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I APPENDIX III - MANAGEMENT LETTERS DEVELOPED AND ISSUED IN CONNECTION WITH LOCAL GOVERNMENT AUDITS I I I. CURRENT YEAR FINDINGS AND RECOMMENDATIONS (CONTINUED) 05.3 Bond Covenant (Continued) I I Recommendation We recommend that the City immediately fund the deficiency in the reserve account and perform regular reviews to ensure compliance with provisions of the bond ordinance at all times. I ManaQement Response I I Due to the unusual event of the funding of the City's first General Obligation Bond in the last quarter of the fiscal year and the depreciation in value of existing bonds, the carrying value of the reserve account was not sufficient. However, funds were available as of September 30, 2005, in the City's operating account. Management has transferred the required funds to the reserve account as of the date of this report and will implement a quarterly review of said accounts to ensure sufficient reserves. I 05-4 Review of Bank Reconciliation Statements I Condition I The City reconciled its cash accounts on a monthly basis however, on the cash reconciliation selected for testing, there was no evidence that a review was performed by supervisory personnel. I I Review of the bank reconciliation statement by designated responsible staff will provide assurance on propriety of the reconciling items and that cash transactions were completely and timely recorded in the accounting records. Recommendation I We recommend review of bank reconciliation statements on a monthly basis and signing of each reconciliation as evidence of supervisory approval. Manaoement Response I Currently bank reconciliations are reviewed by our Accounting Manager; however, going forward, all reconciliations will be signed by the Finance Director. I I I 4 I