprehensive Annual Financial Report to the Government Finance Officers Association of the United States and Canada ~GFQA} for a review. The program is a review of all facets of financial reporting for disclosure, clarity and consistency with national reporting standards. The City received the award for each year since 1994. we commend the City for this ac ~evement. Audit Management Letter Accoun~rng Standards ACCOUNTING STANDARDS Governmental Accounting Standards Board (GASB) statements that are required to be implemented in future years that may affect the City are as follows: City implementation Upcoming GASB Statements Required By Statement Nv. 5~ Accounting and Financial Reporting for Intangible Assets. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2009. 2010 Statement No. 52 Land and Other Real Estate Held as Investments By 2 Endowments. The provisions of this Statement are effective for fiscal periods 009 beginning after June 15, 200$. Statement No. 53 Accounting and Financial Reporting for Derivative Instruments. 201 The provisions of this Statement are effective for fiscal periods beginning after June 0 15, 2009. Statement No. 54 Fund Balance Reporting and Governmental Fund Type 2 Def nitions. The provisions of this statement are effective for penods beginnin 011 g after June 15, 2010. Audit Management Letter Communication With Tf~ose Charged Witf~ Communication COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE we have substantially completed the audit of the City of Columbia Heights, Minnesota as of and for the year ended December 31, X005, and have issued drab reports. Professional standards require that we provide you with the following information related to our audit. Uur Responsibility under U.S. Generally Accepted Auditing Standards and Government Auditing Standards As stated in our engagement letter dated Qctober 3, 2005, our responsibility, as described by professional standards, is to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, inconformity with U.S. generally accepted accounting principles. Dur audit of the financial statements does not relieve you or management of your responsibilities. In planning and performing our audit, we considered the City of. Columbia Heights, Minnesota's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide assurance on the internal control over financial reporting. we also considered internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 4MB Circular A-13 3 . As part of obtaining a reasonable assurance about whether the City of Columbia Heights, Minnesota's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, noncompliance with which could have a direct and material effect on the determination of Audit Management Letter Communica~ian Wifh Those Charged With Cornmunica~ion financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit. Pianned Scope and Timing of the Audit We performed the audit according to the planned scope identified in our engagement letter and within our anticipated time frame. Significant Audit Results ualitative As ects of Accountin Practices Management is responsible for the selection and use of appropriate accounting policies. ~ accordance with the terms of our engagement letter, we will advise management about the appropriateness ofaccounting policies and their application. The significant accounting policies used by the City of Columbia Heights, Minnesota are described in Note 1 to the financial statements. For 2008, the City implemented GASB Statement No. 45 regarding Other Post Employment Benefits ~~PEB}. We noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. Audit Management Letter Communication With Those Charged With Communication 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 f nancial statements was management's estimation on the depreciation of capital assets, the value of land held for resale and the liability for CPEB. we evaluated the key factors and assumptions used to develop the depreciation of capital assets and the value of land held for resale in determining that it is reasonable in relation to the financial statements taken as a whole. The disclosures in the financial statements are neutral, consistent, and clear. Difficulties Encountered in Perfonnin the Audit We encountered no difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Mx sstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has not recorded bond discounts in the government-wide financial statements. There was also a minor difference in liquor inventory that was not recorded in the business-type fund statements. Management has determined that these amounts are immaterial to the financial statements taken as a whole. Audit Management Letter Communicafion With Those Charged With Communicaiion Disa eements with Marra ement For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. we are pleased to report that no such disagreements arose during the course of our audit. Marra ement Re resentations We have requested certain representations from management that are included in the management representation letter. Marra ement Consultations with Other Inde endent 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 governmental unit's financial statements or a determination of the type of auditor's 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. Other Audit Findin s or Issues we generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Audit Management Letter 4~nerMaf~ers OTHER MATTERS During our audit for the year ended December 31, 2005, we noted the following matter: The following is the status of internal control comments identified during the 2007 au it: Comment Status 2007-i Ado tin s ecial assessment rolls. The issue is not resolved: 2007-2 Timel billin of services. No longer a finding. This information is intended solely for the information and use of management, members of the City Council and others within the City of Columbia Heights, Minnesota and is not intended to be, and should not be, used by anyone other than these specified parties. Audit h~anagement Letter