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2022 Special Purpose Audit Report CITY OF GOLDEN VALLEY HENNEPIN COUNTY, MINNESOTA Special Purpose Audit Reports Year Ended December 31, 2022 THIS PAGE INTENTIONALLY LEFT BLANK Page Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 1–2 Independent Auditor’s Report on Minnesota Legal Compliance 3 Schedule of Findings and Responses 4–5 CITY OF GOLDEN VALLEY Table of Contents HENNEPIN COUNTY, MINNESOTA Year Ended December 31, 2022 Special Purpose Audit Reports THIS PAGE INTENTIONALLY LEFT BLANK -1- INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the City Council and Management City of Golden Valley, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Golden Valley, Minnesota (the City) as of and for the year ended December 31, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated August 3, 2023. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. 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 City’s financial statements will not be prevented, or detected and corrected, on a timely basis. 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. Our consideration of internal control was for the limited purpose described in the first paragraph of this section 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. We identified certain deficiencies in internal control, described in the accompanying Schedule of Findings and Responses as findings 2022-001 and 2022-002 that we consider to be material weaknesses. (continued) C E R T I F I E D A C C O U N T A N T S P UBLIC PRINCIPALS Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J. Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA/CMA Jaclyn M. Huegel, CPA Kalen T. Karnowski, CPA Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.mmkr.com Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 -2- COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. CITY’S RESPONSES TO FINDINGS Government Auditing Standards requires the auditor to perform limited procedures on the City’s responses to the findings identified in our audit and described in the accompanying Schedule of Findings and Responses. The City’s responses were not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the responses. PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this report is not suitable for any other purpose. Minneapolis, Minnesota August 3, 2023 -3- INDEPENDENT AUDITOR’S REPORT ON MINNESOTA LEGAL COMPLIANCE To the City Council and Management City of Golden Valley, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Golden Valley, Minnesota (the City) as of and for the year ended December 31, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated August 3, 2023. MINNESOTA LEGAL COMPLIANCE In connection with our audit, nothing came to our attention that caused us to believe that the City failed to comply with the provisions of the contracting – bid laws, depositories of public funds and public investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing sections of the Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State Auditor pursuant to Minnesota Statutes § 6.65, insofar as they relate to accounting matters. 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 regarding the City’s noncompliance with the above referenced provisions, insofar as they relate to accounting matters. PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of compliance and the results of that testing, and not to provide an opinion on compliance. Accordingly, this report is not suitable for any other purpose. Minneapolis, Minnesota August 3, 2023 C E R T I F I E D A C C O U N T A N T S P UBLIC PRINCIPALS Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J. Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA/CMA Jaclyn M. Huegel, CPA Kalen T. Karnowski, CPA Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.mmkr.com Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 CITY OF GOLDEN VALLEY Schedule of Findings and Responses Year Ended December 31, 2022 -4- MATERIAL WEAKNESSES IN INTERNAL CONTROL OVER FINANCIAL REPORTING 2022-001 SEGREGATION OF DUTIES Criteria – Internal control over financial reporting. Condition – The City of Golden Valley, Minnesota (the City) has limited segregation of duties in a number of areas, including controls over cash disbursements, investments, and payroll. Questioned Costs – Not applicable. Context – This condition applies to multiple areas as noted above. Repeat Finding – This is a current year and prior year finding. Cause – The limited segregation of duties is primarily caused by the limited size of the City’s finance department staff. Effect – One important element of internal accounting controls is an adequate segregation of duties, such that no one individual has responsibility to execute a transaction, have physical access to the related assets, and have responsibility or authority to record the transaction. A lack of segregation of duties subjects the City to a higher risk that errors or fraud could occur and not be detected in a timely manner in the normal course of business. Recommendation – We recommend that the City continue to review its accounting procedures and internal controls and make improvements on an ongoing basis within the limits of the staff available. Management Response – There is no disagreement with the audit finding. The City reviews and makes improvements to its internal control structure on an ongoing basis and attempts to maximize the segregation of duties in all areas within the limits of the staff available. However, the City does not consider it cost-beneficial at this time to increase the size of its staff in order to further segregate accounting functions. CITY OF GOLDEN VALLEY Schedule of Findings and Responses (continued) Year Ended December 31, 2022 -5- MATERIAL WEAKNESSES IN INTERNAL CONTROL OVER FINANCIAL REPORTING (CONTINUED) 2022-002 TIMELINESS OF CASH RECONCILIATIONS Criteria – Internal controls over financial reporting are intended to allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. To be effective, control procedures such as periodic and year-end account and subledger reconciliations must be performed regularly, accurately, and in a timely manner. Condition – During our audit, we noted that the monthly cash reconciliation process was not being performed in a timely manner during the fiscal year, and the year-end reconciliation was not fully completed until well after year-end. In previous audits of the City, we have generally found the internal controls in this area to be well designed, implemented, and functioning properly. Although the internal controls were still considered to be well designed, the effectiveness of some control procedures were diminished during the year under audit, due to a lack of timeliness and accuracy. Questioned Costs – Not applicable. Context – Monthly cash reconciliations were not completed on a timely basis throughout the year, and the year-end cash reconciliation was not fully completed until June 2023. Repeat Finding – This is a current and prior year finding. Cause – This condition was primarily caused by the turnover of finance department personnel. Effect – This condition subjects the City to a higher risk that errors or fraud could occur and not be detected in a timely manner in the normal course of business, and potentially diminishes the effectiveness of other internal controls, such as periodic budget-to-actual comparisons that are dependent on the accurate recording of financial transactions. Recommendation – We recommend that the City ensure that its finance department is adequately staffed and trained in order to ensure the timely completion of this critical internal control procedure in the future. Management Response – There is no disagreement with the audit finding. City management will continue to review its internal control procedures and finance department duties to ensure monthly cash reconciliations are accurately completed in a timely manner going forward. THIS PAGE INTENTIONALLY LEFT BLANK