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2015-12-31 STMA Ice Arena Com LtrSt. Michael — Albertville Ice Arena Communications Letter December 31, 2015 I ih berganKDV CPAS1ADVISORS St. Michael — Albertville Ice Arena Table of Contents Report on the Matters Identified as a Result of the Audit of the Financial Statements Material Weakness Significant Deficiency Required Communication 1 2 3 4 (: berganKDV Report on the Matters Identified as a Results of BerganKDV, Ltd. — the Audit of the Financial Statements Cedar Falls 602 Main Street Suite 100 P.O. Box 489 Cedar Falls, IA Chair and Members of the Ice Arena Board and Management 50613-0026 T 319'268.1715 St. Michael — Albertville Ice Arena F 319.268.1720 — Albertville, Minnesota Cedar Rapids 27201st Avenue NE Suite 300 P.O. Box 10200 — In planning and performing our audit of the financial statements of St. Michael — Albertville Cedar Rapids, IA 52402-0200 Ice Arena, Albertville, Minnesota as of and for the year ended December 31, 2015, in F 319.294.9003 accordance with auditing standards generally accepted in the United States of America, we Coralville — considered the Organization's internal control over financial reporting (internal control) as a 2530 Corridor Way Suite basis for designing auditing procedures that are appropriate in the circumstances for the 301 P.O. Box 5267 _ purpose of expressing our opinion on the financial statements, but not for the purpose of Coralville, IA S2241-0267 expressing an opinion on the effectiveness of the Organization's internal control. T 319.248.0367 F 319.248.0582 Accordingly, we do not express an opinion on the effectiveness of the Organization's internal Des — control. Moines 9207 Northpark Drive Johnston,lA Our consideration of internal control was for the limited purpose described in the preceding p� 10 g 50131-2933 T 515.727.5800 F 515.727.5800 _ paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or Minneapolis 3800 American Blvd W significant deficiencies may exist that were not identified. Suite 10DO Bloomington, MN 55431-4420 — A deficiency in internal control exists when the design or operation of a control does not T 952.563.6800 F 952.563.6801 allow management or employees, in the normal course of performing their assigned St. Cloud _ functions, to prevent, or detect and correct, misstatements on a timely basis. A material Park Avenue S weakness is a deficiency, or a combination of deficiencies in internal control, such that there RO P.O. Box 1304 St. Cloud, MN is a reasonable possibility that a material misstatement of the Organization's financial 56302-3713 T 320.251.7010 _ statements will not be prevented, or detected and corrected on a timely basis. The material F 320.251.1784 weakness identified is stated within this letter. waterloo 100 East Park Avenue Suite 300 — A significant deficiency is a deficiency, or a combination of deficiencies, in internal control RD that is less severe than a material weakness, yet important enough to merit attention by those Waterloo, A charged with governance. The significant deficiency identified is stated within this letter. T03 9234.66885 F 319.234.6287 This communication is intended solely for the information and use of management, Board bergankdv.com Members, others within the Organization and state oversight agencies and is not intended to _ be and should not be used by anyone other than these specified parties. r0 v` Minneapolis, Minnesota April 6, 2016 St. Michael — Albertville Ice Arena Material Weakness LACK OF SEGREGATION OF ACCOUNTING DUTIES The Organization has a lack of segregation of accounting duties due to a limited number of office employees. In order to have appropriate segregation of duties, the performance of the following duties would need to be completed by a different employee: initiation and authorization of transactions, recording and processing of transactions, reconciliation and reporting of transactions and financial information, and custody of assets. The lack of adequate segregation of accounting duties could adversely affect the Organization's ability to initiate, record, process, and report financial data consistent with the assertions of the management in the financial statements. Management and the Ice Arena Board are aware of this condition and have taken certain steps to compensate for the lack of segregation but due to the number of staff needed to properly segregate all of the accounting duties, the costs of obtaining desirable segregation of accounting duties can often exceed benefits which could be derived. However, management and the Ice Arena Board must remain aware of this situation and should continually monitor the accounting system, including changes that occur. Organization's Response: Arena and City staff are aware of the lack of segregation, which is due to limited staff dedicated to the STMA Arena, especially in concessions, and continues to look for opportunities to provide additional segregation in a cost effective manner. — St. Michael — Albertville Ice Arena Significant Deficiency INVENTORY NOT RECORDED AT COST During our audit, we noted that inventory was being recorded at sales price and not at cost. We recommend the Organization implement procedures to allow for the tracking and recording of —" inventory at cost. Organization's Response: Arena and City staff are aware of the issue, which is due to limited capabilities of the current inventory system, and continues to look for opportunities to improve the system in a cost effective manner. 3 St. Michael — Albertville Ice Arena Required Communication We have audited the financial statements of the St. Michael — Albertville Ice Arena, Albertville, Minnesota for the year ended December 31, 2015, and have issued our report thereon dated April 6, — 2016. Professional standards require that we provide you with the following information related to our audit. OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA — As stated in our engagement letter, our responsibility, as described by professional standards, is to express an opinion about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your responsibilities. PLANNED SCOPE AND TIMING OF THE AUDIT An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit involved judgment about the number of transactions to be examined and the areas to be tested. Our audit included obtaining an understanding of the Organization and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. Material misstatements may result from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the Organization or to acts by management or employees acting on behalf of the Organization. QUALITATIVE ASPECTS OF ACCOUNTING PRACTICES Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Organization are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year ended December 31, 2015. We noted no transactions entered into by the Organization 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. 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: Depreciation — The Organization is currently depreciating its capital assets over their estimated useful lives, as determined by management, using the straight-line method. The financial statement disclosures are neutral, consistent, and clear. St. Michael — Albertville Ice Arena Required Communication DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT We encountered no significant difficulties in dealing with management in performing and completing our audit. CORRECTED AND 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. We identified the following uncorrected misstatements of the financial statements. Management has determined its effect is immaterial, both individually and in the aggregate, to the financial statements taken as a whole. • Inventory valued at sales price rather than cost In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. 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 auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. MANAGEMENT REPRESENTATIONS We requested certain representations from management which were included in the management representation letter. 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 Organization's financial statements or a determination of the type of auditor's opinion that maybe 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. St. Michael — Albertville Ice Arena Required Communication OTHER AUDIT FINDINGS 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 Organization's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. 0