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2013 Drug Task Force Audit NORTHWEST METRO DRUG TASK FORCE COMMUNICATIONS LETTER Year Ended December 31, 2013 NORTHWEST METRO DRUG TASK FORCE TABLE OF CONTENTS REPORT ON MATTERS IDENTIFIED AS A RESULT OF THE AUDIT OF THE FINANCIAL STATEMENTS ............................................................... 1 REQUIRED COMMUNICATION ................................................................................................ 2 REPORT ON MATTERS IDENTIFIED AS A RESULT OF THE AUDIT OF THE FINANCIAL STATEMENTS Administrative Board and Management Northwest Metro Drug Task Force New Hope, Minnesota In planning and performing our audit of the financial statements of Northwest Metro Drug Task Force as of and for the year ended December 31, 2013, in accordance with auditing standards generally accepted in the United States of America, we considered the internal control over financial reporting (internal control) as a basis for designing our auditing procedures that are appropriate in the circumstances 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 internal control. Accordingly, we do not express an opinion on the effectiveness of the Northwest Metro Drug internal control. Our consideration of internal control was for the limited purpose described in the preceding 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 significant deficiencies may exist that were not identified 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 a combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected and corrected, on a timely basis. We did not identify any deficiencies in internal control that we consider to be material weaknesses. 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. This communication is intended solely for the information and use of management and the Administrative Board and is not intended to be and should not be used by anyone other than these specified parties. KERN, DEWENTER, VIERE, LTD. Minneapolis, Minnesota March 17, 2014 1 NORTHWEST METRO DRUG TASK FORCE REQUIRED COMMUNICATION December 31, 2013 We have audited the financial statements of Northwest Metro Drug Task Force for the year ended December 31, 2013, and have issued our report thereon dated March 17, 2014. 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 Task Force 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 Task Force or to acts by management or employees acting on behalf of the Task Force. QUALITATIVE ASPECTS OF ACCOUNTING PRACTICES Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Task Force 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, 2013. We noted no transactions entered into by the Task Force during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are 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 Task Force 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. DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT We encountered no difficulties in dealing with management in performing and completing our audit. 2 NORTHWEST METRO DRUG TASK FORCE REQUIRED COMMUNICATION December 31, 2013 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. Management did not identify and we did not notify them of any uncorrected financial statement misstatements 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 eements arose during the course of our audit. MANAGEMENT REPRESENTATIONS We requested certain representations from management that are 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 nancial statements or a determination of the 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 FINDINGS OR ISSUES We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. 3 NORTHWEST METRO DRUG TASK FORCE New Hope, Minnesota AUDITED FINANCIAL STATEMENTS For the Year Ended December 31, 2013 NORTHWEST METRO DRUG TASK FORCE TABLE OF CONTENTS APPOINTED OFFICIALS AND ADMINISTRATION .............................................................. 1 INDEPENDENT AUDITORS REPORT ..................................................................................... 2 BASIC FINANCIAL STATEMENTS Balance Sheet Statement of Net Position ..................................................................................... 5 Statement of Revenues, Expenditures and Changes in Fund Balance Statement of Activities .................................................................................................................. 6 Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual General Fund ............................................................................................... 7 Notes to the Financial Statements ................................................................................................... 8 REPORT ON LEGAL COMPLIANCE ........................................................................................ 