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City Council Regular Meeting Minutes July 8, 2025 Page 3 For the Report on Internal Controls, the Team gained an understanding of internal controls in place and their effectiveness in designing the audit procedures. Examples of Internal Controls include Approval over disbursements, reviewing monthly bank reconciliations, establishing ideal segregation of duties, and reviewing financial information to detect errors. There were no internal control findings. For the Report on Minnesota Legal Compliance, which is required by Minnesota Statute §6.65, the OSA audit guide covers seven categories: • Contracting and bidding. • Deposits and investments. • Conflicts of interest. • Public indebtedness. • Claims and disbursements. • Tax increment financing. • Miscellaneous provisions. There were no compliance findings. For Communication with Those Charged with Governance, the City implemented one new accounting standard relating to compensated absences. Routine estimates included valuation of land held for resale and net pension liability and related items. A significant footnote — Note 6 — Long-term Debt was noted. Corrected and uncorrected misstatements and no difficulties or disagreements were encountered. Mr. Hering presented the financial results for the General Fund, Capital Fund Balance, Water and Sewer Enterprise Fund, and Liquor Fund. Councilmember Doolan commented in comparing this to last year, our budget increased from 54% to 56% due to market conditions and the Staff s work. Mayor Pro Tern Jenson referred to the water/sewer enterprise fund and asked why operating revenue was below the cost line when combining depreciation and operation expenses, and asked if this was because people were using less water in lawn irrigation. Mr. Hering stated that water usage varies. Mayor Pro Tem Jenson asked if fees should be adjusted. He thanked Mr. Hering for his report and the City Staff for their great work. Mayor Webster thanked Mr. Hering for his diligence in conducting the audit, and she agrees it is wonderful to have received a clean opinion due to the leadership of Finance Director Maloney and Staff. Motion by Councilmember Elnagdy, seconded by Councilmember Doolan, to accept the 2024 Financial Audit Results as presented. Motion carried 4-0.