Auditor gives Nowthen city a clean opinion but flags a material weakness in bookkeeping controls

A city-hired auditor told the Nowthen City Council on May 12 that the city’s 2025 financial statements are fairly stated in all material respects, but that the municipality faces a material weakness in internal control tied to the segregation of accounting duties.

"We are providing a clean unmodified opinion on the financial statements," Andy of Bergan KDB told the council, adding that the auditor’s office requires reporting on legal compliance and internal controls. "We did have one finding to report for this year and that's a lack of segregation of accounting duties and that is at that material weakness level." (Presented by Andy, auditor.)

The auditor described that condition as common in small finance teams and suggested the council weigh cost versus risk when deciding how to address it. Andy recommended compensating controls — documented month-end reviews, separate review of journal entries, and additional signoffs by staff who do not have transaction-entry access — as ways to mitigate the risk without immediately adding personnel.

On the city’s finances, the auditor summarized recent trends: general fund revenues declined slightly from budget expectations and came in approximately $32,000 less than anticipated, while expenditures were about $103,000 below budget, primarily due to vacant positions. The unrestricted general fund balance remained about $1.5 million, which Andy said represents roughly 60% of current-year expenditures (about seven months of spending). He noted that the state auditor’s office recommends an unrestricted fund balance of 35%–50% of expenditures and that Nowthen’s current level is consistent with that guidance.

Council members asked for practical next steps. Andy suggested documenting the compensating controls (signed month-end reconciliations, independent review of journal entries), which could reduce the severity of the reported deficiency to a lower-level finding over time. City staff said they will circulate a memo and pursue stronger documentation of review processes.

The audit report included no Minnesota legal-compliance findings, the auditor said. The presentation closed with an offer to provide additional trend analyses and follow-up advice on controls during the fiscal year.

The council received the audit report; no formal vote beyond acceptance of the presentation was recorded at the meeting.