13 NORTHWEST METRO DRUG TASK FORCE APPOINTED OFFICIALS AND ADMINISTRATION December 31, 2013 Appointed OfficialsPosition Tim FournierBoard Chair - New Hope Rich StanekBoard Member - Hennepin County Sheriff's Office Stacy CarlsonBoard Member - Golden Valley Steve SmithBoard Member - Robbinsdale Mike GoldsteinBoard Member - Plymouth Stephanie ReveringBoard Member - Crystal Kevin BennerBoard Member - Brooklyn Center Administration Agt. Bob ToppCommander Capt. Scott SlawsonCoordinator/Fiscal Agent 1 INDEPENDENT AUDITORS REPORT Administrative Board Northwest Metro Drug Task Force New Hope, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and the major fund of Northwest Metro Drug Task Force, New Hope, Minnesota, as of and for the year ended December 31, 2013, and the related Notes to the Financial Statements, which collectively comprise the tents. Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedu assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Task that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 2 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and the major fund of Northwest Metro Drug Task Force, New Hope, Minnesota, as of December 31, 2013, and the respective changes in financial position thereof and the budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Omitted Required Supplementary Information generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. Our opinion on the basic financial statements is not affected by this missing information. KERN, DEWENTER, VIERE, LTD. Minneapolis, Minnesota March 17, 2014 3 BASIC FINANCIAL STATEMENTS 4 NORTHWEST METRO DRUG TASK FORCE BALANCE SHEET - STATEMENT OF NET POSITION December 31, 2013 Statement of General FundAdjustmentsNet Position ASSETS Cash $ 416,429$ -$ 416,429 Cash Seizures 151,578 - 151,578 Due From Other Governments 12,076 - 12,076 Prepaid Items 6,039 - 6,039 Capital Assets: Equipment - 173,607 173,607 Less Accumulated Depreciation - (162,172) (162,172) Total Capital Assets, Net of Depreciation - 11,435 11,435 $ 586,122$ 11,435$ 597,557 Total Assets LIABILITIES/FUND BALANCE Liabilities Accounts Payable$ 3,521$ -$ 3,521 Due To Other Governments 15,007 - 15,007 Pending Forfeitures 151,578 - 151,578 170,106 - 170,106 Total Liabilities Fund Balance Nonspendable 6,039 (6,039) - Unassigned 409,977 (409,977) - Total Fund Balance 416,016 (416,016) - $ 586,122 Total Liabilities and Fund Balance NET POSITION Net Investment in Capital Assets 11,435 11,435 Unrestricted 416,016 416,016 Total Net Position 427,451 427,451 Total Liabilities and Net Position$ 11,435$ 597,557 The Notes to the Financial Statements are an integral part of this statement. 5 NORTHWEST METRO DRUG TASK FORCE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - STATEMENT OF ACTIVITIES For the Year Ended December 31, 2013 Statement of General FundAdjustmentsActivities REVENUES Intergovernmental$ 76,432$ -$ 76,432 Seizures and Forfeitures 100,062 - 100,062 Capital Contributions - 7,000 7,000 Total Revenues 176,494 7,000 183,494 EXPENDITURES/EXPENSES Salaries and Benefits 99,059 - 99,059 Building Rent 39,499 - 39,499 Supplies and Evidence 38,336 - 38,336 Insurance 5,607 - 5,607 Professional Fees 8,319 - 8,319 Training 9,816 - 9,816 Utilities 13,178 - 13,178 Repairs and Maintenance 9,338 - 9,338 Buy Fund Expenditures 7,180 - 7,180 Miscellaneous 238 - 238 Depreciation - 14,786 14,786 Total Expenditures/Expenses 230,570 14,786 245,356 Excess of Revenues Under Expenditures/Expenses (54,076) (7,786) (61,862) OTHER FINANCING SOURCES Proceeds from Sale of Capital Asset 580 - 580 Net Change in Fund Balance/ Net Position (53,496) (7,786) (61,282) FUND BALANCE/NET POSITION Beginning of Year 469,512 19,221 488,733 End of Year$ 416,016$ 11,435$ 427,451 The Notes to the Financial Statements are an integral part of this statement. 6 NORTHWEST METRO DRUG TASK FORCE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL FUND For the Year Ended December 31, 2013 Variance with Original and Final Budget Final BudgetActualOver (Under) REVENUES Intergovernmental$ -$ 76,432$ 76,432 Seizures and Forfeitures - 100,062 100,062 Total Revenues - 176,494 176,494 EXPENDITURES Salaries and Benefits 85,000 99,059 14,059 Building Rent 43,000 39,499 (3,501) Supplies and Evidence 39,300 38,336 (964) Insurance 10,000 5,607 (4,393) Professional Fees 10,000 8,319 (1,681) Training 5,700 9,816 4,116 Utilities 13,300 13,178 (122) Repairs and Maintenance 18,000 9,338 (8,662) Buy Fund Expenditures 10,000 7,180 (2,820) Miscellaneous 4,150 238 (3,912) Total Expenditures 238,450 230,570 (7,880) Excess of Revenues Over (Under) Expenditures (238,450) (54,076) 184,374 OTHER FINANCING SOURCES Proceeds from Sale of Capital Asset - 580 580 Net Change in Fund Balance$ (238,450) (53,496)$ 184,954 FUND BALANCE Beginning of Year 469,512 End of Year$ 416,016 The Notes to the Financial Statements are an integral part of this statement. 