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MINUTES OF THE <br /> ORONO CITY COUNCIL MEETEING <br /> Monday,April 22,2019 <br /> 7:00 o'clock p.m. <br /> Crosby moved,Seals seconded,to approve the Consent Agenda as submitted,with the above-noted <br /> revisions to the Resolution for Item No. 11. VOTE: Ayes 4,Nays 0. <br /> PUBLIC COMMENTS <br /> None <br /> PRESENTATION <br /> 14. 2017 AUDIT <br /> Michele Hoffman, Clifton,Larson and Allen,provided a summary of the City's 2017 audit results. <br /> Minnesota Statutes require that the City have an annual audit performed by a certified public accountant <br /> or the State Auditor. The audit was issued a couple of months ago. It should be noted that the audit <br /> provides reasonable but not absolute assurance since the audit does not test every single transaction. <br /> There were no major accounting policies adopted in 2017. The audit provides significant accounting <br /> estimates, such as the useful life of capital assets,valuation of investments,post-employment benefits,net <br /> pension liability, and related deferred outflows and deferred inflows. Full cooperation was received from <br /> management. <br /> Following review of the City's financials, Clifton,Larson is able to issue an unmodified or clean opinion <br /> on the City's financial statements. There were some exceptions to internal controls noted, such as <br /> preparation of financial statements. Audit requirements require that be noted in the internal control letter. <br /> Internal controls are regulated by a lot of complicated accounting rules and it is not unusual for cities to <br /> rely on their auditors for segregation of some duties. The audit looked at the City's controls over <br /> financial transactions that flow through the City. Good accounting practices state that no one employee <br /> should control a transaction from start to finish. Orono did have some areas where only one employee <br /> was responsible for that task, but the audit did not find anything concerning. Overall segregation of <br /> duties can be difficult when there is a smaller staff,which is fairly common in smaller cities. <br /> The audit also looked at journal entries. There was one material adjustment that was required which <br /> related to a debt service payment that was reported in the incorrect fund. The check signer review has <br /> also come up in the past. In certain situations,the actual invoices are not always being reviewed by the <br /> check signer and that area could be strengthened as well. <br /> There were no exceptions noted in regard to Minnesota legal compliance. The audit tested approximately <br /> ten different items, such as bids and quotes, and if there were any items that were not in compliance,those <br /> would be noted. <br /> As it relates to the General Fund,the unassigned fund balance,for the last couple of years it has been <br /> steadily increasing to just under$4.5 million in 2017. That number represents approximately 58 percent <br /> of the City's General Fund expenditures. Hoffinan noted that number typically should be kept at around <br /> 40 to 50 percent of expenditures,which amounts to approximately six months of expenses. City policy <br /> says around 45 percent and Orono did have some excess unassigned fund balances in 2017. <br /> With regard to the General Fund—Revenue,that has also remained fairly steady showing a slight increase <br /> each year. Public services, consisting of various police contracts,accounts for the second largest portion <br /> of that revenue,with property taxes being the largest. Other sources of revenues include licenses and <br /> Page 2 of 5 <br />