Forest Lake council accepts 2024 audit; auditors issue clean opinion, note repeat internal-control finding

The Forest Lake City Council voted June 13 to accept the city's 2024 financial audit, which presented an unmodified, or clean, opinion while noting a repeat internal-control finding.

The independent auditors, Jackie Knowles of Bergen KDP, told the council the audit provides assurance that the financial statements "are fairly presented in all material respects" for the year ending Dec. 31, 2024. Knowles said the auditors found no Minnesota legal compliance findings required to be reported by the Office of the State Auditor. She said the one internal-control issue is a repeat finding: a lack of segregation of accounting duties caused by a single person being able to perform multiple steps in transaction processing.

The audit presentation also summarized 2024 operating results. The council-approved 2024 general fund budget called for roughly $12.5 million in revenue and matching expenditures. Actual general-fund revenues totaled nearly $13.0 million, about $506,000 over budget, while expenditures came in at about $11.94 million, approximately $542,000 under budget. Total general-fund balance increased by just over $1 million during 2024. The unassigned portion of fund balance available for any purpose was $7,222,000 at year-end, equal to 54.7% of the 2025 budgeted general-fund expenditures; auditors noted this complies with the city's policy to maintain 50%.

Knowles highlighted several factors behind revenue and expenditure variances: higher tax revenues driven by an increased levy; roughly $200,000 more in intergovernmental receipts (including police training reimbursements and local government aid); and stronger-than-budgeted permit and plan-check fee activity. On the expenditure side, public safety costs rose by about $329,000, driven by police step and cost-of-living increases, a severance payout, higher fire wages and increased pension-related flows. Some programs, including public works, were under budget primarily due to milder winter weather.

Councilmember Mark (speaking during the audit discussion) noted the volatility of unrealized gains or losses on investments, and Knowles explained governments must report investments at fair market value even if gains are not realized. Council discussion also covered water and sewer fund operating income and the relationship between operating results and long-term capital needs.

Councilmember Erickson moved to accept the audit presentation; the motion carried. The council thanked auditors and city staff for the work on the audit.

The auditors recommended the city address the segregation-of-duties weakness; the council did not take additional action at the meeting beyond accepting the report.