7 NORTHWEST METRO DRUG TASK FORCE NOTES TO THE FINANCIAL STATEMENTS December 31, 2013 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A.Reporting Entity Northwest Metro Drug Task Force was established by a joint powers agreement among the following governmental units through their respective law enforcement agencies: Hennepin County, the Cities of Golden Valley, Robbinsdale, Plymouth, Crystal, New Hope and Brooklyn Center Police Departments. The purpose of the Task Force is to provide a comprehensive and multi jurisdictional effort to reduce drug trafficking and eliminate local street level drug dealers through the coordination of law enforcement agencies within its jurisdiction. The Task Force Administrative Board, comprised of one designated official from each named agency, is responsible for the operations of the Task Force. The financial statements of the Task Force have been prepared in conformity with accounting principles generally accepted in the United States of America. Accounting policies adopted by the Task Force reflect practices common to similar organizations. The more significant accounting policies are described below. member Cis not a component unit of the Cities. In addition, the Task Force has no component units. B.Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Task Force considers revenues to be available if they are collected within 60 days of the end of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, expenditures related to claims and judgments are recorded only when payment is due. C. Seized Assets Monetary and nonmonetary assets are seized as the result of drug busts and sting operations. Seized monetary assets are reported as seized cash at the date of seizure on the accompanying Statement of Net Position with an offsetting pending forfeiture liability. Once the monetary assets are officially forfeited, they are recorded as forfeiture revenue. Seized nonmonetary assets are not reflected on the Statement of Net Position until forfeited or sold. 8 NORTHWEST METRO DRUG TASK FORCE NOTES TO THE FINANCIAL STATEMENTS December 31, 2013 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D.Budgetary Data The Task Force adopts an annual budget based upon grant funds, member matching funds and money made available from other sources. The joint powers agreement specifies procedures regarding the adoption of the General Fund budget. The budget is effective January 1 of each year and is adopted on a basis consistent with accounting principles generally accepted in the United States of America. E.Fund Equity In the fund financial statements, governmental funds report various levels of spending constraints. Nonspendable Fund Balances These are amounts that cannot be spent because they are not in spendable form or they are legally or contractually required to be maintained intact. Restricted Fund Balances These are amounts that are restricted to specific purposes either by a) constraints placed on the use of the resources by creditors, grantors, contributors or laws or regulations of other governments or b) imposed by law through constitutional provisions or enabling legislation. Committed Fund Balances These are amounts that can only be used for specific purposes pursuant to constraints imposed by the Board by resolution. Assigned Fund Balances These are amounts that are constrained by the Asso be used for specific purposes, but are neither restricted nor committed. Assignments shall be Unassigned Fund Balance These are residual amounts in the General Fund not reported in any other classification. F.Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenditures/expense during the reporting period. Actual results could differ from those estimates. NOTE 2 DEPOSITS AND INVESTMENTS Cash balances of the Task Force are invested to the extent available in various accounts authorized by Minnesota Statutes. As of December 31, 2013, cash was comprised of deposits at a commercial bank. The Task Force does not have formal policies in place specifically to address custodial credit risk and interest rate risk for deposits or investments. Minnesota Statutes require all deposits with financial institutions be collateralized in an amount equal to 110% of deposits in excess of Federal Deposit Insurance Corporation (FDIC) insurance. 9 NORTHWEST METRO DRUG TASK FORCE NOTES TO THE FINANCIAL STATEMENTS December 31, 2013 NOTE 2 DEPOSITS AND INVESTMENTS Custodial Credit Risk Deposits: Custodial credit risk is the risk that in the event of bank failure, the As of December 31, 2013 balance was fully insured through FDIC or pledged collateral. NOTE 3 CAPITAL ASSETS Capital assets, which include property, plant and equipment, are reported in the government-wide financial statements and include equipment and vehicles with a historical cost greater than $ 5,000. Such assets are recorded at historical cost. The costs of normal maintenance and repairs that do not add to the value of the asset are not capitalized. Equipment of the Task Force is depreciated using the straight- method over the estimated useful lives line of three to five years. Capital asset activity for the year ended December 31, 2013, was as follows: BeginningEnding BalanceIncreasesDecreasesBalance Governmental Activities: Capital Assets being Depreciated: Equipment$ 171,607$ 7,000$ 5,000$ 173,607 Less Accumulated Depreciation: Equipment 152,386 14,786 5,000 162,172 Governmental Activities Capital Assets, Net$ 19,221$ (7,786) $ -$ 11,435 NOTE 4 RELATED PARTY TRANSACTIONS The Task Force utilizes personnel assigned to the Task Force by certain members of its member agencies. Under the terms of the grant application approved by the Task Force Committee, member benefits. For the years ended December 31, 2013, the Task Force reimbursed member agencies $ 99,059 for personnel assigned to the Task Force. In addition, the Task Force utilizes other personnel and resources of its member agencies without charge in the performance of its duties. The value of services provided was not determined and, accordingly, such amounts are not reported in the accompanying financial statements. 