05.01A - Audit Management Letter

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�7•' / C(iftonLarsonAllen Honorable Mayor and City Council Members City of Pequot Lakes 4638 County Road 11 Pequot Lal<es, MN 56472 CliftanLarsanAllen LLP CLAconnect.com We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Pequot Lakes (City) as of and for the year ended December 31, 2013, and have issued our report thereon dated April 25, 2014. We have previously communicated to you information about our responsibilities under auditing standards generally accepted in the United States of America and Government Auditing 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 City of Pequot Lakes are described in Note 1 to the financial statements. For the year ended December 31, 2013, the statements reflect the adoption of Governmental Accounting Standards Board statement number 65. GASBS 65, Items Previously Reported as Assets and Liabilities, establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. 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. 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(s) affecting the financial statements was (were): • ManagemenYs estimate of the useful lives of depreciable assets is based on guidance issued by the Minnesota Office of the State Auditor and historical practices. We evaluated the key factors and assumptions used to develop the depreciation in determining that it is reasonable in relation to the financial statements taken as a whole.