10 NORTHWEST METRO DRUG TASK FORCE NOTES TO THE FINANCIAL STATEMENTS December 31, 2013 NOTE 5 RISK MANAGEMENT The Task Force is exposed to various risks of loss related to torts: theft of, damage to and destruction of assets; errors and omissions and natural disasters. In order to protect against these risks of loss, the Task Force purchases commercial insurance through the League of Minnesota Cities Insurance Trust (LMCIT), a public entity risk pool. This pool currently operates common risk management and insurance programs for municipal entities. The Task Force pays an annual premium to the LMCIT for its insurance coverage. The LMCIT is self-sustaining through commercial companies for excess claims. The Task Force is covered through the pool for any claims incurred but unreported, however, retains risk for the deductible portion of its insurance policies. The amounts of these deductibles are considered immaterial to the financial statements. During the year ended December 31, 2013, there were no significant reductions in insurance coverage from the prior year. Settled claims have not exceed the past three years. NOTE 6 OPERATING LEASES The Task Force entered into a lease agreement on June 13, 2008 with Standal Properties, Inc. for the period of August 1, 2008 through July 31, 2013 for 4,500 square feet of a 24,100 square foot building. Base rent of $ 125,042 is payable in monthly installments of $ 1,940 for the first 36 months, and $ 2,300 for the last 24 months of the lease term. In addition, the Task Force is required to pay $ 172 per month for 60 months to amortize the cost of installing an air system in the building. The lease agreement also states that the Task Force must pay 18.67% of all taxes, assessments, maintenance, and water and sewer charges related to the building. The Task Force entered into a lease agreement on May 8, 2013 with Standal Properties, Inc. for the period of August 1, 2013 through July 31, 2018 for 4,500 square feet of a 24,100 square foot building. Base rent of $ 138,023 is payable in monthly installments of $ 2,300. The lease agreement also states that the Task Force must pay 18.67% of all taxes, assessments, maintenance, and water and sewer charges related to the building. Total lease expense for the year ended December 31, 2013 was $ 39,499. Future minimum lease payments to the end of the lease are as follows: December 31,Amount 2014$ 27,605 2015 27,605 2016 27,605 2017 27,605 2018 16,103 Total$ 126,523 11 NORTHWEST METRO DRUG TASK FORCE NOTES TO THE FINANCIAL STATEMENTS December 31, 2013 NOTE 7 NONMONETARY ASSETS The Task Force held nonmonetary assets at December 31, 2013 with an estimated fair market value of $ 40,000, these assets are not recorded within the financial statements until sold upon forfeiture and the proceeds deposited. NOTE 8 SUBSEQUENT EVENTS On October 28, 2013 the Task Force entered into a lease agreement with Enterprise FM Trust for five vehicles and maintenance on those vehicles. Annual lease payments are $ 28,700 and payable in monthly installments. These vehicles were not received and put into use until 2014. 12 REPORT ON LEGAL COMPLIANCE Administrative Board Northwest Metro Drug Task Force New Hope, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America, the financial statements of the governmental activities and the major fund of Northwest Metro Drug Task Force, New Hope, Minnesota, as of and for the year ended December 31, 2013, and the related Notes to the Financial Statements, and have issued our report thereon dated March 17, 2014. The Minnesota Legal Compliance Audit Guide for Political Subdivisions, promulgated by the State Auditor pursuant to Minn. Stat. § 6.65, contains six categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, and miscellaneous provisions. Our audit considered all of the listed categories, except that we did not test for compliance with the provisions for public indebtedness because the Task Force has not issued nor had any outstanding debt for the year ended December 31, 2013. In connection with our audit, nothing came to our attention that caused us to believe that the Task Force failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention This report is intended solely for the information and use of those charged with governance and management of the Task Force and the State Auditor and is not intended to be and should not be used by anyone other than these specified parties. KERN, DEWENTER, VIERE, LTD. Minneapolis, Minnesota March 17, 2014 13